By releasing second-quarter figures, Diebold Inc. got the chance Monday to justify its March decision not to yield to an unsolicited buyout offer from United Technologies Corp.
The automated teller machine company, which had said that offer was too low, is in the process of restating its earnings back to 2003 and has provided few financial details since the start of last year. It used that lack of visibility to defend its rejection of United Technologies' bid, though analysts said at the time that shareholders might be upset that it had walked away from a deal that carried a 66% premium unless Diebold could back up the claim that it was undervalued by the price.
Analysts generally agreed that standard was met in the preliminary second-quarter results released Monday, the most comprehensive look at Diebold's financial status since it issued its results for the first quarter of 2007.
Michael Jacobsen, a Diebold spokesman, said the numbers vindicated the board's decision in March not to accept United Technologies' offer.
"The company's focus, the executives' focus, the associates' focus, is to execute on our strategic initiatives," Mr. Jacobsen said. "The company is pretty confident that if we continue to execute on these initiatives, we will generate considerably better return for investors than UTC's unsolicited offer."
Diebold, of North Canton, Ohio, reported revenue of $771 million, up 11% from the second quarter of 2007, and net income of $25.6 million, down 4.8%. It also raised its full-year guidance and announced plans to eliminate up to $100 million in costs.
Diebold's shares had been trading in the mid $20s before United Technologies made its $40 bid in late February, but popped to the high $30s after the offer was made public.
Gil B. Luria, an analyst at Wedbush Morgan Securities, noted that Diebold's shares have held steady at that level since then, while the takeover talk has faded, and said its current price reflects the company's value on its own, not as a buyout play.
The results "give us a sense that they have made a lot of progress," he said. "The stock is now trading on its value as a stand-alone company."
Mr. Luria, who has a "hold" rating on the stock and a $40 price target, said the second-quarter numbers showed that Diebold was "absolutely" justified not to accept United Technologies' bid.
Kartik Mehta, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp., said the results should satisfy shareholders who had questioned the decision to walk away from United Technologies' offer.
Diebold is "finally in a position to start showing investors the numbers they will be able to produce," he said.
Mr. Mehta, who has a "neutral" rating on Diebold's shares, said United Technologies may respond with a higher offer. "We have to wait for what UTC is going to do," he said.
Representatives of United Technologies did not respond to requests for comment Monday.
Diebold said it expects next month to file its complete earnings reports with the Securities and Exchange Commission for the five quarters going back to the second quarter of 2007, and to provide the restated reports back to 2003.
In July of last year, just days before it was scheduled to release its second-quarter results, Diebold said the SEC was investigating its accounting practices, and it has not issued a full earnings statement since then. In January, Diebold said it would have to restate its results for 2003 through the first quarter of last year. The issue was its "bill and hold" accounting method, in which it sometimes booked revenue for sales before shipping the products; Diebold said in October it would discontinue this practice.
The company released an estimated earnings report for the first quarter but did not hold a conference call to discuss the numbers.
On a conference call with analysts Monday, Thomas W. Swidarski, Diebold's president and chief executive, made no mention of United Technologies, focusing instead on his own company's operations.
Adjusted earnings of 37 cents a share missed Wall Street's estimate by 4 cents. The company raised its revenue growth outlook to the 8% to 10% range. In February it had said it expected growth of 6% to 8%.
Mr. Swidarski also announced a $100 million round of cost cuts, in addition to one of the same size announced in February. The new plans include closing a manufacturing plant in Newark, Ohio, by the first quarter and moving that work to a site in Lexington, N.C.
To accommodate that move, the company plans to move some work offshore, with the manufacture of cash-dispensing machines going to plants in Shanghai and Hungary.
Diebold is consolidating 89 U.S. warehouses to three, a project that Mr. Swidarski said he expects to be completed by the fourth quarter.
And it is shifting to a just-in-time manufacturing strategy from a build-to-order approach it has used in the past, which should shorten lead times on deliveries and reduce inventory levels, the CEO said. "It is critical that we make these tough decisions to consolidate our production capacity wherever possible."
