DGAP-CMS: Diebold, Inc.: Release according to Article 30e of the WpHG [the German Securities Trading Act] with the objective of Europe-wide distribution


Diebold, Inc.  / Third country release according to Article 30e Para. 1, No. 3
of the WpHG [the German Securities Trading Act] 

24.09.2016 00:16

Dissemination of a Post-admission Duties announcement according to Article 30e
Para. 1 No. 3 WpHG, transmitted by 
DGAP - a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
---------------------------------------------------------------------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):  September 23, 2016 
Diebold, Incorporated
 
(Exact name of registrant as specified in its charter)
 
         
         
         
Ohio   1-4879   34-0183970
         
(State or other jurisdiction
 
of incorporation)   (Commission
 
File Number)   (I.R.S. Employer
 
Identification No.)
         
5995 Mayfair Road, P.O. Box 3077,
 
North Canton, Ohio       44720-8077
         
(Address of principal executive offices)       (Zip Code)
Registrant's telephone number, including area code: (330) 490-4000
Not Applicable
 
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
      Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
      Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
      Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
      Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 




 




 
     
     
Item 8.01 Other Events  

As previously disclosed on April 19, 2016, Diebold, Incorporated (the
'Company'), issued $400 million aggregate principal amount of 8.5% Senior
Notes due 2024 (the 'Notes') pursuant to the terms of an indenture (the
'Indenture') among the Company, the guarantors party thereto (the
'Guarantors') and U.S. Bank National Association, as trustee (the
'Trustee'). The Notes were sold in a private transaction exempt from the
registration requirements of the Securities Act of 1933 (the 'Securities
Act').

In connection with the issuance of the Notes, the Company entered into a
registration rights agreement dated April 19, 2016 (the 'Registration
Rights Agreement') among the Company, the Guarantors and the initial
purchasers of the Notes. Under the Registration Rights Agreement, Diebold
and the Guarantors agreed, for the benefit of the holders of the Notes,
that they would (1) file a registration statement (the 'Exchange Offer
Registration Statement') on an appropriate registration form with respect
to a registered offer to exchange the Notes for notes registered under the
Securities Act (the 'Exchange Notes'), which shall also be guaranteed by
the Guarantors, with terms substantially identical in all material respects
to the Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions or any increase in annual interest rate)
and (2) use their commercially reasonable efforts to cause the Exchange
Offer Registration Statement to be declared effective under the Securities
Act.

Each of the material domestic direct and indirect wholly-owned subsidiaries
of the Company (the 'Guarantor Subsidiaries') has fully and unconditionally
guaranteed, on a joint and several basis, to pay principal, premium and
interest with respect to the Notes. Each of the Guarantor Subsidiaries is
'100% owned' as defined by Rule 3-10(h)(1) of Regulation S-X.

In connection with the filing of the Exchange Offer Registration Statement,
the audited consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2015 (the
'Original Annual Report') are being updated to provide the following
condensed consolidating financial statements:
   
* condensed consolidating balance sheets as of December 31, 2015 and 2014;
   
* condensed consolidating statements of operations and comprehensive income
(loss) for the years ended December 31, 2015, 2014 and 2013; and
   
* condensed consolidating statements of cash flows for the years ended
December 31, 2015, 2014 and 2013.

In addition, during the first quarter of 2016, the Company adopted the
Accounting Standards Update No. 2015-03, 'Interest - Imputation of Interest
(Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs'
('ASU 2015-03'), and Accounting Standards Update No. 2015-15,
'Interest-Imputation of Interest: Presentation and Subsequent Measurement
of Debt Issuance Costs Associated with Line-of-Credit Arrangements
Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18,
2015 EITF Meeting' ('ASU 2015-15'). The Company applied these changes
retrospectively to all periods presented in the Form 10-K. ASU 2015-03
simplifies the presentation of debt issuance costs by requiring debt
issuance costs to be presented as a deduction from the corresponding debt
liability rather than an asset.

Attached as Exhibit 99.1 to this Current Report are restated versions of
Items 6 and 15 and the consolidated financial statements within Item 8 of
the Original Annual Report, which reflects changes associated with the
presentation of the condensed consolidating financial statements and
adoption of ASU 2015-03 and ASU 2015-15, discussed above.

The following within the consolidated financial statements in Item 8:
Financial Statements and Supplementary Data of the Original Annual Report
have been added to or retrospectively adjusted from the previous
presentation:
   
* Consolidated Balance Sheets
   
* Note 1: Summary Of Significant Accounting Policies
   
* Note 12: Debt
   
* Note 19: Fair Value Of Assets and Liabilities
   
* Note 23: Supplemental Guarantor Information

The adoption of these new accounting pronouncements had no material effect
on the Company's historical consolidated financial condition for any of the
respective periods.





 



Except as specifically noted herein and in the attached exhibits, this
Current Report does not reflect events or developments that occurred after
February 29, 2016, the date on which the Company filed the Original Annual
Report with the SEC, and does not modify or update the disclosures in any
way other than as described above and set forth in the exhibits hereto.
Without limiting the foregoing, this filing does not purport to update or
amend the information contained in the Original Annual Report for any
information, uncertainties, transactions, risks, events or trends occurring
or known to management. More current information is contained in the
Company's Quarterly Reports on Form 10-Q for the periods ended March 31,
2016 and June 30, 2016 and other filings with the SEC. The information in
this Current Report should be read in conjunction with the Original Annual
Report. Revisions to the Original Annual Report included in this Current
Report as noted above supersede the corresponding portions of the Original
Annual Report.

 
     
     
Item 9.01 Financial Statements and Exhibits    

 
         
  (d) Exhibits.    
     
Exhibit
Number   Description
23.1   Consent of Independent Registered Public Accounting Firm
99.1   Updates to our Original Annual Report on Form 10-K for the year
ended December 31, 2015
Part II. Item 6. Selected Financial Data
Part II. Item 8. Financial Statements and Supplementary Data
Part IV. Item 15. Exhibits and Financial Statement Schedules
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 




 




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
 
         
         
    Diebold, Incorporated  
September 23, 2016 By:   /s/ Christopher A. Chapman  
    Name:   Christopher A. Chapman  
    Title:   Senior Vice President and Chief Financial Officer  
 
 
 




 




EXHIBIT INDEX
 
         
Exhibit
Number   Description    
23.1   Consent of Independent Registered Public Accounting Firm
99.1   Updates to our Original Annual Report on Form 10-K for the year
ended December 31, 2015
Part II. Item 6. Selected Financial Data
Part II. Item 8. Financial Statements and Supplementary Data
Part IV. Item 15. Exhibits and Financial Statement Schedules
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document
 


 



Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Diebold, Incorporated:

We consent to the incorporation by reference in the registration statement
(Nos. 33-32960, 33-39988, 33-55452, 33-54677, 33-54675, 333-32187,
333-60578, 333-162036, 333-162037, 333-162049, 333-190626, 333-193713, and
333‑199738) on Form S-8 of Diebold, Incorporated and subsidiaries of our
report dated February 29, 2016, except as to Note 23, which is as of
September 23, 2016, with respect to the consolidated balance sheets of
Diebold, Incorporated and subsidiaries as of December 31, 2015 and 2014,
and the related consolidated statements of operations, comprehensive loss,
equity, and cash flows for each of the years in the three-year period ended
December 31, 2015, and the related financial statement schedule, which
report appears in the current report on Form 8-K of Diebold, Incorporated
dated September 23, 2016.


/s/  KPMG LLP

Cleveland, Ohio
September 23, 2016


 



Exhibit 99.1
PART II

ITEM 6: SELECTED FINANCIAL DATA

The following table should be read in conjunction with 'Part II - Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations' and 'Part II - Item 8 - Financial Statements and Supplementary
Data' of this Form 10-K.
 
                                       
  Year Ended December 31,
  2015   2014   2013   2012   2011
  (in millions, except per share data)
Results of operations             (unaudited)   (unaudited)
Net sales $ 2,419.3 
    $ 2,734.8 
    $ 2,582.7 
    $ 2,724.3 
    $ 2,577.4 
 
Cost of sales 1,767.3 
    2,008.6 
    1,996.7 
    2,044.1 
    1,862.4 
 
Gross profit $ 652.0 
    $ 726.2 
    $ 586.0 
    $ 680.2 
    $ 715.0 
 
                   
Amounts attributable to Diebold, Incorporated                  
Income (loss) from continuing operations, net of tax $ 57.8 
    $ 104.7 
    $ (195.3 )   $ 62.6 
    $ 151.8 
 
Income (loss) from discontinued operations, net of tax 15.9 
    9.7 
    13.7 
    11.0 
    (7.6 )
Net income (loss) attributable to Diebold, Incorporated $ 73.7 
    $ 114.4 
    $ (181.6 )   $ 73.6 
    $ 144.2 
 
                   
Basic earnings (loss) per common share                  
Income (loss) from continuing operations, net of tax $ 0.89 
    $ 1.62 
    $ (3.06 )   $ 1.00 
    $ 2.36 
 
Income (loss) from discontinued operations, net of tax 0.24 
    0.15 
    0.21 
    $ 0.17 
    (0.12 )
Net income (loss) attributable to Diebold, Incorporated $ 1.13 
    $ 1.77 
    $ (2.85 )   $ 1.17 
    $ 2.24 
 
                   
Diluted earnings (loss) per common share                  
Income (loss) from continuing operations, net of tax $ 0.88 
    $ 1.61 
    $ (3.06 )   $ 0.98 
    $ 2.35 
 
Income (loss) from discontinued operations, net of tax 0.24 
    0.15 
    0.21 
    $ 0.17 
    $ (0.12 )
Net income (loss) attributable to Diebold, Incorporated $ 1.12 
    $ 1.76 
    $ (2.85 )   $ 1.15 
    $ 2.23 
 
                   
Number of weighted-average shares outstanding                  
Basic shares 64.9 
    64.5 
    63.7 
    63.1 
    64.2 
 
Diluted shares 65.6 
    65.2 
    63.7 
    63.9 
    64.8 
 
                   
Dividends                  
Common dividends paid $ 75.6 
    $ 74.9 
    $ 74.0 
    $ 72.8 
    $ 72.9 
 
Common dividends paid per share $ 1.15 
    $ 1.15 
    $ 1.15 
    $ 1.14 
    $ 1.12 
 
                   
Consolidated balance sheet data (as of period end)         (unaudited)  
(unaudited)   (unaudited)
Current assets $ 1,643.6 
    $ 1,655.5 
    $ 1,555.4 
    $ 1,814.9 
    $ 1,732.3 
 
Current liabilities $ 955.8 
    $ 1,027.8 
    $ 893.8 
    $ 838.8 
    $ 837.9 
 
Net working capital $ 687.8 
    $ 627.7 
    $ 661.6 
    $ 976.1 
    $ 894.4 
 
Property, plant and equipment, net $ 175.3 
    $ 165.7 
    $ 160.9 
    $ 184.3 
    $ 192.7 
 
Total long-term liabilities $ 851.1 
    $ 757.0 
    $ 668.9 
    $ 908.8 
    $ 834.9 
 
Total assets $ 2,242.4 
    $ 2,339.6 
    $ 2,183.5 
    $ 2,592.9 
    $ 2,517.4 
 
Total equity $ 435.5 
    $ 554.8 
    $ 620.8 
    $ 845.3 
    $ 844.6 
 



1



 



ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
     
FINANCIAL STATEMENTS
     
  Reports of Independent Registered Public Accounting Firm
3

     
  Consolidated Balance Sheets as of December 31, 2015 and 2014
4

     
  Consolidated Statements of Operations for the years ended December 31,
2015, 2014 and 2013
5

     
  Consolidated Statements of Comprehensive Loss for the years ended
December 31, 2015, 2014 and 2013
6

     
  Consolidated Statements of Equity for the years ended December 31, 2015,
2014 and 2013
7

     
  Consolidated Statements of Cash Flows for the years ended December 31,
2015, 2014 and 2013
8

     
  Notes to Consolidated Financial Statements
10




2



 



Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Diebold, Incorporated:

We have audited the accompanying consolidated balance sheets of Diebold,
Incorporated and subsidiaries as of December 31, 2015 and 2014, and the
related consolidated statements of operations, comprehensive loss, equity,
and cash flows for each of the years in the three‑year period ended
December 31, 2015. In connection with our audits of the consolidated
financial statements, we also have audited financial statement schedule,
Schedule II 'Valuation and Qualifying Accounts.' These consolidated
financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Diebold, Incorporated and subsidiaries as of December 31, 2015 and 2014,
and the results of their operations and their cash flows for each of the
years in the three‑year period ended December 31, 2015, in conformity with
U.S. generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), Diebold, Incorporated's
internal control over financial reporting as of December 31, 2015, based on
criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated February 29, 2016, expressed an
unqualified opinion on the effectiveness of the Company's internal control
over financial reporting.


/s/ KPMG LLP

Cleveland, Ohio
February 29, 2016, except as to Note 23,
which is as of September 23, 2016



3



 
Table of Contents
DIEBOLD, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions)

 
               
  December 31,
  2015   2014
ASSETS      
Current assets      
Cash and cash equivalents $ 313.6 
    $ 326.1 
 
Short-term investments 39.9 
    136.7 
 
Trade receivables, less allowances for doubtful accounts of $31.7 and
$20.9, respectively 413.9
    403.3 
 
Inventories 369.3 
    374.7 
 
Deferred income taxes 168.8 
    111.0 
 
Prepaid expenses 23.6 
    21.2 
 
Refundable income taxes 18.0 
    11.7 
 
Current assets held for sale 148.2 
    106.2 
 
Other current assets 148.3 
    164.6 
 
Total current assets 1,643.6 
    1,655.5 
 
Securities and other investments 85.2 
    83.6 
 
Property, plant and equipment, net 175.3 
    165.7 
 
Goodwill 161.5 
    138.1 
 
Deferred income taxes 65.3 
    86.5 
 
Finance lease receivables 36.5 
    90.4 
 
Other assets 75.0 
    119.8 
 
Total assets $ 2,242.4 
    $ 2,339.6 
 
       
LIABILITIES AND EQUITY      
Current liabilities      
Notes payable $ 32.0 
    $ 25.6 
 
Accounts payable 281.7 
    248.6 
 
Deferred revenue 229.2 
    260.8 
 
Payroll and other benefits liabilities 76.5 
    109.4 
 
Current liabilities held for sale 49.4 
    39.1 
 
Other current liabilities 287.0 
    344.3 
 
Total current liabilities 955.8 
    1,027.8 
 
Long-term debt 606.2 
    477.3 
 
Pensions and other benefits 195.6 
    211.0 
 
Post-retirement and other benefits 18.7 
    20.8 
 
Deferred income taxes 1.9 
    6.5 
 
Other liabilities 28.7 
    41.4 
 
Commitments and contingencies 
  
    
  
 
Equity      
Diebold, Incorporated shareholders' equity      
Preferred shares, no par value, 1,000,000 authorized shares, none issued - 
    - 
 
Common shares, $1.25 par value, 125,000,000 authorized shares, 79,696,694
and 79,238,759 issued shares, 65,001,602 and 64,632,400 outstanding shares,
respectively 99.6
    99.0 
 
Additional capital 430.8 
    418.0 
 
Retained earnings 760.3 
    762.2 
 
Treasury shares, at cost (14,695,092 and 14,606,359 shares, respectively)
(560.2 )   (557.2 )
Accumulated other comprehensive loss (318.1 )   (190.5 )
Total Diebold, Incorporated shareholders' equity 412.4 
    531.5 
 
Noncontrolling interests 23.1 
    23.3 
 
Total equity 435.5 
    554.8 
 
Total liabilities and equity $ 2,242.4 
    $ 2,339.6 
 


See accompanying notes to consolidated financial statements.
4



 
Table of Contents
DIEBOLD, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)

 
                       
  Year ended December 31,
  2015   2014   2013
Net sales          
Services $ 1,394.2 
    $ 1,432.8 
    $ 1,420.8 
 
Products 1,025.1 
    1,302.0 
    1,161.9 
 
  2,419.3 
    2,734.8 
    2,582.7 
 
Cost of sales          
Services 932.8 
    974.8 
    1,048.3 
 
Products 834.5 
    1,033.8 
    948.4 
 
  1,767.3 
    2,008.6 
    1,996.7 
 
Gross profit 652.0 
    726.2 
    586.0 
 
Selling and administrative expense 488.2 
    478.4 
    564.5 
 
Research, development and engineering expense 86.9 
    93.6 
    92.2 
 
Impairment of assets 18.9 
    2.1 
    72.0 
 
Gain on sale of assets, net (0.6 )   (12.9 )   (2.4 )
  593.4 
    561.2 
    726.3 
 
Operating profit (loss) 58.6 
  
  165.0 
  
  (140.3 )
Other income (expense)          
Investment income 26.0 
    34.5 
    27.6 
 
Interest expense (32.5 )   (31.4 )   (29.2 )
Foreign exchange (loss) gain, net (10.0 )   (11.8 )   0.2 
 
Miscellaneous, net 3.7 
    (1.6 )   (0.1 )
Income (loss) from continuing operations before taxes 45.8 
    154.7 
    (141.8 )
Income tax (benefit) expense (13.7 )   47.4 
    48.4 
 
Income (loss) from continuing operations, net of tax 59.5 
    107.3 
    (190.2 )
Income from discontinued operations, net of tax 15.9 
    9.7 
    13.7 
 
Net income (loss) 75.4 
    117.0 
    (176.5 )
Income attributable to noncontrolling interests, net of tax 1.7 
    2.6 
    5.1 
 
Net income (loss) attributable to Diebold, Incorporated $ 73.7 
    $ 114.4 
    $ (181.6 )
           
Basic weighted-average shares outstanding 64.9 
    64.5 
    63.7 
 
Diluted weighted-average shares outstanding 65.6 
    65.2 
    63.7 
 
           
Basic earnings (loss) per share          
Income (loss) before discontinued operations, net of tax $ 0.89 
    $ 1.62 
    $ (3.06 )
Income from discontinued operations, net of tax 0.24 
    0.15 
    0.21 
 
Net income (loss) attributable to Diebold, Incorporated $ 1.13 
    $ 1.77 
    $ (2.85 )
      
    
 
Diluted earnings (loss) per share          
Income (loss) before discontinued operations, net of tax $ 0.88 
    $ 1.61 
    $ (3.06 )
Income from discontinued operations, net of tax 0.24 
    0.15 
    0.21 
 
Net income (loss) attributable to Diebold, Incorporated $ 1.12 
    $ 1.76 
    $ (2.85 )
      
    
 
Amounts attributable to Diebold, Incorporated          
Income (loss) before discontinued operations, net of tax $ 57.8 
    $ 104.7 
    $ (195.3 )
Income from discontinued operations, net of tax 15.9 
    9.7 
    13.7 
 
Net income (loss) attributable to Diebold, Incorporated $ 73.7 
    $ 114.4 
    $ (181.6 )
           
Cash dividends declared and paid per share $ 1.15 
    $ 1.15 
    $ 1.15 
 


See accompanying notes to consolidated financial statements.
5



 
Table of Contents
DIEBOLD, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in millions)

 
                       
  Year ended December 31,
  2015   2014   2013
Net income (loss) $ 75.4 
    $ 117.0 
    $ (176.5 )
Other comprehensive (loss) income, net of tax:          
Translation adjustment (net of tax of $5.3, $3.6, and $2.1, respectively)
(141.3 )   (73.7 )   (70.3 )
Foreign currency hedges (net of tax of $(4.0), $(0.3), and $(1.7),
respectively) 6.4
    0.5 
    2.9 
 
Interest rate hedges:          
Net income recognized in other comprehensive income (net of tax of $(0.3),
$(0.4), and $(0.5), respectively) 0.8
    0.7 
    0.7 
 
Less: reclassification adjustments for amounts recognized in net income
(net of tax of $(0.2), $(0.1), and $(0.1), respectively) 0.4
    0.2 
    0.2 
 
  0.4 
    0.5 
    0.5 
 
Pension and other post-retirement benefits:          
Prior service credit recognized during the year (net of tax of $0.1, $0.1,
and $0.3, respectively) (0.1 )   (0.3 )   (0.5 )
Net actuarial losses recognized during the year (net of tax of $(2.7),
$(1.2), and $(5.8), respectively) 4.2
    2.0 
    9.1 
 
Net actuarial gain (loss) occurring during the year (net of tax of $(1.3),
$39.3, and $(28.3), respectively) 2.1
    (63.7 )   44.8 
 
Prior service cost recognized due to curtailment (net of tax of $0.0, $0.0,
and $(0.8), respectively -
    - 
    1.3 
 
Net actuarial losses recognized due to curtailment (net of tax of $0.0,
$0.0, and $(21.1), respectively) -
    - 
    33.4 
 
Settlements (net of tax of $0.0, $0.0, and $(7.8), respectively) - 
    - 
    12.3 
 
  6.2 
    (62.0 )   100.4 
 
Unrealized (loss) gain on securities, net:          
Net (loss) gain recognized in other comprehensive income (net of tax of
$0.0, $0.0 and $(0.1), respectively) -
    (0.5 )   3.9 
 
Less: reclassification adjustments for amounts recognized in net income
(net of tax) -
    2.2 
    1.3 
 
  - 
    (2.7 )   2.6 
 
Other 0.1 
    - 
    1.2 
 
Other comprehensive (loss) income, net of tax (128.2 )   (137.4 )   37.3 
 
Comprehensive loss (52.8 )   (20.4 )   (139.2 )
Less: comprehensive income attributable to noncontrolling interests 3.2 
    1.4 
    5.7 
 
Comprehensive loss attributable to Diebold, Incorporated $ (56.0 )   $
(21.8 )   $ (144.9 )



See accompanying notes to consolidated financial statements.
6



 
Table of Contents
DIEBOLD, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except per share amounts)

   
                                                                       
  Common Shares               Accumulated Other Comprehensive (Loss) Income
Total Diebold, Incorporated Shareholders' Equity
  Number   $1.25 Par Value   Additional
Capital   Retained
Earnings   Treasury
Shares           Non-controlling
Interests   Total
Equity            
Balance, January 1, 2013 77.7 
    $ 97.1 
    $ 358.3 
    $ 978.3 
    $ (551.2 )   $ (91.0 )   $ 791.5 
    $ 35.3 
    $ 826.8 
             
Net (loss) income             (181.6 )           (181.6 )   5.1 
    (176.5 )            
Other comprehensive income                     36.7 
    36.7 
    0.6 
    37.3 
             
Stock options exercised 0.5 
    0.7 
    16.0 
                16.7 
        16.7 
             
Restricted stock units issued 0.3 
    0.4 
    (0.4 )               - 
        - 
             
Other share-based compensation 0.1 
    0.1 
    (0.1 )               - 
        - 
             
Income tax detriment from share-based compensation         (3.9 )          
(3.9 )       (3.9 )
Share-based compensation expense         15.4 
                15.4 
        15.4 
             
Dividends paid             (74.0 )           (74.0 )       (74.0 )         

Treasury shares (0.1 shares)                 (4.1 )       (4.1 )       (4.1
)
Distributions to noncontrolling interest holders, net                      
-
    (16.9 )   (16.9 )            
Balance, December 31, 2013 78.6 
    $ 98.3 
    $ 385.3 
    $ 722.7 
    $ (555.3 )   $ (54.3 )   $ 596.7 
    $ 24.1 
    $ 620.8 
             
Net income             114.4 
            114.4 
    2.6 
    117.0 
             
Other comprehensive (loss) income                     (136.2 )   (136.2 )  
(1.2 )   (137.4 )
Stock options exercised 0.4 
    0.5 
    14.1 
                14.6 
        14.6 
             
Restricted stock units issued 0.2 
    0.2 
    (0.2 )               - 
        - 
             
Income tax detriment from share-based compensation         (2.7 )          
(2.7 )       (2.7 )
Share-based compensation expense         21.5 
                21.5 
        21.5 
             
Dividends paid             (74.9 )           (74.9 )       (74.9 )         

Treasury shares (0.2 shares)                 (1.9 )       (1.9 )       (1.9
)
Distributions to noncontrolling interest holders, net                      
-
    (2.2 )   (2.2 )            
Balance, December 31, 2014 79.2 
    $ 99.0 
    $ 418.0 
    $ 762.2 
    $ (557.2 )   $ (190.5 )   $ 531.5 
    $ 23.3 
    $ 554.8 
             
Net income             73.7 
            73.7 
    1.7 
    75.4 
             
Other comprehensive (loss) income                     (127.6 )   (127.6 )  
1.5
    (126.1 )            
Stock options exercised 0.1 
    0.2 
    3.3 
                3.5 
        3.5 
             
Restricted stock units issued 0.2 
    0.2 
    (0.2 )               - 
        - 
             
Other share-based compensation 0.2 
    0.2 
    (0.2 )               - 
        - 
             
Income tax detriment from share-based compensation         (2.5 )          
(2.5 )       (2.5 )
Share-based compensation expense         12.4 
                12.4 
        12.4 
             
Dividends paid             (75.6 )           (75.6 )       (75.6 )         

Treasury shares (0.1 shares)                 (3.0 )       (3.0 )       (3.0
)
Distributions to noncontrolling interest holders, net                      
-
    (3.4 )   (3.4 )            
Balance, December 31, 2015 79.7 
    $ 99.6 
    $ 430.8 
    $ 760.3 
    $ (560.2 )   $ (318.1 )   $ 412.4 
    $ 23.1 
    $ 435.5 
             

Comprehensive (loss) income attributable to noncontrolling interests of
$1.5 for the year ended December 31, 2015 is net of a $2.1 Venezuela
noncontrolling interest adjustment for the year ended December 31, 2015 to
reduce the carrying value to the estimated fair market value.


See accompanying notes to consolidated financial statements.
7



 
Table of Contents
DIEBOLD INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)

 
                       
  Year Ended December 31,
  2015   2014   2013
Cash flow from operating activities          
Net income (loss) $ 75.4 
    $ 117.0 
    $ (176.5 )
Income from discontinued operations, net of tax 15.9 
    9.7 
    13.7 
 
Income (loss) from continuing operations, net of tax 59.5 
    107.3 
    (190.2 )
Adjustments to reconcile net income (loss) to cash provided by operating
activities:
Depreciation and amortization 64.0 
    73.4 
    82.4 
 
Share-based compensation expense 12.4 
    21.5 
    15.4 
 
Excess tax benefits from share-based compensation (0.5 )   (0.5 )   (0.5 )
Impairment of assets 18.9 
    2.1 
    72.0 
 
Pension curtailment, settlement and special termination - 
  
  - 
  
  69.6 
 
Devaluation of Venezuelan balance sheet 7.5 
    12.1 
    1.6 
 
Gain on sale of assets, net (0.6 )   (12.9 )   (2.4 )
Gain on foreign currency option contracts (7.0 )   - 
    - 
 
Cash flow from changes in certain assets and liabilities, net of the
effects of acquisitions
Trade receivables (56.4 )   (38.2 )   35.5 
 
Inventories (51.2 )   (42.8 )   21.3 
 
Prepaid expenses (3.1 )   (2.6 )   13.5 
 
Refundable income taxes (6.3 )   9.6 
    (4.9 )
Other current assets 9.6 
    (40.1 )   (10.3 )
Accounts payable 57.6 
    55.2 
    (10.5 )
Deferred revenue (14.7 )   50.7 
    16.6 
 
Accrued salaries, wages and commissions (22.1 )   23.4 
    20.2 
 
Deferred income taxes (40.1 )   (11.3 )   (15.1 )
Finance lease receivables 30.8 
    (61.6 )   (32.6 )
Certain other assets and liabilities (26.7 )   43.8 
    41.3 
 
Net cash provided by operating activities - continuing operations 31.6 
    189.1 
    122.9 
 
Net cash provided by (used in) operating activities - discontinued
operations 5.1
    (2.2 )   1.3 
 
Net cash provided by operating activities 36.7 
    186.9 
    124.2 
 
           
Cash flow from investing activities          
Payments for acquisitions, net of cash acquired (59.4 )   (11.7 )   - 
 
Proceeds from maturities of investments 176.1 
    477.4 
    464.3 
 
Proceeds from sale of investments - 
    39.6 
    56.0 
 
Payments for purchases of investments (125.5 )   (428.7 )   (537.7 )
Proceeds from sale of assets 5.0 
    18.4 
    7.5 
 
Capital expenditures (52.3 )   (60.1 )   (33.8 )
Increase in certain other assets (6.3 )   (19.8 )   (13.7 )
Purchase of finance receivables, net of cash collections - 
    - 
    6.3 
 
Net cash (used in) provided by investing activities - continuing operations
(62.4 )   15.1
    (51.1 )
Net cash used in investing activities - discontinued operations (2.5 )  
(1.3 )   (1.6 )
Net cash (used in) provided by investing activities $ (64.9 )   $ 13.8 
    $ (52.7 )

See accompanying notes to consolidated financial statements.
8



 
Table of Contents
DIEBOLD INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)

 
                       
  Year Ended December 31,
  2015   2014   2013
Cash flow from financing activities          
Dividends paid $ (75.6 )   $ (74.9 )   $ (74.0 )
Debt issuance costs (6.0 )   (1.4 )   - 
 
Revolving debt borrowings (repayments), net 155.8 
    2.0 
    (56.0 )
Other debt borrowings 135.8 
    157.6 
    51.2 
 
Other debt repayments (168.7 )   (175.5 )   (121.9 )
Distributions to noncontrolling interest holders (0.1 )   (2.2 )   (16.9 )
Excess tax benefits from share-based compensation 0.5 
    0.5 
    0.5 
 
Issuance of common shares 3.5 
    14.6 
    16.7 
 
Repurchase of common shares (3.0 )   (1.9 )   (4.1 )
Net cash provided by (used in) financing activities - continuing operations
42.2
    (81.2 )   (204.5 )
Net cash provided by (used in) financing activities - discontinued
operations -
    - 
    - 
 
Net cash provided by (used in) financing activities 42.2 
    (81.2 )   (204.5 )
Effect of exchange rate changes on cash (23.9 )   (28.2 )   (5.1 )
(Decrease) increase in cash and cash equivalents (9.9 )   91.3 
    (138.1 )
Add: Cash overdraft included in assets held for sale at beginning of year
(4.1 )   (0.6 )   (0.2 )
Less: Cash overdraft included in assets held for sale at end of year (1.5 )
(4.1 )   (0.6 )
Cash and cash equivalents at the beginning of the year 326.1 
    231.3 
    369.0 
 
Cash and cash equivalents at the end of the year $ 313.6 
    $ 326.1 
    $ 231.3 
 
Cash paid for          
Income taxes $ 64.8 
    $ 49.2 
    $ 76.5 
 
Interest $ 32.6 
    $ 31.2 
    $ 29.5 
 



See accompanying notes to consolidated financial statements.
9



 
Table of Contents
DIEBOLD INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2015
(in millions, except per share amounts)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. The consolidated financial statements include
the accounts of Diebold, Incorporated and its wholly- and majority-owned
subsidiaries (collectively, the Company). All significant intercompany
accounts and transactions have been eliminated.

Use of Estimates in Preparation of Consolidated Financial Statements. The
preparation of the accompanying consolidated financial statements in
conformity with accounting principles generally accepted in the United
States of America (U.S. GAAP) 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 and financing receivables, inventories, goodwill,
intangible assets, other long-lived assets, legal contingencies, guarantee
obligations and assumptions used in the calculation of income taxes,
pension and other 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 condition 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.

International Operations. The financial statements of the Company's
international operations are measured using local currencies as their
functional currencies, with the exception of Venezuela's financial results,
which are measured using the currency exchange mechanism, SICAD 2. The
Company translates the assets and liabilities of its non-U.S. subsidiaries
at the exchange rates in effect at year end and the results of operations
at the average rate throughout the year. The translation adjustments are
recorded directly as a separate component of shareholders' equity, while
transaction gains (losses) are included in net income.

Venezuelan Currency Devaluation. The Company's Venezuelan operations
consisted of a fifty-percent owned subsidiary, which was consolidated.
Venezuela financial results were measured using the U.S. dollar as its
functional currency because its economy is considered highly inflationary.
On March 24, 2014, the Venezuelan government announced a currency exchange
mechanism, SICAD 2, which yielded an exchange rate significantly higher
than the rates established through the other regulated exchange mechanisms.
Management determined that it was unlikely that the Company would be able
to convert bolivars under a currency exchange other than SICAD 2. On March
31, 2014, the Company remeasured its Venezuelan balance sheet using the
SICAD 2 rate of 50.86 compared to the previous official government rate of
6.30, resulting in a decrease of $6.1 to the Company's cash balance and net
losses of $12.1 that were recorded within foreign exchange (loss) gain, net
in the consolidated statements of operations in the first quarter of 2014.
In addition, as a result of the currency devaluation, the Company recorded
a $4.1 lower of cost or market adjustment related to its service inventory
within service cost of sales in the consolidated statements of operations
in 2014. 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 consolidated statements of operations in the first
quarter of 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. On April 29, 2015, the
Company closed the sale for the estimated fair market value and recorded a
$1.0 reversal of impairment of assets based on final adjustments in the
second quarter of 2015, resulting in a $9.3 impairment of assets for the
six months ended June 30, 2015. During the remainder of 2015, the Company
incurred an additional $0.4 related to uncollectible accounts receivable
which is included in selling and administrative expenses on the
consolidated statements of operations. The Company no longer has a
consolidating entity in Venezuela which was included in the Latin America
(LA) segment but will continue to operate in Venezuela on an indirect
basis.

Acquisitions and Divestitures. Acquisitions are accounted for using the
purchase method of accounting. This method requires the Company to record
assets and liabilities of the business acquired at their estimated fair
market values as of the acquisition date. Any excess cost of the
acquisition over the fair value of the net assets acquired is recorded as
goodwill. The Company generally uses valuation specialists to perform
appraisals and assist in the determination of the fair values of the assets
acquired and liabilities assumed. These valuations require management to
make estimates and assumptions that are critical in determining the fair
values of the assets and liabilities.

For divestitures, the Company considers assets to be held for sale when
management approves and commits to a formal plan to actively market the
assets for sale at a price reasonable in relation to their estimated fair
value, the assets are available for immediate sale in their present
condition, an active program to locate a buyer and other actions required
to complete the sale have been initiated, the sale of the assets is
probable and expected to be completed within one year (or, if it is
expected that others will


10



 
Table of Contents
DIEBOLD INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2015
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)

impose conditions on the sale of the assets that will extend the period
required to complete the sale, that a firm purchase commitment is probable
within one year) and it is unlikely that significant changes will be made
to the plan. Upon designation as held for sale, the Company records the
assets at the lower of their carrying value or their estimated fair value,
reduced for the cost to dispose of the assets, and ceases to record
depreciation expense on the assets.

The Company reports financial results for discontinued operations
separately from continuing operations to distinguish the financial impact
of the divestiture from ongoing operations. Discontinued operations
reporting occurs only when the disposal of a component or a group of
components of the Company represents a strategic shift that will have a
major effect on the Company's operations and financial results. During the
year ended December 31, 2015, management of the Company, through receipt in
October 2015 of the required authorization from its Board of Directors
after a potential buyer had been identified, committed to a plan to divest
the electronic security (ES) business. As such, all of the criteria
required for held for sale and discontinued operations classification were
met during the fourth quarter of 2015. The pending divestiture of its ES
business closed on February 1, 2016. Accordingly, the assets and
liabilities, operating results and operating and investing cash flows for
are presented as discontinued operations separate from the Company's
continuing operations for all periods presented. Prior period information
has been reclassified to present this business as discontinued operations
for all periods presented, and has therefore been excluded from both
continuing operations and segment results for all periods presented in
these consolidated financial statements and the notes to the consolidated
financial statements. All assets and liabilities classified as held for
sale are included in total current assets based on the cash conversion of
these assets and liabilities within one year. These items had no impact on
the amounts of previously reported net income attributable to Diebold,
Incorporated or total Diebold, Incorporated shareholders' equity (refer to
note 21).

Assets and liabilities of a discontinued operation are reclassified as held
for sale for all comparative periods presented in the consolidated balance
sheet. The results of operations of a discontinued operation are
reclassified to income from discontinued operations, net of tax, for all
periods presented. For assets that meet the held for sale criteria but do
not meet the definition of a discontinued operation, the Company
reclassifies the assets and liabilities in the period in which the held for
sale criteria are met, but does not reclassify prior period amounts.

Realignment. In the first quarter 2015, the Company announced the
realignment of its Brazil and LA businesses to drive greater efficiency and
further improve customer service. Beginning with the first quarter of 2015,
LA and Brazil operations were reported under one single reportable
operating segment and comparative periods have been reclassified for
consistency. The presentation of comparative periods also reflects the
reclassification of certain global expenses from segment operating profit
to corporate charges not allocated to segments due to the 2015 realignment
activities.

Reclassification. The Company has reclassified the presentation of certain
prior-year information to conform to the current presentation.

Revenue Recognition. The Company's revenue recognition policy is consistent
with the requirements of Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 605,  Revenue Recognition  (ASC
605). In general, the Company records revenue when it is realized, or
realizable and earned. The Company considers revenue to be realized, or
realizable and earned when, persuasive evidence of an arrangement exists,
the products or services have been approved by the customer after delivery
and/or installation acceptance or performance of services; the sales price
is fixed or determinable within the contract; and collectability is
reasonably assured. The Company's products include both hardware and the
software required for the equipment to operate as intended, and for product
sales, the Company determines the earnings process is complete when title,
risk of loss and the right to use the product has transferred to the
customer. Within the North America region, the earnings process is
completed upon customer acceptance. Where the Company is contractually
responsible for installation, customer acceptance occurs upon completion of
the installation of all equipment at a job site and the Company's
demonstration that the equipment is in operable condition. Where the
Company is not contractually responsible for installation, customer
acceptance occurs upon shipment or delivery to a customer location
depending on the terms within the contract. Internationally, customer
acceptance is upon delivery or completion of the installation depending on
the terms in the contract with the customer.

The application of ASC 605 to the Company's customer contracts requires
judgment, including the determination of whether an arrangement includes
multiple deliverables such as hardware, software, maintenance and/or other
services. For contracts that contain multiple deliverables, total
arrangement consideration is allocated at the inception of the arrangement
to each deliverable based on the relative selling price method. The
relative selling price method is based on a hierarchy consisting of vendor
specific objective evidence (VSOE) (price when sold on a stand-alone
basis), if available, or third-party evidence (TPE), if VSOE is not
available, or estimated selling price (ESP) if neither VSOE nor TPE is
available. The Company's ESP is consistent with the objective of
determining VSOE, which is the price at which we would expect to transact
on a stand-alone sale of the deliverable. The determination of ESP is based
on applying significant judgment to weigh a variety of company-specific
factors including our pricing practices, customer volume, geography,
internal costs and gross margin objectives, information gathered from
experience in customer negotiations, recent technological trends, and
competitive landscape. In contracts that involve multiple deliverables with
separately priced extended warranty and product maintenance, these services
are typically accounted for under FASB ASC


11



 
Table of Contents
DIEBOLD INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2015
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)

605-20, Separately Priced Extended Warranty and Product Maintenance
Contracts where stated price is recognized ratably over the period.

For software sales, excluding software required for the equipment to
operate as intended, the Company applies the software revenue recognition
principles within FASB ASC 985-605,  Software - Revenue Recognition.  For
software and software-related deliverables (software elements), the Company
allocates revenue based upon the relative fair value of these software
elements as determined by VSOE. If the Company cannot obtain VSOE for any
undelivered software element, revenue is deferred until all deliverables
have been delivered or until VSOE can be determined for any remaining
undelivered software elements. When the fair value of a delivered element
cannot be established, but fair value evidence exists for the undelivered
software elements, the Company uses the residual method to recognize
revenue. Under the residual method, the fair value of the undelivered
elements is deferred and the remaining portion of the arrangement
consideration is allocated to the delivered elements and recognized as
revenue.

The Company has the following revenue streams related to sales to its
customers:

Financial Self-Service Product & Managed Service Revenue FSS products are
primarily ATMs and other equipment primarily used in the banking industry
which include both hardware and the software required for the equipment to
operate as intended. The Company also provides service contracts on FSS
products that typically cover a 12-month period and can begin at any time
after the warranty period expires. The service provided under warranty is
limited as compared to those offered under service contracts. Further,
warranty is not considered a separate deliverable of the sale and covers
only replacement of defective parts inclusive of labor. Service contracts
provide additional services beyond those covered under the warranty,
including preventative maintenance service, cleaning, supplies stocking and
cash handling, all of which are not essential to the functionality of the
equipment. Service revenue also includes services and parts the Company
provides on a billed-work basis that are not covered by warranty or service
contract. The Company also provides customers with integrated services such
as outsourced and managed services, including remote monitoring,
trouble-shooting, training, transaction processing, currency management,
maintenance or full support services.

Electronic Security Products & Managed Service Revenue The Company provides
global product sales, service, installation, project management for
longer-term contracts and monitoring of original equipment manufacturer
electronic security products to financial, government, retail and
commercial customers. These solutions provide the Company's customers a
single-source solution to their electronic security needs. The Company has
included the net sales from its North America electronic security business
as discontinued operations.

Physical Security & Facility Revenue The Company designs, manufactures
and/or procures and installs physical security and facility products. These
consist of vaults, safe deposit boxes and safes, drive-up banking equipment
and a host of other banking facilities products.

Brazil Other The Company offers election and lottery systems product
solutions and support to the Brazil government. Election systems revenue
consists of election equipment sales, networking, tabulation and diagnostic
software development, training, support and maintenance. Lottery systems
revenue primarily consists of equipment sales. The election and lottery
equipment components are included in product revenue. The software
development, training, support and maintenance components are included in
service revenue.

Software Solutions & Service Revenue The Company offers software solutions,
excluding software required for the equipment to operate as intended,
consisting of multiple applications that process events and transactions
(networking software) along with the related server. Sales of networking
software represent software solutions to customers that allow them to
network various different vendors' ATMs onto one network. Included within
service revenue is revenue from software support agreements, which are
typically 12 months in duration and pertain to networking software.

Cost of Sales. Cost of products sales is primarily comprised of direct
materials and supplies consumed in the manufacturing and distribution of
products, as well as related labor, depreciation expense and direct
overhead expense necessary to acquire and convert the purchased materials
and supplies into finished products. Cost of products sales also includes
the cost to distribute products to customers, inbound freight costs,
internal transfer costs, warehousing costs and other shipping and handling
activity. Cost of services sold is primarily consists of fuel, parts and
labor and benefits costs related to installation of products and service
maintenance contracts, including call center costs as well as costs for
service parts repair centers.

Depreciation and Amortization. Depreciation of property, plant and
equipment is computed using the straight-line method for financial
statement purposes. Amortization of leasehold improvements is based upon
the shorter of original terms of the lease or life of the improvement.
Repairs and maintenance are expensed as incurred. Amortization of the
Company's other long-term assets, such as intangible assets and capitalized
computer software, is computed using the straight-line method over the life
of the asset.


12



 
Table of Contents
DIEBOLD INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2015
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)


Advertising Costs. Advertising costs are expensed as incurred and were
$11.6, $16.7 and $9.8 in 2015, 2014 and 2013, respectively.

Research, Development and Engineering. Research, development and
engineering costs are expensed as incurred and were $86.9, $93.6 and $92.2
in 2015, 2014 and 2013, respectively.

Shipping and Handling Costs. The Company recognizes shipping and handling
fees billed when products are shipped or delivered to a customer and
includes such amounts in net sales. Third-party freight payments are
recorded in cost of sales.

Taxes on Income. Deferred taxes are provided on an asset and liability
method, whereby deferred tax assets are recognized for deductible temporary
differences, operating loss carry-forwards and tax credits. Deferred tax
liabilities are recognized for taxable temporary differences and
undistributed earnings in certain tax jurisdictions. Deferred tax assets
are reduced by a valuation allowance when, based on available evidence, it
is more likely than not that some portion or all of the deferred tax assets
will not be realized. Determination of a valuation allowance involves
estimates regarding the timing and amount of the reversal of taxable
temporary differences, expected future taxable income and the impact of tax
planning strategies. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment.

The Company regularly assesses its position with regard to tax exposures
and records liabilities for these uncertain tax positions and related
interest and penalties, if any, when the tax benefit is not more likely
than not realizable. The Company has recorded an accrual that reflects the
recognition and measurement process for the financial statement recognition
and measurement of a tax position taken or expected to be taken on a tax
return. Additional future income tax expense or benefit may be recognized
once the positions are effectively settled.

Sales Tax. The Company collects sales taxes from customers and accounts for
sales taxes on a net basis.

Cash Equivalents. The Company considers highly liquid investments with
original maturities of three months or less at the time of purchase to be
cash equivalents.

Financial Instruments. The carrying amount of cash and cash equivalents,
short term investments, trade receivables and accounts payable,
approximated their fair value because of the relatively short maturity of
these instruments. The Company's risk-management strategy uses derivative
financial instruments such as forwards to hedge certain foreign currency
exposures and interest rate swaps to manage interest rate risk. The intent
is to offset gains and losses that occur on the underlying exposures, with
gains and losses on the derivative contracts hedging these exposures. The
Company does not enter into derivatives for trading purposes. The Company
recognizes all derivatives on the balance sheet at fair value. Changes in
the fair values of derivatives that are not designated as hedges are
recognized in earnings. If the derivative is designated and qualifies as a
hedge, depending on the nature of the hedge, changes in the fair value of
the derivatives are either offset against the change in the hedged assets
or liabilities through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings.

Fair Value. The Company measures its financial assets and liabilities using
one or more of the following three valuation techniques:
 
     
Valuation technique   Description
Market approach   Prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities.
Cost approach   Amount that would be required to replace the service
capacity of an asset (replacement cost).
Income approach   Techniques to convert future amounts to a single present
amount based upon market expectations.

The hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value is divided into three levels:
 
     
Fair value level   Description
Level 1   Unadjusted quoted prices in active markets for identical assets
or liabilities.
Level 2   Unadjusted quoted prices in active markets for similar assets or
liabilities, unadjusted quoted prices for identical or similar assets or
liabilities in markets that are not active or inputs, other than quoted
prices in active markets, that are observable either directly or
indirectly.
Level 3   Unobservable inputs for which there is little or no market data.

A financial asset or liability's classification within the hierarchy is
determined based on the lowest level input that is significant to the fair
value measurement in its entirety. The Company uses the end of period when
determining the timing of transfers between levels.



13



 
Table of Contents
DIEBOLD INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2015
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)

Short-Term Investments The Company has investments in certificates of
deposit that are recorded at cost, which approximates fair value.
Assets Held in Rabbi Trusts / Deferred CompensationThe fair value of the
assets held in rabbi trusts (refer to notes 6 and 13) is derived from
investments in a mix of money market, fixed income and equity funds managed
by Bank of America/Merrill Lynch. The related deferred compensation
liability is recorded at fair value.
Foreign Exchange Contracts The valuation of foreign exchange forward and
option contracts is determined using valuation techniques, including option
models tailored for currency derivatives. These contracts are valued using
the market approach based on observable market inputs. This analysis
reflects the contractual terms of the derivatives, including the period to
maturity, and uses observable market-based inputs, including spot rates,
foreign currency forward rates, the interest rate curve of the domestic
currency, and foreign currency volatility for the given currency pair.
Forward Contracts A substantial portion of the Company's operations and
revenues are international. As a result, changes in foreign exchange rates
can create substantial foreign exchange gains and losses from the
revaluation of non-functional currency monetary assets and liabilities.
Option Contracts A put option gives the purchaser of the option the right
to sell, and the writer of the option the obligation to buy, the underlying
security at any time during the option period. A call option gives the
purchaser of the option the right to buy, and the writer of the option the
obligation to sell, the underlying security at any time during the option
period. In connection with the Business Combination, the Company entered
into foreign exchange option contracts to purchase or call EUR1,416.0 for a
put of $1,547.1 to limit the effect of exchange rate fluctuations on the
cash component of the purchase price consideration which is denominated in
euros and approximates EUR1,162.2 and estimated euro denominated deal
related costs and any outstanding Wincor Nixdorf borrowings. These foreign
exchange 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
gain or loss on these non-designated derivative instruments is reflected in
other income (expense) miscellaneous, net in our consolidated statements of
operations. 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. The $60.0 delayed premium is recorded at fair value
and netted against the fair value of the foreign exchange option contract
asset.
Interest Rate Swaps The Company has variable rate debt and is subject to
fluctuations in interest related cash flows due to changes in market
interest rates. The Company's policy allows it to periodically enter into
derivative instruments designated as cash flow hedges to fix some portion
of future variable rate based interest expense. The Company executed two
pay-fixed receive-variable interest rate swaps to hedge against changes in
the London Interbank Offered Rate (LIBOR) benchmark interest rate on a
portion of the Company's LIBOR-based borrowings. The fair value of the swap
is determined using the income approach and is calculated based on LIBOR
rates at the reporting date.
Assets and Liabilities Not Measured at Fair Value on a Recurring BasisIn
addition to assets and liabilities that are measured at fair value on a
recurring basis, the Company also measures certain assets and liabilities
at fair value on a nonrecurring basis. Our non-financial assets, including
goodwill, intangible assets and property, plant and equipment, are measured
at fair value when there is an indication of impairment. These assets are
recorded at fair value, determined using level 3 inputs, only when an
impairment charge is recognized. Further details regarding the Company's
goodwill impairment review appear in note 11.
Assets and Liabilities Recorded at Carrying Value The fair value of the
Company's cash and cash equivalents, trade receivables and accounts
payable, approximates the carrying value due to the relative short maturity
of these instruments.
The fair value of the Company's industrial development revenue bonds are
measured using unadjusted quoted prices in active markets for identical
assets categorized as level 1 inputs. The fair value of the Company's
current notes payable and credit facility debt instruments approximates the
carrying value due to the relative short maturity of the revolving
borrowings under these instruments. The fair values of the Company's
long-term senior notes were estimated using market observable inputs for
the Company's comparable peers with public debt, including quoted prices in
active markets, market indices and interest rate measurements, considered
level 2 inputs.

Refer to note 19 for further details of assets and liabilities subject to
fair value measurement.

Trade Receivables. The Company evaluates the collectability of trade
receivables based on a percentage of sales related to historical loss
experience and current trends. The Company will also record periodic
adjustments for known events such as specific customer circumstances and
changes in the aging of accounts receivable balances. After all efforts at
collection have been unsuccessful, the account is deemed uncollectible and
is written off.

Financing Receivables. The Company evaluates the collectability of notes
and finance lease receivables (collectively, financing receivables) on a
customer-by-customer basis and evaluates specific customer circumstances,
aging of invoices, credit risk changes


14



 
Table of Contents
DIEBOLD INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2015
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)

and payment patterns and historical loss experience. When the
collectability is determined to be at risk based on the above criteria, the
Company records the allowance for credit losses which represents the
Company's current exposure less estimated reimbursement from insurance
claims. After all efforts at collection have been unsuccessful, the account
is deemed uncollectible and is written off.

Inventories. The Company primarily values inventories at the lower of cost
or market applied on a first-in, first-out basis. The Company identifies
and writes down its excess and obsolete inventories to net realizable value
based on usage forecasts, order volume and inventory aging. With the
development of new products, the Company also rationalizes its product
offerings and will write-down discontinued product to the lower of cost or
net realizable value.

Deferred Revenue. Deferred revenue is recorded for any services billed to
customers and not yet recognizable if the contract period has commenced or
for the amount collected from customers in advance of the contract period
commencing. In addition, deferred revenue is recorded for products and
other deliverables that are billed to and collected from customers prior to
revenue being recognizable.

Split-Dollar Life Insurance. The Company recognizes a liability for the
post-retirement obligation associated with a collateral assignment
arrangement if, based on an agreement with an employee, the Company has
agreed to maintain a life insurance policy during the post-retirement
period or to provide a death benefit. In addition, the Company recognizes a
liability and related compensation costs for future benefits that extend to
post-retirement periods.

Goodwill. Goodwill is the cost in excess of the net assets of acquired
businesses (refer to note 11). The Company tests all existing goodwill at
least annually for impairment on a reporting unit basis. In 2015, the
annual goodwill impairment test was performed as of October 31 compared to
November 30 in prior years for administrative improvements.

The Company tests for impairment between annual tests if an event occurs o



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Language:     English
Company:      Diebold, Inc.
              5995 Mayfair Road
              44720 North Canton, OH
              United States
Internet:     www.diebold.com
 
End of Announcement                             DGAP News-Service
 
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