Diebold indefinitely suspended its plans to construct a new global headquarters in Ohio, an apparent casualty of the ATM manufacturer's struggling performance that it attributed to business delays in North America and Brazil.
The Thursday morning announcement came as Green, Ohio-based Diebold posted third quarter net income of $17.4 million ($0.27 per share), down 58% from the prior-year quarter's net income of $41.8 million ($0.65 per share). Last week, Diebold lowered its 2012 full-year financial earnings per share forecast to $1.91 to $1.99 per share, down from $2.31 to $2.44 per share.
On an earnings call Thursday, Diebold CEO Thomas Swidarski said constructing the $100 million, 55-acre headquarters was "not the right priority for the business at this time."
The company said in a press release that it would no longer receive a package of state and local incentives tied to the project, which would have totaled approximately $100 million, according to local press estimates when the deal was announced earlier this year.
Diebold's struggles come as it continues to experiences a shift in demand from regional to national accounts. This "mix shift," Swidarski said, is the result of demand slowing from community and regional banks as they complete their investments in new ATM hardware to meet Americans with Disabilities Act and Payment Card Industry security standard compliance.
Total third-quarter revenue increased slightly year-over-year; $709.9 million in the third quarter compared to $709.3 million a year earlier. But the mix shift disrupted Diebold's forecasting model that's used to predict the profit margins of its backlog of scheduled installations at national and regional banks, causing the company to overestimate its profitability in the third quarter this year.
Diebold has used averages of its margins—one estimate for regional banks and a second for national banks—to calculate its combined profitability in North America. It will now base profitability estimates off installation margins on the specific jobs in its backlog, explained CFO Bradley Richardson.
"We realize there will always be timing issues in terms of what period revenue is recognized, but we need to do a much better job forecasting our service costs and the margins associated with our back log," he said on the earnings call.
Still, opportunities in new technologies—like ATMs with deposit automation capabilities—and other integrated services present an opportunity among regional and community banks that Diebold said it can expect to benefit from in 2013
In Brazil, Diebold faced additional decline, as a bank worker labor dispute and recently held elections delayed ATM purchasing orders at least until next year.
In a research note Thursday, Wedbush Securities analysts said the issues that caused the 2% decline in Brazilian revenue "are temporary in nature and will not impact Diebold's success in Brazil based on the strong track record in this region."