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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

DIEBOLD, INCORPORATED
(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code: (330) 490-4000

Securities registered pursuant to Section 12(b) of the Act:

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. [ ]

State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 5, 2001. The aggregate market value was computed by using the closing price on the New York Stock Exchange on March 5, 2001 of $30.08 per share.

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

Table of Contents

DOCUMENTS INCORPORATED BY REFERENCE

(1) PROXY STATEMENT FOR 2001 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 26, 2001

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PART I.

ITEM 1. BUSINESS.

(a) General Development

      The Registrant was incorporated under the laws of the State of Ohio in August, 1876, succeeding a proprietorship established in 1859 and is engaged primarily in the sale, manufacture, installation and service of automated self-service transaction systems, electronic and physical security products, software and integrated systems. On April 17, 2000, the Registrant announced the successful completion of its acquisition of the financial self-service assets and related development activities of European-based Groupe Bull and Getronics NV (European acquisition). The businesses acquired include self-service transaction systems, other self-service terminals and related services primarily for the global banking industry. The acquisition was completed for approximately $90 million and 400,000 French francs (translation $58 million). The majority of subsidiaries of the European acquisition have been acquired and consolidated. The remaining subsidiaries, which are immaterial to the Registrant’s operations, will be consolidated upon completion of the legal closing.

(b) Financial Information about Operating Segments

      The Registrant has defined its operating segments into its three main sales channels: North American Sales and Service (NASS), International Sales and Service (ISS) and a group of smaller sales channels which are combined in a category called Other. The NASS segment sells financial and retail systems, and also services financial, retail and medical systems in the United States and Canada. The ISS segment sells and services financial and retail systems over the remainder of the globe. The segment called Other, sells educational, medical, and other products and also services educational products in the United States. A reconciliation of segment customer revenues to Consolidated Net Sales and of segment operating contribution to Consolidated Operating Profit is contained in Note 16 to the Consolidated Financial Statements.

(c) Description of Business

      The Registrant develops, manufactures, sells and services self-service transaction systems, 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 2000, 1999, and 1998 the Registrant’s sales and services of financial systems and equipment accounted for more than 90 percent 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 no customers in 2000 and 1999 that accounted for more than 10 percent of total net sales. The Registrant had one customer, IBM, its former partner in the InterBold joint venture that accounted for $148.8 million of the total net sales of $1.2 billion in 1998. 2000 and 1999 sales to IBM were $12.8 and $51.6 million, respectively.

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ITEM 1. BUSINESS. — (continued)

      The Registrant’s operating results and the amount and timing of revenue are affected by numerous factors including production schedules, customer priorities, sales volume, and sales mix. During the past several years, the Registrant has dramatically changed the focus of its self-service business to that of a total solutions approach. The value of unfilled orders is not as meaningful an indicator of future revenues due to the significant portion of revenues derived from the Registrant’s growing service-based business, for which order information is not available. Therefore, the Registrant believes that backlog information is not material to an understanding of its business and does not disclose backlog information.

      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. The Registrant believes, based upon outside independent industry surveys, that it is a leading manufacturer of self service systems 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, Wincor-Nixdorf, Dassault, Fujitsu, Itautec and Tidel. In serving the security products market for the financial services industry, the Registrant competes primarily with Mosler. 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 make 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 $52.0 million in 2000, $43.0 million in 1999, and $42.9 million in 1998 for research and development costs.

      Compliance by the Registrant with federal, state and local environmental protection laws during 2000 had no material effect upon capital expenditures, earnings or the competitive position of the Registrant and its subsidiaries.

      The total number of employees employed by the Registrant at December 31, 2000 was 12,544 compared with 9,935 at the end of the preceding year. The increase in 2000 is primarily due to the acquisition of the financial self-service assets and related development activities of European-based Groupe Bull and Getronics NV.

(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 42.8 percent in 2000, 25.4 percent in 1999, and 25.1 percent in 1998.

ITEM 2. PROPERTIES.

      The Registrant’s corporate offices are located in North Canton, Ohio. It owns manufacturing facilities in Canton and Newark, Ohio; Lynchburg, Staunton and Danville, Virginia; and Sumter, South Carolina, and leases a manufacturing facility in Rancho Dominguez, California. On January 5, 2001, the Registrant announced the closing of the Staunton, Virginia manufacturing facility. The Registrant also has manufacturing facilities in Argentina, Belgium, Brazil, China, France, India, and Mexico. The Registrant has selling, service and administrative offices in the following locations: throughout the United States, and in Argentina, Australia, Austria, Belgium, Brazil, China, Colombia, Denmark, Estonia, France, Germany, Hong Kong, Hungary, Indonesia, Paraguay, Portugal, Poland, Romania, Russia, Singapore, South Africa, Spain, Taiwan, Thailand, Turkey, the United Arab Emirates, the United Kingdom, and

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ITEM 2. PROPERTIES. – (continued)

Uruguay. The Registrant considers that its properties are generally in good condition, are well maintained, and are generally suitable and adequate to carry on the Registrant’s business.

ITEM 3. LEGAL PROCEEDINGS.

      At December 31, 2000, 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. While in management’s opinion the financial statements would not be materially affected by the outcome of any present legal proceedings, commitments, or asserted claims, management is aware of a potential claim by the Internal Revenue Service concerning the deductibility of interest related to loans from the Registrant’s corporate-owned life insurance (COLI) programs.

      This claim represents an exposure for additional taxes of approximately $17.6 million, excluding interest. Management is aware that both the U.S. Tax Court and the United States District Court for the District of Delaware have recently reached decisions disallowing the deduction of interest on COLI loans of two similarly situated companies.

      Notwithstanding these adverse court decisions, management believes that the Registrant’s facts and circumstances are different from the above cited court cases. The Registrant has made no provision for any possible earnings impact from this matter because it believes it has a meritorious position and will vigorously contest the IRS’ claim. In the event the resolution of this matter is unfavorable, it may have a material adverse effect on the Registrant’s result of operations for the period in which such unfavorable resolution occurs.

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 2000.

ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT.

      Refer to pages 6 through 9.

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EXECUTIVE OFFICERS OF THE REGISTRANT

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EXECUTIVE OFFICERS OF THE REGISTRANT (continued)

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EXECUTIVE OFFICERS OF THE REGISTRANT — (continued)

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EXECUTIVE OFFICERS OF THE REGISTRANT — (continued)

There is no family relationship, either by blood, marriage or adoption, between any of the executive officers of the Registrant.

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PART II.

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

      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:

      There were approximately 87,684 shareholders at December 31, 2000, 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 $0.62 in 2000, $0.60 in 1999, and $0.56 in 1998.

      On October 15, 1999, 230,015 Common Shares were issued from treasury for the acquisition of Nexus Software, Inc. The fair market value of the shares on the date of issue was $7,023,072; these shares are considered unregistered.

      On December 30, 1998, 30,060 Common Shares were issued from treasury to Gregg A. Searle, former President, who resigned on September 30, 1998. The shares represented the distribution of Mr. Searle’s deferred compensation account which had been allocated in Common Shares, and accordingly, no purchase price was paid by Mr. Searle. The fair market value of the shares on the date of issue was $1,043,653; these shares were considered unregistered.

ITEM 6. SELECTED FINANCIAL DATA.

(Dollars in thousands except per share amounts)

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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 1998 to 2000. Comments on significant year-to-year fluctuations follow the table.

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Acquisitions

On April 17, 2000, the Registrant announced the successful completion of its acquisition of the financial self-service assets and related development activities of European-based Groupe Bull and Getronics NV (European acquisition). The businesses acquired include ATMs, cash dispensers, other self-service terminals and related services primarily for the global banking industry. The acquisition was completed for approximately $90,000 and 400,000 French francs (translation $58,080). The majority of subsidiaries of the European acquisition have been acquired and consolidated. The remaining subsidiaries, which are immaterial to the Registrant’s operations, will be consolidated upon completion of the legal closing. The reported revenue from the European acquisition was $148,785 for the period of April 17, 2000 through December 31, 2000. The acquisition was accretive at the operating profit level and slightly dilutive on earnings per share. While the Registrant expects the European acquisition to be slightly accretive in 2001, given the seasonal nature of its business, it will likely be dilutive in the first quarter of 2001.

On October 21, 1999, the Registrant acquired Procomp Amazonia Industria Eletronica, S.A. (Procomp), a Brazilian manufacturer and marketer of innovative technical solutions, including personal computers, servers, software, professional services, retail and banking automation equipment and voting machines. The acquisition was effected in a combination of cash and stock for $222,310. Prior to the acquisition, Procomp was a major distributor for the Registrant in Latin America. Procomp results following the acquisition are consolidated with the results of the Registrant. Procomp reported revenue of $309,167 and $41,615 for the year ended December 31, 2000 and the period of October 22, 1999 through December 31, 1999, respectively. The acquisition was accretive on earnings per share and at the operating profit level.

The acquisitions have been accounted for as purchase business combinations and, accordingly, the purchase prices have been allocated to identifiable tangible and intangible assets acquired and liabilities assumed, based upon their respective fair values, with the excess allocated to goodwill to be amortized over the estimated economic lives from the respective dates of acquisition. The amounts of goodwill and periods of amortization for the European acquisition and Procomp are $146,080 over 20 years and $135,219 over 17 years, respectively.

Net Sales

Net sales for 2000, which totaled $1,743,608 (including net sales from acquisitions of $457,952) grew $484,431 or 38.5 percent over 1999 and $557,901 or a 47.1 percent increase over 1998. While a slowing domestic market continues to affect U.S. product sales, the Registrant’s investment in global distribution channels and recent acquisitions continue to fuel substantial growth and increased market share. The Registrant’s 2000 sales were particularly enhanced by a single order received by Procomp (Brazil) of $106,000 for electronic voting machines for the Brazilian market. Recent U.S. election events could provide opportunities in the U.S. market for the Registrant’s technology.

Product sales for 2000 increased 41.2 percent over 1999 and 42.6 percent over 1998 sales. Excluding the acquisitions, product sales grew 6.3 percent over 1999 and remained flat from 1998 due to a slowing demand for self-service products. Service revenues for 2000 grew 34.3 percent and 54.8 percent over 1999 and 1998 respectively. Excluding acquisitions, service revenues grew 8.1 percent and 21.1 percent over 1999 and 1998, respectively. The Registrant’s global service revenue is supported by comprehensive service solutions in the self-service, security and firstline businesses in support of our customers.

Customer solutions continue to be the Registrant’s focus. The recent alignment of Diebold North America’s core operations to a single business unit positions the Registrant’s production and distribution organizations to focus on its customer requirements. From a global perspective, the recent European acquisition, which includes manufacturing and service capabilities, will significantly improve the Registrant’s ability to respond to customer demands.

Product Revenue by Geography

* Europe, Middle East and Africa

Product sales of $1,069,405 (including sales of $311,035 from acquisitions) grew 41.2 percent over 1999 and 42.6 percent over 1998 volumes. Product sales in the United States increased $34,595 or 6.7

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percent over 1999 and $54,783 or 11.1 percent over 1998. Growth in security solutions, Nexus and self-service solutions to original equipment manufacturers (OEM) accounted for the majority of the growth in 2000. Product sales in Asia Pacific (including sales from acquisitions of $9,301) grew 44.6 percent over 1999 and 65.8 percent over 1998 volumes. Excluding acquisitions, Asia Pacific experienced growth rates of 27.4 percent over 1999 and 46.1 percent over 1998. Also, product sales in EMEA (including sales from acquisitions of $81,915) grew 156.5 percent and 157.3 percent over 1999 and 1998 respectively. Excluding acquisitions, growth in EMEA was 22.9 percent and 23.3 percent above 1999 and 1998 volumes. Latin America product sales (including acquisitions of $219,817) grew 159.6 percent over 1999 and 133.2 percent over 1998 volumes. Excluding acquisitions, Latin America declined between 1999 and 1998 due to poor economic conditions. Also, product sales in Canada declined 26.7 percent and 46.4 percent as compared to 1999 and 1998, respectively due to establishing distribution operations to replace IBM as the Registrant’s primary distributor.

Service Revenue

Total service revenues for 2000 of $674,203 increased over 1999 and 1998 by $172,272 or 34.3 percent and $238,657 or 54.8 percent, respectively. Domestic revenues are up $24,049 or 5.7 percent over 1999 and up $54,378 or 13.8 percent over 1998. Domestic service revenues have maintained strong growth in the highly competitive service market. The Registrant expects its enhanced service offerings will continue to sustain solid growth. Including acquisitions, international service revenue was up $148,223 or 188.7 percent over 1999 and up $184,279 or 433.8 percent over 1998. Excluding acquisitions, international service revenue was up 24.6 percent over 1999 and 88.7 percent over 1998. International service revenue increased substantially in all geographies as the Registrant continues to establish a worldwide service support infrastructure to enhance total solutions capability.

Total Revenue by Product/Service Solution

Self-service solutions revenue (including acquisitions of $149,945) grew 25.4 percent and 22.3 percent as compared to the periods of 1999 and 1998, respectively. This growth is a result of the Registrant’s global acquisition strategy, which was executed in 2000 and 1999. Along with the acquisition strategy, the Registrant is focused on professional and special services to integrate a broad array of solutions to its customer base worldwide. The Registrant has experienced significant growth in professional service offerings over prior periods. Excluding the voting machine order in Brazil, these services increased 135.2 percent and 337.1 percent over 1999 and 1998, respectively.

Operating Segment Revenue and Operating Profit

Customer Revenues by Segment

Operating Profit by Segment

North American Sales and Service (NASS) revenues for 2000 of $965,859 increased $38,884 or 4.2 percent over 1999 and 8.4 percent over 1998. NASS product revenues were flat year over year reflecting the current market pressures while service revenues were up $24,477 or 5.9 percent. Revenues from annual service contracts remain strong domestically. International Sales and Service (ISS) revenues of $728,828 (including revenues from acquisitions of $457,952) increased 148.5 percent over 1999 and 176.7 percent over 1998 volumes. ISS revenues

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excluding acquisitions were $270,876, up from 1999 by 15.2 percent and 2.8 percent over 1998. ISS product revenues, excluding acquisitions, were up slightly year over year, while service operations yielded increased service revenues of 31.0 percent. Other revenue of $48,921, which includes Nexus, OEM sales, MedSelect and sales to Campus Card, was an increase from 1999 of $10,035 or 25.8 percent.

Total 2000 operating profits (including acquisitions) of $182,057 grew 12.7 percent over 1999 and 27.1 percent above 1998 profits. NASS operating profit decreased 5.6 percent as compared to 1999 and increased 0.2 percent over 1998. NASS operating profits were affected by flat product revenues caused by a slowing demand for self-service terminals. ISS operating profits including acquisitions grew 107.2 percent and 393.9 percent over 1999 and 1998, respectively.

Cost of Sales and Expenses

Cost of sales for 2000 including acquisitions was 67.9 percent of sales compared to 63.7 percent of sales in 1999 and 65.7 percent of sales in 1998. Cost of sales as a percentage of sales increased year over year due mainly to a competitive self-service market globally, which includes acquisitions carrying a higher cost of sales, offset with lower operating expenses. Excluding acquisitions, product cost of sales as a percentage of revenue was up 1.6 percent over 1999 due mainly to pricing pressures in the domestic and international markets and was favorable to 1998. Service cost of sales including acquisitions as a percent of sales increased in 2000 to 72.2 percent up from 71.3 percent and 70.4 percent from 1999 and 1998, respectively. The 2000 increases are due primarily to lower realized gross profits on acquisitions. Excluding acquisitions, service cost of sales percentage improved from 70.9 percent of revenue in 1999 to 70.1 percent in 2000.

Product gross profits in 2000 including acquisitions declined to 34.8 percent from 41.3 percent in 1999 and from 38.3 percent in 1998 mainly due to the lower gross margins experienced in the acquisitions and the impact of foreign currency fluctuations. Excluding acquisitions, product gross profits were 40.6 percent compared to 42.2 percent in 1999. Service gross profits were 27.8 percent compared to 28.7 percent in 1999 and 29.6 percent in 1998. Service gross profits excluding acquisitions improved to 29.9 percent from 29.1 percent in 1999.

Operating expenses expressed as a percent of sales (including acquisitions) decreased by 2.6 percentage points over 1999 and 6.4 percentage points over 1998 expenses. The Registrant is leveraging its worldwide administrative infrastructure and improving productivity by investing in E-initiatives and other automation to improve customer support on a worldwide basis.

Excluding realignment and special charges, operating profit as a percentage of revenue, was 13.1 percent as compared to 1999 of 14.5 percent and 14.1 percent in 1998. Operating profit as a percent to sales excluding acquisitions improved over 1999 and 1998, respectively.

Other Income, Net and Minority Interest

Investment income declined in 2000 compared to 1999, as expected, by $4,719 and remained relatively flat compared to 1998’s results. The decline compared to 1999 was largely attributable to unfavorable performance in the Registrant’s preferred stock portfolio and use of both short- and long-term investments to purchase Procomp and the European acquisition. The Registrant continues to use finance receivables as an investment strategy, which yielded an improved return over 1999 and 1998, offsetting some of the decline in the above investments.

Interest expense is largely related to interest on borrowings obtained as additional funding for the Procomp and European acquisitions and has increased over 1999 and 1998 by $14,070 and $16,938, respectively. Interest expense is expected to decline as the Registrant continues to pay down the borrowings from investments. Miscellaneous expense, net, excluding interest expense, increased from 1999 by $19,153 and from 1998 by $19,678. These increases were in part related to additional goodwill amortization expense recognized in relation to both the Procomp and European acquisitions. Additional goodwill amortization accounted for $11,793 and $13,370 of the increases compared to 1999 and 1998, respectively.

The Registrant also incurred foreign exchange losses in 2000. Foreign exchange losses in total increased $9,442 over 1999 and $9,049 over 1998. The majority of the exchange losses were related to the Procomp operation in Latin America.

Minority interest of $3,040 increased over 1999 by $1,871 and 1998 by $1,197, due to improved results of joint venture operations and an additional joint venture added in 2000 related to the European acquisition. Minority interests for all companies are calculated as a percentage of profits of the joint ventures based on formulas defined in the relevant agreements establishing each venture.

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Income

Income before taxes in 2000 was $204,357 or 11.7 percent of revenue compared to $200,127 (excluding realignment charges and in-process research and development) or 15.9 percent of revenue from 1999 and $180,924, 15.3 percent (excluding realignment and special charges) in 1998. Income excluding acquisitions as a percent to sales remained constant as compared to 1999 and improved over 1998 (excluding realignment and special charges).

The effective tax rate was 33.0 percent in 2000 compared with 36.0 percent in 1999 and 36.4 percent in 1998. The lower tax rate in 2000 was favorably impacted by the Registrant's receipt of tax refunds associated with the Registrant’s export sales. The details of the reconciliation between the U.S. statutory rate and Registrant’s effective tax rate are included in Note 14 of the 2000 Consolidated Financial Statements.

Excluding realignment, special charges and in-process research and development, net income including acquisitions increased 7.3 percent from 1999 and remained flat as compared to 1998, respectively. Excluding acquisitions, net income increased 4.0 percent from 1999 and decreased 3.2 percent over 1998 (excluding realignment, special charges and in-process research and development).

Management’s Analysis of Financial Condition

The Registrant continued to enhance its financial position during 2000 through its strategic acquisitions and improved asset management strategies. Total assets increased $286,596 or 22.1 percent to a 2000 year-end level of $1,585,427. The European acquisition and Procomp accounted for $253,895 of the gain in assets in 2000. Inventory turnover has improved to 6.3 at December 31, 2000 as compared to 5.5 at December 31, 1999. Days sales outstanding has decreased from 77 days at December 31, 1999 to 69 days at December 31, 2000.

Total current assets at December 31, 2000, of $804,363 represented an increase of $156,427 or 24.1 percent from the prior year-end. Trade receivables decreased $35,327 from 1999 excluding the effects of the European acquisition and Procomp trade receivables of $65,169 and $36,219, respectively. Inventories increased $18,110 excluding the European acquisition and Procomp’s December 31, 2000 inventory of $24,268 and $29,718, respectively. Short-term notes receivable are primarily from Procomp’s financing to Brazilian customers.

Short-term investments and long-term securities and other investments decreased by $48,028, or 20.7 percent to a level of $184,552 at December 31, 2000. The decrease was due to the liquidation of certain securities for the European acquisition. The Registrant anticipates being able to meet both short- and long-term operational funding requirements through the use of cash generated from operations. Certain securities may be liquidated in the future for strategic acquisitions or to pay down debt. The Registrant’s securities can be readily converted into cash and cash equivalents if needed.

Total property, plant and equipment, net of accumulated depreciation, was $174,946 at the end of 2000. The European acquisition and Procomp accounted for $9,447 and $17,210 of total property, plant and equipment, respectively. Capital expenditures were $42,694 in 2000, compared with $40,341 in 1999. The increase in 2000 capital spending versus 1999 was primarily due to setting up sales and service operations internationally. Capital expenditures are expected to increase as international expansion continues and as the Registrant invests in capital items, especially information technology, to support the future growth of its business.

Total current liabilities at December 31, 2000, were $566,792, which represented an increase of $184,385 over the prior year-end. The primary cause for the increase is due to an increase in short-term notes payable of $146,159 that were largely used to fund the European acquisition. The Registrant’s current ratio dropped to 1.4 at December 31, 2000 versus 1.7 at the end of 1999, due primarily to the short-term borrowings to fund the acquisitions.

At December 31, 2000, the Registrant had bank credit lines approximating $225,000 U.S. dollars, EUR 100,000 (translation $94,413) and $17,000 AUD (Australian dollars) (translation $9,504), with $263,609 of outstanding borrowings under these agreements. In addition, the Registrant had outstanding $20,800 of Industrial Development Revenue Bonds. The proceeds of the bonds issued in 1997 were used to finance three manufacturing facilities located in Staunton and Danville, Virginia and in Lexington, North Carolina.

The Registrant’s financial position provides it with sufficient resources to meet projected future capital expenditures, dividend and working capital requirements. However, if the need arises, the

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Registrant’s strong financial position should provide adequate access to capital markets.

Pension liabilities decreased by $2,054 from 1999 or 8.4 percent, excluding the effects of the European acquisition of $6,131. The net periodic pension income of $5,719, included in income in 2000, represented an increase of $10,785 from the prior year. Postretirement liabilities at December 31, 2000, were $28,123, an increase of $5,626 over the prior year end, with the European acquisition representing $5,357 of the increase. Net periodic health and life benefit expense charged to income in 2000 of $1,498 increased slightly over the prior year’s expense of $1,477. In addition, the Registrant matches employee contributions to its defined contribution 401(k) savings plan. The Registrant matched 60 percent of each employee’s first three percent on savings and 30 percent of each employee’s second three percent on savings. Net expense for 401(k) match was $7,155 in 2000, which was down from the prior year by $1,857.

Minority interests of $5,260 represented the minority interest in Diebold Financial Equipment Company, Ltd. (China) owned by the Aviation Industries of China and the Industrial and Commercial Bank of China, Shanghai Pudong Branch; in Diebold OLTP Systems, C.A. (Venezuela), owned by five individual investors; in Diebold Argentina, owned by Ciccone Calcografica S.A., in Diebold Colombia, owned by Richardson and Company Ltd and in Agences Bancaires Services & Securite, S.A., owned by Serse S.A. and Solymatic S.A.. On December 31, 2000, the Registrant purchased the remaining ownership interest in Diebold Argentina from Ciccone Calcografica S.A. for $4,875.

Shareholders’ equity increased $91,671 or 10.9 percent to $936,066 at December 31, 2000. Equity increased primarily due to current year earnings. Shareholders’ equity per share was $13.08 at the end of 2000, compared with $11.88 in 1999. The Common Shares of the Registrant are listed on the New York Stock Exchange with a symbol of DBD. There were approximately 4,278 registered shareholders of record as of December 31, 2000.

The Board of Directors declared a first quarter 2001 cash dividend of $0.16 per share. This amount, which represents a 3.2 percent increase from the prior year’s quarterly dividend rate, will be paid on March 9, 2001, to shareholders of record on February 16, 2001. Comparative quarterly cash dividends paid in 2000 and 1999 were $0.155 and $0.15 per share, respectively.

Management’s Analysis of Cash Flows

During 2000, the Registrant generated $146,195 in cash from operating activities, compared with $188,585 in 1999 and $177,238 in 1998. In addition to net income of $136,919 adjusted for depreciation, amortization and minority interest of $71,720, decreases in deferred income taxes, accounts payable (net of the European acquisition), deferred income and increases in other certain assets and liabilities decreased cash provided by operations. Cash was utilized in operations to reduce accounts payable, maintain adequate inventory levels and to organize the operations of the European acquisition. Expressed as a percentage of total assets employed, the Registrant’s cash yield from operations was 9.2 percent in 2000, 14.5 percent in 1999 and 17.6 percent in 1998.

Net cash generated from operating and financing activities in 2000 was used to reinvest $215,357 in assets of the Registrant, compared with $281,800 in 1999 and $96,509 in 1998. The Registrant returned $44,271 to shareholders in the form of cash dividends paid during 2000, which was a 6.2 percent increase from 1999 and a 14.6 percent increase from 1998.

Other Business Information

Subsequent Events

On January 5, 2001, the Registrant announced the closing of the Staunton, Virginia manufacturing facility. The closing is estimated to be completed by the end of the first quarter of 2001. The decision to close the facility coincides with the streamlining of the Registrant’s manufacturing operations in North America in order to balance capacity among global facilities. The facility was opened in 1997 for precision sheet metal processing for ATM components. The Lynchburg, Virginia facility will continue to perform this process for the Registrant. Some of the equipment used at the Staunton facility will replace older equipment at facilities in Lynchburg and Sumter, South Carolina.

Closing costs to be incurred during the first quarter of 2001 are estimated at $2,500 to $3,000 and include closure of the facility, transfer of equipment as well as separation packages and outplacement services offered to employees.

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New Accounting Pronouncement

In December 1999, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition.” SAB 101 does not change existing accounting literature on revenue recognition, but rather explains the SEC staff’s general framework for revenue recognition. SAB 101 states that changes in accounting to apply the guidance in SAB 101 may be accounted for as a change in accounting principle. Through issuance of SAB 101B, the change in accounting principle must be recorded by the fourth quarter 2000. The Registrant has reviewed its revenue recognition practices in conjunction with SAB 101 and 101B requirements. The Registrant has adopted this bulletin in 2000, which has had no material effect on the Registrant’s results of operations or statement of financial position.

In June 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Registrant will adopt SFAS No. 133 as required for its first quarterly filing of fiscal year 2001. It is expected that the adoption will not have a material effect on the Registrant’s results of operation or statement of financial position.

Realignment and Special Charges

As of December 31, 1999, the Registrant completed its realignment plan originally announced in the second quarter of 1998. Under the realignment plan in 1998, the Registrant recorded realignment and special charges of $61,117 ($41,850 after-tax or $0.60 per diluted share). The majority of the realignment charge related to three areas: the ending of the InterBold joint venture with IBM, the exiting of the manufacturing and distribution channel for certain low-end self-service terminal products and the exiting of the proprietary electronic security business. The realignment charge was made up of two components: a special charge of $9,864 primarily for the write-off of inventory from exited lines of business and a realignment charge of $51,253 for all other realignment costs. In December 1999, the realignment plan concluded and the remaining accrual of $3,261, which primarily represented employee costs that were not utilized, was brought back through income.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Refer to pages 18 through 41.

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Consolidated Balance Sheets
Diebold, Incorporated and Subsidiaries
December 31, 2000 and 1999
(Dollars in thousands, except per share amounts)

See accompanying Notes to Consolidated Financial Statements.

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Consolidated Statements of Income
Diebold, Incorporated and Subsidiaries
Years Ended December 31, 2000, 1999 and 1998
(Dollars in thousands, except per share amounts)

See accompanying Notes to Consolidated Financial Statements.

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Consolidated Statements of Shareholders’ Equity
Diebold, Incorporated and Subsidiaries
Years Ended December 31, 2000, 1999 and 1998
(Dollars in thousands)