In its first regular earnings report since catching up on delinquent filings, Diebold Inc. reported Thursday that its earnings surged 65% in the third quarter.
The North Canton, Ohio, company, a major maker of automated teller machines, credited large ATM sales volume in China and election equipment sales in Brazil, but executives cautioned that forecasting would be difficult due to sweeping changes in the U.S. banking industry and wide fluctuations in the dollar's value.
"I'm extremely proud of the progress we're making in a very difficult operating environment," Thomas W. Swidarski, Diebold's president and chief executive officer, said during a conference call with analysts.
Diebold, which gets roughly 70% of its revenue from the ATM business, wants to expand its services segment, Mr. Swidarski said.
Given the volatility of the banking industry recently, "the business case for these services has become even more compelling," he said.
To date, its biggest market for services has been U.S. financial companies, but he cited a contract signed in September with the U.S. Postal Service to provide video security monitoring in post offices, using Internet cameras. This deal, which potentially could last more than 12 years, should begin producing revenue for the company in 2009, he said.
In the third quarter, however, services revenue fell 6%, to $198.9 million, which Mr. Swidarski attributed to a slowdown in bank branch construction and retail store openings.
Overall, the company reported that net income surged 65%, to $46.5 million in the third quarter, compared to the same period last year. Revenue grew 20%, to $890.3 million.
Earnings of 70 cents per share topped the average of analysts' estimates by 6 cents. The analysts had expected $815.8 million of revenue on average.
Citing certain nonroutine expenses, Diebold reduced its per-share earnings forecast for the full year to $1.42 to $1.45, down from the range of $1.52 to $1.62 it offered in September. But it raised the outlook on an adjusted basis, to $2.53 to $2.58 a share, from September's $2.40 to $2.45 range.
Kevin J. Krakora, Diebold's chief financial officer, noted that the new estimate of adjusted earnings points toward 30 to 35 cents of profit per share in the current quarter, but he cautioned that the company might have to write down 10 to 15 cents of this, primarily because of voting machine inventory that it does not know whether it will sell by yearend.
The news drove up Diebold's share prices. By midday Thursday, the stock had climbed 10.19% from Wednesday's close, to $28 per share.
Diebold had not issued a full earnings report since the start of last year, due to a long-running audit of its method of booking revenue. The company had booked revenue before some of its products were delivered, a method called "bill and hold," but has said that it now records revenue when it ships its products.
The audit required Diebold to restate its earnings back to 2003, a task completed last month.
It played an important role in a buyout offer Diebold spurned this year. United Technologies Corp., a Hartford, Conn., conglomerate, bid $40 per share in March, a 66% premium over its share price at the time.
Diebold's board rejected the offer, saying it undervalued the company, though because Diebold was delinquent in its filings, no one could have a true idea of its financial condition.
In August, when Diebold released a preliminary second-quarter report, several observers said it had been right to reject the offer.
