10-Q
TTEC HOLDINGS, INC. filed this Form 10-Q on 11/07/2018
Entire Document
 
ttec_Current folio_10Q

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

Form 10-Q

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2018

 

OR

 

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from          to          

 


 

Commission File Number 001-11919

 


 

TTEC Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

84-1291044

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

9197 South Peoria Street

Englewood, Colorado 80112

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (303) 397-8100

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes    No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

 

 

 

Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   No

 

As of October 31, 2018, there were 46,193,077 shares of the registrant’s common stock outstanding.

 

 


 

TTEC HOLDINGS, INC. AND SUBSIDIARIES

SEPTEMBER 30, 2018 FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

 

 

Page No.

 

 

 

PART I. FINANCIAL INFORMATION 

 

 

 

 

Item 1. 

Financial Statements

 

 

 

 

 

Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 (unaudited)

1

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018 and 2017 (unaudited)

2

 

 

 

 

Consolidated Statement of Stockholders’ Equity as of and for the nine months ended September 30, 2018 (unaudited)

3

 

 

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)

4

 

 

 

 

Notes to the Consolidated Financial Statements (unaudited)

5

 

 

 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

46

 

 

 

Item 4. 

Controls and Procedures

48

 

 

 

PART II. OTHER INFORMATION 

 

 

 

 

Item 1. 

Legal Proceedings

49

 

 

 

Item 1A. 

Risk Factors

49

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

49

 

 

 

Item 5. 

Other Information

49

 

 

 

Item 6. 

Exhibits

50

 

 

 

SIGNATURES 

51

 

 

 

 

 

 

 

 


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

    

2018

    

2017

 

ASSETS

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

93,879

 

$

74,437

 

Accounts receivable, net

 

 

301,770

 

 

385,751

 

Prepaids and other current assets

 

 

86,054

 

 

63,668

 

Income tax receivable

 

 

13,447

 

 

11,099

 

Assets held for sale

 

 

7,822

 

 

7,835

 

Total current assets

 

 

502,972

 

 

542,790

 

 

 

 

 

 

 

 

 

Long-term assets

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

161,244

 

 

163,297

 

Goodwill

 

 

201,826

 

 

206,694

 

Deferred tax assets, net

 

 

22,335

 

 

12,012

 

Other intangible assets, net

 

 

82,902

 

 

92,086

 

Other long-term assets

 

 

67,327

 

 

61,857

 

Total long-term assets

 

 

535,634

 

 

535,946

 

Total assets

 

$

1,038,606

 

$

1,078,736

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

 

$

51,567

 

$

46,029

 

Accrued employee compensation and benefits

 

 

88,636

 

 

83,997

 

Other accrued expenses

 

 

30,324

 

 

18,993

 

Income tax payable

 

 

13,501

 

 

7,497

 

Deferred revenue

 

 

33,555

 

 

21,628

 

Other current liabilities

 

 

21,841

 

 

22,312

 

Liabilities held for sale

 

 

3,546

 

 

1,322

 

Total current liabilities

 

 

242,970

 

 

201,778

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

Line of credit

 

 

272,500

 

 

344,000

 

Deferred tax liabilities, net

 

 

10,698

 

 

11,285

 

Non-current income tax payable

 

 

38,302

 

 

47,871

 

Deferred rent

 

 

14,942

 

 

15,714

 

Other long-term liabilities

 

 

130,336

 

 

95,243

 

Total long-term liabilities

 

 

466,778

 

 

514,113

 

Total liabilities

 

 

709,748

 

 

715,891

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

Preferred stock; $0.01 par value; 10,000,000 shares authorized; zero shares outstanding as of             September 30, 2018 and December 31, 2017

 

 

 —

 

 

 —

 

Common stock; $0.01 par value; 150,000,000 shares authorized; 46,192,458 and 45,861,959 shares outstanding as of September 30, 2018 and December 31, 2017, respectively

 

 

462

 

 

459

 

Additional paid-in capital

 

 

351,141

 

 

351,725

 

Treasury stock at cost: 35,859,795 and 36,190,294 shares as of September 30, 2018 and December 31, 2017, respectively

 

 

(610,214)

 

 

(615,677)

 

Accumulated other comprehensive income (loss)

 

 

(125,973)

 

 

(102,304)

 

Retained earnings

 

 

705,218

 

 

721,664

 

Noncontrolling interest

 

 

8,224

 

 

6,978

 

Total stockholders’ equity

 

 

328,858

 

 

362,845

 

Total liabilities and stockholders’ equity

 

$

1,038,606

 

$

1,078,736

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

1


 

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(Amounts in thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended
 September 30,

 

Nine months ended 

September 30,

 

 

    

2018

    

2017

    

2018

    

2017

 

Revenue

 

$

364,936

 

$

359,036

 

$

1,090,038

 

$

1,050,742

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (exclusive of depreciation and amortization presented separately below)

 

 

286,925

 

 

275,548

 

 

844,555

 

 

797,450

 

Selling, general and administrative

 

 

43,321

 

 

45,167

 

 

134,611

 

 

132,372

 

Depreciation and amortization

 

 

17,317

 

 

16,515

 

 

52,052

 

 

47,273

 

Restructuring and integration charges, net

 

 

2,716

 

 

6,006

 

 

4,599

 

 

9,768

 

Impairment losses

 

 

 —

 

 

 —

 

 

1,120

 

 

 —

 

Total operating expenses

 

 

350,279

 

 

343,236

 

 

1,036,937

 

 

986,863

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

14,657

 

 

15,800

 

 

53,101

 

 

63,879

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,401

 

 

899

 

 

3,940

 

 

2,020

 

Interest expense

 

 

(8,410)

 

 

(3,469)

 

 

(22,634)

 

 

(8,699)

 

Other income (expense), net

 

 

989

 

 

4,416

 

 

(8,786)

 

 

6,573

 

Loss on assets held for sale

 

 

 —

 

 

 —

 

 

(2,000)

 

 

(3,178)

 

Total other income (expense)

 

 

(6,020)

 

 

1,846

 

 

(29,480)

 

 

(3,284)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

8,637

 

 

17,646

 

 

23,621

 

 

60,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

(1,893)

 

 

(2,071)

 

 

(4,648)

 

 

(9,059)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

6,744

 

 

15,575

 

 

18,973

 

 

51,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interest

 

 

(1,369)

 

 

(806)

 

 

(3,489)

 

 

(2,828)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to TTEC stockholders

 

$

5,375

 

$

14,769

 

$

15,484

 

$

48,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,744

 

$

15,575

 

$

18,973

 

$

51,536

 

Foreign currency translation adjustments

 

 

(2,255)

 

 

(1,153)

 

 

(28,139)

 

 

8,414

 

Derivative valuation, gross

 

 

7,463

 

 

3,221

 

 

6,679

 

 

24,713

 

Derivative valuation, tax effect

 

 

(2,015)

 

 

(1,288)

 

 

(2,744)

 

 

(10,117)

 

Other, net of tax

 

 

103

 

 

127

 

 

317

 

 

386

 

Total other comprehensive income (loss)

 

 

3,296

 

 

907

 

 

(23,887)

 

 

23,396

 

Total comprehensive income (loss)

 

 

10,040

 

 

16,482

 

 

(4,914)

 

 

74,932

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Comprehensive income attributable to noncontrolling interest

 

 

(1,313)

 

 

(899)

 

 

(3,271)

 

 

(3,153)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to TTEC stockholders

 

$

8,727

 

$

15,583

 

$

(8,185)

 

$

71,779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

46,172

 

 

45,838

 

 

46,021

 

 

45,816

 

Diluted

 

 

46,316

 

 

46,367

 

 

46,390

 

 

46,348

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to TTEC stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.12

 

$

0.32

 

$

0.34

 

$

1.06

 

Diluted

 

$

0.12

 

$

0.32

 

$

0.33

 

$

1.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share outstanding

 

$

0.28

 

$

0.25

 

$

0.55

 

$

0.47

 

 

The accompanying notes are an integral part of these consolidated financial statements.

2


 

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity

(Amounts in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity of the Company

 

 

 

 

 

 

 

 

    

    

    

    

 

    

    

    

    

 

    

    

 

    

    

 

    

Accumulated

    

    

 

    

    

 

    

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock

 

Treasury

 

Additional

 

Comprehensive

 

Retained

 

Noncontrolling

 

 

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Stock

 

Paid-in Capital

 

Income (Loss)

 

Earnings

 

interest

 

Total Equity

 

Balance as of December 31, 2017

 

 

$

 

45,862

 

$

459

 

$

(615,677)

 

$

351,725

 

$

(102,304)

 

$

721,664

 

$

6,978

 

$

362,845

 

Cumulative effect of adopting accounting standard updates

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(6,584)

 

 

 —

 

 

(6,584)

 

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

15,484

 

 

3,489

 

 

18,973

 

Dividends to shareholders ($0.55 per common share)

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(25,346)

 

 

 —

 

 

(25,346)

 

Dividends distributed to noncontrolling interest

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(2,025)

 

 

(2,025)

 

Foreign currency translation adjustments

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(27,921)

 

 

 —

 

 

(218)

 

 

(28,139)

 

Derivatives valuation, net of tax

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,935

 

 

 —

 

 

 —

 

 

3,935

 

Vesting of restricted stock units

 

 —

 

 

 —

 

315

 

 

 3

 

 

5,215

 

 

(9,836)

 

 

 —

 

 

 —

 

 

 —

 

 

(4,618)

 

Exercise of stock options

 

 —

 

 

 —

 

15

 

 

 —

 

 

248

 

 

(40)

 

 

 —

 

 

 —

 

 

 —

 

 

208

 

Equity-based compensation expense

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

9,292

 

 

 —

 

 

 —

 

 

 —

 

 

9,292

 

Purchases of common stock

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Other, net of tax

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

317

 

 

 —

 

 

 —

 

 

317

 

Balance as of September 30, 2018

 

 —

 

$

 —

 

46,192

 

$

462

 

$

(610,214)

 

$

351,141

 

$

(125,973)

 

$

705,218

 

$

8,224

 

$

328,858

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

3


 

TTEC HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

    

2018

    

2017

    

Cash flows from operating activities

 

 

 

 

 

 

 

Net income

 

$

18,973

 

$

51,536

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

52,052

 

 

47,273

 

Amortization of contract acquisition costs

 

 

1,183

 

 

1,273

 

Amortization of debt issuance costs

 

 

744

 

 

521

 

Imputed interest expense and fair value adjustments to contingent consideration

 

 

8,204

 

 

39

 

Provision for doubtful accounts

 

 

483

 

 

380

 

(Gain) loss on disposal of assets

 

 

25

 

 

85

 

Gain on sale of business and dissolution of entity

 

 

 —

 

 

(3,323)

 

Impairment losses

 

 

1,120

 

 

 —

 

Impairment on equity investment

 

 

15,632

 

 

 —

 

Gain (adjustment) on bargain purchase of a business

 

 

(685)

 

 

 —

 

Non-cash loss on held for sale assets

 

 

2,000

 

 

3,178

 

Deferred income taxes

 

 

(5,276)

 

 

8,155

 

Excess tax benefit from equity-based awards

 

 

(708)

 

 

(1,970)

 

Equity-based compensation expense

 

 

9,292

 

 

8,358

 

(Gain) loss on foreign currency derivatives

 

 

659

 

 

829

 

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

Accounts receivable

 

 

77,186

 

 

13,460

 

Prepaids and other assets

 

 

(39,752)

 

 

(26,814)

 

Accounts payable and accrued expenses

 

 

14,777

 

 

32,597

 

Deferred revenue and other liabilities

 

 

10,200

 

 

14,066

 

Net cash provided by operating activities

 

 

166,109

 

 

149,643

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Proceeds from sale of long-lived assets

 

 

21

 

 

31

 

Purchases of property, plant and equipment, net of acquisitions

 

 

(31,841)

 

 

(43,932)

 

Proceeds from sale of business

 

 

 —

 

 

391

 

Investments in non-marketable equity investments

 

 

(2,119)

 

 

(1,384)

 

Acquisitions, net of cash acquired of $4.5 million and zero, respectively

 

 

(2,027)

 

 

(81,360)

 

Net cash used in investing activities

 

 

(35,966)

 

 

(126,254)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from line of credit

 

 

1,573,500

 

 

1,571,837

 

Payments on line of credit

 

 

(1,645,000)

 

 

(1,534,137)

 

Payments on other debt

 

 

(4,613)

 

 

(4,501)

 

Payments of contingent consideration and hold back payments to acquisitions

 

 

(785)

 

 

(674)

 

Dividends paid to shareholders

 

 

(12,414)

 

 

(10,069)

 

Payments to noncontrolling interest

 

 

(2,025)

 

 

(2,745)

 

Proceeds from exercise of stock options

 

 

208

 

 

2,150

 

Tax payments related to issuance of restricted stock units

 

 

(4,618)

 

 

(4,937)

 

Payments of debt issuance costs

 

 

(35)

 

 

(38)

 

Purchase of treasury stock

 

 

 —

 

 

(18,328)

 

Net cash used in financing activities

 

 

(95,782)

 

 

(1,442)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(14,919)

 

 

1,631

 

 

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

 

19,442

 

 

23,578

 

Cash and cash equivalents, beginning of period

 

 

74,437

 

 

55,264

 

Cash and cash equivalents, end of period

 

$

93,879

 

$

78,842

 

 

 

 

 

 

 

 

 

Supplemental disclosures

 

 

 

 

 

 

 

Cash paid for interest

 

$

13,677

 

$

8,138

 

Cash paid for income taxes

 

$

30,088