Diebold is offering early retirement to 1,200 U.S. employees and freezing pensions as it restructures after losing money in its second quarter and lowering its outlook for the remainder of the year.
Diebold on Tuesday reported it lost $98.6 million, or $1.55 a share, on revenue of $707.1 million for the second quarter ending June 30. That compares to a profit of $25.3 million, or 39 cents per share, on revenue of $743.2 million a year ago.
Shares in the $3 billion Green maker of automated teller machines and security systems fell $1.73, or 5.2 percent, to $31.31. Shares are up 4.3 percent, including dividends, since Jan. 1 and are up 0.4 percent from a year ago.
“Clearly the results we announced today are not in line with our capabilities and potential as a company,” Andy Mattes, president and chief executive officer, said in a statement. “... To get more competitive in the marketplace and back on a winning trajectory, we will focus on achieving an appropriate cost structure and investing in the systems and processes necessary to support sustainable growth. This is where the majority of our time and effort will be focused in the near term. Much of our success lies within our control.”
Mattes, 52, a former Hewlett-Packard and Siemens executive, was hired as Diebold’s CEO in early June.
The company said it expects to have adjusted earnings per share of $1.30 to $1.40 for 2013, with full year revenue down 5 percent to 7 percent from 2012. Using generally accepted accounting principles, Diebold said it expects to lose $1.10 to $1.60 per share this year.
The company said that because it needs to invest in its global service systems, information technology infrastructure and financial shared services to support growth, “earnings will continue to be under pressure in the near term as it makes these necessary investments.”
Mattes said the overhaul of its information technology infrastructure will lay the foundation for solid growth and performance.
“This requires heavy lifting,” he told analysts in a conference call. “The journey will last at least two to three years. ... However, it will enable us to drive continued productivity enhancement to position us for long-term growth.”
Diebold previously announced it was seeking to save $100 million to $150 million by the end of 2015. It announced today the company has already identified $150 million in targeted savings to be completed by the end of 2014.
The company said a pension freeze and voluntary early retirements are part of its efforts to get more aggressive with cost savings.
The pension freeze affects about 3,000 U.S. employees who joined the company prior to July 1, 2003. That is also the date when Diebold stopped offering defined benefit plans for new employees. The freeze does not affect current retirees, who will continue to receive their pensions, a company spokesman said.
Freezing the pension plans will save Diebold about $30 million per year and reduce its underfunded status from $150 million at the end of 2012 to $50 million at the end of 2013, the company said. The company said it has no plans to make voluntary payments to the pension plan for the foreseeable future.
Diebold expects to take a second-half charge of $40 million to $70 million this year to cover pension and severance costs, depending on how many people take voluntary early retirement. The early retirement program is expected to save Diebold $15 million to $25 million annually, again depending on how many people decide to retire.
Diebold at the start of 2013 had about 7,000 U.S. employees, including about 1,900 in the greater Akron area. Current headcount in the United States is about 6,700 people.
The company said it does not know how many people will voluntarily retire but said the industry average for these programs show 25 percent to 45 percent of eligible people typically accept. If all 1,200 eligible people voluntarily retire — Diebold calls that highly unlikely — that would amount to a 17.9 percent reduction in Diebold’s workforce based on 6,700 current employees. About 350 local Diebold employees will be eligible for the voluntary retirement program.
Bradley Richardson, executive vice president and chief financial officer, told analysts that Diebold will repatriate $250 million in cash from outside the United States to pay down domestic debt and enhance liquidity.
Diebold also has an agreement in principle to pay $48 million to the United States to settle an ongoing investigation with the Department of Justice and the Securities and Exchange Commission, Richardson said. In addition, Diebold also has a tentative agreement to pay $30 million to settle a class-action lawsuit based on the company’s 2008 financial restatement, he said.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org.