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Diebold’s quarterly loss beats analysts’ expectations

By Jim Mackinnon
Beacon Journal business writer

Diebold Inc. reported a loss for its third quarter and also announced it will be hiring a new chief financial officer.

The Green maker of ATMs and security systems said Wednesday it lost $21.7 million, or 34 cents per share, on revenue of $705.4 million for its third quarter. A year ago, Diebold had a profit of $16.2 million, or 25 cents per share, on revenue of $709.9 million. Adjusted income showed a profit of 56 cents per share compared to 37 cents per share a year ago, Diebold said.

Third-quarter net income was hurt by a pre-tax goodwill impairment charge of $70 million, or 84 cents per share, for its Brazil operations.

Even with the loss, Diebold’s financial results beat analysts’ expectations. Shares rose 41 cents, or 1.4 percent, to $30.11. Shares are up 1.3 percent, including dividends, since Jan. 1 and are up 6 percent from a year ago.

“We saw positive results from our ongoing business improvement and cost reduction efforts during the third quarter,” Andy Mattes, president and chief executive officer, said in a statement. Mattes was hired as Diebold CEO in June.

“We will reinvest approximately half our savings back into the company and we have yet to fully ramp up investments in our transformation initiatives,” Mattes said. “We still have an enormous amount of work in front of us to get the company back on the right trajectory.”

Mattes reaffirmed Diebold’s dividend. The company expects to have full-year adjusted earnings per share of $1.30 to $1.40, with fiscal 2013 revenue down 5 to 6 percent from fiscal 2012 levels, he said.

Third-quarter and nine-month revenue was down from the same periods a year ago largely because of “challenges in the North American market,” Mattes said. North American revenue fell about 10 percent, driven by the financial services business, he said.

For the first nine months of fiscal 2013, Diebold is showing a loss of $140.2 million, or $2.20 a share, on revenue of $2.05 billion. For the first nine months of fiscal 2012, Diebold had a profit of nearly $85.5 million, or $1.34 a share, on revenue of nearly $2.2 billion.

Diebold also said Bradley C. Richardson, executive vice president and chief financial officer, is leaving the company. In a conference call with industry analysts, Mattes said Richardson wanted other career opportunities.

“It has nothing to do with the course of the company, nothing to do with strategic direction or the financials about our operation,” Mattes said.

Christopher A. Chapman, vice president, global finance, will become interim CFO effective Nov. 6, the company said. Chapman has been with Diebold more than 17 years in various positions. Diebold hired executive search firm Korn Ferry to find a new chief financial officer.

As part of a recently announced $48 million settlement with the Department of Justice and Securities and Exchange Commission over criminal foreign bribery charges, Chapman told industry analysts that an “independent compliance monitor” will be at Diebold for at least 18 months. The monitor will look over Diebold’s policies, controls and training programs to assure the federal government that the company has an effective Foreign Corrupt Practices Act program, Chapman said.

The company expects more than 25 percent of 1,200 U.S. employees eligible for a previously announced early retirement program will take it, Mattes said. The early retirement is not just a means to save costs but also an attempt to attract new talent to Diebold, he said.

Diebold has about 1,900 Akron-Canton-area employees, with about 350 of those eligible for the early retirement program. Diebold has about 6,700 employees in the U.S.

Diebold is optimistic about new technology it is introducing for banks, Mattes said.

“We see increased interest in advanced video and transaction technology with the branch,” he said. “For example, we now have 20 different customers lined up to pilot our in-lobby terminal in North America.”

Banks are looking at how to adjust to customers who do not visit branches as often as they once did but still want offices that are nearby and convenient, he said. They are also studying ways to run smaller branches while still offering services for people who walk into their lobbies, he said.

“That’s why they talk to us about video, because it gives them a way to provide longer opening hours without having to staff local branches,” Mattes said. Banks are looking to shift more work from tellers to automated teller machines. The new technology is expected to shoulder 70 percent and more of teller work, up from about 50 percent now, he said.

Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com



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