NORTH CANTON, Ohio — After losing a total of almost $99 million in its second quarter, Diebold will offer early retirement to 1,200 U.S. employees and freeze pension plans as part of a cost-saving effort, the firm announced Tuesday.
During its second quarter earnings report, Diebold stated that it lost $98.6 million on revenue of $707.1 million, compared to a profit of $25.3 million on revenue of $743.2 million a year ago, Ohio.com reports.
In May, the company announced a multiyear realignment strategy that executives expect would save Diebold $100 million to $150 million by the end of 2015. During the earnings report, the company announced that it has already identified $150 million in targeted savings, which should be completed by the end of 2014.
As part of its aggressive cost-saving plans, the firm will freeze pension plans, which will affect nearly 3,000 U.S. employees, who joined Diebold prior to July 1, 2003. Executives anticipate the pension freeze to save the company about $30 million annually and reduce its underfunded status from $150 million at the end of 2012 to $50 million at the end of this year. The freeze will not affect current retirees, who will continue to receive their pensions.
The firm, which employs roughly 6,700 U.S. workers, presumes the voluntary early retirement program will save Diebold $15 million to $25 million annually, depending on how many employees take the offer. If all 1,200 eligible workers decide to take the deal — that Diebold calls highly unlikely, the company would see a 17.9% workforce reduction.
Meanwhile, Diebold’s electronic security segment continues to progress, as the division’s revenue for the second quarter increased 3.94% year-over-year to $149.6 million. In a research brief, Imperial Capital forecasts that electronic security will remain the security segment’s primary growth driver and will generate increasing recurring revenue, particularly from monitoring and integrated services.
“We believe management remains focused on strategic expansion of the electronic security business and could execute a significant strategic acquisition over the next 12 months,” Imperial Capital Managing Director Jeff Kessler stated in the briefing. “Our view has been that electronic security, as a higher percentage of revenue, a higher growth engine, and a higher margin, could have a meaningful impact on the investment valuation and thesis by FY15.”
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