A rollforward of the activity in the Companys fair value of the contingent consideration is as follows (in thousands):
The Company recorded a fair value gain of $2.6 million to the Qelp contingent consideration in
General and administrative during the year ended December 31, 2016 due to the execution of an addendum to the Qelp purchase agreement, subject to which the Company agreed to pay the sellers EUR 4.0 million by June 30,
2017. The Company paid $4.4 million in May 2017 to settle the outstanding contingent consideration obligation.
The Company recorded
a fair value gain of $0.3 million in General and administrative during the three and six months ended June 30, 2017 to the Clearlink contingent consideration due to changes in the probability of achievement of certain revenue
targets. The Company recorded a fair value gain of $0.4 million in General and administrative during the six months ended June 30, 2017 to the Clearlink contingent consideration upon settlement of one of the contingent
consideration liabilities for $0.1 million. The Company recorded a fair value loss of $0.3 million in General and administrative during the year ended December 31, 2016 to the Clearlink contingent consideration due to
changes in the probability of achievement of certain revenue targets.
The Company accretes interest expense each period using the effective interest method until the
contingent consideration reaches the estimated remaining future value of $1.1 million. Interest expense related to the contingent consideration is included in Interest (expense) in the accompanying Condensed Consolidated Statements
of Operations.
Certain assets, under certain conditions, are measured at fair value on a nonrecurring basis utilizing Level 3 inputs, like those
associated with acquired businesses, including goodwill, other intangible assets and other long-lived assets. For these assets, measurement at fair value in periods subsequent to their initial recognition would be applicable if these assets were
determined to be impaired. The adjusted carrying values for assets measured at fair value on a nonrecurring basis (no liabilities) subject to the requirements of ASC 820 were not material at June 30, 2017 and December 31, 2016.
The following table summarizes the total impairment losses related to nonrecurring fair value measurements of certain assets (no liabilities)
subject to the requirements of ASC 820 (in thousands) (none in 2016):
In connection with the closure of an under-utilized customer contact management center in the U.S., the
Company recorded an impairment charge of $4.2 million during the three and six months ended June 30, 2017 related to leasehold improvements which were not recoverable and equipment, furniture and fixtures that could not be redeployed to
other locations.
During the six months ended June 30, 2017, the Company recorded an impairment charge of $0.2 million related
to the write-down of a vacant and unused parcel of land in the U.S. to its estimated fair value.
The following table presents the Companys purchased intangible assets as of
December 31, 2016 (in thousands):
The Companys estimated future amortization expense for the succeeding years relating to the purchased
intangible assets resulting from acquisitions completed prior to June 30, 2017, is as follows (in thousands):
Goodwill
Changes in goodwill for the six months ended June 30, 2017 consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Foreign
|
|
|
|
|
January 1, 2017
|
|
Acquisition
|
|
Currency
|
|
June 30, 2017
|
Americas
|
|
$
|
255,842
|
|
|
$
|
-
|
|
|
$
|
811
|
|
|
$
|
256,653
|
|
EMEA
|
|
|
9,562
|
|
|
|
-
|
|
|
|
719
|
|
|
|
10,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
265,404
|
|
|
$
|
-
|
|
|
$
|
1,530
|
|
|
$
|
266,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in goodwill for the year ended
December 31, 2016 consist of the following (in thousands):
|
|
|
|
|
|
|
|
Effect of Foreign
|
|
|
|
|
January 1, 2016
|
|
Acquisition
(1)
|
|
Currency
|
|
December 31, 2016
|
Americas
|
|
$
|
186,049
|
|
|
$
|
70,563
|
|
|
$
|
(770)
|
|
|
$
|
255,842
|
|
EMEA
|
|
|
9,684
|
|
|
|
-
|
|
|
|
(122)
|
|
|
|
9,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
195,733
|
|
|
$
|
70,563
|
|
|
$
|
(892)
|
|
|
$
|
265,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
See Note 2, Acquisitions, for further
information.
The Company performs its annual goodwill impairment test during the third quarter, or more
frequently if indicators of impairment exist.
For the annual goodwill impairment test, the Company elected to forgo the option to first
assess qualitative factors and performed its annual
two-step
goodwill impairment test as of July 31, 2016. Under ASC 350, the carrying value of assets is calculated at the reporting unit level. The
quantitative assessment of goodwill includes comparing a reporting units calculated fair value to its carrying value. The calculation of fair value requires significant
21
judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth, the useful life over which cash flows will occur and
determination of the Companys weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. If the fair
value of the reporting unit is less than its carrying value, goodwill is considered impaired and an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than its carrying value.
The process of evaluating the fair value of the reporting units is highly subjective and requires significant judgment and estimates as the
reporting units operate in a number of markets and geographical regions. The Company used an average of the income and market approaches to determine its best estimates of fair value which incorporated the following significant assumptions:
|
●
|
|
Revenue projections, including revenue growth during the forecast periods;
|
|
●
|
|
EBITDA margin projections over the forecast periods;
|
|
●
|
|
Estimated income tax rates;
|
|
●
|
|
Estimated capital expenditures; and
|
|
●
|
|
Discount rates based on various inputs, including the risks associated with the specific reporting units as
well as their revenue growth and EBITDA margin assumptions.
|
As of July 31, 2016, the Company concluded that
goodwill was not impaired for all six of its reporting units with goodwill, based on generally accepted valuation techniques and the significant assumptions outlined above. While the fair values of four of the six reporting units were substantially
in excess of their carrying value, the Qelp reporting units fair value exceeded its carrying value (although not substantially) and the newly acquired Clearlink reporting units fair value approximated its carrying value due to the
proximity to the acquisition date of April 1, 2016.
The Qelp and Clearlink reporting units are at risk of future impairment if
projected operating results are not met or other inputs into the fair value measurement change. However, as of June 30, 2017, there were no indicators of impairment related to Qelps $10.3 million of goodwill or Clearlinks
$70.6 million of goodwill.
Note 6. Financial Derivatives
Cash Flow Hedges
The Company has derivative assets and liabilities relating to outstanding forward contracts and options,
designated as cash flow hedges, as defined under ASC 815
Derivatives and Hedging
(ASC 815), consisting of Philippine Peso, Costa Rican Colon, Hungarian Forint and Romanian Leu contracts. These contracts are entered into to
protect against the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates.
The deferred gains (losses) and related taxes on the Companys cash flow hedges recorded in Accumulated other comprehensive income
(loss) (AOCI) in the accompanying Condensed Consolidated Balance Sheets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
Deferred gains (losses) in AOCI
|
|
$
|
(2,126)
|
|
|
$
|
(2,295)
|
|
Tax on deferred gains (losses) in AOCI
|
|
|
37
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
Deferred gains (losses) in AOCI, net of taxes
|
|
$
|
(2,089)
|
|
|
$
|
(2,226)
|
|
|
|
|
|
|
|
|
|
|
Deferred gains (losses) expected to be reclassified to Revenues from AOCI during the next twelve months
|
|
$
|
(2,126)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred gains (losses) and other future reclassifications from AOCI will fluctuate with movements in the
underlying market price of the forward contracts and options.
Net Investment Hedge
The Company enters into foreign
exchange forward contracts to hedge its net investment in certain foreign operations, as defined under ASC 815. The purpose of these derivative instruments is to protect the Companys interests against the risk that the net assets of certain
foreign subsidiaries will be adversely affected by changes in exchange rates and economic exposures related to the Companys foreign currency-based investments in these subsidiaries.
22
Non-Designated
Hedges
Foreign Currency Forward Contracts
The Company also periodically enters into foreign currency
hedge contracts that are not designated as hedges as defined under ASC 815. The purpose of these derivative instruments is to protect the Companys interests against adverse foreign currency moves relating primarily to intercompany receivables
and payables, and other assets and liabilities that are denominated in currencies other than the Companys subsidiaries functional currencies. These contracts generally do not exceed 180 days in duration.
Embedded Derivatives
The Company enters into certain lease agreements which require payments not denominated in the
functional currency of any substantial party to the agreements. The foreign currency component of these contracts meets the criteria under ASC 815 as embedded derivatives. The Company has determined that the embedded derivatives are not clearly and
closely related to the economic characteristics and risks of the host contracts (lease agreements), and separate, stand-alone instruments with the same terms as the embedded derivative instruments would otherwise qualify as derivative instruments,
thereby requiring separation from the lease agreements and recognition at fair value. Such instruments do not qualify for hedge accounting under ASC 815.
The Company had the following outstanding foreign currency forward contracts and options, and embedded derivatives (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2017
|
|
As of December 31, 2016
|
|
|
Notional
|
|
|
|
Notional
|
|
|
|
|
Amount in
|
|
Settle Through
|
|
Amount in
|
|
Settle Through
|
Contract Type
|
|
USD
|
|
Date
|
|
USD
|
|
Date
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philippine Pesos
|
|
$
|
32,000
|
|
|
|
May 2018
|
|
|
$
|
51,000
|
|
|
|
December 2017
|
|
|
|
|
|
|
Forwards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philippine Pesos
|
|
|
3,000
|
|
|
|
June 2018
|
|
|
|
-
|
|
|
|
-
|
|
Costa Rican Colones
|
|
|
58,750
|
|
|
|
June 2018
|
|
|
|
45,500
|
|
|
|
December 2017
|
|
Hungarian Forints
|
|
|
1,370
|
|
|
|
December 2017
|
|
|
|
-
|
|
|
|
-
|
|
Romanian Leis
|
|
|
3,850
|
|
|
|
December 2017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euros
|
|
|
76,933
|
|
|
|
September 2017
|
|
|
|
76,933
|
|
|
|
September 2017
|
|
|
|
|
|
|
Non-designated
hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards
|
|
|
38,179
|
|
|
|
September 2017
|
|
|
|
55,614
|
|
|
|
March 2017
|
|
Embedded derivatives
|
|
|
13,808
|
|
|
|
April 2030
|
|
|
|
13,234
|
|
|
|
April 2030
|
|
Master netting agreements exist with each respective counterparty to reduce credit risk by permitting net
settlement of derivative positions. In the event of default by the Company or one of its counterparties, these agreements include a
set-off
clause that provides the
non-defaulting
party the right to net settle all derivative transactions, regardless of the currency and settlement date. The maximum amount of loss due to credit risk that, based on gross fair value, the
Company would incur if parties to the derivative transactions that make up the concentration failed to perform according to the terms of the contracts was $0.4 million and $3.9 million as of June 30, 2017 and December 31, 2016,
respectively. After consideration of these netting arrangements and offsetting positions by counterparty, the total net settlement amount as it relates to these positions are asset positions of $3.6 million as of December 31, 2016
(none at June 30, 2017) and liability positions of $4.1 million and $1.6 million as of June 30, 2017 and December 31, 2016, respectively.
Although legally enforceable master netting arrangements exist between the Company and each counterparty, the Company has elected to present
the derivative assets and derivative liabilities on a gross basis in the accompanying Condensed Consolidated Balance Sheets. Additionally, the Company is not required to pledge, nor is it entitled to receive, cash collateral related to these
derivative transactions.
23
The following tables present the fair value of the Companys derivative instruments included
in the accompanying Condensed Consolidated Balance Sheets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
|
Fair Value
|
|
Fair Value
|
Derivatives designated as cash flow hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
Foreign currency forward and option contracts
(1)
|
|
$
|
48
|
|
|
$
|
-
|
|
|
|
|
Derivatives designated as net investment hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
(1)
|
|
|
242
|
|
|
|
3,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
290
|
|
|
|
3,230
|
|
|
|
|
Derivatives not designated as hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
(1)
|
|
|
66
|
|
|
|
691
|
|
Embedded derivatives
(1)
|
|
|
17
|
|
|
|
8
|
|
Embedded derivatives
(2)
|
|
|
67
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets
|
|
$
|
440
|
|
|
$
|
3,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
|
Fair Value
|
|
Fair Value
|
Derivatives designated as cash flow hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
Foreign currency forward and option contracts
(3)
|
|
$
|
1,861
|
|
|
$
|
1,806
|
|
|
|
|
Derivatives designated as net investment hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
(3)
|
|
|
2,384
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,245
|
|
|
|
1,806
|
|
|
|
|
Derivatives not designated as hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
(3)
|
|
|
223
|
|
|
|
106
|
|
Embedded derivatives
(3)
|
|
|
166
|
|
|
|
174
|
|
Embedded derivatives
(4)
|
|
|
89
|
|
|
|
393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities
|
|
$
|
4,723
|
|
|
$
|
2,479
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Included in Other current assets in the
accompanying Condensed Consolidated Balance Sheets.
|
|
(2)
|
Included in Deferred charges and other assets in the accompanying Condensed Consolidated Balance
Sheets.
|
|
(3)
|
Included in Other accrued expenses and current liabilities in the accompanying Condensed
Consolidated Balance Sheets.
|
|
(4)
|
Included in Other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets.
|
24
The following tables present the effect of the Companys derivative instruments included in
the accompanying Condensed Consolidated Financial Statements for the three months ended June 30, 2017 and 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in
AOCI on Derivatives
(Effective Portion)
|
|
Gain (Loss) Reclassified
From Accumulated AOCI
Into Revenues (Effective
Portion)
|
|
Gain (Loss) Recognized in
Revenues on Derivatives
(Ineffective Portion and
Amount Excluded
from
Effectiveness Testing)
|
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Derivatives designated as cash flow hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward and option contracts
|
|
$
|
|
(1,232)
|
|
$
|
(2,072
|
)
|
|
$
|
(820
|
)
|
|
$
|
4
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Derivatives designated as net investment hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
|
|
(4,774)
|
|
|
2,414
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
(6,006)
|
|
$
|
342
|
|
|
$
|
(820
|
)
|
|
$
|
4
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized
in Other income
(expense) on
Derivatives
|
|
|
June 30,
|
|
|
2017
|
|
2016
|
Derivatives not designated as hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
$
|
921
|
|
|
$
|
575
|
|
Embedded derivatives
|
|
|
176
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,097
|
|
|
$
|
585
|
|
|
|
|
|
|
|
|
|
|
The following tables present the effect of the Companys derivative instruments included in the
accompanying Condensed Consolidated Financial Statements for the six months ended June 30, 2017 and 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in
AOCI on Derivatives
(Effective Portion)
|
|
Gain (Loss) Reclassified
From Accumulated AOCI
Into Revenues (Effective
Portion)
|
|
Gain (Loss) Recognized in
Revenues on Derivatives
(Ineffective Portion and
Amount Excluded from
Effectiveness
Testing)
|
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Derivatives designated as cash flow hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward and option contracts
|
|
$
|
(1,466
|
)
|
|
$
|
431
|
|
|
$
|
(1,580
|
)
|
|
$
|
(50
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
Derivatives designated as net investment hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
|
(5,373
|
)
|
|
|
(698
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(6,839
|
)
|
|
$
|
(267
|
)
|
|
$
|
(1,580
|
)
|
|
$
|
(50
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in
Other income (expense)
on Derivatives
|
|
|
June 30,
|
|
|
2017
|
|
2016
|
Derivatives not designated as hedging instruments under ASC 815:
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
$
|
82
|
|
|
$
|
1,370
|
|
Embedded derivatives
|
|
|
315
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
397
|
|
|
$
|
1,324
|
|
|
|
|
|
|
|
|
|
|
25
Note 7. Investments Held in Rabbi Trust
The Companys investments held in rabbi trust, classified as trading securities and included in Other current assets in the
accompanying Condensed Consolidated Balance Sheets, at fair value, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
|
Cost
|
|
Fair Value
|
|
Cost
|
|
Fair Value
|
Mutual funds
|
|
$
|
7,871
|
|
|
$
|
10,729
|
|
|
$
|
7,257
|
|
|
$
|
9,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The mutual funds held in rabbi trust were 69% equity-based and 31% debt-based as of June 30, 2017. Net
investment income (losses), included in Other income (expense), net in the accompanying Condensed Consolidated Statements of Operations consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Gross realized gains from sale of trading securities
|
|
$
|
151
|
|
|
$
|
-
|
|
|
$
|
151
|
|
|
$
|
-
|
|
Gross realized (losses) from sale of trading securities
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
Dividend and interest income
|
|
|
25
|
|
|
|
10
|
|
|
|
39
|
|
|
|
19
|
|
Net unrealized holding gains (losses)
|
|
|
149
|
|
|
|
134
|
|
|
|
542
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (losses)
|
|
$
|
323
|
|
|
$
|
144
|
|
|
$
|
730
|
|
|
$
|
173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 8. Deferred Revenue
Deferred revenue consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
Future service
|
|
$
|
28,860
|
|
|
$
|
27,116
|
|
Estimated potential penalties and holdbacks
|
|
|
6,206
|
|
|
|
6,593
|
|
Estimated chargebacks
|
|
|
5,419
|
|
|
|
5,027
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40,485
|
|
|
$
|
38,736
|
|
|
|
|
|
|
|
|
|
|
Note 9. Deferred Grants
Deferred grants, net of accumulated amortization, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
Property grants
|
|
$
|
3,098
|
|
|
$
|
3,353
|
|
Lease grants
|
|
|
532
|
|
|
|
502
|
|
Employment grants
|
|
|
43
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
Total deferred grants
|
|
|
3,673
|
|
|
|
3,922
|
|
Less: Lease grants - short-term
(1)
|
|
|
(110
|
)
|
|
|
(94)
|
|
Less: Employment grants - short-term
(1)
|
|
|
(43
|
)
|
|
|
(67)
|
|
|
|
|
|
|
|
|
|
|
Total long-term deferred grants
|
|
$
|
3,520
|
|
|
$
|
3,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Included in
Other accrued expenses and current liabilities in the accompanying Condensed Consolidated Balance Sheets.
|
Note 10. Borrowings
On May 12, 2015, the Company entered into a $440 million revolving credit facility (the 2015 Credit Agreement) with a
group of lenders and KeyBank National Association, as Lead Arranger, Sole Book Runner, Administrative Agent, Swing Line Lender and Issuing Lender (KeyBank). The 2015 Credit Agreement is subject to certain borrowing limitations and
includes certain customary financial and restrictive covenants.
The 2015 Credit Agreement includes a $200 million alternate-currency
sub-facility,
a $10 million swingline
sub-facility
and a $35 million letter of credit
sub-facility,
and may be used for
general corporate purposes including acquisitions, share repurchases, working capital support and letters of credit, subject to certain limitations. The Company is not currently aware of any inability of its lenders to provide access to the full
commitment of funds that exist under the revolving credit facility, if necessary. However, there can be no assurance that such facility will be available to the Company, even though it is a binding commitment of the financial institutions.
26
Borrowings consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
Revolving credit facility
|
|
$
|
267,000
|
|
|
$
|
267,000
|
|
Less: Current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
267,000
|
|
|
$
|
267,000
|
|
|
|
|
|
|
|
|
|
|
On April 1, 2016, the Company borrowed $216.0 million under its 2015 Credit Agreement in connection
with the acquisition of Clearlink.
The 2015 Credit Agreement matures on May 12, 2020, and has no varying installments due.
Borrowings under the 2015 Credit Agreement bear interest at the rates set forth in the 2015 Credit Agreement. In addition, the Company is
required to pay certain customary fees, including a commitment fee determined quarterly based on the Companys leverage ratio and due quarterly in arrears as calculated on the average unused amount of the 2015 Credit Agreement.
The 2015 Credit Agreement is guaranteed by all of the Companys existing and future direct and indirect material U.S. subsidiaries and
secured by a pledge of 100% of the
non-voting
and 65% of the voting capital stock of all the direct foreign subsidiaries of the Company and those of the guarantors.
In May 2015, the Company paid an underwriting fee of $0.9 million for the 2015 Credit Agreement, which is deferred and amortized over the
term of the loan, along with the deferred loan fees of $0.4 million related to the previous credit agreement.
The following table
presents information related to our credit agreements (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Average daily utilization
|
|
$
|
267,000
|
|
|
$
|
278,769
|
|
|
$
|
267,000
|
|
|
$
|
174,385
|
|
|
|
|
|
|
Interest expense, including commitment fee
(1)
|
|
$
|
1,600
|
|
|
$
|
1,079
|
|
|
$
|
3,043
|
|
|
$
|
1,454
|
|
|
|
|
|
|
Weighted average interest rate
(2)
|
|
|
2.4%
|
|
|
|
1.6%
|
|
|
|
2.3%
|
|
|
|
1.9%
|
|
(1)
Excludes the amortization of deferred loan
fees.
(2)
Includes the commitment fee.
27
Note 11. Accumulated Other Comprehensive Income (Loss)
The Company presents data in the Condensed Consolidated Statements of Changes in Shareholders Equity in accordance with ASC 220,
Comprehensive Income
(ASC 220). ASC 220 establishes rules for the reporting of comprehensive income (loss) and its components. The components of accumulated other comprehensive income (loss) consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
Translation
Gain (Loss)
|
|
Unrealized
Gain (Loss) on
Net
Investment
Hedge
|
|
Unrealized
Actuarial Gain
(Loss) Related
to Pension
Liability
|
|
Unrealized
Gain (Loss) on
Cash Flow
Hedging
Instruments
|
|
Unrealized
Gain (Loss) on
Post
Retirement
Obligation
|
|
Total
|
Balance at January 1, 2016
|
|
$
|
(58,601
|
)
|
|
$
|
4,170
|
|
|
$
|
1,029
|
|
|
$
|
(527
|
)
|
|
$
|
267
|
|
|
$
|
(53,662
|
)
|
Pre-tax
amount
|
|
|
(13,832
|
)
|
|
|
3,409
|
|
|
|
212
|
|
|
|
(2,313
|
)
|
|
|
(9
|
)
|
|
|
(12,533
|
)
|
Tax (provision) benefit
|
|
|
-
|
|
|
|
(1,313
|
)
|
|
|
(8
|
)
|
|
|
72
|
|
|
|
-
|
|
|
|
(1,249
|
)
|
Reclassification of (gain) loss to net income
|
|
|
-
|
|
|
|
-
|
|
|
|
(52
|
)
|
|
|
527
|
|
|
|
(58
|
)
|
|
|
417
|
|
Foreign currency translation
|
|
|
40
|
|
|
|
-
|
|
|
|
(56
|
)
|
|
|
16
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
(72,393
|
)
|
|
|
6,266
|
|
|
|
1,125
|
|
|
|
(2,225
|
)
|
|
|
200
|
|
|
|
(67,027
|
)
|
Pre-tax
amount
|
|
|
20,416
|
|
|
|
(5,373
|
)
|
|
|
-
|
|
|
|
(1,466
|
)
|
|
|
-
|
|
|
|
13,577
|
|
Tax (provision) benefit
|
|
|
-
|
|
|
|
2,069
|
|
|
|
-
|
|
|
|
28
|
|
|
|
-
|
|
|
|
2,097
|
|
Reclassification of (gain) loss to net income
|
|
|
-
|
|
|
|
-
|
|
|
|
(21
|
)
|
|
|
1,522
|
|
|
|
(25
|
)
|
|
|
1,476
|
|
Foreign currency translation
|
|
|
(34
|
)
|
|
|
-
|
|
|
|
(18
|
)
|
|
|
52
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2017
|
|
$
|
(52,011
|
)
|
|
$
|
2,962
|
|
|
$
|
1,086
|
|
|
$
|
(2,089
|
)
|
|
$
|
175
|
|
|
$
|
(49,877
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the amounts reclassified to net income from accumulated other comprehensive
income (loss) and the associated line item in the accompanying Condensed Consolidated Statements of Operations (in thousands):
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
Statements of Operations
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Location
|
Actuarial Gain (Loss) Related to Pension Liability:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
amount
|
|
$
|
11
|
|
|
$
|
10
|
|
|
$
|
21
|
|
|
$
|
22
|
|
|
|
Direct salaries and related costs
|
|
Tax (provision) benefit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification to net income
|
|
|
11
|
|
|
|
10
|
|
|
|
21
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) on Cash Flow Hedging Instruments:
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
amount
|
|
|
(820
|
)
|
|
|
4
|
|
|
|
(1,580
|
)
|
|
|
(50
|
)
|
|
|
Revenues
|
|
Tax (provision) benefit
|
|
|
17
|
|
|
|
3
|
|
|
|
58
|
|
|
|
22
|
|
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification to net income
|
|
|
(803
|
)
|
|
|
7
|
|
|
|
(1,522
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) on Post Retirement Obligation:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
amount
|
|
|
13
|
|
|
|
14
|
|
|
|
25
|
|
|
|
27
|
|
|
|
General and administrative
|
|
Tax (provision) benefit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification to net income
|
|
|
13
|
|
|
|
14
|
|
|
|
25
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassification of gain (loss) to net income
|
|
$
|
(779
|
)
|
|
$
|
31
|
|
|
$
|
(1,476
|
)
|
|
$
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
See Note 15, Defined Benefit Pension Plan and Postretirement
Benefits, for further information.
(2)
See Note 6, Financial
Derivatives, for further information.
As discussed in Note 12, Income Taxes, earnings associated with the
Companys investments in its foreign subsidiaries are considered to be indefinitely reinvested and no provision for income taxes on those earnings or translation adjustments have been provided.
28
Note 12. Income Taxes
The Companys effective tax rate was 15.0% and 29.9% for the three months ended June 30, 2017 and 2016, respectively. The decrease
in the effective tax rates is primarily due to the recognition of a $1.2 million previously unrecognized tax benefit arising from the effective settlement of the Canadian Revenue Agency audit. The decrease in the effective tax rate was also
affected by several additional factors, including shifts in earnings among the various jurisdictions in which the Company operates, none of which are individually material. The difference between the Companys effective tax rate as compared to
the U.S. statutory federal income tax rate of 35.0% was primarily due to the aforementioned factors as well as the recognition of tax benefits resulting from foreign tax rate differentials, income earned in certain tax holiday jurisdictions, changes
in unrecognized tax benefits, adjustments of valuation allowances and tax credits, partially offset by the tax impact of permanent differences and foreign withholding taxes.
The Companys effective tax rate was 22.9% and 30.4% for the six months ended June 30, 2017 and 2016, respectively. The decrease in
the effective tax rates is primarily due to the recognition of a $1.2 million previously unrecognized tax benefit arising from the effective settlement of the Canadian Revenue Agency audit and the recognition of a $0.9 million tax benefit
resulting from the adoption of ASU
2016-09
on January 1, 2017. The decrease in the effective tax rate was also affected by several additional factors, including shifts in earnings among the various
jurisdictions in which the Company operates, none of which are individually material. The difference between the Companys effective tax rate as compared to the U.S. statutory federal income tax rate of 35.0% was primarily due to the
aforementioned factors as well as the recognition of tax benefits resulting from foreign tax rate differentials, income earned in certain tax holiday jurisdictions, changes in unrecognized tax benefits, adjustments of valuation allowances and tax
credits, partially offset by the tax impact of permanent differences and foreign withholding taxes.
Earnings associated with the
investments in the Companys foreign subsidiaries are considered to be indefinitely reinvested outside of the U.S. Therefore, a U.S. provision for income taxes on those earnings or translation adjustments has not been recorded, as permitted by
criterion outlined in ASC 740,
Income Taxes
(ASC 740)
.
Determination of any unrecognized deferred tax liability related to investments in foreign subsidiaries is not practicable due to the inherent complexity of the
multi-national tax environment in which the Company operates.
The Company received assessments for the Canadian 2003-2009 audit. Requests
for Competent Authority Assistance were filed with both the Canadian Revenue Agency and the U.S. Internal Revenue Service and the Company paid mandatory security deposits to Canada as part of this process. The total amount of deposits, net of the
effects of foreign exchange rate adjustments, was $13.8 million as of December 31, 2016 (none at June 30, 2017) and was included in Deferred charges and other assets in the accompanying Condensed Consolidated Balance
Sheet. As of June 30, 2017, the Company determined that all material aspects of the Canadian audit were effectively settled pursuant to ASC 740. As a result, the Company recognized a net income tax benefit of $1.2 million and the deposits
were applied against the anticipated liability.
With the effective settlement of the Canadian audit, the Company has no significant tax
jurisdictions under audit; however, the Company is currently under audit in several tax jurisdictions. The Company believes it is adequately reserved for the remaining audits and their resolution is not expected to have a material impact on its
financial condition and results of operations.
29
Note 13. Earnings Per Share
Basic earnings per share are based on the weighted average number of common shares outstanding during the periods. Diluted earnings per share
includes the weighted average number of common shares outstanding during the respective periods and the further dilutive effect, if any, from stock appreciation rights, restricted stock, restricted stock units and shares held in rabbi trust using
the treasury stock method.
The numbers of shares used in the earnings per share computation are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
41,854
|
|
|
|
41,970
|
|
|
|
41,756
|
|
|
|
41,838
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock appreciation rights, restricted stock, restricted stock units and shares
held in rabbi trust
|
|
|
80
|
|
|
|
131
|
|
|
|
163
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total weighted average diluted shares outstanding
|
|
|
41,934
|
|
|
|
42,101
|
|
|
|
41,919
|
|
|
|
42,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from the diluted earnings per share calculation
|
|
|
46
|
|
|
|
21
|
|
|
|
16
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On August 18, 2011, the Companys Board of Directors (the Board) authorized the Company
to purchase up to 5.0 million shares of its outstanding common stock (the 2011 Share Repurchase Program). On March 16, 2016, the Board authorized an increase of 5.0 million shares to the 2011 Share Repurchase Program for a
total of 10.0 million shares. A total of 5.3 million shares have been repurchased under the 2011 Share Repurchase Program since inception. The shares are purchased, from time to time, through open market purchases or in negotiated private
transactions, and the purchases are based on factors, including but not limited to, the stock price, management discretion and general market conditions. The 2011 Share Repurchase Program has no expiration date.
There were no shares repurchased under the Companys share repurchase programs during the three and six months ended June 30, 2017
and 2016.
Note 14. Commitments and Loss Contingency
Commitments
During the six
months ended June 30, 2017, the Company entered into several leases in the ordinary course of business. The following is a schedule of future minimum rental payments required under operating leases that have noncancelable lease terms as of
June 30, 2017, including the impact of the leases assumed in connection with the Telecommunications Asset acquisition (in thousands):
|
|
|
|
|
|
|
Amount
|
|
|
2017 (remaining six months)
|
|
$
|
2,780
|
|
2018
|
|
|
7,272
|
|
2019
|
|
|
6,822
|
|
2020
|
|
|
7,506
|
|
2021
|
|
|
7,610
|
|
2022
|
|
|
6,926
|
|
2023 and thereafter
|
|
|
18,407
|
|
|
|
|
|
|
Total minimum payments required
|
|
$
|
57,323
|
|
|
|
|
|
|
30
During the six months ended June 30, 2017, the Company entered into agreements with
third-party vendors in the ordinary course of business whereby the Company committed to purchase goods and services used in its normal operations. These agreements generally are not cancelable, range from one to five year periods and may contain
fixed or minimum annual commitments. Certain of these agreements allow for renegotiation of the minimum annual commitments. The following is a schedule of the future minimum purchases remaining under the agreements as of June 30, 2017 (in
thousands):
|
|
|
|
|
|
|
Amount
|
|
|
2017 (remaining six months)
|
|
$
|
5,560
|
|
2018
|
|
|
5,881
|
|
2019
|
|
|
5,176
|
|
2020
|
|
|
619
|
|
2021
|
|
|
-
|
|
2022
|
|
|
-
|
|
2023 and thereafter
|
|
|
-
|
|
|
|
|
|
|
Total minimum payments required
|
|
$
|
17,236
|
|
|
|
|
|
|
The July 2015 Qelp acquisition included contingent consideration of $6.0 million, based on achieving
targets tied to revenues and EBITDA for the years ended December 31, 2016, 2017 and 2018. On September 26, 2016, the Company entered into an addendum to the Qelp purchase agreement with the sellers to settle the outstanding contingent
consideration for EUR 4.0 million to be paid by June 30, 2017. The Company paid $4.4 million in May 2017 to settle the outstanding contingent consideration obligation.
As part of the April 2016 Clearlink acquisition, the Company assumed contingent consideration liabilities related to four separate
acquisitions made by Clearlink in 2015 and 2016, prior to the Merger. The fair value of the contingent consideration related to these previous acquisitions was $2.8 million as of April 1, 2016 and was based on achieving targets primarily
tied to revenues for varying periods of time during 2016 and 2017. As of June 30, 2017, the fair value of the remaining contingent consideration was $1.1 million. The estimated future value of the contingent consideration is
$1.1 million and is expected to be paid on varying dates through October 2017.
Loss Contingency
The Company, from time to time, is involved in legal actions arising in the ordinary course of business. With respect to these matters,
management believes that the Company has adequate legal defenses and/or when possible and appropriate, provided adequate accruals related to those matters such that the ultimate outcome will not have a material adverse effect on the Companys
financial position or results of operations.
Note 15. Defined Benefit Pension Plan and Postretirement Benefits
Defined Benefit Pension Plans
The following table provides information about the net periodic benefit cost for the Companys pension plans (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Service cost
|
|
$
|
128
|
|
|
$
|
120
|
|
|
$
|
253
|
|
|
$
|
238
|
|
Interest cost
|
|
|
49
|
|
|
|
45
|
|
|
|
98
|
|
|
|
89
|
|
Recognized actuarial (gains)
|
|
|
(11
|
)
|
|
|
(10
|
)
|
|
|
(21
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
166
|
|
|
$
|
155
|
|
|
$
|
330
|
|
|
$
|
305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
Employee Retirement Savings Plans
The Company maintains a 401(k) plan covering defined employees who meet established eligibility requirements. Under the plan provisions, the
Company matches 50% of participant contributions to a maximum matching amount of 2% of participant compensation. The Companys contributions included in the accompanying Condensed Consolidated Statements of Operations were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
401(k) plan contributions
|
|
$
|
309
|
|
|
$
|
334
|
|
|
$
|
620
|
|
|
$
|
619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Split-Dollar Life Insurance Arrangement
In 1996, the Company entered into a split-dollar life insurance arrangement to benefit the former Chairman and Chief Executive Officer of the
Company. Under the terms of the arrangement, the Company retained a collateral interest in the policy to the extent of the premiums paid by the Company. The postretirement benefit obligation included in Other long-term liabilities and
the unrealized gains (losses) included in Accumulated other comprehensive income in the accompanying Condensed Consolidated Balance Sheets were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
Postretirement benefit obligation
|
|
$
|
21
|
|
|
$
|
27
|
|
Unrealized gains (losses) in AOCI
(1)
|
|
$
|
175
|
|
|
$
|
200
|
|
|
(1)
Unrealized
gains (losses) are impacted by changes in discount rates related to the postretirement obligation.
|
|
Note 16. Stock-Based Compensation
The Companys stock-based compensation plans include the 2011 Equity Incentive Plan, the
Non-Employee
Director Fee Plan and the Deferred Compensation Plan. The following table summarizes the stock-based compensation expense (primarily in the Americas), income tax benefits related to the
stock-based compensation and excess tax benefits (deficiencies) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Stock-based compensation (expense)
(1)
|
|
$
|
(2,261
|
)
|
|
$
|
(3,547
|
)
|
|
$
|
(4,732
|
)
|
|
$
|
(5,729
|
)
|
Income tax benefit
(2)
|
|
|
871
|
|
|
|
1,348
|
|
|
|
1,822
|
|
|
|
2,177
|
|
Excess tax benefit (deficiency) from stock-based compensation
(3)
|
|
|
-
|
|
|
|
149
|
|
|
|
-
|
|
|
|
2,060
|
|
(1)
Included in General and
administrative costs in the accompanying Condensed Consolidated Statements of Operations.
(2)
Included in Income taxes in the accompanying Condensed Consolidated Statements of Operations.
(3)
Included in Additional
paid-in
capital in the accompanying Condensed Consolidated Statement of Changes in Shareholders Equity.
There were no capitalized
stock-based compensation costs as of June 30, 2017 and December 31, 2016.
Beginning January 1, 2017, as a result of the
adoption of ASU
2016-09,
the Company began accounting for forfeitures as they occur, rather than estimating expected forfeitures. The net cumulative effect of this change was recognized as a $0.2 million
reduction to retained earnings as of January 1, 2017. Additionally, excess tax benefits (deficiencies) from stock compensation are included in Income taxes in the accompanying Condensed Consolidated Statements of Income subsequent
to the adoption of ASU
2016-09.
2011
Equity Incentive Plan
The Companys Board of Directors (the Board) adopted the Sykes Enterprises, Incorporated 2011 Equity Incentive Plan (the 2011 Plan) on March 23, 2011, as amended on May 11, 2011 to reduce the number of
shares of common stock available to 4.0 million shares. The 2011 Plan was approved by the shareholders at the May 2011 annual shareholders meeting. The 2011 Plan replaced and superseded the Companys 2001 Equity Incentive Plan (the
2001 Plan), which expired on March 14, 2011. The outstanding awards granted under the 2001 Plan will remain in effect until their exercise, expiration or termination. The 2011 Plan permits the grant of restricted stock, stock
appreciation rights, stock options and other stock-based awards to certain employees of the Company, members of the Companys Board and certain
non-employees
who provide services to the Company in order
to encourage them to remain in the employment of, or to faithfully provide services to, the Company and to increase their interest in the Companys success.
32
Stock Appreciation Rights
The Board, at
the recommendation of the Compensation and Human Resources Development Committee (the Compensation Committee), has approved in the past, and may approve in the future, awards of stock-settled stock appreciation rights (SARs)
for eligible participants. SARs represent the right to receive, without payment to the Company, a certain number of shares of common stock, as determined by the Compensation Committee, equal to the amount by which the fair market value of a share of
common stock at the time of exercise exceeds the grant price. The SARs are granted at the fair market value of the Companys common stock on the date of the grant and vest
one-third
on each of the first
three anniversaries of the date of grant, provided the participant is employed by the Company on such date. The SARs have a term of 10 years from the date of grant. The fair value of each SAR is estimated on the date of grant using the Black-Scholes
valuation model that uses various assumptions.
The following table summarizes the assumptions used to estimate the fair value of SARS
granted:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
Expected volatility
|
|
|
19.3%
|
|
|
|
25.3%
|
|
Weighted-average volatility
|
|
|
19.3%
|
|
|
|
25.3%
|
|
Expected dividend rate
|
|
|
0.0%
|
|
|
|
0.0%
|
|
Expected term (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
Risk-free rate
|
|
|
1.9%
|
|
|
|
1.5%
|
|
The following table summarizes SARs activity as of June 30, 2017 and for the six months then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Appreciation Rights
|
|
Shares (000s)
|
|
Weighted
Average Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term (in years)
|
|
Aggregate
Intrinsic Value
(000s)
|
Outstanding at January 1, 2017
|
|
|
633
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
396
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(196
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2017
|
|
|
833
|
|
|
$
|
-
|
|
|
|
8.9
|
|
|
$
|
4,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or expected to vest at June 30, 2017
|
|
|
833
|
|
|
$
|
-
|
|
|
|
8.9
|
|
|
$
|
4,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2017
|
|
|
163
|
|
|
$
|
-
|
|
|
|
7.2
|
|
|
$
|
1,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information regarding SARs granted and exercised (in thousands, except per SAR
amounts):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
Number of SARs granted
|
|
|
396
|
|
|
|
323
|
|
Weighted average grant-date fair value per SAR
|
|
$
|
6.24
|
|
|
$
|
7.68
|
|
Intrinsic value of SARs exercised
|
|
$
|
1,678
|
|
|
$
|
1,691
|
|
Fair value of SARs vested
|
|
$
|
1,846
|
|
|
$
|
1,520
|
|
33
The following table summarizes nonvested SARs activity as of June 30, 2017 and for the six
months then ended:
|
|
|
|
|
|
|
|
|
Nonvested Stock Appreciation Rights
|
|
Shares (000s)
|
|
Weighted
Average Grant-
Date Fair Value
|
Nonvested at January 1, 2017
|
|
|
515
|
|
|
$
|
7.76
|
|
Granted
|
|
|
396
|
|
|
$
|
6.24
|
|
Vested
|
|
|
(241
|
)
|
|
$
|
7.69
|
|
Forfeited or expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Nonvested at June 30, 2017
|
|
|
670
|
|
|
$
|
6.88
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2017, there was $4.0 million of total unrecognized compensation cost, net of actual
forfeitures, related to nonvested SARs granted under the 2011 Plan. This cost is expected to be recognized over a weighted average period of 1.5 years.
Restricted Shares
The Board, at the recommendation of the Compensation Committee, has approved in the past,
and may approve in the future, awards of performance and employment-based restricted shares (restricted shares) for eligible participants. In some instances, where the issuance of restricted shares has adverse tax consequences to the
recipient, the Board may instead issue restricted stock units (RSUs). The restricted shares are shares of the Companys common stock (or in the case of RSUs, represent an equivalent number of shares of the Companys common
stock) which are issued to the participant subject to (a) restrictions on transfer for a period of time and (b) forfeiture under certain conditions. The performance goals, including revenue growth and income from operations targets,
provide a range of vesting possibilities from 0% to 100% and will be measured at the end of the performance period. If the performance conditions are met for the performance period, the shares will vest and all restrictions on the transfer of the
restricted shares will lapse (or in the case of RSUs, an equivalent number of shares of the Companys common stock will be issued to the recipient). The Company recognizes compensation cost, net of actual forfeitures, based on the fair value
(which approximates the current market price) of the restricted shares (and RSUs) on the date of grant ratably over the requisite service period based on the probability of achieving the performance goals.
Changes in the probability of achieving the performance goals from period to period will result in corresponding changes in compensation
expense. The employment-based restricted shares currently outstanding vest
one-third
on each of the first three anniversaries of the date of grant, provided the participant is employed by the Company on such
date.
The following table summarizes nonvested restricted shares/RSUs activity as of June 30, 2017 and for the six months then
ended:
|
|
|
|
|
|
|
|
|
Nonvested Restricted Shares and RSUs
|
|
Shares (000s)
|
|
Weighted
Average Grant-
Date Fair Value
|
Nonvested at January 1, 2017
|
|
|
1,136
|
|
|
$
|
25.47
|
|
Granted
|
|
|
480
|
|
|
$
|
29.42
|
|
Vested
|
|
|
(328
|
)
|
|
$
|
20.95
|
|
Forfeited or expired
|
|
|
(63
|
)
|
|
$
|
20.71
|
|
|
|
|
|
|
|
|
|
|
Nonvested at June 30, 2017
|
|
|
1,225
|
|
|
$
|
28.48
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information regarding restricted shares/RSUs granted and vested (in thousands,
except per restricted share/RSU amounts):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
Number of restricted shares/RSUs granted
|
|
|
480
|
|
|
|
451
|
|
Weighted average grant-date fair value per restricted share/RSU
|
|
$
|
29.42
|
|
|
$
|
30.32
|
|
Fair value of restricted shares/RSUs vested
|
|
$
|
6,868
|
|
|
$
|
6,785
|
|
34
As of June 30, 2017, there was $27.0 million of total unrecognized compensation cost,
net of actual forfeitures, related to nonvested restricted shares/RSUs granted under the 2011 Plan. This cost is expected to be recognized over a weighted average period of 2.0 years.
Non-Employee
Director Fee Plan
The Companys 2004
Non-Employee
Director Fee Plan (the 2004 Fee Plan), as amended on May 17, 2012, provided that all new
non-employee
directors joining the Board would receive
an initial grant of shares of common stock on the date the new director is elected or appointed, the number of which will be determined by dividing $60,000 by the closing price of the Companys common stock on the trading day immediately
preceding the date a new director is elected or appointed, rounded to the nearest whole number of shares. The initial grant of shares vested in twelve equal quarterly installments,
one-twelfth
on the date of
grant and an additional
one-twelfth
on each successive third monthly anniversary of the date of grant. The award lapses with respect to all unvested shares in the event the
non-employee
director ceases to be a director of the Company, and any unvested shares are forfeited.
The 2004 Fee Plan also provided that each
non-employee
director would receive, on the day after the
annual shareholders meeting, an annual retainer for service as a
non-employee
director (the Annual Retainer). Prior to May 17, 2012, the Annual Retainer was $95,000, of which $50,000 was
payable in cash, and the remainder was paid in stock. The annual grant of cash vested in four equal quarterly installments,
one-fourth
on the day following the annual meeting of shareholders, and an additional
one-fourth
on each successive third monthly anniversary of the date of grant. The annual grant of shares paid to
non-employee
directors prior to May 17, 2012 vests
in eight equal quarterly installments,
one-eighth
on the day following the annual meeting of shareholders, and an additional
one-eighth
on each successive third monthly
anniversary of the date of grant. On May 17, 2012, upon the recommendation of the Compensation Committee, the Board adopted the Fifth Amended and Restated
Non-Employee
Director Fee Plan (the
Amendment), which increased the common stock component of the Annual Retainer by $30,000, resulting in a total Annual Retainer of $125,000, of which $50,000 was payable in cash and the remainder paid in stock. In addition, the Amendment
also changed the vesting period for the annual equity award, from a
two-year
vesting period, to a
one-year
vesting period (consisting of four equal quarterly
installments,
one-fourth
on the date of grant and an additional
one-fourth
on each successive third monthly anniversary of the date of grant). The award lapses with
respect to all unpaid cash and unvested shares in the event the
non-employee
director ceases to be a director of the Company, and any unvested shares and unpaid cash are forfeited.
In addition to the Annual Retainer award, the 2004 Fee Plan also provided for any
non-employee
Chairman of the Board to receive an additional annual cash award of $100,000, and each
non-employee
director serving on a committee of the Board to receive an additional annual cash award. The additional
annual cash award for the Chairperson of the Audit Committee is $20,000 and Audit Committee members are entitled to an annual cash award of $10,000. The annual cash awards for the Chairpersons of the Compensation Committee, Finance Committee
and Nominating and Corporate Governance Committee are $15,000, $12,500 and $12,500, respectively, and all other members of such committees are entitled to an annual cash award of $7,500.
The 2004 Fee Plan expired in May 2014, prior to the 2014 annual shareholders meeting. In March 2014, upon the recommendation of the
Compensation Committee, the Board determined that, following the expiration of the 2004 Fee Plan, the compensation of
non-employee
Directors should continue on the same terms as provided in the Fifth Amended
and Restated
Non-Employee
Director Fee Plan, except the amounts of cash and equity grants shall be determined annually by the Board, and that the stock portion of such compensation would be issued under the
2011 Plan.
At the Boards regularly scheduled meeting on December 10, 2014, upon the recommendation of the Compensation
Committee, the Board determined that the amount of the cash and equity compensation payable to
non-employee
directors beginning on the date of the 2015 annual shareholders meeting would be increased as
follows: cash compensation would be increased by $5,000 per year to a total of $55,000 and equity compensation would be increased by $25,000 per year to a total of $100,000. No change would be made in the additional amounts payable to the Chairman
of the Board or the Chairs or members of the various Board committees for their service on such committees, and no changes would be made in the payment terms described above for such cash and equity compensation.
At the Boards regularly scheduled meeting on December 6, 2016, upon the recommendation of the Compensation Committee, the Board
determined that the amount of the cash compensation payable to
non-employee
directors beginning on the date of the 2017 annual shareholders meeting would be increased by $15,000 per year to a total of
$70,000.
35
The Board may pay additional cash compensation to any
non-employee
director for services on behalf of the Board over and above those typically expected of directors, including but not limited to service on a special committee of the Board. Directors who are
executive officers of the Company receive no compensation for service as members of either the Board of Directors or any committees of the Board.
The following table summarizes nonvested common stock share award activity as of June 30, 2017 and for the six months then ended:
|
|
|
|
|
|
|
|
|
Nonvested Common Stock Share Awards
|
|
Shares (000s)
|
|
Weighted
Average Grant-
Date Fair Value
|
Nonvested at January 1, 2017
|
|
|
10
|
|
|
$
|
28.69
|
|
Granted
|
|
|
24
|
|
|
$
|
32.93
|
|
Vested
|
|
|
(14
|
)
|
|
$
|
30.41
|
|
Forfeited or expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Nonvested at June 30, 2017
|
|
|
20
|
|
|
$
|
32.54
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information regarding common stock share awards granted and vested (in
thousands, except per share award amounts):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
Number of share awards granted
|
|
|
24
|
|
|
|
32
|
|
Weighted average grant-date fair value per share award
|
|
$
|
32.93
|
|
|
$
|
29.04
|
|
Fair value of share awards vested
|
|
$
|
430
|
|
|
$
|
410
|
|
As of June 30, 2017, there was $0.6 million of total unrecognized compensation cost, net of actual
forfeitures, related to nonvested common stock share awards granted under the Fee Plan. This cost is expected to be recognized over a weighted average period of less than one year.
Deferred Compensation Plan
The Companys
non-qualified
Deferred
Compensation Plan (the Deferred Compensation Plan), which is not shareholder-approved, was adopted by the Board effective December 17, 1998. It was last amended and restated on December 9, 2015, effective as of January 1,
2016, and was subsequently amended on May 18, 2016, effective as of June 30, 2016, August 17, 2016, effective as of January 1, 2017 and May 25, 2017, effective as of July 1, 2017. Eligibility is limited to a select
group of key management and employees who are expected to receive an annualized base salary (which will not take into account bonuses or commissions) that exceeds the amount taken into account for purposes of determining highly compensated employees
under Section 414(q) of the Internal Revenue Code of 1986 based on the current years base salary and applicable dollar amounts. The Deferred Compensation Plan provides participants with the ability to defer between 1% and 80% of their
compensation (between 1% and 100% prior to June 30, 2016, the effective date of the first amendment) until the participants retirement, termination, disability or death, or a change in control of the Company. Using the Companys
common stock, the Company matches 50% of the amounts deferred by participants on a quarterly basis up to a total of $12,000 per year for the president, chief executive officer and executive vice presidents, $7,500 per year for senior vice
presidents, global vice presidents and vice presidents, and, effective January 1, 2017, $5,000 per year for all other participants (there was no match for other participants prior to January 1, 2017, the effective date of the second
amendment). Matching contributions and the associated earnings vest over a seven-year service period. Vesting will be accelerated in the event of the participants death or disability, a change in control or retirement (defined as separate from
service after age 65). In the event of a distribution of benefits as a result of a change in control of the Company, the Company will increase the benefit by an amount sufficient to offset the income tax obligations created by the distribution of
benefits. Deferred compensation amounts used to pay benefits, which are held in a rabbi trust, include investments in various mutual funds and shares of the Companys common stock (see Note 7, Investments Held in Rabbi Trust). As of
June 30, 2017 and December 31, 2016, liabilities of $10.8 million and $9.4 million, respectively, of the Deferred Compensation Plan were recorded in Accrued employee compensation and benefits in the accompanying
Condensed Consolidated Balance Sheets.
36
Additionally, the Companys common stock match associated with the Deferred Compensation
Plan, with a carrying value of approximately $2.1 million and $1.8 million as of June 30, 2017 and December 31, 2016, respectively, is included in Treasury stock in the accompanying Condensed Consolidated Balance
Sheets.
The following table summarizes nonvested common stock activity as of June 30, 2017 and for the six months then ended:
|
|
|
|
|
|
|
|
|
Nonvested Common Stock
|
|
Shares (000s)
|
|
Weighted
Average Grant-
Date Fair Value
|
Nonvested at January 1, 2017
|
|
|
2
|
|
|
$
|
22.77
|
|
Granted
|
|
|
10
|
|
|
$
|
30.66
|
|
Vested
|
|
|
(8
|
)
|
|
$
|
30.62
|
|
Forfeited or expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Nonvested at June 30, 2017
|
|
|
4
|
|
|
$
|
27.08
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information regarding shares of common stock granted and vested (in thousands,
except per common stock amounts):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
Number of shares of common stock granted
|
|
|
10
|
|
|
|
6
|
|
Weighted average grant-date fair value per common stock
|
|
$
|
30.66
|
|
|
$
|
29.76
|
|
Fair value of common stock vested
|
|
$
|
240
|
|
|
$
|
183
|
|
Cash used to settle the obligation
|
|
$
|
422
|
|
|
$
|
359
|
|
As of June 30, 2017, there was $0.1 million of total unrecognized compensation cost, net of actual
forfeitures, related to nonvested common stock granted under the Deferred Compensation Plan. This cost is expected to be recognized over a weighted average period of 3.7 years.
Note 17. Segments and Geographic Information
The Company operates within two regions, the Americas and EMEA. Each region represents a reportable segment comprised of aggregated regional
operating segments, which portray similar economic characteristics. The Company aligns its business into two segments to effectively manage the business and support the customer care needs of every client and to respond to the demands of the
Companys global customers.
The reportable segments consist of (1) the Americas, which includes the United States, Canada,
Latin America, Australia and the Asia Pacific Rim, and provides outsourced customer engagement solutions (with an emphasis on inbound technical support, digital support and demand generation, and customer service) and technical staffing and
(2) EMEA, which includes Europe, the Middle East and Africa, and provides outsourced customer engagement solutions (with an emphasis on technical support and customer service) and fulfillment services. The sites within Latin America, Australia
and the Asia Pacific Rim are included in the Americas segment given the nature of the business and client profile, which is primarily made up of U.S.-based companies that are using the Companys services in these locations to support their
customer engagement needs.
37
Information about the Companys reportable segments is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
EMEA
|
|
Other
(1)
|
|
Consolidated
|
Three Months Ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
314,871
|
|
|
$
|
60,540
|
|
|
$
|
27
|
|
|
$
|
375,438
|
|
Percentage of revenues
|
|
|
83.9%
|
|
|
|
16.1%
|
|
|
|
0.0%
|
|
|
|
100.0%
|
|
|
|
|
|
|
Depreciation, net
|
|
$
|
11,842
|
|
|
$
|
1,254
|
|
|
$
|
724
|
|
|
$
|
13,820
|
|
Amortization of intangibles
|
|
$
|
4,989
|
|
|
$
|
261
|
|
|
$
|
-
|
|
|
$
|
5,250
|
|
|
|
|
|
|
Income (loss) from operations
|
|
$
|
26,089
|
|
|
$
|
2,163
|
|
|
$
|
(16,962
|
)
|
|
$
|
11,290
|
|
Total other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
(890
|
)
|
|
|
(890
|
)
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
(1,555
|
)
|
|
|
(1,555
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
305,211
|
|
|
$
|
59,152
|
|
|
$
|
39
|
|
|
$
|
364,402
|
|
Percentage of revenues
|
|
|
83.8%
|
|
|
|
16.2%
|
|
|
|
0.0%
|
|
|
|
100.0%
|
|
|
|
|
|
|
Depreciation, net
|
|
$
|
10,316
|
|
|
$
|
1,162
|
|
|
$
|
482
|
|
|
$
|
11,960
|
|
Amortization of intangibles
|
|
$
|
4,995
|
|
|
$
|
268
|
|
|
$
|
-
|
|
|
$
|
5,263
|
|
|
|
|
|
|
Income (loss) from operations
|
|
$
|
30,725
|
|
|
$
|
2,896
|
|
|
$
|
(20,219
|
)
|
|
$
|
13,402
|
|
Total other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
(373
|
)
|
|
|
(373
|
)
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
(3,891
|
)
|
|
|
(3,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
635,802
|
|
|
$
|
123,607
|
|
|
$
|
43
|
|
|
$
|
759,452
|
|
Percentage of revenues
|
|
|
83.7%
|
|
|
|
16.3%
|
|
|
|
0.0%
|
|
|
|
100.0%
|
|
|
|
|
|
|
Depreciation, net
|
|
$
|
23,310
|
|
|
$
|
2,440
|
|
|
$
|
1,418
|
|
|
$
|
27,168
|
|
Amortization of intangibles
|
|
$
|
9,967
|
|
|
$
|
514
|
|
|
$
|
-
|
|
|
$
|
10,481
|
|
|
|
|
|
|
Income (loss) from operations
|
|
$
|
64,022
|
|
|
$
|
7,743
|
|
|
$
|
(34,461
|
)
|
|
$
|
37,304
|
|
Total other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
(1,582
|
)
|
|
|
(1,582
|
)
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
(8,165
|
)
|
|
|
(8,165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
567,287
|
|
|
$
|
117,777
|
|
|
$
|
84
|
|
|
$
|
685,148
|
|
Percentage of revenues
|
|
|
82.8%
|
|
|
|
17.2%
|
|
|
|
0.0%
|
|
|
|
100.0%
|
|
|
|
|
|
|
Depreciation, net
|
|
$
|
19,492
|
|
|
$
|
2,326
|
|
|
$
|
926
|
|
|
$
|
22,744
|
|
Amortization of intangibles
|
|
$
|
8,363
|
|
|
$
|
527
|
|
|
$
|
-
|
|
|
$
|
8,890
|
|
|
|
|
|
|
Income (loss) from operations
|
|
$
|
63,712
|
|
|
$
|
6,306
|
|
|
$
|
(36,346
|
)
|
|
$
|
33,672
|
|
Total other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
(475
|
)
|
|
|
(475
|
)
|
Income taxes
|
|
|
|
|
|
|
|
|
|
|
(10,105
|
)
|
|
|
(10,105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Other items (including corporate and other costs, impairment costs, other income and expense, and income taxes)
are shown for purposes of reconciling to the Companys consolidated totals as shown in the tables above for the three and six months ended June 30, 2017 and 2016. Inter-segment revenues are not material to the Americas and EMEA segment
results.
|
38
The Companys reportable segments are evaluated regularly by its chief operating decision
maker to decide how to allocate resources and assess performance. The chief operating decision maker evaluates performance based upon stand-alone segment revenue and income (loss) from operations. Because assets by segment are not reported to or
used by the Companys chief operating decision maker to allocate resources, or to assess performance, total assets by segment are not disclosed.
Note 18. Other Income (Expense)
Other
income (expense), net consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Foreign currency transaction gains (losses)
|
|
$
|
(535
|
)
|
|
$
|
1,410
|
|
|
$
|
644
|
|
|
$
|
2,756
|
|
Gains (losses) on foreign currency derivative instruments not designated as hedges
|
|
|
1,097
|
|
|
|
(585
|
)
|
|
|
397
|
|
|
|
(1,324
|
)
|
Other miscellaneous income (expense)
|
|
|
269
|
|
|
|
242
|
|
|
|
642
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
831
|
|
|
$
|
1,067
|
|
|
$
|
1,683
|
|
|
$
|
1,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 19. Related Party Transactions
In January 2008, the Company entered into a lease for a customer engagement center located in Kingstree, South Carolina. The landlord,
Kingstree Office One, LLC, is an entity controlled by John H. Sykes, the founder, former Chairman and Chief Executive Officer of the Company and the father of Charles Sykes, President and Chief Executive Officer of the Company. The lease payments on
the
20-year
lease were negotiated at or below market rates, and the lease is cancellable at the option of the Company. There are penalties for early cancellation which decrease over time. The Company paid
$0.1 million to the landlord during both the three months ended June 30, 2017 and 2016, and $0.2 million during both the six months ended June 30, 2017 and 2016 under the terms of the lease.
39