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Diebold Lowers Earnings Target

Diebold Lowers Earnings Target

Additionally, the company has identified a reconciliation issue in its North America sales commission accrual account, as of December 31, 2004, with the impact on specific prior years yet to be determined. As a result of this reconciliation, the company has determined the commission account was under accrued by approximately $13 million at the end of 2004. This is a preliminary estimate and the final amount could vary. A thorough review is currently underway and is expected to be completed shortly. This amount is excluded from earnings estimates provided throughout the remainder of this outlook. Revised Second Quarter and Full-Year Expectations The company now expects second quarter earnings to be $.47 to $.50. Included in this earnings estimate are restructuring charges of $.04 per share and European Opteva manufacturing start-up costs and related issues of approximately $.03 per share. Excluding these one-time items, second quarter earnings per share are expected to be $.54 to $.57. Full-year 2005 operating earnings are now expected to be $2.60 to $2.70. This range excludes manufacturing start-up costs and related issues of approximately $.04 per share, and restructuring charges of $.15 to $.30. The company has defined and is reviewing various options for restructuring and will provide a more definitive review of its anticipated restructuring costs in its second quarter earnings announcement. This revised earnings guidance compares to 2004 full-year earnings per share of $2.54. Factors contributing to the lowered earnings expectations are: – Growth in the company’s North America business is lower than its previous expectations as upgrade/replacement activity in the regional bank segment has developed at a slower than expected rate. – A proportionately higher mix of revenue from the company’s international operations and election systems businesses, which carry lower margins – A negative foreign currency exchange impact due to the strengthening of the dollar, particularly against the Euro which moved from approximately $1.30 to $1.20 during the second quarter – Continuing cost challenges in the transition to a single, global product platform Cost-Reduction Initiatives To further strengthen its competitiveness, the company is initiating several actions now and for the remainder of 2005: – The elimination of approximately 300 full-time positions in North America and Western Europe. This action includes jobs affected by the recently announced closing of the Danville, Va., manufacturing facility – Further global manufacturing realignment and facility consolidation – Acceleration of the consolidation of research and development operations and service functions – Further product cost reductions through procurement, manufacturing and design improvements “We are disappointed with our financial performance during the quarter and with our revised outlook for the year,” said Walden W. O’Dell, Diebold chairman and chief executive officer. “Our global markets remain healthy as we once again experienced strong growth in orders and backlog during the quarter. However, our North America revenue outlook is lower than previously expected, resulting in a lower profit outlook. β€œIn addition, we continue to face challenges on the cost side as we transition to a global product platform. We are moving quickly and decisively to improve our performance by accelerating our cost-reduction initiatives.” O’Dell added, “There is tremendous value in Diebold, from the strength of our brand to our world-class technology and product solutions. We are confident that by taking these aggressive cost actions now, we will be able to leverage our leadership position in the marketplace and ensure long-term, profitable growth.”

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