10-Q
TTEC HOLDINGS, INC. filed this Form 10-Q on 11/07/2018
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TTEC HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

The Company’s U.S. income tax returns filed for the tax years ending December 31, 2015 to present, remain open tax years. The Company has been notified of the intent to audit, or is currently under audit of, income taxes for Canada for tax years 2009 and 2010, the Philippines for tax year 2015, Canada GST for tax years 2014 through 2018, and the state of Minnesota in the United States for tax years 2014 through 2016. Although the outcome of examinations by taxing authorities are always uncertain, it is the opinion of management that the resolution of these audits will not have a material effect on the Company’s Consolidated Financial Statements. During the third quarter of 2018, the Company closed an audit in Ireland for the year 2016 with no material changes. The Company successfully closed their audit in the second quarter of 2017 in Hong Kong for the tax year 2014 with no material changes. The Company recorded a benefit in the amount of $0.8 million in the financial statements during the fourth quarter of 2017 related to the favorable resolution of tax audits. Finally, during the second and third quarters of 2018, the Company recorded benefits of $1.0 million and $1.1 million, respectively, related to the release of uncertain tax positions due to the closing of statutes of limitations.

The Company has been granted “Tax Holidays” as an incentive to attract foreign investment by the government of the Philippines. Generally, a Tax Holiday is an agreement between the Company and a foreign government under which the Company receives certain tax benefits in that country, such as exemption from taxation on profits derived from export-related activities. In the Philippines, the Company has been granted multiple agreements with an initial period of four years and additional periods for varying years, expiring at various times between 2011 and 2020. The aggregate effect on income tax expense for the three months ended September 30, 2018 and 2017 was approximately $1.9 million and $2.8 million, respectively, which had a favorable impact on diluted net income per share of $0.04 and $0.06, respectively. The aggregate effect on income tax expense for the nine months ended September 30, 2018 and 2017 was approximately $5.7 million and $8.9 million, respectively, which had a favorable impact on diluted net income per share of $0.12 and $0.19, respectively.

Subsequent to the financial reporting date, but prior to the date of the filing of the financial statements for the third quarter, the Company paid a dividend from its foreign operations to its U.S. parent in the amount of $280 million. The payment is consistent with the Company’s assertion regarding earnings permanently invested offshore and is expected to have a state tax expense impact in the range of $1 million to $3 million which will be recorded during the quarter ended December 31, 2018.

 

 

(9)RESTRUCTURING CHARGES, INTEGRATION CHARGES AND IMPAIRMENT LOSSES

Restructuring Charges

During the three and nine months ended September 30, 2018 and 2017, the Company continued restructuring activities primarily associated with reductions in the Company’s capacity, workforce and related management in several of the segments to better align the capacity and workforce with current business needs.

During 2017, several restructuring activities were completed related to the purchase of Connextions (see Note 2) including the closure of two delivery centers that came with the acquisition. During 2017, a net $0.4 million severance accrual was recorded in relation to these closures. In conjunction with closing these two delivery centers, a $0.6 million termination fee and a $1.4 million net lease liability and applicable expenses were recorded as of December 31, 2017. These net charges were included in the Consolidated Statements of Comprehensive Income (Loss) during the year ended December 31, 2017. During the third quarter 2018, the Company opted to execute an early termination clause for a center in the U.S. and has expensed $1.6 million which is included in the Restructuring and integration costs, net on the Consolidated Statements of Comprehensive Income (Loss).

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