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In 1999 Diebold began to emerge from profound changes, taking major strides to become the global leader in financial self-service solutions. THE PAST FEW YEARS REPRESENT a period of great transition for Diebold. We've experienced some tremendous high points while encountering a few obstacles along the way. As a result, we've learned some valuable lessons. Among the more important events were:
In emerging from this transition, we realize the most important factors in the future success of the Company are growing and establishing the global component of our business and capitalizing on our services-related expertise.
We began executing this strategy in earnest in 1998 by building our own global infrastructure to market and distribute our products and services. As a result, we finished 1999 in a stronger position internationally than in past years. Through a combination of acquisitions, investment in direct sales and service operations and strategic alliances with distribution partners, we have greatly expanded our reach worldwide. We now have nearly 10,000 employees with representation in more than 75 countries around the world. We have also started to leverage our transition to a service-based company. We see great opportunity around the globe to provide expanded value-added services to customers, and we plan to show concrete returns on our investment in service capability in the near future.
1999 Results The initial payoff from these efforts began with the results we achieved in 1999. Sales rose to $1.26 billion, up 6 percent compared with the previous year, and diluted earnings per share reached $1.85, up 9 percent compared with 1998 earnings, excluding realignment charges. Between 1990 and 1999, Diebold's earnings per share grew at a compound annual rate of 18.5 percent, exceeding our long-term goal of 15 percent compound annual growth in earnings per share.
Review of Operations We completed a number of strategic acquisitions in 1999 to help us better compete globally. The largest was the purchase of Brazil-based Procomp Amazonia Industria Eletronica, S.A. (Procomp) for $222 million in cash and stock. This manufacturer and marketer of self-service solutions for banking, retail and election automation both strengthened our position in our traditional self-service markets and added new capabilities. Indeed, Procomp received the largest contract in Diebold's history with an order for voting terminals and related products valued at more than $100 million. Together with strategic acquisitions and joint ventures in Colombia, Argentina, Mexico and Venezuela, we are now very well positioned in Latin America. We did much more to complete the devel- opment of a global infrastructure in 1999. In about 30 countries in Europe, the Middle East and Asia, we built or expanded our own direct sales and service organizations or formed partnerships with select distributors. These developments, crucial in helping us succeed through the previously mentioned transition, are more fully described in the following pages.
Most significantly, as announced early in 2000, we are in the process of acquiring the financial self-services assets of Amsterdam-based Getronics NV and Groupe Bull, headquartered in France.
Changes in Officers and Directors Another key transition for the Company is a personal change, as well. After 18 years with the Company, 15 years at the helm, I will be retiring from Diebold after the annual meeting in April. I am extremely proud of all that our management team and employees have accomplished and thank them for their efforts and support.
Clearly, a major achievement in 1999 was identifying my successor - Walden W. "Wally" O'Dell, who joined us in November as president and chief executive officer and as a member of our board of directors. Wally has an excellent track record of fostering profitable growth around the globe during a 33-year career with Emerson Electric Co. Because of his proven leadership, business management skills and background in technology, global operations and service, he is exceptionally well suited to guide Diebold to be the leading global provider of self-service solutions.
Joining our board of directors in October was Gale S. Fitzgerald, chairman and chief executive officer of Computer Task Group (CTG),Inc. (NYSE:TSK), a $500 million international information technology services firm. Her professional services expertise will greatly benefit Diebold's transition to a company that is driven by software and services. Among other changes, Charles J. Bechtel was appointed group vice president, Global Services, and named to the executive team in September. His critical assignment is to maximize the potential of our professional and technical service capabilities and deliver them to customers worldwide.
Dividend On January 27, 2000, our board of directors declared a first quarter cash dividend of 15.5 cents per share on all common shares, payable March 10, 2000. This is an increase of slightly more than 3 percent over the prior dividend. Diebold has increased its cash dividend each year for 47 consecutive years, a record matched by few companies.
Outlook In the year ahead, we expect to benefit from our work to develop a global infrastructure and enhance our service capabilities. We enter the new century with a unique combination of capabilities, outlined on pages 8 and 9 of this annual report, to propel our growth.
Another key to success will be building the Diebold brand worldwide and strengthening our reputation as a customer-focused, high-quality provider of self-service solutions. We continue to evaluate individual business lines to ensure that we can compete from a position of strength and achieve our growth and profit goals. We are committed to adjusting any areas that are not up to our expectations.
Let me conclude by thanking all shareholders and customers for your support over the past 18 years. I've truly enjoyed our times together. Looking ahead, I am certain that we will emerge from the recent changes and transitions to continue building a bright, prosperous future for the Company and its shareholders.
Robert W. Mahoney
Chairman of the Board
Let me begin by saying how excited I am to have the opportunity to lead Diebold into the next century. It is a great company with a great brand, and I am very optimistic that we will be able to build on the solid foundation that Bob Mahoney has laid over the past 18 years.
BOB HAS GUIDED OUR COMPANY from being a manufacturer of hardware to becoming more software and services driven. He began to evolve Diebold into a truly global company. Under Bob's leadership, Diebold has accomplished much and recorded outstanding growth rates in the past decade. I intend to continue his legacy by making Diebold the global leader in self-service hardware, software and services.
During my several months with Diebold, I have met with and received input from many employees, shareholders, customers and suppliers. As a result, I have identified priorities on which we must focus to make measurable progress:
We must first increase Diebold's market share by focusing on key market segments with the highest growth potential, packaging innovative solutions for our customers, and further expanding our international sales and service infrastructure. We want to establish global leadership in financial self-service solutions.
Next, we must develop an Internet business strategy that will solidify Diebold's position in future banking and e-commerce systems, as the Internet will continue to have a profound effect on business trends in the coming decade.
At the same time, we need to continue developing our capability to provide professional services and software - key areas that will drive future growth and results. We clearly have opportunities to expand the range of value-added services that we provide.
We must increase the speed with which we do everything. That means knowing our customers, anticipating their needs and offering the right solution before competitors can react. To achieve this, we must develop better operating systems, simplify our organizational structure and, most importantly, empower employees worldwide to make local decisions quickly. We must also partner with organizations that can quickly add to our solutions set as we strive to address our customers' changing needs.
We need to improve the way we manage our assets as well. I will be working with our executive team and others to develop plans to do so.
Finally, we are committed to fairness and increasing openness in informing you about Diebold. We now provide much more information in our earnings releases and have made our quarterly conference call accessible on our Web site.
We are currently finalizing enhancements to our global strategy and implementation plans and will be announcing our leadership team's detailed vision soon.
I am very excited about the opportunities that lie ahead, and I am personally committed to attaining global leadership in our markets and creating value for our shareholders.
Walden W. O'Dell
President and Chief Executive Officer
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While
expanding our geographic scope, we have also continued to add valuable
capabilities. For example, the purchase of U.S.-based Nexus Software
enables us to support retail bank branch operations in upgrading
their systems to the Windows NT operating platform. This and a bank
branch optimization company we also acquired add important capabilities
to our professional services offering.
We
enter the new century with
a unique combination of capabilities to propel our growth.
