The company expects to reinvest a portion of the savings in research, development and the systems and infrastructure necessary to drive long-term growth and execute on electronic security and financial self-service strategies. In addition, some of the savings should offset price erosion, wage inflation in emerging markets and volatile commodity prices in the company's core business. Given these factors, the company anticipates that approximately 50 percent of the savings will positively impact operating profit.
The substantial portion of the actions necessary to achieve the targeted savings should be completed by the end of 2014, and the total savings are expected to be fully realized by the end of 2015. The company has incurred first quarter 2013 restructuring charges of approximately $10 million resulting from this realignment plan. While the company is in the process of finalizing specific details regarding the initiatives within the realignment plan, it estimates additional future restructuring costs of $15 million to $30 million related to the plan.
Late in the fourth quarter 2012, Diebold began to take several actions to realign and streamline various aspects of its organization. The actions the company has taken to date are expected to account for approximately $60 million of the overall savings plan. This savings figure is included in the company's 2013 outlook. The near-term actions include:
-The reduction of approximately 700 full-time job positions, primarily in North America and corporate operations. The majority of these job reductions have already taken place;
-Rationalization of manufacturing facilities by selling operations in Lynchburg, Va., and Lexington, N.C., to a long-time materials supplier;
-Institution of stricter policies to control discretionary spend across numerous areas to include restricting non-essential travel, reducing the number of company vehicles, canceling non-critical consulting engagements, and reducing spend on all non-core marketing activities and other initiatives.
In addition, Diebold is moving toward a more centralized management structure in order to drive swift action and clear accountability across its global operations. As part of the new structure, four long-term transformation initiatives have been identified to deliver savings during the multi-year realignment program and ensure an improved long-term cost foundation. These include:
-Globalizing the company's service organization and processes to align with the increasingly global and more complex nature of the business. This is expected to enhance efficiencies, improve customer response times and reduce the company's cost to provide service;
-Creating a unified, center-led global organization for research and development. This is expected to eliminate duplication of effort, leverage solutions developed regionally across the globe, increase speed to market and ultimately drive down product costs;
-Transforming the company's general and administrative cost structure by increasing utilization of our existing shared services centers in low-cost regions, instituting common processes and leveraging industry best practices across the enterprise; and
-Focusing on commercial effectiveness. This includes re-evaluating pricing strategies, reducing fixed costs within the sales organization, improving time to market and better managing product-life cycle.
The necessary structural reduction of the company's costs is ultimately expected to improve cash flow and generate the investment capacity required to execute on its growth strategies. Additional investments from savings will also be made in R&D — to speed new solutions to market — as well as infrastructure improvements such as information technology systems, in order to accelerate transformation, improve capabilities and reduce costs.
"The process of change management is challenging, and it entails making difficult decisions. These difficult but necessary actions represent significant changes to our overall cost structure and organization. We have performed a thorough review of our current and future business requirements and have identified the changes that will support our long-term strategies to maximize cash flow, enable continued growth and drive shareholder value," said George S. Mayes Jr., Diebold executive vice president and chief operating officer. "These changes—along with the longer-term, structural transformational objectives we are working toward—will better prepare the company for positive growth moving forward. We are fully committed to achieve targeted savings and will pursue these initiatives with urgency and focus."
SPECIAL NOTE: Please refer to the Diebold press release "Diebold Reports 2013 First Quarter Financial Results," also issued today, for related information.
In this press release, statements that are not reported financial results or other historical information are "forward-looking statements". Forward-looking statements give current expectations or forecasts of future events and are not guarantees of future performance. These forward-looking statements relate to, among other things, the company's future operating performance, the company's share of new and existing markets, the company's short- and long-term revenue and earnings growth rates, and the company's implementation of cost-reduction initiatives and measures to improve pricing, including the optimization of the company's manufacturing capacity.
The use of the words "will," "believes," "anticipates," "expects," "intends" and similar expressions is intended to identify forward-looking statements that have been made and may in the future be made by or on behalf of the company. Although the company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, the economy, its knowledge of its business, and on key performance indicators that impact the company, these forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in or implied by the forward-looking statements. The company is not obligated to update forward-looking statements, whether as a result of new information, future events or otherwise.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Some of the risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements include, but are not limited to:
- competitive pressures, including pricing pressures and technological developments;
- changes in the company's relationships with customers, suppliers, distributors and/or partners in its business ventures;
- changes in political, economic or other factors such as currency exchange rates, inflation rates, recessionary or expansive trends, taxes and regulations and laws affecting the worldwide business in each of the company's operations, including Brazil, where a significant portion of the company's revenue is derived;
- global economic conditions, including any additional deterioration and disruption in the financial markets, including the bankruptcies, restructurings or consolidations of financial institutions, which could reduce our customer base and/or adversely affect our customers' ability to make capital expenditures, as well as adversely impact the availability and cost of credit;
- acceptance of the company's product and technology introductions in the marketplace;
- the company's ability to maintain effective internal controls;
- changes in the company's intention to repatriate cash and cash equivalents and short-term investments residing in international tax jurisdictions could negatively impact foreign and domestic taxes;
- unanticipated litigation, claims or assessments, as well as the outcome/impact of any current/pending litigation, claims or assessments, including with respect to the ongoing securities class action and the company's Brazilian tax dispute;
- variations in consumer demand for financial self-service technologies, products and services;
- potential security violations to the company's information technology systems;
- the investment performance of our pension plan assets, which could require us to increase our pension contributions, and significant changes in health care costs, including those that may result from government action;
- the amount and timing of repurchases of the company's common shares, if any;
- the outcome of the company's global FCPA review and any actions taken by government agencies in connection with the company's self disclosure, including the pending DOJ and SEC investigations;
- the company's ability to settle the FCPA investigation, and the ultimate amount of any potential settlement; and
- the company's ability to achieve benefits from its cost-reduction initiatives and other strategic changes, including its multi-year realignment plan and other restructuring actions.
Diebold, Incorporated is a global leader in providing integrated self-service delivery and security systems and services. Diebold employs approximately 16,000 associates with representation in nearly 90 countries worldwide and is headquartered in the Canton, Ohio area, USA. Diebold is publicly traded on the New York Stock Exchange under the symbol 'DBD.' For more information, visit the company's website at www.diebold.com or follow the company on Twitter: http://twitter.com/dieboldinc.
SOURCE Diebold, Incorporated