Diebold Reports Fourth Quarter and Year-End Financial Results

NORTH CANTON, Ohio, Jan. 30 /PRNewswire-FirstCall/ -- Diebold, Incorporated today reported fourth quarter 2006 income from continuing operations of $27.1 million or $.41 per share. This compares to $10.4 million or $.15 per share from the fourth quarter of 2005, representing an increase of 160.3 percent and 173.3 percent, respectively. Fourth quarter revenue from continuing operations was $825.4 million, an increase of 1.8 percent from the fourth quarter of 2005.

Included in the fourth quarter was a non-cash charge of $.25 per share related to the impairment of a portion of the costs previously capitalized relative to the company's enterprise resource planning (ERP) implementation. Also included in the quarter were restructuring charges of $.11 per share resulting primarily from costs associated with the continued realignment of the European service and research and development operations as well as the relocation of the company's Europe, Middle East and Africa (EMEA) headquarters. Excluding restructuring and impairment charges*, diluted earnings per share in the fourth quarter would have been $.77.

Net cash provided by operating activities in the fourth quarter of 2006 was $110.5 million, up 50.6 percent from the comparable period in the prior year. Free cash flow* for the quarter was $96.0 million, an increase of $32.7 million, or 51.6 percent from the same period in the previous year. Full-year 2006 net cash provided by operating activities was $265.2 million, up 126.9 percent, while free cash flow* was $206.1 million, up 279.9 percent from 2005.

Business Review Management commentary

"We continued to make progress in the fourth quarter on our key strategic initiatives, including manufacturing optimization, ERP implementation and enhancing our organizational leadership. I am encouraged that these and other efforts driven by our associates continue to result in positive financial improvement," said Thomas W. Swidarski, Diebold president and chief executive officer. "For the second consecutive quarter, we have seen our quarterly gross margins improve compared to the prior year. This improvement reflects our intense focus on stabilizing pricing and enhancing the quality of our solutions while continuing to reduce our cost structure. While our competitive position has improved dramatically over the past year, we still have a long way to go before we reach the potential that I believe this company is capable of achieving."

ERP/IT implementation; ERP asset impairment charge

In the fourth quarter, the company hired key executive management with considerable experience in IT strategic planning, business transformation and global Oracle ERP system implementation. In addition, the company has made substantial progress with the previously disclosed evaluation of its ERP implementation plan, global IT organization, as well as the completion of its evaluation of the software and hardware architecture. As a result of this completed evaluation, the company has determined that $22.5 million in previously capitalized ERP costs have become impaired. The impairment charge was primarily a result of previous customizations made to the software and software-related costs that have been rendered obsolete due to adjustments in the implementation plan, process improvements and the decision to implement a newer release of the ERP software. The company remains committed to the Oracle ERP platform and achieving the resulting efficiencies from an integrated global IT system.

Manufacturing optimization

During the quarter, Diebold successfully initiated serial production at its new manufacturing facility in Budapest, Hungary, producing approximately 1,000 Opteva(R) automated teller machines (ATMs). Quality levels and on-time delivery of products from this facility met or exceeded that achieved by the company's manufacturing plants in Asia and North America.

Regarding the ongoing effort to close the production facility in Cassis, France, the company has determined it has fulfilled its obligations related to the consultation process. As a result, the company has ended all production at the Cassis plant. On January 8, 2007, the company officially notified 101 of the 122 plant employees of termination of their employment. On an interim basis, however, the company is required to keep the remaining employees to facilitate the closure of the facility. One of the unions is legally challenging the process and the court is expected to rule on this challenge in the first quarter. Management remains committed to completing this realignment as quickly as possible.

Organizational structure

Diebold continues to refine its international organization. Since assuming responsibility for the EMEA operations, in addition to heading the Asia Pacific region, James L.M. Chen has made a number of key organizational changes. Specifically, Chen has changed his management structure from the country level to the regional level. For example, Asia Pacific has been divided into two regions, while EMEA has been divided into three -- each with a dedicated leader. This new organizational structure will enable the company to better serve customers in the regions by more effectively aligning its sales and service structure and leveraging resources across countries.

Multi-year profit improvement plan

Diebold has established the processes and systems necessary to execute its multi-year profit improvement plan that encompasses a $100 million reduction in the company's cost structure by the end of 2008. As of year-end 2006, the company has eliminated $12 million in expense from its 2007 cost structure. The company has also identified an additional $23 million in costs that it intends to eliminate by the end of 2007. The company remains confident with its goal of achieving a corporate operating margin of 11 to 12 percent in 2009.

Fourth Quarter Orders (constant currency)

Total orders for financial self-service and security products and services were essentially flat compared to the prior year period. Financial self- service orders declined slightly due primarily to the continued softness in the Americas market, which was down in the mid-single digit range and a double-digit decline in Asia Pacific, which had exceptionally strong order growth in the prior year period. This decline was offset by strong fourth quarter EMEA orders, which increased in the double-digit range from the fourth quarter 2005. Security orders increased in the mid single-digit range led by the Americas being up in the high single digits.

Revenue

Total revenue for the quarter was up 1.8 percent, with security products and services revenue up 15.8 percent over the fourth quarter 2005 and financial self-service revenue up 2.4 percent for the quarter. These increases were offset by an $18.4 million reduction in Brazilian lottery revenue from the fourth quarter of 2005 and a $9.8 million reduction in election systems revenue. During the quarter, the net positive currency impact was approximately $15.3 million, or 1.9 percent. The positive currency impact on revenue was largely due to the year-over-year strengthening of the Brazilian real and the euro.

Gross Margin

Total gross margin for the quarter was 25.3 percent, compared to 22.9 percent in the fourth quarter 2005. Restructuring charges of $3.8 million were included in the fourth quarter 2006, while restructuring charges of $3.6 million were recorded in the fourth quarter 2005.

Product gross margin was 28.9 percent, compared to 25.3 percent in the fourth quarter 2005. Restructuring charges of $1.2 million were included in the fourth quarter 2006, while restructuring charges of $2.2 million were recorded in the fourth quarter 2005. Excluding restructuring charges*, product gross margin would have been 29.2 percent in the fourth quarter 2006, compared to 25.8 percent in the fourth quarter 2005. Improved pricing discipline in North America, a lower cost structure and a more favorable geographic mix within Latin America contributed to the improvement in product gross margin in the fourth quarter 2006. In addition, improved profitability in the election systems business also contributed to the increase in gross margin.

Service gross margin was 21.3 percent, compared to 19.8 percent in the fourth quarter of 2005. Restructuring charges of $2.6 million were included in the fourth quarter 2006, while restructuring charges of $1.4 million were recorded in the fourth quarter 2005. Excluding restructuring charges*, service gross margin would have been 22.0 percent in the fourth quarter 2006, compared to 20.2 percent in the fourth quarter 2005. The year-over-year improvement in service margin was driven by improved product quality and related productivity gains, especially within the U.S. market. In addition, service gross margin in the election systems business also improved on significantly higher revenue.

Income from Continuing Operations

Income from continuing operations was 3.3 percent of revenue compared to 1.3 percent in the fourth quarter 2005. The increase in income from continuing operations was due primarily to higher gross profit and lower operating expenses as a percentage of revenue. Fourth quarter 2006 operating expenses included restructuring charges of $5.9 million primarily related to the relocation of the EMEA headquarters and the realignment of the European service and research and development operations. In addition, a non-cash $22.5 million ERP asset impairment charge was recognized in the fourth quarter.

Also contributing to the improvement in income from continuing operations was a lower fourth quarter effective tax rate. The fourth quarter tax rate was primarily lower due to a change in income mix, which favored lower-tax jurisdictions, and the successful implementation of global tax initiatives.

Balance Sheet, Cash Flow and Share Repurchase Highlights

The company's net debt* was $335.4 million at December 31, 2006 compared to $241.9 million at December 31, 2005. The $93.6 million increase in net debt* over the last 12 months was principally due to free cash flow* of $206.1 million offset by share repurchases of $148.1 million, dividends of $57.4 million, acquisitions of $62.1 million and a $32.1 million increase in other assets.

Net cash provided by operating activities increased by $37.1 million in the fourth quarter, moving from $73.4 million in the fourth quarter 2005 to $110.5 million in the fourth quarter 2006. Free cash flow* increased by $32.7 million, moving to $96.0 million in the fourth quarter from $63.3 million of free cash flow* in the fourth quarter of 2005. The increase in free cash flow* was largely due to higher earnings and improved trade receivable collections. Included in the fourth quarter cash collections was approximately $7 million of past due elections receivables from counties in California. Days sales outstanding (DSO) were 59 days at December 31, 2006, compared to 65 days at December 31, 2005, with most of the improvement occurring in North America and EMEA. Inventory turns declined slightly, moving from 5.8 turns at December 31, 2005 to 5.6 turns at December 31, 2006.

In the fourth quarter 2006, Diebold repurchased approximately 0.1 million shares of the company's common stock under its repurchase plan. The company has approximately 0.9 million shares remaining under its existing board authorization.

Restructuring

The company incurred fourth quarter restructuring charges of $.11 per share. The majority of these costs were associated with the realignment of the European service and research and development operations and the relocation of the EMEA headquarters. Full-year restructuring charges in 2006 were $.28 per share. This includes charges of $.13 per share primarily associated with the consolidation of global R&D facilities and other service consolidations, $.07 per share from the termination of the IT outsourcing agreement, $.03 per share for realignment of the company's global manufacturing operations, $.03 of other restructuring charges related to the company's relocation of its European headquarters, $.01 per share for product development rationalization and $.01 per share for severance.

The company is in the process of closing its Cassis, France manufacturing facility and has determined that it has fulfilled its obligations related to the consultation process with the employee works council. On January 8, 2007, the company officially ceased production at the plant and has begun taking the required steps to facilitate the closure of the facility. In addition, the company has identified a potential buyer for the building and is in the final stages of negotiating the sale. The restructuring costs associated with these actions are now expected to be incurred in the first quarter of 2007, and are estimated to be $.25 to $.30 per share, which include cash charges of approximately $18 million to $22 million.

Full-year 2007 outlook

The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. These statements do not include the potential impact of any future mergers, acquisitions, disposals or other business combinations.

"2006 was a year of transition at Diebold, where we focused primarily on addressing operational issues. Our focus in 2007 will expand to include enhancing and broadening our product and service solutions to bolster our competitive position," said Swidarski. "Specifically, we plan to expand our solutions set in the deposit automation area, significantly improve the competitiveness of our financial self-service software platform and expand our integrated services model beyond Brazil. We also intend in early 2007 to finalize our Cassis plant closure and communicate our strategy related to the election systems business."

Expectations for the full year 2007 include: - Revenue growth of 3 to 5 percent - Financial self-service revenue growth of 2 to 3 percent. - Security revenue growth of 8 to 12 percent. - Election systems revenue is anticipated to be in the range of $185 million to $215 million. - Brazilian lottery systems revenue of approximately $18 million to $20 million. - Earnings per share 2007 EPS (GAAP) $1.85 - $2.00 Cassis Restructuring $0.30 - $0.25 2007 EPS non-GAAP, excluding restructuring expense $2.15 - $2.25 - Free cash flow* including restructuring actions is now expected to be $150 to $165 million, which includes the anticipated cash charges associated with the Cassis restructuring. Financial Information

Thomas W. Swidarski and Kevin J. Krakora will discuss the company's financial performance during a conference call today at 10:00 a.m. (ET). Access is available from Diebold's Web site at http://www.diebold.com/. The replay can also be accessed on the site for up to three months after the call.

*See accompanying notes for non-GAAP measures. Full-Year Gross Profit/Margin Summary from Continuing Operations (non-GAAP, excluding restructuring and special items)* GAAP Restruct. Financial Self Service 2006 charges 2006* Product Revenue 957,698 957,698 Gross profit 259,807 2,876 262,683 Gross margin 27.1% 27.4% Service Revenue 941,527 941,527 Gross profit 189,589 3,959 193,548 Gross margin 20.1% 20.6% Security solutions Product Revenue 328,291 328,291 Gross profit 92,475 423 92,898 Gross margin 28.2% 28.3% Service Revenue 446,909 446,909 Gross profit 85,128 - 85,128 Gross margin 19.0% 19.0% Election systems/ Brazilian lottery Product Revenue 183,261 183,261 Gross profit 70,351 - 70,351 Gross margin 38.4% 38.4% Service Revenue 48,546 48,546 Gross profit 13,168 - 13,168 Gross margin 27.1% 27.1% Total Product Revenue 1,469,250 1,469,250 Gross profit 422,633 3,299 425,932 Gross margin 28.8% 29.0% Service Revenue 1,436,982 1,436,982 Gross profit 287,885 3,959 291,844 Gross margin 20.0% 20.3% Total Revenue 2,906,232 2,906,232 Gross profit 710,518 7,258 717,776 Gross margin 24.4% 24.7% Restruct. GAAP and special Financial Self Service 2005 charges 2005* Product Revenue 879,195 879,195 Gross profit 239,264 16,829 256,093 Gross margin 27.2% 29.1% Service Revenue 891,865 891,865 Gross profit 204,752 5,327 210,079 Gross margin 23.0% 23.6% Security solutions Product Revenue 276,509 276,509 Gross profit 63,917 1,300 65,217 Gross margin 23.1% 23.6% Service Revenue 385,104 385,104 Gross profit 77,726 778 78,504 Gross margin 20.2% 20.4% Election systems/ Brazilian lottery Product Revenue 137,715 137,715 Gross profit 37,917 - 37,917 Gross margin 27.5% 27.5% Service Revenue 16,661 16,661 Gross profit 1,906 - 1,906 Gross margin 11.4% 11.4% Total Product Revenue 1,293,419 1,293,419 Gross profit 341,098 18,129 359,227 Gross margin 26.4% 27.8% Service Revenue 1,293,630 1,293,630 Gross profit 284,384 6,105 290,489 Gross margin 22.0% 22.5% Total Revenue 2,587,049 2,587,049 Gross profit 625,482 24,234 649,716 Gross margin 24.2% 25.1% *See accompanying notes for non-GAAP measures. Revenue Summary by Product, Service and Geographic Area Revenue Summary by Product and Service Solutions (In Thousands -- Quarter Ended December 31) % Change % Change constant 2006 2005 GAAP currency* Financial Self-Service Products $302,345 $298,910 1.1% -1.6% Services 247,854 238,438 3.9% 1.7% Total Fin. self-service 550,199 537,348 2.4% -0.2% Security solutions Products 102,990 81,781 25.9% 25.7% Services 117,355 108,453 8.2% 7.6% Total Security 220,345 190,234 15.8% 15.3% Total Fin. self-service & security 770,544 727,582 5.9% 3.8% Election systems Products 32,592 57,727 -43.5% -43.5% Services 20,985 5,624 273.1% 272.9% Total Election systems 53,577 63,351 -15.4% -15.4% Brazilian lottery systems 1,285 19,683 -93.5% -93.7% Total Revenue from Continuing Operations $825,406 $810,616 1.8% -0.1% Revenue Summary by Geographic Segment (In Thousands -- Quarter Ended December 31) % Change % Change constant 2006 2005 GAAP currency* The Americas Financial self-service solutions $332,710 $326,144 2.0% 0.9% Security solutions 204,581 175,453 16.6% 16.6% subtotal 537,291 501,597 7.1% 6.3% Brazilian lottery systems 1,285 19,683 -93.5% -93.7% Election systems 53,577 63,351 -15.4% -15.4% Total Americas 592,153 584,631 1.3% 0.5% Asia Pacific Financial self-service solutions 81,023 82,012 -1.2% -4.6% Security solutions 12,446 9,493 31.1% 27.3% Total Asia Pacific 93,469 91,505 2.1% -1.3% Europe, Middle East, Africa Financial self-service solutions 136,466 129,192 5.6% 0.1% Security solutions 3,318 5,288 -37.3% -42.3% Total Europe, Middle East, Africa 139,784 134,480 3.9% -1.6% Total Revenue from Continuing Operations $825,406 $810,616 1.8% -0.1% *See accompanying notes for non-GAAP measures. Notes for Non-GAAP Measures 1. Reconciliation of GAAP EPS to non-GAAP measures: Q4 2006 Twelve Months Ended 2006 Total EPS (GAAP) $0.41 $1.29 Restructuring Charges 0.11 0.28 Asset Impairment 0.25 0.25 Operating EPS (Non-GAAP) $0.77 $1.82 The company's management believes excluding these items is useful to investors because it provides an overall understanding of the company's historical financial performance and future prospects. Management believes operating EPS (non-GAAP) is an indication of the company's base-line performance before gains, losses or other charges that are considered by management to be outside the company's core operating results. Exclusion of these items permits evaluation and comparison of results for the company's core business operations, and it is on this basis that management internally assesses the company's performance. 2. The company's management believes that constant currency is useful to investors since it depicts order and GAAP revenue growth in local currency without the benefit or detriment occurring from currency fluctuations. 3. Free cash flow/(use) is calculated as follows: Twelve Twelve Months Months Ended Ended Q4 2006 Q4 2005 2006 2005 Net cash provided by operating activities (GAAP measure) $110,470 $73,361 $265,173 $116,865 Capital expenditures (12,068) (8,487) (44,277) (48,454) Rotable spares expenditures (2,398) (1,529) (14,749) (14,151) Free cash flow (use) (non-GAAP measure) $96,004 $63,345 $206,147 $54,260 The company's management believes that free cash flow is useful to investors because it is a meaningful indicator of cash generated from operating activities that is available for the execution of its business strategy, including service of debt principal, dividends, share repurchase and acquisitions. Free cash flow is not an indicator of residual cash available for discretionary spending, because it does not take into account mandatory debt service or other non-discretionary spending requirements that are deducted in the calculation of free cash flow. 4. Net (debt) is calculated as follows: December 31, 2006 December 31, 2005 Cash, cash equivalents and other investments (GAAP measure) $353,385 $260,785 Less Industrial development revenue bonds and other (12,000) (13,450) Less Notes payable (676,805) (489,194) Net (debt) (non-GAAP measure) $(335,420) $(241,859) The company's management believes that given the net debt, the significant cash, cash equivalents and other investments on its balance sheet, that net cash against outstanding debt is a meaningful debt calculation. 5. Reconciliation of GAAP Gross Margin to Non GAAP measures Product Service Total Gross Margin Gross Margin Gross Margin Q4 2006 Q4 2005 Q4 2006 Q4 2005 Q4 2006 Q4 2005 GAAP Gross Margin $126,607 $115,849 $82,520 $69,758 $209,127 $185,607 GAAP Gross Margin % 28.9% 25.3% 21.3% 19.8% 25.3% 22.9% Restructuring $1,213 $2,244 $2,550 $1,362 $3,763 $3,606 Operating gross margin (non GAAP) $127,820 $118,093 $85,070 $71,120 $212,890 $189,213 Operating gross margin (non GAAP) % 29.2% 25.8% 22.0% 20.2% 25.8% 23.3% The company's management believes excluding restructuring charges from gross profit margins is an indication of the company's baseline performance before gains, losses, or other charges that are considered by management to be outside the company's core operating results. The exclusion of these items permits evaluation and comparison of results for the company's core business operations and it is on this basis that the company's management internally assesses the company's performance. Forward-Looking Statements

In this press release, statements that are not reported financial results or other historical information are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward- looking statements give current expectations or forecasts of future events and are not guarantees of future performance. These forward-looking statements relate to, among other things, the company's future operating performance, the company's share of new and existing markets, the company's short- and long- term revenue and earnings growth rates, the company's implementation of cost- reduction initiatives and measures to improve pricing, including the optimization of the company's manufacturing capacity. The use of the words "believes," "anticipates," "expects," "intends" and similar expressions is intended to identify forward-looking statements that have been made and may in the future be made by or on behalf of the company. Although the company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, the economy, its knowledge of its business, and on key performance indicators that impact the company, these forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in or implied by the forward-looking statements. The company is not obligated to update forward-looking statements, whether as a result of new information, future events or otherwise.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Some of the risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements include, but are not limited to:

- competitive pressures, including pricing pressures and technological developments; - changes in the company'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 company's operations, including Brazil, where a significant portion of the company's revenue is derived; - acceptance of the company's product and technology introductions in the marketplace; - unanticipated litigation, claims or assessments; - the timely completion of the company's new manufacturing operation for financial self-service terminals and related components in the Eastern European region; - costs associated with the planned closure of the company's Cassis production facility, including the timing of related restructuring charges; - the completion of the company's implementation of its ERP system and other IT-related functions; - the company's ability to reduce costs and expenses and improve internal operating efficiencies, including the optimization of the company's manufacturing capacity; - the company's ability to successfully implement measures to improve pricing; - variations in consumer demand for financial self-service technologies, products and services; - challenges raised about reliability and security of the company's election systems products, including the risk that such products will not be certified for use or will be decertified; - changes in laws regarding the company's election systems products and services; - potential security violations to the company's information technology systems; and - the company's ability to achieve benefits from its cost-reduction initiatives and other strategic changes.

Diebold, Incorporated is a global leader in providing integrated self- service delivery and security systems and services. Diebold employs more than 15,000 associates with representation in nearly 90 countries worldwide and is headquartered in Canton, Ohio, USA. Diebold reported revenue of $2.9 billion in 2006 and is publicly traded on the New York Stock Exchange under the symbol 'DBD.' For more information, visit the company's Web site at http://www.diebold.com/.

DIEBOLD, INCORPORATED CONDENSED CONSOLIDATED INCOME STATEMENTS - UNAUDITED (IN THOUSANDS EXCEPT EARNINGS PER SHARE) Three months ended Twelve months ended December 31, December 31, 2006 2005 2006 2005 Net Sales Product $437,927 $458,100 $1,469,250 $1,293,419 Service 387,479 352,516 1,436,982 1,293,630 Total 825,406 810,616 2,906,232 2,587,049 Cost of goods Product 311,320 342,251 1,046,617 952,321 Service 304,959 282,758 1,149,097 1,009,246 Total 616,279 625,009 2,195,714 1,961,567 Gross Profit 209,127 185,607 710,518 625,482 Percent of net sales 25.3% 22.9% 24.4% 24.2% Operating expenses Selling, general and administrative 125,727 130,098 463,862 403,804 Research, development and engineering 17,122 16,958 70,995 60,409 Total 142,849 147,056 534,857 464,213 Percent of net sales 17.3% 18.1% 18.4% 17.9% Operating profit 66,278 38,551 175,661 161,269 Percent of net sales 8.0% 4.8% 6.0% 6.2% Asset impairment (22,462) - (22,462) - Other expense and minority interest, net (7,687) (9,661) (28,750) (23,018) Income from continuing operations before taxes 36,129 28,890 124,449 138,251 Percent of net sales 4.4% 3.6% 4.3% 5.3% Taxes on income (9,047) (18,487) (37,902) (55,347) Effective tax rate 25.0% 64.0% 30.5% 40.0% Income from continuing operations $27,082 $10,403 $86,547 $82,904 Percent of net sales 3.3% 1.3% 3.0% 3.2% Income from discontinued operations, net of tax $- $- $- $909 Gain on sale of discontinued operations, net of tax - - - 12,933 Income from discontinued operations $- $- $- $13,842 Net income $27,082 $10,403 $86,547 $96,746 Basic weighted average shares outstanding 65,525 69,198 66,669 70,577 Diluted weighted average shares outstanding 66,102 69,310 66,885 70,966 Basic Earnings Per Share from continuing operations $0.41 $0.15 $1.30 $1.17 Basic Earnings Per Share from discontinued operations - - - 0.20 Total Basic Earnings Per Share $0.41 $0.15 $1.30 $1.37 Diluted Earnings Per Share from continuing operations $0.41 $0.15 $1.29 $1.17 Diluted Earnings Per Share from discontinued operations - - - 0.19 Total Diluted Earnings Per Share $0.41 $0.15 $1.29 $1.36 DIEBOLD, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED (IN THOUSANDS) December 31, December 31, 2006 2005 ASSETS Current assets Cash and cash equivalents $253,814 $207,900 Short-term investments 99,571 52,885 Trade receivables, net 610,893 676,361 Inventories 389,107 341,614 Other current assets 190,955 149,120 Total current assets 1,544,340 1,427,880 Securities and other investments 70,088 54,154 Property, plant and equipment, net 256,232 276,966 Goodwill 460,339 389,134 Other assets 185,636 205,059 $2,516,635 $2,353,193 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable $11,324 $34,472 Accounts payable 158,388 180,725 Other current liabilities 429,024 364,834 Total current liabilities 598,736 580,031 Long-term notes payable 665,481 454,722 Long-term liabilities 161,017 165,591 Total shareholders' equity 1,091,401 1,152,849 $2,516,635 $2,353,193 DIEBOLD, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (IN THOUSANDS) Twelve months ended December 31, 2006 2005 Cash flow from operating activities: Net income $86,547 $96,746 Adjustments to reconcile net income to cash provided by operating activities: Income from discontinued operations - (909) Minority share of income 6,597 6,829 Depreciation and amortization 91,633 76,239 Share-based compensation 15,431 (2,444) Deferred income taxes (38,388) 10,063 Impairment of asset 22,462 - Gain on sale of discontinued operations - (20,290) (Gain) loss on sale of assets, net (287) 5,327 Cash provided (used) by changes in certain assets and liabilities: Trade receivables 81,993 (97,075) Inventories (31,842) (23,558) Prepaid expenses (15,064) 1,860 Other current assets 4,157 (15,982) Accounts payable (29,796) 39,500 Certain other assets and liabilities 71,730 40,559 Net cash provided by operating activities 265,173 116,865 Cash flow from investing activities: Proceeds from sale of discontinued operations - 29,350 Payments for acquisitions, net of cash acquired (62,156) (27,701) Net investment activity (45,152) (20,829) Capital expenditures (44,277) (48,454) Rotable spares expenditures (14,749) (14,151) Increase in certain other assets (30,495) (38,628) Net cash used by investing activities (196,829) (120,413) Cash flow from financing activities: Dividends paid (57,408) (57,770) Net borrowings 170,405 214,541 Repurchase of common shares (148,057) (138,208) Other financing activities 10,998 8,657 ` Net cash (used) provided by financing activities (24,062) 27,220 Effect of exchange rate changes on cash 1,632 183 Increase in cash and cash equivalents 45,914 23,855 Cash and cash equivalents at the beginning of the period 207,900 184,045 Cash and cash equivalents at the end of the period $253,814 $207,900