Syntel Reports Third Quarter 2017 Financial Results
October 17 2017 - 8:30AM
Highlights:
Syntel, Inc. (Nasdaq:SYNT), a leading global provider of integrated
information technology and knowledge process services, today
announced financial results for the third quarter, ended September
30, 2017.
Third Quarter Financial
Highlights
Syntel's revenue for the third quarter decreased
4.1 percent to $231.3 million from $241.3 million in the prior-year
period, and rose two percent from $226.8 million in the second
quarter of 2017. During the third quarter, Banking and Financial
Services accounted for 44.5 percent of total revenue, with Retail,
Logistics and Telecom at 18 percent, Healthcare and Life Sciences
at 18 percent, Insurance at 15.3 percent, and Manufacturing at 4.2
percent.
The Company's gross margin was 38.1 percent in
the third quarter, compared to 39.2 percent in the prior-year
period and 35.9 percent in the second quarter of 2017. Selling,
General and Administrative (SG&A) expenses were 11.7 percent of
revenue in the third quarter, compared to 12.2 percent in the
prior-year period and 12.7 percent in the previous quarter.
The third quarter income from operations was
26.4 percent of revenue as compared to 27 percent in the prior-year
period and 23.3 percent in the second quarter 2017.
Net income for the third quarter was $48.8 million or $0.58 per
diluted share. During the third quarter, Syntel had a one-time
reversal of approximately $6.3 million in tax provisions, which
positively impacted the EPS by $0.07 per share.
This compares to a net loss of $217.2 million or $2.58 per
diluted share in the prior-year period and a net income of $36.7
million or $0.44 per diluted share in the second quarter of 2017.
During the year-ago quarter, a net loss arose in connection with a
special cash dividend and the one-time repatriation of cash for
which the Company recognized a one-time tax expense of $271 million
(net of foreign tax credits) in the third quarter of 2016,
negatively impacting the EPS by $3.21 per share.
During Q3, Syntel spent $2.2 million in CAPEX
and finished the quarter with cash and short-term investments of
$109 million. The Company ended the quarter with 21,928 employees
globally. During the quarter, Syntel repurchased 875,435 shares of
its common stock for a total purchase price of $16.1 million.
Operational Highlights
"We continued to deepen our strategic relationships during the
third quarter," said Syntel CEO and President Rakesh Khanna. "In
particular, contribution from the 4 to 50 client segment grew
faster than the overall company."
"While we continue to see headwinds in certain
areas, the demand for digital services was strong and our Insurance
segment continued to post healthy growth,” said Khanna. “We are
encouraged by our Q3 results, but there is more work to be done.
Our customers are at the center of our universe, and this focus
will help Syntel return to growth over time.”
2017 Guidance
Based on current visibility levels and an
exchange rate assumption of 65.0 Indian rupees to the dollar, the
Company currently expects 2017 revenue of $890 million to $902
million and EPS in the range of $1.81 to $1.88.
Syntel to Host Conference
Call
Syntel will discuss its third quarter 2017
results today on a conference call at 10:00 a.m. (EDT). To listen
to the call, please dial (877) 837-3915 in the US/Canada or (973)
638-3495 internationally. The call will also be broadcast live via
the Internet at Syntel's web site: investor.syntelinc.com. Please
access the site at least 15 minutes prior to the call to register
and download any necessary software. A replay will be available
until October 24, 2017 by dialing (855) 859-2056 and entering
“98749553." International callers may dial (404) 537-3406 and enter
the same passcode.
About SyntelSyntel
(Nasdaq:SYNT) is a leading global provider of integrated
information technology and knowledge process services. Syntel helps
global enterprises evolve the core by leveraging automation, scaled
agile and cloud platforms to build efficient application
development and management, testing and infrastructure solutions.
Syntel’s digital services enable companies to engage customers,
discover new insights through analytics, and create a more
connected enterprise through the internet of things. Syntel’s
"Customer for Life" philosophy builds collaborative partnerships
and creates long-term client value by investing in IP, solutions
and industry-focused delivery teams with deep domain knowledge.
To learn more, visit us at
www.syntelinc.com.
Safe Harbor ProvisionThis news
release may include forward-looking statements, including those
with respect to the future level of business for Syntel, Inc. These
statements are necessarily subject to risk and uncertainty. Actual
results could differ materially from those projected in these
forward-looking statements as a result of certain risk factors set
forth in the Company's Annual Report on Form 10-K for the year
ended December 31, 2016, the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 2017 or from other factors not
currently anticipated.
Contacts: North America/Europe: Jon Luebke, Syntel,
248/619-3503, jon_luebke@syntelinc.com
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SYNTEL, INC. AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME |
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(UNAUDITED) |
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(IN THOUSANDS, EXCEPT PER SHARE
DATA) |
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THREE MONTHS ENDED |
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NINE MONTHS ENDED |
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SEPTEMBER 30, |
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SEPTEMBER 30, |
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2017 |
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2016 |
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2017 |
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2016 |
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Net
revenues |
$ |
231,340 |
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$ |
241,255 |
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$ |
684,020 |
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$ |
728,663 |
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|
Cost of
revenues |
|
143,219 |
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|
146,672 |
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|
432,017 |
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|
453,371 |
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Gross profit |
|
88,121 |
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|
94,583 |
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|
252,003 |
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|
275,292 |
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Selling,
general and administrative expenses |
|
27,160 |
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|
29,526 |
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|
86,150 |
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|
77,468 |
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Income from operations |
|
60,961 |
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65,057 |
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|
165,853 |
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|
197,824 |
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Other income (expense): |
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Interest
Expense |
|
(3,041 |
) |
|
(839 |
) |
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(9,633 |
) |
|
(1,984 |
) |
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Other
income |
|
520 |
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|
5,066 |
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|
1,478 |
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|
15,182 |
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Other
income (expense), net |
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(2,521 |
) |
|
4,227 |
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(8,155 |
) |
|
13,198 |
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Income
before provision for income taxes |
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58,440 |
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|
69,284 |
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|
157,698 |
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|
211,022 |
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Income tax
expense |
|
9,607 |
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|
286,513 |
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|
33,833 |
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|
316,403 |
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Net
income/(Loss) |
$ |
48,833 |
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$ |
(217,229 |
) |
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$ |
123,865 |
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$ |
(105,381 |
) |
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Other Comprehensive
Income |
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Foreign currency translation adjustments |
$ |
(1,255 |
) |
$ |
(391 |
) |
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$ |
5,857 |
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$ |
(17,725 |
) |
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Gains
on derivatives: |
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Gains arising during period on cash flow hedges |
|
342 |
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- |
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|
633 |
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- |
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Unrealized gains/(losses) on securities: |
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Unrealized holding gains arising during period |
|
301 |
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|
170 |
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|
496 |
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|
217 |
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Reclassification adjustment for gains included in net
income |
|
(77 |
) |
|
(1,931 |
) |
|
|
(112 |
) |
|
(244 |
) |
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|
224 |
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(1,761 |
) |
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|
384 |
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(27 |
) |
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Defined benefit pension plans: |
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Net profit arising during period |
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- |
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- |
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6 |
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- |
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Amortization of prior service cost included in net periodic
pension cost |
|
28 |
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12 |
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|
60 |
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|
47 |
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28 |
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12 |
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|
66 |
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|
47 |
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Other comprehensive Income (Loss), before tax |
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(661 |
) |
|
(2,140 |
) |
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|
6,940 |
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(17,705 |
) |
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Income tax benefit (expenses) related to Other comprehensive
income (loss) |
|
(217 |
) |
|
659 |
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(396 |
) |
|
(54 |
) |
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Other comprehensive Income/(loss), net of
tax |
|
(878 |
) |
|
(1,481 |
) |
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6,544 |
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(17,759 |
) |
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Comprehensive Income/(Loss) |
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$ |
47,955 |
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$ |
(218,710 |
) |
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$ |
130,409 |
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$ |
(123,140 |
) |
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Dividend Per Share |
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$ |
- |
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$ |
15.00 |
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$ |
- |
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$ |
15.00 |
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EARNINGS/(LOSS) PER SHARE: |
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Basic |
$ |
0.59 |
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$ |
(2.58 |
) |
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$ |
1.48 |
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$ |
(1.25 |
) |
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Diluted |
$ |
0.58 |
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$ |
(2.58 |
) |
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$ |
1.48 |
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$ |
(1.25 |
) |
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Weighted average common shares outstanding: |
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Basic |
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83,462 |
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|
84,214 |
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|
83,692 |
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|
84,155 |
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Diluted |
|
83,537 |
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|
84,289 |
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|
83,741 |
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|
84,278 |
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SYNTEL, INC. AND SUBSIDIARIES |
|
CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
(UNAUDITED) |
|
(IN THOUSANDS) |
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|
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(Unaudited) |
|
(Audited) |
|
|
|
September 30, |
|
December 31, |
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|
2017 |
|
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|
2016 |
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|
ASSETS |
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Current
assets: |
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Cash and cash equivalents |
$ |
75,417 |
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$ |
78,332 |
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Short term investments |
|
33,618 |
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|
21,614 |
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Accounts receivable, net of allowance for doubtful accounts of
$2,140 at September 30, 2017 and $801 at December 31, 2016,
respectively |
|
109,341 |
|
|
|
118,299 |
|
|
Revenue earned in excess of billings |
|
26,465 |
|
|
|
25,039 |
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Other current assets |
|
30,213 |
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|
|
36,306 |
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|
|
|
|
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Total current assets |
|
275,054 |
|
|
|
279,590 |
|
|
|
|
|
|
|
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Property
and equipment |
|
236,955 |
|
|
|
227,056 |
|
|
Less accumulated depreciation and amortization |
|
131,855 |
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|
|
120,580 |
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|
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Property and equipment, net |
|
105,100 |
|
|
|
106,476 |
|
|
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Goodwill |
|
906 |
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|
|
906 |
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|
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Non current
Term Deposits with Banks |
|
389 |
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|
|
225 |
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Deferred
income taxes and other non current assets |
|
79,581 |
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|
|
67,346 |
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TOTAL ASSETS |
$ |
461,030 |
|
|
$ |
454,543 |
|
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LIABILITIES AND SHAREHOLDERS'
(DEFICIT)/EQUITY |
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|
LIABILITIES |
|
|
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Current
liabilities: |
|
|
|
|
Accrued payroll and related costs |
$ |
51,339 |
|
|
$ |
56,650 |
|
|
Income taxes payable |
|
18,721 |
|
|
|
15,195 |
|
|
Accounts payable and other current liabilities |
|
33,177 |
|
|
|
31,559 |
|
|
Deferred revenue |
|
3,432 |
|
|
|
7,973 |
|
|
Loans and borrowings |
|
26,090 |
|
|
|
21,264 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
132,759 |
|
|
|
132,641 |
|
|
|
|
|
|
|
|
Deferred income taxes
and other non current liabilities |
|
|
29,992 |
|
|
|
26,373 |
|
|
Non Current loans and
borrowings |
|
|
361,895 |
|
|
|
478,616 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
524,646 |
|
|
|
637,630 |
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders' (deficit)/equity |
|
(63,616 |
) |
|
|
(183,087 |
) |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS'
(DEFICIT)/EQUITY |
$ |
461,030 |
|
|
$ |
454,543 |
|
|
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|
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