Good day, everyone, and welcome to Diebold Incorporated's First Quarter 2013 Financial Results Conference Call. At this time for opening remarks and introductions, I would like to turn the call over to the Vice President and Chief Communications Officer, John Kristoff. Please go ahead.

Thank you, Camille. Good morning, and thank you for joining us for Diebold's first quarter conference call. Joining me today are Henry Wallace, Executive Chairman; George Mayes, Chief Operating Officer; and Brad Richardson, Chief Financial Officer. Also with us in the room today and available to answer questions is Mychal Kempt, our Head of North American Operations. 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. Henry, George 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 have restructuring charges, non-routine and amortization expenses and non-routine income 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 financial information. For a reconciliation of our GAAP to non-GAAP numbers, please refer to the supplemental material at the end of the presentation. Finally, a replay of this conference call will be available later today from our website. I should also note that we intend to file our 10-Q this afternoon. And as a reminder, some of the comments today may be considered forward-looking statements. Internal and/or external factors could significantly impact financial results. As a precaution, please refer to the more detailed risk factors that have previously been filed with the SEC. And with that, I'll turn it over to Henry to open things up.

Thank you, John, and good morning, everyone. The first quarter loss we reported this morning was extremely disappointing to all of us at Diebold, but it was not unexpected. In fact it was in line with our internal forecast. In late 2012, as we developed our forecast for 2013, we could see a significant shift taking place in our North American business. This put significant downward pressure on our profitability. At the same time, our 2013 profit outlook for Latin America/Brazil and Asia Pacific was projected to be weak in the first half and very much back-end loaded. These trends, together with our increasing need to reduce our cost structure, pointed to a very weak first and second quarter. Faced with this situation, we moved quickly in January to develop a plan to change the trajectory of the company. We implemented senior management changes and are presently interviewing candidates for the new CEO. This process is going well and we remain focused on finding the right person for the job. Timing is still open, but I'm encouraged by the quality of candidates that we are seeing. We established the position of a Chief Operating Officer and appointed George Mayes to that position. Our international business is significantly larger and more complex than it was a decade ago and we need real focus on driving the execution of our strategies and plans with a focus on speed, discipline and accountability in our operations around the world. We've reorganized our product development, service and supply chain operations as global functions. This will speed up our capabilities to develop products, leverage best practices and improve processes to significantly drive operational excellence and lower costs across our regional operations. We have already executed a series of short-term actions to reduce personnel, other costs and…

Thank you, Henry. As previously mentioned, we have moved quickly with an increased sense of urgency to take the actions necessary to extract greater value from our company. The 3 key areas we are quickly making changes to better position the company include: organizational realignment, structural cost reductions and investments in growth. As we rebuild our company, we recognize the emergent opportunity in the markets we serve such as brands transformation, integrated services and electronic security. And we continue to invest in these areas. In order to realize positive acceleration, we are taking critical steps to shape the long-term trajectory of the company. As Henry mentioned, we have been moving quickly to develop a multi-year global realignment plan including near- and long-term actions in order to accelerate the improvement in our performance. Most importantly, we are taking an approach that has been proven and tested. We are focusing on improving our critical business processes. This is different than in the past. This process focus will ensure that we sustain our gains in the future as we change the trajectory of the company. We have set a target to reduce our cost structure by $100 million to $150 million. 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. While this target is considerable, there is leverage in our business model that we have yet to realize. The near-term actions the company has taken include reducing our headcount by 700 full-time positions primarily in North America and corporate operations. The majority of these job reductions have already taken place. We continue to rationalize in our manufacturing facilities by selling our operations in Lynchburg, Virginia and Lexington, North Carolina. In order to make sure that we…

Thank you very much, George, and good morning, everyone. Let me walk you through our first quarter financial performance. Then I would like to spend some time providing further details behind the rationale, objective and savings associated with the realignment plan we announced this morning. Finally, I will discuss our outlook for 2013. As you can see on Slide 17, we reported total revenue for the quarter of $634 million, down approximately 9% from the first quarter 2012. This includes approximately 2% negative currency impact primarily related to the Brazilian reais. In North America, revenue was down about 17%. As we noted on our year-end earnings call in February, the North American region is down off a very tough comparison to the prior year period. During the prior year period, we set a milestone for the highest first quarter revenue in earnings in the company's history. This was a result of a strong demand in the high margin regional bank business, driven by accelerated ATM installations related to the March deadline for ADA and PCI requirements for ATMs. Revenue in Latin America was down about 10% mostly attributable to the timing of major ATM tenders in Brazil. The decline in the Americas was partially offset by revenue growth in Asia Pacific of approximately 17%, as well as positive growth in EMEA where we are encouraged with the continued progress of our restructuring efforts. However, profit margins in these regions are significantly below what we generate in North America, which impacted our global profitability during the quarter. Both product and service revenue decreased 17% and 4%, respectively. From a mix perspective, service represented 60% of the total revenue during the quarter. Looking at our financial self-service business on Slide 19. First quarter revenue was $496 million, a decrease of 12% or…

Thanks, Brad. Camille, we'll take our first question now, please.

[Operator Instructions] And we'll take our first question from Gil Luria with Wedbush.

In terms of Brazil as a big swing factor, last quarter you quantified the swing factor as about $30 million of operating income. A quarter into the year with knowing that we won one of those deals, is that swing factor any lower at this point in time?

Yes, Gil. It's Brad. I think that's still a good approximation.

And then in terms of those deals, the one you won, as well as the 2 that are still out there, should you win them, the mix of rollouts, would it be mostly this year, mostly next year? What's the ratio between the ATMs you would rollout this year versus next year?

Yes, Gil, I mean, I think it's roughly about half would come into -- maybe half to a little less than a half would come into the 2013 and the following would be into 2014.

Got it. And finally, within your EMEA region, do you see any noticeable changes in terms of the environment? Obviously you're in a limited, a more limited set of countries right now, but has spending slowed down or picked up in terms of the overall banks within those countries?

No, Gil, I would say it's stable at this point.

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

A couple of questions. From an SG&A standpoint, how much of your spend, would you say, is fixed versus variable kind of before executing on this realignment and restructuring? And what will that ratio look like in your mind post these efforts?

Yes, I mean, I think, Matt, I mean the vast majority of that -- the SG&A is fixed. Let's just say, 90% of it's fixed. And with the cost reductions that we're making, some of them are in the sales area, but the disproportion in our amount in the G&A area, I would expect that ratio maybe to be 80, 80-20.

And then as you think about realization of these savings, what sort of revenue growth is implied, if any, on capturing, say, the $50 million to $75 million down to operating profit?

I think, as you look at the overall assumption here, it's based upon very, very minimal revenue growth for the company. Such that, as revenue growth comes and we're able to leverage the company and generate higher operating profit.

Maybe just to help frame up this small bank dynamic, I believe you disclosed what your small bank revenue was in the first quarter of '12. Can you review that again and then maybe give us an idea as far as where that stood in the first quarter of '13? And I guess embedded in this sort of flat to moderately down EPS outlook, what is your view of small bank for the full year?

Let me answer the first part of this and then I'll let Michael kind of give you what's going on in the marketplace. And without giving you the specific revenues for the regional community bank, what I would say, and I think it kind of speaks to the results that we're announcing here this morning, is that in the first quarter of last year within our financial self-service business here in North America, we were about 80% of the revenues were regional community banks. And in the first quarter of this year, it's about 40% regional and community, 60% national. So you can see how that has had a very significant impact. You can see it at the product margin level, but you can also see it at the service margin. Regarding the outlook, Mychal, do you want to comment?

Matt, it's Mychal. We've seen in this regional bank business kind of return to what I would say more of a historical normalized rate. And although that's not where we want to be, certainly, we're encouraged by improved visibility and pipeline growth that I've seen come out in the first quarter. I think that improved visibility and pipeline growth really kind of supports our full-year view. Pipeline is being driven predominantly by Windows 7 and EMV-type upgrades, certainly activity around branch transformation and deposit automation.

And we'll take our next question from Julio Quinteros with Goldman Sachs.

Just real quickly, can we go back through the capital allocation plans for the remainder of the year. It sounded like you guys were planning on doing a private placement and then just thinking through the remainder of the year in terms of free cash flow expectations beyond the debt raising. Also it kind of sounds like you're also committing to the continued dividend payout, correct?

Right. So our free cash flow estimate, again, we're estimating to be somewhere around $100 million in free cash flow. And again, that supports the -- that $100 million is after reinvestment of $60 million of capital investments. Regarding kind of the what we're doing on the debt side is with the private placement notes maturing, again, $75 million matured in March, we're out raising some money to refinance, if you will, that $75 million, as well as to give us an incremental $75 million that we will use to pay down the revolver at this point. Both of those actions give us then the capacity that we need obviously to move forward.

Okay, and what's the put and take against the pension expense itself? It sounded like there was a $30 million expense there as well?

Yes, so that's -- there's 2 $30 millions that we talked about in the prepared remarks. $30 million is the expense right now that we're projecting for 2013. Again, that's up from in 2008, where it was essentially 0. So that was the reference to the $30 million, is the expense that's hitting the company, really about 1% on the operating margin line. What I mentioned is that regarding funding is, at the end of last year, we were about 76% funded. With the performance of the market right now, we're about 81% funded. We don't have any mandatory requirements to fund the plan this year, but we are looking potentially to put in about $30 million of Diebold's stock into the plan. We'll make that decision at this point in the third quarter this year.

And we'll take our next question from Paul Coster with JPMorgan. Paul Coster - JP Morgan Chase & Co, Research Division: So the restructuring obviously yields some opportunity to reinvest. And it sounds like there's 3 growth areas of branch transformation, electronic security and integrated services, is that correct? And then can you just sort of give us some sense of what you think the growth prospects for each of those are?

Yes, I would just start with branch transformation. I think, as we begin to have these conversations with -- in some of the key financial institutions, they have several kind of reasons that they're -- rationales as they're looking at branch transformation. Obviously, they're looking at it to facilitate their cost reduction. But I think more importantly, they're having the conversations because it gives -- it enables them a way to differentiate themselves with their customer base. I think it's very early in the conversation to give you a specific number around the growth rate, but I will tell you that we are having several conversations with large institutions and there appears to be a significant appetite to invest in our hardware as we go forward and for us at Diebold that bodes well for us because we have a proven solution in place that's being tested and being certified, and so we think we have a significant opportunity there. In terms of electronic security, we believe that our growth is going to be in that 3% to 4% range. And I think there might be some opportunity to do better than that. But clearly, I think for now that, that's probably the expected range that we're going to be in. In terms of integrated security, that the growth rate would be a little bit higher than where we are with the electronic security piece. I think those 3 strategies clearly underpin our long-term aspirations to grow in the 4% to 6% range as a total company and then when you look at the various markets, each of them have different growth rates. But in summary, we believe that our strategies will enable us to achieve that 4% to 6% growth rate that we've articulated in previous meetings. Paul Coster - JP Morgan Chase & Co, Research Division: You've made some pretty significant internal changes here. Do you feel that you've compromised any of your growth initiatives? Have there been any sort of revenue impacts from these cutbacks?

No. I would tell you, I think the most encouraging thing, as I said in my comments, in the past as we've taken these initiatives, we probably have not been as focused around making sure that we keep and maintain the capabilities within the company. And so, we have taken a very, very focused look at maintaining our core capabilities and in new product development from a hardware and software standpoint. We have taken a particular effort in making sure that we maintain the ability to satisfy our customers' requirements. We want to make all of these changes transparent to our customers. So if anything as we've gone through this diligence, I believe that we've enhanced our ability to satisfy our customers. And through the efforts of streamlining our new product development organization and rationalizing our processes throughout the organization, that we have increased our ability to deliver speed to market as we go forward. So I would tell you that if anything I think that we've enhanced the capabilities of the organization through these efforts. And as I said, I just want to emphasize that we're at the beginning of this process. And as we go forward, it will accelerate the pace and be able to deliver in a much more meaningful, crisper way to our customers the new products and increase our speed to market while reducing our cost. Paul Coster - JP Morgan Chase & Co, Research Division: Okay. Last question, many of us sort of feel that the company needs to -- I don't know if many of us. I believe that the company needs to move up the food chain a little bit by tilting revenues towards software somewhat. Do you concur? And to what extent should we view the selection of the CEO as a litmus test for your sort of commitment to that strategy?

Well, let me answer that. This is Henry. Let me answer that on behalf of the team. The answer is, yes, we do see that there's real benefit in moving up the food chain, and software is clearly one of those areas and we've talked about that several times. And it goes through all the corporate strategies. And so as we think about the next leader of the company, that's one of the areas that we think is very important and that's certainly a big factor in our minds as we think about that.

And we'll take our next question from Jeffrey Kessler with Imperial Capital.

Could you give an indication of what seasonally free cash flow sets out to be by quarter, realizing that obviously you have capital commitments that pop up that are unusual during the course of the year, such as, perhaps installations in Brazil, things like that. But normally, what would we be expecting in terms of the seasonality of your free cash flow?

Jeff, generally the first quarter is our weakest. And again, you saw that in terms of the negative $41 million that we announced here this morning, again, in line with the prior year free cash flow use. What you see then typically is the second and third quarters are moderately kind of neutral, if you will, and then the fourth quarter is when the vast majority of our free cash flow is generated. And that's just really a function of the way certain contracts work on the service side of the business here in North America, as well as certain kind of government bank activity outside of North America.

Okay. And with regard to getting up to your in-line with industry peers, particularly with your fixed cost levels. Without going into any specifics on who your -- the industry peers are, what are the improvements you need to make? And what are the types of things that your industry peers are doing with fixed cost that you need to get up to?

Yes, without comparing ourselves to our industry peers, our focus is really looking at our fixed cost from a Diebold perspective. And we believe that there's several additional things that we can do around looking at, obviously, our organizational structures, looking at our channel and participation strategies in each of our regions, going into each business region and doing a detailed analysis by line of the individual fixed cost structure. There's several things that we are going to be focused on here in the future and we think there's an opportunity, as I've said, the activities that we've taken thus far are just really the beginning. We believe that there's a significant opportunity to reduce our fixed cost and our operating expense as we go forward. And we will spend the next several weeks and months working towards that end.

Good. Finally, last question. You mentioned that you were starting to begin to integrate or at least you had -- begin to have the product capability, service capability to start integrating initial electronic security products with financial services. Could you elaborate on that a little more?

Yes, I spoke about our SecureStat launch that we just launched down at the West Coast of the ISC, the Integrated Securities' Conference. And what that is, it's a tool that enables the integration of different security applications into one agnostic kind of web-based tool. And so it enables our partners or customers to take DVRs and fire alarms and sensing panels, access technology and to be able to look at it through one web portal. And so in our business, this is really a first in the industry. And because it's device agnostic, we believe that it really provides us an opportunity to leapfrog our competitors and really provides a compelling tool that any commercial or financial institution can use to kind of control their security environment. So we're very excited about it. We got extremely favorable reviews at the ISC. And we continue to have very critical conversations with customers who would like to use that solution going forward.

And we'll take our next question from Zahid Siddique with Gabelli & Company. Zahid Siddique - Gabelli & Company, Inc.: I wanted to go back to your guidance. So you are projecting earnings to be modestly lower than 2012? And I think June 2012, you did about $2.07, let's call it $2.05. So if we assume $1.90 or $1.80 would be modestly lower that implies -- and if we do the math, Q3 and Q4, it implies that Q3 and Q4 earnings would more than double on a year-over-year basis. Is that a realistic assumption?

Well certainly, again, I think the flat down moderately, I mean, I think you kind of dimensioned that. But if you really look at the second half of last year, you may recall that in particular in the fourth quarter, we ran into a series of operational issues in the company. And so certainly, as we sit here and we kind of think about the second half of this year, we're not anticipating kind of a repeat of those. So again, that provides a favorable year-over-year comparison. Then you look at, clearly, the cost take-outs that we've announced here this morning. Those are going on as we speak. Those have a second half benefit. In our prepared remarks, we talked about what's going on with the national accounts. Mychal spoke to, again, the momentum of -- albeit it's off of a low base, but the momentum that we have in the regional space, coupled with the normal backend loading of the Latin America business, including Brazil, which we've spoken to. Those all give us the basis for a stronger second half. Zahid Siddique - Gabelli & Company, Inc.: To the degree that, earnings could actually double roughly or more than double in the second half?

Yes, certainly. Again those factors that I just listed, serve as the basis for the full year guidance. Zahid Siddique - Gabelli & Company, Inc.: Okay. And just last question, I think, if I heard you correctly, you said that the services margins would be better than 2012. Is that what I heard? And what were the margins again in 2012?

For 2012, our service margin was 25.7%. And again, you will recall that last year, those margins fell off in the second half of the year due to some operational issues, as well as due to the investments that we were making to stand up Toronto-Dominion. And therefore again, we're expecting, with the cost actions coupled with the absence of some of the issues we had in 2012, to create a favorable year-over-year variance.

And we'll take a follow-up question from Matt Summerville with KeyBanc.

A couple of questions. First, your pension expense is $30 million a year. If you were to prefund this $30 million with your stock, what would the EPS accretion be, Brad?

Yes, that would be roughly, probably $0.03 or $0.04 in very rough terms. But we're not anticipating that, that funding's going to take place until the third quarter of this year, so you'd only get a partial year effect this year.

And then, I want to make sure I understand. So your electronic security orders sounded like they were up 40%, but it sounds like you're looking for 3% revenue growth. Did I misunderstand something?

Matt, that's for total security. And physical security is still down year-over-year. And then we've exited some segments as well, related -- you saw, we sold off our government security business and some other segments. We're not talking about orders, we're just talking about electronic security.

Got it. And then Brad, I think this is my last question. On your one -- your fourth quarter conference call, I believe you said the earning seasonality this year would be 20%, 25% first half, the remainder back half. Is that still true, in terms of how you're kind of modeling things out?

Yes, I mean, I think given the order activity in Brazil and where the margins came in on the Brazil order, I think the backend loading has increased from that expectation that we gave at the fourth quarter call. But again, what we've done since that fourth quarter call is given some of the issues with Brazil as we have intervened on the cost actions in order to support the full year guidance that we're reaffirming here this morning.

And that does conclude today's question-and-answer session. Mr. Kristoff, at this time I will turn the conference back to you for any additional or closing remarks.

Thanks, Camille. And thank you, everyone, for joining us this morning. As always, if you have follow-up questions, please feel free to contact me directly or Jamie Finefrock. Thank you.

And this does conclude today's presentation. Thank you for your participation.