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The Suburbanite
  • Diebold cuts continue after second quarter loss

  • Diebold will offer early retirement and freeze pensions as part of continued efforts to cut costs. The company also is absorbing several one-time charges as it moves toward a turn around.

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  • Diebold plans to offer early retirement to 1,200 employees across the United States — including 350 in Northeast Ohio — and freeze the pension for 3,000 other employees.
    The moves are among several additional cost-cutting measures the company announced Tuesday when it released its second quarter earnings. Diebold also said it has settled two lawsuits and is working to resolve a tax dispute with federal and state agencies in Brazil.
    It’s part of an effort to reduce Diebold’s cost structure, Andy W. Mattes, president and chief executive officer, told stock analysts during a conference call.
    The company announced plans earlier this year to eliminate $150 million in costs, but that was before Mattes joined the company in June. Mattes said more steps must be taken.
    “We will continue down this path and accelerate our cost reduction,” he said.
    ROUGH QUARTER
    The company cited lower sales and problems in Brazil as factors in a second quarter loss of $98.6 million. The loss, equal to $1.55 per share, compared with profits of $25.3 million, or 39 cents per share, in 2012. Second quarter revenue was $707.1 million, down 4.9 percent from $743.2 million last year.
    Through the first half of the year, Diebold had a loss of $112 million, or $1.76 per share, compared with profits of $69.2 million, or $1.09 per share, last year. Revenue dropped 7 percent to $1.34 billion compared with $1.44 billion in 2013.
    The numbers aren’t final and official filings with the Securities and Exchange Commission might be delayed, Diebold cautioned.
    The tax dispute in Brazil could change the second quarter numbers and require the company to restate its financial results going back to 2008. The dispute is over tax breaks Diebold claimed on components made in Brazil, spokesman Mike Jacobsen said.
    The company cited revenue as a bright spot, noting that the 2012 second quarter was assisted by automatic teller machine sales that helped banks comply with Americans with Disabilities Act requirements. Revenue was better than analysts had projected, Jacobsen said.
    MOVES PLANNED
    About 350 Diebold employees in Northeast Ohio will be among the 1,200 who receive the early retirement offer.
    Employees still haven’t seen the offer, Jacobsen said. It’s expected that employees will be asked to make a decision by mid November. The company didn’t say how many people it hoped would accept the package.
    The early retirement offers are on top of 700 job cuts — 100 of them local — announced at the end of the first quarter as part of a realignment plan.
    Diebold also will stop putting money into a pension that covers 3,000 employees, freezing the plan. The move will save about $30 million per year. The company stopped offering the pension to new employees — replacing it with a 401k plan — in July 2003.
    Other moves total roughly $100 million of one-time charges that the company will absorb. That includes costs related to the tax problems in Brazil.
    Page 2 of 2 - Expenses include a $30 million settlement of a shareholder lawsuit. The company’s insurance will cover $12.5 million of the settlement.
    Diebold also is settling a Foreign Corrupt Practices Act case. Jacobsen said the company discovered the problem in 2009 while researching the purchase of a Russian-based distributor and reported it to the SEC. The cost is $48 million, including $20 million the company already had set aside.
    TURNAROUND
    Resolving the issues should help Diebold move forward with its turnaround efforts, Mattes told analysts.
    “There’s a great deal of value here,” Mattes said of Diebold. “We have many strong assets, especially in our service portfolio, and have a very recognized brand in the market. While we have a lot of work ahead of us, my overall assessment is that we have a great turnaround opportunity here.”
    Investors didn’t respond with the same optimism.
    Diebold shares closed at $31.30, down $1.74 in heavy trading. More than 2.42 million shares traded Tuesday, compared with average daily trading of 615,000 shares over the past three months.
    Reach Edd at 330-580-8484 or edd.pritchard@cantonrep.com
    On Twitter: @epritchardREP