# DIEBOLD NIXDORF, Inc: Form 10-Q for the period ended Mar 31, 2016

- Company: [DIEBOLD NIXDORF, Inc](/companies/dbd.md) (CIK 28823)
- Form: 10-Q
- Filed: 2016-04-28
- Accepted by EDGAR: Apr 28, 2016, 07:32 ET
- Period: 2016-03-31
- Accession: 0000028823-16-000195
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/28823/000002882316000195/dbd331201610q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/28823/000002882316000195/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2016-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2016-01-01 to 2016-03-31 | $509.6m | us-gaap:SalesRevenueNet |
| Cost of revenue | 3 months, 2016-01-01 to 2016-03-31 | $370.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2016-01-01 to 2016-03-31 | $138.8m | us-gaap:GrossProfit |
| Research and development | 3 months, 2016-01-01 to 2016-03-31 | $18.5m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2016-01-01 to 2016-03-31 | $125.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2016-01-01 to 2016-03-31 | −$5.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2016-01-01 to 2016-03-31 | $11.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2016-01-01 to 2016-03-31 | −$800.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2016-01-01 to 2016-03-31 | $168.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2016-01-01 to 2016-03-31 | $2.56 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2016-01-01 to 2016-03-31 | $2.58 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2016-01-01 to 2016-03-31 | 65,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2016-01-01 to 2016-03-31 | −$115.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2016-01-01 to 2016-03-31 | $4.7m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2016-01-01 to 2016-03-31 | $18.8m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2016-01-01 to 2016-03-31 | $1.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2016-03-31 | $304.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2016-03-31 | $1.69bn | us-gaap:AssetsCurrent |
| Total assets | at 2016-03-31 | $2.28bn | us-gaap:Assets |
| Current liabilities | at 2016-03-31 | $990.1m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2016-03-31 | $595.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 56,478 characters.

### Overview

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and accompanying notes that appear elsewhere in this Quarterly Report on Form 10-Q.

#### Introduction

Diebold, Incorporated and its subsidiaries provide the services, software and technology that connect people around the world with their money - bridging the physical and digital worlds of cash conveniently, securely and efficiently. Since its founding in 1859, Diebold has evolved to become a leading provider of exceptional self-service innovation, security and services to financial, retail, commercial and other markets. The Company employs approximately 15,000 associates globally following the recently completed divestiture of the NA electronic security business. The Company's service staff is one of the financial industry's largest, with professionals in more than 600 locations and businesses in more than 90 countries worldwide. The Company continues to execute its multi-year transformation, Diebold 2.0, with the primary objective of transforming the Company into a world-class, services-led and software-enabled Company, supported by innovative hardware.

Diebold 2.0 consists of four pillars:

- Cost - Streamline the cost structure and improve near-term delivery and execution.
- Cash - Generate increased free cash flow in order to fund the investments necessary to drive profitable growth, while preserving the ability to return value to shareholders in the form of dividends and, as appropriate, share repurchases.
- Talent - Attract and retain the talent necessary to drive innovation and the focused execution of the transformation strategy.
- Growth - Return the Company to a sustainable, profitable growth trajectory.

In the second half of 2015, the Company fully transitioned into the “Walk” phase of Diebold 2.0 whereby the Company continued to build on each pillar of cost, cash, talent and growth. Compared to the “Crawl” phase, the main difference in “Walk” is a greater emphasis on increasing the mix of revenue from services and software, as well as shaping the Company’s portfolio of businesses. As it relates to increasing the mix of services and software, the Company has sharpened its focus on pursuing and winning managed services and multi-vendor services contracts. Through the first quarter of 2016, the Company has approximately 29,000 ATMs under a managed services agreement and approximately 13,000 competitor ATMs under a service contract in North America. For the software business, the acquisition of Phoenix has significantly enhanced the Company's ability to capture more of the market for ATM, multi-vendor, marketing and asset management software.

As it relates to shaping the portfolio of businesses in the first quarter of 2016, the Company completed the sale of its NA electronic security business and achieved several additional milestones in connection with the Acquisition. First, the Company successfully surpassed the minimum threshold for tendered ordinary shares of Wincor Nixdorf. Subsequent to quarter end, the Company commenced and priced, and completed a portion of, the required financing for the Acquisition. Also, the Company has obtained antitrust approval in certain jurisdictions for the Acquisition, including early termination of the Hart-Scott-Rodino waiting period and thus achieving U.S. antitrust approval. The collective progress made thus far has the Company targeting to close the Acquisition in the summer of 2016.

In December 2015, the Company announced it is forming a new joint venture with a subsidiary of the Inspur Group, a Chinese cloud computing and data center company, to develop, manufacture and distribute FSS solutions in China. The Inspur Group will hold a majority stake of 51 percent in the new joint venture, which will be named Inspur Financial Information Systems, Ltd. The joint venture will offer a complete range of self-service terminals within the Chinese market, including ATMs. Diebold will serve as the exclusive distributor outside of China for all products developed by the new joint venture, which will be sold under the Diebold brand. The Company does not expect to consolidate the Inspur Financial Information Systems, Ltd. once the joint venture is formed and will include its results of operations in equity in earnings of an investee included in other income (expense) of the condensed consolidated statements of operations.

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In addition, to support Diebold's services-led approach to the market, Inspur will acquire a minority share of Diebold's current China joint venture. Moving forward, this business will be focused on providing a whole suite of services including installation, maintenance, professional and managed services related to ATMs and other automated transaction solutions.

#### Solutions

The Company believes it is a leader in managed and maintenance services with a dedicated service network serving its customers across the globe. The combination of the Company’s differentiated security, remote management and highly-trained field technicians has made the Company the preferred choice for current and emerging self-service solutions. Through managed services, banks entrust the management of their ATM and security operations to the Company, allowing their associates to focus on core competencies. Furthermore, the Company’s managed services provide banks and credit unions with a leading-edge technology that they need to stay competitive in the marketplace.

A significant demand driver in the global ATM marketplace is branch automation. The concept is to help financial institutions grow revenue, reduce costs, and increase convenience and security for the banks’ customers by migrating routine transactions, typically done inside the branch, to lower-cost automated channels. The Company serves as a strategic partner to its customers by offering a complete branch automation solution — services, software and technology — that addresses the complete value chain of consult, design, build and operate. The Company’s Advisory Services team collaborates with its clients to help define the ideal customer experience, modify processes, refine existing staffing models and deploy technology to meet branch automation objectives. The Diebold 9900 in-lobby teller terminal (ILT) provides branch automation technology by combining the speed and accuracy of a self-service terminal with intelligence from the bank’s core systems, as well as the ability to complete higher value transactions away from the teller line.

The Company also offers hardware-agnostic, omni-channel software solutions for ATMs and a host of other self-service applications. These offerings include highly configurable, enterprise-wide software that automates and migrates financial services across channels, changing the way financial products are delivered to consumers.

Mobile integration is an emerging trend in branch automation, as consumers look for more convenient ways to interact with their financial institutions. To address this need, the Company offers its innovative Mobile Cash Access software solution, which enables consumers to initiate ATM transactions with a mobile device. By eliminating the need for an ATM card, Mobile Cash Access dramatically speeds up transaction time, addresses the risk of card skimming, and reduces the risk of fraud and theft since sensitive customer information is never stored on the mobile device and is passed to the ATM via a secure virtual private network connection. The Company has demonstrated success with this solution in NA and EMEA.

As part of its branch automation solution, the Company offers two-way video capabilities. The solution provides consumers with on-demand access to bank call center representatives at the ATM for sales or bank account maintenance support. In addition to delivering a personal touch outside of regular business hours, it ultimately assists financial institutions by maximizing operational efficiencies, improving the consumer experience and enhancing the overall consumer relationship.

An innovation that enhances security for customers is Diebold’s ActivEdge™ secure card reader. This is the ATM industry’s first complete anti-skimming, EMV compliant card reader that prevents all known forms of skimming, the most prevalent type of ATM crime. ActivEdge™ can assist financial institutions avoid skimming-related fraud losses, which, according to the ATM Industry Association, totals more than $2 billion annually worldwide. ActivEdge™ requires users to insert cards into the reader via the long edge, instead of the traditional short edge. the Company believes by shifting a card’s angle 90 degrees, ActivEdge™ prevents modern skimming devices from reading the card’s full magnetic strip, eliminating the devices’ ability to steal card data.

The Company will continue to invest in developing new and supporting current services, software and security solutions that align with the needs of its customers. The Company recently added its high-performance cash-dispensing and full-function ATM models to its self-service platform. Over the past year, the Company has unveiled three new lines of ATMs-standard market, extended branch and the high-performance line, which are designed to meet specific market and branch needs for customers.

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#### Business Drivers

The business drivers of the Company's future performance include, but are not limited to:

- demand for services and software, including managed services and professional services;
- timing of self-service equipment upgrades and/or replacement cycles;
- demand for products and solutions related to bank branch automation opportunities;
- demand for security products and services for the financial and commercial sectors; and
- high levels of deployment growth for new self-service products in emerging markets.

### Significant Highlights

In the fourth quarter of 2015, the Company announced its intention to acquire all 29.8 Wincor Nixdorf ordinary shares outstanding (33.1 total Wincor Nixdorf ordinary shares issued inclusive of 3.3 treasury shares) through a voluntary tender offer for €38.98 in cash and 0.434 common shares of the Company per Wincor Nixdorf ordinary share outstanding. The Company considered a number of factors in connection with its evaluation of the proposed transaction, including significant strategic opportunities and potential synergies, as generally supporting its decision to enter into the business combination agreement. As of March 29, 2016, the Company confirmed that it received 68.9 percent of total Wincor Nixdorf ordinary shares issued inclusive of treasury shares (76.5 percent of all Wincor Nixdorf ordinary shares outstanding) for purposes of satisfying the minimum tender condition of the offer. On April 15, 2016, the Company announced the final results of the offer that 22.9 Wincor Nixdorf ordinary shares had been tendered by the end of the statutory additional acceptance period on April 12, 2016, which (together with 0.2 voting proxies held by the Company) represented 69.9 percent of total Wincor Nixdorf ordinary shares issued inclusive of treasury shares (77.5 percent of all Wincor Nixdorf ordinary shares outstanding). At the end of the offer acceptance period on March 22, 2016, all closing conditions to the offer had been satisfied, except that the offer remains subject to regulatory approval. The offer is targeted to close in the summer of 2016. The Company intends to finance the cash portion of the offer consideration as well as any Wincor Nixdorf debt outstanding with funds available under the Company’s Credit Agreement and proceeds from the issuance and sale of the Notes on April 19, 2016, which Notes are required to be redeemed in the event that the offer has not closed by November 21, 2016. The Company will incur interest expense along with continuing to incur certain costs and fees, some of which will be payable even in the event the Acquisition is terminated or expires. Wincor Nixdorf has a fiscal year end of September 30 and is reported using IFRS, as issued by the EU. For the fiscal year ended September 30, 2015, Wincor Nixdorf recorded net sales of €2,427.0. For more information related to the Acquisition, the Company has filed a Registration Statement on Form S-4 with the SEC which was declared effective by the SEC on February 5, 2016.

On October 25, 2015, the Company entered into a definitive asset purchase agreement with Securitas Electronic Security to divest its electronic security business located in the United States and Canada for an aggregate purchase price of $350,000,000.0 in cash, 10.0 percent of which was contingent based on the successful transition of certain customer relationships. The Company received the full payment of $35,000,000.0 in the first quarter of 2016 now that all contingencies for this payment have been achieved. For the NA electronic security business to continue its growth, it would require resources and investment that the Company was not committed to make given its focus on the self-service market. The closing of the transaction occurred on February 1, 2016 and the Company recorded a gain on sale, net of tax, of $149.1 on this divestiture in the first quarter of 2016. The closing purchase price is subject to a customary working capital adjustment. The Company also agreed to provide certain transition services to Securitas Electronic Security after the closing, including providing Securitas Electronic Security a $6,000,000.0 credit for such services, of which $5.0 relates to a quarterly payment to Securitas Electronic Security and $1.0 is a credit against payments due from Securitas Electronic Security. During the three months ended March 31, 2016, $1.3 was paid as part of the quarterly payment and $0.3 was used against amounts owed by Securitas Electronic Security. The operating results for the NA electronic security business were previously included in the Company's NA segment and have been reclassified to discontinued operations for all of the periods presented.

On March 13, 2015, the Company acquired all of the equity interests of Phoenix for a total purchase price of $72.9, including $12.6 of deferred cash payment payable over the next three years. Acquiring Phoenix, a leader in developing innovative multi-vendor software solutions for ATMs and a host of other FSS applications, is a foundational move to accelerate the Company’s growth in the fast-growing managed services and branch automation spaces. The results of operations for Phoenix are primarily included in NA within the Company's condensed consolidated financial statements from the date of the acquisition.

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As of March 31, 2015, the Company agreed to sell its equity interest in its Venezuela joint venture to its joint venture partner and recorded a $10.3 impairment of assets in the first quarter of 2015. The Company no longer has a consolidating entity in Venezuela but will continue to operate in Venezuela on an indirect basis.

Prior to the sale, the Company's Venezuela operations consisted of a fifty-percent owned subsidiary, which was consolidated. Venezuela was measured using the U.S. dollar as its functional currency because its economy is considered highly inflationary. On February 10, 2015, the Venezuela government introduced a new foreign currency exchange platform called the Marginal Currency System, or SIMADI, which replaced the SICAD 2 mechanism, yielding another significant increase in the exchange rate. As of March 31, 2015, management determined it was unlikely that the Company would be able to convert bolivars under a currency exchange other than SIMADI and remeasured its Venezuela balance sheet using the SIMADI rate of 192.95 compared to the previous SICAD 2 rate of 50.86, which resulted in a loss of $7.5 recorded within foreign exchange (loss) gain, net in the condensed consolidated statements of operations in the first quarter of 2015.

### Results of Operations

The following discussion of the Company’s financial condition and results of operations provides information that will assist in understanding the financial statements and the changes in certain key items in those financial statements. The following discussion should be read in conjunction with the condensed consolidated financial statements and the accompanying notes that appear elsewhere in this Quarterly Report.

|  | Three Months Ended March 31, 2016 Dollars | % of Net sales | 2015 Dollars | % of Net sales |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $509.6 | 100.0 | $574.8 | 100.0 |
| Gross profit | $138.8 | 27.2 | $159.3 | 27.7 |
| Operating expenses | $144.5 | 28.4 | $162.3 | 28.2 |
| Operating loss | $(5.7) | (1.1) | $(3.0) | (0.5) |
| Net income (loss) | $168.5 | 33.1 | $(5.6) | (1.0) |
| Net income (loss) attributable to noncontrolling interests | $0.3 | 0.1 | $(2.8) | (0.5) |
| Net income (loss) attributable to Diebold, Incorporated | $168.2 | 33.0 | $(2.8) | (0.5) |

#### Net Sales

The following table represents information regarding our net sales:

|  | Three Months Ended March 31, 2016 | 2015 | % Change |
| --- | ---: | ---: | ---: |
| Financial self-service | $446.5 | $495.0 | (9.8) |
| Security | 61.1 | 69.5 | (12.1) |
| Brazil other | 2.0 | 10.3 | (80.6) |
| Net sales | $509.6 | $574.8 | (11.3) |

FSS sales in the first quarter of 2016 decreased $48.5 or 9.8 percent compared to the same period of 2015, including net unfavorable currency impact of $27.9 or 4.4 percent. The unfavorable currency impacts in the three months ended March 31, 2016 were related mainly to the Brazil real as well as smaller impacts from the South Africa rand, India rupee, Canada dollar, and China renminbi. The following results include the impact of foreign currency:

- NA FSS sales in the three months ended March 31, 2016 decreased $3.1 or 1.5 percent compared to the prior year period, of which $2.4 was related to unfavorable currency. The decline principally resulted from lower product revenue in the U.S. regional bank space related to the wind down of the Agilis 3/Windows 7 upgrade project and lower volume in Canada as a result of a large deposit automation upgrade project that ended in the third quarter of 2015. These declines were

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partially offset by higher service revenue attributable to increased multi-vendor service contracts and the benefit of the Phoenix acquisition.

- AP FSS sales in the three months ended March 31, 2016 decreased $29.1 or 27.3 percent, compared to the prior year period. Unfavorable currency impact of $6.5 negatively influenced the three month period. In addition, the decrease was largely attributable to a decline in product revenue stemming from lower volume primarily in China, where the government continues to encourage banks to increase their use of domestic ATM suppliers. India also contributed to the decline due to lower product, installation and managed services revenue compared to the prior period.
- EMEA FSS sales in the three months ended March 31, 2016 decreased $1.2 or 1.4 percent compared to the prior year period. Unfavorable currency impact of $5.5 adversely impacted the three months ended March 31, 2016, principally driven by the weakening of the South Africa rand and the euro. On a constant currency basis, sales increased primarily due to higher product sales in Switzerland partially offset by overall lower product volume in the UK.
- LA FSS sales in the three months ended March 31, 2016 decreased $15.1 or 15.8 percent compared to the prior year period. The three months ended March 31, 2016 was negatively impacted by unfavorable currency of $13.5 related to the Brazil real. On a fixed rate basis, volume declines in Brazil and Colombia were partially offset by higher volume in Mexico and regional distributor channels. Venezuela also contributed to the decrease in revenue as the Company sold its equity interest in the joint venture in March of 2015.

Security sales in the three months ended March 31, 2016 decreased $8.4 or 12.1 percent compared to the same period in 2015 impacted by $1.1 of unfavorable currency as well as volume declines in the physical security business in North America and a decrease in the electronic security business in Latin America largely attributable to lower sales in Chile, which was partially offset by an increase in Colombia.

Brazil other sales in the three months ended March 31, 2016 decreased $8.3 due to a reduction in both lottery and information technology sales compared to the same prior year period. Market-specific economic and political factors continue to weigh on the purchasing environment driving lower volume in the country. Unfavorable currency impact of $3.1 adversely influenced the three months ended March 31, 2016.

#### Gross Profit

The following table represents information regarding our gross profit:

|  | Three Months Ended March 31, 2016 | 2015 | % Change |
| --- | ---: | ---: | ---: |
| Gross profit - services | $108.2 | $111.7 | (3.1) |
| Gross profit - products | 30.6 | 47.6 | (35.7) |
| Total gross profit | $138.8 | $159.3 | (12.9) |
| Gross margin – services | 32.1% | 32.7% |  |
| Gross margin – products | 17.7% | 20.4% |  |
| Total gross margin | 27.2% | 27.7% |  |

Service gross margin for the three months ended March 31, 2016 was relatively flat. Service gross profit included restructuring charges of $0.3 in the three months ended March 31, 2016 and no charges in the three months ended March 31, 2015. Additionally, service gross profit was impacted by expenses related to customer service level agreement contract requirements in India for the three months ended March 31, 2016.

The decrease in product gross margin for the three months ended March 31, 2016 compared to the same period in 2015 was mainly due to an unfavorable blend of country revenue and product solution mix. The main drivers were China due to increased competitive tier three market conditions negatively impacting margins and in North America, where margin declined due to product mix in the U.S. regional bank space and an increase in national account sales with unfavorable customer mix.

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#### Operating Expenses

The following table represents information regarding our operating expenses:

|  | Three Months Ended March 31, 2016 | 2015 | % Change |
| --- | ---: | ---: | ---: |
| Selling and administrative expense | $125.6 | $120.5 | 4.2 |
| Research, development and engineering expense | 18.5 | 22.3 | (17.0) |
| Impairment of assets | — | 19.4 | (100.0) |
| Loss on sale of assets, net | 0.4 | 0.1 | N/M |
| Total operating expenses | $144.5 | $162.3 | (11.0) |

The increase in selling and administrative expense in the three months ended March 31, 2016 compared to the same period of 2015 primarily resulted from higher non-routine charges as well as incremental expense affiliated with the Phoenix acquisition. These increases were partially offset by favorable currency impact and lower restructuring charges. Non-routine expenses of $13.8 and $4.6 were included in the three months ended March 31, 2016 and 2015, respectively. The primary component of the non-routine expenses in the first quarter of 2016 pertained to acquisition and divestiture costs totaling $11.0 as well as $2.8 of legal, indemnification and professional fees related to the corporate monitor. Selling and administrative expense included restructuring charges of $0.1 and $2.5 in the three months ended March 31, 2016 and 2015, respectively. Restructuring charges in the first quarter of 2015 were mainly associated with initiatives taken in LA.

Research, development and engineering expense as a percent of net sales in the three months ended March 31, 2016 and 2015 were 3.6 percent and 3.9 percent, respectively. The Company is nearing the completion of the cost savings reinvestment phase of its transformation project resulting in a decrease, partially offset by an increase in incremental expense associated with the Phoenix acquisition, in the three months ended March 31, 2016 as compared to the same period in 2015.

As of March 31, 2015, the Company agreed to sell its equity interest in its Venezuela joint venture to its joint venture partner and recorded a $10.3 impairment of assets in the first quarter of 2015. The Company no longer has a consolidating entity in Venezuela but continues to operate in Venezuela on an indirect basis. Additionally, the Company recorded an impairment of $9.1 related to redundant legacy Diebold internally-developed software as a result of the acquisition of Phoenix in the first quarter of 2015.

#### Operating Loss

The following table represents information regarding our operating loss:

|  | Three Months Ended March 31, 2016 | 2015 | % Change |
| --- | ---: | ---: | ---: |
| Operating loss | $(5.7) | $(3.0) | (90.0) |
| Operating loss margin | (1.1)% | (0.5)% |  |

The change in operating loss for the three months ended March 31, 2016 compared to the same period in 2015 was driven by a decline in total gross profit associated with unfavorable product and customer mix in the U.S., deteriorating market conditions in China and was impacted by expenses related to customer service level agreement contract requirements in India. A decline in operating expenses partially offset the decrease in gross profit primarily due to impairment charges in the prior period.

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#### Other Income (Expense)

The following table represents information regarding our other income (expense), net:

|  | Three Months Ended March 31, 2016 | 2015 | % Change |
| --- | ---: | ---: | ---: |
| Investment income | $4.9 | $7.9 | (38.0) |
| Interest expense | (11.5) | (8.0) | (43.8) |
| Foreign exchange (loss) gain, net | (2.4) | (9.2) | 73.9 |
| Miscellaneous, net | 34.6 | (1.2) | N/M |
| Other income (expense), net | $25.6 | $(10.5) | N/M |

The decrease in investment income in the three months ended March 31, 2016, compared with the same period in 2015, was driven primarily by unfavorable currency impact and a decrease in customer financing in Brazil. Interest expense was higher than the prior year period due to the premiums associated with providing notice of the prepayment of $50.0 aggregate principal amount of the Company's senior notes. The foreign exchange (loss) gain, net for the three months ended March 31, 2015 included $7.5 related to the devaluation of Venezuela currency. Miscellaneous, net in the three months ended March 31, 2016 included a mark-to-market gain of $36.5 associated with the Company's foreign exchange option contracts entered into on November 23, 2015.

#### Income (Loss) From Continuing Operations, Net of Tax

The following table represents information regarding our income (loss) from continuing operations, net of tax:

|  | Three Months Ended March 31, 2016 | 2015 | % Change |
| --- | ---: | ---: | --- |
| Income (loss) from continuing operations, net of tax | $20.7 | $(10.1) | N/M |
| Percent of net sales | 4.1% | (1.8)% |  |
| Effective tax rate | (4.0)% | 25.2% |  |

Income (loss) from continuing operations, net of tax increased as a result of income derived from the Company's gain on foreign currency option contracts and was partially offset by a decrease in operating profit.

The significant decrease in the effective tax rate for the three months ended March 31, 2016 compared to the same period in 2015 is primarily attributable to the nontaxable $36.5 mark-to-market gain on foreign currency option contracts related to the Acquisition and the decrease in the deferred tax liability associated with the Company's undistributed foreign subsidiary earnings. This decrease was offset by discrete tax benefits that were recorded in the three months ended March 31, 2015, which benefits were primarily related to the Venezuela divestiture and the release of a valuation allowance.

#### Income From Discontinued Operations, Net of Tax

Income from discontinued operations, net of tax was $147.8 and $4.5 for the three months ended March 31, 2016 and 2015, respectively. The closing of the NA electronic security divestiture occurred on February 1, 2016 and the Company recorded a gain on sale, net of tax, of $149.1 in the first quarter of 2016. The closing purchase price is subject to a customary working capital adjustment which is expected to be finalized in the second quarter of 2016. Additionally, the income from discontinued operations, net of tax includes a loss of $1.3 as a result of the operations included through February 1, 2016 and income of $4.5 for the three months ended March 31, 2015.

#### Net Income (Loss)

Net income (loss) increased $174.1 to income of $168.5 for the three months ended March 31, 2016, compared to a loss of $5.6 for the same period in 2015, due to the reasons described above.

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### Segment Revenue and Operating Profit Summary

The following tables represent information regarding our revenue and operating profit by reporting segment:

| North America | Three Months Ended March 31, 2016 | 2015 | % Change |
| --- | ---: | ---: | ---: |
| Revenue | $251.7 | $259.2 | (2.9) |
| Segment operating profit | $53.4 | $61.1 | (12.6) |
| Segment operating profit margin | 21.2% | 23.6% |  |

NA revenue in the three months ended March 31, 2016 decreased compared to the prior year period primarily due to lower product revenue in the U.S. regional and Canadian FSS businesses as well as lower revenue from physical security. These decreases were partially offset by higher service revenue in the U.S. as a result of increased multi-vendor service contracts and the benefit of the Phoenix acquisition. Segment operating profit decreased in the first quarter of 2016 due to lower product volume and unfavorable customer and product solution mix in the U.S., which adversely impacted gross profit, in addition to incremental amortization expense.

| Asia Pacific | Three Months Ended March 31, 2016 | 2015 | % Change |
| --- | ---: | ---: | ---: |
| Revenue | $80.5 | $110.5 | (27.1) |
| Segment operating profit | $8.7 | $18.2 | (52.2) |
| Segment operating profit margin | 10.8% | 16.5% |  |

AP revenue in the three months ended March 31, 2016 decreased from the prior year comparable period mainly as a result of a decline in product revenue stemming from lower volume particularly in China, where the government continues to encourage banks to increase their use of domestic ATM suppliers. Revenue for the three months ended March 31, 2016 was also adversely impacted by unfavorable currency of $6.8. Segment operating profit in the three months ended March 31, 2016 compared to the same period of 2015 decreased from a combination of lower product gross margin and lower service gross profit related to liquidated damages in India partially offset by favorable operating expense.

| Europe, Middle East and Africa | Three Months Ended March 31, 2016 | 2015 | % Change |
| --- | ---: | ---: | ---: |
| Revenue | $85.6 | $86.8 | (1.4) |
| Segment operating profit | $10.4 | $12.4 | (16.1) |
| Segment operating profit margin | 12.1% | 14.3% |  |

EMEA revenue in the three months ended March 31, 2016 decreased slightly compared to the prior year period due to unfavorable currency impact of $5.5, offset by an increase of $4.3 in the three months ended March 31, 2016 compared to the same period in 2015 that was primarily driven by higher product volume mainly in Switzerland and partially offset by overall lower product volume in the UK, primarily due to the cyclical nature of its project activity. Segment operating profit declined mainly due to the product revenue mix across the region and unfavorable currency impact from higher cost of imports.

| Latin America | Three Months Ended March 31, 2016 | 2015 | % Change |
| --- | ---: | ---: | ---: |
| Revenue | $91.8 | $118.3 | (22.4) |
| Segment operating profit | $7.0 | $3.1 | N/M |
| Segment operating profit margin | 7.6% | 2.6% |  |

LA revenue decreased in the three months ended March 31, 2016 compared to the same period of 2015 due to unfavorable currency impact of $17.5 and market-specific economic and political factors in Brazil affecting the purchasing environment thereby driving

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lower volume. Segment operating profit in the three months ended March 31, 2016 increased mainly due to lower operating expense in LA related to cost reduction actions.

Refer to note 18 to the condensed consolidated financial statements for further details of segment revenue and operating profit.

### Liquidity and Capital Resources

The Company's total cash and cash availability as of March 31, 2016 and December 31, 2015 was as follows:

|  | March 31, 2016 | December 31, 2015 |
| --- | ---: | ---: |
| Cash and cash equivalents | $304.6 | $313.6 |
| Additional cash availability from |  |  |
| Short-term uncommitted lines of credit | 68.8 | 69.0 |
| Revolving credit facility | 298.9 | 352.0 |
| Restricted cash | 116.1 | — |
| Short-term investments | 49.7 | 39.9 |
| Total cash and cash availability | $838.1 | $774.5 |

Capital resources are obtained from income retained in the business, borrowings under the Company’s senior notes, committed and uncommitted credit facilities and operating and capital leasing arrangements. Management expects that the Company’s capital resources will be sufficient to finance planned working capital needs, research and development activities, investments in facilities or equipment, pension contributions, the payment of dividends on the Company’s common shares and any repurchases of the Company’s common shares for at least the next 12 months. As of March 31, 2016, $341.1 or 96.3 percent of the Company's unrestricted cash and cash equivalents and short-term investments reside in international tax jurisdictions. Repatriation of these funds could be negatively impacted by potential payments for foreign and domestic taxes. The Company has $145.8 that is available for repatriation with no additional tax expense as the Company has already provided for such taxes. Part of the Company’s growth strategy is to pursue acquisitions complementary to the Company's future structure. The Company has made acquisitions in the past and intends to make acquisitions in the future. The Company intends to finance any future acquisitions with either cash and short-term investments, cash provided from operations, borrowings under available credit facilities, proceeds from debt or equity offerings and/or the issuance of common shares. The Company has successfully obtained commitments for the appropriate financing for the Acquisition with the revolver and term loan A under the Credit Agreement and the Notes. It is anticipated that the term loan B under the amended credit agreement will be complete during the second quarter of 2016.

The following table summarizes the results of our condensed consolidated statement of cash flows for the three months ended March 31:

| Net cash flow (used) provided by: | 2016 | 2015 |
| --- | ---: | ---: |
| Operating activities - continuing operations | $(109.9) | $(64.6) |
| Investing activities - continuing operations | (13.8) | (69.8) |
| Financing activities - continuing operations | (247.0) | 52.2 |
| Discontinued operations, net | 359.8 | 2.1 |
| Effect of exchange rate changes on cash and cash equivalents | 3.4 | (14.8) |
| Net decrease in cash and cash equivalents | $(7.5) | $(94.9) |

### Operating Activities

Cash flows from operating activities can fluctuate significantly from period to period as working capital needs and the timing of payments for income taxes, restructuring activities, pension funding and other items impact reported cash flows.

Net cash used in operating activities was $109.9 for the three months ended March 31, 2016, an increase of $45.3 from $64.6 for the same period in 2015.

- The aggregate of trade accounts receivable, inventories and accounts payable used $105.8 in operating cash flows during the three months ended March 31, 2016, compared to $107.3 used in the same period of 2015. In general, the amount of

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cash flow provided or used by the aggregate of trade accounts receivable, inventories and trade accounts payable depends upon how effectively the Company manages the cash conversion cycle, which represents the number of days that elapse from the day it pays for the purchase of raw materials and components to the collection of cash from its customers and can be significantly impacted by the timing of collections and payments in a period. The change in accounts receivable is lower due to a decrease from invoicing primarily from lower sales at the end of the quarter compared to the prior year period. Accounts payable decreased due to higher payments primarily in NA related to deal costs meanwhile inventory was relatively consistent year over year.

- The aggregate of the other certain assets and liabilities used $9.3 of operating cash during the three months ended March 31, 2016, compared to $5.4 provided in the same period of 2015. The decrease is primarily due to a reduction in deferred revenue due to lower collection in advance payments offset by a reduction in advance payments for purchases and collection of notes receivable in China.
- Net income for the three months ended March 31, 2016 increased $174.1, which is primarily attributable to the gain from the NA electronic security business divestiture. Net income (loss) from continuing operations, net of tax, increased $30.8 primarily due to the gain on foreign currency option contracts in the first quarter of 2016.

On November 23, 2015, the Company entered into foreign currency option contracts to purchase €1,416.0 for $1,547.1 to hedge against the effect of exchange rate fluctuations on the euro denominated cash consideration related to the Acquisition and estimated euro denominated deal related costs and any outstanding Wincor Nixdorf borrowings. The cash component of the purchase price consideration approximates €1,162,200,000.0. The weighted average strike price is $1.09 per euro. These foreign currency option contracts are non-designated and are included in other current assets or other current liabilities based on the net asset or net liability position, respectively, in our consolidated balance sheets. The arrangement will net settle with an additional maximum payout of $60,000,000.0, which relates to a delayed premium due at maturity of the contracts in November 2016. During the three months ended March 31, 2016, the Company recorded a $36.5 mark-to-market gain on foreign currency option contracts reflected in miscellaneous, net. The foreign currency option contracts were $43.5 and $7.0 as of March 31, 2016 and December 31, 2015, respectively, and are included in other current assets. As of April 25, 2016, the fair value of the foreign currency option contracts was $27.6.

### Investing Activities

Net cash used in investing activities was $13.8 for the three months ended March 31, 2016 compared to net cash used by investing activities of $69.8 for the same period in 2015. The $56.0 change was primarily related to the acquisition of Phoenix in March 2015 for a cash payment of $59.4 less cash acquired.

### Financing Activities

Net cash used by financing activities was $247.0 for the three months ended March 31, 2016 compared to net cash provided by financing activities of $52.2 for the same period in 2015. The change was primarily due to a period over period decrease of $181.0 in debt borrowings, net of repayments, primarily related to the repayment of $175.0 aggregate principal amount of the Company's senior notes that matured in March 2016 and the $116.1 deposit of restricted cash pursuant to the terms of the Credit Agreement.

The cash provided by the discontinued operations, net, includes the cash provided by the operations of the NA electronic security business. In the first quarter of 2016, discontinued operations, net, primarily related to the $365.2 proceeds received for the NA electronic security business divestiture that includes a preliminary working capital adjustment which is expected to be finalized in the second quarter of 2016.

Effect of exchange rate changes on cash and cash equivalents was negatively impacted by $9.5 related to the currency devaluation in Venezuela for the three months ended March 31, 2015.

**Debt** As of March 31, 2016, the Company had various international short-term uncommitted lines of credit with borrowing limits of $109.0. The weighted-average interest rate on outstanding borrowings on the short-term uncommitted lines of credit as of March 31, 2016 and December 31, 2015 was 3.78 percent and 5.66 percent, respectively. Short-term uncommitted lines mature in less than one year. The amount available under the short-term uncommitted lines at March 31, 2016 was $68.8.

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The Company entered into a revolving and term loan credit agreement (the Credit Agreement), dated as of November 23, 2015, among the Company and certain of the Company's subsidiaries, as borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders named therein. The Credit Agreement included, among other things, mechanics for the Company’s existing revolving and term loan A facilities to be refinanced under the Credit Agreement. On December 23, 2015, the Company entered into a Replacement Facilities Effective Date Amendment among the Company, certain of the Company’s subsidiaries, the lenders identified therein and JPMorgan Chase Bank, N.A., as Administrative Agent, pursuant to which the Company is refinancing its existing $520.0 revolving and $230.0 term loan A senior unsecured credit facilities (which have been terminated and repaid in full) with, respectively, a new unsecured revolving facility (the Revolving Facility) in an amount of up to $520.0 and a new (non-delayed draw) unsecured term loan A facility (the Term A Facility) on substantially the same terms as the Delayed Draw Term Facility (as defined in the Credit Agreement) in the amount of up to $230.0. The Delayed Draw Term Facility of $250.0 may be drawn up to one year after the closing date of the Acquisition. The Revolving Facility and Term A Facility will be subject to the same maximum consolidated net leverage ratio and minimum consolidated interest coverage ratio as the Delayed Draw Term Facility. On December 23, 2020, the Term A Facility will mature and the Revolving Facility automatically terminate. The weighted-average interest rate on outstanding revolving credit facility borrowings as of March 31, 2016 and December 31, 2015 was 2.30 percent and 2.33 percent, respectively, which is variable based on the LIBOR. The amount available under the revolving credit facility as of March 31, 2016 was $298.9.

On April 19, 2016, the Company issued $400.0 aggregate principal amount of the Notes in an offering exempt from the registration requirements of the Securities Act of 1933 in connection with the Acquisition. The Notes are and will be guaranteed by certain of the Company’s existing and future domestic subsidiaries. The Company incurred $0.8 of fees in the three months ended March 31, 2016 related to the offering of the Notes, which are amortized as a component of interest expense over the term of the Notes. If the Acquisition has not closed by November 21, 2016, the Company will be required to redeem the Notes in whole at a redemption price equal to 100% of the aggregate principal amount of the Notes, plus accrued and unpaid interest on the Notes to, but excluding, the redemption date.

In addition, in April 2016, allocation and pricing of the Term Loan B facility provided under the Credit Agreement (which Term Loan B facility is intended to provide part of the financing for the Acquisition) was completed. The Company expects as a result that the Term Loan B facility will, at funding thereof, consist of a $1,000.0 U.S. dollar-denominated tranche that will bear interest at LIBOR plus an applicable margin of 4.50 percent (or, at the Company’s option, prime plus an applicable margin of 3.50 percent), and a €350.0 euro-denominated tranche that will bear interest at EURIBOR plus an applicable margin of 4.25 percent, and to enter into an amendment to the Credit Agreement in respect of the foregoing within 31 days of the pricing of the Term Loan B facility. Each tranche is expected to be funded during the second quarter of 2016 at 99 percent of par.

Below is a summary of anticipated financing and replacement facilities information, upon closing of the Acquisition and first compliance certificate:

| Anticipated Financing and Replacement Facilities | Interest Rate Index and Margin | Maturity/Termination Dates | Term (Years) |
| --- | --- | --- | ---: |
| Revolving Facility | LIBOR + 2.00% | December 2020 | 5 |
| Term Loan A Facility | LIBOR + 2.00% | December 2020 | 5 |
| Delayed Draw Term Loan A | LIBOR + 2.00% | December 2020 | 5 |
| Term Loan B Facility ($1,000.0) | LIBOR(i) + 4.50% | November 2023 | 7.5 |
| Term Loan B Facility (€350.0) | EURIBOR(ii) + 4.25% | November 2023 | 7.5 |
| Senior Notes due 2024 | 8.5% | April 2024 | 8 |

(i) LIBOR with a floor of 0.75%.

(ii) EURIBOR with a floor of 0.75%.

In March 2006, the Company issued senior notes in an aggregate principal amount of $300.0 with a weighted-average fixed interest rate of 5.50 percent. The Company entered into a derivative transaction to hedge interest rate risk on $200.0 of the senior notes, which was treated as a cash flow hedge. This reduced the effective interest rate from 5.50 percent to 5.36 percent. The Company funded the repayment of $75.0 aggregate principal amount of the senior notes at maturity in March 2013 using borrowings under its revolving credit facility and the repayment of $175.0 aggregate principal amount of the Company's senior notes that matured in March 2016 through the use of proceeds from the divestiture of the Company's NA electronic security business. As of March 31, 2016, the remaining $50.0 aggregate principal amount senior notes due 2018 were reclassified to notes payable from long-

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term debt because the Company sent a prepayment notice informing the holders of the senior notes the Company's intent to prepay the senior notes in full on May 2, 2016. The notice included an estimated make-whole premium of $3.9 to be paid in addition to the principal and interest of the senior notes and is included in interest expense for the three months ended March 31, 2016.

The Company’s financing agreements contain various restrictive financial covenants, including net debt to capitalization, net debt to EBITDA and net interest coverage ratios. As of March 31, 2016, the Company was in compliance with the financial and other covenants in its debt agreements.

**Restricted Cash** As of March 31, 2016, the Company had $116.1 in restricted cash to be used for paying off existing debt and related interest, as well as any deal costs pursuant to the terms of the Credit Agreement. The carrying value of restricted cash approximates its fair value and is included in cash flows from financing activities. Restricted cash consists of the domestic net proceeds from the NA electronic security divestiture offset by the $175.0 payment of the senior notes during the first quarter of 2016. Restricted cash is expected to be fully utilized by December 31, 2016.

**Dividends** The Company paid dividends of $18.8 and $18.9 in the three months ended March 31, 2016 and 2015, respectively. Quarterly dividends were $0.2875 per share for both periods. The Company announced during the fourth quarter of 2015 its intention to pay a dividend at a rate less than the Company's current annual dividend rate following the close of the Acquisition.

**Contractual Obligations** In the first three months of 2015, the Company entered into purchase commitments due within one year for materials through contract manufacturing agreements for a total negotiated price. At March 31, 2016, the Company had purchase commitments due within one year totaling $7.5 for materials through contract manufacturing agreements at negotiated prices.

Except for the items noted above, all contractual cash obligations with initial and remaining terms in excess of one year and contingent liabilities remained generally unchanged at March 31, 2016 compared to December 31, 2015.

**Off-Balance Sheet Arrangements** The Company enters into various arrangements not recognized in the condensed consolidated balance sheets that have or could have an effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources. The principal off-balance sheet arrangements that the Company enters into are guarantees, operating leases and sales of finance receivables. The Company provides its global operations guarantees and standby letters of credit through various financial institutions to suppliers, regulatory agencies and insurance providers. If the Company is not able to make payment, the suppliers, regulatory agencies and insurance providers may draw on the pertinent bank. Refer to note 13 to the condensed consolidated financial statements for further details of guarantees. The Company has sold finance receivables to financial institutions while continuing to service the receivables. The Company records these sales by removing finance receivables from the condensed consolidated balance sheets and recording gains and losses in the condensed consolidated statements of operations.

### Critical Accounting Policies and Estimates

Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s condensed consolidated financial statements. The preparation of these financial statements requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. Such estimates include revenue recognition, the valuation of trade, finance lease receivables, inventories, goodwill, intangible assets, other long-lived assets, legal contingencies, guarantee obligations and assumptions used in the calculation of income taxes, pension and post-retirement benefits and customer incentives, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors. Management monitors the economic conditions and other factors and will adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

Management believes there have been no significant changes during the three months ended March 31, 2016 to the items that the Company disclosed as its critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

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### Forward-Looking Statement Disclosure

In this Quarterly Report on Form 10-Q, statements that are not reported financial results or other historical information are “forward-looking statements.” Forward-looking statements give current expectations or forecasts of future events and are not guarantees of future performance. These forward-looking statements relate to, among other things, the Company's future operating performance, the Company's share of new and existing markets, the Company's short- and long-term revenue and earnings growth rates, and the Company's implementation of cost-reduction initiatives and measures to improve pricing, including the optimization of the Company's manufacturing capacity.

The use of the words “will,” “believes,” “anticipates,” “expects,” “intends” and similar expressions is intended to identify forward-looking statements that have been made and may in the future be made by or on behalf of the Company. Although the Company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, the economy, its knowledge of its business, and on key performance indicators that impact the Company, these forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in or implied by the forward-looking statements. The Company is not obligated to update forward-looking statements, whether as a result of new information, future events or otherwise.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Some of the risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements include, but are not limited to:

- the Company's ability to successfully consummate the Acquisition, including satisfying closing conditions;
- the ultimate outcome and results of integrating the operations of the Company and Wincor Nixdorf, the ultimate outcome of the Company’s pricing and operating strategy applied to Wincor Nixdorf and the ultimate ability to realize synergies;
- the Company's ability to successfully consummate its transaction with the Inspur Group;
- the success of the Company's strategic business alliance with Securitas AB;
- the Company's ability to reduce stranded costs related to its NA electronic security business from its ongoing operations;
- competitive pressures, including pricing pressures and technological developments;
- changes in the Company's relationships with customers, suppliers, distributors and/or partners in its business ventures;
- changes in political, economic or other factors such as currency exchange rates, inflation rates, recessionary or expansive trends, taxes and regulations and laws affecting the worldwide business in each of the Company's operations;
- global economic conditions, including any additional deterioration and disruptions in the financial markets, including bankruptcies, restructurings or consolidations of financial institutions or otherwise, which could reduce our customer base and/or adversely affect our customers’ ability to make capital expenditures, as well as adversely impact the availability and cost of credit;
- acceptance of the Company's product and technology introductions in the marketplace;
- the Company’s ability to maintain effective internal controls over financial reporting;
- changes in the Company’s intention to further repatriate cash and cash equivalents and short-term investments residing in international tax jurisdictions could negatively impact foreign and domestic taxes;
- unanticipated litigation, claims or assessments, as well as the outcome/impact of any current/pending litigation, claims or assessments;
- variations in consumer demand for FSS technologies, products and services;
- potential disruptions, breaches or other violations of the Company's information technology systems;
- the investment performance of the Company’s pension plan assets, which could require the Company to increase its pension contributions, and significant changes in healthcare costs, including those that may result from government action;
- the amount and timing of repurchases of the Company’s common shares, if any; and
- the Company's ability to achieve benefits from its cost-reduction initiatives and other strategic changes as well as its business process outsourcing initiative.

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## Market risk

As filed, 1,012 characters.

On November 23, 2015, the Company entered into foreign currency option contracts to purchase €1,416.0 for $1,547.1 to hedge against the effect of exchange rate fluctuations on the euro denominated cash consideration related to the Acquisition and provide cash for working capital. The cash component of the purchase price consideration approximates €1,162.2. The weighted average strike price is $1.09 per euro. These foreign currency option contracts are non-designated and included in other current assets or other current liabilities based on the net asset or net liability position, respectively. Changes in foreign exchange rates between the U.S dollar and euro can create substantial gains and losses from the revaluation of the derivative instrument.

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 for a discussion of market risk exposures. There have been no material changes in this information since December 31, 2015.

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## Controls and procedures

As filed, 2,391 characters.

This Quarterly Report includes the certifications of our chief executive officer (CEO) and chief financial officer (CFO) required by Rule 13a-14 of the Securities Exchange Act of 1934 (the Exchange Act). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Based on the performance of procedures by management, designed to ensure the reliability of financial reporting, management believes that the unaudited condensed consolidated financial statements fairly present, in all material respects, the Company's financial position, results of operations and cash flows as of the dates, and for the periods presented.

### Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to management, including the CEO and CFO as appropriate, to allow timely decisions regarding required disclosures.

In connection with the preparation of this Quarterly Report, the Company's management, under the supervision and with the participation of the CEO and CFO, conducted an evaluation of disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the CEO and CFO have concluded that such disclosure controls and procedures were effective as of March 31, 2016.

### Change in Internal Controls

We continued a phased implementation of enterprise resource planning systems in our North America and Latin America operations, the majority of which was completed during 2015 and the balance expected to be completed during 2016. We believe we are maintaining and monitoring appropriate internal controls during the implementation period. During the quarter ended March 31, 2016, there have been no other changes in our internal control over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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## Risk factors

As filed, 166 characters.

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. There has been no material change to this information since December 31, 2015.

Filed Apr 28, 2016.
Source: SEC EDGAR, the filing index for accession 0000028823-16-000195. Last ingested by Listed: Oct 28, 2026, 07:18 ET. No prices; not investment advice.