Diebold (DBD) Cuts Q4, FY12 Outlook

January 24, 2013 9:04 AM EST
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Diebold, Incorporated (NYSE: DBD) today announced preliminary 2012 fourth quarter revenue of approximately $840 million and a loss from continuing operations of $(.12) per share, or income from continuing operations of $.45 per share on a non-GAAP* basis. For the full-year 2012, Diebold now expects EPS from continuing operations of approximately $1.28, or $2.07 on a non-GAAP* basis, on revenue growth of approximately 6 percent. Diebold also announced preliminary full-year free cash flow* of approximately $85 million. These results are preliminary in nature and subject to standard year-end financial reporting procedures.

*** The Street sees Q4 EPS of $0.64 and FY12 EPS of $2.27.

In addition, included in the GAAP results, the company incurred in the fourth quarter $22 million of pre-tax, non-routine expenses related to early buyout payments made to eligible pension participants. Also during the quarter, the company incurred $18 million of pre-tax, non-routine expenses primarily related to an increase in the accrued loss made in anticipation of the eventual resolution of the previously disclosed Foreign Corrupt Practices Act (FCPA) investigation.


The major factors contributing to the company's lower-than-expected earnings included an accelerated slowdown in the U.S. regional bank space and associated declines in non-contract-based service work, in addition to higher costs in the U.S. service business partially due to the impact of certain items, including an insurance liability charge and Hurricane Sandy. Finally, we continue to see ongoing activity delays in the Brazil business.

Free Cash Flow

In regards to free cash flow, the company's pattern of prepayment activity fell short of historical averages. This, coupled with the drop in earnings, resulted in free cash flow falling well short of expectations. However, Diebold's core elements of working capital continue to make progress, as the company ended the year with net debt* of approximately $20 million.

2013 Expectations

In regards to the outlook for 2013, the company expects relatively flat revenue. While the company is encouraged by the backlog seen in the Asia Pacific and U.S. national account segments, it expects the U.S. regional bank space to be down substantially from 2012. In addition, the company expects improvements within its Brazil business with several significant tenders expected in the first half of 2013. However, limited visibility to the U.S. regional bank market and the final outcome of the large Brazilian orders creates a wide range of earnings expectations. As such, the company is cautious on its full year outlook for 2013, expecting non-GAAP earnings to be flat to down moderately from 2012. However, free cash flow is expected to improve over 2012.

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