Diebold Inc – ‘10-K405’ for 12/31/98

As of:  Monday, 3/8/99   ·   For:  12/31/98   ·   Accession #:  950152-99-1688   ·   File #:  1-04879

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Annual Report — [x] Reg. S-K Item 405   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     Diebold, Incorporated Form 10-K405                    43    239K 
 2: EX-3.3      Articles of Incorporation/Organization or By-Laws      6     24K 
 3: EX-10.14    Material Contract                                     21     55K 
 4: EX-21       Subsidiaries of the Registrant                         2     19K 
 5: EX-23       Consent of Experts or Counsel                          1      7K 
 6: EX-24       Power of Attorney                                      2     10K 
 7: EX-27       Financial Data Schedule (Pre-XBRL)                     1      9K 

10-K405   —   Diebold, Incorporated Form 10-K405
Document Table of Contents

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----------------  
UNITED STATES   
SECURITIES AND EXCHANGE COMMISSION
--------------------------------------------------------------------------------
WASHINGTON, D.C. 20549
 FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF         
THE SECURITIES EXCHANGE ACT OF 1934                 
For the fiscal year ended December 31, 1998                   

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            (IRS Employer Identification Number)  
incorporation or organization)                                                  

5995 Mayfair Road, P.O. Box 3077,                                               
North Canton, Ohio                               44720-8077         
---------------------------------         ------------------------------------- 
(Address of principal executive offices)               (Zip Code)               

Registrant's telephone number, including area code: (330) 490-4000
--------------------------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:     

                                    Name of each
 Title of each class                     exchange on which registered:

Common Shares  $1.25 Par Value                 New York Stock Exchange      
---------------------------------         ------------------------------------- 

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was     
required to file such reports), and (2) has been subject to such filing         
requirements for the past 90 days.    Yes X      No                             
                ---        ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405  
of Regulation S-K is not contained herein, and will not be contained, to the    
best of Registrant's knowledge, in definitive proxy or information statements   
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]                                                                  

State the aggregate market value of the voting stock held by non-affiliates of  
the Registrant as of March 2, 1999. The aggregate market value was computed by  
using the closing price on the New York Stock Exchange on March 2, 1999 of      
$29.563 per share.                                                              

       Common Shares, Par Value $1.25 Per Share       $2,016,878,297

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

         Class                            Outstanding at March 2, 1999
Common Shares $1.25 Par Value                       68,949,664 Shares     
---------------------------------         ------------------------------------- 

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DOCUMENTS INCORPORATED BY REFERENCE                                             

(1)    PROXY STATEMENT FOR 1999 ANNUAL MEETING                                  
OF SHAREHOLDERS TO BE HELD APRIL 21, 1999                         

                                                                [Download Table]

                                              PART OF 10-K          
                                               INTO WHICH           
        CAPTION OR HEADING         PAGE NO.   INCORPORATED  ITEM NO.
        ------------------         --------   ------------  --------
                                                                    
Information about Nominees for                                      
Election as Directors                   3-7           III         10

Executive Compensation                  7-15          III         11

Annual Meeting of Shareholders;                                     
Security Ownership of Directors                                     
and Management                          2-5           III         12

Compensation Committee Interlocks                                   
and Insider Participation                7            III         13


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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. During 1998, no significant changes occurred in
the manner of conducting the Registrant's business.                             

(b) Financial Information about Operating Segments                              
--------------------------------------------------                              

      The Registrant defines its operating segments as follows: North American
Sales and Service (NASS), International Sales and Service (ISS), Manufacturing  
and Development (M & D) and Corporate. The North American Sales and Service     
segment sells and services financial, retail, educational and medical systems in
the United States and Canada. The International Sales and Service segment sells 
and services financial, retail, educational and medical systems over the        
remainder of the globe. The Manufacturing and Development segment manufactures  
the equipment sold to NASS and ISS and also sells to limited external customers,
the largest of which is International Business Machines Corporation (IBM). The  
Corporate segment supports the other segments and eliminates all inter-segment  
revenues and costs. Detailed analysis of segment information can be found in    
Note 16 to the Consolidated Financial Statements.                               

(c) Description of Business                                                     
---------------------------                                                     

 The Registrant develops, manufactures, sells and services automated
teller machines (ATMs), electronic and physical security systems, various       
products used to equip bank facilities, software and integrated systems for     
global financial and commercial markets. Sales of systems and equipment are made
directly to customers by the Registrant's sales personnel and by manufacturer's 
representatives and distributors. The sales/support organization works closely  
with customers and their consultants to analyze and fulfill the customers'      
needs. Products are sold under contract for future delivery at agreed upon      
prices. In 1998, 1997, and 1996 the Registrant's sales and services of financial
systems and equipment accounted for more than 90% of consolidated net sales.    

   The principal raw materials used by the Registrant are steel, copper,
brass, lumber and plastics which are purchased from various major suppliers.    
Electronic parts and components are also procured from various suppliers. These 
materials and components are generally available in quantity at this time.      

The Registrant had one customer, IBM, who was its partner in the  
InterBold joint venture, that accounted for $148,755,000 of the total net sales 
of $1,185,707,000 in 1998, $173,751,000 of the total net sales of $1,226,936,000
in 1997, and $146,103,000 of the total net sales of $1,030,191,000 in 1996. On  
January 27, 1998, the Registrant completed its purchase of IBM's 30 percent     
minority interest in InterBold for $16.1 million, IBM's tax capital account in  
InterBold.                                                                      

Backlog as of December 31, 1998 was $299,739,000 which was an 8.2%
increase from December 31, 1997 backlog of $276,986,000. While this increase in 
backlog can be considered positive, order backlog is not the sole indicator of  
future revenue streams. There are numerous other factors which influence the    
amount and timing of revenue in future periods.                                 

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ITEM 1. BUSINESS. - (continued)                                                 
-----------------                                                               

  All phases of the Registrant's business are highly competitive; some
products being in competition directly with similar products and others         
competing with alternative products having similar uses or producing similar    
results. Registrant believes, based upon outside independent industry surveys,  
that it is a leading manufacturer of automated teller machines in the United    
States and is also a market leader internationally. In the area of automated    
transaction systems, the Registrant competes primarily with NCR Corporation,    
Triton, Siemens-Nixdorf, Dassault, Bull, Olivetti and Fujitsu. In serving the   
security products market for the financial services industry, the Registrant    
competes primarily with Mosler and Lefebure in the security equipment and       
systems field. Of these, some compete in only one or two product lines, while   
others sell a broader spectrum of products competing with the Registrant.       
However, the unavailability of comparative sales information and the large      
variety of individual products makes it impossible to give reasonable estimates 
of the Registrant's competitive ranking in or share of the market in its        
security product fields of activity. Many smaller manufacturers of safes,       
surveillance cameras, alarm systems and remote drive-up equipment are found in  
the market.                                                                     

    The Registrant charged to expense approximately $42.9 million in 1998,
$45.1 million in 1997, and $41.8 million in 1996 for research and development   
costs.                                                                          

      Compliance by the Registrant with federal, state and local environmental
protection laws during 1998 had no material effect upon capital expenditures,   
earnings or the competitive position of the Registrant and its subsidiaries.    

   The total number of employee associates employed by the Registrant at
December 31, 1998 was 6,489 compared with 6,714 at the end of the preceding     
year.                                                                           

(d) Financial Information about International and U.S.                          
------------------------------------------------------                          
Operations and Export Sales                                             
---------------------------                                             

  Sales to customers outside the United States as a percent of total
consolidated net sales approximated 25.1 percent in 1998, 26.1 percent in 1997, 
and 22.3 percent in 1996.                                                       

ITEM 2. PROPERTIES.                                                             
-------------------                                                             

        The Registrant's corporate offices are located in North Canton, Ohio. It
owns facilities (approximately 1.5 million square feet) in Canton, Green and    
Newark, Ohio; Lynchburg, Staunton and Danville, Virginia; Lexington, North      
Carolina; Sumter, South Carolina; Melbourne, Australia; Mexico City, Mexico; and
leases facilities (approximately .5 million square feet) in Akron, Canton, Canal
Fulton, Massillon, Newark and Seville, Ohio; Rancho Dominguez, California;      
Caracas, Venezuela; London, England; Sydney, Australia; Buenos Aires, Argentina;
Stuttgart, Germany; Paris, France and Shanghai, China. These facilities house   
manufacturing, production, associated engineering, warehousing, testing,        
administration and development and distribution for all product lines.          

ITEM 3.  LEGAL PROCEEDINGS.                                                     
---------------------------                                                     

    At December 31, 1998, the Registrant was a party to several lawsuits
that were incurred in the normal course of business, none of which individually 
or in the aggregate is considered material in relation to the Registrant's      
financial position or results of operations.                                    

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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 1998.                                                         

ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT.                                  
----------------------------------------------                                  

Refer to pages 6 through 8.                                     

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                                                        [Enlarge/Download Table]


EXECUTIVE OFFICERS OF THE REGISTRANT                                                                            

                                                                                        Other Positions         
                                                                       Year Elected        Held Last            
     Name                  Age              Title                     Present Office      Five Years            
-----------------          ---        ----------------------          --------------    ----------------        

                                                                                      1996-98                   
                                                                                      -------                   
                                                                                                                
Robert W. Mahoney           62        Chairman of the Board,              1998        Chairman of the Board     
                                       President and Chief Executive                  and Chief Executive       
                                       Officer and Director                           Officer and Director      
                                                                                      1993-96                   
                                                                                      -------                   
                                                                                      Chairman of the Board,    
                                                                                      President and Chief       
                                                                                      Executive Officer and     
                                                                                      Director - Diebold        

Gerald F. Morris            55        Executive Vice President            1993        --                        
                                       and Chief Financial Officer                                              

                                                                                      1994-96                   
                                                                                      -------                   
Alben W. Warf               60        Senior Vice President,              1996        Group Vice President,     
                                       Electronic Systems                             Self-Service Systems -    
                                       Development and                                Diebold                   
                                       Manufacturing                                                            

                                                                                      1993-96                   
                                                                                      -------                   
David Bucci                 47        Group Vice President,               1997        Vice President, North     
                                        North American                                American Sales and Service
                                        Sales and Service                             Eastern Division - Diebold

Michael J. Hillock          47        Group Vice President,               1997        1993-97                   
                                       International Sales                            -------                   
                                       and Service                                    Vice President and        
                                                                                      General Manager,          
                                                                                      Sales and Service,        
                                                                                      Europe, Middle East       
                                                                                      and Africa                


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EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)                              

                                                        [Enlarge/Download Table]


                                                                       Other Positions           
                                                        Year Elected      Held Last              
     Name             Age        Title                 Present Office    Five Years              
-----------------     ---  ----------------------      --------------  ----------------          
                                                                                                 
Charles J. Bechtel     53  Vice President,                  1998        1997-98                  
                             Global Support Services                    -------                  
                                                                        Vice President,          
                                                                        Information Systems      
                                                                        1990-97                  
                                                                        -------                  
                                                                        Vice President, Marketing
                                                                        and Sales Operations     

James L.M. Chen        38  Vice President and               1998        1996-98                  
                            Managing Director,                          -------                  
                            Asia/Pacific                                Philips Electronics      
                                                                        China B.V.               
                                                                        General Manager,         
                                                                        Business Electronics     
                                                                        1994-96                  
                                                                        -------                  
                                                                        AT&T China Company       
                                                                        Limited                  
                                                                        Managing Director,       
                                                                        Global Information       
                                                                        Solutions, China         

Warren W. Dettinger    45  Vice President,                  1989        --                       
                            General Counsel and                                                  
                            Assistant Secretary                                                  

                                                                        1996-97                  
                                                                        -------                  
Reinoud G. J. Drenth   35  Vice President and               1997        Vice President           
                            Managing Director, Europe                   Worldwide Marketing      
                            Middle East, and Africa                     - Diebold                
                                                                        1987-96                  
                                                                        -------                  
                                                                        NCR Corporation          
                                                                        1995 - Marketing Vice    
                                                                        President, Financial     
                                                                        Services Industry        
                                                                        1994 - Executive         
                                                                        Assistant, Worldwide     
                                                                        Industry Marketing       

Donald E. Eagon, Jr.   56  Vice President,                  1990        --                       
                            Corporate Communications                                             


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EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)                              

                                                        [Enlarge/Download Table]

                                                                            Other Positions            
                                                            Year Elected      Held Last                
     Name                 Age        Title                  Present Office    Five Years               
-----------------         ---  ----------------------       --------------  ----------------           

                                                                                                       
Charee Francis-Vogelsang   52    Vice President and              1983          --                      
                                  Secretary                                                            

Bartholomew J. Frazzitta   56    Vice President and              1990          --                      
                                  General Manager,                                                     
                                  Security Products                                                    

Larry D. Ingram            52    Vice President,                 1993         --                       
                                  Procurement and Services                                             

Charles B. Scheurer        57    Vice President,                 1991          --                      
                                  Human Resources                                                      

Robert L. Stockamp         55    Vice President and              1990          --                      
                                  Corporate Controller                                                 

                                                                               1984-97                 
                                                                               -------                 
Ernesto R. Unanue          57    Vice President and              1997          Vice President of Sales,
                                  Managing Director,                           Carribbean and South    
                                  Latin America                                American Division       

Robert J. Warren           52    Vice President and              1990          --                      
                                   Treasurer                                                           


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.                                    
----------------------------                                    

        On January 30, 1997, the Board of Directors of the Registrant declared a
three-for-two stock split which was effected in the form of a stock dividend,   
distributed on February 19, 1997, to shareholders of record on February 7, 1997.
Accordingly, all numbers of Common Shares, except authorized shares and treasury
shares, and all per share data have been restated to reflect this stock split.  

    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:                                                      

                                                                [Download Table]

                     1998                  1997                   1996    
             --------------------  --------------------  -----------------
               High      Low          High      Low         High      Low 
              ------    -----        ------    -----       ------    -----
                                                                          
1st Quarter   $55.31    $41.69       $44.88   $36.38      $27.08    $22.44
2nd Quarter    44.44     23.63        43.63    28.00       32.17     24.17
3rd Quarter    31.44     20.00        50.63    39.75       39.08     27.75
4th Quarter    36.88     19.13        50.94    42.13       42.33     35.58
                                      -----    -----      ------    ------

Full Year     $55.31    $19.13       $50.94   $28.00      $42.33    $22.44
              ======    ======       ======   ======      ======    ======


     There were approximately 109,511 shareholders at December 31, 1998,
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 $0.56 in 1998, $0.50 in 1997, and $0.45 in 1996.       

       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 are considered unregistered.                 

                                                        [Enlarge/Download Table]

ITEM 6. SELECTED FINANCIAL DATA.                                                                                
--------------------------------                                                                                
     (Dollars in thousands)                                                                                     
                                                   1998          1997          1996        1995          1994   
                                               -------------  -----------  -----------  -----------  -----------
                                                                                                                
         Net Sales                               $1,185,707    $1,226,936   $1,030,191    $863,409      $760,171
         Net Income                                  76,148       122,516       97,425      76,209        63,511
         Basic earnings per share                      1.10          1.78         1.42        1.11          0.93
         Diluted earnings per share                    1.10          1.76         1.40        1.10          0.93
         Total Assets                             1,004,188       991,050      859,101     749,795       666,174
         Cash dividends paid per Common Share          0.56          0.50         0.45        0.43          0.39


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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 1996 to 
1998. Comments on significant year-to-year fluctuations follow the table.       

                                                        [Enlarge/Download Table]


                                                   1998                                  1997                             1996      
                                     ---------------------------------   ----------------------------------    ---------------------
                                                    Percent    Percent                Percent     Percent                   Percent 
                                                    of Net    Increase                 of Net     Increase                  of Net  
(Dollars in thousands)                Amount         Sales   (Decrease)    Amount      Sales    (Decrease)       Amount      Sales  
====================================================================================================================================
                                                                                                                                    
Net sales                                                                                                                           
  Products .......................   $750,161        63.3%      (9.1)%   $825,125        67.3%        21.5%    $679,053      65.9%  
  Services .......................    435,546        36.7        8.4      401,811        32.7         14.4      351,138      34.1   
                                    ------------------------------------------------------------------------------------------------
                                    1,185,707       100.0       (3.4)   1,226,936       100.0         19.1    1,030,191     100.0   

Cost of sales                                                                                                                       
  Products .......................    462,788        61.7       (8.8)     507,322        61.5         20.4      421,261      62.0   
  Special charges ................      9,864          --         --           --          --           --           --        --   
  Services .......................    306,805        70.4        6.0      289,514        72.1         15.2      251,418      71.6   
                                    ------------------------------------------------------------------------------------------------
                                      779,457        65.7       (2.2)     796,836        64.9         18.5      672,679      65.3   
                                    ------------------------------------------------------------------------------------------------

Gross profit .....................    406,250        34.3       (5.5)     430,100        35.1         20.3      357,512      34.7   
Selling and administrative expense    194,535        16.4        1.4      191,842        15.7         15.2      166,572      16.2   
Research, development and                                                                                                           
  engineering expense ............     54,215         4.6       (0.3)      54,397         4.4          7.6       50,576       4.9   
Realignment charges ..............     51,253         4.3         --           --          --           --           --        --   
                                    ------------------------------------------------------------------------------------------------
                                      300,003        25.3       21.8      246,239        20.1         13.4      217,148      21.1   
                                    ------------------------------------------------------------------------------------------------

Operating profit .................    106,247         9.0      (42.2)     183,861        15.0         31.0      140,364      13.6   
Other income, net ................     15,403         1.3      123.4        6,894         0.5        (34.5)      10,533       1.0   
Minority interest ................     (1,843)       (0.2)     (63.8)      (5,096)       (0.4)        16.0       (4,393)     (0.4)  

                                    ------------------------------------------------------------------------------------------------

Income before taxes ..............    119,807        10.1      (35.5)     185,659        15.1         26.7      146,504      14.2   
Taxes on income ..................     43,659         3.7      (30.9)      63,143         5.1         28.7       49,079       4.7   
                                    ------------------------------------------------------------------------------------------------
Net income .......................   $ 76,148         6.4%     (37.8)%   $122,516        10.0%        25.8%    $ 97,425       9.5%  
                                    ================================================================================================


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REALIGNMENT AND SPECIAL CHARGES                                                 

In the second quarter of 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 for the write-off of primarily    
inventory from exited lines of business and a realignment charge of $51,253 for 
all other realignment costs.                                                    

Industry-wide banking trends such as bank mega-mergers, as well as the          
transition from IBM to the Registrant's own international distribution channels,
prompted the re-evaluation of the Registrant's business plans and organizational
structure. North American facilities were consolidated and certain facilities   
were closed. More than 600 jobs were estimated to be eliminated. At December 31,
1998, 519 jobs had been terminated. The Registrant estimated savings of $22,000 
annually from the realignment program. Details of the components and remaining  
realignment accrual can be found in Note 8 to the 1998 Consolidated Financial   
Statements.                                                                     

OPERATING SEGMENTS                                                              

The Registrant adopted Statement of Financial Accounting Standards No. 131,     
"Operating Segments," for the 1998 Annual Report on Form 10-K. The Registrant   
reports the following operating segments: North American Sales and Service,     
International Sales and Service, Manufacturing and Development and Corporate.   

North American Sales and Service operating profit in 1998, 1997 and 1996 was    
$149,231, $164,723 and $147,589, respectively. The decline in profit from 1997  
to 1998 was due mainly to decreased shipments of ATMs. Operating profit for the 
International Sales and Service organization in 1998, 1997 and 1996 was $8,189, 
$18,170 and $7,936, respectively. The decline in 1998 operating profit          
internationally is attributed to expenses relating to the Registrant setting up 
its own international distribution systems. Details of revenue from customers,  
inter-segment revenues and operating profit contribution can be found in Note 16
to the 1998 Consolidated Financial Statements.                                  

NET SALES                                                                       

Net sales for 1998 totaled $1,185,707, which represented a decline of $41,229 or
3.4 percent from 1997 and growth of $155,516 or 15.1 percent from 1996. In 1998,
sales exceed the $1 billion mark for the third consecutive year in the          
Registrant's 139 - year history.                                                

Product net sales of $750,161 fell short of 1997 by $74,964 or 9.1 percent,     
while product net sales were up over 1996 by $71,108 or 10.5 percent. During    
1998, the Registrant experienced a slow-down in global sales of ATMs. The       
decrease in sales volumes can be attributed to recent banking industry          
mega-mergers as well as banks channeling resources into remediating year 2000   
issues, as opposed to making capital expenditures for ATMs. Sales to IBM dropped
by 14.4 percent in 1998 versus 1997, when IBM was the Registrant's main         
international distribution channel. The Registrant is currently implementing    
plans for its own international sales and distribution channels. Total U.S.     
product revenue in 1998 fell 9.8 percent from 1997, and sales of products       
outside the United States fell 7.6 percent in 1998 from 1997.                   

1998 was a strong year for the Registrant's service business. Service net sales 
of $435,546 increased $33,735 or 8.4 percent from 1997 and were up $84,408 or   
24.0 percent from 1996. The major factors contributing to the service revenue   
gain in 1998 were the growth of the installed base of equipment resulting from  
new product installations and continued growth of service offerings such as     
first-line maintenance.                                                         

Total product backlog of unfilled orders reached $299,739 at December 31, 1998, 
compared with $276,986 at the end of 1997 and $233,586 at the end of 1996. The  
December 31, 1998 backlog is the highest level attained in the Registrant's     
history. While this increase in backlog is considered favorable, backlog is not 
the sole indicator of future revenue streams. Production schedules, customer    
priorities and other such factors can affect the pace of converting backlog into
revenue.                                                                        

COST OF SALES AND EXPENSES                                                      

Cost of sales for 1998 was $779,457, compared with $796,836 in 1997 and $672,679
in 1996. The 1998 decline is mostly attributable to lower sales volumes on ATMs.

Gross profits on product sales decreased $30,430 from 1997 and increased $29,581
from 1996 to a level of $287,373 in 1998. Product gross margins in 1998 were    
38.3 percent of product sales, compared with 38.5 percent in 1997 and 38.0      
percent in 1996. The relative stability of product gross profits as a percentage
of product sales is due to the Registrant's continued cost reduction efforts.   

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Service gross profits of $128,741 in 1998 increased from $112,297 in 1997 and   
$99,720 in 1996. Service gross margins as a percentage of service sales were    
29.6 percent in 1998, 27.9 percent in 1997, and 28.4 percent in 1996. Gross     
margins on service sales improved in 1998 over previous years due mainly to     
increased profitability in North America.                                       

Operating expenses in 1998 were $248,750 (excluding realignment charges)        
compared with $246,239 in 1997 and $217,148 in 1996. The stability of operating 
expenses in 1998 stems from the Registrant's efforts to contain operating costs 
on lower sales volumes. Operating expenses as a percentage of net sales were    
21.0 percent in 1998 (excluding realignment charges), 20.1 percent in 1997 and  
21.1 percent in 1996.                                                           

Operating profit of $167,364 in 1998 (excluding realignment charges) decreased  
9.0 percent from $183,861 in 1997, and increased 19.2 percent over 1996         
operating profits of $140,364. Operating profit margin of 14.1 percent in 1998  
(excluding realignment charges) fell slightly over 1997 operating profit margin 
of 15.0 percent, but grew over the 13.6 margin in 1996.                         

OTHER INCOME, NET AND MINORITY INTEREST                                         

Other income, net increased $8,509 from 1997 and $4,870 from 1996. The net      
increase is due in part to reduced amortization costs relating to intangible    
assets. Investment income decreased in 1998 as compared with 1997 due to lower  
interest rates achieved in the Registrant's municipal bond portfolio. The drop  
in municipal bond interest was partially offset by a continued growth in        
interest income from finance receivables.                                       

Minority interest of $1,843 decreased from $5,096 in 1997 and $4,393 in 1996 due
to the Registrant purchasing IBM's 30 percent minority share in the InterBold   
joint venture in January 1998. Minority interest consisted primarily of income  
or losses allocated to the minority ownership of Diebold Financial Equipment    
Company, Ltd. (China) and Diebold OLTP Systems C.A. (Venezuela). 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.                                                                   

INCOME                                                                          

1998 income before taxes amounted to $180,924 (excluding realignment charges).  
Although 1998 income before taxes decreased from 1997 results of $185,659, 1998 
income before taxes as a percentage of net sales was 15.3 percent, an           
improvement over 1997's 15.1 percent of net sales. 1996 income before taxes was 
$146,504, or 14.2 percent of net sales.                                         

The effective tax rate was 36.4 percent in 1998 compared with 34.0 percent in   
1997 and 33.5 percent in 1996. The primary reason for the higher tax rate in    
1998 was the write-off of intangible assets in connection with the Registrant's 
realignment program, which are non-deductible for tax purposes. The Registrant  
expects the effective tax rate to trend higher in the future due to a reduction 
in tax-exempt interest as a percentage of pretax income and tax law changes that
have affected insurance contracts. Details of the reconciliation between the    
U.S. statutory rate and the effective tax rate are included in Note 14 of the   
1998 Consolidated Financial Statements.                                         

1998 net income of $117,998 (excluding realignment charges) fell short of 1997  
results of $122,516. For both 1998 (excluding realignment charges) and 1997, net
income as a percentage of net sales was 10.0 percent. Net income in 1996 was    
$97,425, or 9.5 percent of net sales.                                           

MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITION                                    

The Registrant continued to enhance its financial position during 1998. Total   
assets increased $13,138 or 1.3 percent to a 1998 year-end level of $1,004,188. 
Asset turnover (excluding cash, cash equivalents and short-term and long-term   
investment securities) fell in 1998 to 1.53 versus 1.69 in 1997.                

Total current assets at December 31, 1998, of $543,548 represented a decrease of
$6,289 or 1.1 percent from the prior year-end. The decrease in trade receivables
and inventories was offset by an increase in cash, finance receivables and      
deferred income taxes. Trade receivables decreased $35,994 or 11.9 percent to a 
level of $266,891 at December 31, 1998. As a percentage of net sales, trade     
receivables were 22.5 percent in 1998, 24.7 percent in 1997 and 24.9 percent in 
1996. Inventories at year-end 1998 totaled $127,880 which represented a decrease
of $202 or 0.2 percent from 1997. The decrease in trade receivables and         
inventory was due to decreased sales volumes as well as the write-off of certain
accounts receivable and inventory under the Registrant's realignment program.   

Short-term investments and long-term securities and other investments increased 
by $31,106, or 17.8 percent to a level of $ 205,441 at December 31, 1998,       
largely due to additional cash flow from operating activities. The Registrant   
anticipates being able to meet both short- and long-term operational funding    
requirements without liquidating individual securities prior to maturity by     
varying the timing of maturities within the portfolio. However, since most of   
these                                                                           

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securities are marketable, they could readily be converted into cash and cash   
equivalents if needed to fund future acquisitions, joint ventures and strategic 
alliances throughout the world as part of a continuing strategy to strengthen   
the Registrant's global competitiveness.                                        

Total property, plant and equipment, net of accumulated depreciation, was       
$147,131 at the end of 1998, which represented a net increase of $3,230, or 2.2 
percent over prior year-end. Capital expenditures were $30,768 in 1998, compared
with $67,722 in 1997. The drop in 1998 capital spending versus 1997 was expected
in the light of the high level of capital expenditures in 1997 from the         
expansion of facilities for manufacturing, research, software development,      
management development, and support services. The accounting for the            
Registrant's investment in projects related to internal applications hardware   
and software has been done in accordance with EITF Issue 97-13, "Accounting for 
Business Process Reengineering Costs." Accordingly, the Registrant has expensed 
as incurred, when applicable, business process re-engineering costs as well as  
expenditures incurred for preliminary software project stage activities. The    
Registrant has capitalized costs related to application development stage       
activities, post-implementation/operation stage activities, as well as fixed    
asset acquisitions, such as new computer equipment, office furniture, and work  
stations related to these projects.                                             

Total current liabilities at December 31, 1998, were $235,533, which represented
a decrease of $6,547, or 2.7 percent from the prior year-end. The primary cause 
for the decrease in current liabilities was due to a 13.6 percent drop in       
accounts payable. The Registrant's current ratio was 2.3 at the end of 1998 as  
well as 1997.                                                                   

At December 31, 1998, the Registrant had lines of credit totaling $150,000, all 
unrestricted as to use. 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 Registrant's strong financial    
position should ensure the availability of adequate additional financial        
resources.                                                                      

Pension liabilities were $22,745 at December 31, 1998, representing an increase 
of $2,130 or 10.3 percent over prior year-end. The net periodic pension costs of
$4,864 charged to income in 1998 represented an increase of $218 from the prior 
year.                                                                           

Minority interests of $3,741 represented the minority interest in Diebold       
Financial Equipment Company, Ltd. (China) owned by the Aircraft Industries of   
China and the Industrial and Commercial Bank of China, Shanghai Pudong Branch   
and the minority interest in Diebold OLTP Systems, C.A (Venezuela), owned by    
five individual investors.                                                      

Shareholders' equity increased $30,542 or 4.6 percent to $699,123 at December   
31, 1998. Shareholders' equity per share was $10.15 at the end of 1998, compared
with $9.69 in 1997. The Common Shares of the Registrant are listed on the New   
York Stock Exchange with a symbol of DBD. There were approximately 7,782        
registered shareholders of record as of December 31, 1998.                      

The Board of Directors declared a first-quarter 1999 cash dividend of $0.15 per 
share. This amount, which represents a 7.1 percent increase from the prior      
year's quarterly dividend rate, will be paid on March 12, 1999, to shareholders 
of record on February 19, 1999. Comparative quarterly cash dividends paid in    
1998 and 1997 were $0.14 and $0.125 per share, respectively.                    

MANAGEMENT'S ANALYSIS OF CASH FLOWS                                             

During 1998, the Registrant generated $177,238 in cash from operating           
activities, compared with $111,330 in 1997 and $96,456 in 1996. In addition to  
net income of $76,148 adjusted for depreciation, amortization and other charges 
of $39,540, decreases in accounts receivable also increased cash provided by    
operations. Cash was utilized in operations to reduce accounts payable and to   
maintain adequate inventory levels. Expressed as a percentage of total assets   
employed, the Registrant's cash yield from operations was 17.6 percent in 1998, 
and 11.2 percent in 1997 and 1996.                                              

Net cash generated from operating activities in 1998 was used to reinvest       
$96,509 in assets of the Registrant, compared with $102,725 in 1997 and $55,299 
in 1996. The Registrant returned $38,631 to shareholders in the form of cash    
dividends paid during 1998, which was a 12.1 percent increase from 1997 and a   
23.9 percent increase from 1996.                                                

OTHER BUSINESS INFORMATION                                                      

YEAR 2000 DISCLOSURE                                                            

The Registrant is firmly committed to providing products and systems that are   
ready to operate in the                                                         

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year 2000 and beyond. Strategic initiatives have been under way to address the  
readiness of products delivered to our customers, corporate business systems,   
and the readiness of our suppliers. All of these initiatives are in place to    
assist in the continued delivery of products and services to our customers      
without interruption.                                                           

The Registrant is actively pursuing the year 2000 readiness of its corporate    
systems. The project was initiated in 1996 within the Global Support            
organization. Corporate applications have been inventoried and categorized as   
active, inactive, or year 2000 ready. To assist in this process and verify the  
results, the Registrant is pursuing the evaluation and remediation, if          
necessary, of all of the active applications including service invoicing,       
customer information systems, service systems, dispatch systems, and financial  
systems. A new enterprise system, verified to be year 2000 ready by the system  
provider, is being installed that addresses manufacturing, order entry, and     
links to the other corporate applications.                                      

The Registrant's corporate information systems project completion is scheduled  
for the first quarter of 1999. Although the Registrant plans to meet its        
projected completion date, it can provide no assurances that all of its year    
2000 efforts will be successful. As required by standard accounting practice,   
the Registrant is expensing as incurred all costs associated with these systems 
changes. The costs are not expected to have a material effect on the            
Registrant's financial position or results of operation.                        

A project is also under way to contact all Diebold suppliers to assess their    
level of readiness for operating in the year 2000 and beyond. The Registrant    
will evaluate the readiness of the suppliers and take appropriate steps to      
develop a confidence that they will continue to operate without interruption in 
business.                                                                       

The Registrant has formed an Oversight Committee to continually review issues   
related to the year 2000 requirements. This Committee, consisting of senior     
management members, remains focused on the completion of all year 2000 related  
initiatives, and appropriation of sufficient resources to ensure timely         
completion of year 2000 activities. Contingency plans are currently being       
developed by the Oversight Committee. These efforts are to minimize any         
potential year 2000 compliance impact; however, it is not possible to guarantee 
compliance. Failure of the Registrant or any third party with whom the          
Registrant has a material relationship to achieve year 2000 compliance could    
have a material adverse effect on the Registrant's business, financial condition
or results of operations. Additional year 2000 information on products and      
services can be found on the Registrant's Web site at "www.diebold.com."        

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.                            

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                           CONSOLIDATED BALANCE SHEETS                                                                              
                     DIEBOLD, INCORPORATED AND SUBSIDIARIES                                                                         
                           DECEMBER 31, 1998 AND 1997                                                                               
                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)                                                                    
                                                                                                1998                        1997    
====================================================================================================================================
                                                                                                                                    
ASSETS                                                                                                                              
Current assets                                                                                                                      
  Cash and cash equivalents........................................................        $    42,540                    $ 20,296  
  Short-term investments...........................................................             37,433                      36,473  
  Trade receivables................................................................            266,891                     302,885  
  Inventories......................................................................            127,880                     128,082  
  Finance receivables .............................................................             19,856                      13,559  
  Deferred income taxes ...........................................................             34,038                      32,159  
  Prepaid expense and other current assets.........................................             14,910                      16,383  
------------------------------------------------------------------------------------------------------------------------------------
     Total current assets..........................................................            543,548                     549,837  

------------------------------------------------------------------------------------------------------------------------------------
Securities and other investments...................................................            168,008                     137,862  
Property, plant and equipment, at cost.............................................            278,435                     259,634  
  Less accumulated depreciation and amortization...................................            131,304                     115,733  
------------------------------------------------------------------------------------------------------------------------------------
                                                                                               147,131                     143,901  
Deferred income taxes ............................................................              12,716                       8,654  
Finance receivables...............................................................              65,573                      60,970  
Other assets......................................................................              67,212                      89,826  
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           $ 1,004,188                    $991,050  
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                
Current liabilities                                                                                                                 
  Accounts payable.................................................................        $    89,881                    $104,043  
  Estimated income taxes...........................................................             13,582                      12,721  
  Accrued insurance................................................................             16,386                      18,972  
  Accrued installation costs.......................................................             17,455                      12,909  
  Deferred income..................................................................             57,985                      60,891  
  Other current liabilities........................................................             40,244                      32,544  
------------------------------------------------------------------------------------------------------------------------------------
     Total current liabilities.....................................................            235,533                     242,080  
------------------------------------------------------------------------------------------------------------------------------------
Bonds payable......................................................................             20,800                      20,800  
Pensions...........................................................................             22,745                      20,615  
Postretirement benefits............................................................             22,246                      22,033  
Minority interest..................................................................              3,741                      16,941  
Commitments and contingencies......................................................                ---                         ---  
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 69,494,483 and 69,275,714 shares, respectively                                                                          
     outstanding 68,880,761 and 69,004,838 shares, respectively....................             86,868                      86,595  
  Additional capital...............................................................             43,281                      38,247  
  Retained earnings................................................................            604,227                     566,710  
  Treasury shares, at cost (613,722 and 270,876 shares, respectively)..............            (21,902)                    (12,882) 
  Accumulated other comprehensive income...........................................            (12,802)                     (9,706) 
  Other............................................................................               (549)                       (383) 
------------------------------------------------------------------------------------------------------------------------------------
    Total shareholders' equity.....................................................            699,123                     668,581  
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           $ 1,004,188                    $991,050  
====================================================================================================================================
See accompanying Notes to Consolidated Financial Statements.                                                                        

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                       CONSOLIDATED STATEMENTS OF INCOME                                                                     
                    DIEBOLD, INCORPORATED AND SUBSIDIARIES                                                                   
                        YEARS ENDED DECEMBER 31, 1998,                                                                       
                                 1997 AND 1996                                                                               
                    (In thousands except per share amounts)                                                                  

                                                                                   1998              1997             1996   
=============================================================================================================================
Net sales                                                                                                                    
                                                                                                                             
  Products...............................................................        $750,161         $825,125          $679,053 
  Services...............................................................         435,546          401,811           351,138 
-----------------------------------------------------------------------------------------------------------------------------
                                                                                1,185,707        1,226,936         1,030,191 

-----------------------------------------------------------------------------------------------------------------------------
Cost of sales                                                                                                                
  Products...............................................................         462,788          507,322           421,261 
  Special charges........................................................           9,864           --                --     
  Services...............................................................         306,805          289,514           251,418 
-----------------------------------------------------------------------------------------------------------------------------
                                                                                  779,457          796,836           672,679 
-----------------------------------------------------------------------------------------------------------------------------
Gross profit.............................................................         406,250          430,100           357,512 

Selling and administrative expense.......................................         194,535          191,842           166,572 
Research, development and engineering expense............................          54,215           54,397            50,576 
Realignment charges......................................................          51,253           --                --     
-----------------------------------------------------------------------------------------------------------------------------
                                                                                  300,003          246,239           217,148 
-----------------------------------------------------------------------------------------------------------------------------
Operating profit.........................................................         106,247          183,861           140,364 

Other income (expense)                                                                                                       
  Investment income......................................................          18,587           19,109            19,307 
  Miscellaneous, net.....................................................          (3,184)         (12,215)           (8,774)
Minority interest........................................................          (1,843)          (5,096)           (4,393)
-----------------------------------------------------------------------------------------------------------------------------
Income before taxes......................................................         119,807          185,659           146,504 
Taxes on income..........................................................          43,659           63,143            49,079 
-----------------------------------------------------------------------------------------------------------------------------
Net income...............................................................         $76,148         $122,516          $ 97,425 

=============================================================================================================================
Basic weighted-average number of shares..................................          68,960           68,939            68,796 
Diluted weighted-average number of shares................................          69,310           69,490            69,350 
Basic earnings per share.................................................        $   1.10         $   1.78          $   1.42 
Diluted earnings per share...............................................        $   1.10         $   1.76          $   1.40 
-----------------------------------------------------------------------------------------------------------------------------


See accompanying Notes to Consolidated Financial Statements.                    

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                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY                                                                    
                     DIEBOLD, INCORPORATED AND SUBSIDIARIES                                                                         
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996                                                                      
                             (Dollars in thousands)                                                                                 

                                     Common Shares                                                                                  
                                     -------------                                                                                  
                                                                                                    Accumulated                     
                                                                                          Compre-      Other                        
                                                  Par   Additional  Retained   Treasury   hensive  Comprehensive                    
                                    Number       Value   Capital    Earnings   Shares     Income       Income      Other      Total 
=================================================================================================================================== 
Balance,                                                                                                                            
                                                                                                                                    
  December 31, 1995               45,893,678    $57,367    $52,420    $412,432   $(3,849)            $(10,061)    $(629)   $507,680 
----------------------------------------------------------------------------------------------------------------------------------- 
Net income - 1996................                                       97,425           $   97,425                          97,425 
                                                                                         ----------                                 
Translation adjustment...........                                                               240                             240 
Pensions.........................                                                               185                             185 
Unrealized loss on                                                                                                                  
  investment securities..........                                                              (432)                           (432)
                                                                                        -----------                                 
Other comprehensive income.......                                                                (7)       (7)                      
                                                                                        -----------                                 
Comprehensive income.............                                                        $   97,418                                 
                                                                                         ==========                                 
Stock options exercised..........     86,918        108      1,208                                                            1,316 
Unearned compensation............      3,000          4        104                                                  414         522 
Performance shares...............     67,892         85      3,060                                                            3,145 
Dividends declared...............                                      (31,190)                                             (31,190)
Treasury shares..................                                                 (3,321)                                    (3,321)
Three-for-two stock split........ 22,945,788     28,682    (28,682)                                                              -- 
------------------------------------------------------------------------------------------------------------------------------------
Balance,                                                                                                                            
  December 31, 1996               68,997,276    $86,246    $28,110    $478,667   $(7,170)            $(10,068)    $(215)   $575,570 
------------------------------------------------------------------------------------------------------------------------------------
Net income - 1997................                                      122,516            $ 122,516                         122,516 
                                                                                          ---------                                 
Translation adjustment...........                                                              (185)                           (185)
Pensions.........................                                                               217                             217 
Unrealized gain on                                                                                                                  
  investment securities..........                                                               333                             333 
                                                                                          ---------                                 
Other comprehensive income.......                                                               365       365                       
                                                                                          ---------                                 
Comprehensive income.............                                                         $ 122,881                                 
                                                                                          =========                                 
Stock options exercised..........    180,247        226      5,821                                                            6,047 
Unearned compensation............     11,000         14        430                                                 (171)        273 
Performance shares...............     87,191        109      3,886                                                            3,995 
Dividends declared...............                                      (34,473)                                             (34,473)
Treasury shares..................                                                 (5,712)                                    (5,712)
------------------------------------------------------------------------------------------------------------------------------------
Balance,                                                                                                                            
  December 31, 1997               69,275,714    $86,595    $38,247    $566,710  $(12,882)             $(9,703)    $(386)   $668,581 
------------------------------------------------------------------------------------------------------------------------------------
Net income - 1998................                                       76,148             $ 76,148                          76,148 
                                                                                          ---------                                 
Translation adjustment...........                                                               150                             150 
Pensions.........................                                                            (2,797)                         (2,797)
Unrealized loss on                                                                                                                  
  investment securities..........                                                              (452)                           (452)
                                                                                          ----------                                
Other comprehensive income.......                                                            (3,099)   (3,099)                      
                                                                                          ---------                                 
Comprehensive income.............                                                         $  73,049                                 
                                                                                          =========                                 
Stock options exercised..........    208,031        260      4,538                                                            4,798 
Unearned compensation............     10,738         13        511                                                 (163)        361 
Dividends declared...............                                      (38,631)                                             (38,631)
Treasury shares..................                              (15)               (9,020)                                    (9,035)
------------------------------------------------------------------------------------------------------------------------------------
Balance,                                                                                                                            
  December 31, 1998               69,494,483    $86,868    $43,281    $604,227  $(21,902)            $(12,802)    $(549)   $699,123 
------------------------------------------------------------------------------------------------------------------------------------

See accompanying Notes to Consolidated Financial Statements.                                                                        


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                      CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                  
                     DIEBOLD, INCORPORATED AND SUBSIDIARIES                                                                  
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996                                                               
                             (Dollars in thousands)                                                                          

                                                                          1998                  1997                  1996   
---------------------------------------------------------------------------------------------------------------------------- 
Cash flow from operating activities:                                                                                         
                                                                                                                             
  Net income.....................................................       $76,148              $122,516                $97,425 
Adjustments to reconcile net income to cash                                                                                  
    provided by operating activities:                                                                                        
    Minority share of income.....................................         1,843                 5,096                  4,393 
    Depreciation and amortization................................        25,649                18,701                 20,984 
    Other charges and amortization...............................        13,891                 9,749                 11,979 
    Goodwill written off under realignment plan..................        23,001                    --                     -- 
    Deferred income taxes........................................        (4,192)                1,118                 (5,252)
    (Gain) loss on disposal of assets, net.......................         1,963                 1,113                    610 
    Loss (gain) on sale of investments, net......................          (232)                   --                     10 
    Cash provided (used) by changes in certain                                                                               
      assets and liabilities:                                                                                                
      Trade receivables..........................................        35,994               (46,313)               (59,427)
      Inventories................................................           202               (18,650)               (18,430)
      Prepaid expenses and other current assets..................         1,477                (2,730)                (3,948)
      Accounts payable...........................................       (14,162)                9,334                 27,805 
    Other certain assets and liabilities.........................        15,656                11,396                 20,307 
-----------------------------------------------------------------------------------------------------------------------------

Net cash provided by operating activities........................       177,238               111,330                 96,456 

Cash flow from investing activities:                                                                                         
  Proceeds from maturities of investments........................        41,438                52,109                 55,023 
  Proceeds from sales of investments.............................           599                    --                  5,675 
  Payments for purchases of investments..........................       (78,348)              (44,486)               (69,498)
  Capital expenditures...........................................       (30,768)              (67,722)               (33,581)
  Increase in net finance receivables............................       (10,900)              (28,499)                (2,821)
  Increase in other certain assets...............................       (18,456)              (14,068)               (10,223)
  Other..........................................................           (74)                  (59)                   126 
-----------------------------------------------------------------------------------------------------------------------------
  Net cash used by investing activities..........................       (96,509)             (102,725)               (55,299)

Cash flow from financing activities:                                                                                         
  Dividends paid.................................................       (38,631)              (34,473)               (31,190)
  Distribution for purchase if IBM's share of minority                                                                       
          interest in InterBold..................................       (16,141)                   --                     -- 
  Distribution of affiliate's earnings to minority                                                                           
          interest holder........................................            --                (1,295)                (5,719)
  Issuance of Common Shares......................................         4,612                 5,572                  1,248 
  Repurchase of  Common Shares...................................        (8,325)                 (798)                    -- 
  Proceeds from long-term borrowings.............................            --                20,800                     -- 
  Other..........................................................            --                    --                    691 
-----------------------------------------------------------------------------------------------------------------------------
  Net cash used by financing activities..........................       (58,485)              (10,194)               (34,970)
-----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents.................        22,244                (1,589)                 6,187 
Cash and cash equivalents at the beginning of the year...........        20,296                21,885                 15,698 
-----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year.................       $42,540              $ 20,296                $21,885 
============================================================================================================================ 

See accompanying Notes to Consolidated Financial Statements.                                                                 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DIEBOLD, INCORPORATED AND SUBSIDIARIES
 (Dollars in thousands except per share amounts)

NOTE 1:  SUMMARY OF SIGNIFICANT                                                 
ACCOUNTING POLICIES                                                             

PRINCIPLES OF CONSOLIDATION                                                     

The Consolidated Financial Statements include the accounts of the Registrant and
its wholly and majority-owned subsidiaries. All significant intercompany        
accounts and transactions have been eliminated.                                 

STATEMENTS OF CASH FLOWS                                                        

For the purposes of the Consolidated Statements of Cash Flows, the Registrant   
considers all highly liquid investments with a maturity of three months or less 
at the time of purchase to be cash equivalents. Cash paid during 1998, 1997 and 
1996 for income taxes amounted to $37,994, $60,738 and $47,293 respectively.    

INTERNATIONAL OPERATIONS                                                        

The Registrant translates the assets and liabilities of its non-U.S.            
subsidiaries at the exchange rates in effect at year-end and the results of     
operations at the average rate throughout the year. The translation adjustments 
are recorded directly as a separate component of shareholders' equity, while    
transaction gains (losses) are included in net income. Sales to customers       
outside the United States approximated 25.1 percent of net sales in 1998, 26.1  
percent in 1997, and 22.3 percent in 1996.                                      

FINANCIAL INSTRUMENTS                                                           

The carrying amount of financial instruments including cash and cash            
equivalents, trade receivables and accounts payable approximated fair value as  
of December 31, 1998 and 1997, because of the relatively short maturity of these
instruments.                                                                    

TRADE RECEIVABLES AND SALES                                                     

Revenue, after provision for installation, is generally recognized based on the 
terms of the sales contracts. The majority of sales contracts for product are   
written with selling terms "F.O.B. factory." However, certain sales contracts   
may have other terms such as "F.O.B. destination" or "upon installation." The   
Registrant recognizes revenue on these contracts when the appropriate event has 
occurred. The equipment that is sold is usually shipped and installed within one
year. Installation that extends beyond one year is ordinarily attributable to   
causes not under the control of the Registrant. Service revenue is recognized in
the period service is performed and subject to the individual terms of the      
service contracts.                                                              

The concentration of credit risk in the Registrant's trade receivables with     
respect to the banking and financial services industries is substantially       
mitigated by the Registrant's credit evaluation process, reasonably short       
collection terms and the geographical dispersion of sales transactions from a   
large number of individual customers. The Registrant maintains allowances for   
potential credit losses, and such losses have been within management's          
expectations.                                                                   

INVENTORIES                                                                     

Inventories are valued at the lower of cost or market applied on a first-in,    
first-out basis. Cost is determined on the basis of actual cost.                

INVESTMENT SECURITIES                                                           

Investments in debt and equity securities with readily determinable fair values 
are accounted for at fair value. The Registrant's investment portfolio is       
classified as available-for-sale.                                               

DEPRECIATION AND AMORTIZATION                                                   

Depreciation of property, plant and equipment is computed using the             
straight-line method for financial statement purposes. Accelerated methods of   
depreciation are used for federal income tax purposes. Amortization of leasehold
improvements is based upon the shorter of original terms of the lease or life of
the improvement.                                                                

RESEARCH AND DEVELOPMENT                                                        

Total research and development costs charged to expense were $42,946, $45,184,  
and $41,797 in 1998, 1997 and 1996, respectively.                               

OTHER ASSETS                                                                    

Other assets primarily consist of the costs in excess of the net assets of      
acquired businesses (goodwill), pension assets and certain other assets. These  
assets are stated at cost and, if applicable, are amortized ratably over a      
period of three to 25 years. The Registrant periodically monitors the value of  
goodwill by assessing whether the asset can be recovered over                   

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its remaining useful life through undiscounted cash flows generated by the      
underlying businesses.                                                          

DEFERRED INCOME                                                                 

Deferred income is recognized for customer billings in advance of the period in 
which the service will be performed and is recognized in income on a            
straight-line basis over the contract period.                                   

STOCK-BASED COMPENSATION                                                        

Compensation cost is measured on the date of grant only if the current market   
price of the underlying stock exceeds the exercise price. The Registrant        
provides pro forma net income and pro forma net earnings per share disclosures  
for employee stock option grants made in 1995 and future years as if the fair   
value based method had been applied.                                            

TAXES ON INCOME                                                                 

Deferred taxes are provided on a liability method whereby deferred tax assets   
are recognized for deductible temporary differences and operating loss          
carryforwards and deferred tax liabilities are recognized for taxable temporary 
differences. Temporary differences are the differences between the reported     
amounts of assets and liabilities and their tax bases. Deferred tax assets are  
reduced by a valuation allowance when, in the opinion of management, it is more 
likely than not that some portion or all of the deferred tax assets will not be 
realized. Deferred tax assets and liabilities are adjusted for the effects of   
changes in tax laws and rates on the date of enactment.                         

EARNINGS PER SHARE                                                              

Basic earnings per share are computed by dividing income available to common    
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflect the potential dilution that could    
occur if common stock equivalents were exercised and then shared in the earnings
of the Registrant.                                                              

COMPREHENSIVE INCOME                                                            

The Registrant adopted Statement of Financial Accounting Standards No. 130,     
"Reporting Comprehensive Income," on January 1, 1998. As permitted by the       
Statement, the Registrant displays comprehensive income in the Consolidated     
Statements of Shareholders' Equity and accumulated other comprehensive income   
separately from retained earnings and additional paid-in-capital in the         
Consolidated Balance Sheets and Statements of Shareholders' Equity. Items       
considered to be other comprehensive income include adjustments made for foreign
currency translation (under Statement 52), pensions (under Statement 87) and    
unrealized holding gains and losses on available-for-sale securities (under     
Statement 115).                                                                 

Accumulated other comprehensive income (loss) balances for 1998, 1997 and 1996  
for foreign currency translations were ($9,094), ($9,244) and ($9,059), for     
pensions were ($4,116), ($1,319) and ($1,536), and for unrealized holding gains 
on investment securities were $408, $859 and $526, respectively. The related tax
(expense) or benefit for adjustments to accumulated other comprehensive income  
for 1998, 1997 and 1996 for pensions were $1,506, ($117) and ($100) and for     
unrealized holding gains/(losses) on investment securities were $243, ($179) and
$232, respectively. Translation adjustments are not booked net of tax. Those    
adjustments are accounted for under the indefinite reversal criterion of APB    
Opinion 23, "Accounting for Income Taxes--Special Areas."                       

USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS            

The preparation of the Consolidated Financial Statements in conformity with     
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities and  
disclosure of contingent assets and liabilities at the date of the Consolidated 
Financial Statements and the reported amounts of revenues and expenses during   
the reporting period. Actual results could differ from those estimates.         

RECLASSIFICATIONS                                                               

The Registrant has reclassified the presentation of certain prior-year          
information to conform with the current presentation format.                    

NOTE 2:  RELATED PARTY TRANSACTIONS                                             
INTERBOLD JOINT VENTURE                                                         

The Consolidated Financial Statements for the periods of January 1 through      
January 27, 1998, and the years of 1997 and 1996 include the accounts of        
InterBold, a joint venture between the Registrant and IBM. The joint venture    
provided ATMs and other financial self-service systems worldwide. IBM's         
ownership interest in InterBold is reflected in "minority interest" on the      
Registrant's Consolidated Balance Sheets for the periods IBM was a partner in   
the joint venture.                                                              

On June 27, 1997, Diebold announced that InterBold would discontinue its        
international marketing and distribution agreement with IBM. On July 2, 1997,   

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IBM informed Diebold that it was exercising its option pursuant to the InterBold
contractual arrangements to sell its 30 percent minority interest in InterBold  
to the Registrant. On January 27, 1998, Diebold completed its purchase of IBM's 
30 percent minority interest in InterBold for $16,141 which represented IBM's   
tax capital account on July 2, 1997. The Registrant financed the purchase with  
its cash reserves.                                                              

NOTE 3:  INVESTMENT SECURITIES                                                  

At December 31, 1998 and 1997, the investment portfolio was classified as       
available-for-sale. The marketable debt and equity securities are stated at fair
value, and the Registrant includes as a separate component of shareholders'     
equity net unrealized holding gains of $408 (net of taxes of $219) and $859 (net
of taxes of $464) at December 31, 1998 and 1997, respectively. The fair value of
securities and other investments is estimated based on quoted market prices.    

The Registrant's investment securities, excluding insurance contracts, at       
December 31, are summarized as follows:                                         

                                                                [Download Table]

                                           Amortized     Fair   
                                          Cost Basis    Value   
----------------------------------------------------------------
1998                                                            
================================================================
                                                                
Short-term investments:                                         
  Tax-exempt municipal bonds ...........   $ 37,151   $ 37,433  
----------------------------------------------------------------
Securities and other investments:                               
  Tax-exempt municipal bonds ...........   $108,256   $109,234  
  Equity securities ....................     29,845     29,212  
----------------------------------------------------------------
                                           $138,101   $138,446  
----------------------------------------------------------------

                                           Amortized      Fair  
                                           Cost Basis    Value  
----------------------------------------------------------------
1997                                                            
================================================================
Short-term investments:                                         
  Tax-exempt municipal bonds ...........   $ 36,331   $ 36,473  
----------------------------------------------------------------
Securities and other investments:                               
  Tax-exempt municipal bonds ...........   $ 85,245   $ 86,247  
  Equity securities ....................     28,668     28,847  
----------------------------------------------------------------
                                           $113,913   $115,094  
----------------------------------------------------------------


The contractual maturities of tax-exempt municipal bonds at December 31, 1998   
are as follows:                                                                 

                                                                [Download Table]

                                          Amortized      Fair   
                                          Cost Basis    Value   
================================================================
                                                                
Due within one year ....................   $ 37,151   $ 37,433  
Due after one year                                              
 through five years ....................    108,256    109,234  
----------------------------------------------------------------
                                           $145,407   $146,667  
----------------------------------------------------------------

NOTE 4:  INVENTORIES                                                            

Major classes of inventories at December 31, are summarized as follows:         

                                                                [Download Table]

                                             1998        1997   
================================================================
                                                                
Finished goods and                                              
  service parts ........................   $ 43,835   $ 44,776  
Work in process ........................     83,873     82,985  
Raw materials ..........................        172        321  
----------------------------------------------------------------
                                           $127,880   $128,082  
----------------------------------------------------------------

NOTE 5:  PROPERTY, PLANT AND EQUIPMENT                                          

Property, plant and equipment at December 31, together with annual depreciation 
and amortization rates, consisted of the following:                             

                                                                [Download Table]

                                                                    Annual
                                              1998       1997       Rates 
==========================================================================
                                                                          
Land and land                                                             
  improvements .........................   $  8,028   $  5,305      5-20% 
Buildings ..............................     64,216     42,552      2-34% 
Machinery, equipment                                                      
  and rotatable                                                           
  spares ...............................    187,362    150,972      5-40% 
Leasehold                                                                 
  improvements .........................      4,297      2,981      Lease 
                                                                    Term  
Construction in                                                           
  progress .............................     14,532     57,824         -- 
------------------------------------------------------------------------- 
                                           $278,435   $259,634            
------------------------------------------------------------------------- 

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NOTE 6:  FINANCE RECEIVABLES                                                    

The components of finance receivables for the net investment in sales-type      
leases are as follows:                                                          

                                                                [Download Table]

                                     1998          1997  
=========================================================
                                                         
Total minimum                                            
  lease receivables ...........   $ 103,929    $  93,043 
Estimated unguaranteed                                   
  residual values .............       5,762        3,051 
---------------------------------------------------------
                                    109,691       96,094 
Less:  Unearned interest                                 
             income ...........     (22,411)     (20,469)
       Unearned residuals......      (1,851)      (1,096)
---------------------------------------------------------
                                    (24,262)     (21,565)
---------------------------------------------------------
                                  $  85,429    $  74,529 
---------------------------------------------------------

Future minimum lease receivables due from customers under sales-type leases as  
of December 31, 1998, are as follows:                                           

-------------------------------------------                                     
1999 ..........................   $  21,126                                     
2000 ..........................      21,731                                     
2001 ..........................      21,513                                     
2002 ..........................      19,330                                     
2003 ..........................      11,815                                     
Thereafter ....................       8,414                                     
-------------------------------------------                                     
$ 103,929   
-------------------------------------------                                     

NOTE 7:  SHORT-TERM FINANCING                                                   

At December 31, 1998, bank credit lines approximated $150,000 with various banks
for short-term financing. The Registrant had no outstanding borrowings under    
these agreements at December 31, 1998 and 1997.                                 

The Registrant has informal understandings with certain banks to maintain       
compensating balances which are not legally restricted as to withdrawal. The    
lines of credit can be withdrawn at each bank's option.                         

NOTE 8:  REALIGNMENT AND SPECIAL CHARGES                                        

In the second quarter of 1998, the Registrant recognized realignment and special
charges of $61,117 ($41,850 after-tax or $0.60 per diluted share) in connection 
with a corporate-wide realignment program. Exit costs were accounted for under  
EITF 94-3, "Liability Recognition for Certain Employee Termination Benefits and 
Other Costs to Exit an Activity (Including Certain Costs Incurred in a          
Restructuring)." Long-lived asset impairments were accounted for under Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of    
Long-Lived Assets and for Long- Lived Assets to Be Disposed of." Inventory      
related charges were taken when it was determined that the utility, as a result 
of the realignment decisions, was less than the cost for the affected inventory.
Special charges of $9,864 mainly represent the write-off of inventory for exited
businesses and all other realignment charges of $51,253 were recognized as a    
separate operating expense in the Consolidated Statements of Income.            

Elements of the realignment and special charges were divided into three         
categories: facility closing and write down of assets, employee associate costs 
and other exit costs. Facility closing and write down of assets costs were      
estimated to be $40,343. Items included in this category were certain impaired  
intangible assets, mainly relating to the separation from IBM in the InterBold  
joint venture in 1998, manufacturing assets relating to exited businesses,      
redundant inventory of exited businesses and contractual costs to exit leased   
facilities. North American facilities were consolidated and several facilities  
were closed under the realignment program.                                      

Termination pay and separation costs were estimated to be $8,269. More than 600 
employee associates were estimated to be terminated, and at 12/31/1998, 519 jobs
have been eliminated. The estimated costs in this category included the         
termination pay, job outplacement and fringe benefit costs for each eliminated  
job. Terminations came from all areas of the corporation .                      

Other exit costs under the realignment program were estimated to be $12,505.    
These costs included legal, insurance and communications costs and the write-off
of accounts receivable relating to exited businesses.                           

Assets relating to the realignment were written down or scrapped. Costs from the
realignment will be paid from operating funds over the term of the realignment  
plan. The anticipated completion date for the majority of costs relating to the 
plan is expected to be by the end of 1999.                                      

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The following table shows the realignment charge and accrual and all activity   
through December 31, 1998:                                                      

                                                        [Enlarge/Download Table]


                                                 FACILITY                                                        
                                               CLOSING AND         EMPLOYEE            OTHER                     
                                                WRITE DOWN         ASSOCIATE           EXIT                      
                                                OF ASSETS            COSTS             COSTS           TOTAL     
                                              ---------------    --------------     ------------    ------------ 
                                                                                                                 
Original realignment charge at                                                                                   
 commencement of plan                        $     40,343             $8,269      $     12,505      $     61,117 

Write off of intangibles and long-lived                                                                          
 assets under Statement 121                       (24,857)                --                --           (24,857)
                                             ------------       ------------      ------------      ------------ 
Beginning accrual at commencement of                                                                             
   plan                                            15,486              8,269            12,505            36,260 
1998 activity                                     (13,409)            (3,693)           (7,910)          (25,012)
                                             ------------       ------------      ------------      ------------ 

Balance at December 31, 1998                 $      2,077       $      4,576      $      4,595      $     11,248 
                                             ============       ============      ============      ============ 
================================================================================================================ 

NOTE 9:  BONDS PAYABLE                                                          

Bonds payable at December 31 consisted of the following:                        

                                                                [Download Table]

                                     1998       1997 
-----------------------------------------------------
                                                     
Industrial Development Revenue                       
   Bond due January 1, 2017...     $ 5,800     $5,800
Industrial Development Revenue                       
   Bond due April 1, 2017......      7,500      7,500
Industrial Development Revenue                       
   Bond due June 1, 2017.......      7,500      7,500
-----------------------------------------------------
                                   $20,800    $20,800
-----------------------------------------------------

In 1997, three Industrial Development Revenue Bonds were issued on behalf of the
Registrant. The proceeds from the bond issuances were used to construct new     
manufacturing facilities in Danville and Staunton, Virginia and Lexington, North
Carolina. The Registrant guaranteed the payments of principal and interest on   
the bonds by obtaining letters of credit. Each Industrial Development Revenue   
Bond carries a variable interest rate which is reset weekly by the remarketing  
agents. The bonds can be called at anytime. The Registrant is in compliance with
the covenants of its loan agreements and believes that the covenants will not   
restrict its future operations.                                                 

Interest paid on these bonds charged to expense was $743 in 1998 and $176 in    
1997.                                                                           

NOTE 10:  SHAREHOLDERS' EQUITY                                                  

On January 30, 1997, the Board of Directors declared a three-for-two stock split
effected in the form of a stock dividend, distributed on February 19, 1997, to  
shareholders of record on February 7, 1997. Accordingly, all numbers of Common  
Shares, except authorized shares and treasury shares, and all per share data    
have been restated to reflect this stock split.                                 

On the basis of amounts declared and paid, the annualized quarterly dividends   
per share were $0.56 in 1998, $0.50 in 1997, and $0.45 in 1996.                 

In the following chart, the Registrant provides net income and earnings per     
share reduced by the pro forma amounts calculating compensation cost for the    
Registrant's fixed stock option plan under the fair value method. The fair value
of each option grant was estimated on the date of grant using the Black-Scholes 
option-pricing model with the following average assumptions for 1998, 1997 and  
1996, respectively: risk-free interest rates of 4.7, 5.7 and 5.5 percent;       
dividend yield of 1.8 percent in 1998 and 2.2 percent in 1997 and 1996,         
volatility of 24, 19 and 21 percent; and average expected lives of six years for
management and four years for executive management and non-employee directors.  
Pro forma net income reflects only options granted since January 1, 1995.       

                                                                [Download Table]

                                    1998           1997            1996  
                                 ----------     ---------       ---------
                                                                         
Net income                                                               
  As reported..........           $76,148        $122,516        $97,425 

  Pro forma...............        $73,822        $120,556        $97,030 

Earnings per share                                                       
  As reported                                                            
    Basic                         $  1.10        $   1.78        $  1.42 
    Diluted                       $  1.10        $   1.76        $  1.40 

  Pro forma                                                              
    Basic                         $  1.07        $   1.75        $  1.41 
    Diluted                       $  1.07        $   1.74        $  1.40 

FIXED STOCK OPTIONS                                                             

Under the 1991 Equity and Performance Incentive Plan (1991 Plan), Common Shares 
are available for grant of options at a price not less than 85 percent of       

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the fair market value of the Common Shares on the date of grant. The exercise   
price of options granted since January 1, 1995, was equal to the market price at
the grant date, and accordingly, no compensation cost has been recognized. In   
general, options are exercisable in cumulative annual installments over five    
years, beginning one year from the date of grant. The number of Common Shares   
that may be issued or delivered pursuant to the 1991 Plan is 6,265,313, of which
5,067,804 shares were available for issuance at December 31, 1998. The 1991 Plan
will expire on April 2, 2002.                                                   

The 1991 Plan replaced the Amended and Extended 1972 Stock Option Plan (1972    
Plan), which expired by its terms on April 2, 1992. Awards already outstanding  
under the 1972 Plan are unaffected by the adoption of the 1991 Plan.            

Under the 1997 Milestone Stock Option Plan (Milestone Plan), options for 100    
Common Shares were granted to all eligible salaried and hourly employee         
associates. The exercise price of the options granted under the Milestone Plan  
was equal to the market price at the grant date, and accordingly, no            
compensation cost has been recognized. In general, all options are exercisable  
beginning two years from the date of grant. The number of Common Shares that may
be issued or delivered pursuant to the Milestone Plan is 600,000, of which      
559,800 shares were available for issuance at December 31, 1998. The Milestone  
Plan will expire on March 2, 2002.                                              

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The following is a summary with respect to options outstanding at December 31,  
1998, 1997 and 1996, and activity during the years ending on those dates:       

                                                        [Enlarge/Download Table]

                                                       1998                       1997                       1996            
                                              ----------------------     ----------------------    -----------------------   
                                                           Weighted-                  Weighted-                 Weighted-    
                                                            Average                   Average                    Average     
                                                           Exercise                   Exercise                   Exercise    
                                               Shares       Price         Shares        Price        Shares        Price     
                                              ---------    ---------     ---------    ---------    ---------     ---------   
                                                                                                                             
Outstanding at the beginning of year          2,121,223     $  27        1,529,545      $  18      1,180,283      $  12      

Options granted                                 271,150        47          829,500         41        500,438         29      

Options exercised                              (208,031)       13         (203,260)        10       (130,377)        10      

Options expired or forfeited                   (195,310)       39          (34,562)        40        (20,799)        17      

-----------------------------------------------------------------------------------------------------------------------------

Outstanding at the end of year                1,989,032     $  30        2,121,223      $  27      1,529,545      $  18      

-----------------------------------------------------------------------------------------------------------------------------

Options exercisable at end of year              780,967                    694,448                   577,198                 

Weighted-average fair value                                                                                                  
  of options granted during the year              $  12                       $  7                      $  6                 


The following table summarizes pertinent information regarding fixed stock      
options outstanding and options exercisable at December 31, 1998:               

                                                        [Enlarge/Download Table]


                                    -----------------------------------------------------------------------------------
                                                 Options Outstanding                           Options Exercisable     
                                    -----------------------------------------------------------------------------------
                                                       Weighted-                                                       
                                                        Average                                                        
                                       Number          Remaining        Weighted-          Number           Weighted-  
                                            of         Contractual       Average                of           Average   
                                        options             Life        Exercise           options          Exercise   
    Range of Exercise Prices         outstanding       (In Years)          Price         exercisable           Price   
-----------------------------------------------------------------------------------------------------------------------

                                                                                                                       
              $  7     -      42           9,763           0.22        $   16                 9,763          $  16     
                 7     -      16          59,151           1.00            10                49,023              9     
                 6     -      36          88,515           2.00            16                65,727             12     
                 9     -      42         686,384           3.00            37               125,692             20     
                13     -      40         138,869           4.00            17               116,369             13     
                17     -      18         111,695           5.00            17                83,930             17     
                15     -      19         215,600           6.00            16               146,547             16     
                24     -      34         244,575           7.00            24               116,774             24     
                33     -      38         222,130           8.00            38                66,342             38     
                29     -      48         212,350           9.00            47                   800             48     
                                       ---------                                         ----------                    
                                       1,989,032           5.00         $30.16              780,967          $18.66    
                                       ---------                                         ----------                    


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RESTRICTED SHARE GRANTS                                                         

The 1991 Plan also provides for the issuance of restricted shares to certain    
employee associates. Outstanding shares granted at December 31, 1998, totaled   
26,238 restricted shares. The shares are subject to forfeiture under certain    
circumstances. Unearned compensation representing the fair market value of the  
shares at the date of grant will be charged to income over the                  
three-to-five-year vesting period.                                              

PERFORMANCE SHARE GRANTS                                                        

The 1991 Plan also provides for the issuance of Common Shares based on certain  
management objectives achieved within a specified performance period of at least
one year as determined by the Board of Directors. The management objectives set 
in 1998 are based on a three-year performance period ending December 31, 2000.  
The management objectives for the period ended December 31, 1998, were set in   
April 1996. The objectives were exceeded and a payout was made in the form of   
cash and/or Common Shares in 1999.                                              

The compensation cost that has been charged against income for its              
performance-based share grant plan was $2,280, $10,400, and $13,534 in 1998,    
1997 and 1996, respectively.                                                    

On January 28, 1999 the Board of Directors announced the adoption of a new      
Rights Agreement that provides for Rights to be issued to shareholders of record
on February 11, 1999. The new Rights Agreement replaces the existing Rights     
Agreement that expired on February 10, 1999. The description and terms of the   
Rights are set forth in the Rights Agreement, dated as of February 11, 1999,    
between the Registrant and the Bank of New York, as Agent. Under the Rights     
Agreement, the Rights will initially trade together with the Common Shares and  
will not be exercisable. In the absence of further Board action, the Rights     
generally will become exercisable and allow the holder to acquire Common Shares 
at a discounted price if a person or group acquires twenty percent or more of   
the outstanding Common Shares. Rights held by persons who exceed the applicable 
threshold will be void. Under certain circumstances, the Rights will entitle the
holder to buy shares in an acquiring entity at a discounted price. The Rights   
Agreement also includes an exchange option. In general, after the Rights become 
exercisable, the Board of Directors may, at its option, effect an exchange of   
part or all of the Rights (other than Rights that have become void) for Common  
Shares. Under this Option, the Registrant would issue one Common Share for each 
Right, subject to adjustment in certain circumstances. The Rights are redeemable
at any time prior to the Rights becoming exercisable and will expire on February
11, 2009, unless redeemed or exchanged earlier by the Registrant.               

NOTE 11:  EARNINGS PER SHARE                                                    
(In thousands except per share amounts)                                         

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.                                                                          

                                                                [Download Table]


                                          1998       1997        1996 
----------------------------------------------------------------------
                                                                      
NUMERATOR                                                             
Income available to                                                   
   Common shareholders                                                
   used in basic and diluted                                          
   earnings per share                    $76,148   $122,516   $97,425 

DENOMINATOR                                                           
Weighted-average                                                      
   number of Common                                                   
   Shares used in basic                                               
   earnings per share                     68,960     68,939    68,796 

Effect of dilutive fixed                                              
  stock options and                                                   
  performance shares                         350        551       554 
                                     ---------------------------------

Weighted-average                                                      
   number of Common                                                   
   Shares and dilutive                                                
   potential Common                                                   
   Shares used in dil-                                                
   uted earnings per share                69,310     69,490    69,350 
                                     ---------------------------------

BASIC EARNINGS                                                        
   PER SHARE                            $   1.10  $    1.78  $   1.42 
DILUTED EARNINGS                                                      
   PER SHARE                            $   1.10  $    1.76  $   1.40 

Fixed stock options on 1,161 Common Shares in 1998 and 179 Common Shares in 1996
were not included in computing diluted earnings per share, because their effects
were antidilutive.                                                              

NOTE 12:  PENSION PLANS AND                                                     
POSTRETIREMENT BENEFITS                                                         

The Registrant adopted Statement of Financial Accounting Standards No. 132,     
"Employers' Disclosures about Pensions and Other Postretirement Benefits" on    
January 1, 1998. Accordingly, all historical disclosures have been restated to  
comply with current reporting formats.                                          

The Registrant has several pension plans covering substantially all employee    
associates. Plans covering salaried employee associates provide pension benefits
that are based on the employee associate's                                      

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compensation during the 10 years before retirement. The Registrant's funding    
policy for those plans is to contribute annually at an actuarially determined   
rate. Plans covering hourly employee associates and union members generally     
provide benefits of stated amounts for each year of service. The Registrant's   
funding policy for those plans is to make at least the minimum annual           
contributions required by applicable regulations.                               

Approximately 90 percent of the plan assets at the valuation dates of September 
30, 1998 and 1997 were invested in listed stocks and investment grade bonds.    

Minimum liabilities have been recorded in 1998 and 1997 for the plans whose     
total accumulated benefit obligation exceeded the fair value of the plan's      
assets.                                                                         

In addition to providing pension benefits, the Registrant provides healthcare   
and life insurance benefits for certain retired employee associates. Eligible   
associates may be entitled to these benefits based upon years of service with   
the Registrant, age at retirement and collective bargaining agreements.         
Presently, the Registrant has made no commitments to increase these benefits for
existing retirees or for employee associates who may become eligible for these  
benefits in the future. Currently there are no plan assets, and the Registrant  
funds the benefits as the claims are paid.                                      

The effect of a one percentage point annual increase in the assumed healthcare  
cost trend rate would increase the service and interest cost components of the  
healthcare benefits by $111, while a one percentage point decrease in the trend 
rate would decrease the service and interest components of the healthcare       
benefits by $98.                                                                

The postretirement benefit obligation was determined by application of the terms
of medical and life insurance plans together with relevant actuarial assumptions
and healthcare cost trend rates projected at annual rates declining from 8.0    
percent in 1998 to 4.5 percent through the year of 2005 as well as the following
years. The effect of a one percentage point annual increase in these assumed    
healthcare cost trend rates would increase the healthcare accumulated           
postretirement benefit obligation by $1,566, while a one percentage point       
decrease in the trend rate would decrease the accumulated postretirement benefit
obligation by $1,388.                                                           

The following table sets forth the change in benefit obligation, change in plan 
assets, funded status, Consolidated Balance Sheets presentation, net periodic   
pension benefit cost and the relevant assumptions for the Registrant's defined  
benefit pension plans and health and life insurance post-retirement benefits at 
December 31:                                                                    

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                                                        [Enlarge/Download Table]


                                                   ------------------------------------------------------ 
                                                        PENSION BENEFITS         HEALTH AND LIFE BENEFITS 
                                                   ------------------------------------------------------ 
                                                      1998           1997           1998           1997   
                                                   ------------------------------------------------------ 
                                                                                                          
CHANGE IN BENEFIT OBLIGATION                                                                              
----------------------------                                                                              
Benefit obligation at beginning of year            $ 214,655      $ 193,596      $  20,778      $  25,595 
Service cost                                           8,674          6,680             53             46 
Interest cost                                         15,818         14,260          1,442          1,342 
Assumption change                                      8,884          7,123            430         (4,693)
Liability (gain)/loss                                  5,233             --          1,178             -- 
Benefits paid                                         (7,962)        (7,241)        (2,037)        (1,338)
Other                                                     --            237             --           (174)
                                                   ---------      ---------      ---------      --------- 
Benefit obligation at end of year                  $ 245,302      $ 214,655      $  21,844      $  20,778 

CHANGE IN PLAN ASSETS                                                                                     
---------------------                                                                                     
Fair value of plan assets at beginning of year     $ 271,643      $ 217,686      $      --      $      -- 
Employer contributions                                 1,949          3,333          2,037          1,338 
Benefits paid                                         (7,962)        (7,241)        (2,037)        (1,338)
Investment  return                                    (4,422)        57,865             --             -- 
                                                   ---------      ---------      ---------      --------- 
Fair value of plan assets at end of year           $ 261,208      $ 271,643      $      --      $      -- 

FUNDED STATUS                                                                                             
-------------                                                                                             
Funded status                                      $  15,906      $  56,988      $ (21,844)     $ (20,778)
Unrecognized net loss/(gain)                          (9,621)       (47,366)        (2,750)        (4,551)
Prior service costs not yet recognized                 6,263          7,324             --             -- 
Unrecognized net transition obligation                (9,656)       (11,139)            --             -- 
                                                   ---------      ---------      ---------      --------- 
Prepaid/(accrued) pension cost                     $   2,892      $   5,807      $ (24,594)     $ (25,329)

AMOUNTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS                                                         
-------------------------------------------------                                                         
Prepaid benefit cost                               $  17,484      $  22,140      $      --      $      -- 
Accrued benefit liability                            (22,745)       (20,615)       (24,594)       (25,329)
Intangible asset                                       1,835          2,267             --             -- 
Accumulated other comprehensive income                 6,318          2,015             --             -- 
                                                   ---------      ---------      ---------      --------- 
Net amount recognized                              $   2,892      $   5,807      $ (24,594)     $ (25,329)

                                                        [Enlarge/Download Table]


                                                    PENSION BENEFITS                     HEALTH AND LIFE BENEFITS         
                                           ---------------------------------------  --------------------------------------
                                               1998          1997         1996        1998         1997         1996      
                                           ---------------------------------------  --------------------------------------
                                                                                                                          
NET PERIODIC PENSION BENEFIT COST                                                                                         
---------------------------------                                                                                         
Service cost                                 $  8,673       $  7,795     $  7,140    $     53           62            57  
Interest cost                                  15,818         14,260       13,405       1,442     $  1,788      $  1,806  

Expected return on assets                     (19,531)       (17,295)     (15,858)         --           --            --  
Transition (asset)/obligation recognition      (1,484)        (1,484)      (1,484)         --           --            --  
Prior service cost amortization                 1,062          1,061        1,061          --           --            --  
Net (gain)/loss recognition                       326            309          405        (192)          --            --  
                                             --------       --------     --------    --------     --------      --------  
Net periodic pension cost/(income)           $  4,864       $  4,646     $  4,669    $  1,303     $  1,850      $  1,863  

WEIGHTED-AVERAGE ASSUMPTIONS AS OF                                                                                        
----------------------------------                                                                                        
SEPTEMBER 30 VALUATION DATE                                                                                               
---------------------------                                                                                               
Discount rate                                    7.00%          7.25%        7.25%       7.00%        7.25%         7.25% 
Long term rate of return on plan assets          9.25%          9.00%        9.00%         --           --            --  
Rate of increase in compensation level           5.00%          5.00%        5.00%         --           --            --  

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The aggregate benefit obligation for plans with benefit obligations in excess of
plan assets was $39,051 in 1998 and $34,332 in 1997. The fair value of plan     
assets for plans with benefit obligations in excess of plan assets was $13,779  
in 1998 and $15,217 in 1997. The amounts included within other comprehensive    
income arising from a change in the additional minimum pension liability, net of
tax were ($2,797) and $217 in 1998 and 1997 respectively.                       

The Registrant offers an employee associate 401(k) Savings Plan (Savings Plan)  
to encourage eligible employee associates to save on a regular basis by payroll 
deductions, and to provide them with an opportunity to become shareholders of   
the Registrant. Under the Savings Plan from January 1 through March 31, 1998,   
the Registrant matched 100 percent of a participating employee associate's first
4 percent of contributions and 40 percent of a participating employee           
associate's second 4 percent of contributions. Under the Savings Plan from April
1 through December 31, 1998, the Registrant matched 80 percent of a             
participating employee associate's first 4 percent of contributions and 40      
percent of a participating employee associate's second 4 percent of             
contributions. Total Registrant match in 1998, 1997 and 1996 was $9,338, $9,217 
and $7,028, respectively.                                                       

NOTE 13: LEASES                                                                 

The Registrant's future minimum lease payments due under operating leases for   
real and personal property in effect at December 31, 1998, are as follows:      

                                                                [Download Table]


                              Real      Vehicles and
Expiring          Total      Estate       Equipment 
=================================================== 
                                                    
1999 ...........  $27,266   $  9,066      $18,200   
2000 ...........   21,692      7,433       14,259   
2001 ...........   15,090      5,835        9,255   
2002 ...........    7,954      4,664        3,290   
2003 ...........    3,714      3,713            1   
Thereafter......    7,022      7,022           --   
--------------------------------------------------- 
                  $82,738    $37,733      $45,005   
--------------------------------------------------- 

Rental expense for 1998, 1997 and 1996 under all lease agreements amounted to   
approximately $34,158, $30,900, and $28,100, respectively.                      

NOTE 14:  INCOME TAXES                                                          

Income tax expense attributable to income from continuing operations consists   
of:                                                                             

                                                                [Download Table]


                         1998      1997       1996  
====================================================
Federal and international                           
                                                    
  Current..........    $39,656   $54,348    $45,082 
  Deferred.........       (272)     (265)    (2,696)
----------------------------------------------------
                        39,384    54,083     42,386 
State and local                                     
  Current..........      5,132     9,368      7,203 
  Deferred.........       (857)     (308)      (510)
----------------------------------------------------
                         4,275     9,060      6,693 

Total income tax                                    
   expense             $43,659   $63,143    $49,079 
----------------------------------------------------


In addition to the 1998 income tax expense of $43,659, certain deferred income  
tax benefits of $1,749 were allocated directly to shareholders' equity.         

A reconciliation of the difference between the U.S. statutory tax rate and the  
effective tax rate is as follows:                                               

                                                                [Download Table]


                         1998       1997       1996  
=====================================================
                                                     
Statutory tax rate....   35.0%      35.0%      35.0% 
State and local income                               
  taxes, net of federal                              
  tax benefit.........    2.3        3.2        3.0  
Realignment charges...    3.3        0.0        0.0  
Exempt income.........   (4.2)      (2.5)      (2.7) 
Insurance contracts...   (2.4)      (2.1)      (2.3) 
Other.................    2.4        0.4        0.5  
---------------------------------------------------- 
Effective tax rate       36.4%      34.0%      33.5% 
---------------------------------------------------- 

Deferred income taxes reflect the net tax effects of temporary differences      
between the carrying amount of assets and liabilities for financial reporting   
purposes and the amounts used for income tax purposes. Significant components of
the Registrant's deferred tax assets and liabilities are as follows:            

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                                                                [Download Table]


                                 1998        1997  
================================================== 
                                                   
DEFERRED TAX ASSETS                                
Postretirement benefits....   $ 16,655     $13,882 
Accrued expenses...........     18,053      18,852 
Inventory..................      7,084       6,711 
Partnership income.........      2,131       4,861 
Realignment charges........      6,408         --  
Deferred revenue...........      5,951       3,353 
Net operating                                      
   loss carryforwards......      1,692       1,685 
State deferred taxes.......      9,197       6,841 
Other......................      7,753      10,218 
-------------------------------------------------- 
                                74,924      66,403 
Valuation allowance.......      (1,579)     (1,777)
-------------------------------------------------- 

Net deferred tax assets...    $ 73,345    $ 64,626 
-------------------------------------------------- 

DEFERRED TAX LIABILITIES                           
Pension...................    $  7,645    $  7,728 
Amortization..............         441       4,093 
Depreciation..............       3,800       3,186 
Finance receivables.......       7,520       1,693 
Other.....................       7,185       7,113 
-------------------------------------------------- 

Net deferred tax                                   
  liabilities.............      26,591      23,813 
-------------------------------------------------- 

Net deferred tax asset....     $46,754    $ 40,813 
-------------------------------------------------- 

At December 31, 1998, the Registrant's international subsidiaries had deferred  
tax assets relating to net operating loss carryforwards of $1,692, $599 of which
expires in years 1999 through 2003, and $1,093 of which has an indefinite       
carryforward period. The Registrant recorded a valuation allowance to reflect   
the estimated amount of deferred tax assets, which, more likely than not, will  
not be realized. The valuation allowance relates to certain international net   
operating losses and other international deferred tax assets.                   

NOTE 15: COMMITMENTS AND                                                        
CONTINGENCIES                                                                   

At December 31, 1998, the Registrant was a party to several lawsuits that were  
incurred in the normal course of business, none of which individually or in the 
aggregate is considered material by management in relation to the Registrant's  
financial position or results of operations.                                    

NOTE 16: SEGMENT INFORMATION                                                    

The Registrant adopted Statement of Financial Accounting Standards No. 131,     
"Disclosures about Segments of an Enterprise and Related Information", as       
required for this Annual Report on Form 10-K. Statement 131 requires companies  
to report information about the revenues derived from the enterprise's segments,
about the geographical divisions in which the enterprise earns revenues and     
holds assets, and about major customers.                                        

The Registrant has defined its segments into four main areas: North American    
Sales and Service (NASS), International Sales and Service (ISS), Manufacturing  
and Development (M & D) and Corporate. These segments are organized under the   
supervision of the Diebold Executive Management Team and are evaluated based on 
the following information presented: revenues from customers, revenues from     
inter-segment transactions, and operating profit contribution to the total      
corporation. All inter-segment transactions are eliminated to arrive at the     
total corporation revenue and operating profit. All income and expense items    
below operating profit are not allocated to the segments and are not disclosed. 
Also, the realignment and special charges taken by the Registrant in the second 
quarter of 1998 are not allocated to the segments and are presented separately. 

The North American Sales and Service segment sells and services financial,      
retail, educational and medical systems in the United States and Canada. The    
International Sales and Service segment sells and services financial, retail,   
educational and medical systems over the remainder of the globe. The            
Manufacturing and Development segment manufactures the equipment sold to NASS   
and ISS and also sells to limited external customers, the largest of which is   
IBM. The Corporate segment supports the other segments and eliminates all       
inter-segment revenues and costs. As permitted under Statement 131, certain     
information not used routinely 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 expense, 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.           

More than 90 percent of the Registrant's customer revenues are derived from the 
sales and service of financial systems and equipment. The Registrant had one    
customer, IBM, its former partner in the InterBold joint venture, that accounted
for $148,755 of the total net sales of $1,185,707 in 1998, $173,751 of the total
net sales of $1,226,936 in 1997, and $146,103 of the total net sales of         
$1,030,191 in 1996. Sales to IBM are made from both the ISS and M & D segments. 

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Domestic revenues were $888,500, $906,491 and $800,150 in 1998, 1997 and 1996   
respectively. International revenues were $297,207, $320,448 and $230,039 in    
1998, 1997, and 1996, respectively.                                             

Financial information by segment for the years ended December 31, 1998, 1997 and
1996 is as follows:                                                             

                                                        [Enlarge/Download Table]


------------------------------------------------------------------------------------------------------------------------------------
                                                         INTERNATIONAL                                    REALIGNMENT               
                                       NORTH AMERICAN      SALES &      MANUFACTURING    CORPORATE/       AND SPECIAL               
                                      SALES & SERVICE      SERVICE      & DEVELOPMENT   ELIMINATIONS        CHARGES        TOTAL    
------------------------------------------------------------------------------------------------------------------------------------
1998 SEGMENT INFORMATION BY GROUP                                                                                                   
                                                                                                                                    
Customer revenues                     $   887,548     $   121,509      $   173,286     $     3,364      $        --      $ 1,185,707
Inter-segment revenues                          6             278          582,843        (583,127)              --               --
Operating profit                          149,231           8,189           53,325         (43,381)         (61,117)         106,247

1997 SEGMENT INFORMATION BY GROUP                                                                                                   

Customer revenues                         904,188         131,775          197,970          (6,997)              --        1,226,936
Inter-segment revenues                         --              --          687,296        (687,296)              --               --
Operating profit                          164,723          18,170           45,893         (44,925)              --          183,861

1996 SEGMENT INFORMATION BY GROUP                                                                                                   

Customer revenues                         818,443          81,586          145,962         (15,800)              --        1,030,191
Inter-segment revenues                         --              --          591,931        (591,931)              --               --
Operating profit                          147,589           7,936           43,035         (58,196)              --          140,364


NOTE 17: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)                            

See "Comparison of Selected Quarterly Financial Data (Unaudited)" on page 33 of 
this Annual Report on Form 10-K.                                                

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FORWARD-LOOKING STATEMENT DISCLOSURE                                            

In the Registrant's written or oral statements, the use of the words "believes,"
"anticipates," "expects" and similar verbs 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. The        
Registrant gives no assurance that its goals will be realized, and it is under  
no obligation to report changes to its outlook. Readers are cautioned not to    
place undue reliance on these forward-looking statements. 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;                                              

-    acceptance of the Registrant's product and technology introductions in the 
marketplace;                                                          

-    unanticipated litigation, claims or assessments;                           

-    the ability to replace revenues generated by IBM as its primary            
international distributor; and                                        

-    the ability to implement the steps of the corporate realignment program.   

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                                                        [Enlarge/Download Table]


COMPARISON OF SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)                                                                         

                                   1ST QUARTER               2ND QUARTER               3RD QUARTER                4TH QUARTER       
    (Dollars in thousands        1998       1997            1998       1997           1998        1997           1998       1997    
except per share amounts)                                                                                                           
====================================================================================================================================
                                                                                                                                    
Net sales................      $295,739    $264,608       $280,592    $303,202       $287,291    $317,778      $322,085    $341,348 
Gross profit.............       102,135      92,359         90,021     106,203        100,039     108,522       114,055     123,016 
Net income*..............        26,850      23,733        (14,444)     30,690         29,391      33,056        34,350      35,037 
Basic earnings                                                                                                                      
  per share*.............          0.39        0.34          (0.21)       0.45           0.43        0.48          0.50        0.51 
Diluted earnings                                                                                                                    
  per share*.............          0.39        0.34          (0.21)       0.44           0.43        0.47          0.50        0.50 
====================================================================================================================================


See Note 17 to Consolidated Financial Statements and 5-Year Summary 1998-1994.  

*    The sum of quarterly figures does not equal annual figures due to rounding 
    or differences in the weighted-average number of shares outstanding during
the respective periods.                                               

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REPORT OF MANAGEMENT

The management of Diebold, Incorporated is responsible for the contents of the  
consolidated financial statements, which are prepared in conformity with        
generally accepted accounting principles. The consolidated financial statements 
necessarily include amounts based on judgments and estimates. Financial         
information elsewhere in the Annual Report on Form 10-K is consistent with that 
in the consolidated financial statements.                                       

The Registrant maintains a comprehensive accounting system which includes 
controls designed to provide reasonable assurance as to the integrity and       
reliability of the financial records and the protection of assets. An internal  
audit staff is employed to regularly test and evaluate both internal accounting 
controls and operating procedures, including compliance with the Registrant's   
statement of policy regarding ethical and lawful conduct. The role of KPMG LLP, 
the independent auditors, is to provide an objective examination of the         
consolidated financial statements and the underlying transactions in accordance 
with generally accepted auditing standards. The report of KPMG LLP accompanies  
the consolidated financial statements.                                          

  The Audit Committee of the Board of Directors, composed of directors who are
not members of management, meets regularly with management, the independent     
auditors and the internal auditors to ensure that their respective              
responsibilities are properly discharged. KPMG LLP and the Managing Director of 
Internal Audit have full and free access to the Audit Committee.                

/s/Gerald F. Morris                                                             
Gerald F. Morris                                                                
Executive Vice President and Chief Financial Officer                            

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                                                        [Enlarge/Download Table]


                            5-YEAR SUMMARY 1998-1994                                                                                
                     DIEBOLD, INCORPORATED AND SUBSIDIARIES                                                                         
                             SELECTED FINANCIAL DATA                                                                                
               (IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)                                                                   

                                                            1998              1997            1996           1995           1994    
====================================================================================================================================
OPERATING RESULTS                                                                                                                   
                                                                                                                                    
Net sales ...........................................   $1,185,707        $1,226,936      $1,030,191       $863,409       $760,171  
Cost of sales........................................      779,457           796,836         672,679        568,978        504,489  
Gross profit.........................................      406,250           430,100         357,512        294,431        255,682  
Selling and administrative expense...................      194,535           191,842         166,572        144,490        128,309  
Research, development and engineering expense........       54,215            54,397          50,576         43,130         36,599  
Operating profit.....................................      106,247           183,861         140,364        106,811         90,774  
Other income, net....................................       15,403             6,894          10,533          6,612          5,152  
Minority interest ...................................       (1,843)           (5,096)         (4,393)          (200)        (1,948) 
Income before taxes..................................      119,807           185,659         146,504        113,223         93,978  
Taxes on income......................................       43,659            63,143          49,079         37,014         30,467  
Net income ..........................................       76,148           122,516          97,425         76,209         63,511  
Realignment and special charges (Note A).............       61,117                --              --             --             --  
Basic earnings per share (Note B)....................         1.10              1.78            1.42           1.11           0.93  
Diluted earnings per share (Note B)..................         1.10              1.76            1.40           1.10           0.93  

------------------------------------------------------------------------------------------------------------------------------------
DIVIDEND AND COMMON SHARE DATA                                                                                                      
Basic weighted-average shares outstanding (Note B)...       68,960            68,939          68,796         68,649         68,243  
Diluted weighted-average shares outstanding (Note B).       69,310            69,490          69,350         69,022         68,595  
Common dividends paid................................  $    38,631       $    34,473     $    31,190      $  29,290      $  26,682  
Common dividends paid per share (Note B).............         0.56              0.50            0.45           0.43           0.39  

------------------------------------------------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION                                                                                                         
Current assets.......................................   $  543,548        $  549,837      $  487,523       $376,212       $329,658  
Current liabilities..................................      235,533           242,080         228,220        189,078        159,755  
Net working capital..................................      308,015           307,757         259,303        187,134        169,903  
Property, plant and equipment, net...................      147,131           143,901          95,934         84,072         64,713  
Total assets.........................................    1,004,188           991,050         859,101        749,795        666,174  
Long-term debt, less current maturities..............       20,800            20,800             ---            ---            ---  
Shareholders' equity.................................      699,123           668,581         575,570        507,680        459,839  
Shareholders' equity per share (Note C)..............        10.15              9.69            8.36           7.39           6.70  

------------------------------------------------------------------------------------------------------------------------------------
RATIOS                                                                                                                              
Pretax profit on net sales (%).......................         10.1%             15.1%           14.2%          13.1%          12.4% 
Current ratio........................................     2.3 to 1          2.3 to 1        2.1 to 1       2.0 to 1       2.1 to 1  

------------------------------------------------------------------------------------------------------------------------------------
OTHER DATA                                                                                                                          
Capital expenditures.................................  $    30,768        $   67,722     $    33,581     $   35,308     $   22,641  
Depreciation and amortization........................       25,649            18,701          20,984         14,174         13,240  
====================================================================================================================================

Note A -- In the second quarter of 1998, the Registrant recorded realignment                                                        
          and special charges of $61,117 ($41,850 after-tax or $0.60 per diluted                                                    
          share).                                                                                                                   
Note B -- After adjustment for stock splits.                                                                                        
Note C -- Based on shares outstanding at year-end adjusted for stock splits.                                                        

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ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING       
-------       -----------------------------------------------------------       
AND FINANCIAL DISCLOSURE.                           
-------------------------                           

     There have been no changes in accountants or disagreements with accountants
on accounting and financial disclosures.                                        

PART III.                                                                       

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.               
--------      ---------------------------------------------------               

Information with respect to directors of the Registrant is included on
pages 3 through 7 of the Registrant's proxy statement for the 1999 Annual       
Meeting of Shareholders ("1999 Annual Meeting") and is incorporated herein by   
reference. Refer to pages 6 through 8 of this Form 10-K for information with    
respect to executive officers.                                                  

ITEM 11.      EXECUTIVE COMPENSATION.                                           
--------      -----------------------                                           

   Information with respect to executive compensation is included on pages 7
through 15 of the Registrant's proxy statement for the 1999 Annual Meeting and  
is incorporated herein by reference.                                            

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.   
--------      ---------------------------------------------------------------   

     Information with respect to security ownership of certain beneficial owners
and management is included on pages 2 through 5 of the Registrant's proxy       
statement for the 1999 Annual Meeting and is incorporated herein by reference.  

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                   
--------      -----------------------------------------------                   

The information with respect to certain relationships and related     
transactions set forth under the caption "Compensation Committee Interlocks and 
Insider Participation" on page 7 of the Registrant's proxy statement for the    
1999 Annual Meeting is incorporated herein by reference.                        

PART IV.                                                                        

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.  
--------      ----------------------------------------------------------------  

(a)     Documents filed as a part of this report.                               

     1. The following additional information for the years 1998, 1997, and
1996 is submitted herewith:                                                     

         Independent Auditors' Report on Consolidated Financial Statements
and Financial Statement Schedule                        

    SCHEDULE II.               Valuation and Qualifying Accounts

       All other schedules are omitted, as the required information is
        inapplicable or the information is presented in the consolidated
financial statements or related notes.                  

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ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.    
--------    ----------------------------------------------------------------    
(continued)                                             

2.          Exhibits                                        

        3.1(i)    Amended and Restated Articles of Incorporation of Diebold,
                    Incorporated -- incorporated by reference to Exhibit 3.1 (i)
               of Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994.                

         3.1(ii)   Code of Regulations -- incorporated by reference to Exhibit
                   4(c) to Registrant's Post-Effective Amendment No. 1 to Form
S-8 Registration Statement No. 33-32960.

          3.2       Certificate of Amendment by Shareholders to Amended Articles
                    of Incorporation of Diebold, Incorporated -- incorporated by
                  reference to Exhibit 3.2 to Registrant's Form 10-Q for the
quarter ended March 31, 1996.           

3.3       Certificate of Amendment to Amended Articles of   
Incorporation of Diebold, Incorporated. 

    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-Q for the
quarter ended June 30, 1998.            

        *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) of 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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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.       
(continued)                                                   

        *10.8(ii)   Amendment No. 1 to the 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.               

 *10.9       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, 1992.       

  *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.                

21.         Subsidiaries of the Registrant.                     

23.         Consent of Independent Auditors.                    

24.         Power of Attorney.                                  

27.         Financial Data Schedule.                            

*    Reflects management contract or other compensatory arrangement       
 required to be filed as an exhibit pursuant to Item 14(c) of this
report.                                                         

(b)     Reports on Form 8-K.                                                    

    No reports on Form 8-K were filed during the fourth quarter of 1998.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange  
Act of 1934, the Registrant has duly caused this report to be signed on its     
behalf by the undersigned, thereunto duly authorized.                           

                           DIEBOLD, INCORPORATED

March 4, 1999                 By:         /s/Robert W. Mahoney                
--------------                             --------------------                 
Date                                   Robert W. Mahoney                
                                          Chairman of the Board, President and
                             Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and  
in the capacities and on the dates indicated.                                   

                                                                [Download Table]


        Signature                        Title                     Date     
        ---------                        -----                     ----     

                                                                            
/s/Robert W. Mahoney     Chairman of the Board, President and  March 4, 1999
----------------------    Chief Executive Officer              -------------
  Robert W. Mahoney       (Principal Executive Officer)                     

/s/Gerald F. Morris      Executive Vice President              March 4, 1999
-------------------       and Chief Financial Officer          -------------
  Gerald F. Morris        (Principal Accounting and                         
                          Financial Officer                                 

/s/Louis V. Bockius III  Director                              March 4, 1999
-----------------------                                        -------------
  Louis V. Bockius III                                                      

/s/Daniel T. Carroll     Director                              March 4, 1999
-----------------------                                        -------------
  Daniel T. Carroll                                                         

/s/Richard L. Crandall   Director                              March 4, 1999
-----------------------                                        -------------
  Richard L. Crandall                                                       

             *           Director                              March 4, 1999
-----------------------                                        -------------
  Donald R. Gant                                                            

/s/L. Lindsey Halstead   Director                              March 4, 1999
-----------------------                                        -------------
  L. Lindsey Halstead                                                       

            *            Director                              March 4, 1999
-----------------------                                        -------------
  Phillip B. Lassiter                                                       


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                                                                [Download Table]


       Signature            Title        Date   
       ---------            -----        ----   
                                                

           *             Director  March 4, 1999
-----------------------            -------------
  John N. Lauer                                 

           *             Director  March 4, 1999
-----------------------            -------------
  William F. Massy                              

/s/W.R. Timken, Jr.      Director  March 4, 1999
-----------------------            -------------
  W. R. Timken, Jr.                             


*   The undersigned, by signing his name hereto, does sign and execute this     
 Annual Report on Form 10-K pursuant to the Powers of Attorney executed by
   the above-named officers and directors of the Registrant and filed with the
Securities and Exchange Commissions on behalf of such officers and      
directors.                                                              

Dated:  March 4, 1999           *By:    /s/Gerald F. Morris                     
 ---------------                  ----------------------------------
                                  Gerald F. Morris, Attorney-in-Fact

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 INDEPENDENT AUDITORS' REPORT ON
 -------------------------------
 FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
 -----------------------------------------------------

The Board of Directors and Shareholders                                         
Diebold, Incorporated                                                           

We have audited the accompanying consolidated balance sheets of Diebold,        
Incorporated and subsidiaries as of December 31, 1998 and 1997 and the related  
consolidated statements of income, shareholders' equity and cash flows for each 
of the years in the three-year period ended December 31, 1998. In connection    
with our audits of the consolidated financial statements, we also have audited  
the financial statement schedule as listed in Item 14 (a)(1) of Form 10-K of    
Diebold, Incorporated for each of the years in the three-year period ended      
December 31, 1998. These consolidated financial statements and financial        
statement schedule are the responsibility of the Registrant's management. Our   
responsibility is to express an opinion on these consolidated financial         
statements and financial statement schedule based on our audits.                

We conducted our audits in accordance with generally accepted auditing          
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the financial position of Diebold,            
Incorporated and subsidiaries as of December 31, 1998 and 1997 and the results  
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when 
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth     
therein.                                                                        

/s/KPMG LLP                                                                     

KPMG LLP                                                                        
Cleveland, Ohio                                                                 
January 19, 1999                                                                

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                                                        [Enlarge/Download Table]


                                     DIEBOLD, INCORPORATED AND SUBSIDIARIES                          

                                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS                     

                                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996                       

                                       Balance at                                          Balance   
                                        beginning                                          at end    
                                         of year          Additions            Deductions  of year   
                                       ----------         ---------            ----------  -------   

                                                                                                     
Year ended December 31, 1998                                                                         
----------------------------                                                                         
Allowance for doubtful accounts         $6,838,018        $5,438,303           $3,902,649  $8,373,672

Year ended December 31, 1997                                                                         
----------------------------                                                                         
Allowance for doubtful accounts         $5,917,055        $1,727,130             $806,167  $6,838,018

Year ended December 31, 1996                                                                         
----------------------------                                                                         
Allowance for doubtful accounts         $5,541,954        $2,273,553           $1,898,452  $5,917,055


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 EXHIBIT INDEX
 -------------

  EXHIBIT NO.          DOCUMENT DESCRIPTION                         PAGE NO.
  -----------          --------------------                         --------

3.3            Certificate of Amendment to Amended          
                    Articles of Incorporation                       44

    10.14           Deferral of Stock Option Gains Plan             45

    21              Subsidiaries of the Registrant                  46

    23              Consent of Independent Auditors                 47

    24              Power of Attorney                               48

    27              Financial Data Schedule                         49

43

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K405’ Filing		Date		First		Last			Other Filings
		6/1/17		23
		4/1/17		23
		1/1/17		23
		2/11/09		26					4
		4/2/02		24
		3/2/02		24
		12/31/00		26					10-K,  11-K
		4/21/99		2					DEF 14A
		3/12/99		13
Filed on:		3/8/99							DEF 14A
		3/4/99		39		40
		3/2/99		1
		2/19/99		13
		2/11/99		26		37			SC 13G/A
		2/10/99		26
		1/28/99		26					8-K
		1/19/99		41
For Period End:		12/31/98		1		42			11-K
		12/30/98		9
		9/30/98		9		38			10-Q
		6/30/98		37					10-Q,  4
		3/31/98		29		38			10-Q
		1/29/98		38
		1/27/98		3		21
		1/1/98		20		26
		12/31/97		3		42			10-K,  11-K
		9/30/97		27					10-Q
		7/2/97		20		21
		6/27/97		20					8-K
		3/31/97		37					10-Q
		2/19/97		9		23
		2/7/97		9		23
		1/30/97		9		23
		12/31/96		16		42			10-K405,  11-K
		3/31/96		37					10-Q
		1/1/95		23		24
		12/31/94		37					10-K,  11-K
		1/1/94		37
		12/31/93		38
		7/1/93		38
		12/31/92		37		38
		4/2/92		24
									List all Filings

14 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 8/09/23  Diebold Nixdorf, Inc.             10-Q        6/30/23   90:13M
 5/30/23  Diebold Nixdorf, Inc.             10-Q        3/31/23   87:10M
 3/27/23  Diebold Nixdorf, Inc.             S-4/A                  3:3.9M                                   Donnelley … Solutions/FA
 3/16/23  Diebold Nixdorf, Inc.             10-K       12/31/22  138:19M
 2/10/23  Diebold Nixdorf, Inc.             S-4                   18:5M                                     Donnelley … Solutions/FA
11/09/22  Diebold Nixdorf, Inc.             10-Q        9/30/22   96:12M
 8/09/22  Diebold Nixdorf, Inc.             10-Q        6/30/22   93:11M
 5/10/22  Diebold Nixdorf, Inc.             10-Q        3/31/22   94:9.9M
 3/11/22  Diebold Nixdorf, Inc.             10-K       12/31/21  139:21M
10/28/21  Diebold Nixdorf, Inc.             10-Q        9/30/21   91:11M
 7/29/21  Diebold Nixdorf, Inc.             10-Q        6/30/21   91:11M
 5/10/21  Diebold Nixdorf, Inc.             10-Q        3/31/21   89:9.8M
 3/01/21  Diebold Nixdorf, Inc.             10-K       12/31/20  140:23M
10/28/20  Diebold Nixdorf, Inc.             10-Q        9/30/20  100:13M