NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
(In thousands, except share and per share data)
(Unaudited)
1. OVERVIEW AND BASIS OF PREPARATION
Unless otherwise noted in this report, any description of "us," "we," or "our," refers to StarTek, Inc. and its subsidiaries (the "Company"). Financial information in this report is presented in U.S. dollars.
Business
Startek is a global business process outsourcing company that provides omnichannel customer interactions, technology and back-office support solutions for some of the world’s most iconic brands in a variety of vertical markets. Operating under the Startek and Aegis brand, we help these large global companies connect emotionally with their customers, solve issues, and improve net promoter scores and other customer-facing performance metrics. Through consulting and analytics services, technology-led innovation, and engagement solutions, we deliver personalized experiences at the point of conversation between our clients and their customers across every interaction channel and phase of the customer journey.
Startek has proven results for the multiple services we provide, including sales, order management and provisioning, customer care, technical support, receivables management, and retention programs. We manage programs using a variety of multi-channel customer interactions, including voice, chat, email, social media and back-office support. Startek has facilities in India, United States, Malaysia, Philippines, Australia, South Africa, Canada, Honduras, Jamaica, Kingdom of Saudi Arabia, Argentina, Peru and Sri Lanka.
Basis of preparation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US-GAAP") for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by US-GAAP for complete financial statements.
These consolidated financial statements reflect all adjustments (consisting only of normal recurring entries, except as noted) which, in the opinion of management, are necessary for fair presentation. The results of operations for interim periods are not necessarily indicative of full year results.
The consolidated financial statements reflect the financial results of all subsidiaries that are more than 50% owned and over which the Company exerts control. When the Company does not have majority ownership in an entity but exerts significant influence over that entity, the Company accounts for the entity under the equity method of accounting. All intercompany balances are eliminated on consolidation. Where our ownership of a subsidiary was less than 100%, the non-controlling interest is reported in our Consolidated Balance Sheets. The non-controlling interest in our consolidated net income is reported as "Net income (loss) attributable to non-controlling interests" in our Consolidated Statements of Comprehensive Income (loss).
The consolidated balance sheet as of December 31, 2019, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by US-GAAP. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.
8
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment, intangibles, impairment of goodwill, valuation allowances for deferred tax assets and restructuring costs. Management believes that the estimates used in the preparation of the condensed consolidated financial statements are reasonable, and management has made assumptions about the possible effects of the novel coronavirus (“COVID-19”) pandemic on critical and significant accounting estimates. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. Any changes in estimates are adjusted prospectively in the Company’s condensed consolidated financial statements.
Revenue
The company utilizes a five-step process given in ASC 606, for revenue recognition that focuses on transfer of control, rather than transfer of risks and rewards. It also provided additional guidance on accounting for contract acquisition and fulfillment costs. Refer Note 4 on "Revenue from Contracts with Customers" for further information.
Leases
On January 1, 2019, the Company adopted Accounting Standards Codification 842, Leases, (Topic 842) with the transition approach. However, the Company has accounted the lease for the comparable periods as per the Accounting Standards Codification 840.
We determine if an arrangement is a lease at inception. Operating leases are included in right-of-use (“ROU”) assets, current maturity of operating lease liabilities, and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property plant and equipment, long-term debt, accrued expenses and other current liabilities in our consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the balance lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the date of initial application on determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.
The Company elected the practical expedient permitted under the transition guidance under Topic 842, which among other matters, allowed the Company (i) not to apply the recognition requirements to short-term leases (leases with a lease term of 12 months or less), (ii) not to reassess whether any expired or existing contracts are or contain leases, (iii) not to reassess the lease classification for any expired or existing leases, and (iv) not to reassess initial direct costs for any existing leases
We have lease agreements with lease and non-lease components, which are generally accounted for separately.
During the first quarter of 2020, the COVID-19 pandemic did not trigger changes to the terms of any of the Company’s leases, however during second quarter we have received partial relief from, a few landlords in terms of rent discounts for certain periods and deferments of rent for a few facilities. Rent discounts and deferment of rent have been accounted for without lease modification using the practical expedient provided by the FASB.
9
Business Combinations
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, Business Combinations, by recognizing identifiable tangible and intangible assets acquired, liabilities assumed, and non-controlling interests in the acquired business at their fair values. The excess of the cost of the acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed is recorded as goodwill. Acquisition related costs are expensed as incurred.
Goodwill and Intangible Assets
Goodwill represents the cost of acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased. Goodwill is not amortized but is tested for impairment at least on an annual basis on December 31, based on a number of factors, including operating results, business plans and future cash flows. The Company performs an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the assessment of events or circumstances, the Company performs a quantitative assessment of goodwill impairment if it determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, based on the quantitative impairment analysis, the carrying value of a reporting unit exceeds the fair value of reporting units, an impairment loss is recognized in an amount equal to the excess. In addition, the Company performs a quantitative assessment of goodwill impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Refer to Note 3 for information and related disclosures.
Intangible assets acquired in a business combination were recorded at fair value at acquisition date using generally accepted valuation methods appropriate for the type of intangible asset. Intangible assets with definite lives are amortized over the estimated useful lives and are reviewed for impairment at least annually, or more frequently if indicators of impairment arise.
Foreign Currency Matters
The Company has operations in Argentina and its functional currency has historically been the Argentine Peso. The Company monitors inflation rates in countries in which it operates as required by US GAAP. Under ASC 830-10-45-12, an economy must be classified as highly inflationary when the cumulative three-year rate exceeds 100%. Considering the inflation data of Argentina, the Company has considered Argentina to be highly inflationary beginning on July 1, 2018. In accordance with ASC 830, the functional currency of the Argentina business has been changed to USD, which requires remeasurement of the local books to USD. Exchange gains and losses are recorded through net income as opposed to through other comprehensive income as had been done historically. Translation adjustments from periods prior to the change in functional currency were not removed from equity.
Stock-Based Compensation
We recognize expense related to all share-based payments to employees, including grants of employee stock options, based on the grant-date fair values amortized straight-line over the period during which the employees are required to provide services in exchange for the equity instruments. We include an estimate of forfeitures when calculating compensation expense. We use the Black-Scholes method for valuing stock-based awards. See Note 10, “Share-Based Compensation” for further information.
Common Stock Warrant Accounting
We account for common stock warrants as equity instruments, based on the specific terms of our warrant agreement. For more information refer to Note 10, "Share-Based Compensation."
Recent Accounting Pronouncements
In December 2019, FASB issued ASU 2019-12 which modifies ASC 740 to simplify accounting for income taxes. ASU 2019-12 amends the requirements related to the accounting for “hybrid” tax regimes. FASB amended ASC 740-10-15-4(a) to state that an entity should include the amount of tax based on income in the tax provision and should record any incremental amount recorded as a tax not based on income. This amendment effectively reverses the order in which an entity determines the type of tax under current U.S. GAAP. The Company does not have a hybrid tax regime currently.
FASB also removed the previous guidance that prohibit recognition of a DTA for a step up in tax basis “except to the extent that the newly deductible goodwill amount exceeds the remaining balance of book goodwill.” Instead, the amended guidance contains a model under which an entity can consider a list of factors in determining whether the step-up in tax basis is related to the business combination that caused the initial recognition of goodwill or to a separate transaction. The Company does not have a step up in tax basis for goodwill.
ASU 2019-12 also modified intra-period tax allocation exception to incremental approach. As per the modification, an entity should determine the tax effect of income from continuing operations without considering the tax effect of items that are not included in continuing operations, such as discontinued operations or other comprehensive income. The Company does not believe this to have material impact on their consolidated financial statements.
The ASU also makes one minor improvements to the Codification topics. Tax benefit of tax-deductible dividends on allocated and unallocated employee stock ownership plan shares shall be recognized in the income statement. FASB decided to change the phrase “recognized in the income statement” to “recognized in income taxes allocated to continuing operations” to clarify where income tax benefits related to tax-deductible dividends should be presented in the income statement. This improvement is not expected to have material impact on the Company.
The above amendments are effective for fiscal years beginning after December 15, 2020.
In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). The amendment makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other post retirement benefit plans. The new guidance eliminates requirements for certain disclosures that are no longer considered cost beneficial and requires new ones that the FASB considers pertinent. ASU No. 2018-14 is effective for fiscal years ending after December 15, 2020.
In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13"), Measurement of Credit Losses on Financial Instruments. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The standard will replace today's "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For available for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This ASU is effective for annual periods beginning after December 15, 2022, and interim periods therein for smaller reporting companies. We do not expect the adoption of ASU 2016-13 will have a material impact on our consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-03, “Codification Improvements to Financial Instruments.” This ASU represents changes to clarify or improve the Codification. The amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications in relation to financial instruments. This guidance was effective immediately upon issuance. The additional elements of the ASU did not have a material impact on the Company's consolidated results of operations, cash flows, financial position and or disclosures.
In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides temporary optional expedients and exceptions to the guidance in US GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. The guidance is effective upon issuance and generally can be applied through 31 December 2022. The Company is still in the process of assessing the impact of this ASU.
11
3. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The carrying value of goodwill is allocated to reporting units is as follows:
Reporting Units
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Americas
|
|
|
64,315
|
|
|
|
64,315
|
|
India
|
|
|
15,180
|
|
|
|
31,000
|
|
Malaysia
|
|
|
47,543
|
|
|
|
47,543
|
|
Saudi Arabia
|
|
|
54,840
|
|
|
|
54,840
|
|
South Africa
|
|
|
1,578
|
|
|
|
5,910
|
|
Argentina
|
|
|
4,991
|
|
|
|
4,991
|
|
Australia
|
|
|
8,186
|
|
|
|
10,742
|
|
Total
|
|
$
|
196,633
|
|
|
$
|
219,341
|
|
We perform a goodwill impairment analysis at least annually (in the fourth quarter of each year) unless indicators of impairment exist in interim periods. The Goodwill was allocated to new reporting units using a relative fair value allocation approach. We performed a quantitative assessment to determine if the fair value of each of our reporting units with goodwill exceeded its carrying value.
The assumptions used in the analysis are based on the Company’s internal budget. The Company projected revenue, operating margins and cash flows for a period of five years and applied a perpetual long-term growth rate using discounted cash flows (DCF) method. These assumptions are reviewed annually as part of management’s budgeting and strategic planning cycles. These estimates may differ from actual results. The values assigned to each of the key assumptions reflect the management’s past experience as their assessment of future trends and are consistent with external/internal sources of information.
During the first quarter of 2020, the Company reviewed the carrying value of goodwill due to the events and circumstances surrounding the COVID-19 pandemic. As a result of the recent global economic disruption and uncertainty due to the COVID-19 pandemic, the Company concluded a triggering event had occurred as of March 31, 2020, and accordingly, performed interim impairment testing on the goodwill balances of its reporting units. As quoted market prices are not available for these reporting units, the calculations of their estimated fair values were based on a discounted cash flow model (income approach).
The results of these interim impairment tests indicated that the estimated fair value of the India, South Africa and Australia reporting unit was less than its carrying value. Consequently, a goodwill impairment charge of $15,820, $4,332 and $2,556 was recorded for the India, South Africa and Australia reporting unit respectively.
As of June 30, 2020, based on the qualitative assessment, we concluded there is no additional impairment of goodwill.
The following table presents the changes in goodwill during the period:
|
|
Amount
|
|
Opening balance, December 31, 2019
|
|
$
|
219,341
|
|
Impairment
|
|
|
(22,708
|
)
|
Ending balance, June 30, 2020
|
|
$
|
196,633
|
|
Intangible Assets
The following table presents our intangible assets as of June 30, 2020
|
|
Gross Intangibles
|
|
|
Accumulated Amortization
|
|
|
Net Intangibles
|
|
|
Weighted Average Amortization Period (years)
|
|
Customer relationships
|
|
$
|
66,220
|
|
|
$
|
13,474
|
|
|
$
|
52,746
|
|
|
|
6.5
|
|
Brand
|
|
|
49,500
|
|
|
|
9,561
|
|
|
|
39,939
|
|
|
|
7.1
|
|
Trademarks
|
|
|
13,210
|
|
|
|
1,715
|
|
|
|
11,495
|
|
|
|
7.5
|
|
Other intangibles
|
|
|
2,130
|
|
|
|
666
|
|
|
|
1,464
|
|
|
|
4.9
|
|
|
|
$
|
131,060
|
|
|
$
|
25,416
|
|
|
$
|
105,644
|
|
|
|
|
|
During the first quarter of 2020, the Company reviewed the carrying value of its intangible assets due to the events and circumstances surrounding the COVID-19 pandemic. As a result of the recent global economic disruption and uncertainty due to the COVID-19 pandemic, the Company concluded a triggering event had occurred as of March 31, 2020, and accordingly, performed interim impairment testing on the all intangible assets. Based on the results of our analyses, the estimated fair values of the trade names exceeded the carrying values.
As of June 30, 2020, based on the qualitative assessment, we concluded there is no impairment of the company's intangible assets.
Expected future amortization of intangible assets as of June 30, 2020 is as follows:
Years Ending December 31,
|
|
Amount
|
|
Remainder of 2020
|
|
$
|
5,175
|
|
2021
|
|
|
10,350
|
|
2022
|
|
|
10,350
|
|
2023
|
|
|
10,306
|
|
2024
|
|
|
10,252
|
|
Thereafter
|
|
|
59,211
|
|
12
4. REVENUE
The company follows a five-step process in accordance with ASC 606, for revenue recognition that focuses on transfer of control, rather than transfer of risks and rewards.
Contracts with Customers
All of the Company's revenues are derived from written contracts with our customers. Generally speaking, our contracts document our customers' intent to utilize our services and the relevant terms and conditions under which our services will be provided. Our contracts generally do not contain minimum purchase requirements nor do they include termination penalties. Our customers may generally cancel our contract, without cause, upon written notice (generally ninety days). While our contracts do have stated terms, because of the facts stated above, they are accounted for on a month-to-month basis.
Our contracts give us the right to bill for services rendered during the period, which for the majority of our customers is a calendar month, with a few customers specifying a fiscal month. Our payment terms vary by client and generally range from due upon receipt to 60-90 days.
Performance Obligations
We have identified one main performance obligation for which we invoice our customers, which is to stand ready to provide care services for our customers’ clients. A stand-ready obligation is a promise that a customer will have access to services as and when the customer decides to use them. Ours is considered a stand-ready obligation because the delivery of the underlying service (that is, receiving customer contact and performing the associated care services) is outside of our control or the control of our customer.
Our stand-ready obligation involves outsourcing of the entire customer care life cycle, including:
|
•
|
The identification, operation, management and maintenance of facilities, IT equipment, and IT and telecommunications infrastructure
|
|
•
|
Management of the entire human resources function, including recruiting, hiring, training, supervising, evaluating, coaching, retaining, compensating, providing employee benefits programs, and disciplinary activities
|
These activities are all considered an integral part of the production activities required in the service of standing ready to accept calls as and when they are directed to us by our clients.
13
Revenue Recognition Methods
Because our customers receive and consume the benefit of our services as they are performed and we have the contractual right to invoice for services performed to date, we have concluded that our performance obligation is satisfied over time. Accordingly, we recognize revenue for our services in the month they are performed. This is consistent with our prior revenue recognition model.
We are generally entitled to invoice for our services on a monthly basis. We invoice according to the hourly and/or per transaction rates stated in each contract for the various activities we perform. Some contracts include opportunities to earn bonuses or include parameters under which we will incur penalties related to performance in any given month. Bonus or penalty amounts are based on the current month’s performance. Formulas are included in the contracts for calculation of any bonus or penalty. There is no other performance in future periods that will impact the bonus or penalty calculation in the current period. We estimate the amount of the bonus or penalty using the “most likely amount” method and we apply this method consistently. The bonus or penalty calculated is generally approved by the client prior to billing (and revenue being recognized).
Practical expedients and exemptions
Because the Company’s contracts are essentially month-to-month, we have elected the following practical expedients:
|
•
|
ASC 606-10-50-14 exempts companies from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less
|
|
•
|
ASC 340-40-25-4 allows companies to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.
|
|
•
|
ASC 606-10-32-2A allows an entity to make an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (for example, sales, use, value added, and some excise taxes)
|
|
•
|
ASC 606-10-55-18 allows an entity that has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date (for example, a service contract in which an entity bills a fixed amount for each hour of service provided), the entity may recognize revenue in the amount to which the entity has a right to invoice.
|
Our net revenues in the second quarter were negatively impacted by COVID-19, primarily due to lockdowns and lower active workforce in most of the Geographies where we had operations, the Company did see improvement throughout the quarter as few countries and states began to gradually re-open. For example, sales in Malaysia and Australia returned to growth in the second quarter. However, the ultimate COVID-19 impact on the fiscal year sales remains highly fluid and will continue to evolve with geographical re-openings and shutdowns due to volatile virus waves.
Disaggregated Revenue
Revenues by our clients' industry vertical for the three and six months ended June 30, 2020 and 2019, respectively:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
Vertical:
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Telecom
|
|
|
50,186
|
|
|
|
64,421
|
|
|
|
105,527
|
|
|
|
130,245
|
|
E-commerce & Consumer
|
|
|
21,354
|
|
|
|
24,375
|
|
|
|
47,802
|
|
|
|
48,719
|
|
Financial & Business Services
|
|
|
10,438
|
|
|
|
13,245
|
|
|
|
23,833
|
|
|
|
26,565
|
|
Media & Cable
|
|
|
22,099
|
|
|
|
23,587
|
|
|
|
45,265
|
|
|
|
45,344
|
|
Travel & Hospitality
|
|
|
14,179
|
|
|
|
17,375
|
|
|
|
29,965
|
|
|
|
33,889
|
|
Healthcare & Education
|
|
|
9,178
|
|
|
|
8,352
|
|
|
|
22,617
|
|
|
|
18,881
|
|
Technology, IT & Related Services
|
|
|
4,402
|
|
|
|
3,458
|
|
|
|
9,497
|
|
|
|
5,896
|
|
All other segments
|
|
|
10,816
|
|
|
|
6,470
|
|
|
|
19,323
|
|
|
|
12,886
|
|
Gross Revenue
|
|
|
142,652
|
|
|
|
161,283
|
|
|
|
303,829
|
|
|
|
322,425
|
|
Less: Warrant Contra Revenue
|
|
|
(485
|
)
|
|
|
(730
|
)
|
|
|
(763
|
)
|
|
|
(730
|
)
|
Net Revenue
|
|
$
|
142,167
|
|
|
$
|
160,553
|
|
|
|
303,066
|
|
|
$
|
321,695
|
|
14
5. NET LOSS PER SHARE
Basic net loss per common share is computed based on our weighted average number of common shares outstanding. Diluted earnings per share is computed based on our weighted average number of common shares outstanding plus the effect of dilutive stock options, non-vested restricted stock, and deferred stock units, using the treasury stock method.
When a net loss is reported, potentially issuable common shares are excluded from the computation of diluted earnings per share as their effect would be anti-dilutive.
The Company always maintained Startek's 2008 Equity Incentive Plan (see Note 10, "Share-based compensation and employee benefit plans" for more information). For the three and six months ended June 30, 2020, the following shares were not included in the computation of diluted earnings per share because we reported a net loss and the effect would have been anti-dilutive (in thousands):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Anti-dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
1,948
|
|
|
|
2,628
|
|
|
|
1,948
|
|
|
|
2,628
|
|
6. IMPAIRMENT LOSSES & RESTRUCTURING/EXIT COST
Impairment Loss
During the first quarter of 2020, the Company reviewed the carrying value of goodwill due to the events and circumstances surrounding the COVID-19 pandemic and performed interim impairment testing on the goodwill balances of its reporting units. Accordingly, a goodwill impairment charge of $15,820, $4,332 and $2,556 was recorded for the India, South Africa and Australia reporting unit respectively.
Restructuring/Exit Cost
The table below summarizes the balance of accrued restructuring, other acquisition related cost and involuntary termination cost, which is included in other accrued liabilities in our consolidated balance sheets, and the changes during the six months ended June 30, 2020:
|
|
Employee related
|
|
|
Facilities related
|
|
|
Total
|
|
Balance as of December 31, 2019
|
|
$
|
1,326
|
|
|
$
|
514
|
|
|
$
|
1,840
|
|
Accruals/(reversals)
|
|
|
1,797
|
|
|
|
52
|
|
|
|
1,849
|
|
Payments
|
|
|
(2,490
|
)
|
|
|
(325
|
)
|
|
|
(2,815
|
)
|
Balance as of June 30, 2020
|
|
$
|
633
|
|
|
$
|
241
|
|
|
$
|
874
|
|
Employee related
In 2020, under a company-wide restructuring plan, we eliminated a number of positions which were considered redundant coupled with change in key management personnel , We recognized provision for employee related costs across a number of geographies and we expect to pay the remaining costs of $633 by the end of third quarter 2020.
Facilities related
In 2018, we terminated various leases in the United States and the Philippines due to closedown of the facilities. We recognized provision for the remaining costs associated with the leases. We expect to pay the remaining costs of $241 by the end of the first quarter of 2021.
15
7. DERIVATIVE INSTRUMENTS
Cash flow hedges
Our locations in Canada and the Philippines primarily serve US-based clients. The revenues from these clients is billed and collected in US Dollars, but the expenses related to these revenues are paid in Canadian Dollars and Philippine Pesos. We enter into derivative contracts, in the form of forward contracts and range forward contracts (a transaction where both a call option is purchased and a put option is sold) to mitigate this foreign currency exchange risk. The contracts cover periods commensurate with expected exposure, generally three to twelve months. We have elected to designate our derivatives as cash flow hedges in order to associate the results of the hedges with forecasted expenses.
The Company has terminated all Cash flow hedges contracts early in April, 2020 due to a change in counterparty relationship, hence balance as on June 30, 2020 is nil.
The following table shows the notional amount of our foreign exchange cash flow hedging instruments as of June 30, 2020:
|
|
For the Three Months Ended June 30, 2020
|
|
|
For the Three Months Ended June 30, 2020
|
|
|
Year Ended December 31,2019
|
|
|
Year Ended December 31,2019
|
|
|
|
Local Currency Notional Amount
|
|
|
U.S. Dollar Notional Amount
|
|
|
Local Currency Notional Amount
|
|
|
U.S. Dollar Notional Amount
|
|
Philippine Peso
|
|
|
-
|
|
|
|
-
|
|
|
|
769,000
|
|
|
|
14,361
|
|
Canadian Dollar
|
|
|
-
|
|
|
|
-
|
|
|
|
1,400
|
|
|
|
1,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,408
|
|
Derivative assets and liabilities associated with our hedging activities are measured at gross fair value as described in Note 8, "Fair Value Measurements," and are included in prepaid expense and other current assets and accrued expenses and other current liabilities in our condensed consolidated balance sheets, respectively.
|
|
Gain (Loss) Recognized in AOCI, net of tax
|
|
|
Gain (Loss) Recognized in AOCI, net of tax
|
|
|
Gain/ (Loss) Reclassified from AOCI into Income
|
|
|
Gain/ (Loss) Reclassified from AOCI into Income
|
|
|
|
Six months ended June 30, 2020
|
|
|
Six months ended June 30, 2019
|
|
|
Six months ended June 30, 2020
|
|
|
Six months ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
(434
|
)
|
|
|
436
|
|
|
|
(246
|
)
|
|
|
(88
|
)
|
Non-designated hedges
We have also entered into foreign currency range forward contracts and interest swap contract as required by our lenders. These hedges are not designated hedges under ASC 815, Derivatives and Hedging. These contracts generally do not exceed 3 years in duration.
Unrealized gains and losses and changes in fair value of these derivatives are recognized as incurred in Exchange gains (losses), net in the Consolidated Statements of Comprehensive Income (Loss). The following table presents these amounts for the three and six months ended June 30, 2020 and 2019:
Derivatives not designated under ASC 815
|
|
For the Three Months Ended June 30, 2020
|
|
|
For the Three Months Ended June 30, 2019
|
|
|
For the Six Months Ended June 30, 2020
|
|
|
For the Six Months Ended June 30, 2019
|
|
Foreign currency forward contracts
|
|
$
|
(1,304
|
)
|
|
$
|
342
|
|
|
$
|
468
|
|
|
$
|
315
|
|
Interest rate swap
|
|
$
|
(83
|
)
|
|
$
|
(405
|
)
|
|
$
|
(423
|
)
|
|
$
|
(630
|
)
|
8. FAIR VALUE MEASUREMENTS
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The levels of the fair value hierarchy are described below:
Level 1 - Quoted prices for identical instruments traded in active markets.
Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3 - Unobservable inputs that cannot be supported by market activity and that are significant to the fair value of the asset, liability, or equity such as the use of certain pricing models, discounted cash flow models and similar techniques that use significant assumptions. These unobservable inputs reflect our own estimates of assumptions that market participants would use in pricing the asset or liability:
16
Derivative Instruments
The values of our derivative instruments are derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such the derivatives are classified as Level 2 in the fair value hierarchy.
The following tables set forth our assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy. These balances are included in Other current assets and Other current liabilities, respectively, on our balance sheet.
|
|
As of June 30, 2020
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
—
|
|
|
$
|
1,834
|
|
|
$
|
—
|
|
|
$
|
1,834
|
|
Total fair value of assets measured on a recurring basis
|
|
$
|
—
|
|
|
$
|
1,834
|
|
|
$
|
—
|
|
|
$
|
1,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
$
|
—
|
|
|
$
|
696
|
|
|
$
|
—
|
|
|
$
|
696
|
|
Foreign exchange contracts
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total fair value of liabilities measured on a recurring basis
|
|
$
|
—
|
|
|
$
|
696
|
|
|
$
|
—
|
|
|
$
|
696
|
|
|
|
As of December 31, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
—
|
|
|
$
|
1,823
|
|
|
$
|
—
|
|
|
$
|
1,823
|
|
Total fair value of assets measured on a recurring basis
|
|
$
|
—
|
|
|
$
|
1,823
|
|
|
$
|
—
|
|
|
$
|
1,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap
|
|
$
|
—
|
|
|
$
|
544
|
|
|
$
|
—
|
|
|
$
|
544
|
|
Foreign exchange contracts
|
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
22
|
|
Total fair value of liabilities measured on a recurring basis
|
|
$
|
—
|
|
|
$
|
566
|
|
|
$
|
—
|
|
|
$
|
566
|
|
17
9. DEBT
The below table presents details of the Company's debt:
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Short term debt and current portion of long term debt
|
|
|
|
|
|
|
|
|
Working capital facilities
|
|
$
|
29,134
|
|
|
$
|
23,179
|
|
Loan from related parties
|
|
|
-
|
|
|
|
3,312
|
|
Current maturity of long term loan
|
|
|
8,400
|
|
|
|
16,800
|
|
Equipment loan
|
|
|
832
|
|
|
|
801
|
|
Current maturity of finance lease obligations
|
|
|
631
|
|
|
|
632
|
|
Total
|
|
$
|
38,997
|
|
|
$
|
44,724
|
|
|
|
|
|
|
|
|
|
|
Long term debt
|
|
|
|
|
|
|
|
|
Term loan, net of debt issuance costs
|
|
$
|
110,036
|
|
|
$
|
105,075
|
|
Equipment loan
|
|
|
195
|
|
|
|
619
|
|
Secured revolving credit facility
|
|
|
-
|
|
|
|
23,097
|
|
Finance lease obligations
|
|
|
692
|
|
|
|
1,353
|
|
Total
|
|
$
|
110,923
|
|
|
$
|
130,144
|
|
Working capital facilities
The Company has a number of working capital facilities in various countries in which it operates. These facilities provide for a combined borrowing capacity of approximately $30 million for a number of working capital products. These facilities bear interest at benchmark rate plus margins between 3.0% and 4.5% and are due on demand. These facilities are collateralized by various Company assets and have a total outstanding balance of $29 million as of June 30, 2020.
Loan from related parties
On August 26, 2019, the Company entered into a Loan Agreement with Tribus Capital Limited, as lender (“Tribus”), pursuant to which Tribus made a single-draw unsecured term loan to the Company in the aggregate amount of $1.5 million. The Company has paid interest on such loan at the rate of 8.5% per annum. All principal and interest on the loan was paid on April 21, 2020. The amounts outstanding as at June 30, 2020 is nil.
On November 20, 2019, the Company entered into a Loan Agreement with Bluemoss Ergon Limited, as lender (“Bluemoss”), pursuant to which Bluemoss made a single-draw unsecured term loan to the Company in the aggregate amount of $1.75 million. The Company has paid interest on such loan at the rate of 8.5% per annum. All principal and interest on the loan was paid on April 22, 2020. The amounts outstanding as at June 30, 2020 is nil.
Term loan
On October 27, 2017, the Company entered into a Senior Term Agreement ("Term loan") to provide funding for the acquisition of ESM Holdings Limited and its subsidiaries in the amount of $140 million for a five year term. The Term loan was fully funded on November 22, 2017 and is to be repaid based on a quarterly repayment schedule beginning six months after the first utilization date.
On July 9, 2020, the Company entered into an Amended and Restated Facility Agreement to amend some of the terms of the Term Loan. The key terms amended include, deferment of principal repayment for the amounts due between May 2020 and Jan 2021. Testing of covenants were also waived for the calendar year 2020. Next principal repayment now due in February 2021 and covenant testing will be carried out for the quarter ended March 2021.
Principal payments due on the term loan are as follows:
Years
|
|
Amount
|
|
Remainder of 2020
|
|
|
-
|
|
2021
|
|
|
17,850
|
|
2022
|
|
|
103,950
|
|
Total
|
|
$
|
121,800
|
|
The Term loan has a floating interest rate of USD LIBOR plus 4.5% annually for the first year and thereafter the margin will range between 3.75% and 4.5% subject to certain financial ratios.
In connection with the Term loan, the Company incurred issuance costs of $7.3 million which are net against the Term loan on the balance sheet. Unamortized debt issuance costs as of June 30, 2020 amount to $3.4 million.The Company agreed to pay a one time consent fees to the lender consortium towards the Amendment Agreement entered into on July 9, 2020. The consent fee would be $0.921 million and will be payable no later than June 30, 2021.
Secured revolving credit facility
The Company had a secured revolving credit facility in Startek USA. Under this agreement, we may borrow the lesser of the borrowing base calculation and $40 million. As long as no default has occurred and with lender consent, we may increase the maximum availability to $60 million in $5 million increments, and we may request letters of credit in an amount equal to the aggregate revolving credit commitments. The borrowing base is generally defined as 90% of our eligible accounts receivable less certain reserves.
This facility was closed in April 2020 and the amounts outstanding as of June 30, 2020 is nil.
Non-recourse factoring
We have entered into factoring agreements with financial institutions to sell certain of our accounts receivable under non-recourse agreements. Under the arrangement, the Company sells the trade receivables on a non-recourse basis and accounts for the transactions as sales of receivables. The applicable receivables are removed from the Company's consolidated balance sheet when the cash proceeds are received by the Company. We do not service any factored accounts after the factoring has occurred. We utilize factoring arrangements as part of our financing for working capital. The aggregate gross amount factored under these agreements was $29.68 million for six months ended June 30, 2020.
18
BMO Equipment Loan
On December 27, 2018, the Company executed an agreement to secure a loan against US and Canadian assets in the amount of $2.06 million at the interest of 7.57% per annum, to be repaid over 2.5 years. The loan was funded in January 2019.
Finance lease obligations
From time to time and when management believes it to be advantageous, we may enter into other arrangements to finance the purchase or construction of capital assets.
10. SHARE-BASED COMPENSATION
Amazon Warrant
On January 23, 2018, Startek entered into the Amazon Transaction Agreement, pursuant to which we agreed to issue to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon (“NV Investment”), a warrant (the “Warrant”) to acquire up to 4,000,000 shares (the “Warrant Shares”) of our common stock, par value $0.01 per share (“Common Stock”), subject to certain vesting events. On May 17, 2019, the Company issued and sold 692,520 shares of Common Stock to certain investors at a price per share of $7.48. The Warrant contains certain anti-dilution provisions and as a result of such offering, the total number of shares issuable to Amazon was adjusted from 4,000,000 to 4,002,964 and the exercise price of the Warrant was adjusted from $9.96 per share to $9.95 per share. On June 29, 2020, the Company issued and sold 1,540,041 shares of Common Stock to CSP Victory Limited at a price per share of $4.87 per share. As a result of such transaction, the total number of shares issuable to Amazon has been adjusted from 4,002,964 to 4,006,051 and the exercise price of the Warrant was adjusted from $9.95 per share to $9.94 per share. We entered into the Amazon Transaction Agreement in connection with commercial arrangements between us and any of our affiliates and Amazon and/or any of its affiliates pursuant to which we and any of our affiliates provide and will continue to provide commercial services to Amazon and/or any of its affiliates. The vesting of the Warrant shares, described below, is linked to payments made by Amazon or its affiliates (directly or indirectly through third parties) pursuant to the commercial arrangements.
The first tranche of 425,532 Warrant Shares vested upon the execution of the Amazon Transaction Agreement. The remainder of the Warrant Shares will vest in various tranches based on Amazon’s payment of up to $600 million to us or any of our affiliates in connection with the receipt by Amazon or any of its affiliates of commercial services from us or any of our affiliates. The Warrant Shares are exercisable through January 23, 2026.
The second tranche of 212,766 Warrant Shares vested on May 31, 2019. The amount of contra revenue attributed to these Warrant Shares is $730.
The third tranche of 212,953 Warrant Shares vested on Feb 29, 2020. The amount of contra revenue attributed to these Warrant Shares is $278 after adjusting the impact of $413 towards adoption of ASU 2019-08 on January 01, 2020 and $565 towards accrual till December 31, 2019, respectively using initial grant-date fair value.
As per ASC 606, the Company has accrued $485 for three month and $763 for six month respectively ended June 30, 2020 using initial grant-date fair value.
The contra-revenue and equity is estimated and recorded, using the Monte Carlo pricing model, when performance completion is probable, with adjustments in each reporting period until performance is complete in conformance with the requirements in ASC 606 and ASC 718.
The Warrant provides for net share settlement that, if elected by the holders, will reduce the number of shares issued upon exercise to reflect net settlement of the exercise price. The Warrant provides for certain adjustments that may be made to the exercise price and the number of shares of common stock issuable upon exercise due to customary anti-dilution provisions based on future events. Vested Warrant Shares are classified as equity instruments.
In line with ASU 2019-08, the Company has measured share-based payments at grant-date fair value, which will be the basis for the amount to be reduction in revenue. The Company has given the transitional impact of $413 in Equity in respect of awards wherein measurement date was not established or were not settled as of the beginning of financial year in which ASU is adopted (i.e. Jan 01, 2020).
Share-based compensation
Our share-based compensation arrangements include grants of stock options, restricted stock units and deferred stock units under the StarTek, Inc. 2008 Equity Incentive Plan and our Employee Stock Purchase Plan. The compensation expense that has been charged against income for the three months and six months ended June 30, 2020 was $(82) & $209. As of June 30, 2020, there was no unrecognized compensation expense related to non-vested stock options.
11. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss consisted of the following items:
|
|
Foreign Currency Translation Adjustment
|
|
|
Derivatives Accounted for as Cash Flow Hedges
|
|
|
Defined Benefit Plan
|
|
|
Equity attributable to Startek shareholders
|
|
|
Non-controlling interests
|
|
|
Total
|
|
Balance at December 31, 2019
|
|
$
|
(4,568
|
)
|
|
$
|
475
|
|
|
$
|
(1,929
|
)
|
|
$
|
(6,022
|
)
|
|
$
|
(1,597
|
)
|
|
$
|
(7,619
|
)
|
Foreign currency translation
|
|
|
(3,665
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,665
|
)
|
|
|
-
|
|
|
|
(3,665
|
)
|
Reclassification to operations
|
|
|
-
|
|
|
|
(246
|
)
|
|
|
-
|
|
|
|
(246
|
)
|
|
|
-
|
|
|
|
(246
|
)
|
Unrealized losses
|
|
|
-
|
|
|
|
(434
|
)
|
|
|
-
|
|
|
|
(434
|
)
|
|
|
-
|
|
|
|
(434
|
)
|
Pension remeasurement
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,006
|
)
|
|
|
(1,006
|
)
|
|
|
(1,624
|
)
|
|
|
(2,630
|
)
|
Balance at June 30, 2020
|
|
$
|
(8,233
|
)
|
|
$
|
(205
|
)
|
|
$
|
(2,935
|
)
|
|
$
|
(11,373
|
)
|
|
$
|
(3,221
|
)
|
|
$
|
(14,595
|
)
|
19
12. SEGMENT AND GEOGRAPHICAL INFORMATION
The Company provides business process outsourcing services (“BPO”) to clients in a variety of industries and geographical locations. Our approach is focused on providing our clients with the best possible combination of services and delivery locations to meet our clients' needs in the best and most efficient manner. Our Chief Executive Officer (CEO) and President, who have been identified as the Chief Operating Decision Maker ("CODM"), reviews financial information mainly on a geographical basis.
In the fourth quarter of 2019, we reorganized our operating business model. Our new operating business model is focused on geographies in which we operate. Our CODM reviews the performance and makes resource allocation geography wise, hence the geographical level represents the operating segments of Startek, Inc.
Prior period results have been revised for segment disclosure to conform to current period presentation. We report our results of operations as follows in Six reportable segments:-
a) Americas
b) Middle East
c) Malaysia
d) India and Sri Lanka
e) Argentina & Peru
f) Rest of World
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
58,479
|
|
|
|
53,395
|
|
|
|
126,647
|
|
|
|
116,998
|
|
India & Sri Lanka
|
|
|
16,698
|
|
|
|
27,948
|
|
|
|
40,950
|
|
|
|
56,157
|
|
Malaysia
|
|
|
12,017
|
|
|
|
20,748
|
|
|
|
23,902
|
|
|
|
33,196
|
|
Middle East
|
|
|
36,243
|
|
|
|
34,216
|
|
|
|
70,760
|
|
|
|
65,334
|
|
Argentina & Peru
|
|
|
8,997
|
|
|
|
11,839
|
|
|
|
19,205
|
|
|
|
24,423
|
|
Rest of World
|
|
|
9,733
|
|
|
|
12,407
|
|
|
|
21,602
|
|
|
|
25,587
|
|
Total
|
|
|
$ 142,167
|
|
|
|
$ 160,553
|
|
|
|
$ 303,066
|
|
|
|
$ 321,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
$ (255)
|
|
|
|
$ (1,803)
|
|
|
|
$ 671
|
|
|
|
$ (938)
|
|
India & Sri Lanka
|
|
|
(210)
|
|
|
|
(878)
|
|
|
|
(905)
|
|
|
|
252
|
|
Malaysia
|
|
|
3,305
|
|
|
|
2,428
|
|
|
|
4,940
|
|
|
|
3,872
|
|
Middle East
|
|
|
598
|
|
|
|
4,127
|
|
|
|
2,215
|
|
|
|
5,384
|
|
Argentina & Peru
|
|
|
(376)
|
|
|
|
319
|
|
|
|
(360)
|
|
|
|
(120)
|
|
Rest of World
|
|
|
453
|
|
|
|
433
|
|
|
|
725
|
|
|
|
846
|
|
Segment operating income
|
|
|
3,515
|
|
|
|
4,626
|
|
|
|
7,286
|
|
|
|
9,297
|
|
Startek consolidation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
22,708
|
|
|
|
-
|
|
Intangible amortization
|
|
|
2,581
|
|
|
|
2,748
|
|
|
|
5,163
|
|
|
|
5,376
|
|
Total operating income
|
|
|
$ 934
|
|
|
|
$ 1,878
|
|
|
|
$ (20,585)
|
|
|
|
$ 3,920
|
|
Property, plant and equipment, net by geography based on the location of the assets is presented below:
|
|
As on
|
|
|
As on
|
|
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Property, plant and equipment, net:
|
|
|
|
|
|
|
|
|
Americas
|
|
|
12,750
|
|
|
|
14,156
|
|
India & Sri Lanka
|
|
|
13,219
|
|
|
|
10,772
|
|
Malaysia
|
|
|
4,063
|
|
|
|
4,375
|
|
Middle East
|
|
|
5,071
|
|
|
|
4,722
|
|
Argentina & Peru
|
|
|
1,488
|
|
|
|
1,701
|
|
Rest of World
|
|
|
1,053
|
|
|
|
1,781
|
|
Total
|
|
$
|
37,644
|
|
|
$
|
37,507
|
|
13. LEASES
We have operating and finance leases for service centers, corporate offices and certain equipment. Our leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases for up to 3-5 years, and some of which include options to terminate the leases within 1 year.
The components of lease expense were as follows:
|
|
Three Months Ended June 30, 2020
|
|
|
Three Months Ended June 30, 2019
|
|
|
Six Months Ended June 30, 2020
|
|
|
Six Months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
|
7,111
|
|
|
|
7,901
|
|
|
|
14,370
|
|
|
|
15,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
|
342
|
|
|
|
501
|
|
|
|
668
|
|
|
|
985
|
|
Interest on lease liabilities
|
|
|
30
|
|
|
|
15
|
|
|
|
74
|
|
|
|
43
|
|
Total Finance lease cost
|
|
|
372
|
|
|
|
516
|
|
|
|
742
|
|
|
|
1,028
|
|
20
Supplemental cash flow information related to leases was as follows:
|
|
Six Months Ended June 30, 2020
|
|
|
Six Months Ended June 30, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
|
14,062
|
|
|
|
15,235
|
|
Operating cash flow from finance leases
|
|
|
74
|
|
|
|
43
|
|
Financing cash flows from finance leases
|
|
|
742
|
|
|
|
1,251
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
17,278
|
|
|
|
72,079
|
|
Finance leases
|
|
|
-
|
|
|
|
-
|
|
Supplemental balance sheet information related to leases was as follows:
|
|
As of June 30, 2020
|
|
|
As of December 31, 2019
|
|
Operating leases
|
|
|
|
|
|
|
|
|
Operating lease right-of-use assets
|
|
|
77,437
|
|
|
|
73,692
|
|
|
|
|
-
|
|
|
|
-
|
|
Operating lease liabilities - Current
|
|
|
20,223
|
|
|
|
19,677
|
|
Operating lease liabilities - Non-current
|
|
|
58,251
|
|
|
|
54,341
|
|
Total operating lease liabilities
|
|
|
78,474
|
|
|
|
74,018
|
|
|
|
|
|
|
|
|
|
|
Finance Leases
|
|
|
|
|
|
|
|
|
Property and equipment, at cost
|
|
|
5,173
|
|
|
|
4,391
|
|
Accumulated depreciation
|
|
|
(3,411
|
)
|
|
|
(1,984
|
)
|
Property and equipment, at net
|
|
|
1,762
|
|
|
|
2,407
|
|
|
|
|
-
|
|
|
|
-
|
|
Finance lease liabilities - Current
|
|
|
631
|
|
|
|
632
|
|
Finance lease liabilities - Non-current
|
|
|
692
|
|
|
|
1,353
|
|
Total finance lease liabilities
|
|
|
1,323
|
|
|
|
1,985
|
|
Weighted average remaining lease term
|
|
As of June 30, 2020
|
|
|
As of December 31, 2019
|
|
Operating leases
|
|
4.49 yrs
|
|
|
4.66 yrs
|
|
Finance leases
|
|
1.42 yrs
|
|
|
1.92 yrs
|
|
|
|
|
|
|
|
|
|
|
Weighted average discount rate
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
6.79
|
%
|
|
|
7.27
|
%
|
Finance leases
|
|
|
6.01
|
%
|
|
|
6.01
|
%
|
Maturities of lease liabilities were as follows:
|
|
Operating Leases
|
|
|
Finance Leases
|
|
Year ending December 31,
|
|
|
|
|
|
|
|
|
Remaining 2020
|
|
|
24,690
|
|
|
|
413
|
|
2021
|
|
|
15,924
|
|
|
|
577
|
|
2022
|
|
|
14,877
|
|
|
|
441
|
|
2023
|
|
|
12,116
|
|
|
|
-
|
|
2024
|
|
|
9,333
|
|
|
|
-
|
|
Thereafter
|
|
|
5,969
|
|
|
|
-
|
|
Total Lease payments
|
|
|
82,909
|
|
|
|
1,431
|
|
Less imputed interest
|
|
|
(4,435
|
)
|
|
|
(108
|
)
|
Total
|
|
|
78,474
|
|
|
|
1,323
|
|
14. SUBSEQUENT EVENT
On July 9, 2020, Startek entered into an amendment agreement for its senior term loan and revolving credit facility. Refer to Note 9 "Debt".
21