Good day everyone. Welcome to Diebold Incorporated Third 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 the Vice President and Chief Communications Officer, Mr. John Kristoff. Please go ahead, sir.

Thank you, Danna. Good morning and thank you for joining us for Diebold’s third 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 the 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 with past calls, it's important to note that we are restructuring non-routine expenses 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 be focused on non-GAAP financial information. For a reconciliation of our GAAP to non-GAAP numbers, please refer to the supplemental material at the end of the presentation. In addition, all results of operations reported today, including prior periods exclude discontinued operation. 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 will turn the call over to Tom.

Thank you, John. Good morning everyone. While our business in the third quarter was sound from a topline perspective, we experienced a number of unique challenges relative to profitability. First, we had a forecasting issue in our North American operation that caused us to overestimate our profitability going into the quarter. Our business in North America remains robust as we turned in 9% revenue growth during the quarter; however, a shift in mix significantly impacted profit margin on several sub-segments of the business. Second, North American service margins were adversely affected by lower than expected build work and continued investments in our integrated services platform, software and productivity tools. Finally, a couple of very large financial self service projects with government banks in Brazil have been pushed out in 2013. Brad and I will address each of these factors in more detail in our comments this morning. As a result of the revenue mix shift in North America and project delays in Brazil, as previously announced, we have reduced our earnings expectations for the full year. Despite these mixed shift and timing issues, we remain confident in the fundamentals of our global financial self service business which we anticipate to grow at 8% to 9% this year or 12% to 13% on a constant currency basis. While product margins are under continued pressure, we expect our service margins to return to the positive sequential trajectory in the fourth quarter. Also I am encouraged by our security business performance during the quarter which grew nearly 8%. Security is the key strategic growth initiative for our company and we are beginning to gain increased traction in this space. As a result, we've tightened our full-year security revenue guidance within a higher end of our prior outlook and remain confident in our ability…

Thanks Tom, and good morning everyone. Before I get into our quarterly financial results and outlook for the remainder of the year. I would like to provide some insight into the preliminary third quarter results we have reported last week, which were well below our expectation. As Tom, mentioned we missed our internal projections for the quarter, largely due to customer’s mix issues within our highly profitable North American regional business. In addition we experienced an adverse impact due to lower billed work service volume and additional cost associated with the investment in our integrated services platform. And we have good visibility into our backlog and the related scheduling, we were not to as sharp around accurately projecting the timing and margin associated with specific installations during the quarter, which is turn adversely impacted margin. We realized there will always be timing issues in terms of what period revenue is recognized, but we need to do a much better job forecasting our service cost and the margins associated with our scheduled backlog. We are addressing our processes to improve our forecasting efforts and execution moving forward. Looking at our third quarter results, we reported non-GAAP EPS of $0.39 per share compared to $0.69 in the prior year. There were a number of factors which lead to deteriorating growth margins and higher operating expense during the quarter. As a result we have lowered our full year non-GAAP EPS guidance to $2.25 to $2.30 from the prior range of $2.50 to $2.60. I will walk you through these factors in greater detail in a few moments. Our revenue outlook however remains largely intact as our core markets which while cyclical remains sound. We did experience two large bank customer delays in Brazil which impacted our top line assumptions for the full year.…

Thank you, Brad. Danna, we’ll take our first question now, please.

Thank you. (Operator Instructions). And we will go first to Kartik Mehta with Northcoast Research.

I wanted to ask you Brad and Tom I think you both mentioned that the opportunity to do some acquisitions and I wanted to get to your thoughts and may be what areas you’re going to focus on and if you believe based on evaluations you are seeing out there if these will be accretive to earnings or that would take a little bit longer to achieve?

So Kartik I will start may be and frame up the areas that we are looking at. I would say there is probably four areas of focus; one what would be called traditional break fix maintenance type of services and certainly those types of acquisitions are easy to fold into any existing operation and we think those can be accretive very quickly. The second type of acquisition will be in the security space that may include an acquisition on the technology side, it may include an acquisition relative to the services our capabilities, but security certainly is a top of mind issue for us and as we’ve generated and the momentum here, we think there is some opportunities we’re going to be evaluating in that space. The third I would point to, have to do with the, what I would called gases into the services space. So technologies that we fold into the integrated services offering would be very appealing to us and sometimes these are smaller technology companies with a capability and this one happen to be around security on the internet banking space, but there is other one in that type of (inaudible) we would be looking and generally those would be smaller. And then I would say the fourth would be in key geographies and we have identified six to 10 key geographies which really drive the businesses that were in a long-term and anything in those areas much like we did with Altus to give up the strength and capability to compete more effectively and the market we think is critical will be the fourth area that we focus on.

Thanks, Tom. And then the question on Brazil. I think Brad, in our prepared remarks you talked about Brazil and obviously that’s having a year-over-year tough comparison from a margin standpoint and I am wondering from the orders you have seen and maybe just having a perspective of that geography, what percentage of the EBIT do you think you could get back in 2013 that you lost in 2012?

Certainly, as we showed on slide 30, I mean we estimated the impact of the government bank delays, somewhere in the neighborhood of $0.08 to $0.10 per share and we are watching the order activity very closely on the bank delays, but our assumption is that we would get that back in 2013. That was part of the 2013 consideration slide that we showed and again there's lots of puts and takes for 2013 but certainly we would expect that to come back in 2013.

And then just a final question Brad, you maintained your cash flow guidance even though you took down EPS guidance, can you just talk about maybe what areas are helping you, so you are able to maintain your cash flow guidance that you have confidence you can get to 170 in 2012.

Certainly when we started the year we signaled about $150 million of free cash flow and as we've seen our performance this year continue to improve, we took it up to the 170. We probably have cut back a little bit on the capital investment side which will certainly help us achieve the 170. But if you look at the slides again I mean there's quite a bit of momentum on the receivables here in the fourth quarter like we normally have but also the inventory performance albeit it’s not where we wanted to be, its been performing better than where we were a year ago this time and so its those factors that give us confidence on the $170 million of free cash.

And we will go next to Gil Luria with Wedbush Securities.

I wanted to ask a couple of questions on the state of regional bank market and your business there, do you expect to be as we are now after we had the ADA spike earlier in the year, are we still up year-over-year in regional banks so third quarter over third quarter of last year so is that deposit automation upgrade cycle still happening for regional bank.

Yeah Gil if you would look at year-over-year just regional banks space and just self service we are up year-over-year. I think what we are seeing is the rates that were up is decelerating.

And then in terms of competitive wins and losses, can you help us with a comparable metric to the one that was mentioned by NCR a couple of weeks ago. In terms of banks that you haven't done business with over the last three years and you did business with this year so how many banks have you added this year that you haven't done business with over the last three years.

Yeah, Gil, I think that number is about 700 this year I think it’s a little north of 700 and as you might expect a lot of those would be institutions that are small and as a result of ADA and PCI you know have to make an investment and those would be in that very smallest category in terms of the regional bank space. We have sub segments there, but overall I would say maybe even a more important indicator would be revenue growth year-over-year were up 94% there which to me looks at the broader breadth of kind of the capability of a lot of the regional that are a little bit bigger than a one or two kind of a ATM acquisitions. So we look at a number of those type of factors and kind of give us a sense of how we are turned in.

And then on the managed services business, you are ramping up TB which is by far the biggest customer you had today, and you, seem to be some incremental cost that your taking on. First question is how long is it going to take for you to add the required infrastructure and then the second part of that question is, once you ramp up to take on TB with their full phase of ATMs. Are you going to have to make that kind of investment every year to take on more customers or the investment you're making this year scalable for you to bring in other customer?

So, I'll answer those pieces and then Brad you can chime in if need be. So first of all, one of the comments I think Brad and I both made was our service margin in the fourth quarter are going to return back to what we consider normal levels for us. As you saw the second and third were down. Part of that had to do with investments that we're making here, relative to the TB. So in essence, we have completed the vast majority of investments we're making here. So I don’t expect to have any impacts its had. The second piece of that is because of the way we made those investments there are truly scalable. So we're leveraging, you know, as I mentioned, Terremark with Verizon in their partnership. We have our space within their facilities and can leverage their capabilities. So while it took us a while from an investment standpoint to get up to speeds for someone that size and scope and technical capabilities that TB needed. We're now at that level and we would not expect to have to make an incremental investment like we have as we put on any size accounts going forward. The other piece of that is it will help us because we will begin move in once we have thrown a dominion up and running. We will begin moving all of the [IS] businesses that we're currently running on our system over there which would really allow us to again focus on cost and take some of that out and allow us to be much more efficient going forward.

And we will take our next question from Matt Summerville with KeyBanc.

Couple of questions Tom, first one of your initial remarks was to get a forecasting issue in North America you overestimated profitability. I am a little lost just to actually how that happens in this (inaudible) age with the IT systems we have, so is that a human issue an IT issue is this lingering ERP stuff I mean really dig into how this happened.

Bard you want to.

Yeah, Matt good morning and certainly with our IT systems we have very, very good visibility to the backlog, and we have got good visibility to backlog split between national and regional, and we have decent visibility as to when that backlog is actually going to be scheduled and installed. What we found this quarter though is our visibility to the margins within that backlog. We typically had been using more of kind of an average for the regional phase average for the national space and that typically has worked well for us and that the North American business has been very predictable, it didn’t work in this quarter and so we have taken additional steps in our forecasting process to really show the backlog, show it scheduled but then show the margins the actual specific installation margins on that backlog that’s the fix that we have made. Matt Summerville – KeyBanc: Okay. And is that just a bigger picture about (inaudible) we are looking at kind of three years of flat EPS if we go back even six years or so ago revenues about where it is operating profit non-GAAP is about where it is I mean what do you guys do from here, you have gone through actually 200, and you have taken a lot of cost out. The margins just aren’t improving, what should give us confidence that the lights sort of get switched on and margins around that sustainable track to 10%?

Okay, matt. That's question that we have very focused on from our long term standpoint. Certainly when you go back that period of time, you look at what happened during the financial crisis, you look at how you come out on the other end. So the world is very different today then it was five or six years ago and we recognize that. The cost side equation is certainly one piece of that and as we’ve outlined today there are number of actions were taking there, there is a number of productivity tools, like (inaudible) resolve which helped on the service. So while you think of smart business 100, you think of maybe infrastructure pieces, probably more important was on the productivity side. So as you can see this year our margins on the service side, this quarter we are down significantly compared to where they have been historically. We are expecting to end the year and exit say the fourth quarter closer to 28%. And our expectation is to continue to grow those over the next several years, with the productivity tools I am talking about. The other piece of that is you mix in the [IS] efforts that we put in place. So the higher services capability from and again gap fits into the type of discussion for talking about. Those capabilities of providing Toronto-Dominion with endpoint security, we are providing with content distribution. The other thing outside the traditional hardware and software, it’s really the software services becomes the key ingredient for us and those are the capabilities we have been building and those margins are higher. Certainly, if you look at the third element the product margin, the product margin is going to be under pressure and that why we put so much emphasis on building…

Thank you and then just one last quick one, it sounds like you guys have essentially tabled the idea of buying back stock even at $30 in favor of going out and acquiring stuff. Can you just flush that out with me in terms of how you are thinking about that and why you have chosen to go that path?

I think what we are seeing in the marketplace is evidenced by the till that we recent completed, there are some pretty attractive assets out there and some of that can be very accretive to us relatively quickly and while they may not be large in size, they give us some competitive capabilities to compete. So the one in Turkey certainly, Turkey is a market that we've entered, we are not a one or two player, we are a three player there adding a service operation with a kind of breadth and scope that they have allows us to participate in the market that's growing 15% a year or so. We see that as being a very strategic acquisition right within the core of what we do. Likewise, we are looking at United States relative to those types of operations and in other key markets around the world. So I would view this as good investment in our key business which allows to accelerate growth and achieve the kind of margin performance that we are looking to achieve through some accretive acquisition. Brad, anything you would add?

No. I think that covers it.

And we will go next to Julio Quinteros with Goldman Sachs.

Hi, it’s actually Roman for Julio. First I guess it’s a follow-up to Matt’s first question, when you look at North America and you look at the order growth that you've seen in nationals versus regionals. I guess nothing surprised you on the pace of order growth. It was more on the margin there, but with the visibility you have in the recent quarters and the time lag that it takes from that orders to convert into revenue, what do you think the revenue impact in terms of nationals versus regional is for the next two quarters, should we expect this mission to continue for the first half of 2013 or beyond?

Yeah, I would say that that mixed shift will absolutely continue to shift more toward national less toward regional as we go through 2013. The big fast upgrade cycle relative to ADA PCI which drove a lot of business in the regional really has come to an end. Now we are back to more of a regular paced replacement and deposit automation being the big driver in regionals but as you get to the smaller regionals, they are less and less equipped to get to deposit automation as fast as the mid-tier regionals all the way up to the nationals. So, we see the mix continuing to move in that direction for sure.

And is there any change in the magnitude of that mix over the last few quarters and what sort of delta between order growth in nationals and regionals?

Yeah, I don't know if I have a percent I can quote right now but certainly it's significant in terms of what it is. We probably get back to what the actual mix kind of change. I don’t have that.

The order activity certainly on that.

Okay, and then one last one. And in Brazil and I know that the cost reductions there, the headcount reductions there is probably very consistent of what you are doing corporate wide but given that you expect Brazil to bounce back. I am just a little confused. Are you timing for a potential slowdown in that region or again is this just a more consistent with what you are doing across the board? Thanks.

We're not expecting a slowdown at all. I think in Brad’s comment just see in the slide, we really expect Brazil to have a very solid 2013. This is more, in programs we put in place over the last six months, nine months to recognize the inevitability of the issues we're going to face on the products from a long-term systemic standpoint and making the necessary adjustments there. Secondly, as you move more in those services form of things, we need to improve from a productivity standpoint. So part of these are tools from productivity standpoint as you move to services and part of the reflection of the product environment that we see going on. So, these are necessary important steps for us to be a leaner, healthier organization going forward.

Roman, I would just kind of reinforce. I mean this is something we've been looking at and we've been working on but the government bank pushout, certainly this isn’t a result of that. We had a third-party in helping us really look at process in order to look at where we could drive productivity primarily in the corporate overhead of our Brazilian business. So this is not a reaction to kind of the quarter, this is reaction to the product pressures that Tom spoke too as well as quite frankly reacting to operating in a relatively high inflationary environment. We have to look at this.

And we will go next to Paul Coster with JPMorgan.

I get the point about how full [costing] was the perhaps a little bit defective in terms of anticipating the margin mix, but may be as to I misunderstood the prior conversation but I also got the impression that there was so a fairly significant change anyway in the mix between national, regional counts quite later on in the quarter. If there is any truth to that statement? Can you just about the linearity of the change there and what it might be suggesting why would for instance regionals be slowing down at this point in time?

Yeah, Paul let me address that. A lot of that had to do with coming off the PCI ADA upgrade cycle. As we look out going forward in what we see kind of in the order book would suggest that it’s going to continue movement from the smallest banks that they were just buying an ATM to meet compliance and regulatory requirements to more of a deposit automation replacement product. When you look at that, you look at the top three banks then we look at the next four to 25, the banks four to 25 are moving aggressively and they are moving forward with deposit automation kind of capabilities. The next set of regional banks, the next 1,000 is different than the last set which is probably the remaining 9,000. The next 1,000 we are seeing activity there but it’s slower than the tier above them and then the bottom group, the bottom 9,000 whatever we are seeing that it’s taking longer. So the amount of revenue may be pretty comparable, the amount out of activity may be just as high but again it’s really tilted toward the top 25 or maybe the top 100 and then the second tilt would be sort of the top 1,000 and below that we are seeing much lower and they are taking longer. So that would be kind of consistent with your question.

And can you, I mean, what do you think the underlying reason for that difference would be?

Yeah, so the difference is pretty simple for a lot of these folks. Number one is that the complexity moving in deposit automation requires a backend capability whether it’s the processing or the in-house capability and for a lot of folks that becomes a big obstacle or big stumbling block which is why we are trying to get them an integrated service. I mean, that's really we are integrated services oriented and we talked about integrated services this quarter. We said really year-over-year we are down but actually the number of customers is above because lot of it’s oriented towards this, just a number of slices down in the number of revenue associated with those price goes down. So that's why integrated services for us is so important. It continues to move there. But I would basically say they got regulatory issues they are facing, they have a compliance issue they are facing and then they have backend operational processing issues that are facing. Thus it’s a longer slow move whereas when you move up to the biggest banks and you are talking about whether it would be a 100 or 300 or 500 or for 2,000 ATMs, the benefits are pretty powerful and have the skill set and the competencies to integrate and move those. And they are expecting and are getting the kind of result that generate continue to rollout.

And we will go next to Michael Kim with Imperial.

Just turning to electronic security. Can you talk a little bit about some of the gross drivers in the quarter? Was it primarily in the finance vertical is there some initial extension to additional verticals and also any commentary on the mix?

Yeah, I would say that from the electronic securities front it really was almost across the board at this point. We are putting more emphasis back on the financial side, but we still have a lot of piece of business that extends beyond financial with electronic security. So I would say as we are building this organization out our expectations are electronic security will continue to grow, physical security in this quarter was relatively flat. So you saw the growth of electronic security evident itself. When physical security was down 10% or 20% then you mapped any of the growth on the electronic side. So we put resources against it, we think we've the right programs in place and the technical capabilities that we are putting in place and so our goal is to drive electronic security from a recurring revenue standpoint which is different than some of the projects we've done in the past which would be the one time bigger installations or implementations and you get the product revenue but you don't get the ongoing recurring revenue and I would say that's the biggest difference for is to focus on a recurring revenue stream and while its relatively small now again we expect this to grow over time and that’s where we are putting our emphasis and focus and our number one segment is going to be the financial segment.

And is most of the recurring revenue driven by IS or other monitoring type revenue.

It would be a combination of those two. IS and monitoring.

And what was the progress on any visibility on IS adoption at this point.

Yeah, I'm not sure I have, I mean we've had a couple of pretty good examples of mid sized contract the $1 million to $2 million range with banks that have adopted IAS really for us to take over some of the infrastructure for their security within those organizations all the way up to some larger ones where they are going to be outsourcing and we are going to take over entire monitoring for them. So we are seeing a nice wide range, but again we are starting out, the base is small and it will take some time to grow it and again you are looking a lot of these, these are monthly recurring revenue businesses so you need to get a pretty big base for that monthly revenue and the margins associated with that are going to make the kind of impact for a while. But we absolutely feel good about kind of the pace and direction we are on. We feel good about the ability that as we focused on it, to see the kind of early results that we are seeing.

And we will take our final question from Zahid Siddique with Gabelli & Company. Zahid Siddique - Gabelli & Company: Couple of quick questions, one, one of your competitors for the past several quarters has been commenting about gaining share in North America and ATM market, I wanted to check with you to see if you have been losing any share in North America over the past several quarters.

I think a couple of things there, one is I would point that the simple answer is no, we probably feel like we are the one taking the share. When you look at our growth rate, overall on a constant currency basis for the year in self service its going to be 12% to 13%. I've not seen any competitor anywhere in the world talking at that level on a constant currency basis and that's number one. If I look at North America I would look at the key components of North America, the regional banks base were up 94%, I think the question earlier was indicating that some of our competitors are up 50% or somewhere in that range so I mean I look at that and say that we clearly are doing well in that regard and then I would look at the other aspects of a number of accounts and some of the things like that where we feel like again we have a bigger share, we are growing faster and have taken more accounts. So I'm not sure how I can conclude anything that we are either holding or taking a little bit of share but again on quarter-to-quarter basis, I don't think that’s as important as saying, what are the fundamentals of business, or what are we doing long-term systemically and that’s really we get into the integrated services in the service side of the business which we think, again is our key differentiator and that’s why the customer accounts and the product is important to us. It's really for the services and the add-on recurring revenue of service. So I feel good about where we are at from a share standpoint. I certainly don’t feel good about where we are at, what we perform relative to margin standpoint. Zahid Siddique - Gabelli & Company: But regards to the Brazil tax assessment that you highlighted, if you take that and I guess, also the SEPA and if you go back a few years, you had revenue recognition issue. Why do these issues keep on pumping up in one shape or other? Is there something fundamentally wrong somewhere?

I think they are very, very different issues. And certainly as I mentioned in my prepared remarks, you look at the investment we've made in the compliance area in order to really strengthen our global compliance and give ourselves confidence that in the areas, for example, like SEPA that we feel confident that we got the controls in place to ensure that we operate in (inaudible) of the laws. I would point you to certainly in Brazil that the tax assessment that we got and again we take this very seriously but I think you can look at Brazil and look at many multi-nationals and getting tax assessment is not uncommon. Again, we take this one very seriously but it's not uncommon to get a tax assessment. So I think the issues that we’ve had they are not directly correlated. We've invested very heavily in our compliance activity as well as our control activity. Zahid Siddique - Gabelli & Company: And then last question for security, you are guiding for full year for revenues to be up 3% to 4%. I think that implies the Q4 would be up may be 11% or 12% is that a fair assumption?

I think that’s pretty accurate. Zahid Siddique - Gabelli & Company: And how much is electronic security within the security business?

It’s generally about half. So again it depends on whether physical security is flat or down a little as to kind of how it shakes out, but generally from an overall revenue standpoint physical and electronic today are about 50-50 of the total security picture.

I wanted to turn the call back to you for any additional or closing remark.

Thank you, Danna. Well thank you everyone for joining us this morning and as always if you have follow-up questions, please feel free to contact myself or Nick Codispoti directly after the call. Thanks.

Again, that does conclude today’s presentation. We thank you for your participation.