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North Canton, Ohio - Diebold, Incorporated (Nyse: Dbd) Today Reported Its

The following excerpt is from the company's SEC filing.


financial results.

"We continue to make achievements in our Diebold 2.0 transformation journey, and our recent strategic announcements support our objective to become a truly services-led, software-enabled company,” said Andy W. Mattes, Diebold president and chief executive officer. “We announced an agreement to divest our electronic security business in North America in a transaction valued at approximately $350 million. We also decided to narrow the scope of our Brazil other business primarily to lottery and election equipment to help rationalize our solution set in that market. These portfolio-shaping moves will sharpen the company's focus on the dynamic self-service industry, where we see a great deal of opportunity to grow and further solidify our position as a market leader.

“Our operational performance for the third quarter was in line with our expectations," Mattes continued. "Revenue was impacted by Brazil and China, given the political and economic environment in both countries. I'm encouraged by our constant currency total order growth, which increased in the high single digits, excluding the impact of China.

"In addition, we also continued our progress to become a more services-led company by winning major multi-vendor service contracts in North America," said Mattes. "This brings the total number of non-Diebold ATMs added under contract in North America to more than 11,000 this year."

Operational Highlights

Won a five-year multi-vendor service agreement with a top-three U.S.-based bank to service more than 6,000 non-Diebold ATMs in North America. Diebold will provide device-agnostic services and related hardware support.

Signed a contract with Banco Internacional de Ecuador to modernize its fleet with 400 ATMs, software and related maintenance services. As part of the agreement, Diebold will provide advisory and installation services.

Entered into a product agreement with Riyad Bank in Saudi Arabia to deliver 100 of the company's new 5500 series ATMs.

Achieved a five-year managed services contract with a major multi-national bank in Mexico, covering their entire fleet of approximately 2,200 ATMs in that country.

Financial Results of Operations

Total revenue for the

was $

680.9 million

, a decrease of $87.1 million or 11.3% from the prior-year period, and a decrease of

in constant currency. The currency impact was mainly driven by a weakening of the Brazil real and the euro. Total decrease in revenue in constant currency was driven primarily by lower volume in the Brazil other business and China.

Financial self-service revenue decreased

, or increased

in constant currency. Security revenue grew

Gross Margin

Total gross margin for the

, a decrease of 150 basis points from the

, driven by a decrease in service margin of 20 basis points and a 480 basis point decline in product margin. The minor change in service margin was primarily attributable to solution and geographic mix. The product margin decrease was primarily due to lower Brazil other business, which had higher volume in the prior year period, and an inventory reserve increase of $4.7 million in the third quarter of 2015, also associated with the Brazil other business.

Operating Margin

Total operating expenses were $

147.7 million

of revenue, for the

, compared with $

153.9 million

of revenue, in the

. Operating expenses in the

included restructuring and non-routine charges of

$9.8 million

, consisting primarily of severance costs related to the company's transformation, legal, indemnification and professional fees related to the corporate monitor efforts, and fees related to potential acquisitions and divestitures. In addition, our third quarter results include a bad debt reserve of $4.6 million related to the Brazil other business. The

included restructuring charges of

$0.5 million

and non-routine expense of

$3.6 million

, which primarily related to legal, indemnification and professional fees related to the corporate monitor efforts.

Operating profit of $

19.6 million

of revenue, was realized in the

, compared with operating profit of $

46.7 million

. Non-GAAP operating profit in the

$31.6 million

of revenue, compared with

$51.3 million

Income Tax

The effective tax rate on continuing operations for the three months ended

September 30, 2015

was a benefit of


, attributable to the repatriation of foreign earnings and the associated recognition of foreign tax credits, compared with an expense of

for the same period of

Net Income / (Loss) Attributable to Diebold

Net income attributable to Diebold was

$21.7 million

, compared with net income attributable to Diebold of

$33.1 million

Balance Sheet, Cash Flow

The company's net debt was

$401.5 million

, an increase of $

354.8 million

December 31, 2014

. The increase in net debt is largely attributable to the acquisition of Phoenix Interactive Design, adverse exchange rate impact on cash balances, as well as seasonal working capital expansion. The company's net debt to capital ratio was 36.5% at September 30, 2015, and 4.5% at December 31, 2014.

Free cash flow (use) in the

$(38.4) million

, an increase in cash use of

$(4.2) million

from the third quarter



The company is updating its previous outlook for full-year 2015 revenue to be down approximately 7% to 8%, with earnings per share of approximately $1.75 to $1.85 on a non-GAAP basis. The company expects a non-GAAP effective tax rate of approximately 21% for the full year.

Previous Guidance

Current Guidance

Total Revenue

~ (5%) to (6%)

~ (7%) to (8%)

2015 EPS (GAAP)

$1.09 - $1.33

$1.03 - $1.16

Restructuring charges & non-routine expense

$0.61 - $0.57

$0.72 - $0.69

Total EPS (non-GAAP measure)

$1.70 - $1.90

$1.75 - $1.85