Good day, everyone, welcome to the Diebold, Incorporated second quarter financial results conference call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Vice President and Chief Communications Officer, Mr. John Kristoff. Please go ahead, sir.

Thank you, (Deanna). Good morning, and thank you for joining us for Diebold's second quarter conference call. Joining me today are Tom Swidarski, President and CEO, and Brad Richardson, Executive Vice President and CFO. Just a few notes before we get started, in addition to an earnings release, we've provided a supplementary presentation on the investor page of our website. Tom and Brad will be walking through this presentation as part of their comments today and we encourage you to follow along. Before we discuss our results, as in past calls, it's important to note that we have restructuring, non-routine expenses, and impairment charges in our financials. We believe that excluding these items gives an indication of the company's baseline operational performance. As a result, many of the remarks this morning will focus on non-GAAP information. For a reconciliation for our GAAP to non-GAAP numbers, please refer to the supplemental material at the end of the presentation. In addition, all results of operations are reported today, including prior period, exclude discontinued operations. Finally, a replay of this conference call will be available later today from our website and as a reminder, some of the comments today may be considered forward-looking statements. Internal and/or external factors could significantly impact actual results. As a precaution, please refer to the more detailed risk factors that have previously been filed with the SEC. And now with opening remarks, I'll turn it over to Tom.

Thanks, John. Good morning, everyone. Thanks for joining our call today. We generated solid top-line growth during the quarter and we improved our net debt position by nearly $50 million. Also we achieved profitability in AMEA during the quarter and are on track to achieve our goal to be profitable for the full year in that region. We saw more than a 30% revenue growth in Latin America and Brazil a region where we are building upon our leadership position. I'm also pleased with our overall top-line performance as we experienced strong financial self-service growth in deposit automation with national account customers in the United States. However, as expected, we saw reduction in the regional account activity associated with ADA compliance. This shift in activity resulted in a less profitable mix of business in our North American operation. Combined with a much higher tax rate in the quarter, this resulted in a sequential drop in earnings from the first quarter. Given a recent significantly negative shift in currency, recall the delay of anticipated additional revenue from Brazil elections system into 2013, we are tightening our guidance for 2012. Aside from these two items, our outlooks remains unchanged and we are confident in the underlying factors that are driving growth in the business. Now let's look at the business from a geographic standpoint starting with North America. Revenue in North America increased 18% from the second quarter, 2011 driven by continued strong performance in financial self-service partially offset by the decline in security. Importantly, total order entry in North America Group in the low single-digit range had very good performance in second quarter 2011 when we saw double-digit growth in borders further illustrating the robustness of the market in our leadership position. This growth was driven by significant increase in the…

Thanks, Tom, and good morning, everyone. Before I get into our quarterly financial results and 2012 outlook, I'd like to touch on a few key topics from the quarter. First, we delivered 12% revenue growth despite a 6% negative currency impact, which was primarily driven by the Brazilian real and, to a lesser extent, the Indian rupee and the euro. The solid second quarter revenue results were once again impacted by strong performance in our North American financial self-service business, especially as it relates to deposit automation. We continue our strategy to transform it into a software-led services company as evidenced by the nearly 30% revenue growth we experienced during the quarter in our North American Integrated Services business. Also contributing to improved overall performance is the continued success of our restructuring efforts in AMEA. As we communicated during last quarter's call, we eliminated $15 million from our cost structure in the region last year. During the second quarter, we again saw improved gross margins and, more importantly, we achieved modest profitability. And as Tom said earlier, we are on track to achieve profit in AMEA for the full year despite thick economic headwinds in this region. Finally, moving forward, a strong balance sheet and anticipated free cash flow supports our growth in key areas such as software, services, and electronic security. Now to review our financial results, turning to Slide 14, total revenue was $743 million, up 12% from the second quarter 2011 including a 6% negative currency impact. For the quarter, service revenue increased 2% and product revenue increased nearly 27%, again driven by financial self-service in North America. Looking at our financial self-service business on Slide 15, second quarter revenue was $590 million, an increase of 16%. This includes double-digit growth in North America, Latin America, and…

Thank you, Brad. (Deanna) will prepare to take our first call -- I'm sorry, first question at this point.

Thank you. (Operator Instructions) You first question comes from the lien of Kartick Mehta - Northcoast Research.

I'm wondering if you look at today the fundamentals of the ATM market versus like the beginning of the year, kind of worldwide, what markets do you think are in line with what you expected, kind of better than what you expected, and maybe worse than what you expected?

Let me go by region. I'll start with North America, and I'd say North America is in line with what we expected. We knew coming out of the gate that the first quarter – we didn't know maybe quite the sheer size the first quarter was going to be on the Regions side but we knew it was going to be very strong. So we saw a lot of the – a little bit of the second quarter being pulled in as a result of the ADA, the deadline. But I'd say really the – both this year and kind of long-term sustainability and the underlying factors of North America remain constant and we're pretty bullish about that. When I look at AMEA, I would say AMEA overall -- you would say is probably a little worse as the year as gone on relative to some of the Western European countries and so in our case, while revenue, for instance, in the quarter was down and you'd say well, that might be a negative impact for us. Actually we swung the profitability because it was focused on specific countries there. So overall, I would say for us where we participate, we would say that that's a pretty chalky market and it's pretty volatile but I would say that's probably down a little from what we expected at the beginning of the year. When I look at Asia Pacific, I would say Asia Pacific is pretty close, maybe with the biggest movement in terms of being more positive in the thought in terms of India and what that could mean really for the outlying years in terms of the actions of the government there because not so much with the state-run banks but really that puts the private banks in the position they're having to play catch-up and so you have opportunities in both of those segments as that unfolds. So Asia Pacific probably is maybe going to be a little better than we thought at the beginning of the year. I think the remainder would be Latin America and Brazil and for us, I would say in the self-service piece, certainly if I strip out Brazil voting, the voting piece was different than we expected, I explained, but on self-service side I'd have to say very strong and maybe even a little better than we thought at the beginning of the year.

You talked a little bit about India and how the market is changing there. From a growth perspective, what would you expect the growth rate for that country to be from an ATM side over the next couple years?

Yes, Kartick, I think from our standpoint, the big pieces there have to do really with the managed services side of things. So when you start taking a look, if you're going to look at just unit count you'd say pretty strong growth but the pricing on that is pretty low and how you participate there is a little different. So for us, I would say it should be double-digit growth environment for us in India with a lot of emphasis on service and services and that really plays into kind of what we think our strength and what we built there within the India market. Certainly, as you've seen, the dynamics there are changing very quickly. We'll know a whole lot more in the next three to four months how things shake out but we feel pretty good about what's happening there from a macro level standpoint.

Just one final question, Tom; in Brazil, there were talks in the marketplace that maybe Bank of (inaudible) was going to put out an RFP and I'm wondering, to the extent that you could talk about, has that RFP been placed and have they determined who's going to supply the ATMs?

Yes, Kartick, I think we can from the standpoint that they've been pretty public in terms of looking to have a second supplier there. As many may know that Bank of (inaudible), one of the best banks in the world and certainly from a stature standpoint but also in terms of a performance standpoint within Brazil and Latin America. And they've been captive really to Cal Tech, which is their – was a wholly owned subsidiary there from a technology standpoint, so they are the sole provider in terms of ATMs. They changed really approaches here this year and fortunately for us, we did win an order from the bank. We've been in the process of working with them and when I visited Brazil on my most recent trip to have a chance to have several meetings both at the bank and at the technology show we were at and had some long conversations there, so I feel very good about our capability, especially compared with what they are accustomed to. I think for us, it'll be a long relationship unfolding over many years and the first pieces of the hurdle, you have to go through certification, you have to go through all the internal hurdles you might imagine with a bank with 30,000, 40,000 ATMs and the local sophistication they have. But to date they were very positive to me in terms of kind of where we stood, the pace with which we were pushing them, not them pushing us, and our ability to really not only get in there but on really the hardware side but on the services side, as well, which is really key. So we have some pilots going on certainly from a technology standpoint but more interesting to me was a lot of pilots going on with services side, which I think is really encouraging because that gives you really the sustainability that you have versus just selling a piece of hardware. So feel really good about that and I think 2013 for us will shape up very nicely with Bank of (inaudible).

Your next question comes from the line of Matt Summerville - Keybanc.

Brad, can you qualify the hit you took on excess (inaudible) inventory and some of the investments you're making in the fleet? What did all that sort of cost you in the quarter?

Well, Matt, I mean, I think if you look at the overall margin performance and kind of the trend that we had been on, what I'd ask you to do is just kind of assume the trend that we have been on. Now again, first quarter was maybe a little stronger than the historical trend but take that historical trend and then (inaudible) versus what we actually delivered and that's really the impact.

And then the level of investment you're making in infrastructure around the Integrated Services organization, how long will these investments you're making sort of suppress margins somewhat, if you will?

Yes, I mean, I think again, implied in our guidance is that the margin performance for the service side of the business will be up certainly from the performance that we delivered in the second quarter because again of the high investments. But those investments will continue for the rest of this year I think is a fair assumption. But again, we're guiding to relatively flat service margins. Again, second half will be up slightly but it'll still be burdened by some of this infrastructure investment as we formally launch the Toronto Dominion contract.

And Matt, if I may add one comment there. So our expectations we would enter – exit the year, I should say, in the first quarter north of 28% relative to the service margins. So I would say the second and third quarter would bear the biggest impact relative to the immediacy of kind of the building of infrastructure. And if I could explain that for a minute, it's basically because of the level of sophistication associated with Toronto Dominion but also because of the growing book of business there. The decision we made was really to invest significantly to have a capacity to allow us to expand kind of into the future. So I would call it the step function investment. So it's one that really should be able to carry us for several years after this and be cutting edge and also give us, again, competitive advantage So while it's going to impact us I would say maybe materially in the second and third quarter in terms of margins, we would see sequential growth from this point in terms of margins and more importantly, give us really good confidence in our ability to handle the increased volumes that we're seeing as Toronto Dominion gets layered on and global sophistication that we'd want to manage that business going forward.

Hey, Tom, just one or two other things; can you update us as to what the total contract value is that you have now just in the ATM business? You gave us the security business. And then can you also help us with how we should think about mix? You provided a bridge, essentially, from Q1 to what you just reported in Q2 as we move from here to Q3 and Q4 on the product side, obviously, how should we be thinking about mix relative to this quarter?

Hey, Matt, would you frame the first part of your question again? Were you talking about Toronto Dominion or were you talking about something different?

No, just the total ATM file value or Integrated Services backlog. It's a number you've given before

Yes, I think the contract value in the second quarter was about $100 million total contract value and the backlog now is getting close to half a billion. Yes, so that would be the – and think of that spread over the three or four or five years of (inaudible) contract what we haven't revenued yet but we'll revenue over that period of time, so contracts we've already signed and there lies the issue relative to making sure we've got the right infrastructure in place to be able to both to kind of processes along with the technology in place to handle the volumes that we see coming down the pike here, 2013.

And then just on a mix the back half of the year?

Oh, mix on the back half of the year? It would be – if you're looking at North America, the mix clearly starts waving toward the nationals and maybe that's 55, 60, 40 national to regionals and then you see a higher mix of international, as well.

Your next question comes from the line of Gil Luria - Wedbush Securities.

Orders overall, it sounds like US orders still up and a few other regions, they were down. Overall orders, how are they year over year and what do you expect for the rest of the year in terms of how orders are going to come in? Thomas Swidarski?: Yes, so, Gil, the way I would think about that is in the quarter itself, down slightly, but when I look at the full year, I would say orders are going to be up very consistent with revenues. So obviously each quarter brings its own unique comparisons and likewise int eh third quarter, I would see very significant growth in orders but again, a lot of it has to do with timing and we can even that out over the course of the whole year. We'd say double-digit order growth kind of scenario.

Got it and then it comes to that mix shift in the US, regional banks appear to be coming off the highs from ADA pretty quickly. How long do you expect that decline to go? How much further down would regional banks go? Is the rank the nationals going to be enough to offset that? Are we looking at a possibility of declining revenue next year in North America? Thomas Swidarski?: Next year, I'm not sure I can really answer next year. I think I would answer that maybe because I don't have enough information here but I would say Gil, when I think of this year, I would say that the strength in the nationals combined with where we're at in regionals should put us in very good stead and be basically flat. The one thing I would suggest is that as a result of ADA pulled a lot of the orders in from the second quarter to the first quarter and the revenue obviously was impacted dramatically, as well, but I would say going forward I would expect order entry to begin climbing again for the regional bank space in that the second quarter was more of a breather in the market than there was any significant material change there. So I would expect for us, regional bank performance to be, from a historic standpoint, relatively good. It's just when you're coming off the kind of level we had in the first quarter, we're just not going to really see any kind of activity like that for many, many years but I feel very good about the order activity in the regional bank space and again, it began to climb from where it was int eh second quarter. (inaudible) the nationals to be even stronger. I think that's the message.

And then finally on security, you're expecting to turn that into growth, into positive growth in the second half of the year. Is physical security stabilizing? Is it electronic security is going to grow fast to compensate for the declines in physical security? Is that going to stabilizing at this point?

Yes, I would say in essence, the physical security is pretty close to what I'd call stable now. So the growth trend is going to be electronic security growth and again, we looked at that and we feel pretty confident in that 1% to 4%. We said that all along. I know when you look at that number, you say gee, we haven't been able to hit it yet but again, there's new hope for the second half of the year. These are mostly orders in hand and we're executing against and we feel very good in the 1% to 4% range and as I mentioned on the call, the more important piece is that we're seeing some real traction there on electronic security side with the banks and mentioned two significant banks where you get recurrent revenue streams now with long-term contracts that while they may not make an impact here for each of the next two quarters, long-term that's very sustainable and good margin business when you talk about monitoring on the security front. So we're pleased with the kind of activity there and like we said, we moved from about $4 million to $10 million. Getting small numbers but gives me confidence in the trend that we should see good performance in 2013, which is probably the most important trend on that.

Your next question comes from the line of Julio Quinteros - Goldman Sachs.

Question on the guidance; just wanted to clarify perhaps what, if anything, surprised you during the quarter? So obviously currency headwinds and the macro (inaudible). It is what it is, but plus the increasing investments and even the mid-shift between regionals and nationals, did any of that surprise you? Maybe it was the mid-shift a little bit quicker or give you increasing measurements a little more than you expected originally?

No, I would say that wasn't a surprise. There are two discreet factors. One you mentioned is currency. The one that was the surprise of the information, that was really Brazil. Had to do with kind of the Brazil elections and impacts for the full year. So really outside of that, the first half of the year would be kind of in line with where we kind of said was the first and second half would be pretty even this year and now we think the fourth quarter's going to be a little bit bigger because of the movement out of the third quarter relative to the Brazil elections So I'd say overall, some in – put some takes in and out but nothing really of any dramatic surprise.

OK, and in relation to Brazil, what was the reason for the push-out and what degree of comfort to you have that the order will actually come in in the total time frame you provided? Thomas Swidarski?: Yes, so the push-out was they're running elections in October and so I don't know if your remember but early on, we mentioned they had a changing of the guard there. We had basically the commitment of 90,000 and we had placed a hard order for 35,000. As they started unfolding the year, they came to us and basically said look, we're not going to do any other orders before the elections. The elections are in October, so we have expectations then in the December time frame to receive an additional order and while you're never 100% sure, we have some direct conversations with them. We feel pretty confident about the ability of that occurring, so that's our expectations before the quarter order.

And one last one on AMEA; what's the plan there going forward and how can we expect you to grow that business from here getting (inaudible) taking there? Thomas Swidarski?: Yes, OK, so I think there's two aspects. One is we've been very, very focused on the profitability side of the equation. So as such, as we indicated, there's what countries we're focused on. We got out of certain countries and try to get out of some cost structure there. You saw the actions we have taken over the year and I think it's paying off by the performance both not this quarter because we had profitability but even last quarter in terms of improvement year over year. So the trend there is positive. We continue to manage that very closely. The second piece is when you look at it from an overall standpoint, despite getting out of certain countries and moving the organization around, our order entry has been reasonably good and I think a full year to be pretty comparable to last year with difficult economic environment. So the other piece of that is so we have certain countries we have some strength in. The UK happens to be a country where quite frankly, we've not been a player at all and so that was a market where we felt given the size of the banks and the impact they have from a global standpoint. And the conversations we had had that we had been working with some of them that we had developed a product oriented to that market that we unveiled to the market. We brought in a leader that has been a banking expert there for the last ten years with one of the biggest competitors in the region and we also have additional infrastructure we've put in place. So my expectation in the UK would be an important player for us going forward along with what we do kind of in Brazil and Italy and in Belgium, South Africa and some of those key countries in addition to Turkey, so really the area that probably we have the weakness from in terms of Eastern Europe. We don't that changing here for us in the short term but we've got those other countries where we think the opportunities are pretty good and with the leadership we've put in place, we feel very good about not only profitability but being able to start looking at some growth here in 2013.

(Operator Instructions) Your next question comes from the line of Michael Kim - Imperial Capital.

Just first off on the tax rate guidance, could you help us understand a little bit the balance of the year, especially considering the mix of regions that drove it up through the higher tax revenue second quarter? Thanks.

Yes, Michael, let me answer that. Again, I think the 34% tax rate that we had in the second quarter brings the year to date non-GAAP tax rate up to about 28%. As we look to the full year, we're guiding around 27%. And so I think you could see in the second half of the year, it'll be slightly lower tax rate than where we are on a year to date basis and that's really driven by again, all the discussion that we just had on what's happening to the profitability of the North American business with more national bank revenue which again, comes in at a lower margin, so that's really what's driving the overall tax rate down slightly in the second half of the year.

And then just turning to electronic security, more of a strategic question. I think looking at Stanley (inaudible), they've been pretty active in acquiring and consolidating a number of security companies over the past few years. How do you guys feel about your organic capacity versus having (inaudible) or perhaps looking a little bit more substantial than that?

Yes, I'll start (inaudible) couple things. Let me first talk about the organic side. One of the things you'd look at and tear our business apart, you'd say hey, in North America, which is what we're talking about really in electronic security, we see self-service historically at 50, 60-plus percent market share. We see the same thing in physical security. As a matter of fact, physical security was probably 60% or 70% and then you see electronic security as a share of the financial marketplace with less than 10% in (inaudible) 70% (inaudible). First of all, the opportunity we kind of focused on was really focusing on the financials. I mean, the financial industry with electronic security and we really started moving in that direction aggressively over the past, say, a year, and we took one of our key folks that sold Integrated Services and put them over on that side of the house and say you're going to do that electronic security firm. So I'm really pleased with the Regions and BBT kind of conversation that we've got major top 25 banks that are looking to us to do that which is evidence to our capability there. Then the second would be that we brought Tony over to run the business because of his experience and capabilities and so we'll have the ability to tweak our strategies as we move forward and clearly, we don't need Tony to help us in the financial space; we need him to help us in all the other commercial spaces along with his experience on the M&A side. So I would say for us, we think about them as small global acquisitions. We want to make sure that we've got the core of our company focused and running clearly in the financial space and then to take advantage of some of the experience we have with some of the major type of enterprise-wide projects but first things first. We want to get financials running and then we'll start looking outside the financials to increase our capabilities there and we feel like we have the skill sets, we have the competencies to put the right organization in place and now has the right leadership. So we're going to be patient with this. We think it's a big market with a lot of opportunities going forward but it's opportunities from an (inaudible) standpoint avail themselves, we'll do those prudently. We're not going to acquire for the sake of acquiring (inaudible) capabilities or (inaudible) that we don't have today (inaudible) right parts. So we'll watch that very closely but most importantly, our confidence in building from 1% to 4% this year is solely based on the financial sector and then as we go forward, I'm hoping that we should start seeing capabilities growing in double-digits here in 2013, '14, '15 in the electronic securities space.

Your next question comes from the line of Paul Coster - JPMorgan.

My sense is that you expect the Brazil electoral systems business to shift into 2013. That said, it's after the elections themselves, so is there any urgency in Brazil or is it possible it shifts back into 2014 and beyond?

No, the contract – the way this commitment is written is that if they don't order those this year, pricing, certification, everything else goes out the window, so that's something they don't want to put themselves through again. So their sense of urgency is taking advantage of a pretty favorable contract which we got some assurance of that they will do this year and for us, it means the order would be then December revenue next year but they've been on kind of the mindset of saying look, we're going to replace numbers of these each and every year. Thus this becomes much more of a recurring business and I think this is just part of that strategy. So we feel pretty good about – our confidence is pretty high in terms of what's going to happen next year relative to the revenue (inaudible) involved in ordering (inaudible) in December.

There's a sort of strange data point last week regarding Bank of America's intentions around it's off-premise ATMs and withdrawing a number from the market. Can you just sort of comment upon that? Is it something that we should be concerned about more broadly regarding national accounts? Brad Richardson?: No, I think for us it's actually a good (inaudible) so for us, the movement in terms of the off-premise locations are much less technically competent types of ATMs, so to speak and so in Bank of America's case, they're looking for the kind of functionality and service contracts and capabilities that we can provide where you're talking about taking cash, checks, recycling, availability in the 99% range. So the off-site terminals, much more likely (inaudible) market, which is a market we really don't participate in. So for us that was really a place that impacts through our competitors who play in that space but really doesn't impact us in any manner since we're really focused on the functionality and the service side and services side of the business.

And lastly, I apologize if you've already answered this but just (inaudible) for the remainder of this year, it sounds like it's going to be heavily back-end loaded, I assume, in India and (inaudible) service contracts but correct me if I'm wrong there but in addition, should we expect sequential growth in the third quarter? Brad Richardson?: In terms of – I assume you're saying sequential growth from an EPS standpoint?

EPS and revenue, that standpoint, yes. Brad Richardson?: So I would say through sequentially no, you would see really the fourth quarter bearing the bigger growth relative (inaudible) EPS to get us to our guidance, so third quarter would be down sequentially in that regard. From a revenue standpoint, we're relatively flat.

At this time, I'd like to turn the call back over to John Kristoff for any final or closing remarks.

Thanks, (Deanna), and thank you, everyone for joining us this morning and as always, if you have any additional or follow-up questions, please feel free to reach out to me directly.

This does conclude today's conference. We thank you for your participation. You may now disconnect.