Diebold Inc. reported Q4 earnings yesterday — confirming the bad news the company had forecast in a preliminary report. Revenue in Q4 2012 was $840.1 million, down 1.2 percent from the same period in 2011; still the company managed to record an overall increase in revenues in 2012, improving 5.5 percent over 2011.
The company experienced a fourth-quarter net loss of $7.5 million, compared with Q4 2011 net income of $79.8 million. Losses included non-routine expenses of $21.9 pre-tax for early buyouts of certain pension plan participants, as well as a non-routine expense of $18 million pre-tax to increase its accrual in an ongoing Foreign Corruption Practices Act investigation.
Not pulling his punches
Diebold executive chairman Henry D.G. Wallace was blunt in his assessment of the company's recent performance.
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"The 2012 results and the present outlook for 2013 are disappointing, and we need to improve," he said. "As previously communicated, we expect 2013 non-GAAP earnings to be flat to down modestly from 2012, and revenue to be relatively flat. I am also expecting the first quarter to be weak and well below the first quarter of last year, which benefited from strong regional bank demand."
Wallace noted some "bright spots" in Asia Pacific, Latin America and in U.S. national accounts. But the uncertainty surrounding U.S. regional bank activity and the outcome of some major business awards in Brazil could significantly affect the range of outcomes, he said.
Engineering a turnaround
"Therefore, the company is not including a specific [earnings per share] range in its guidance for 2013 at this time," Wallace said. "However, I want to assure you that we have a strong team, we are focused on the tasks ahead, and I am confident in our ability to return Diebold to a long-term sustainable growth plan."
A key member of that team is George S. Mayes Jr., who was recently named COO following the ousting from the company of Diebold CEO Thomas Swidarski and Charles Ducey, executive vice president of North American operations.
"George has a strong track record of operational excellence, and together we are committed to improving our financial position in the short term, as well as initiating longer-term structural improvements throughout our global operations," Wallace said. "This will be undertaken with a sense of urgency without jeopardizing our ability to provide outstanding products and services."
The Q4 numbers:
- Total revenue was down 1.2 percent year-over-year.
- Total gross margin (21.9 percent) was down 4.3 percent year-over-year with declines in both product and service.
- Total operating expenses ($176.6 million) were up 2.7 percent year-over-year.
- Operating profit ($7.5 million) represented 0.9 percent of net sales, a decrease of 7.0 percent year-over year.
- Non-GAAP operating profit ($42.5 million) was 5.1 percent of revenue, and was down 8.9 percent (compared with $75.8 million) year over year.
- The company incurred a non-cash impairment charge of $1.0 million related to the cancellation of a new corporate headquarters project.
The recorded earnings call and presentation materials are available online and will remain on the Diebold site for up to three months following the call.
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All graphics courtesy of Diebold Inc.
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