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Green company cites U.S. legal costs in federal probes for 4.8 percent slide. Sales increase is 11 percent; executives predict strong growth for rest of year
Published on Tuesday, Aug 12, 2008
From staff and wire reports
Automated teller machine maker Diebold Inc. said net income fell in the second quarter of the year as sales rose 11 percent to $711 million.
The Green company reported preliminary quarterly results Monday morning, saying second- quarter earnings dropped by 4.8 percent to $25.6 million, or 38 cents a share, compared with $26.9 million, or 40 cents a share, a year ago. Earnings fell largely because of legal costs associated with federal investigations into accounting practices as well as restructuring costs, the company said.
The company said it anticipates strong sales growth for the remainder of the year.
The company's preliminary earnings release beat analysts' expectations. Excluding one-time costs, earnings were 64 cents a share, up from 37 cents a year ago. Two analysts in a Bloomberg News survey predicted second-quarter earnings of 48 cents and 42 cents.
Diebold stock rose $1.07, or 2.8 percent, to $38.77. Shares are up 36 percent, including reinvested dividends, since Jan. 1 and are down 19.9 percent from a year ago.
Diebold said it expects to begin making its financial filings up to date in September as part of a lengthy process to resolve a Securities and Exchange Commission investigation that started in 2006 into some of its accounting practices. The company has not released results since the first quarter of 2007.
Diebold executives said they are about ''75 percent'' on the way to meeting a year-end target of reducing overall employment by 800 people.
The company announced it will close a Newark, Ohio, factory that employs about 100 people who make security-related equipment, and shift production to Lexington, N.C., in 2009.
The company also is shifting the bulk of its production lines for its Opteva ATM brand to Hungary and China as part of a three-year $100 million cost-reduction plan it expects to complete by the end of the year. Diebold said it is shifting production from high cost to low cost regions as it pares its Opteva production lines from four to two.
The company said it expected sales growth of 8 to 10 percent for 2008, an increase of two percentage points.
''As these results demonstrate, we have made significant progress in our efforts to improve profitability through the initiatives we established early in 2006,'' Thomas W. Swidarski, Diebold president and chief executive officer, said in a statement.
Diebold said it is planning to find an additional $100 million in savings in upcoming years.
Warehouse operations will be pared from 89 locations around the United States to just
three — Columbus, Phoenix and Greensboro, N.C., the company said.
''They beat expectations and top-line growth was strong,'' said Kartik Mehta, a Cleveland analyst with FTN Midwest Research. ''Diebold felt they were on target to achieve a lot of the goals established before the United Technologies bid and, with these results, they were able to show they are in good shape to achieve those goals. United Technologies will have to determine what they want to do next.'' He rates Diebold's shares ''neutral'' and doesn't own any.
The company has rejected a March buyout offer from United Technologies Corp., based in Connecticut, for $40 a share, or about $2.63 billion. A United Technologies' top executive in May said the company would not follow through on its offer without getting a more detailed look at Diebold's financials.
Diebold said it had particularly strong orders in the Asia-Pacific region and the Americas, with large orders in China and Brazil. Security orders decreased as new bank branch construction and retail store openings remain weak in the United States, Diebold said.
Diebold plans to restate some financials from 2003 through the first quarter of 2007 to change how it recognizes revenue.
The SEC had questioned Diebold's now discontinued practice of recognizing some revenue on a ''bill and hold'' basis, where sales are recorded before delivery. Diebold now is recording revenue as products are accepted at a customer location.
From staff and wire reports
Get the full article here.
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