UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended: December 31, 2017
Commission file number: 001-36671
Atento S.A.
(Exact name of Registrant as specified in its charter)
Atento S.A.
(Exact name of Registrant’s name into English)
Grand Duchy of Luxembourg
(Jurisdiction of incorporation or organization)
4, rue Lou Hemmer, L-1748 Luxembourg Findel
Grand Duchy of Luxembourg
(Address of principal executive offices)
Mauricio Teles Montilha, Chief Financial Officer
Address: Rua Professor Manoelito de Ornellas, 303, 1º andar, condomínio Nova São Paulo, 04719-040, São Paulo, Brasil
Telephone No.: + 55 (11) 3779-0881
e-mail: investor.relations@atento.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Ordinary Shares, no par value
Title of each class
Name of each exchange on which registered
New York Stock Exchange
Securities
registered
or
to
be
registered
pursuant
to
Section
12(g)
of
the
Act:
None
(Title of Class)
Securities
for
which
there
is
a
reporting
obligation
pursuant
to
Section
15(d)
of
the
Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
73,909,056 ordinary shares
¨
Yes x
x
No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
¨
Yes x
x
No
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.
x
Yes ¨
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
x
Yes ¨
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule
12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨
Accelerated filer x
Non-accelerated filer ¨¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
US GAAP ¨
International Financial Reporting Standards as issued by the
International Accounting Standards Board x
Other ¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨
Yes x
No
¨
Item 17 ¨
Item 18
Atento S.A.
TABLE OF CONTENTS
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
PRESENTATION OF FINANCIAL INFORMATION
TRADEMARKS AND TRADE NAMES
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A. Directors and Senior Management
B. Advisers
C. Auditors
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
A. Offer Statistics
B. Method and Expected Timetable
ITEM 3. KEY INFORMATION
A. Selected Financial Data
B. Capitalization and Indebtedness
C. Reasons for the Offer and Use of Proceeds
D. Risk Factors
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
B. Business Overview
C. Organizational Structure
D. Property, Plant and Equipment
ITEM 4A. UNRESOLVED STAFF COMMENTS
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. Operating Results
B. Liquidity and Capital Resources
C. Research and Development, Patents and Licenses, etc.
D. Trend Information
E. Off-Balance Sheet Arrangements
F. Tabular Disclosure of Contractual Obligations
G. Safe harbor
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
B. Compensation
C. Board practices
D. Employees
E. Share Ownership
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
B. Related Party Transactions
C. Interests of Experts and Counsel
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
B. Significant Changes
ITEM 9. THE OFFER AND LISTING
A. Offering and Listing Details
B. Plan of Distribution
C. Markets
D. Selling Shareholders
E. Dilution
F. Expenses of the Issue
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
2
3
4
4
7
7
7
7
7
7
7
7
7
7
15
15
15
35
35
36
48
49
50
50
52
67
74
74
75
75
76
76
76
79
80
82
84
85
85
86
87
87
87
89
89
89
90
90
99
90
91
91
91
B. Memorandum and Articles of Association
C. Material Contracts
D. Exchange Controls
E. Taxation
F. Dividends and Paying Agents
G. Statement by Experts
H. Documents on Display
I. Subsidiary Information
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
B. Warrants and Rights
C. Other Securities
D. American Depositary Shares
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
ITEM 15. CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
B. Management’s Annual Report on Internal Control over Financial Reporting
C. Attestation Report of the Registered Public Accounting Firm
D. Changes in Internal Control over Financial Reporting
ITEM 15T. CONTROLS AND PROCEDURES
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
ITEM 16B. CODE OF ETHICS
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
ITEM 16G. CORPORATE GOVERNANCE
ITEM 16H. MINE SAFETY DISCLOSURE
PART III
ITEM 17. FINANCIAL STATEMENTS
ITEM 18. FINANCIAL STATEMENTS
ITEM 19. EXHIBITS
90
96
96
97
99
99
99
99
99
101
101
101
101
101
102
102
102
102
102
102
102
102
103
103
103
103
103
103
103
103
103
104
105
105
105
Table of Contents
Basis of Presentation and Other Information
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Except where the context otherwise requires or where otherwise indicated, the terms “Atento”, “we”, “us”, “our”, “the Company”, and “our business” refer
to Atento S.A., a public limited liability company (société anonyme) incorporated under the laws of Luxembourg on March 5, 2014, together with its consolidated
subsidiaries.
Atento S.A. was formed as a direct subsidiary of Atalaya Luxco Topco S.C.A. (“Topco”). In April 2014, Topco also incorporated Atalaya Luxco PIKCo
S.C.A. (“PikCo”) and on May 15, 2014 Topco contributed to PikCo: (i) all of its equity interests in its then direct subsidiary, Atalaya Luxco Midco S.à.r.l.
(“Midco”), the consideration for which was an allocation to PikCo’s account “capital contributions not remunerated by shares” (the “Reserve Account”) equal to €2
million, resulting in Midco becoming a direct subsidiary of PikCo; and (ii) all of its debt interests in Midco (comprising three series of preferred equity certificates
(the “Original Luxco PECs”)), the consideration for which was the issuance by PikCo to Topco of preferred equity certificates having an equivalent value. On May
30, 2014, Midco authorized the issuance of, and PikCo subscribed for, a fourth series of preferred equity certificates (together with the Original Luxco PECs, the
“Luxco PECs”).
On October 7, 2014, we completed our IPO and issued 4,819,511 ordinary shares at a price of $15.00 per share. As a result of the IPO, the Share Split and
the Reorganization Transaction, we had 73,619,511 ordinary shares outstanding and owned 100% of the issued and outstanding share capital of Midco, as of
November 9, 2015.
On August 4, 2015, our Board of Directors (“The Board”) approved a share capital increase and issued 131,620 shares, increasing the number of outstanding
shares to 73,751,131.
On July 28, 2016, the Board approved a share capital increase and issued 157,925 shares, increasing the number of outstanding shares to 73,909,056.
Acquisition
and
Divestment
Transactions
On August 4, 2016, the Company through its direct subsidiary Atento Teleservicios España entered into an agreement (the “Share Sale and Purchase
Agreement”) with Intelcia Group, S.A. for the sale of 100% of Atento Morocco S.A., encompassing Atento’s operations in Morocco providing services to the
Moroccan and French markets (the “Morocco Transaction”). The Morocco Transaction was consummated on September 30, 2016, upon receipt of regulatory
approval. Atento’s operations in Morocco, which provide services to the Spanish market, are excluded from the Morocco Transaction and will continue operating
as part of Atento Spain.
On September 2, 2016, the Company through its direct subsidiary Atento Brasil acquired 81.49%, the controlling interest of RBrasil Soluções S.A.
(RBrasil).
On May 9, 2017, we announced an extended partnership with Itaú, a leading financial institution in Brazil, through which we will leverage the industry-
leading capabilities of RBrasil and Atento Brasil S.A. (“Atento Brasil”) to serve Itaú’s increasing demand for end-to-end collections solutions, customer service
and back office services.
On June 9, 2017, the Company, through its subsidiary, Atento Brasil, acquired 50.00002% of Interfile Serviços de BPO Ltda. and 50.00002% of
Interservicer – Serviços em Crédito Imobiliário Ltda. (jointly, “Interfile”), a leading provider of BPO services and solutions, including credit origination, for the
banking and financial services sector in Brazil. Through this acquisition, we expect to be able to expand our capabilities in the financial services segment,
especially in credit origination, accelerate our penetration into higher value-added solutions, strengthen our leadership position in the Brazilian market and facilitate
the expansion of our credit origination segment into other Latin American markets.
On June 30, 2017, we announced the signing of a strategic partnership and the acquisition of a minority stake in Keepcon, a leading provider of semantic
technology-based automated customer experience management, through our subsidiary Contact US Teleservices Inc. The acquisition of a minority stake in
Keepcon follows our overall strategy to develop and expand our digital capabilities. Our goal is to integrate all of our digital assets to generate additional value for
clients and drive growth across verticals and geographies. We aim to turn the business disruption generated by the digital revolution into differentiated customer
experience solutions generating competitive advantages for customers. We expect that the investment in Keepcon by Atento will expand the artificial intelligence
and automatization capabilities of our omnichannel platform.
2
Table of Contents
Other
Transactions
On August 10, 2017, Atento completed a refinancing transaction of its financing structure throughout its subsidiary Atento Luxco 1. The new financing
structure included an offering of US$400.0 million aggregate principal amount of 6.125% Senior Secured Notes due 2022 (the “Offering”). Atento used the net
proceeds from the Offering, together with cash on hand, to redeem all of the Issuer’s outstanding 7.375% Senior Secured Notes due 2020 and all of the existing
debentures due 2019 of its subsidiary Atento Brasil. The Senior Secured Notes are guaranteed on a senior secured basis by certain of Atento’s wholly-owned
subsidiaries on a joint and several basis.
On August 18, 2017, Atento filed a Form F-3 with the SEC, for the sake of up to $200,000,000 Ordinary Shares by Atento and 62,660,015 Ordinary Shares
Offered by the selling shareholder. In consequence, the selling shareholder may offer and sell from time to time up to 62,660,015 of Ordinary Shares, covered by
the Form F-3. These Ordinary Shares were offered in amounts, at prices and on terms to be determined at the time of their offering, if any.
On September 21, 2017, the Board of Directors approved a dividend policy for the Company with a goal of paying annual cash dividends pay-out in line
with industry peers and practices. The declaration and payment of any interim dividends will be subject to approval of Atento’s corporate bodies and will be
determined based upon, amongst other things, Atento’s performance, growth opportunities, cash flow, contractual covenants, applicable legal requirements and
liquidity factors. The Board of Directors intends to review the dividend policy regularly and so accordingly is subject to change at any time.
On October 31, 2017, our Board of Directors declared a cash interim dividend with respect to the ordinary shares of $0.3384 per share paid on November
28, 2017 to shareholders of record as of the close on November 10, 2017.
On November 13, 2017, Atento filed a Supplemental Prospectus with the SEC, for the sale of Pikco of 12,295,082 ordinary shares. After the offering Pikco
owns 50,364,933 ordinary shares in Atento, representing 68.14% of the outstanding shares.
Exchange Rate Information
In this Annual Report, all references to “U.S. dollar” and “$” are to the lawful currency of the United States and all references to “euro” or “€” are to the
single currency of the participating member states of the European and Monetary Union of the Treaty Establishing the European Community, as amended from
time to time. In addition, all references to Brazilian Reais (BRL), Mexican Peso (MXN), Chilean Peso (CLP), Argentinean Peso (ARS), Colombian Peso (COP)
and Peruvian Nuevos Soles (PEN) are to the lawful currencies of Brazil, Mexico, Chile, Argentina, Colombia and Peru, respectively.
The following table shows the exchange rates of the U.S. dollar to these currencies for the years and dates indicated as reported by the relevant central banks
of the European Union and each country, as applicable.
2013
2014
2015
2016
Euro (€)
Brazil (BRL)
Mexico (MXN)
Colombia (COP)
Chile (CLP)
Peru (PEN)
Argentina (ARS)
Average
December 31
0.73
2.34
13.08
1,926.83
524.61
2.80
6.52
0.75
2.16
12.77
1,869.31
495.40
2.70
5.48
Average
December 31
0.82
2.66
14.74
2,390.44
606.75
2.98
8.55
0.75
2.35
13.33
2,000.23
570.51
2.84
8.12
Average
December 31
0.92
3.90
17.25
3,153.54
710.16
3.41
13.04
0.93
3.34
15.88
2,745.55
654.76
3.19
9.26
Average
December 31
0.95
3.26
20.62
3,000.71
667.29
3.36
15.89
0.90
3.48
18.69
3,054.33
676.73
3.38
14.78
2017
Average
December 31
0.89
3.19
18.92
2,951.28
648.86
3.26
16.56
0.83
3.31
19.66
2,984.00
615.22
3.25
18.65
We present our historical financial information under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (the “IASB”).
PRESENTATION OF FINANCIAL INFORMATION
3
Table of Contents
Atento’s Financial Information
The consolidated financial information of Atento are the consolidated results of operations of Atento, which includes the years ended December 31, 2013,
2014, 2015, 2016 and 2017.
Rounding
Certain numerical figures set out in this Annual Report, including financial data presented in millions or thousands and percentages, have been subject to
rounding adjustments, and, as a result, the totals of the data in this Annual Report may vary slightly from the actual arithmetic totals of such data. Percentages and
amounts reflecting changes over time periods relating to financial and other data set forth in “Item 3. Key Information–A. Selected Financial Data” and “Item 5.
Operating and Financial Review and Prospects–A. Operating Results–Management’s Discussion and Analysis of Financial Condition and Results of Operations”
are calculated using the numerical data in the financial statements or the tabular presentation of other data (subject to rounding) contained in this Annual Report, as
applicable, and not using the numerical data in the narrative description thereof.
TRADEMARKS AND TRADE NAMES
This Annual Report includes our trademarks as “Atento,” which are protected under applicable intellectual property laws and are the property of the
Company or our subsidiaries. This Annual Report also contains trademarks, service marks, trade names and copyrights of other companies, which are the property
of their respective owners. Solely for convenience, trademarks and trade names referred to in this Annual Report may appear without the ® or TM symbols, but such
references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor
to these trademarks and trade names.
In 2017, Atento launched its digital business unit under the brand “Atento Digital”. Atento Digital’s mainstream offering encompasses a wide range of
digital capabilities that enhance customer experience and increase efficiency across the customer lifecycle, from acquiring to managing and retaining customers.
Atento Digital’s offer also includes consultancy services and solutions for advancing digital transformation processes while fully leveraging existing systems.
Atento Digital is a trademark registered by Atento.
CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS
This Annual Report contains estimates and forward-looking statements, principally in “Item 3. Key Information—D. Risk Factors”, “Item 4. Information on
the Company—B. Business Overview” and “Item 5. Operating and Financial Review and Prospects”. Some of the matters discussed concerning our business
operations and financial performance include estimates and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of
1995.
Our estimates and forward-looking statements are based mainly on our current expectations and estimates on projections of future events and trends, which
affect or may affect our businesses and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable
assumptions, they are subject to certain risks and uncertainties and are made in light of information currently available to us. Our estimates and forward-looking
statements may be influenced by the following factors, among others:
• the competitiveness of the customer relationship management and business process (“CRM BPO”) market;
• the loss of one or more of our major clients, a small number of which account for a significant portion of our revenue, in particular Telefónica;
• risks associated with operating in Latin America, where a significant proportion of our revenue is derived and where a large number of our employees are
based;
• our clients deciding to enter or further expand their own CRM BPO businesses in the future;
• any deterioration in global markets and general economic conditions, in particular in Latin America and in the telecommunications and the financial
services industries from which we derive most of our revenue;
• increases in employee benefit expenses, changes to labor laws and labor relations;
4
Table of Contents
• failure to attract and retain enough sufficiently trained employees at our service delivery centers to support our operations;
• inability to maintain our pricing and level of activity and control our costs;
• consolidation of potential users of CRM BPO services;
• the reversal of current trends towards CRM BPO solutions;
• fluctuations of our operating results from one quarter to the next due to various factors including seasonality;
• the significant leverage our clients have over our business relationships;
• the departure of key personnel or challenges with respect to labor relations;
• the long selling and implementation cycle for CRM BPO services;
• difficulty controlling our growth and updating our internal operational and financial systems as a result of our increased size;
• inability to fund our working capital requirements and new investments;
• fluctuations in, or devaluation of, the local currencies in the countries in which we operate against our reporting currency, the U.S. dollar;
• current political and economic volatility, particularly in Brazil, Mexico, Argentina and Europe;
• our ability to acquire and integrate companies that complement our business;
• the quality and reliability of the technology provided by our technology and telecommunications providers, our reliance on a limited number of suppliers
of such technology and the services and products of our clients;
• our ability to invest in and implement new technologies;
• disruptions or interruptions in our client relationships;
• actions of the Brazilian, EU, Spanish, Argentinian, Mexican and other governments and their respective regulatory agencies, including adverse
competition law rulings and the introduction of new regulations that could require us to make additional expenditures;
• damage or disruptions to our key technology systems or the quality and reliability of the technology provided by technology telecommunications
providers;
• an increase in the cost of telecommunications services and other services on which we and our industry rely;
• an actual or perceived failure to comply with data protection regulations, in particular any actual or perceived failure to ensure secure transmission of
sensitive or confidential customer data through our networks;
• the effect of labor disputes on our business; and
• other risk factors listed in the section of this Annual Report entitled “Item 3. Key Information—D. Risk Factors”.
The words “believe”, “may”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect” and similar words are intended to identify estimates and
forward-looking statements. Estimates and forward-looking statements are intended to be accurate only as of the date they were made, and we undertake no
obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-
looking statements involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in
these estimates and forward-looking statements. You should therefore not make any investment decision based on these estimates and forward-looking statements.
5
Table of Contents
The forward-looking statements contained in this Annual Report speak only as of the date of this Annual Report. We do not undertake to update any
forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.
6
Table of Contents
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A. Directors and Senior Management
Not applicable.
B. Advisers
Not applicable.
C. Auditors
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
A. Offer Statistics
Not applicable.
B. Method and Expected Timetable
Not applicable.
ITEM 3. KEY INFORMATION
A. Selected Financial Data
The following selected financial information should be read in conjunction with the section “Item 5. Operating and Financial Review and Prospects” and our
consolidated financial statements, included elsewhere in this Annual Report.
Following the Reorganization Transaction and the IPO, our financial statements present the results of operations of Atento. The consolidated financial
statements of Atento are substantially the same as the consolidated financial statements of Midco prior to the IPO, as adjusted for the Reorganization Transaction.
Upon consummation, the Reorganization Transaction was reflected retroactively in the Company’s earnings per share calculations.
The following table sets forth selected historical financial data of Atento. We prepare our financial statements in accordance with IFRS as issued by the
IASB. Our financial reporting periods presented in the table below reflects the consolidated results of operations of Atento, as of and for the years ended December
31, 2013, 2014, 2015, 2016 and 2017.
Selected Consolidated Other Financial Information
($ in millions other than share and per share data)
(*)
2013
Revenue
Operating profit/(loss)
Profit/(loss) from continuing operations
Loss from discontinued operations
Profit/(loss) for the year
Earnings/(loss) per share-basic from continuing operations
Loss per share-basic from discontinued operations
Earnings/(loss) per share-diluted from continuing operations
Loss per share-diluted from discontinued operations
Dividends declared per share
Number of shares
Weighted average number of shares outstanding-basic
Weighted average number of shares outstanding-diluted
Balance sheet data:
Total assets
Equity
Capital stock
(*) Exclude discontinued operations - Morocco.
2,317.9
105.6
(3.3)
(0.7)
(4.0)
(0.05)
(0.01)
(0.05)
(0.01)
-
2,000,000
68,800,000
68,800,000
1,842.2
(134.0)
2.6
7
2014
2016
2015
As of and for the year ended December 31,
(*)
2,278.2
87.6
(41.6)
(0.5)
(42.1)
(0.60)
(0.01)
(0.60)
(0.01)
-
73,619,511
69,603,252
69,603,252
(*)
1,949.9
121.8
52.2
(3.1)
49.1
0.71
(0.04)
0.70
(0.04)
-
73,751,131
73,648,760
74,674,967
(*)
1,757.5
116.4
3.4
(3.2)
0.2
0.05
(0.04)
0.05
(0.04)
-
73,909,056
73,816,933
74,089,724
1,657.9
464.9
0.048
1,378.4
397.8
0.048
1,377.6
430.2
0.048
2017
1,921.3
92.4
(13.6)
-
(13.6)
(0.18)
-
(0.18)
-
0.33
73,909,056
73,909,056
73,909,056
1,330.3
377.8
0.048
Table of Contents
Summary Consolidated Historical Financial Information
As of and for the year ended December 31,
2013 (*)
2014 (*)
2015 (*)
2016 (*)
Change
(%)
Change
excluding
FX (%)
As of and for
the
year ended
December
31,
2017
Change
(%)
Change
excluding
FX (%)
2,317.9
2,278.2
1,949.9
(3.3)
(0.7)
(4.0)
232.7
293.8
79.7
1.08
79.7
1.08
(103.0)
851.2
(41.6)
(0.5)
(42.1)
205.9
305.3
89.2
1.21
89.2
1.21
(120.1)
653.3
238.3
415.0
52.2
(3.1)
49.1
223.3
249.7
77.9
1.06
77.9
1.06
(121.2)
575.6
184.0
391.6
1,757.5
3.4
(3.2)
0.2
213.7
221.9
48.2
0.65
48.1
0.65
(48.2)
534.9
194.0
340.9
(9.9)
(93.5)
3.2
(99.6)
(4.3)
(11.1)
(38.1)
(38.7)
(38.3)
(38.7)
(60.2)
(7.1)
5.4
(12.9)
(1.4)
(92.8)
6.7
(99.6)
5.4
(3.6)
(29.8)
(30.1)
(30.0)
(30.1)
(2.2)
(14.1)
2.2
(21.3)
1,921.3
(13.6)
-
(13.6)
196.9
221.0
58.4
0.79
55.2
0.75
(67.5)
486.3
141.8
344.5
9.3
N.M.
(100.0)
N.M.
(7.9)
(0.4)
21.2
21.6
14.8
14.9
40.1
(9.1)
(26.9)
1.1
5.1
N.M.
(100.0)
N.M.
(13.0)
(4.7)
21.4
21.3
14.9
14.8
31.9
(9.1)
(30.1)
3.8
($ in millions)
Revenue
Profit/(loss) from continuing
operations
Loss from discontinued operations
Profit/(loss) for the year
EBITDA (1)
Adjusted EBITDA (1)
Adjusted Earnings (2)
Adjusted Earnings per share (in
U.S. dollars) (3)
Adjusted Earnings attributable to
Owners of the parent (2)
Adjusted Earnings per share
attributable to Owners of the parent
(in U.S. dollars) (3)
Capital Expenditure (4)
Total Debt
Cash and cash equivalents and
short-term financial investments
Net debt with third parties (5)
(*) Exclude discontinued operations - Morocco.
213.5
637.7
N.M. means not meaningful
(1)
In considering the financial performance of the business, our management analyzes the financial performance measures of EBITDA and Adjusted
EBITDA at a company and operating segment level, to facilitate decision-making. EBITDA is defined as profit/(loss) for the period from
continuing operations before net finance expense, income taxes and depreciation and amortization. Adjusted EBITDA is defined as EBITDA
adjusted to exclude restructuring costs, site relocation costs and other items not related to our core results of operations. EBITDA and Adjusted
EBITDA are not measures defined by IFRS. The most directly comparable IFRS measure to EBITDA and Adjusted EBITDA is profit/(loss) for
the year/period from continuing operations.
We believe EBITDA and Adjusted EBITDA are useful metrics for investors to understand our results of continuing operations and profitability
because they permit investors to evaluate our recurring profitability from underlying operating activities. We also use these measures internally to
establish forecasts, budgets and operational goals to manage and monitor our business, as well as to evaluate our underlying historical
performance. We believe EBITDA facilitates comparisons of operating performance between periods and among other companies in industries
similar to ours because it removes the effect of variances in capital structures, taxation, and non-cash depreciation and amortization charges, which
may differ between companies for reasons unrelated to operating performance. We believe Adjusted EBITDA better reflects our underlying
operating performance because it excludes the impact of items which are not related to our core results of continuing operations.
8
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EBITDA and Adjusted EBITDA measures are frequently used by securities analysts, investors and other interested parties in their evaluation of
companies comparable to us, many of which present EBITDA-related performance measures when reporting their results.
EBITDA and Adjusted EBITDA have limitations as analytical tools. These measures are not presentations made in accordance with IFRS, are not
measures of financial condition or liquidity and should not be considered in isolation or as alternatives to profit or loss for the period from
continuing operations or other measures determined in accordance with IFRS. EBITDA and Adjusted EBITDA are not necessary comparable to
similarly titled measures used by other companies. These non-GAAP measures should be considered supplemental in nature and should not be
construed as being more important than comparable GAAP measures.
See below under the heading “Reconciliation of EBITDA and Adjusted EBITDA to profit/(loss)” for a reconciliation of profit/(loss) for the period
from continuing operations to EBITDA and Adjusted EBITDA.
(2)
In considering the Company’s financial performance, our management analyzes the performance measure of Adjusted Earnings. Adjusted
Earnings is defined as profit/(loss) for the periods from continuing operations adjusted for certain amortization of acquisition related intangible
assets, restructuring costs, site relocation costs and other items not related to our core results of operations, net foreign exchange impacts and their
tax effects. Adjusted Earnings is not a measure defined by IFRS. The most directly comparable IFRS measure to Adjusted Earnings is profit/(loss)
for the periods from continuing operations.
We believe Adjusted Earnings is a useful metric for investors and is used by our management for measuring profitability because it represents a
group measure of performance which excludes the impact of certain non-cash charges and other charges not associated with the underlying
operating performance of the business, while including the effect of items that we believe affect shareholder value and in-year returns, such as
income tax expense and net finance costs.
Our management uses Adjusted Earnings to (i) provide senior management with monthly reports of our operating results; (ii) prepare strategic
plans and annual budgets; and (iii) review senior management’s annual compensation, in part, using adjusted performance measures.
Adjusted Earnings is defined to exclude items that are not related to our core results of operations. Adjusted Earnings measures are frequently used
by securities analysts, investors and other interested parties in their evaluation of companies comparable to us, many of which present an Adjusted
Earnings related performance measure when reporting their results.
Adjusted Earnings has limitations as an analytical tool. Adjusted Earnings is neither a presentation made in accordance with IFRS nor a measure
of financial condition or liquidity, and should not be considered in isolation or as an alternative to profit or loss for the period from continuing
operations or other measures determined in accordance with IFRS. Adjusted Earnings is not necessarily comparable to similarly titled measures
used by other companies. These non-GAAP measures should be considered supplemental in nature and should not be construed as being more
important than comparable GAAP measures.
See below under the heading “Reconciliation of Adjusted Earnings to profit/(loss)” for a reconciliation of Adjusted Earnings to our profit/(loss) for
the period from continuing operations.
Adjusted Earnings per share is calculated based on weighted average number of ordinary shares outstanding of 73,909,056, 73,816,933 and
73,648,760 as of December 31, 2017, 2016 and 2015, respectively.
We define capital expenditure as the sum of the additions to property, plant and equipment and the additions to intangible assets during the period.
In considering our financial condition, our management analyzes net debt with third parties, which is defined as total debt less cash, cash
equivalents (net of any outstanding bank overdrafts) and short-term financial investments.
Net debt with third parties has limitations as an analytical tool. Net debt with third parties is neither a measure defined by or presented in
accordance with IFRS nor a measure of financial performance, and should not be considered in isolation or as an alternative financial measure
determined in accordance with IFRS. Net debt with third parties is not necessarily comparable to similarly titled measures used by other
companies. These non-GAAP measures should be considered supplemental in nature and should not be construed as being more important than
comparable GAAP measures.
See below under the heading “Financing Arrangements” for a reconciliation of total debt to net debt with third parties utilizing IFRS reported
balances obtained from the financial information included elsewhere in this Annual Report. The most directly comparable IFRS measure to net
debt with third parties is total debt.
9
(3)
(4)
(5)
Table of Contents
Cash Flow Selected Data:
($ in millions)
Cash flows from operating activities
Cash flows used in investing activities
Cash flows from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Effect of changes in exchange rates
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2013
2014
For the year ended
December 31,
2015
2016
2017
99.6
(123.4)
31.2
7.4
5.8
200.3
213.5
135.3
(149.8)
38.8
24.3
(26.4)
213.5
211.4
37.0
(67.2)
36.6
6.4
(33.8)
211.4
184.0
141.9
(75.1)
(62.7)
4.2
5.8
184.0
194.0
Reconciliation of EBITDA and Adjusted EBITDA to profit/(loss):
($ in millions)
Profit/(loss) from continuing operations
Net finance expense (**)
Income tax expense
Depreciation and amortization
EBITDA (non-GAAP) (unaudited)
Acquisition and integration related costs (a)
Restructuring costs (b)
Sponsor management fees (c)
Site relocation costs (d)
Financing and IPO fees (e)
Contingent Value Instrument (f)
Asset impairments and Other (g)
Total non-recurring items (***)
Adjusted EBITDA (non-GAAP) (unaudited)
2013 (*)
For the year ended December 31,
2015 (*)
2014 (*)
2016 (*)
2017
(3.3)
100.3
8.2
127.5
232.7
29.3
12.8
9.1
1.8
6.1
-
2.0
61.1
293.8
(41.6)
110.8
18.4
118.3
205.9
9.9
26.7
7.3
1.7
51.9
-
1.9
99.4
305.3
52.2
46.4
23.2
101.5
223.3
0.1
15.8
-
3.4
0.3
-
6.8
26.4
249.7
3.4
107.8
5.2
97.3
213.7
-
33.7
-
9.3
-
(41.7)
6.9
8.2
221.9
114.5
(90.9)
(84.3)
(60.8)
8.6
194.0
141.8
(13.6)
93.5
12.5
104.4
196.9
-
16.8
-
-
-
-
7.3
24.1
221.0
(*) Exclude discontinued operations – Morocco.
(**) Net finance expense includes interest income, interest expense, changes in fair value of financial instruments and net foreign exchange losses.
(***) We define non-recurring items as items that are limited in number, clearly identifiable, unusual, are unlikely to be repeated in the near future in the ordinary
course of business and that have a material impact on the consolidated results of operations. Non-recurring items can be summarized as demonstrated below:
(a) Acquisition and integration related costs incurred in 2013 and 2014, are costs associated with the acquisition and post-acquisition process in connection with
the full strategy review. These projects were substantially completed by the end of 2014. For the year ended December 31, 2013, of the $29.3 million in
acquisition and integration related costs, $27.9 million relate to professional fees incurred to establish Atento as a standalone company not affiliated to
Telefónica. These projects are mainly related to full strategy review including growth plans and operational setup with a leading consulting firm ($14.7
million), improvement of financial and cash flow reporting ($5.9 million), improving procurement efficiency ($4.8 million) and executive recruiting fees
related primarily to strengthening the senior management team post acquisition ($1.4 million). For the year ended December 31, 2014 acquisition and
integration related costs primarily resulted from consulting fees incurred in connection with the full strategy review including our growth plan and operational
setup with a leading consulting firm ($4.0 million), improving procurement efficiency ($2.3 million), and IT transformation projects ($2.5 million).
Acquisition and integration related costs incurred in 2015 are costs associated with the post-acquisition process in connection with a full strategy review and
our SAP IT transformation project. These projects were substantially completed by the end of 2015.
10
Table of Contents
(b) Restructuring costs incurred in 2013, 2014, 2015 and 2016 primarily included several restructuring activities and other personnel costs that were not related to
our core result of operations. For the year ended December 31, 2013, $8.6 million of our restructuring costs were related to the relocation of our corporate
headquarters and severance payments directly related to the acquisition. In addition, in 2013 we incurred $1.5 million in restructuring costs in Spain (relating
to restructuring expenses incurred as a consequence of significant reduction in activity levels as a result of adverse market conditions in Spain), and $1.4
million in Chile (related to restructuring expenses incurred in connection with the implementation of a new service delivery model with Telefónica).
Restructuring costs incurred for the year ended December 31, 2014, are primarily related to headcount restructuring activities in Spain. In addition, we incurred
restructuring costs not related to our core results of operations in Argentina and Peru of $4.8 million, $2.5 million in Chile of restructuring expenses incurred in
connection with the implementation of a new service delivery model with Telefónica, and certain changes to the executive team, and an additional $0.7 million
related to the relocation of corporate headquarters. Restructuring costs incurred in the year ended December 31, 2015, primarily relates to optimization of labor
force to current or expected adjustments in activity levels, mainly in EMEA and Brazil. Restructuring costs for the year ended December 31, 2016 and 2017
are compounded of two main concepts: i) investments to lower our variable cost structure, which is mostly labor and ii) investments to drive a more
sustainable lower-cost and competitive operating model. Both were direct response to the exceptional and severe adverse macroeconomic conditions in key
markets such as Spain, Argentina, Brazil, Mexico and Puerto Rico, which drove significant declines in volume. The restructuring program carried out in 2017
to adjust the indirect costs structure has been finalized in the fourth quarter of 2017.
(c) Sponsor management fees represent the annual advisory fee paid to Bain Capital Partners, LLC that were b expensed during 2013 and 2014. The advisory
agreement was terminated in connection with the initial public offering.
(d) Site relocation costs incurred for the years ended December 31, 2013, 2014, 2015 and 2016 include costs associated with our strategic initiative to relocate call
centers from tier 1 cities to tier 2 cities in Brazil to achieve efficiencies through lower rental costs, attrition and absenteeism. Site relocation costs incurred for
the year ended December 31, 2015 related to the anticipation for site closures in Brazil in connection of the site relocation program to tier 2 and tier 3 cities.
Site relocation costs incurred for the year ended December 31, 2016, a re related to the investments in Brazil, to relocate and consolidate our sites from higher
to lower costs locations. This program started in 2014 when 53 percent of our sites were in Tier 2 cities.
(e) Financing and IPO fees for the year ended December 31, 2014 primarily relate to non-core professional fees incurred during the IPO process including
advisory, auditing and legal expenses. Financing and IPO fees for the year ended December 31, 2015 primarily relate to non-core professional fees incurred
during the IPO process, including advisory, auditing and legal expenses.
(f) On November 8, 2016 the CVI nominal value of ARS666.8 million, or $135.6 million, was terminated. As a result, in 2016 we recognized a gain of $41.7
million in “Other gains” representing the principle amount of the CVI.
( g
)
Asset impairments and other costs incurred for the year ended December 31, 2013 relate to projects for inventory control in Brazil which are not related to our
core results of operations. Asset impairments and other costs incurred for the year ended December 31, 2014, mainly relate to the goodwill and other intangible
asset impairment relating to our operation in Czech Republic (divested in December 2014) of $3.7 million and Spain of $28.8 million, offset by the amendment
of the MSA with Telefónica, by which the minimum revenue commitment for Spain was reduced against a $34.5 million penalty fee paid by Telefónica. Asset
impairments and other costs incurred for the year ended December 31, 2015, mainly relate to the impairment of goodwill and other intangible assets in the
Czech Republic (divested in December 2014) of $3.7 million and Spain of $28.8 million, offset by the amendment of the MSA with Telefónica, by which the
minimum revenue commitment for Spain was reduced against a $34.5 million penalty fee paid by Telefónica. Other non-recurring items for the year ended
December 31, 2016 refer mainly to other costs with the sale of Morocco operation related to the accrual of the reserve in amount of $3.1 million as guarantee
to the buyer for potential indemnity related to eventual liability assessed from the period before the sale. For 2017, non-recurring items relates mostly to the
recognition of the costs incurred or expected to be incurred to recover the operations in Mexico and Puerto Rico affected by recent natural disasters. These
estimated costs of $3.2 million are related to third quarter of 2017 and includes costs that were incurred but could not be charged to customers (mainly salaries
and benefits) and other extraordinary costs related to the natural disasters. In addition, there were costs incurred on the secondary offer process occurred in
November 2017.
11
Table of Contents
Reconciliation of Adjusted Earnings to profit/(loss):
($ in millions)
Profit/(loss) from continuing operations
Acquisition and integration related costs (a) (**)
Amortization of acquisition related intangible assets (b)
Restructuring costs (c) (**)
Sponsor management fees (d) (**)
Site relocation costs (e) (**)
Financing and IPO fees (f) (**)
PECs interest expense (g)
Asset impairments and Other (h) (**)
DTA adjustment in Spain (i)
Net foreign exchange gain on financial instruments (j)
Net foreign exchange impacts (k)
Contingent Value Instrument (l)
Financial non-recurring (m)
Depreciation non-recurring (n)
Tax effect (o)
Total of add-backs
Adjusted Earnings (non-GAAP) (unaudited)
Adjusted basic Earnings per share (in U.S. dollars) (***)
(unaudited)
2013 (*)
For the year ended December 31,
2015 (*)
2014 (*)
2016
2017
(3.3)
29.3
40.7
12.8
9.1
1.8
6.1
25.7
2.0
-
11.6
(17.8)
-
-
-
(38.3)
83.0
79.7
1.08
(41.6)
9.9
36.6
26.7
7.3
1.7
51.9
25.4
1.9
9.8
(27.3)
33.3
-
-
-
(46.4)
130.8
89.2
1.21
52.2
0.1
27.5
15.8
-
3.4
0.3
-
6.8
1.5
(17.5)
4.0
-
-
-
(16.2)
25.7
77.9
1.06
3.4
-
24.2
33.6
-
9.3
-
-
6.9
-
(0.7)
21.1
(26.2)
-
-
(23.5)
44.8
48.2
0.65
(13.6)
-
22.4
16.8
-
-
-
-
7.3
-
(0.2)
23.4
-
17.7
2.8
(18.2)
72.0
58.4
0.79
(*) Exclude discontinued operations – Morocco.
(**) We define non-recurring items as items that are limited in number, clearly identifiable, unusual, are unlikely to be repeated in the near future in the ordinary
course of business and that have a material impact on the consolidated results of operations. Non-recurring items can be summarized as demonstrated below:
(a) Acquisition and integration related costs incurred in 2013 and 2014, are costs associated with the acquisition and post-acquisition process in connection with
the full strategy review. These projects were substantially completed by the end of 2014. For the year ended December 31, 2013, of the $29.3 million in
acquisition and integration related costs, $27.9 million relate to professional fees incurred to establish Atento as a standalone company not affiliated to
Telefónica. These projects are mainly related to full strategy review including growth plans and operational setup with a leading consulting firm ($14.7
million), improvement of financial and cash flow reporting ($5.9 million), improving procurement efficiency ($4.8 million) and executive recruiting fees
related primarily to strengthening the senior management team post acquisition ($1.4 million). For the year ended December 31, 2014 acquisition and
integration related costs primarily resulted from consulting fees incurred in connection with the full strategy review including our growth plan and operational
setup with a leading consulting firm ($4.0 million), improving procurement efficiency ($2.3 million), and IT transformation projects ($2.5 million).
Acquisition and integration related costs incurred in 2015 are costs associated with the post-acquisition process in connection with a full strategy review and
our SAP IT transformation project. These projects were substantially completed by the end of 2015.
(b) Amortization of acquisition related intangible assets represents the amortization expense of customer base, recorded as intangible assets. This customer base
represents the fair value (within the business combination involving the acquisition of control of Atento Group) of the intangible assets arising from service
agreements (tacit or explicitly formulated in contracts) with Telefónica Group and with other customers.
12
Table of Contents
(c) Restructuring costs incurred in 2013, 2014, 2015 and 2016 primarily included several restructuring activities and other personnel costs that were not related to
our core result of operations. For the year ended December 31, 2013, $8.6 million of our restructuring costs were related to the relocation of our corporate
headquarters and severance payments directly related to the acquisition. In addition, in 2013 we incurred $1.5 million in restructuring costs in Spain (relating
to restructuring expenses incurred as a consequence of significant reduction in activity levels as a result of adverse market conditions in Spain), and $1.4
million in Chile (related to restructuring expenses incurred in connection with the implementation of a new service delivery model with Telefónica).
Restructuring costs incurred for the year ended December 31, 2014, are primarily related to headcount restructuring activities in Spain. In addition, we incurred
restructuring costs not related to our core results of operations in Argentina and Peru of $4.8 million, $2.5 million in Chile of restructuring expenses incurred in
connection with the implementation of a new service delivery model with Telefónica, and certain changes to the executive team, and an additional $0.7 million
related to the relocation of corporate headquarters. Restructuring costs incurred in the year ended December 31, 2015, primarily relates to optimization of labor
force to current or expected adjustments in activity levels, mainly in EMEA and Brazil. Restructuring costs for the year ended December 31, 2016 and 2017
are compounded of two main concepts: i) investments to lower our variable cost structure, which is mostly labor and ii) investments to drive a more
sustainable lower-cost and competitive operating model. Both were direct response to the exceptional and severe adverse macroeconomic conditions in key
markets such as Spain, Argentina, Brazil, Mexico and Puerto Rico, which drove significant declines in volume. The restructuring program carried out in 2017
to adjust the indirect costs structure has been finalized in the fourth quarter of 2017.
(d) Sponsor management fees represent the annual advisory fee paid to Bain Capital Partners, LLC that were expensed during 2013 and 2014. The advisory
agreement was terminated in connection with the initial public offering.
(e) Site relocation costs incurred for the years ended December 31, 2013, 2014, 2015 and 2016 include costs associated with our strategic initiative to relocate call
centers from tier 1 cities to tier 2 cities in Brazil to achieve efficiencies through lower rental costs, attrition and absenteeism. Site relocation costs incurred for
the year ended December 31, 2015 related to the anticipation for site closures in Brazil in connection of the site relocation program to tier 2 and tier 3 cities.
Site relocation costs incurred for the year ended December 31, 2016, a re related to the investments in Brazil, to relocate and consolidate our sites from higher
to lower costs locations. This program started in 2014 when 53 percent of our sites were in Tier 2 cities.
(f) Financing and IPO fees for the year ended December 31, 2014 primarily relate to non-core professional fees incurred during the IPO process including
advisory, auditing and legal expenses. Financing and IPO fees for the year ended December 31, 2015 primarily relate to non-core professional fees incurred
during the IPO process, including advisory, auditing and legal expenses.
(g) PECs Interest expense represents accrued interest on the preferred equity certificates that were capitalized in connection with the IPO.
(h) Asset impairments and other costs incurred for the year ended December 31, 2013 relate to projects for inventory control in Brazil which are not related to our
core results of operations. Asset impairments and other costs incurred for the year ended December 31, 2014, mainly relate to the goodwill and other intangible
asset impairment relating to our operation in Czech Republic (divested in December 2014) of $3.7 million and Spain of $28.8 million, offset by the amendment
of the MSA with Telefónica, by which the minimum revenue commitment for Spain was reduced against a $34.5 million penalty fee paid by Telefónica. Asset
impairments and other costs incurred for the year ended December 31, 2015, mainly relate to the impairment of goodwill and other intangible assets in the
Czech Republic (divested in December 2014) of $3.7 million and Spain of $28.8 million, offset by the amendment of the MSA with Telefónica, by which the
minimum revenue commitment for Spain was reduced against a $34.5 million penalty fee paid by Telefónica. Other non-recurring items for the year ended
December 31, 2016 refer mainly to other costs with the sale of Morocco operation related to the accrual of the reserve in amount of $3.1 million as guarantee
to the buyer for potential indemnity related to eventual liability assessed from the period before the sale. For 2017, non-recurring items relates mostly to the
recognition of the costs incurred or expected to be incurred to recover the operations in Mexico and Puerto Rico affected by recent natural disasters. These
estimated costs of $3.2 million are related to third quarter of 2017 and includes costs that were incurred but could not be charged to customers (mainly salaries
and benefits) and other extraordinary costs related to the natural disasters. In addition, there were costs incurred on the secondary offer process occurred in
November 2017.
13
Table of Contents
(i) Deferred tax asset adjustment as a consequence of the tax rate reduction in Spain from 30% to 28% in 2015 and to 25% in 2016.
(j) Since April 1, 2015, the Company designated the foreign currency risk on certain of its subsidiaries as net investment hedges using financial instruments as the
hedging items. As a consequence, any gain or loss on the hedging instrument, related to the effective portion of the hedge is recognized in other
comprehensive income (equity) as from that date. The gains or losses related to the ineffective portion are recognized in the statements of operations. For
comparability, these adjustments are added back to calculate Adjusted Earnings.
(k) Since 2015, our management analyzes the Company financial condition performance excluding non-cash net foreign exchange impacts related to
intercompany loans which eliminates the volatility of foreign exchange variances from our operational results with third parties. The net impact to equity is
zero since the current translation adjustments of the balance sheet to the subsidiaries with local denominated currencies other than the USD is registered at
Equity.
(l) On November 8, 2016 the CVI nominal value of ARS666.8 million, or $135.6 million was terminated. As a result, in 2016 we recognized a gain of $41.7
million in “Other gains” representing the principle amount of the CVI.
(m) Financial non-recurring relates to the costs incurred in the debt refinance process occurred in August 2017, which includes: (i) 2020 Senior Secured Notes call
premium of $11.1 million and amortization of issuance costs of $4.9 million; (ii) Brazilian debentures due 2019 penalty fee of $0.7 million and remaining
balance of the issuance cost of $1.0 million.
(n) Non-recurring depreciation relates to the provision for accelerated depreciation of fixed assets in Puerto Rico and Mexico, due to the recent natural disasters
(See “Cautionary note regarding forward looking statements”).
(o) The tax effect represents the impact of the taxable adjustments based on tax nominal rate by country. For 2017, the effective tax rate after removing non-
recurring items is 34.5%.
(***) Adjusted Earnings per share is calculated based on the weighted average number of ordinary shares outstanding of 73,909,056, 73,816,933 and 73,648,760
as of December 31, 2017, 2016 and 2015, respectively.
Financing Arrangements
($ in millions, except Net Debt/Adj. EBITDA LTM)
2013
2014
2015
2016
2017
As of December 31,
Debt:
Senior Secured Notes
Brazilian Debentures
Vendor Loan Note (1)
Contingent Value Instrument (2)
Preferred Equity Certificates
Finance Lease Payables
Other Borrowings
Total Debt
Preferred Equity Certificates
Total Debt excluding PECs
Cash and cash equivalents
Short-term financial investments
Net debt with third parties (3) (unaudited)
Adjusted EBITDA LTM (4) (non-GAAP) (unaudited)
Net Debt/Adjusted EBITDA LTM (non-GAAP)
(unaudited)
297.7
345.9
151.7
43.4
519.6
11.9
0.6
1,370.8
(519.6)
851.2
(213.5)
-
637.7
293.8
2.2x
14
300.3
245.9
-
36.4
-
9.0
61.7
653.3
-
653.3
(211.4)
(26.9)
415.0
305.3
1.4x
301.7
168.1
-
26.3
-
4.7
74.8
575.6
-
575.6
(184.0)
-
391.6
249.7
1.6x
303.3
156.6
-
-
-
3.6
71.4
534.9
-
534.9
(194.0)
-
340.9
221.9
1.5x
398.3
21.1
-
-
-
10.5
56.4
486.3
-
486.3
(141.8)
-
344.5
221.0
1.6x
Table of Contents
Reflects the prepayment to Telefónica of the entire indebtedness under the Vendor Loan Note. The loan was liquidated in connection with the IPO.
( 1
)
(2) The CVI was terminated on November 8, 2016 as part of the Telefónica MSA renegotiation, as described in “Basis of Presentation and Other Information”
section.
(3)
In considering our financial condition, our management analyzes Net debt with third parties, which is defined as total debt less cash and cash equivalents. Net
debt with third parties is not a measure defined by IFRS and it has limitations as an analytical tool. Net debt with third parties is neither a measure defined by
or presented in accordance with IFRS nor a measure of financial performance, and should not be considered in isolation or as an alternative financial measure
determined in accordance with IFRS. Net debt is not necessarily comparable to similarly titled measures used by other companies.
(4) Adjusted EBITDA LTM (Last Twelve Months) is defined as EBITDA adjusted to exclude certain acquisition and integration related costs, restructuring costs,
sponsor management fees, site relocation costs, financing fees, IPO costs, asset impairments and other items not related to our core results of operations.
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
External Risks
The CRM BPO market is very competitive.
Our industry is very competitive, and we expect competition to remain intense from a number of sources in the future. We believe the principal competitive
factors in the markets in which we operate are industry expertise, service quality, price, and the ability to add value to a client’s business. We face competition
primarily from other CRM BPO companies and IT services companies. In addition, the trend toward offshore outsourcing, international expansion by foreign and
domestic competitors and continued technological changes may result in new and different competitors entering our markets. These competitors may include
entrants from the communications, software and data networking industries or entrants in geographical locations with lower costs than those in which we operate.
Some of these existing and future competitors may have greater financial, human and other resources, longer operating histories, greater technological
expertise and more established relationships in the industries that we currently serve or may serve in the future. In addition, some of our competitors may enter into
strategic or commercial relationships among themselves or with larger, more established companies in order to increase their ability to address customer needs and
reduce operating costs, or enter into similar arrangements with potential clients. Further, trends of consolidation in our industry and among CRM BPO competitors
may result in new competitors with greater scale, a broader geographic footprint, better technologies and price efficiencies attractive to our clients. Increased
competition, our inability to compete successfully, and pricing pressures or loss of market share could result in reduced operating profit margins which could have
a material adverse effect on our business, financial condition, results of operations and prospects.
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A substantial portion of our revenue, operations and investments are in Latin America and we are therefore exposed to risks inherent in operating and
investing in the region.
For the year ended December 31, 2017, we derived 39.5% of our revenue from the Americas and 49.2% from Brazil. We intend to continue to develop and
expand our facilities in the Americas and Brazil. Our operations and investments in the Americas and Brazil are subject to various risks related to the economic,
political and social conditions of the countries in which we operate, including risks related to the following:
· inconsistent regulations, licensing and legal requirements may increase our cost of operations as we endeavor to comply with myriad of laws that differ
from one country to another in an unpredictable and adverse manner;
· currencies may be devalued or may depreciate or currency restrictions or other restraints on transfer of funds may be imposed;
· the effects of inflation and currency depreciation and fluctuation may require certain of our subsidiaries to undertake a mandatory recapitalization;
· governments may expropriate or nationalize assets or increase their participation in companies;
· governments may impose burdensome regulations, taxes or tariffs;
· political changes may lead to changes in the business environments in which we operate; and
· economic downturns, political instability and civil disturbances may negatively affect our operations.
Any deterioration in global market and economic conditions, especially in Latin America, and, particularly in the telecommunications and financial
services industries from which we generate most of our revenue, may adversely affect our business, financial condition, results of operations and
prospects.
Global market and economic conditions, including in Latin America, in the past several years have presented volatility and increasing risk perception, with
tighter credit conditions and recession or slower growth in most major economies continuing into 2017. Our results of operations are affected directly by the level
of business activity of our clients, which in turn is affected by the level of economic activity in the industries and markets that they serve. Many of our clients’
industries are especially vulnerable to any crisis in the financial and credit markets or economic downturn. A substantial portion of our clients are concentrated in
the telecommunications and financial services industries, which were especially vulnerable to the global financial crisis and economic downturn that began in 2008.
For the year ended December 31, 2017, 46.7% of our revenue was derived from clients in the telecommunications industry and 31.7% of our revenue was derived
from clients in the financial services industry including insurance. Our business and future growth largely depend on continued demand for our services from
clients in these industries.
As our business has grown, we have become increasingly exposed to adverse changes in general global economic conditions, which may result in reductions
in spending by our clients and their customers. Global economic concerns such as the varying pace of global economic recovery continue to create uncertainty and
unpredictability and may have an adverse effect on the cost and availability of credit, leading to decreased spending by businesses. Any deterioration of general
economic conditions, or weak economic performance in the economies of the countries in which we operate, particularly in Brazil and the Americas may have a
material adverse effect on our business, financial condition, results of operations and prospects. Brazil and the Americas, for example, comprised 87.5%, 87.4%
and 88.7% of our revenue respectively, for the years ended December 31, 2015, 2016 and 2017. In addition, key markets such as the telecommunications and
financial services industries comprised 78.4% of our revenue for the year ended December 31, 2017.
Increases in employee benefit expenses as well as changes to labor laws could reduce our profit margin.
Employee benefit expenses is our largest expense and accounted for $1,410.5 million in 2015, $1,309.9 million in 2016 and $1,429.1 million in 2017, or
72.3%, 74.5% and 74.4%, respectively, of our revenue in those periods.
Employee salaries and benefits expenses in many of the countries in which we operate, principally in Latin America, have increased during the periods
presented in this Annual Report as a result of economic growth, increased demand for CRM BPO services and increased competition for trained employees such as
employees at our service delivery centers in Latin America. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Total
operating expenses.”
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We will attempt to control costs associated with salaries and benefits as we continue to add capacity, but we may not be successful in doing so. We may
need to increase salaries more significantly and rapidly than in previous periods to remain competitive, which may have a material adverse effect on our business,
financial condition, results of operations and prospects. Wage increases or other expenses related to the termination of our employees may reduce our profit
margins and have a material adverse effect on our business, financial condition, results of operations and prospects. If we expand our operations into new
jurisdictions, we may be subject to increased operating costs, including higher employee benefit expenses in these new jurisdictions relative to our current
operating costs, which could have a negative effect on our results of operations.
Furthermore, most of the countries in which we operate have labor protection laws, including statutorily mandated minimum annual wage increases,
legislation that imposes financial obligations on employers and laws governing the employment of workers. These labor laws in one or more of the key
jurisdictions in which we operate, particularly Brazil, may be modified in the future in a way that is detrimental to our business. If these labor laws become more
stringent, or if there are continued increases in statutory minimum wages or higher labor costs in these jurisdictions, it may become more difficult for us to
discharge employees, or cost effectively downsize our operations as our level of activity fluctuates, both of which would likely have a material adverse effect on
our business, financial condition, results of operations and prospects.
The payroll tax exemption still maintained in March 2018, however, the Bill 8456 was presented on September 1st by the Finance Minister, Henrique
Meirelles, to substitute the Provisional Measure 774 (MP) that was revoked a few days before its approval. The Bill text is very similar to the original MP which
maintains 4 sectors (communications, transportation, infrastructure and civil construction) in the tax break and excludes 50 other sectors, including Call Center,
from the payroll tax exemption.
On March 21, 2017, the Lower House voted the request for urgency of Bill 8456 and on the same evening, the sponsor’s report was presented to the party
leaders for analysis and to the surprise of all sectors, a clause was included putting an expiration date until December 31, 2019 and some requirements for the use of
the benefit, like the maintenance or increase of jobs, reduction of employment turnover and decrease of work accidents. A new report was released on March 24,
2017 extinguishing the expiration date and the requirements previously presented in the report. In this current draft, Call Centers remain in the tax benefit at 3% of
revenue.
The last draft presented by the sponsor, this week, is to be voted and except for an unexpected change, it would be sustained.
Our operating results may fluctuate from one quarter to the next due to various factors including seasonality.
Our operating results may differ significantly from quarter to quarter and our business may be affected by factors such as: client losses, the timing of new
contracts and of new product or service offerings, termination of existing contracts, variations in the volume of business from clients resulting from changes in our
clients’ operations or the onset of certain parts of the year, such as the summer vacation period in our geographically diverse markets and the year-end holiday
season in Latin America, the business decisions of our clients regarding the use of our services, startup costs, delays or difficulties in expanding our operational
facilities and infrastructure, changes to our revenue mix or to our pricing structure or that of our competitors, inaccurate estimates of resources and time required to
complete ongoing projects, currency fluctuation and seasonal changes in the operations of our clients.
We typically generate less revenue in the first quarter of the year and is related of the fact that our clients generally spend less after the year-end holiday
season. We have also found that our revenue increases in the last quarter of the year, particularly in November and December when our business benefits from the
increased activity of our clients and their customers, who generally spend more money and are otherwise more active during the year-end holiday season. These
seasonal effects also cause differences in revenue and income among the various quarters of any financial year, which means that the individual quarters of a year
should not be directly compared with each other or used to predict annual financial results.
In addition, the sales cycle for our services, typically from six to 12 months (from the date the contract is entered into until the beginning of the provision of
services), and the internal budget and approval processes of our prospective clients, make it difficult to predict the timing of new client engagements. Also, we
recognize revenue only upon actual provision of the contracted services and when the criteria for recognition are achieved. The financial benefit of gaining a new
client may not be realized at the intended time due to delays in the implementation of our services or due to an increase in the startup costs required in building our
infrastructure. These factors may make it difficult for us to prepare accurate internal financial forecasts or replace anticipated revenue that is not received as a result
of these delays.
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Natural events, wars, cyberattacks, terrorist attacks and other acts of violence involving any of the countries in which we or our clients have operations
could adversely affect our operations and client confidence.
Natural events (such as floods and earthquakes), terrorist attacks and other acts of violence or war may adversely disrupt our operations, lead to economic
weakness in the countries in which they occur and affect worldwide financial markets, and could potentially lead to economic recession, which could have a
material adverse effect on our business, financial condition, results of operations and prospects. These events could adversely affect our clients’ levels of business
activity and precipitate sudden significant changes in regional and global economic conditions and cycles. These events also pose significant risks to our people and
to our business operations around the world.
If we experience a temporary or permanent interruption in our operations at one or more of our data or contact centers, through natural disaster, casualty,
operating malfunction, cyberattack, terrorist attack, sabotage or other causes, we may be unable to provide the services we are contractually obligated to deliver.
Failure to provide contracted services could result in contractual damages or clients’ termination or renegotiation of their contracts. The results of these incidents
could include, but are not limited to, business interruption, disclosure of nonpublic information, decreased customer revenues, misstated financial data, liability for
stolen assets or information, increased cybersecurity protection costs, litigation and reputational damage adversely affecting customer confidence. Although we
maintain internal controls to protect our company and our clients from events that could interrupt our delivery of services, there is no guarantee that such controls
will be effective or that any interruption will not be prolonged. Any prolonged interruption in our ability to provide services to our clients for which our plans and
precautions fail to adequately protect us could have a material adverse effect on our business, results of operation and financial condition.
Fluctuations in, or devaluation of, the local currencies in the countries in which we operate against the U.S. dollar could have a material adverse effect
on our business, financial condition, results of operations and prospects.
As of December 31, 2017, 95.3% of our revenue was generated in countries that use currencies other than the U.S. dollar, mostly the local currencies of the
Latin American countries in which we operate (particularly, currencies such as the Brazilian Reais, the Mexican Peso, the Chilean Peso and the Argentinean Peso).
Both Brazil and Mexico have experienced inflation and volatility in the past and some Latin American countries have recently been classified as hyperinflationary
economies. While inflation may not have a significant effect on the profit and loss of a local subsidiary itself, depreciation of the local currency against the U.S.
dollar would reduce the value of the dividends payable to us from our operating companies. We report our financial results in U.S. dollars and our results of
operations would be adversely affected if these local currencies depreciate significantly against the U.S. dollar, which may also affect the comparability of our
financial results from period to period, as we convert our subsidiaries’ statements of financial position into U.S. dollars from local currencies at the period end
exchange rate, and statements of operations and cash flows at average exchange rates for the year. Conversely, where we provide offshore services to U.S. clients
and our revenue is earned in U.S. dollars, an appreciation in the currency of the country in which the services are provided could result in an increase in our costs in
proportion to the revenue we earn for those services. The exchange rates between these local currencies and the U.S. dollar have changed substantially in recent
years and may fluctuate substantially in the future. For the years ended December 31, 2015, 2016 and 2017, these fluctuations had a significant effect on our results
of operations.
In addition, future government action, including changes in interest rates and monetary policy or intervention in the exchange markets and other government
action to adjust the value of the local currency may trigger inflationary increases. For example, governmental measures to control inflation may include maintaining
a tight monetary policy with high interest rates, thereby restricting the availability of credit and reducing economic growth. As a result, interest rates may fluctuate
significantly. Furthermore, losses incurred based on the exchange rate used may be exacerbated if regulatory restrictions are imposed when these currencies are
converted into U.S. dollars.
The occurrence of such fluctuations, devaluations or other currency risks could have a material adverse effect on our business, financial condition, results of
operations and prospects.
The Brazilian government exercises significant influence over the Brazilian economy. This influence, as well as Brazilian political and economic
conditions, could adversely impact our business, financial condition, results of operations and prospects.
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For the years ended December 31, 2017, 2016 and 2015, revenue from our operations in Brazil accounted for 49.2%, 46.5% and 47.7% of our total revenue,
respectively and Adjusted EBITDA from our operations in Brazil accounted for 56.4%, 54.5% and 51.8% of our total Adjusted EBITDA, respectively. In each
case, before holding company level revenue, expenses and consolidation adjustments.
Historically, the Brazilian government has frequently intervened in the Brazilian economy and occasionally made drastic changes in policy and regulations.
The Brazilian government’s actions to control inflation and implement macroeconomic policies have in the past often involved wage and price controls, currency
devaluations, capital controls and limits on imports, among other things. Our business, financial condition, results of operations and prospects may be adversely
affected by changes in policies or regulations, or by other factors such as:
· devaluations and other currency fluctuations;
· inflation rates;
· interest rates;
· liquidity of domestic capital and lending markets;
· energy shortages;
· exchange controls and restrictions on remittances abroad (such as those that were briefly imposed in 1989 and early 1990);
· monetary policy;
· minimum wage policy;
· tax policy; and
· other political, diplomatic, social and economic developments in or affecting Brazil.
Currently, Brazilian markets are experiencing heightened volatility due to the uncertainties derived from the ongoing “Lava Jato” investigation, being
conducted by the Office of the Brazilian Federal Prosecutor, which has impacted the Brazilian economy and political environment. Members of the Brazilian
federal government and of the legislative branch, as well as senior officers of large state-owned companies and privately held companies, have faced allegations of
political corruption, including allegedly accepting bribes by means of kickbacks on contracts granted by the government. The profits of these kickbacks allegedly
financed the political campaigns of political parties of the current federal government coalition that were unaccounted for or not publicly disclosed, and personally
enriched the recipients of bribes under this bribery scheme. The potential outcome of these investigations is uncertain, but they have already had an adverse impact
on the image and reputation of the implicated companies, and on the general market perception of the Brazilian economy.
We cannot predict whether such allegations will lead to further political and economic instability or whether new allegations against government officials
will arise in the future. In addition, we cannot predict the outcome of any such allegations nor their effect on the Brazilian economy. In addition, the President of
Brazil has considerable power to determine governmental policies and actions that relate to the Brazilian economy that could consequently affect our business,
financial condition and results of operations. Furthermore, future developments in policies of the Brazilian government and/or the uncertainty of whether and when
such policies and regulations may be implemented, all of which are beyond our control, could have a material adverse effect on us.
The Brazilian government regularly implements changes to tax policies that may increase our and our clients’ tax burdens. These changes can include
modifications in the rate of assessments, nonrenewal of existing tax relief, such as the “Plano Brasil Maior” and, on occasion, enactment of temporary taxes the
proceeds of which are earmarked for designated governmental purposes. Because we derive a significant portion of our revenue, EBITDA and Adjusted EBITDA
from our operations in Brazil, if the “Plano Brasil Maior” is not extended or not made permanent, it would have a significant negative impact on our total costs. Our
inability to pass through such increase in costs to our customers will materially and adversely affect our results of operations. Furthermore, increases in our overall
tax burden could negatively affect our overall financial performance and profitability.
The Brazilian currency has been devalued over the past four decades. Throughout this period, the Brazilian government has implemented various economic
plans and used various exchange rate policies, including sudden devaluations, periodic mini devaluations (such as daily adjustments), exchange controls, dual
exchange rate markets and a floating exchange rate system. From time to time, there have been significant fluctuations in the exchange rate between the Brazilian
currency and the U.S. dollar and other currencies.
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In the past, Brazil’s economy has experienced balance of payment deficits and shortages in foreign exchange reserves, and the government has responded by
restricting the ability of persons or entities, Brazilian or foreign, to convert Brazilian currency into any foreign currency. The government may institute a restrictive
exchange control policy in the future. Any restrictive exchange control policy could prevent or restrict our access to other currencies to meet our financial
obligations and our ability to pay dividends out of our Brazilian activities.
In recent years, there has been considerable changes in the tax policy in Brazil, including tax increases that has impacted our business and further changes
have been proposed.
Uncertainty over whether possible changes in policies or rules affecting these or other factors may contribute to economic uncertainties in Brazil, which
could adversely affect our business, financial condition, results of operation and prospects.
Argentina has undergone significant political, social and economic instability in the past several years, and if such instability continues or worsens, our
Argentine operations could be materially adversely affected.
In 2017, our operations in Argentina accounted for 7.4% of our revenue and 3.8% of our Adjusted EBITDA (in each case, before holding company level
revenue and expenses and consolidation adjustments).
Political
and
Currency
Risk.
In 2015, the Argentine economy has experienced a recession, as well as a political and social crisis, and the significant
depreciation of the Argentine peso against major international currencies. Depending on the relative impact of other variables affecting our operations, including
technological changes, inflation, gross domestic product (“GDP”) growth, and regulatory changes, the continued depreciation of the Argentine peso may have a
negative impact on our business in Argentina. For example, in 2017, the Argentine peso depreciated approximately 14.8% against the U.S. dollar.
The country has been experiencing high inflation in recent years and there can be no assurance that Argentina will not experience another recession, higher
inflation, devaluation, unemployment and social unrest in the future. In addition, the country’s sovereign debt crisis continues to unfold and the outcome thereof,
including related litigation between Argentina and certain of its debt holders, remains uncertain. In case Argentina continues to be technically in default in its
international debt it will not be possible for the new administration to get much needed international financing and its ability to perform infrastructure work will be
adversely affected.
Restrictions
on
Transfer
of
Funds.
Argentina was under a severe exchange control system that required government approval for any transfer of funds.
Although the current administration elected on December 10, 2015 had taken measures to lift foreign exchange controls there can be no assurance that the
Argentine government will not impose new restrictions on the transfer of funds from Argentina to preserve and protect foreign exchange reserves. In such scenario,
it is possible, for example, that the government restricts, either directly or indirectly, the transfer of dividends from local companies to their foreign shareholders. If
we are unable to repatriate funds from Argentina for whatever reason, we will not be able to use the cash flow from our Argentine operations to finance our
operating requirements elsewhere or to satisfy our debt obligations.
In case of a new financial crisis, there can be no assurance that we will be able to finance our operations in Argentina.
Our business depends in part on our capacity to invest in technology and these costs of technology and telecommunications services, which we rely on
from third parties, could have a material adverse effect on our business, financial condition, results of operations and prospects.
The CRM BPO industry in which we operate is subject to the periodic introduction of new technologies which often can enable us to service our clients
more efficiently and cost effectively. Our business success is partly linked to our ability to recognize these new technological innovations from industry leading
providers of such technology and to apply these technological innovations to our business. If we do not recognize the importance of new technology to our business
in a timely manner or are not committed to investing in and developing such new technology and applying these technologies to our business, our current products
and services may be less attractive to existing and new clients, and we may lose market share to competitors who have recognized these trends and invested in such
technology. There can be no assurance that we will have sufficient capacity or capital to meet these challenges. Any such failure to recognize the importance of
such technology or a decision not to invest and develop such technology that keeps pace with evolving industry standards and changing client demands could have
a material adverse effect on our business, financial condition, results of operations and prospects.
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In addition, any increases in the cost of telecommunications services and products provided by third parties, including telecommunications equipment,
software, IT products and related IT services and call center workstations have a direct effect on our operating costs. The cost of telecommunications services is
subject to several factors, including changes in regulations and the telecommunications market as well as competitive factors, for example, the concentration and
bargaining power of technology and telecommunications suppliers, most of which are beyond our control or which we cannot predict. The increase in the costs of
these essential services and products could have a material adverse effect on our business, financial condition, results of operations and prospects.
Damage or disruptions to our key technology systems and facilities either through events beyond or within our control that adversely affect our clients’
businesses, could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our key technology systems and facilities may be damaged in natural disasters such as earthquakes or fires or subject to damage or compromise from human
error, technical disruptions, power failure, computer glitches and viruses, telecommunications failures, adverse weather conditions and other unforeseen events, all
of which are beyond our control or through bad service or poor performance which are within our control. Such events may cause disruptions to information
systems, electrical power and telephone service for sustained periods. Any significant failure, damage or destruction of our equipment or systems, or any major
disruptions to basic infrastructure such as power and telecommunications systems in the locations in which we operate, could impede our ability to provide services
to our clients and thus adversely affect their businesses, have a negative impact on our reputation and may cause us to incur substantial additional expenses to repair
or replace damaged equipment or facilities.
While we currently have property damage insurance in force, our insurance coverage may not be sufficient to guarantee costs of repairing the damage
caused from such disruptive events and such events may not be covered under our policies. Prolonged disruption of our services, even if due to events beyond our
control could also entitle our clients to terminate their contracts with us, which would have a material adverse effect on our business, financial condition, results of
operations and prospects.
Tax matters, new legislation and actions by taxing authorities may have an adverse effect on our operations, effective tax rate and financial condition.
We may not be able to predict our future tax liabilities due to the international nature of our operations, as we are subject to the complex and varying tax
laws and rules of several foreign jurisdictions. Our results of operations and financial condition could be adversely affected if tax contingencies are resolved
adversely or if we become subject to increased levels of taxation.
We are subject to income taxes in numerous foreign jurisdictions. Our tax expense and cash tax liability in the future could be adversely affected by
numerous factors, including, but not limited to, changes in tax laws, regulations, accounting principles or interpretations and the potential adverse outcome of tax
examinations and pending tax related litigation. Changes in the valuation of deferred tax assets and liabilities, which may result from a decline in our profitability
or changes in tax rates or legislation, could have a material adverse effect on our tax expense. The governments of foreign jurisdictions from which we deliver
services may assert that certain of our clients have a “permanent establishment” in such foreign jurisdictions because of the activities we perform on their behalf,
particularly those clients that exercise control over or have substantial dependency on our services. Such an assertion could affect the size and scope of the services
requested by such clients in the future.
Transfer pricing regulations to which we are subject require that any transaction among us and our subsidiaries be on arm’s length terms. If the applicable
tax authorities were to determine that the transactions among us and our subsidiaries do not meet arm’s length criteria, we may incur increased tax liability,
including accrued interest and penalties. Such changes in tax laws or regulations could increase our tax expenses, reducing our profitability and cash flows.
If we are unable to accurately predict our future tax liabilities or become subject to increased levels of taxation or our tax contingencies are unfavorably
resolved, our results of operations and financial condition could be adversely affected.
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Due to the global nature of our operations, we are subject to the complex and varying tax laws and rules of several jurisdictions and have material tax-related
contingent liabilities that are difficult to predict or quantify. In preparing our financial statements, we calculate our effective income tax rate based on current tax
laws and regulations and our estimated taxable income within each of these jurisdictions. The United States recently adopted tax reform legislation commonly
known as the Tax Cuts and Jobs Act, which will increase our effective income tax rate by imposing a new tax regime impacting our non-U.S. operations. The U.S.
tax changes also provide flexibility related to repatriating non-U.S. earnings to the United States without additional U.S. taxation, and as a result, we have changed
classification of certain earnings that were previously deemed to be permanently reinvested offshore and recorded deferred tax liabilities for the associated
withholding taxes. Other changes in tax laws or regulations in the jurisdictions in which we do business, including the United States, or changes in how the Tax
Cuts and Jobs Act or other tax laws are implemented or interpreted, could further increase our effective tax rate, further restrict our ability to repatriate
undistributed offshore earnings, or impose new restrictions, costs or prohibitions on our current practices and reduce our net income and adversely affect our cash
flows.
We are also subject to tax inspections, including with respect to transfer pricing, our tax positions may be challenged by tax authorities. Although we believe
that our current tax provisions are reasonable and appropriate, there can be no assurance that these items will be settled for the amounts accrued, that additional tax
exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposures. Any increase in the amount of taxation
incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, results of operations and financial condition.
Prompted by Brazil current economic and political turmoil, the tax authorities have intensified the number of tax inspections. The judicial and administrative
courts, for their part, have been extremely careful in ruling out tax liabilities. As a result, several tax issues are now on the radar: goodwill amortization expenses;
corporate restructuring and tax planning; to name a few. On this scenario there are risks and uncertainties regarding the decisions taken by the Conselho
Administrativo de Recursos Fiscais (the Brazilian Tax Appeal Administrative Council, “CARF”) which could negatively impact the Brazil tax environment and
consequently us.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our
ordinary shares or if our operating results do not meet their expectations, the price of our ordinary shares could decline.
The market price of our ordinary shares is influenced by the research and reports that industry or securities analysts publish about us or our business. If one
or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn
could cause the market price of our ordinary shares or its trading volume to decline. Moreover, if one or more of the analysts who cover our Company downgrade
our ordinary shares or if our operating results or prospects do not meet their expectations, the market price of our ordinary shares could decline.
Internal Risks
Telefónica, certain of its affiliates and a few other major clients account for a significant portion of our revenue and any loss of a large portion of
business from these clients could have a material adverse effect on our business, financial condition, results of operations and prospects.
We have derived and believe that we will continue to derive a significant portion of our revenue from companies within the Telefónica Group and a few
other major client groups. For the year ended December 31, 2015, 2016 and 2017, we generated, 45.2%, 42.2% and 39.2%, respectively, of our revenue from the
services provided to the Telefónica Group. Our contracts with Telefónica Group companies in Brazil and Spain comprised approximately 57.7%, 56.4% and
57.8%, respectively, of our revenue from the Telefónica Group for the years ended December 31, 2015, 2016 and 2017. Our 15 largest client groups (including the
Telefónica Group) on a consolidated basis accounted for a total of 76.4% of our revenue for the year ended December 31, 2017.
We are party to a master services agreement (the “MSA”) with Telefónica for the provision of certain CRM BPO services to Telefónica Group companies
which governs the services agreements entered with the Telefónica Group companies. As of December 31, 2017, 34 companies within the Telefónica Group were a
party to 131 arm’s length contracts with us. While our service contracts with the Telefónica Group companies have traditionally been renewed, there can be no
assurance that such contracts will be renewed upon their expiration. Although the MSA is an umbrella agreement which governs our services agreements with the
Telefónica Group companies, the termination of the MSA on December 31, 2021 (except in Brazil and Spain, where the MSA terminates on December 31, 2023)
does not automatically result in a termination of any of the local services agreements in force after those dates. In addition, there can be no assurance that the MSA
will be renewed upon its expiration. Furthermore, the MSA or any other agreement with any of the Telefónica Group companies may be amended in a manner
adverse to us or terminated early.
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In addition, there can be no assurance that the volume of work to be performed by us for the various Telefónica Group companies will not vary significantly
from year to year in the aggregate, particularly since we are not the exclusive outsourcing provider for the Telefónica Group. Consequently, our revenue or margins
from the Telefónica Group may decrease in the future. A number of factors other than the price and quality of our work and the services we provide could result in
the loss or reduction of business from Telefónica Group companies including the impacts of adverse macro-economic conditions on Telefónica Group’s business,
and we cannot predict the timing or occurrence of any such event. For example, a Telefónica Group company may demand price reductions, increased quality
standards, change its CRM BPO strategy, or under certain circumstances transfer some or all the work and services we currently provide to Telefónica in-house.
The loss of a significant part of our revenue derived from these clients, particularly the Telefónica Group, as a result of the occurrence of one or more of the
above events would have a material adverse effect on our business, financial condition, results of operations and prospects.
Our profitability will suffer if we are not able to maintain our pricing and/or control costs.
Our profit margins, and therefore our profitability, is largely a function of our level of activity and the rates we are able to charge for our services. If we are
unable to maintain the pricing for our services and/or an appropriate seat utilization rate, without corresponding cost reductions, our profitability will decline. The
pricing and levels of activity we are able to achieve are affected by a number of factors, including our clients’ perceptions of our ability to add value through our
services, the length of time it takes for volume of new clients to ramp up, competition, the introduction of new services or products by us or our competitors, our
ability to accurately estimate, attain and sustain revenue from client contracts, margins and cash flows over increasingly longer contract periods and general
economic and political conditions.
Our profitability is also a function of our ability to control our costs and improve our efficiency. As we increase the number of our employees and execute
our strategies for growth, we may not be able to manage the significantly larger and more geographically diverse workforce, which could adversely affect our
ability to control our costs or improve our efficiency. Further, because there is no certainty that our business will grow at the rate that we anticipate, we may incur
expenses for the increased capacity for a significant period without a corresponding growth in our revenue.
Our success depends on our key employees.
Our success depends on the continued service and performance of our executive officers and other key personnel in each of our business units, including our
structure personnel. There is competition for experienced senior management and personnel with expertise in the CRM BPO industry, and we may not be able to
retain our key personnel or recruit skilled personnel with appropriate qualifications and experience. Although we have entered into employment contracts with our
executive officers, it may not be possible to require specific performance under a contract for personal services and in any event these agreements do not ensure the
continued service of these executive officers. The loss of key members of our personnel, particularly to competitors, could have a material adverse effect on our
business, financial condition, results of operations and prospects.
If we experience challenges with respect to labor relations, our overall operating costs and profitability could be adversely affected and our reputation
could be harmed.
While we believe we have good relations with our employees, any work disruptions or collective labor actions may have an adverse impact on our services.
Approximately 72.8% of our workforce is under collective bargaining agreements. Collective bargaining agreements are generally renegotiated in every one to
three years with the principal labor unions in seven of the countries in which we operate. If these labor negotiations are not successful or we otherwise fail to
maintain good relations with employees, we could suffer a strike or other significant work stoppage or other form of industrial action, which could have a material
adverse effect on our business, financial condition, results of operations and prospects and harm our reputation.
Rapid growth may make it difficult for us to maintain our internal operational and financial systems.
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Since our foundation in 1999, and particularly from 2004 onwards, we have experienced rapid growth and significantly expanded our operations in key
regions and client industries. Our number of workstations decreased from 91,567 as of December 31, 2015 to 89,082 as of December 31, 2016 and increased to
92,264 as of December 31, 2017. The average number of employees (excluding internships) decreased from 163,974 for the year ended December 31, 2015 to
151,601 for the year ended December 31, 2016 and increased to 151,817 for the year ended December 31, 2017.
To manage growth effectively, we must recruit new employees and implement improved operational systems, procedures and internal controls on a timely
basis. In addition, we need to update our existing internal accounting, financial and cost control systems to ensure we can access all necessary financial
information. If we fail to implement these systems, procedures and controls or update these systems on a timely basis, we may not be able to service our clients’
needs, hire and retain new employees, pursue new business, complete future acquisitions or operate our business effectively. Failure to effectively transfer new
client business to our delivery centers, properly budget transfer costs, accurately estimate operational costs associated with new contracts or access financial,
accounting or cost control information in a timely fashion could result in delays in executing client contracts, trigger service level penalties or cause our profit
margins not to meet our expectations. Any inability to control such growth or update our systems could materially adversely affect our business, financial
condition, results of operations and prospects.
If we are unable to fund our working capital requirements and new investments, our business, financial condition, results of operations and prospects
could be adversely affected.
The CRM BPO industry is characterized by high working capital requirements and the need to make new investments in operating sites and employee
resources to meet the requirements of our clients. Similar to our competitors in this industry, we incur significant startup costs related to investments in
infrastructure to provide our services and the hiring and training of employees, such expenses being historically incurred before revenue is generated.
In addition, we are exposed to adverse changes in our main clients’ payment policies, which could have a material adverse impact on our ability to fund our
working capital needs. During the year ended December 31, 2017, our average days sales outstanding (“DSO”) was approximately 66 days. If our key clients
implement policies which extend the payment terms of our invoices, our working capital levels could be adversely affected and our finance costs may increase. As
a result, under the service contracts we entered into since that time, the provisions relating to the time by which Telefónica must satisfy its payment obligations to
us was extended. If we are unable to fund our working capital requirements, access financing at competitive prices or make investments to meet the expanding
business of our existing and potential new clients, our business, financial condition, results of operations and prospects could be adversely affected.
Our ability to provide our services depends in part upon the quality and reliability of the facilities, machinery and equipment provided by our technology
and telecommunications providers, our reliance on a limited number of suppliers of such technology and the services and products of our clients.
The success of our business depends in part on our ability to provide high quality and reliable services, which in part depends on the proper functioning of
facilities, machinery and equipment (including appropriate hardware and software and technological applications) provided by third parties and our reliance on a
limited number of suppliers of such technology, and is, therefore, beyond our control.
We also depend on the communication services provided by local communication companies in the countries in which we operate, and any significant
disruptions in these services would adversely affect our business. If these or other third-party providers fail to maintain their equipment properly or fail to provide
proper services in a timely or reliable manner our clients may experience service interruptions. If interruptions adversely affect our services or the perceived quality
and reliability of our services, we may lose client relationships or be forced to make significant unplanned investments in the purchase of additional equipment
from other providers to ensure that we can continue to provide high quality and reliable services to our clients. In addition, if one or more of the limited number of
suppliers of our technology could not deliver or provide us with the requisite technology on a timely basis, our clients could suffer further interruptions. Any such
interruptions may have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition, in some areas of our business, we depend upon the quality and reliability of the services and products of our clients which we help to sell to their
end customers. If the services and products we provide to our clients experience technical difficulties, we may have a harder time selling these services and
products to other clients, which may have an adverse effect on our business, financial condition, results of operations and prospects.
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Our results of operations could be adversely affected if we are unable to maintain effective internal controls.
Any internal and disclosure controls and procedures, no matter how well conceived and operated, can only provide only reasonable, not absolute, assurance
that the objectives of the control system are met. The design of a control system must consider the benefits of controls relative to their costs. Inherent limitations
within a control system include the realities that judgments in decision—making can be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by individuals acting alone or in collusion with others to override controls. Accordingly, because of the inherent
limitations in the design of a cost-effective control system, misstatements due to error or fraud may occur and may not always be prevented or timely detected. If
we are unable to assert that our internal controls over financial reporting are effective now or in the future, or if our auditors are unable to express an opinion on the
effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse
effect on our stock price.
We are a party to a number of labor disputes resulting from our operations in Brazil mainly to the reiterated jurisprudence in the labor courts in the
absence of a law for outsourced activity. Nevertheless, a Labor Reform was approved in the country in July, 2017 (effective as from November, 2017
after 120 day after its sanction) originating a new legal environment as we expect to reduce the figures of new labor claims.
Despite the prospective effects of the new mentioned legal environment, Atento has been named in numerous labor-related disputes commenced by Atento’s
employees or ex-employees, for various reasons, including dismissals or claims over employment conditions in general, and our internal structuring and
reorganizations and dismantlings. In addition, we are regularly party to ongoing disputes with local tax authorities and social security authorities in the
jurisdictions in which we operate. In the normal course of our business we are also party to various other lawsuits and regulatory proceedings, including, among
other things, daily and general working routine, overtime rules, health and safety matters in the workplace, commercial claims and other matters. The estimated
amount involved in these claims total $316.8 million of which $24.3 million have been classified as probable, $162.7 million classified as possible and $129.8
million classified as remote, based on inputs from external and internal counsels as well as historical statistics. In connection with such disputes, Atento Brasil and
its affiliates have, in accordance with local laws, deposited $46.6 million with the Brazilian courts as security for claims made by employees or former employees.
In addition, considering the levels of litigation in Brazil and our historical experience with these types of claims, as of December 31, 2017, we have recognized
$24.3 million of provisions. If our provisions for any of our labor claims are insufficient or the claims against us rise significantly in the future, this could have a
material adverse effect on our business, financial condition, results of operations and prospects. See “Item 8. Financial Information—A. Consolidated Statements
and Other Financial Information—Legal Proceedings”.
Our existing debt may affect our flexibility in operating and developing our business and our ability to satisfy our obligations.
As of December 31, 2017, we had total indebtedness of $486.3 million. Our level of indebtedness may have significant negative effects on our future
operations, including:
·
impairing our ability to obtain additional financing in the future (or to obtain such financing on acceptable terms) for working capital, capital expenditure,
acquisitions or other important needs;
·
requiring us to dedicate a substantial portion of our cash flow to the payment of principal and interest on our indebtedness, which could impair our
liquidity and reduce the availability of our cash flow to fund working capital, capital expenditure, acquisitions and other important needs;
·
increasing the possibility of an event of default under the financial and operating covenants contained in our debt instruments; and
·
limiting our ability to adjust to rapidly changing conditions in the industry, reducing our ability to withstand competitive pressures and making us more
vulnerable to a downturn in general economic conditions or business than our competitors with less debt.
If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to refinance all or a portion of our existing debt or
obtain additional financing. We cannot assure you that any such refinancing would be possible or that any additional financing could be obtained. Our inability to
obtain such refinancing or financing may have a material adverse effect on our business, financial condition, results of operations and prospects.
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In addition, several of our financing arrangements contain a number of covenants and restrictions including limits on our ability and our subsidiaries’ ability
to incur additional debt, pay dividends and make certain investments. Complying with these covenants may cause us to take actions that make it more difficult to
successfully execute our business strategy and we may face competition from companies not subject to such restrictions. Moreover, our failure to comply with
these covenants could result in an event of default or refusal by our creditors to renew certain of our loans.
Control by Bain Capital could adversely affect our other shareholders.
Bain Capital controls Topco and PikCo, and owns, directly or indirectly, approximately 68.14% of our ordinary shares, Bain Capital have a continuing
ability to control our board of directors and to exercise significant influence over our affairs for the foreseeable future, including controlling the election of directors
and significant corporate transactions, such as a merger or other sale of our Company or our assets.
This concentrated control by Bain Capital limits the ability of other shareholders to influence corporate matters and, as a result, we may take actions that our
other shareholders do not view as beneficial. For example, this concentration of ownership could have the effect of delaying or preventing a change in control or
otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could cause the market price of our ordinary shares to decline or
prevent our shareholders from realizing a premium over the market price for their ordinary shares.
The market price of our ordinary shares may be volatile.
The stock market has been highly volatile. As a result, the market price of our ordinary shares may be volatile, and investors in our ordinary shares may
experience a decrease, which could be substantial, in the value of their ordinary shares, including decreases unrelated to our operating performance or prospects, or
a complete loss of their investment. The price of our ordinary shares could be subject to wide fluctuations in response to a number of factors, including those listed
elsewhere in this “Risk Factors” section and others such as:
·
variations in our operating performance and the performance of our competitors;
·
actual or anticipated fluctuations in our quarterly or annual operating results;
·
changes in our revenue or earnings estimates or recommendations by securities analysts;
·
publication of research reports by securities analysts about us or our competitors or our industry;
·
our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
·
additions or departures of key personnel;
·
strategic decisions by us or our competitors, such as acquisitions, divestitures, spinoffs, joint ventures, strategic investments or changes in business
strategy;
·
announcement of technological innovations by us or our competitors;
·
the passage of legislation, changes in interpretations of laws or other regulatory events or developments affecting us;
·
speculation in the press or investment community;
·
changes in accounting principles;
·
terrorist acts, acts of war or periods of widespread civil unrest;
·
changes in general market and economic conditions;
·
changes or trends in our industry;
·
investors’ perception of our prospects; and
·
adverse resolution of any new or pending litigation against us.
In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of
litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy
judgments or to settle or defend litigation.
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Any determination to pay dividends is at the discretion of our board of directors, and we may not pay any dividends. Accordingly, investors may only
realize future gains on their investments if the price of their ordinary shares increases, which may never occur.
On September 21, 2017, the Board of Directors approved a dividend policy for the Company with a goal of paying annual cash dividends pay-out in line
with industry peers and practices. The declaration and payment of any interim dividends is subject to approval of Atento’s corporate bodies and will be determined
based upon, amongst other things, Atento’s performance, growth opportunities, cash flow, contractual covenants, applicable legal requirements and liquidity
factors. The Board of Directors intends to review the dividend policy regularly and so accordingly is subject to change at any time.
Future equity issuances may dilute the holdings of ordinary shareholders and could materially affect the market price of our ordinary shares.
We may in the future decide to offer additional equity to rise capital or for other purposes. Any such additional offering could reduce the proportionate
ownership and voting interests of holders of our ordinary shares, as well as our earnings per ordinary share and net asset value per ordinary share. Future sales of
substantial amounts of our ordinary shares in the public market, whether by us or by our existing shareholders, or the perception that sales could occur, may
adversely affect the market price of our shares, which could decline significantly.
Cyberattacks and operational frauds including unauthorized disclosure of sensitive or confidential client and customer data, whether through breach of
our computer systems or otherwise, could expose us to protracted and costly litigation and cause us to lose clients.
Risk relating to losing clients, reputation and increase of global insurance policy premium due operational frauds. Atento delivers its services to its clients
through a complex technological platform that integrates many aspects of information technology: powerful telephonic, hardware and software. The Group ensures
that requisite security and insurance cover are applied in the context of its activities. The Group requests that each subsidiary to adhere to internal data security and
protection standards, as well as to international security and quality standards, however in our regular course of business Atento operates client systems that might
not comply with our Group IT Security rules.
While we take actions to improve our controls, it is possible that our technology controls over our client’s operations and other practices we follow may not
prevent the fraud in our platforms. If any person, including any of our employees, negligently disregards or intentionally breaches our established controls with
respect to such data or otherwise mismanages or misappropriates that data, we could be subject to monetary damages, fines and/or criminal prosecution. Operations
frauds by using client or customer data, whether through system failure, employee negligence, fraud or misappropriation, could damage our reputation and cause us
to lose clients.
We are typically required to collect and store sensitive data in connection with our services, including names, addresses, social security numbers, credit card
account numbers, checking and savings account numbers and payment history records, such as account closures and returned checks. As the complexity of
information infrastructure continuous to grow, the potential risk of security breaches and cyberattacks increases. Such breaches can lead to shutdowns or system
interruptions, and potential unauthorized disclosure of sensitive or confidential information. We are also subject to numerous laws and regulations designed to
protect this information. Laws and regulations that impact our business are increasing in complexity, change frequently, and at times conflict among the various
jurisdictions where we do business. In addition, many of our service agreements with our clients do not include any limitation on our liability to clients with respect
to breaches of our obligation to keep the information we receive confidential. We take precautions to protect confidential client and customer data. However, if any
person, including any of our employees, gains unauthorized access or penetrates our network security or otherwise mismanages or misappropriates sensitive data or
violates our established data and information security controls, we could be subject to significant liability to our clients or their customers for breaching contractual
confidentiality provisions or privacy laws, including legal proceedings, monitory damages, significant remediation costs and regulatory enforcement actions.
Penetration of the network security of our data centers could have a negative impact on our reputation, which could have a material adverse effect on our business,
results of operations, financial condition and prospects.
Continuity and Reputation Risks
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We may fail to attract and retain sufficiently trained employees at our service delivery centers to support our operations, which could have a material
adverse effect on our business, financial condition, results of operations and prospects.
The CRM BPO industry relies on large numbers of trained employees at service centers, and our success depends to a significant extent on our ability to
attract, hire, train and retain employees. The CRM BPO industry, including us, experiences high employee turnover. On average in the year ended December 31,
2017, we experienced monthly turnover rates of 5.9% of our overall operations personnel (we include both permanent and temporary employees, counting each
from his or her first day of employment with us) requiring us to continuously hire and train new employees, particularly in Latin America, where there is significant
competition for trained employees with the skills necessary to perform the services we offer to our clients. In addition, we compete for employees, within our
industry as well as with companies in other industries and in many locations where we operate there are a limited number of properly trained employees. Increased
competition for these employees, in the CRM BPO industry or otherwise, could have an adverse effect on our business. Additionally, a significant increase in the
turnover rate among trained employees could increase our costs and decrease our profit margins.
In addition, our ability to maintain and renew existing engagements, obtain new business and increase our margins will depend, in large part, on our ability
to attract, train and retain employees with skills that enable us to keep pace with growing demands for outsourcing, evolving industry standards, new technology
applications and changing client preferences. Our failure to attract, train and retain personnel with the experience and skills necessary to fulfill the needs of our
existing and future clients or to assimilate new employees successfully into our operations could have a material adverse effect on our business, financial condition,
results of operations and prospects.
If our clients decide to enter or further expand their own CRM BPO businesses in the future or current trends towards providing CRM BPO services
and/or outsourcing activities slow or are reversed, it may materially adversely affect our business, results of operations, financial condition and
prospects.
None of our current agreements with our clients prevents them from competing with us in our CRM BPO business and none of our clients have entered into
any non-compete agreements with us. Our current clients may seek to provide CRM BPO services similar to those we provide. Some clients conduct CRM BPO
services for other parts of their own businesses and for third parties. Any decision by our key clients to enter into or further expand their CRM BPO business
activities in the future could cause us to lose valuable clients and suppliers and may materially adversely affect our business, financial condition, results of
operations and prospects.
Moreover, we have based our strategy of future growth on certain assumptions regarding our industry, legal framework, services and future demand in the
market for such services. However, the trend to outsource business processes may not continue and could be reversed by factors beyond our control, including
negative perceptions attached to outsourcing activities or government regulations against outsourcing activities.
In addition, our business may be adversely affected by potential new laws and regulations prohibiting or limiting outsourcing of certain core business
activities of our clients in key jurisdictions in which we conduct our business, such as in Brazil. The introduction of such laws and regulations or the change in
interpretation of existing laws and regulations could adversely affect our business, financial condition, results of operations and prospects.
We have a long selling cycle for our CRM BPO services that requires significant investments and management resources, and a long implementation
cycle that requires significant resource commitments.
We have a long selling cycle for our CRM BPO services, which requires significant investment of capital, resources and time by both our clients and us.
Before committing to use our services, potential clients require us to expend substantial time and resources educating them as to the value of our services and
assessing the feasibility of integrating our systems and processes with theirs. Our clients then evaluate our services before deciding whether to use them. Therefore,
our selling cycle, which generally ranges from six to 12 months, is subject to many risks and delays over which we have little or no control, including our clients’
decision to choose alternatives to our services (such as other providers or in-house offshore resources) and the timing of our clients’ budget cycles and approval
processes.
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Implementing our services involves a significant commitment of resources over an extended period of time from both our clients and us. Our clients may
also experience delays in obtaining internal approvals or delays associated with technology or system implementations, thereby delaying further the implementation
process. Our current and future clients may not be willing or able to invest the time and resources necessary to implement our services, and we may fail to close
sales with potential clients to which we have devoted significant time and resources, which could have a material adverse effect on our business, financial
condition, results of operations and prospects.
If our services do not comply with the quality standards required by our clients or we are in breach of our obligations under our agreements with our
clients, our clients may assert claims for reduced payments to us or substantial damages against us, which could have a material adverse effect on our
business, financial condition, results of operations and prospects.
Most of our contracts with clients contain service level and performance requirements, including requirements relating to the quality of our services and the
timing and quality of responses to the client’s inquiries. In some cases, the quality of services that we provide is measured by quality assurance indicators and
surveys which are based in part on the results of direct monitoring by our clients of interactions between our employees and their customers. Failure to consistently
meet service requirements of a customer or errors made by our employees in the course of delivering services to customers could disrupt our client’s business and
result in a reduction in revenue or a claim for substantial damages against us. For example, some of our agreements stipulate standards of service that, if not met by
us, would result in lower payments to us. We also enter into variable pricing arrangements with certain clients and the quality of services provided may be a
component of the calculation of the total amounts received from such clients under these arrangements.
In addition, in connection with our service contracts, certain representations may be made, including representations relating to the quality of our services,
the ability of our associates and our project management techniques. A failure or inability to meet these requirements or a breach of such representations could
seriously damage our reputation and affect our ability to attract new business or result in a claim for damages against us, which could have a material adverse effect
on our business, financial condition, results of operations and prospects.
Our business operations are subject to various regulations and changes to these regulations or enactment of new regulations could require us to make
additional expenditures, restrict our business operations or expose us to significant fines or penalties in the case of noncompliance with such
regulations.
Our business operations must be conducted in accordance with a number of sometimes conflicting government regulations, including but not limited to, data
protection laws and consumer laws, and labor conditions laws, as well as trade restrictions and sanctions, tariffs, taxation, data privacy and labor relations.
Under data protection laws, we are typically required to manage, protect, utilize and store sensitive or confidential customer data in connection with the
services we provide. Under the terms of our client contracts, we represent that we will keep such information confidential in compliance with regulations.
Furthermore, we are subject to local data protection laws, consumer laws and/or “do not call list” regulations in most of the countries in which we operate, all of
which may require us to make additional expenditures to ensure compliance with these regulations. We also believe that we will be subject to additional laws and
regulations in the future that may be stricter than those currently in force to protect consumers and end users. We seek to implement measures to protect sensitive
and confidential customer data in accordance with client contracts and data protection laws and consumer laws. If any person, including any of our employees,
penetrates our network security or otherwise mismanages or misappropriates sensitive or confidential customer data, we could be subject to significant fines for
breaching privacy or data protection and consumer laws or lawsuits from our clients or their customers for breaching contractual confidentiality provisions which
could result in negative publicity, legal liability, loss of clients and damage to our reputation, each of which could have a material adverse effect on our business,
financial condition, results of operations and prospects. In addition, our business operations may be impacted if current regulations are made stricter or more
broadly applied or if new regulations are adopted. Violations of these regulations could impact our reputation and result in financial liability, criminal prosecution,
unfavorable publicity, restrictions on our ability to process information and breach of our contractual commitments. Any broadening of current regulations or the
introduction of new regulations may require us to make additional expenditures, restrict our business operations or expose us to significant fines or penalties, even
the temporary shut down our facilities. Any such violations or changes in regulations could, as a result, have a material adverse effect on our business, financial
condition, results of operations and prospects.
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Specific Risks
The consolidation of the potential users of CRM BPO services may adversely affect our business, financial condition, results of operations and
prospects.
Consolidation of the potential users of CRM BPO services may decrease the number of clients who contract our services. Any significant reduction in or
elimination of the use of the services we provide as a result of consolidation would result in reduced net revenue to us and could harm our business. Such
consolidation may encourage clients to apply increasing pressure on us to lower the prices we charge for our services, which could have a material adverse effect
on our business, financial condition, results of operations and prospects.
Our key clients have significant leverage over our business relationships, upon which we are dependent.
We are dependent upon the business relationships we have developed with our clients. Our service contracts generally allow our clients to modify such
relationships and our commensurate level of work. Typically, the initial term of our service contracts is one to two years. Generally, our specific service contracts
provide for early termination, in some cases without cause, by either party, provided 30 to 90 days prior written notice is given. Clients may also unilaterally reduce
the use and number of services under our contracts without penalty. The termination or reduction in services by a substantial percentage or a significant reduction
in the price of these contracts could adversely affect our business and reduce our margins. The revenue generated from our 15 largest client groups (including
Telefónica Group companies) for the year ended December 31, 2017 represented 76.4% of our revenue. Excluding revenue generated from the Telefónica Group,
our next 15 largest client groups for the year ended December 31, 2017 represented in aggregate 38.2% of our revenue. In addition, a contract termination or
significant reduction in the services contracted to us by a major client could result in a higher-than-expected number of unassigned employees, which would
increase our employee benefit expenses associated with terminating employees. We may not be able to replace any major client that elects to terminate or not to
renew its contract with us, which would have a material adverse effect on our business, financial condition, results of operations and prospects.
We may face difficulties as we expand our operations into countries in which we have no prior operating experience.
We may expand our global footprint to maintain an appropriate cost structure and meet our clients’ delivery needs. This may involve expanding into
countries other than those in which we currently operate and where we have less familiarity with local procedures. It may involve expanding into less developed
countries, which may have less political, social or economic stability and less developed infrastructure and legal systems. As we expand our business into new
countries we may encounter economic, regulatory, personnel, technological and other difficulties that increase our expenses or delay our ability to start up our
operations or become profitable in such countries. This may affect our relationships with our clients and could have an adverse effect on our business, financial
condition, results of operations and prospects.
Adverse decisions of the Superior Labor Court or other labor authorities in Brazil or legislative changes in applicable law with respect to the legality of
outsourcing of certain activities that we provide could have a material adverse impact on our business, financial condition, results of operations and
prospects.
As in the past there was no specific legislation in Brazil concerning outsourcing activities, the issue in the country was regulated by an understanding of
Labor Justice, enshrined in Supreme Labor Court’s Summary 331 (Tribunal Superior do Trabalho – TST), which established that the outsourcing of intermediate
activities of the company that took the services was legal, meanwhile the outsourcing of essential activities was illegal. In Brazilian law, a summary is an entry that
registers the standardized interpretation adopted by a Court on a specific topic, based on the judgment of several similar cases, with the dual purpose of making
public the jurisprudence for the society as well as to promote uniformity between decisions.
Summary 331, however, did not define how this differentiation between both intermediate and/or essential activities should be carried out. It is up to the
Labor Court, in the analysis of each case, to carry it out, which brought enormous legal uncertainty. However, by means of actions directly offered by the
representative entities of the employer’s sector to the constitutional court, conducted by Brazilian Supreme Court (“Supremo Tribunal Federal”), or “STF,” it was
granted that outsourcing issue would in theory have a constitutional legal basis and so the STF has jurisdiction to consider arguments regarding the legality of
outsourcing services in Brazil and, therefore, that it will judge the merit of the claims. The two main actions are about outsourcing in general and outsourcing in the
telecommunications sector.
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If confirmed by a decision on the merit, such interpretation of the STF will be a binding precedent that must be adhered to by all lower courts in the country.
We cannot predict when any such decisions would be issued nor what the final outcome of such cases will be.
Additionally, on March 31, 2017, the National Congress in Brazil approved a law, sanctioned by the president, regulating all outsourced labor relations,
considering legal any kind of outsourcing activities being them intermediate and/or essential for the outsourcing company. Despite some disputes provoked by the
trade union centrals and the Public Labor Ministry, so far no measure suspending the new law was obtained before Brazilian higher courts and so, presently, this
new law decreased the risk of labor conviction until then faced by the subsidiary Atento Brasil S.A.
We may seek to acquire suitable companies in the future and if we cannot find suitable targets or cannot integrate these companies properly into our
business after acquiring them, it could have a material adverse effect on our business, results of operations, financial condition and prospects.
While we have grown almost exclusively organically, we may in the future pursue transactions, including acquisitions of complementary businesses, to
expand our product offerings and geographic presence as part of our business strategy. These transactions could be material to our financial condition and results of
operations. We may not complete future transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the expected benefits of any
acquisition or investments. Other companies may compete with us for these strategic opportunities. We also could experience negative effects on our results of
operations and financial condition from acquisition related charges, amortization of intangible assets and asset impairment charges, and other issues that could arise
in connection with, or as a result, of the Reorganization Transaction. This includes regulatory or compliance issues that could exist for an acquired company or
business and potential adverse short-term effects on results of operations through increased costs or otherwise. These effects, individually or in the aggregate, could
cause a deterioration of our credit profile and result in reduced availability of credit to us or increased borrowing costs and interest expense in the future.
Additionally, the inability to identify suitable acquisition targets or investments or the inability to complete such transactions may affect our competitiveness.
Furthermore, we may not be able to integrate effectively such future acquisitions into our operations and may not obtain the profitability we expect from such
acquisitions. Any such risks related to future acquisitions could have a material adverse effect on our business, results of operations, financial condition and
prospects.
We are a Luxembourg public limited liability company (société anonyme) and it may be difficult for you to obtain or enforce judgments against us or our
executive officers and directors in the United States.
We are organized under the laws of the Grand Duchy of Luxembourg. Most of our assets are located outside the United States. Furthermore, some of our
directors and officers named in this Annual Report reside outside the United States and most of their assets are located outside the United States. As a result,
investors may find it difficult to effect service of process within the United States upon us or these persons or to enforce outside the United States judgments
obtained against us or these persons in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the U.S. federal securities laws.
Likewise, it may also be difficult for an investor to enforce in U.S. courts judgments obtained against us or these persons in courts located in jurisdictions outside
the United States, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. It may also be difficult for an investor to bring
an original action in a Luxembourg court predicated upon the civil liability provisions of the U.S. federal securities laws against us or these persons.
Luxembourg law, furthermore, does not recognize a shareholder’s right to bring a derivative action on behalf of the Company except where such
shareholder or a group of shareholders holds shares representing at least ten percent (10%) of the Company’s share capital at the annual general meeting of
shareholders of the Company resolving upon the discharge to be granted to the directors.
As there is no treaty in force on the reciprocal recognition and enforcement of judgments in civil and commercial matters between the United States and the
Grand Duchy of Luxembourg, courts in Luxembourg will not automatically recognize and enforce a final judgment rendered by a U.S. court. The enforceability in
Luxembourg courts of judgments entered by U.S. courts will depend upon the conditions set forth in the Luxembourg procedural code, which may include the
following:
·
the judgment of the U.S. court is enforceable ( exécutoire
) in the United States;
·
the U.S. court had jurisdiction over the subject matter leading to the judgment (that is, its jurisdiction was in compliance both with Luxembourg private
international law rules and with the applicable domestic U.S. federal or state jurisdictional rules);
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·
the U.S. court has applied to the dispute the substantive law designated by the Luxembourg conflict of law rules (although one first instance decision
rendered in Luxembourg—which had not been appealed—no longer applies this condition);
·
the judgment was granted following proceedings where the counterparty had the opportunity to appear, and if appeared, there was no violation of the
rights of the defendant;
·
the U.S. court has acted in accordance with its own procedural rules; and
·
the judgment of the U.S. court does not contravene Luxembourg international public policy.
Our directors and officers, past and present, are entitled to indemnification from us to the fullest extent permitted by Luxembourg law against liability and
all expenses reasonably incurred or paid by him/her in connection with any losses or liabilities, claim, action, suit or proceeding in which he/she is involved by
virtue of his/her being or having been a director or officer and against amounts paid or incurred by him in the settlement thereof, subject to limited exceptions. To
the extent allowed by law, the rights and obligations among us and any of our current or former directors and officers will be governed exclusively by the laws of
Luxembourg and subject to the jurisdiction of the Luxembourg courts, unless such rights or obligations do not relate to or arise out of their capacities as directors or
officers. Although there is doubt as to whether U.S. courts would enforce such a provision in an action brought in the United States under U.S. securities laws, such
provision could make enforcing judgments obtained outside Luxembourg more difficult to enforce against our assets in Luxembourg or in jurisdictions that would
apply Luxembourg law.
Our shareholders may have more difficulty protecting their interests than they would as shareholders of a U.S. corporation.
Our corporate affairs are governed by our articles of association and by the laws governing public limited liability companies organized under the laws of
the Grand Duchy of Luxembourg. The rights of our shareholders and the responsibilities of our directors and officers under Luxembourg law are different from
those applicable to a corporation incorporated in the United States. Luxembourg law and regulations in respect of corporate governance matters might not be as
protective of minority shareholders as state corporation laws in the United States. Therefore, our shareholders may have more difficulty in protecting their interests
in connection with actions taken by our directors and officers or our principal shareholders than they would as shareholders of a corporation incorporated in the
United States.
You may not be able to participate in equity offerings, and you may not receive any value for rights that we may grant.
Pursuant to Luxembourg law on commercial companies, dated August 10, 1915, as amended (the “Luxembourg Corporate Law”), existing shareholders are
generally entitled to preemptive subscription rights in the event of capital increases and issues of shares against cash contributions. However, our articles of
association provide that preemptive subscription rights can be limited, waived or cancelled by our board of directors for a period ending on the fifth anniversary of
the date of publication of the notarial deed recording the minutes of the extraordinary general shareholders’ meeting which adopted the authorized capital of the
Company in the Recueil
électronique
des
sociétés
et
associations
approving an increase of the share capital by the board of directors within the limits of the
authorized share capital, which publication has occurred on December 3, 2014. The general meeting of our shareholders may renew, expand or amend such
authorization. See Item IOB “Articles of association” for additional detail.
Luxembourg insolvency laws may offer our shareholders less protection than they would have under U.S. insolvency laws.
As a company organized under the laws of the Grand Duchy of Luxembourg and with our registered office in Luxembourg, we are subject to Luxembourg
insolvency laws in the event any insolvency proceedings are initiated against us including, amount other things, Regulation (EU) 2015/848 of the European
Parliament and of the Council of 20 May 2015 on insolvency proceedings. Should courts in another European country determine that the insolvency laws of that
country apply to us in accordance with and subject to such EU regulations, the courts in that country could have jurisdiction over the insolvency proceedings
initiated against us. Insolvency laws in Luxembourg or the relevant other European country, if any, may offer our shareholders less protection than they would have
under U.S. insolvency laws and make it more difficult for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency laws.
As a foreign private issuer, we are permitted to, and rely on exemptions from certain corporate governance standards applicable to U.S. issuers,
including the requirement that a majority of an issuer’s directors consist of independent directors. This may afford less protection to holders of our
ordinary shares.
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The New York Stock Exchange listing rules requires listed companies to have, among other things, a majority of their board members be independent, and
to have independent director oversight of executive compensation, nomination of directors and corporate governance matters. As a foreign private issuer, however,
while we intend to comply with these requirements within the permitted phase-in periods, we are permitted to follow home country practice in lieu of the above
requirements. Luxembourg law, the law of our home country, does not require that a majority of our board consist of independent directors or the implementation
of a nominating and corporate governance committee, and our board may thus in the future not include, or include fewer, independent directors than would be
required if we were subject to the New York Stock Exchange listing rules, or they may decide that it is in our interest not to have a Compensation Committee or
nominating and corporate governance committee, or have such committees governed by practices that would not comply with New York Stock Exchange listing
rules. Since a majority of our board of directors may not consist of independent directors if we decide to rely on the foreign private issuer exemption to the New
York Stock Exchange listing rules, our board’s approach may, therefore, be different from that of a board with a majority of independent directors, and as a result,
the management oversight of our Company could, in the future, be more limited than if we were subject to the New York Stock Exchange listing rules.
Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as companies that are not foreign
private issuers whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective
disclosure of material information. As a result, our shareholders may not have access to information they deem important, which may result in our shares being less
attractive to investors.
We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. Holders of
our ordinary shares.
Based on the composition of our income, assets and operations, we do not expect to be treated as a passive foreign investment company (“PFIC”) for U.S.
federal income tax purposes for the current taxable year or in the foreseeable future. However, the application of the PFIC rules is subject to uncertainty in several
respects, and we cannot assure you the U.S. Internal Revenue Service will not take a contrary position. Furthermore, this is a factual determination that must be
made annually after the close of each taxable year. If we are a PFIC for any taxable year during which a “U.S. Holder” (a beneficial owner of ordinary shares that is
for U.S. federal income tax purposes: (a) an individual who is a citizen or resident of the U.S.; (b) a corporation (or other entity taxable as a corporation for U.S.
federal income tax purposes) created or organized in or under the laws of the U.S., any state thereof or the District of Columbia; (c) an estate the income of which is
subject to U.S. federal income taxation regardless of its source; or (d) a trust (i) if a court within the U.S. can exercise primary supervision over its administration,
and one or more U.S. persons have the authority to control all of the substantial decisions of that trust, or (ii) that was in existence on August 20, 1996 and validly
elected under applicable Treasury Regulations to continue to be treated as a domestic trust) holds our ordinary shares, certain adverse U.S. federal income tax
consequences could apply to such U.S. Holder.
Future sales of our ordinary shares, or the perception in the public markets that these sales may or may not occur, could impact our share price.
The market price of our ordinary shares could decline as a result of sales of a large number of our ordinary shares in the market, and the perception that
these sales could occur may also depress the market price of our ordinary shares. We have 73.9 million ordinary shares outstanding as of March 31, 2018.
All of our outstanding ordinary shares may be sold in the public market by existing stockholders subject to applicable volume and other limitations imposed
under federal securities laws. PikCo is entitled, under contracts providing for registration rights, to require us to register our ordinary shares owned by them with
the SEC. Upon effectiveness of any registration statement, subject to lockup agreements with the representatives of the underwriters, those ordinary shares will be
available for immediate resale in the United States in the open market.
Sales of our ordinary shares or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price
that we deem appropriate. These sales, or the perception that such sales could occur, also could cause the market price for our ordinary shares to fall and make it
more difficult for you to sell our ordinary shares.
We may incur non-cash goodwill and deferred tax asset impairment charges in the future.
We carry a significant goodwill balance on our balance sheet. We test goodwill for impairment annually as of December 31 and at other times if events have
occurred or circumstances exist that indicate the carrying value of goodwill may no longer be recoverable.
Also, the Company regularly reviews its deferred tax assets for recoverability and determines if a portion or all of a deferred tax asset will not be realized.
The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based on the evaluation of positive and negative
evidence. This evidence includes historical pretax and taxable income, projected future taxable income, the expected timing of the reversal of existing temporary
differences and the implementation of tax planning strategies. Projected future taxable income is based on expected results and assumptions as to the jurisdiction in
which the income will be earned. The expected timing of the reversals of existing temporary differences is based on current tax law and the Company’s tax
methods of accounting.
Although no indications of goodwill and deferred tax asset impairments have been identified, there can be no assurance that we will not incur impairment
charges in the future, particularly in the event of a prolonged economic slowdown. A significant impairment could have a material adverse effect on our results of
operations.
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ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
History and Structure
Our legal name is Atento S.A. We are a public limited liability company (“société anonyme”) organized and existing under the laws of the Grand Duchy of
Luxembourg on March 5, 2014 and have our registered office at 4, rue Lou Hemmer, L - 1748 Luxembourg Findel, Grand Duchy of Luxembourg. American Stock
Transfer & Trust Company, LLC is the U.S. agent.
Our principal executive offices are located at Rua Professor Manoelito de Ornellas, 303, 1º andar, Condomínio Nova São Paulo, 04719 - 040, São Paulo,
Brazil, telephone number +55 (11) 3779 - 0881, Av. Yucatán 15, Col. Hipódromo Condesa. México D.F 06700, and C/ Santiago de Compostela 94, 28035 Madrid,
Spain. Our agent for service of process in the United States is American Stock Transfer & Trust Company, LLC.
We were founded in 1999 to consolidate the Telefónica Group’s CRM services into a single company to take advantage of the expected demand in CRM
services and to capture efficiencies of scale, with the start - up of our operations in Brazil, Chile, El Salvador, Guatemala, Peru, Puerto Rico and Spain. By 2000,
we had launched our operations in other countries including Argentina, Colombia, and Morocco, while further growing our Brazilian operations and in 2001 our
operations in Mexico. We then began to increase our focus on consolidation and business profitability.
We continued our geographic expansion by launching our Uruguay operations and our commercial offices in France in 2006 and Panama in 2007. From
2003 to 2007, we focused on implementing our differentiation strategy by offering higher quality services and the development and maintenance of long - term
relationships with our clients. This strategy was very successful, driving a significant increase in revenue and operating profit from 2003 to 2007.
In 2008, we broadened our strategic targets to include the pursuit and provision of new business opportunities, while continuing to implement our strategy of
differentiation by offering higher quality solutions, superior value - added services and building and maintaining long - term relationships. We also expanded our
geographical presence in 2008 in the Czech Republic and in 2009 we began operations in the United States.
In connection with Bain Capital’s acquisition, Atento further reinforced its partnership with Telefónica. In 2012 we signed a MSA agreement with
Telefónica with a nine-year term through 2021, which includes annual minimum revenue commitments in all jurisdictions (except for Argentina).
On November 8, 2016, Atento entered into Amendment Agreement to the Master Services Agreement with Telefónica S.A., reinforced and strengthening
the Company’s strategic relationship with Telefónica, its largest client. The Amendment provides for the following: a reset of volume targets in Brazil and Spain, as
well as a two-year extension of the MSA for those countries until December 31, 2023.
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In October 2014, Atento became a publicly listed company on the New York Stock Exchange (NYSE), under the ticker “ATTO”.
Capital Expenditure
Our business has significant capital expenditure requirements, including for the construction and initial fit-out of our service delivery centers; improvements
and refurbishment of leased facilities for our service delivery centers; acquisition of various items of property, plant and equipment, mainly comprised of furniture,
computer equipment and technology equipment; and acquisition and upgrades of our software or specific customer’s software.
The funding of the majority of our capital expenditure is covered by existing cash and cash from operating activities. The table below shows our capital
expenditure by segment for the years ended December 31, 2015, 2016 and 2017:
($ in millions)
Brazil (*)
Americas
EMEA
Other and eliminations
Total capital expenditure
For the year ended December 31,
2016
2015
2017
74.2
39.2
7.3
0.5
121.2
23.0
23.0
2.1
0.1
48.2
38.8
24.8
3.9
-
67.5
(*) For December 31, 2017 the amount invested by the Company’s principal capital expenditures, does not include Interfile acquisition and the amount paid to
extend the partnership with Itaú.
B. Business Overview
Our Company
Atento is the largest provider of CRM BPO services and solutions in Latin America and among the top five providers globally based on revenues. Our
business was founded in 1999 as the CRM BPO provider to the Telefónica Group. Since then, we have significantly diversified our client base, and we became an
independent company in December 2012 when we were acquired by funds affiliated with Bain Capital. In October 2014, Atento became a publicly listed company
on the New York Stock Exchange (NYSE), under the ticker “ATTO”.
Latin America is one of the most attractive CRM BPO markets globally and we believe Atento is uniquely positioned to capture this growth potential as one
of the few scale players in the region. According to Frost & Sullivan, Latin America is one of the fastest growing CRM BPO market in the world, with a market
size of approximately $10 billion in 2016.
The potential for growth in the markets where we operate is strong and is driven by a number of demographic and business trends, including (i) sustained
demand and growth driven by an improving macroeconomic environment, a rapidly growing population and an emerging middle class, (ii) further outsourcing of
CRM BPO operations, (iii) potential for further penetration in existing markets, (iv) development of new industry vertical expertise, such as with multisector
companies, and (v) North America’s continued offshoring trend as U.S.-based businesses continue to offshore call center services to other geographies. For
example, in 2015, 53% of the population in Latin America utilized banking services, compared to 93% of the population in the United States, and broadband user
penetration was 52% in Latin America, compared to 87% in the United States.
We are the largest provider of CRM BPO services in Latin America, where we had a market share of 17% for the year ended December 31, 2016, according
to Frost & Sullivan. We hold the number one market share position in most of the countries in Latin America where we operate, including Brazil, the largest market
in Latin America, Mexico, Peru, Argentina and Chile, based on revenues for the year ended December 31, 2016. We have achieved our leadership position over our
17-year history through our dedicated focus on superior client service, scaled and reliable technology and operational platform, a deep understanding of our clients’
diverse local needs, and our highly engaged employee base. Given its growth outlook, Latin America continues to be one of the most attractive CRM BPO markets
globally and we believe we are distinctly positioned as one of the few scale operators in the region, where we have approximately twice the market share of the
second-largest operator.
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We offer a comprehensive portfolio of CRM BPO services, including sales, customer care, technical support, collections and back office. We continue to
evolve from offering individual CRM BPO services to combining multiple service offerings covering both the front- and back-end of the customer experience into
customized CRM BPO solutions adapted to client needs. We believe our customized end-to-end solutions provide an improved experience for our clients’
customers, create stronger customer relationships that reinforce our clients’ brand recognition, and enhance our clients’ customer loyalty. Our individual services
and solutions are delivered across multiple channels, including digital (SMS, email, chats, social media and apps, among others) and voice, and are enabled by
process design, technology and intelligence functions. In 2017, CRM BPO solutions and individual services comprised 26.5% and 73.5% of our revenue,
respectively. Brazil has the highest penetration of CRM BPO solutions of our segments, and we change solutions from 41.5% of revenue in 2016 to 37.5% of
revenue in Brazil in 2017.
We also enjoy longstanding client relationships across a variety of industries and we work with market leaders in telecommunications, banking and financial
services, and multisector, which for us is comprised of the consumer goods, services, public administration, healthcare, transportation, technology and media
industries. In 2017, our revenue from clients in telecommunications, financial services and multisector represented 46.7%, 31.7% and 21.6% of our total revenue,
respectively. Since our founding in 1999, we have significantly diversified the sectors we serve and our client base has grown to over 400 separate clients. Revenue
from non-Telefónica clients accounted for 61.0% of our total revenue in 2017, compared to 10.0% of our total revenue when we were founded in 1999.
Atento benefits from a highly engaged employee base. Our over 150,000 employees worldwide are critical to our ability to deliver best-in-class customer
service. In 2016, for the fourth consecutive year, we were recognized as one of the top 25 companies to work for in the world, according to the list of the World’s
Best Multinational Workplaces by Great Place to Work® (“GPTW”), a group in which Atento is the only CRM BPO and Latin America-based company. In 2017
we were also recognized for the seventh year in a row as one of the 25 Best Multinational Workplaces in Latin America by Great Place to Work®.
We have a strong relationship with Telefónica underpinned by a long-term master services agreement (the “MSA”). On November 8, 2016, we entered into
an Amendment Agreement to the MSA (the “Amendment”) with Telefónica, our largest client, reinforcing and strengthening the Company’s strategic relationship
with Telefónica. The Amendment provides for the following: a reset of volume targets in Brazil and Spain, as well as a two-year extension of the MSA for those
countries until December 31, 2023; revised invoicing and collection processes in all key markets; providing that the Company will maintain at least our current
share of Telefónica’s spending in all key contracts; and certain other amendments. We are currently serving 34 companies of the Telefónica Group under 131
arm’s-length contracts. Although the MSA is an umbrella agreement which governs our services agreements with the Telefónica Group companies, the termination
of the MSA on December 31, 2021 (except in Brazil and Spain, where the MSA terminates on December 31, 2023) does not automatically result in a termination of
any of the local services agreements in force after those dates.
On August 4, 2016, we, through our direct subsidiary Atento Teleservicios España, S.A.U., entered into a Share Sale and Purchase Agreement with Intelcia
Group, S.A. for the sale of 100% of Atento Morocco S.A., which encompassed Atento’s operations in Morocco and provided services to the Moroccan and French
markets (the “Morocco Transaction”). The Morocco Transaction was consummated on September 30, 2016, upon receipt of regulatory approval. Atento’s
operations in Morocco which provide services to the Spanish market were excluded from the Morocco Transaction and continue to operate as part of the Atento
Teleservicios España, S.A.U. branch in Morocco. The Morocco Transaction allowed the Company to continue strengthening its focus on its core markets of Spain
and Latin America.
On September 2, 2016, the Company, through its subsidiary Atento Brasil S.A. (“Atento Brasil”), acquired 81.49% of the shares of RBrasil Soluções S.A.
(“RBrasil”), a leading provider of late-stage collection services in Brazil. The total amount paid for this acquisition was R$27.1 million (equivalent to
approximately $8.6 million). We believe the combination of Atento Brasil and RBrasil:
• creates the largest provider of collection services in Brazil, with more than 6,600 professionals with a strong collection of know-how and expertise,
optimally positioning Atento to expand its share of the $2.7 billion collections market in Latin America;
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• provides new and existing clients with a fully integrated platform and delivers customized collections solutions;
• enhances the effectiveness of collections solutions through the extensive use of technology, business intelligence and analytics capabilities; and
• drives consolidation in this highly fragmented and compelling market in Latin America.
Following the acquisition of RBrasil, we have pursued several opportunities to grow in the late-stage collection services segment, including long-term
contracts with relevant clients in key sectors.
On May 9, 2017, we announced an arrangement with Itaú Unibanco, a leading financial institution in Brazil, through which we will leverage the industry-
leading capabilities of RBrasil and Atento Brasil to serve Itaú Unibanco’s increasing demand for end-to-end collections solutions, customer service and back office
services.
On June 9, 2017, the Company, through its subsidiary Atento Brasil, acquired 50.00002% of Interfile Serviços de BPO Ltda. and 50.00002% of
Interservicer-Serviços em Crédito Imobiliário Ltda. (jointly, "Interfile"), a leading provider of BPO services and solutions, including credit origination, for the
banking and financial services sector in Brazil. The total amount paid for this acquisition was $14.7 million, net of cash acquired. Through this acquisition, we
expect to be able to expand our capabilities in the financial services segment, especially in credit origination, accelerate our penetration into higher value-added
solutions, strengthen our leadership position in the Brazilian market and facilitate the expansion of our credit origination segment into other Latin America markets.
On June 29, 2017, we launched a new business unit, Atento Digital, to drive customer experience in the age of digitalization. Atento Digital's mainstream
offering encompasses a wide range of digital capabilities that enhance customer experience and increase efficiency across the customer lifecycle, from acquiring to
managing and retaining customers. Atento Digital's proposal incorporates the use of digital marketing tools, automation, artificial intelligence, cognitive technology
based on Keepcon's semantic engine and analytics to deliver a new level of customer experience and process efficiency for Atento's core service such as sales,
customer care, technical support, collections or back office. All these services are offered via Atento's omni-channel platform that combines both traditional and
digital channels. Atento's digital proposal also includes consultancy services and solutions for advancing digital transformation processes while fully leveraging
existing systems.
On June 30, 2017, we announced the signing of a strategic partnership and the acquisition of a minority stake in Keepcon, a leading provider of semantic
technology-based automated customer experience management through our subsidiary Contact US Teleservices Inc. The acquisition of a minority stake in Keepcon
follows our overall strategy to develop and expand our digital capabilities, grouped under a newly created global digital business unit. Our goal is to integrate all of
our digital assets to generate additional value for clients and drive growth across verticals and geographies. We aim to turn the business disruption generated by the
digital revolution into differentiated customer experience solutions generating competitive advantages for customers. We expect that the investment in Keepcon by
Atento will expand the artificial intelligence and automatization capabilities of our omnichannel platform.
Our revenue for the year ended December 31, 2017, was $1,921.3 million, our Adjusted EBITDA was $221.9 million and our loss for the year was $13.6
million. For the years ended December 31, 2016 and 2017, our revenue decreased by 9.9%, and increased by 9.3%, respectively, and our Adjusted EBITDA
decreased by 11.1% and 0.4%, respectively. For the years ended December 31, 2016 and 2017, respectively, excluding the impact of foreign exchange, our revenue
decreased by 1.4%, and increased by 5.1% and our Adjusted EBITDA decreased by 3.6% and 4.7%, respectively. The following table sets forth a breakdown of
revenue based on geographical region for the years ended December 31, 2015, 2016 and 2017:
($ in millions, except percentage changes)
Brazil
Americas
EMEA
Other and eliminations (1)
Total
(1) Includes holding company level revenues and consolidation adjustments.
37
For the year ended December 31,
2015
2016
2017
930.2
789.8
231.7
(1.8)
1,949.9
816.4
718.9
223.9
(1.7)
1,757.5
944.8
758.0
223.4
(5.0)
1,921.3
Table of Contents
We operate in 13 countries worldwide, and organize our business into the following three geographic markets: (i) Brazil, (ii) Americas, excluding Brazil
(“Americas”) and (iii) EMEA. For the year ended December 31, 2017, Brazil accounted for 49.2% of our revenue and 56.4% of our Adjusted EBITDA; Americas
accounted for 39.5% of our revenue and 37.8% of our Adjusted EBITDA; EMEA accounted for 11.6% of our revenue and 6.7% of our Adjusted EBITDA (in each
case, before holding company level revenue and consolidation adjustments). The following table sets forth a breakdown of revenue by country for the years ended
December 31, 2015, 2016 and 2017:
Revenue
by
country
($ in millions)
Country
Spain
Other and eliminations (*)
EMEA
Argentina
Chile
Colombia
El Salvador
United States
Guatemala
Mexico
Peru
Puerto Rico
Uruguay
Panama
Other and eliminations (*)
Americas
Brazil
Other and eliminations (*)
Total revenue
(*) Includes holding company level revenues and consolidation adjustments.
38
For the years ended December 31,
2015
2016
2017
(%)
233.0
(1.3)
231.7
162.1
79.6
59.5
19.2
28.9
17.1
242.4
145.4
14.0
3.7
4.6
13.3
789.8
930.2
(1.8)
1,949.9
224.0
(0.1)
223.9
119.6
80.1
61.0
16.7
37.0
15.8
199.6
151.8
14.6
3.5
5.0
14.2
718.9
816.4
(1.7)
1,757.5
223.4
-
223.4
142.5
97.2
75.4
12.5
48.3
16.7
178.5
151.7
10.2
3.2
4.5
17.4
758.0
944.8
(5.0)
1,921.3
11.6
-
11.6
7.4
5.1
3.9
0.7
2.5
0.9
9.3
7.9
0.5
0.2
0.2
0.9
39.5
49.2
(0.3)
100.0
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The amounts of revenue by country reported above are impacted by foreign exchange effects, which can be significant between the years in some countries.
For additional information, see Item 5. Operating and Financial Review and Prospects–A. Operating Results–Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
Seasonality
Our performance is subject to seasonal fluctuations. For each of the years presented herein, our performance was lower in the first quarter of the year than in
the remaining three quarters of the year. This is primarily due to (i) our clients generally spending less in the first quarter of the year after the year end holiday
season, (ii) the initial costs to train and hire new employees at new service delivery centers to provide additional services to our clients which are usually incurred
in the first quarter of the year, and (iii) statutorily mandated minimum wage and salary increases of operators, supervisors and coordinators in many of the countries
in which we operate which are generally implemented at the beginning of the first quarter of each year, whereas revenue increases related to inflationary
adjustments and contracts negotiations generally take effect after the first quarter. We have also found that growth in our revenue increases in the last quarter of the
year, especially in November and December, as the year end holiday season begins and we have an increase in business activity resulting from the handling of
holiday season promotions offered by our clients. These seasonal effects also cause differences in revenue and expenses among the various quarters of any year,
which means that the individual quarters of a year should not be directly compared with each other or used to predict annual operating results.
Our Strategy
Our mission is to be the number one customer experience solutions provider in the markets we serve by being a truly multi-client business. Atento’s tailored
CRM BPO solutions are designed to enable our clients to create a best-in-class experience for their customers, enabling our clients to focus on operating their core
businesses. Atento utilizes its industry expertise, commitment to customer care and consultative approach to offer superior and scalable solutions across the entire
value chain and customer life cycle, customizing each solution to the individual client’s needs. Our goal is to significantly outperform expected market growth by
being our clients’ service provider of choice for customer experience while driving margin efficiencies.
In the third quarter of 2016, we announced a “Strategy Refresh” to drive long-term profitable growth and create shareholder value. Recent market trends,
including the macroeconomic context in Brazil, the largest CRM BPO market in Latin America, and the accelerating adoption of omnichannel and digital
capabilities, prompted us to re-examine the priorities that support our long-term strategy. The ultimate goal of this exercise was to ensure we have the right focus
and capabilities to capitalize on industry trends in Latin America and to leverage our scale and financial strength to selectively broaden and diversify in key
verticals, countries and solutions taking advantage of the expected economic recovery in the Latin America region, and Brazil in particular.
Above - Market Growth
We are focused on our clients’ needs and, therefore, developing and delivering value-added, multi-channel services and solutions is an absolute priority for
us. We believe our offer is a strong component of our growth equation as well as our ability to generate value for our clients in an environment impacted by digital
technologies. We will continue evolving our offer to best serve our clients along three axes:
•
•
•
Double down on higher value-added solutions with a strong industry focus. This means that we want to go deeper into our client's customer value chain
with customized end to end solutions
Accelerate digital solutions across the customer lifecycle, becoming the strategic service provider for digital CRM processes
Strengthen our process consulting capabilities to provide unique business transformation solutions
We offer a comprehensive portfolio of customizable and scalable solutions encompassing the full customer life cycle from leads generation to sales,
customer care, technical support, back office and collections We believe we bring a differentiated combination of scale, capacity for processing client transactions,
and industry expertise to our client customer care operations, which allows us to provide higher-quality and lower-cost customer care services than our clients
could deliver on their own. We have strong client relationships, which allows us to capture a greater share of client spend, gain relevance as a business service
provider, and consequently achieve higher levels of profitability. We believe we have significant whitespace remaining in our core business across all verticals,
with initiatives implemented to continue increasing both share of wallet with existing customers, as well as attract new customers, either from competitors or from
new clients, as these clients choose to outsource their in-house operations with us because of our strong sector credentials.
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Our value proposition has continued to evolve towards end-to-end CRM BPO solutions, incorporating processes, technology and analytics as enablers for
our services, all aimed at improving efficiency and reducing costs for our clients. Our revenue from these solutions in particular has grown faster than our overall
revenue over the past several years. For the year ended December 31, 2017, our share of CRM BPO solutions represented 26.5% of revenue, up 120 basis points
year on year.
We also recognized the importance of focusing on our digital solutions. As our clients’ customers further adopt social networks and increase use of their
smartphones, it is our job to accompany them in their journey. We recently launched a new business unit, Atento Digital, to drive customer experience in the digital
age. Atento Digital integrates digital marketing tools, automatization of front- and back-office customer processes and a robust omnichannel platform to generate
efficiency and results for customer acquisition, management and retention. It also provides solutions to advanced digital transformation processes while making the
most of existing systems. Atento Digital’s mainstream offerings encompass a range of services, including online sales, digital customer care, digital technical
support, digital HR and digital collections, all of which are delivered through Atento’s omnichannel platform integrating traditional and digital channels. Atento
Digital’s offerings also include consulting capabilities and the use of analytics and automatization tools to enhance the effectiveness and efficiency of customer-
related processes. One of Atento Digital’s first initiatives has been the expansion of the artificial intelligence and automatization capabilities of its omnichannel
platform using Keepcon semantic technology. The integration of this technology with Atento’s existing solutions allows the Company to monitor, analyze and
manage customer sentiments and needs through social media in real-time. This information can be delivered through a blended automated and agent-based solution,
or through a fully automated solution. We plan on continuing to focus on digital initiatives into the coming years as we work to improve hybrid multichannel
support, automation, customer analytics and the overall customer experience across clients, geographies and industries.
From a geographic perspective, our above market growth strategy contemplates strengthen our leadership position in Latin America, one of the fastest
growing CRM BPO markets in the world. A market which presents significant room for outsourcing penetration and that starts to see a general recovery of
consumer indexes and growth of its middle class, fueling consumer expenditure and demand for customer intensive industries. Our geographic strategy implies also
achieving a meaningful presence in the US Nearshore business, aligned with Atento leadership position in the Latin America market.
The continued diversification of the client base is one more key element of our profitable growth strategy. We believe we have come a long way since 2014
in this aspect moving from a 53.5% of our revenues being generated by Multisector clients to 57.5% in 2017. We are aggressively growing outside of Telefónica
and continue to win new client relationships, either from competitors or from new clients as they outsource their in house operations because of our strong sector
credentials. Today, we provide solutions to most of the telcos (telecommunications companies) in Brazil and have been awarded contracts with leading Latin
America regional telecommunication companies, other than Telefónica, in five countries. Going forward, we are focused on growing these new relationships to
scale. Specifically, the 2017 acceleration with non-Telefónica telcos (telecommunications companies) is a result of the significant whitespaces we still have in this
segment.
Outside of telcos (telecommunications companies), we expect our expanded capabilities to continue helping us to gain share with financial services, while
increasing presence in other fast-growing segments. Although telcos (telecommunications companies) and financial services remain key drivers for growth, we
focusing our commercial efforts in other fast growing sectors such as healthcare, retail, travel & hospitality or consumer electronics where outsourcing is just
starting.
We also recognize that the market for providing outsourcing services to U.S. clients from Latin America is a sizable and fast-growing opportunity for us. We
firmly believe our strong relationships with multinational clients throughout Latin America positions us well to also serve their off - shoring needs in the United
States, as exemplified by our near - shoring relationships, and have continued investing in U.S. infrastructure.
Finally, we are committed to continue expanding capabilities and addressable markets via strategic operations.
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World - Class Operating Model
Building on advancements in 2017, we are continuing to see benefits in our operational excellence and transformation initiatives, which continue to support
future profitable growth. We have added specific initiatives to drive a “low cost to serve” operating model (the “Low Cost Operating Model”) for all aspects of our
business. This initiative seeks to drive down the major cost drivers in our business via automation and robotics, alternative channel mix and advanced service
delivery methods.
We continue to make investments in infrastructure, proprietary technologies, and management and development processes that capitalize on our extensive
experience managing large and globalized operations. Our operational excellence strategy is supported by six key global initiatives:
Low Cost Operating Model. As we continue to drive best-in-class operations, we have been focused on developing a “lower cost to serve” operating model
for Atento. We have analyzed the major cost components of our business in the human resources, technology, facilities and infrastructure areas, and we have
developed specific solutions to lower the cost to serve in each category. For example, in the human resources area, we have implemented initiatives to drive down
average handling time and after call work, and to reduce the time we spend on recruiting and selection. Additionally, we implemented solutions to decrease the
number of training days while preserving the quality of training. In the technology area, we have successfully trialed automation solutions and virtual automatic call
distributor (“ACD”) technologies, and consolidated operations among multiple global shared services. In the facilities area, we have directed more capacity to
lower cost Tier 2 cities and are focused on seat utilization as an indicator of efficiencies. In the infrastructure area, we have focused on reducing telecom and
network costs through restructuring and diligent capacity planning. All of these initiatives come together to enable a “lower cost to serve” operating model for
Atento. Furthermore, we manage our foreign currency risk by using derivatives to hedge any exposure incurred in currencies other than those of the functional
currency of each country in which we operate. We benefit, to a certain degree, from the fact that, in each country in which we have operations, we generally collect
revenue in the same currency as the currency in which we incur a majority of our expenses in that country.
Deliver a Consistent and Efficient IT Platform. Our technology strategy has remained focused on (i) delivering a cost-efficient and reliable IT
infrastructure to meet the needs of existing clients and to support expansion into the higher margin solutions business, (ii) enhancing our ability to add capacity
rapidly with a highly variable cost structure for new business, (iii) developing new products and solutions that can be rapidly scaled and rolled out across
geographies, (iv) providing standard operational tools and processes to enable the best experience to our clients’ customers and (v) establishing common platforms
that facilitate centralization of core information technology (“IT”) services. We have piloted and are now rolling out new technologies to enable a more agile IT
platform in support of new solutions, carve-out business, and a low-cost operating model. Specifically, we have consolidated our network operations center and
security operations center globally in Brazil, globalized our IT service desk under one management structure, completed successful pilots of a virtual ACD routing
solution, and implemented several automated transaction handling solutions.
Disciplined Commercial Execution. We are highly focused on the relationships we have with our client base and consider it to be a key competitive
advantage. As part of doing so, we approach the commercial aspect of our client relationships in a highly disciplined manner in which we strive to ensure wage
inflation pass-throughs are contractually captured. As we continue to engage with our clients, we actively ensure these inflation pass-throughs are applied, as
contractually obligated. The nature of our services and solutions yield significant efficiency gains for our clients which, combined with the long-term nature of a
significant portion of our client relationships, often provides a constructive environment for which to contractually ensure wage inflation pass-throughs.
Best-In-Class Operational Excellence. We are focused on a variety of initiatives to enhance agent productivity. In 2016, we established a new operational
command center in Peru, finalizing our global strategy for establishing command centers in each of our regions (command centers were established in 2014 in São
Paulo, Brazil, and in 2015 in Mexico City, Mexico, and Madrid, Spain). These centers are pivotal to our strategy of streamlining the efficiency of our operations
across our delivery centers and optimizing corporate functionality and management effectiveness through a standardized set of industry-certified processes and
capabilities. The centers are continuously upgraded with leading-edge technology to enhance our ability to shift resources across programs and channels as needed,
in real-time, based on client requirements. In 2016, we established Azure as our data repository in order to provide our management with immediate analytics and
continuous data, enabling it to streamline processes that we expect will offer the optimal customer experience for our clients.
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Leading HR Effectiveness . Human resources is one of our largest costs at Atento, and we have focused on recruiting, selecting and training talent because
we believe this is key to the successful delivery of our CRM BPO services and solutions. Given our dependency on human resources in all of our operations, we
continue to focus on creating efficiencies in our recruiting, selection and training areas. We have established new recruiting channels and techniques to reduce the
number of required resources to fill demands, implemented an automated selection tool which reduces our dependence on a big recruiting team and improves the
accuracy of our process, and implemented new simulation- and web-based training solutions in 2016 which have reduced our dependence on instructor-led training
and the number of training days required, as well as improved our learning curve post-training and the consistency of our training delivery. The roll out of these
initiatives has helped us reduce our monthly turnover in Brazil from 6.4% in 2016 to 5.2% in 2017 .
Site Footprint Optimization. As we have continually focused on moving from Tier 1 cities to Tier 2 cities in order to optimize our cost to serve, we have
also focused on improving our facilities utilization rate (the number of billable hours per day we are billing per seat) as an indicator of the health of our business.
Additionally, we seek to optimize lease expenses and reduce employee benefit expenses by focusing on reduced turnover and absenteeism. In Brazil, we have
increased the percentage of total workstations located in Tier 2 cities from 62.4% for the year ended December 31, 2016 to 62.9% for the year ended December 31,
2017, due to the new sites opened outside São Paulo and Rio de Janeiro. As demand for new services and solutions grows and complexity continues to increase, we
are focusing on a new operating model which will be focused on defined centers of excellence around credit factoring, collections, telecom and finance. As always,
we continue to evaluate and adjust our site footprint to create the most competitive combination of quality of service and cost effectiveness.
High Performing Organization
We believe that our people are a key enabler to the success of our business model and a strategic pillar to our competitive advantage. We have created, and
constantly reinforced, a culture that we believe is unique in the industry. We have developed processes to identify talent (both internally and externally), created
individualized development plans and designed incentive programs that, together with permanent motivation initiatives, foster a work environment that aligns our
professional development with client objectives and business goals (including efficiency objectives, financial targets and client and employee satisfaction metrics).
We have implemented an operating model that integrates the corporate organization, allowing us to benefit from global scale and fostering “best practices” sharing.
We have developed shared service centers, driving efficiency and pursuing a process-oriented organization. The corporate organization is integrated globally, but
strategically segmented into different operating regions to leverage and gain efficiency by working together with the regional teams. We believe that this new
organizational structure will foster agility and simplicity while ensuring that corporate leaders are focused on coordinating, communicating and pursuing new
solutions and innovation. We also continue to receive industry recognition for the strong culture and workplace environment we promote across our organization.
We have been recognized as one of the top 25 companies to work for across the globe, during fours years, according to the list of the World’s Best Multinational
Workplaces by GPTW, being the only CRM BPO and Latin America-based company.
Client Value Propositions through Integrated Solutions Across Multiple Channels
We are close to our clients and understand how their customers choose to interact. Our services and solutions span across various combinations of channels
and are very flexible, utilizing various degrees of automation and intelligent analytics. We work closely with our clients to optimize the front- and back-end
customer experience by offering solutions through a multichannel delivery platform tailored to each client’s needs. Furthermore, we offer a comprehensive
portfolio of scalable solutions, including sales, customer care, collections, back office and technical support. These solutions incorporate multiple services, all
deliverable across a full spectrum of communication channels, including digital, voice and in-person. In summary, our focus is not only in developing integrated
solutions, but also delivering them across the most appropriate (analog or digital) channels and platforms.
Our vertical industry expertise in telecommunications, banking and financial services, and multisector allows us to tailor our services and solutions for our
clients, further embedding us into their value chain while delivering impactful business results. As we continue to evolve towards customized client solutions and
performance-based pricing structures, we seek to create a mutually beneficial partnership and increase the portion of our clients’ CRM BPO services that we
provide.
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Our value proposition has continued to evolve toward end-to-end CRM BPO solutions, incorporating processes, technology and analytics as enablers for our
services, all aimed at improving our clients’ efficiency and reducing their costs. In 2017, CRM BPO solutions and individual services comprised 26.5% and 73.5%
of our revenue, respectively. For our clients in Brazil, our largest market, CRM BPO solutions and individual services comprised 37.5% and 62.5% of our revenue,
respectively, for the year ended December 31, 2017.
Our Clients
Over the years, we have steadily grown our client base, resulting in what we believe is a world-class roster of clients. Our longstanding, blue-chip client base
spans a variety of industries and includes the Telefónica Group, Banco Bradesco, Banco Santander, HSBC, Samsung and Whirlpool, among others. Our clients are
leaders in their respective industries and require best-in-class service from their outsourcing partners. We serve clients primarily in telecommunications, financial
services and multisector, which for us includes consumer goods, retail, public administration, healthcare, travel, transportation and logistics, and technology and
media. For the year ended December 31, 2017, our revenue from clients in telecommunications, financial services and multisector represented 46.7%, 31.7% and
21.6% of total revenue, respectively.
For December 31, 2017, our top 15 clients accounted for 76.4% of our revenue, and, excluding the Telefónica Group companies, our next 15 clients
accounted for 38.2% of our revenue. With each of these clients we have worked closely over many years across multiple countries, building strong partnerships and
commercial relationships.
Longstanding
Client
Relationships
We seek to create long-term relationships with our clients in order to be viewed as an integral part of their respective businesses, and not just as a service
provider. We strive to offer products and solutions that cover the client’s entire value chain, which we believe offers greater benefits to our clients and generally
leads to a mutually beneficial, longer-term relationship. In 2017, 61.0% of our revenue from clients other than the Telefónica Group came from clients that had
relationships with us for ten or more years.
Development
of
Client
Base
As of December 31, 2017, our client base consisted of over 400 separate clients. Since 1999, when our former parent company, Telefónica, and its
subsidiaries contributed approximately 90.0% of our revenue, we have driven the diversification of our client base by sources of revenue. For the years ended
December 31, 2015, 2016 and 2017, we generated 45.2%, 42.5% and 39.0%, respectively, of our revenue from Telefónica Group companies.
As of December 31, 2017, 34 companies within the Telefónica Group were party to 131 arm’s - length contracts with Atento. Our service agreements with
Telefónica Group companies remained in effect following the consummation of the Acquisition. Additionally, we entered into the MSA, a new framework
agreement that replaced our prior framework agreement with Telefónica and which is intended to govern our relationship with Telefónica through 2021, with the
exception of Brazil and Spain ending in 2023.
Telefónica
Group
Master
Service
Agreement
Our service agreements with Telefónica remained in effect following the consummation of the Acquisition, and we entered into the MSA, a new framework
agreement that replaced the framework agreement with Telefónica that was in place prior to the Acquisition. The term of the MSA expires on December 31, 2021,
with the exception of Brazil and Spain ending in 2023 according to the agreement.
The MSA requires the Telefónica Group companies to meet the minimum annual revenue commitments to us in each jurisdiction where we currently
conduct business (other than Argentina). The MSA commitment is meant to be a minimum commitment, or floor, rather than a target or budget. If the Telefónica
Group companies fail to meet country specific revenue commitments, which are measured on an annual basis, Telefónica S.A. will be required to compensate us in
cash for any shortfalls. If the Telefónica Group companies fail to meet the annual aggregate minimum revenue commitments for all jurisdictions covered by the
MSA, Telefónica, S.A. will be required to compensate us. Any such compensation payments will be in amounts calculated as a percentage of the revenue shortfalls,
ranging from 8% to 20% of the shortfall depending on the scope of such shortfall and the relevant calendar year. In May 2014, we and Telefónica amended the
MSA to adjust the minimum revenue commitments in Spain and Morocco by an average of €46.0 million ($62.6 million, based on the May 31, 2014 month end
close foreign exchange rates) per year to reflect the lower level of activities in these geographies and a corresponding €25.4 million ($34.6 million, based on the
May 31, 2014 month end close foreign exchange rates) payment was made by Telefónica representing the discounted value of the reduction in minimum revenue
commitments which was subsequently applied to repay the Vendor Loan Note. See “Item 5. Operating and Financial Review and Prospects ¾
Liquidity and
Capital Resources—Financing Arrangements—Vendor Loan Note”.
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In November 2016, we entered into an amendment decreasing the annual targets (MRT) for the remaining years of the MSA agreement, with a one-off
reset/reduction starting in 2017, of €100.0 million for Brazil and €20.0 million for Spain. In return Atento obtained an extension of the Brazil and Spain MSA
targets for an additional 2 years (2022 and 2023); an adjustment of Payment Terms: Change to 30-day payment terms apply in Brazil, Spain, Peru, Mexico, Chile,
Colombia and Argentina and the elimination of the Argentinean CVI contract.
Although the MSA is an umbrella agreement which governs our services agreements with the Telefónica Group companies, the termination of the MSA
does not automatically result in a termination of any of the local services agreements in force after those dates. The MSA contemplates a right of termination before
the end of the MSA in the different countries in event of a change of control of the Company occurring as a result of a sale to a Telefónica competitor.
In November 2016, we entered into another three-year contract in Brazil with Vivo, maintaining volume levels through the expansion of our business and
improved profitability supported by changes in our operating model.
The Company also amended the MSA with Telefónica to include:
• Brazil and Spain extended to 2023 (previously 2021), aligning revenue targets to current operating conditions and retaining total level of commitment.
• Atento guaranteed to maintain at least current share of wallet, remaining largest service provider to Telefónica.
• Payment terms and invoicing process improved in all key markets.
• Argentinian $24.0 million Contingent Value Obligation, or CVI, eliminated further strengthening our balance sheet.
CRM/BPO industry recognitions
Over the years, the quality and innovation of Atento’s solutions to enhance the customer experience of Atento’s clients have been consistently recognized
with the most prestigious awards within the CRM/BPO industry.
Our Company takes great pride in these recognitions. They are a direct result of our eagerness to meet Atento’s clients' expectations and to create customer
experience solutions that become a source of competitive advantage.
Listed below some of the most relevant awards achieved in 2017:
·
Latam Awards, Best Customer Relations Companies in Latin America.
Prestigious annual award with a regional scope that appraises and identifies the best customer relations companies in Latin America across
different categories.
·
Great Place to Work Awards.
For the fourth year running, Atento is one of the 25 Best Multinationals to Work in the World. The Company is also one of the 25 Best
Multinationals to Work for in Latin America for the sixth consecutive year, according to Great Place to Work. In 2016, seven of the Company's
national operations were included in the Great Place to Work®.
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·
ECHO Latam Awards (Formely known as Amauta), Best Direct and Interactive Marketing Practices in Latin America.
The Amauta Awards are the most important awards in the direct and interactive marketing industry in Latin America. Atento received 8 Amauta
awards in the 2017 edition. Atento in the CRM/BPO sector company to receive most AMAUTA awards over the years.
·
ABEMD Awards, Best Direct Marketing Practices in Brazil.
The ABEMD awards recognize the best solutions in the direct marketing industry in Brazil. They analyze the strategy, planning, creativity and
results of each solution. In 2016, Atento was selected Agency of the Year in the Contact Center Category. Also won six awards granted by
ABEMD for the solutions developed for customers Santander, Mapfre, GPA, Ford and Sony.
·
Consumidor Moderno Awards for Excellence in Customer Service
Consumidor Moderno awards are a reference in the CRM BPO sector in Brazil and they are based on one of the most comprehensive studies to
assess the quality of customer service in the country. In 2017, Atento was recognized as “Contact Center of the Year – Major Operations”. The
award is granted with the participation of Centro de Inteligência Padrão (CIP), in partnership with SAX – Customer Experience Specialists, one of
the most renowned customer experience research companies in Brazil.
·
IMT Awards, Best CRM Practices in Mexico.
Most prestigious awards for the CRM industry in Mexico, granted by the Instituto Mexicano de Teleservicios. Atento was recognized with 2 IMT
awards in the 2017 edition.
·
Socially Responsible Company Awards in Peru.
This certificate is awarded to companies for their high standards in working conditions, business ethics, engagement with the community and
environmental protection. This is the fourth time Atento has been awarded this certificate in Peru and it is the only company in its sector to hold it.
·
Platinum Contact Center Awards.
The Platinum Contact Center Awards recognize the highest quality in customer service and technological innovation in Spain. Atento Spain
received two awards in the 2016 edition Best Customer Service Experience in Energy for its work with Repsol and Best Customer Service
Experience in Citizen Services for the 060 service.
·
CRC Gold Awards.
The CRC Gold Award for Best Outsourcer recognizes excellence in customer services and business process outsourcing and are the leading
CRM/BPO industry awards in Spain. Atento was recognized with the 2017 CRC Gold Award for Best Outsourcer in Spain. Also received the
award for Best Customer Service Operation and was again given the Award for Best Business Process Outsourcing Operation.
·
Top Employer.
Atento received the Top Employer certificate awarded by the CRF institute (Corporate Research Foundation) in Spain in 2017.
·
National Quality Award.
Atento received the National Quality Award in Argentina in 2017. The highest recognition for Quality in the country.
·
Verint Customer Awards.
Atento received the Global Customer Award in the Commercial category at Verint Global Conference in 2016.
·
AMDIA Awards.
Highest recognition for Direct and Interactive Marketing in Argentina. In 2017, Atento received two Silver and one Gold awards for their social
media solutions. Atento also received the Grand Prix recognition, highest recognition in the AMDIA awards, for the solutions implemented for
General Motors.
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Competitive Landscape
Global Competitive Landscape
Atento is the largest provider of CRM BPO services and solutions in Latin America and among the top five providers globally based on revenues. Relative
to CRM BPO market share in Latin America, we hold the number one position in most countries in which we operate including Brazil, the largest market, Perú,
México, Chile and Argentina.
In Gartner’s Magic Quadrant for Customer Management Contact Center BPO (March 2017), in 4 years we have positioned ourselves among the top 5
leading global players, showing significant improvement in ability to execute and completeness of vision. The 2017 report highlights: Atento’s digital efforts,
coupled with its offerings such as digital marketing, customer analytics, robotic process automation (RPA) and IA services, long-term relations with its clients, and
the adoption a consultative sales methodology when positioning value-added multichannel and analytics services, process and industry knowledge, senior
management experience, time to market, responsiveness, focus on service quality, process methodologies, and the ability to scale.
Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those
vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be
construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or
fitness for a particular purpose.
The Gartner Report(s) described herein, (the “Gartner Report(s)”) represent(s) data, research opinion or viewpoints published, as part of a syndicated
subscription service, by Gartner, Inc. (“Gartner”), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of
the date of this Prospectus) and the opinions expressed in the Gartner Report(s) are subject to change without notice.
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C. Organizational Structure
At December 31, 2015, 2016 and 2017, none of the Group’s subsidiaries is listed on a stock exchange, except for Atento Luxco 1 S.A., which has debt
securities listed in the International Stock Exchange (TISE) in Guernsey. All subsidiaries use year-end December 31 as their reporting date.
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D. Property, Plants and Equipment
Property
We perform our business in service delivery centers leased from third parties, and we did not own any real estate as of December 31, 2017, except for one
plot of land in Morocco and part of a building in Peru. Additionally, in April 2006, we obtained a grant of use by the Consorcio para el Desarrollo (development
consortium) of the province of Jaen in Spain, on a 2,400 square meter field for 30 years, extendable for 15 year periods up to a maximum of 75 years. In 2006, we
built a service delivery center at the site. As of December 31, 2017, the rest of our service delivery centers around the world were under lease agreements. Our lease
agreements are generally long-term, between one to ten years, some of which provide for extensions.
Lease expenses on a consolidated basis totaled $75.6 million, $63.0 million and $66.9 million in the years ended December 31, 2015, 2016 and 2017.
Our infrastructure is designed according to our clients’ needs. Our technology systems possess the flexibility to integrate with our clients’ existing
infrastructure. This approach enables us to deliver the optimal infrastructure mix through on-shoring, off-shoring or near-shoring, as required. Our deployment
team is trained to achieve timely implementation to minimize our clients’ time-to-market. We address client capacity needs by providing solutions such as software
based platforms, high level infrastructure mobility, process centralization and high concentration of delivery centers.
Our infrastructure has grown in response to a substantial increase in demand for our services. As of December 31, 2017, we had 92,264 workstations
globally, with 48,933 in Brazil, 37,773 in the Americas (excluding Brazil) and 5,558 in EMEA. As of December 31, 2017, we had 100 delivery centers globally, 35
in Brazil, 51 in the Americas (excluding Brazil) and 14 in EMEA.
The following table shows the number of workstations and delivery centers in each of the jurisdictions in which we operated as of December 31, 2015,
2016, 2017.
Brazil
Americas
Argentina (2)
Central America (3)
Chile
Colombia
Mexico
Peru
United States (4)
EMEA
Morocco (5)
Spain
Total
2015
Number of Workstations
2016
2017
47,694
36,229
3,705
2,629
2,495
7,292
9,905
8,893
1,310
7,644
2,039
5,605
91,567
45,913
37,574
3,673
2,644
2,673
7,723
10,298
9,253
1,310
5,595
-
5,595
89,082
48,933
37,773
4,220
2,433
2,571
8,643
9,849
9,004
1,053
5,558
-
5,558
92,264
Number of Service Delivery Centers (1)
2016
2017
2015
33
51
11
5
3
9
16
4
3
18
4
14
102
31
50
11
5
3
9
15
4
3
14
-
14
95
35
51
12
4
3
10
15
4
3
14
-
14
100
(1) Includes service delivery centers at facilities operated by us and those owned by our clients where we provide operations personnel and workstations.
(2) Includes Uruguay.
(3) Includes Guatemala and El Salvador.
(4) Includes Puerto Rico.
(5) Operations in Morocco were divested on September 30, 2016.
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The following is a list of our principal workstations as of December 31, 2015, 2016, 2017:
Brazil
São Bernardo do Campo
São Paulo (Belem)
São Paulo (São Bento I)
São Paulo (Nova São Paulo)
Rio de Janeiro (Madureira)
São Paulo (Santana)
São Paulo (Santo Antonio)
Salvador (Uruguay)
São José dos Campos
Santos
Americas
Peru (LaMolina)
Peru (Maquinarias)
Colombia (Telares)
Colombia (Bucaramanga)
Mexico (Aeropuerto)
Chile (Vicuña Mackenna)
EMEA
Spain (Ilustración)
Spain (Glorias)
Spain (Getafe)
Spain (Benicalap)
Number of Workstations
2015
2016
2017
2,929
2,514
3,072
2,374
2,044
2,678
1,981
1,985
1,967
1,759
5,712
2,184
1,035
1,331
1,347
1,521
1,260
862
506
329
3,043
2,520
2,552
2,385
1,916
2,375
2,059
1,974
2,018
1,745
5,713
2,312
1,455
1,321
1,484
1,459
1,240
870
507
329
3,139
2,470
2,335
2,155
2,119
2,103
2,059
2,059
1,983
1,794
5,581
2,312
1,905
1,472
1,449
1,411
1,005
877
507
472
Telecommunications
Infrastructure.
We work with the main telephone carriers at the local and international levels. We have recently implemented a
network to interconnect the main countries in which we operate, allowing us to offer new options of connectivity and to run new applications for
videoconferencing. Since almost all our voice platform is based on IP technology, we have implemented a solid and flexible telecommunications infrastructure,
which provides business continuity through redundant architectures and interconnection schemes in most of our facilities.
ITEM 4A. UNRESOLVED STAFF COMMENTS
The Company has no unresolved comments from the staff of the U.S. Securities and Exchange Commission with respect to its periodic reports under the
Securities Exchange Act.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Critical accounting estimates and assumptions
The preparation of consolidated financial statements under IFRS as issued by the IASB requires the use of certain assumptions and estimates that affect the
carrying amount of assets and liabilities within the next financial year.
Some of the accounting policies applied in preparing the accompanying consolidated financial statements required Management to apply significant
judgments in order to select the most appropriate assumptions for determining these estimates. These assumptions and estimates are based on Management
experience, the advice of consultants and experts, forecasts and other circumstances and expectations prevailing at year end. Management’s evaluation takes into
account the global economic situation in the sector in which the Atento Group operates, as well as the future outlook for the business. By virtue of their nature,
these judgments are inherently subject to uncertainty. Consequently, actual results could differ substantially from the estimates and assumptions used. Should this
occur, the values of the related assets and liabilities would be adjusted accordingly.
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Although these estimates were made on the basis of the best information available at each reporting date on the events analyzed, events that take place in the
future might make it necessary to change these estimates in coming years. Changes in accounting estimates would be applied prospectively in accordance with the
requirements of IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, recognizing the effects of the changes in estimates in the related
consolidated income statements.
An explanation of the estimates and judgments that entail a significant risk of leading to a material adjustment in the carrying amounts of assets and
liabilities is as follow:
Useful
lives
of
property,
plant
and
equipment
and
intangible
assets
The accounting treatment of items of property, plant and equipment and intangible assets entails the use of estimates to determine their useful lives for
depreciation and amortization purposes. In determining the useful life, it is necessary to estimate the level of use of assets as well as forecast technological trends in
the assets. Assumptions regarding the level of use, the technological framework and the future development require a significant degree of judgment, bearing in
mind that these aspects are rather difficult to foresee. Changes in the level of use of assets or in their technological development could result in a modification of
their useful lives and, consequently, in the associated depreciation or amortization.
Estimated
impairment
of
goodwill
The Atento Group tests goodwill for impairment annually, in accordance with the accounting principle described in Note 3h. Goodwill is subject to
impairment testing as part of the cash-generating unit to which it has been allocated. The recoverable amounts of cash-generating units defined in order to identify
potential impairment in goodwill are determined on the basis of value in use, applying five-year financial forecasts based on the Atento Group’s strategic plans,
approved and reviewed by Management. These calculations entail the use of assumptions and estimates, and require a significant degree of judgment. The main
variables considered in the sensitivity analyses are growth rates, discount rates using the Weighted Average Cost of Capital (“WACC”) and the key business
variables.
Deferred
taxes
The Atento Group assesses the recoverability of deferred tax assets based on estimates of future earnings. The ability to recover these deferred amounts
depends ultimately on the Atento Group’s ability to generate taxable earnings over the period in which the deferred tax assets remain deductible. This analysis is
based on the estimated timing of the reversal of deferred tax liabilities, as well as estimates of taxable earnings, which are sourced from internal projections.
The appropriate classification of tax assets and liabilities depends on a series of factors, including estimates as to the timing and realization of deferred tax
assets and the projected tax payment schedule. Actual income tax receipts and payments could differ from the estimates made by the Atento Group as a result of
changes in tax legislation or unforeseen transactions that could affect the tax balances.
The Atento Group has recognized deferred tax assets corresponding to losses carried forward since, based on internal projections, it is probable that it will
generate future taxable profits against which they may be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting date, and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of that deferred tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting
date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Provisions
and
contingencies
Provisions are recognized when the Atento Group has a present obligation as a result of a past event, it is probable that an outflow of resources will be
required to settle the obligation and a reliable estimate can be made of the amount of the obligation. This obligation may be legal or constructive, deriving from,
inter alia, regulations, contracts, customary practice or public commitments that would lead third parties to reasonably expect that the Atento Group will assume
certain responsibilities. The amount of the provision is determined based on the best estimate of the outflow of resources embodying economic benefit that will be
required to settle the obligation, taking into account all available information as of the reporting date, including the opinions of independent experts such as legal
counsel or consultants.
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No provision is recognized if the amount of liability cannot be estimated reliably. In such cases, the relevant information is disclosed in the notes to the
consolidated financial statements.
Given the uncertainties inherent in the estimates used to determine the amount of provisions, actual outflows of resources may differ from the amounts
recognized originally on the basis of these estimates.
Fair
value
of
derivatives
The Atento Group uses derivative financial instruments to mitigate risks, primarily derived from possible fluctuations in interest rates. Derivatives are
recognized at the inception of the contract at fair value.
The fair values of derivative financial instruments are calculated on the basis of observable market data available, either in terms of market prices or through
the application of valuation techniques. The valuation techniques used to calculate the fair value of derivative financial instruments include the discounting of
future cash flow associated with the instruments, applying assumptions based on market conditions at the valuation date or using prices established for similar
instruments, among others. These estimates are based on available market information and appropriate valuation techniques. The fair values calculated could differ
significantly if other market assumptions and/or estimation techniques were applied.
Refer to Notes 3t and 3u of our consolidated financial statements, included elsewhere in this document for details regarding new amendments standards and
interpretations
A. Operating Results
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis of our financial condition and results of operations should be read for the years ended December 31,
2015, 2016 and 2017 and the related notes there to, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected
Financial Data” included elsewhere in this Annual Report. The preparation of the consolidated financial statements referred to in this section required the adoption
of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years presented and are subject to certain risks and
uncertainties. Our future results may vary substantially from those indicated as a result of various factors that affect our business, including, among others, those
mentioned in the sections “Cautionary Statement with respect to Forward Looking Statements” and “Item 3. Key Information—D. Risk Factors”, and other factors
discussed elsewhere in this Annual Report. The consolidated financial statements for the years ended December 31, 2015, 2016 and 2017, prepared in accordance
with IFRS as issued by the IASB are included in “Item 18. Financial Statements”.
The following discussion includes forward looking statements. Our actual results could differ materially from those that are discussed in these forward-
looking statements.
Overview
Atento is the largest provider of customer-relationship management and business-process outsourcing (“CRM BPO”) services and solutions in Latin
America, and among the top five providers globally based on revenue. Atento’s tailored CRM BPO solutions are designed to enable our client’s ability to deliver a
high-quality product by creating a best-in-class experience for their customers, enabling our clients to focus on operating their core businesses. Atento utilizes its
industry expertise commitment to customer care, and consultative approach, to offer superior and scalable solutions across the entire value chain for customer care,
customizing each solution to the individual client’s needs.
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In the third quarter of 2016 we announced a refreshed strategy to drive long-term profitable growth and create shareholder value. Recent market trends,
including the macroeconomic pull-back in Brazil (the largest CRM BPO market in Latin America), and the accelerating adoption of omni-channel and digital
capabilities, prompted us to reexamine the priorities that support our long-term strategy. The ultimate goal of this exercise, or Strategy Refresh, was to ensure we
had the right focus and capabilities to capitalize on industry trends in Latin America and leverage our scale and financial strength to selectively broaden and
diversify in key verticals, countries, and solutions.
We offer a comprehensive portfolio of customizable, and scalable, solutions including front and back-end services ranging from sales, applications-
processing, customer care and credit-management. We leverage our deep industry knowledge and capabilities to provide industry-leading solutions to our clients.
We provide our solutions to over 400 clients via over 151,000 highly engaged customer care specialists facilitated by our best-in-class technology infrastructure
and multi-channel delivery platform. We believe we bring a differentiated combination of scale, capacity for processing client’s transactions, and industry expertise
to our client’s customer care operations, which allow us to provide higher-quality and lower cost customer care services than our clients could deliver on their own.
We operate in 13 countries worldwide and organize our business into three geographic markets: (i) Brazil, (ii) Americas, excluding Brazil (“Americas”) and
(iii) EMEA. For the year ended December 31, 2017, Brazil accounted for 49.2% of our revenue, Americas accounted for 39.5% of our revenue and EMEA
accounted for 11.6% of our revenue (in each case, before holding company level revenue and consolidation adjustments).
Our number of workstations increased from 89,082 as of December 31, 2016 to 92,264 as of December 31, 2017. Generally, our competitors have higher
EBITDA and depreciation expense than us because we lease rather than own all of our call center facilities (e.g., buildings and related equipment), except for IT
infrastructure that is supported by Atento and depreciated.
As a part of our strategy to improve cost and increase efficiency we continued to migrate a portion of our call centers from Tier 1 to Tier 2 cities. These
cities, which tend to be lower cost locations, allow us to optimize our lease expenses and reduce labor costs. By being a preferred employer, we can then draw new
and larger pools of talent and reduce turnover and absenteeism. We have completed many successful site transfers in Brazil, Colombia and Argentina. In Brazil, for
example, the percentage of total workstations located in Tier 2 cities increased 0.5%, from 62.4% for the year ended December 31, 2016 to 62.9% for the year
ended December 31, 2017, due to the new sites opened outside Sao Paulo and Rio de Janeiro. As demand for our services and solutions grows, and their complexity
continues to increase, we have opportunities to evaluate and adjust our site footprint even further to create the most competitive combination of quality and cost
effectiveness for our customers.
For a table showing the number of delivery centers and workstations in each of the jurisdictions in which we operated as of December 31, 2015, 2016 and
2017, see “Item 4. Information on the Company—D. Property, Plant and Equipment”.
For the years ended December 31, 2015, 2016 and 2017, revenue generated from our 15 largest client groups represented 83.3%, 80.3% and 76.4% of our
revenue, respectively. Excluding revenue generated from the Telefónica Group, for the years ended December 31, 2015, 2016 and 2017, our next 15 largest client
groups represented 38.8%, 38.7% and 38.2% of our revenue, respectively.
Our vertical industry expertise in telecommunications, financial services and multi-sector companies allows us to adapt our services and solutions for our
clients, further embedding us into their value chain while delivering effective business results and increasing the portion of our client’s services related to CRM
BPO. For the years ended December 31, 2015, 2016 and 2017, CRM BPO solutions comprised 23.9%, 25.3% and 26.5% of our revenue, respectively, and
individual services comprised 76.1%, 74.7% and 73.5% of our revenue, respectively.
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During the years ended December 31, 2015, 2016 and 2017, telecommunications represented 49.2%, 48.5% and 46.7% of our revenue, respectively, and
financial services represented 35.6%, 35.0% and 31.7% of our revenue, respectively. Additionally, during the years ended December 31, 2015, 2016 and 2017 the
sales by service were:
Customer Service
Sales
Collection
Back Office
Technical Support
Others
Total
Average
headcount
For the years ended December 31,
2015
2016
2017
47.9%
18.0%
10.6%
9.7%
10.5%
3.3%
100.0%
49.0%
16.6%
10.1%
10.8%
9.4%
4.1%
100.0%
48.4%
16.8%
8.8%
12.9%
9.1%
4.0%
100.0%
The average headcount in the Atento Group in 2015, 2016 and 2017 and the breakdown by country is presented as follow:
Brazil
Central America
Chile
Colombia
Spain
Morocco (*)
Mexico
Peru
Puerto Rico
United States
Argentina and Uruguay
Corporate
Total
(*) Operations in Morocco were divested on September 30, 2016.
53
December 31,
2015
2016
2017
90,418
4,687
4,615
7,770
10,497
1,348
19,934
15,279
832
629
7,829
136
78,088
5,734
4,720
8,288
10,213
-
19,439
15,907
857
679
7,529
147
78,015
4,940
5,438
9,809
10,534
-
18,409
15,515
739
732
7,609
77
163,974
151,601
151,817
Change
(%)
Change
excluding
FX (%)
9.3
N.M.
(99.1)
14.2
9.1
6.1
8.4
(67.0)
10.6
9.3
5.1
N.M.
(99.2)
10.1
5.0
0.8
3.3
(68.5)
5.3
5.0
(25.4)
2.5
28.1
(66.0)
(61.6)
(17.8)
Table of Contents
Consolidated Statements of Operations for the Years Ended December 31, 2015, 2016 and 2017
($ in millions, except percentage changes)
Revenue
Other operating income
Other gains and own work capitalized (1)
Operating expenses:
Supplies
Employee benefit expenses
Depreciation
Amortization
Changes in trade provisions
Other operating expenses
Total operating expenses
For the year ended
December 31,
2015 (*)
2016 (*)
Change
(%)
Change
excluding
FX (%)
1,949.9
4.3
-
(77.6)
(1,410.5)
(50.1)
(51.4)
(1.3)
(241.5)
(1,832.4)
1,757.5
5.8
41.8
(65.6)
(1,309.9)
(46.4)
(50.9)
(1.9)
(214.0)
(1,688.7)
(9.9)
34.9
N.M.
(15.5)
(7.1)
(7.4)
(1.0)
46.2
(11.4)
(7.8)
(1.4)
45.0
N.M.
(7.0)
1.7
(0.4)
6.3
46.2
(4.8)
0.6
For the year
ended
December 31,
2017
1,921.3
16.4
0.4
(74.9)
(1,429.1)
(49.2)
(55.2)
(0.6)
(236.6)
(1,845.7)
Operating profit
121.8
116.4
(4.4)
7.5
92.4
(20.6)
Finance income
Finance costs (1)
Change in fair value of financial instruments (**)
Net foreign exchange loss (1)
15.5
(75.5)
17.5
(3.9)
7.2
(59.2)
0.7
(56.5)
(53.5)
(21.6)
(96.0)
N.M.
(49.7)
(17.3)
(96.0)
N.M.
7.9
(78.1)
0.2
(23.4)
9.1
32.0
(67.2)
(58.5)
Net finance expense
(46.4)
(107.8)
132.3
N.M.
(93.5)
(13.3)
Profit/(loss) before income tax
75.4
8.6
(88.6)
(87.3)
(1.0)
(112.0)
(110.1)
Income tax expense
Profit/(loss) from continuing operations
Discontinued operations:
Loss from discontinued operations
Profit/(loss) for the year
Profit/(loss) attributable to:
Owners of the parent
Non-controlling interest
(23.2)
52.2
(3.1)
49.1
49.1
-
(5.2)
3.4
(3.2)
0.2
0.1
0.1
(77.6)
(93.5)
3.2
(99.6)
(99.8)
N.M.
(74.5)
(92.8)
6.7
(99.5)
(99.7)
N.M.
(12.5)
(13.6)
-
(13.6)
(16.8)
3.2
141.0
N.M.
(100.0)
N.M.
N.M.
N.M.
144.1
N.M.
(100.0)
N.M.
N.M.
N.M.
Other financial data:
EBITDA (2) (unaudited)
Adjusted EBITDA (2) (unaudited)
(1) The year ended December 31, 2016 contains the impacts of the CVI termination. The reversal of the principal amount of $41.7 million was recognized in "Other gains and
own work capitalized", the interest reversal of $19.9 million was recognized in "Finance costs" and the loss of $35.4 million on the conversion of Argentine pesos to U.S. dollars
was recognized in "Net foreign exchange loss".
(2) For reconciliation with IFRS as issued by the IASB, see section "Summary Consolidated Historical Financial Information - Reconciliation of EBITDA and Adjusted
EBITDA to profit/(loss)" as above.
213.7
221.9
223.3
249.7
196.9
221.0
(4.3)
(11.1)
5.4
(3.6)
(7.9)
(0.4)
(13.0)
(4.7)
(*) Exclude discontinued operations - Morocco.
N.M. means not meaningful
54
Table of Contents
Consolidated Statements of Operations by Segment for the Years Ended December 31, 2015, 2016 and 2017
($ in millions, except percentage changes)
For the year ended
December 31,
2015 (*)
2016 (*)
Change
(%)
Change
excluding
FX (%)
For the year
ended
December 31,
2017
Change
(%)
Change
excluding
FX (%)
Revenue:
Brazil
Americas
EMEA
Other and eliminations (1)
Total revenue
Operating expenses:
Brazil
Americas
EMEA
Other and eliminations (1)
Total operating expenses
Operating profit/(loss) :
Brazil
Americas (2)
EMEA
Other and eliminations (1)
Total operating profit
Net finance expense :
Brazil
Americas (2)
EMEA
Other and eliminations (1)
Total net finance expense
Income tax benefit/(expense):
Brazil
Americas
EMEA
Other and eliminations (1)
Total income tax expense
Profit/(loss) from continuing operations:
Brazil
Americas (2)
EMEA
Other and eliminations (1)
Profit/(loss) from continuing operations
Loss from discontinued operations
Profit/(loss) for the year:
Brazil
Americas (2)
930.2
789.8
231.7
(1.8)
816.4
718.9
223.9
(1.7)
1,949.9
1,757.5
(863.9)
(726.0)
(233.0)
(9.5)
(1,832.4)
(771.1)
(676.0)
(232.5)
(9.1)
(1,688.7)
66.5
65.8
(0.3)
(10.2)
121.8
(25.3)
(8.7)
(12.3)
(0.1)
(46.4)
(14.0)
(20.2)
3.2
7.8
(23.2)
27.2
36.9
(9.4)
(2.5)
52.2
(3.1)
27.2
36.9
46.3
88.2
(7.4)
(10.7)
116.4
(40.1)
(31.1)
(12.3)
(24.3)
(107.8)
(3.1)
(15.8)
4.9
8.8
(5.2)
3.1
41.3
(14.9)
(26.1)
3.4
(3.2)
3.1
41.3
55
(12.2)
(9.0)
(3.4)
(5.6)
(9.9)
(10.7)
(6.9)
(0.2)
(4.2)
(7.8)
(30.4)
34.0
N.M.
4.9
(4.4)
58.5
N.M.
-
N.M.
132.3
(77.9)
(21.8)
53.1
12.8
(77.6)
(88.6)
11.9
58.5
N.M.
(93.5)
3.2
(88.6)
11.9
(7.0)
6.5
(3.1)
6.3
(1.4)
(5.4)
8.7
-
(4.2)
0.6
(27.3)
59.5
N.M.
4.9
7.5
68.5
N.M.
-
N.M.
N.M.
(77.0)
(11.7)
53.1
12.8
(74.5)
(88.3)
24.8
55.2
N.M.
(92.8)
6.7
(88.3)
24.8
944.8
758.0
223.4
(5.0)
1,921.3
(899.2)
(734.6)
(226.8)
15.0
(1,845.7)
55.5
31.5
(1.8)
7.2
92.4
(33.0)
(13.2)
(16.8)
(30.4)
(93.5)
(8.8)
(9.7)
5.0
0.9
(12.5)
13.7
8.6
(13.6)
(22.2)
(13.6)
-
13.7
8.6
15.7
5.4
(0.2)
N.M.
9.3
16.6
8.7
(2.5)
N.M.
9.3
19.9
(64.3)
(76.6)
N.M.
(20.6)
(17.6)
(57.5)
36.9
25.1
(13.3)
N.M.
(38.8)
2.7
(89.5)
141.0
N.M.
(79.2)
(9.0)
(14.8)
N.M.
(100.0)
N.M.
(79.2)
6.3
6.1
(1.9)
N.M.
5.1
7.0
9.5
(4.1)
N.M.
5.0
13.4
(66.3)
(76.3)
N.M.
(25.4)
(24.1)
(60.0)
33.5
23.7
(17.8)
N.M.
(39.9)
(0.3)
(89.7)
144.1
N.M.
(80.7)
(9.4)
(16.6)
N.M.
(100.0)
N.M.
(80.7)
Table of Contents
EMEA
Other and eliminations (1)
Profit/(loss) for the year:
Profit/(loss) attributable to:
Owners of the parent
Non-controlling interest
Other financial data:
EBITDA (3) :
Brazil
Americas (2)
EMEA
Other and eliminations (1)
Total EBITDA (unaudited)
Adjusted EBITDA (3) :
Brazil
Americas
EMEA
Other and eliminations (1)
Total Adjusted EBITDA (unaudited)
(12.5)
(2.5)
49.1
49.1
-
116.5
104.2
12.1
(9.5)
223.3
129.4
109.1
18.6
(7.4)
249.7
(18.1)
(26.1)
0.2
0.1
0.1
98.7
122.0
3.2
(10.2)
213.7
121.0
92.0
16.3
(7.4)
221.9
44.8
N.M.
(99.6)
(99.8)
N.M.
(15.3)
17.1
(73.6)
7.4
(4.3)
(6.5)
(15.7)
(12.4)
-
(11.1)
43.7
N.M.
(99.5)
(99.8)
N.M.
(11.4)
37.1
(72.9)
8.5
5.4
(3.9)
(1.5)
(10.4)
1.4
(3.6)
(13.6)
(22.2)
(13.6)
(16.8)
3.2
112.4
69.1
7.6
7.8
196.9
124.7
83.5
14.8
(2.0)
221.0
(24.9)
(14.8)
N.M.
N.M.
N.M.
13.9
(43.4)
137.0
N.M.
(7.9)
3.1
(9.2)
(9.3)
(72.4)
(0.4)
(26.2)
(16.6)
N.M.
N.M.
N.M.
6.3
(45.8)
115.5
N.M.
(13.0)
(4.1)
(9.1)
(13.4)
(71.8)
(4.7)
(1) Includes activities of the intermediate holding in Spain (Atento Spain Holdco, S.L.U.), Luxembourg holdings, as well as inter-group transactions between segments.
(2) The year ended December 31, 2016 contains the impacts of the CVI termination. The reversal of the principal amount of $41.7 million was recognized in "Other gains and own work
capitalized", the interest reversal of $19.9 million was recognized in "Finance costs" and the loss of $35.4 million on the conversion of Argentine pesos to U.S. dollars was recognized in "Net
foreign exchange loss".
(3) For reconciliation with IFRS as issued by the IASB, see section "Summary Consolidated Historical Financial Information - Reconciliation of EBITDA and Adjusted EBITDA to
profit/(loss)" as above.
(*) Exclude discontinued operations - Morocco.
N.M. means not meaningful
56
Table of Contents
Year Ended December 31, 2016 Compared to Year Ended December 31, 2017
Revenue
Revenue increased by $163.8 million, or 9.3%, from $1,757.5 million for the year ended December 31, 2016 to $1,921.3 million for the year ended
December 31, 2017. Excluding the impact of foreign exchange, revenue increased 5.1%.
Revenue was negatively impacted by the recent natural disasters occurred in Mexico and Puerto Rico in September 2017. The impacts related to these
events totaled $11.3 million in the year.
Multisector continued to deliver a sustainable growth, with a revenue increase of $161.2 million, or 15.9%, from $1,010.7 million for the year ended
December 31, 2016 to $1,171.9 million for the year ended December 31, 2017. Excluding the impact of foreign exchange, revenue from multisector clients
increased 10.9%, supported by gains in all regions.
Revenue from Telefónica increased by $2.7 million, or 0.4%, from $746.8 million for the year ended December 31, 2016 to $749.5 million for the year
ended December 31, 2017. Excluding the impact of foreign exchange, revenue from Telefónica clients decreased 3.0%, mainly by the volume reduction in Mexico,
Spain, Brazil and Peru.
For the year ended December 31, 2017, revenue from multisector clients was 61.0% of total revenue compared to 57.5% for the year ended December 31,
2016, an increase of 3.5 percentage points.
The following chart sets forth a breakdown of revenue by geographical region for the year ended December 31, 2016 and 2017 and as a percentage of
revenue and the percentage change between those periods with and net of foreign exchange effects.
For the year ended December 31,
($ in millions, except percentage
changes)
Brazil
Americas
EMEA (*)
Other and eliminations (1)
Total
2016
(%)
2017
(%)
Change (%)
816.4
718.9
223.9
(1.7)
1,757.5
46.5
40.9
12.7
(0.1)
100.0
944.8
758.0
223.4
(5.0)
1,921.3
49.2
39.5
11.6
(0.3)
100.0
15.7
5.4
(0.2)
N.M.
9.3
Change
excluding
FX (%)
6.3
6.1
(1.9)
N.M.
5.1
(1) Includes holding company level revenues and consolidation adjustments.
Brazil
Revenue in Brazil for the years ended December 31, 2016 and 2017 totaled $816.4 million and $944.8 million, respectively, an increase of $128.4 million, or
15.7%. Excluding the impact of foreign exchange, revenue increased by 6.3%. Excluding the impact of foreign exchange, revenue from Telefónica decreased by
1.9%, due to lower volumes while revenue from multisector clients increased by 10.5%, supported primarily by new client wins.
Americas
Revenue in Americas for the years ended December 31, 2016 and 2017 totaled $718.9 million and $758.0 million, respectively, an increase of $39.1 million,
or 5.4%. Excluding the impact of foreign exchange, revenue increased 6.1%. Excluding the impact of foreign exchange, revenue from Telefónica decreased by
1.0%, driven by lower volumes in Mexico and Peru while revenue from multisector clients increased by 12.0%, supported by new client wins in Argentina,
Colombia, Chile and U.S. Nearshore business.
EMEA
Revenue in EMEA for the years ended December 31, 2016 and 2017 was $223.9 million and $223.4 million, respectively, a decrease of $0.5 million, or
0.2%. Excluding the impact of foreign exchange, revenue decreased by 1.9%. Excluding the impacts of foreign exchange, revenue from Telefónica decreased by
5.9%, due to lower volumes in Spain, while revenue from multisector clients increased by 5.4%, supported by new service wins.
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Other operating income
Other operating income increased from $5.8 million for the year ended December 31, 2016 to $16.4 million for the year ended December 31, 2017, or by
$10.6 million, mainly due to an extraordinary revenue related to a sale and leaseback operation of IT equipment’s in Brazil. This amount off-set the amounts of the
write-off from the assets, registered in other operating expenses, and it represents no impact to the EBITDA.
Other gains and own work capitalized
Other gains and own work capitalized decreased $41.4 million, from $41.8 million for the year ended December 31, 2016 to $0.4 million for the year ended
December 31, 2017, related to the principal amount of the CVI that was terminated on November 8, 2016.
Total operating expenses
Total operating expenses increased by $157.0 million, or 9.3%, from $1,688.7 million for the year ended December 31, 2016 to $1,845.7 million for the year
ended December 31, 2017. Excluding the impact of foreign exchange, operating expenses increased by 5.0%, mainly in Brazil (set up costs incurred to implement
operations for recently acquired new clients and costs from recent acquisitions), Argentina (higher inflation), Colombia and U.S. Nearshore business (higher
volumes). As a percentage of revenue, operating expenses represented 96.1% for the years ended December 31, 2016 and 2017, respectively.
Supplies
:
Supplies expenses increased by $9.3 million, or 14.2%, from $65.6 million for the year ended December 31, 2016 to $74.9 million for the year
ended December 31, 2017. Excluding the impact of foreign exchange, supplies expenses increased by 10.1%, mainly due to higher set up costs to implement
operations from recent acquired clients in Brazil. As a percentage of revenue, supplies represented 3.7% and 3.9% for the years ended December 31, 2016 and
2017, respectively.
Employee
benefit
expenses:
Employee benefit expenses increased by $119.2 million, or 9.1%, from $1,309.9 million for the year ended December 31, 2016
to $1,429.1 million for the year ended December 31, 2017. Excluding the impact of foreign exchange, employee benefit expenses increased by 5.0%, mainly in
Brazil (higher labor contingencies, set up costs for new clients and higher labor expenses as per new collective agreement recently signed) and Americas (higher
inflation in Argentina). As a percentage of revenue, employee benefit expenses represented 74.5% and 74.4% for the years ended December 31, 2016 and 2017,
respectively.
Depreciation and amortization: Depreciation and amortization expenses increased by $7.1 million, or 7.3%, from $97.3 million for the year ended December
31, 2016 to $104.4 million for the year ended December 31, 2017. Excluding the impact of foreign exchange, depreciation and amortization expense increased by
2.1%, impacted by the write-off of fixed assets in Mexico and Puerto Rico as a consequence of recent natural disasters in third quarter of 2017. Excluding this
effect, depreciation and amortization was slightly lower than last year (-0.3%).
Changes
in
trade
provisions:
Changes in trade provisions changed by $1.3 million, from an expense of $1.9 million for the year ended December 31, 2016 to
an expense of $0.6 million for the year ended December 31, 2017.
Other
operating
expenses:
Other operating expenses increased by $22.6 million, or 10.6%, from $214.0 million for the year ended December 31, 2016 to
$236.6 million for the year ended December 31, 2017. Excluding the impact of foreign exchange, other operating expenses increased by 5.3%, mainly in Brazil (set
up costs for new clients and costs from recent acquisitions) and Americas (higher inflation in Argentina). As a percentage of revenue, other operating expenses
were 12.2% and 12.3% for the years ended December 31, 2016 and 2017, respectively.
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Brazil
Total operating expenses in Brazil increased by $128.1 million, or 16.6%, from $771.1 million for the year ended December 31, 2016 to $899.2 million for
the year ended December 31, 2017. Excluding the impact of foreign exchange, operating expenses in Brazil increased by 7.0%, impacted by set up costs for new
clients, costs from recent acquisitions and higher labor contingencies. Operating expenses as a percentage of revenue increased from 94.5% to 95.2% for the years
ended December 31, 2016 and 2017, respectively.
Americas
Total operating expenses in Americas increased by $58.6 million, or 8.7%, from $676.0 million for the year ended December 31, 2016 to $734.6 million for
the year ended December 31, 2017. Excluding the impact of foreign exchange, operating expenses in Americas increased by 9.5%. Operating expenses as a
percentage of revenue increased from 94.0% to 96.9% for the years ended December 31, 2016 and 2017, respectively. This increase was mainly caused by the
impact of higher inflation in Argentina, increase in variable costs due to volume increase in Argentina, Colombia, Chile and U.S. Nearshore business and
provisions made in September 2017 related to the costs expected to recover part of operations in Mexico and Puerto Rico affected by the recent natural disasters.
EMEA
Total operating expenses in EMEA decreased by $5.8 million, or 2.5%, from $232.6 million for the year ended December 31, 2016 to $226.8 million for the
year ended December 31, 2017. Excluding the impact of foreign exchange, operating expenses in EMEA decreased by 4.1%. Operating expenses as a percentage of
revenue decreased from 103.9% to 101.5% for the years ended December 31, 2016 and 2017, respectively, mainly as an impact of the cost initiatives in fixed costs
recently implemented.
Operating profit
Operating profit decreased by $24.0 million, from $116.4 million for the year ended December 31, 2016 to $92.4 million for the year ended December 31,
2017. Excluding the impact of foreign exchange, operating profit decreased 25.4%. Operating profit margin decreased from 6.6% for the year ended December 31,
2016 to 4.8% for the year ended December 31, 2017.
Brazil
Operating profit in Brazil increased by $9.2 million, from $46.3 million for the year ended December 31, 2016 to $55.5 million for the year ended December
31, 2017. Excluding the impact of foreign exchange, operating profit increased by 13.4%. Operating profit margin in Brazil increased from 5.7% for year ended
December 31, 2016 to 5.9% for the year ended December 31, 2017.
Americas
Operating profit in Americas decreased by $56.7 million, from $88.2 million for the year ended December 31, 2016 to $31.5 million for the year ended
December 31, 2017. Excluding the impact of foreign exchange, operating profit decreased by 66.3%. Operating profit margin in Americas decreased from 12.3%
for the year ended December 31, 2016 to 3.9% for the year ended December 31, 2017. Decline in operating profit was mainly explained by the CVI termination
positive impact of $41.7 million which was recognized in "Other gains" in 2016 and negative impacts of lower results in Mexico in 2017.
EMEA
Operating profit in EMEA changed by $5.7 million, from a loss of $7.5 million for the year ended December 31, 2016 to a loss of $1.8 million for the year
ended December 31, 2017. Operating profit margin improved from negative margin of 3.3% in 2016 to a negative margin of 0.8% in 2017. This increase is mainly
related to lower fixed costs as a result of the implementation of cost saving initiatives.
Finance income
Finance income was $7.9 million for the year ended December 31, 2017 compared to $7.2 million for the year ended December 31, 2016. Excluding the
impact of foreign exchange, finance income increased by 2.5% during the year ended December 31, 2017.
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Finance costs
Finance costs increased by $18.9 million, or 32.0%, from $59.2 million for the year ended December 31, 2016 to $78.1 million for the year ended December
31, 2017. Excluding the impact of foreign exchange, finance costs increased by 28.1% during the year ended December 31, 2017. The increase in finance costs was
mainly due to one-off expenses related to the refinance process during August 2017, $4.2 million of refinance costs and also due to an one-off gain occurred during
2016 related to CVI elimination. Excluding these effects, finance costs decreased $18.8 million in the year ended December 31, 2017.
Changes in fair value of financial instruments
Changes in fair value of financial instruments changed by $0.5 million, from a gain of $0.7 million for the year ended December 31, 2016 to a gain of $0.2
million for the year ended December 31, 2017.
Net foreign exchange gain/(loss)
Net foreign exchange gain/(loss) changed by $33.1 million, from a loss of $56.5 million for the year ended December 31, 2016 to a loss of $23.4 million for
the year ended December 31, 2017. This change is mainly related to an one-off negative impact during 2016 due to CVI elimination.
Income tax expense
Income tax expense for the years ended December 31, 2016 and 2017 totaled $5.2 million and $12.5 million, respectively. The increase in tax expenses was
mainly attributed to: (i) the recognition of non-deductible expenses mainly in Mexico, Peru and Colombia, (ii) the contribution of losses in the holdings companies.
Profit/(loss) for the period
Profit/(loss) for the years ended December 31, 2016 and 2017 was a profit of $0.2 million and a loss of $13.6 million, respectively, as a result of the items
disclosed above.
EBITDA and Adjusted EBITDA
EBITDA decreased by $16.8 million, or 7.9%, from $213.7 million for the year ended December 31, 2016 to $196.9 million for the year ended December 31,
2017. For the same period, Adjusted EBITDA decreased by $0.9 million, or 0.4% from $221.9 million for the year ended December 31, 2016 to $221.0 million for
the year ended December 31, 2017. The difference between EBITDA and Adjusted EBITDA is due to the exclusion of items that were not related to our core
results of operations. Our Adjusted EBITDA is defined as EBITDA adjusted to exclude the, restructuring costs, site relocation costs, asset impairments and other
items which are not related to our core results of operations. See “Summary Consolidated Historical Financial Information” for a reconciliation of EBITDA and
Adjusted EBITDA to profit/(loss).
Excluding the impact of foreign exchange, EBITDA decreased by 13.0% and Adjusted EBITDA decreased by 4.7%, mainly driven by pressure in
costs/margins across the regions
Adjusted EBITDA was impacted by the recent natural disasters occurred in Mexico and Puerto Rico and by the CVI termination. The impacts related to these
events in the fourth quarter of 2017 totalized a loss of $0.9 million and a gain of $41.7 million in 2016, respectively.
Brazil
EBITDA in Brazil increased by $13.7 million, or 13.9%, from $98.7 million for the year ended December 31, 2016 to $112.4 million for the year ended
December 31, 2017. For the same period, Adjusted EBITDA increased by $3.7 million, or 3.1%, from $121.0 million to $124.7 million. Excluding the impact of
foreign exchange, EBITDA increased by $6.7 million, or 6.3%, and Adjusted EBITDA decreased by $5.3 million, or 4.1%.
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Americas
EBITDA in Americas decreased by $52.9 million, or 43.4%, from $122.0 million for the year ended December 31, 2016 to $69.1 million for the year ended
December 31, 2017. For the same period, Adjusted EBITDA decreased by $8.5 million, or 9.2%, from $92.0 million to $83.5 million.
Excluding the impact of foreign exchange, EBITDA decreased during this period by $58.4 million, or 45.8%, and Adjusted EBITDA decreased $8.4 million,
or 9.1%, respectively.
The decrease in EBITDA and Adjusted EBITDA is mainly driven by declines in volume from Mexico.
EMEA
EBITDA in EMEA improved by $4.4 million, from $3.2 million for the year ended December 31, 2016 to $7.6 million for the year ended December 31,
2017. For the same period, Adjusted EBITDA decreased by $1.5 million, or 9.3%, from $16.3 million to $14.8 million.
Excluding the impact of foreign exchange, EBITDA increased during this period by $4.1 million, while Adjusted EBITDA decreased by $2.3 million, or
13.4%, respectively.
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Year Ended December 31, 2015 Compared to Year Ended December 31, 2016
Revenue
Revenue decreased by $192.4 million, or 9.9%, from $1,949.9 million for the year ended December 31, 2015 to $1,757.5 million for the year ended
December 31, 2016. Excluding the impact of foreign exchange, revenue decreased 1.4% driven primarily by the reduction in volume from Telefónica, particularly
in Brazil and Spain. This impact was partially offset by the positive performance from multisector clients, mainly in the Americas region.
Revenue from Telefónica, excluding the impact of foreign exchange, decreased 7.8% driven by volume declines in Brazil and Spain. Revenue from
multisector clients increased 3.8%, led by 10.9% growth in the Americas which was partially offset by declines in Brazil and in Mexico.
Consistent with our strategy to diversify our revenue base, for the year ended December 31, 2016, revenue from multisector clients totaled 57.8% of total
revenue, an increase of 3.2 percentage points over the prior year.
The following chart sets forth a breakdown of revenue based on geographical region for the years ended December 31, 2015 and 2016 and as a percentage of
revenue the percentage change between those periods and the change net of foreign exchange effects.
For the year ended December 31,
($ in millions, except percentage
changes)
Brazil
Americas
EMEA (*)
Other and eliminations (1)
Total
2015
(%)
2016
(%)
Change (%)
930.2
789.8
231.7
(1.8)
1,949.9
47.7
40.5
11.9
(0.1)
100.0
816.4
718.9
223.9
(1.7)
1,757.5
46.5
40.9
12.7
(0.1)
100.0
(12.2)
(9.0)
(3.4)
(5.6)
(9.9)
Change
excluding
FX (%)
(7.0)
6.5
(3.1)
6.3
(1.4)
(*) Exclude discontinued operations - Morocco.
(1) Includes holding company level revenues and consolidation adjustments.
Brazil
Revenue in Brazil for the years ended December 31, 2015 and 2016 was $930.2 million and $816.4 million, respectively. Revenue decreased $113.8 million,
or 12.2%. Excluding the impact of foreign exchange, revenue decreased 7.0%, with Telefónica decreasing 17.4%, while multisector clients declined 0.8%. Growth
from our acquisition of RBrasil in the third quarter of 2016 and gains with new clients were more than offset by macro driven declines in Telefónica and our
financial services clients.
Americas
Revenue in the Americas for the years ended December 31, 2015 and 2016 was $789.8 million and $718.9 million, respectively. Revenue decreased by $70.9
million, or 9.0%. Excluding the impact of foreign exchange, revenue increased by 6.5%. Excluding the impact of foreign exchange, revenue from Telefónica
increased 1.5% led by new services in Argentina and Peru, while revenue from multisector clients increased 10.9%, supported by broad-based growth in most
markets with new and existing clients, particularly in Argentina, Chile, Peru, Colombia, Central America and our U.S. Nearshore business.
EMEA
Revenue in EMEA for the years ended December 31, 2015 and 2016 was $231.7 million and $223.9 million, respectively. Revenue decreased by $7.8
million, or 3.4%. Excluding the impact foreign exchange, revenue decreased by 3.1%. Revenue from Telefónica declined 6.5% driven by macro related pressure in
Spain. Revenue from multisector clients increased 3.7%. Despite the significant volume reduction in some contracts with Public Administration, new business wins
from private sectors in 2015 and 2016, compensated that negative impact.
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Other operating income
Other operating income increased by $1.5 million, from $4.3 million for the year ended December 31, 2015 to $5.8 million for the December 31, 2016.
Other gains
Other gains increased $41.7 million related to the principal amount of the CVI that was terminated on November 8, 2016.
Total operating expenses
Total operating expenses decreased by $143.7 million, or 7.8%, from $1,832.4 million for the year ended December 31, 2015 to $1,688.7 million for the
year ended December 31, 2016. This decrease was mainly due to foreign exchange. Excluding the impact of foreign exchange, operating expenses increased by
0.6%. As a percentage of revenue, operating expenses constituted 94.0% and 96.1% for the years ended December 31, 2015 and 2016, respectively. These changes
were due to the following items:
Supplies
:
Supplies decreased by $12.0 million, or 15.5%, from $77.6 million for the year ended December 31, 2015 to $65.6 million for the year ended
December 31, 2016. Excluding the impact of foreign exchange, supplies expense decreased by 7.0%, mainly due to reductions in Brazil. As a percentage of
revenue, supplies constituted 4.0% and 3.7% for the years ended December 31, 2015 and 2016, respectively.
Employee
benefit
expenses:
Employee benefit expenses decreased by $100.6 million, or 7.1%, from $1,410.5 million for the year ended December 31, 2015
to $1,309.9 million for the year ended December 31, 2016. Excluding the impact of foreign exchange, employee benefit expenses increased by 1.7%. As a
percentage of revenue, employee benefits expenses constituted 72.3% and 74.5% for the years ended December 31, 2015 and 2016, respectively. This increase in
the percentage of revenue is due to the negative impact of high inflation in countries like Brazil, Mexico and Colombia, and non-recurring restructuring costs
primarily in Brazil, Spain and Argentina to align the labor force with new volumes levels.
Depreciation
and
amortization:
Depreciation and amortization expense decreased by $4.2 million, or 4.1%, from $101.5 million for the year ended
December 31, 2015 to $97.3 million for the year ended December 31, 2016. Excluding the impact of foreign exchange, depreciation and amortization expenses
increased by 3.0%, mainly due to the enhanced technology platform supporting higher value added services.
Changes in trade provisions: Changes in trade provisions changed from an expense of $1.3 million for the year ended December 31, 2015 to an expense of
$1.9 million for the year ended December 31, 2016. As a percentage of revenue, changes in trade provisions constituted 0.1% for the years ended December 31,
2015 and 2016.
Other
operating
expenses:
Other operating expenses decreased by $27.5 million, or 11.4%, from $241.5 million for the year ended December 31, 2015 to
$214.0 million for the year ended December 31, 2016. Excluding the impact of foreign exchange, other operating expenses decreased by 4.8%, mainly driven by
Brazil. As a percentage of revenue, other operating expenses decreased from 12.4% in 2015 to 12.2% in 2016.
Brazil
Total operating expenses in Brazil decreased by $92.8 million, or 10.7%, from $863.9 million for the year ended December 31, 2015 to $771.1 million for
the year ended December 31, 2016. Excluding the impact of foreign exchange, operating expenses in Brazil decreased by 5.4%, as a result of cost reduction
initiatives through the year. As a percentage of revenue, operating expenses increased from 92.9%in 2015 to 94.5% in 2016.
Americas
Total operating expenses in the Americas decreased by $50.0 million, or 6.9%, from $726.0 million for the year ended December 31, 2015 to $676.0 million
for the year ended December 31, 2016. Excluding the impact of foreign exchange, operating expenses in the Americas increased by 8.7%. This increase was
primarily due to the impact of high inflation in countries like Argentina and Colombia and to non-recurring restructuring costs to adapt to lower volumes. As a
percentage of revenue operating expenses increased from 91.9% in 2015 to 94.0% in 2016.
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EMEA
Total operating expenses in EMEA decreased by $0.4 million, or 0.2%, from $233.0 million for the year ended December 31, 2015 to $232.5 million for the
year ended December 31, 2016. Excluding the impact of foreign exchange, operating expenses in EMEA remained at the same level as last year. As a percentage of
revenue, operating expenses increased from 100.6% in 2015 to 103.8% in 2016. T his increase as percentage of revenue was mainly due to non-recurring costs
related to the divestment of Morocco that took place in September 2016 and to restructuring costs to adapt the structure to lower volumes, mainly from Telefónica.
Operating profit
Operating profit decreased by $5.4 million, or 4.4%, from $121.8 million for the year ended December 31, 2015 to $116.4 million for the year ended
December 31, 2016. Excluding the impact of foreign exchange, operating profit increased by 7.5%. Operating profit margin increased from 6.2% for the year ended
December 31, 2015 to 6.6% for the year ended December 31, 2016. This increase in profit and margin was driven by the positive impact of the CVI termination
that happened in 2016 in Argentina. Excluding the positive impact of CVI termination in amount of $41.7 million, operating profit decreased $47.1 million, or
38.7%, from $121.8 million for the year ended December 31, 2015 to $74.7 million in 2016 and for the same time, operating profit margin decreased from 6.2% to
4.3%. This negative results in operating profit and operating profit margin is caused by the reduction in volume from some significant costumers, mainly
Telefónica, and the difference in timing between the revenue reduction and the effects of the cost initiatives that have been implemented.
Brazil
Operating profit in Brazil decreased by $20.2 million, or 30.4%, from $66.5 million for the year ended December 31, 2015 to $46.3 million for the year
ended December 31, 2016. Excluding the impact of foreign exchange, operating profit decreased by 27.3%. Operating profit margin decreased from 7.1% for the
year ended December 31, 2015 to 5.7% for the year ended December 31, 2016, affected by the reduction in volume from Telefónica.
Americas
Operating profit in the Americas increased by $22.4 million, or 34.0%, from $65.8 million for the year ended December 31, 2015 to $88.2 million for the
year ended December 31, 2016. Excluding the impact of foreign exchange, operating profit in the Americas increased by 59.5% in 2016. Operating profit margin
increased from 8.3% to 12.3% for the years ended December 31, 2015 and 2016, respectively. The growth in operating profit and margin was driven by the positive
$41.7 million impact of the CVI termination. Excluding this impact, operating profit decreased $19.3 million, or 29.3%, from $65.8 million for the year ended
December 31, 2015 to $46.5 million in 2016 and operating profit margin decreased from 8.3% to 6.5%, as a result of lower volume, mainly from Telefónica, and
the difference in timing between the revenue reduction and the effects of the cost initiatives that have been implemented.
EMEA
Operating profit in EMEA decreased by $7.2 million, from a loss of $0.3 million for the year ended December 31, 2015 to a loss of $7.5 million for the year
ended December 31, 2016. Excluding the impact of foreign exchange, operating profit in EMEA decreased by $7.0 million in 2016, driven by lower volumes in
Telefónica and some Public Sector clients.
Finance income
Finance income decreased by $8.3 million, from $15.5 million for the year ended December 31, 2015 to $7.2 million for the year ended December 31, 2016.
Excluding the impact of foreign exchange, finance income decreased by 49.7%. The decrease in finance income was mainly due to a one-off payroll tax credit in
Brazil in 2016.
Finance costs
Finance costs decreased by $16.3 million, or 21.6%, from $75.5 million for the year ended December 31, 2015 to $59.2 million for the year ended December
31, 2016. Excluding the impact of foreign exchange, finance costs decreased by 17.3%. The decrease in finance costs was driven by a $19.9 million reversal of
finance costs in 2016 related to the CVI termination.
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Changes in fair value of financial instruments
Changes in fair value of financial instruments decreased by $16.8 million, or 96.0%, from an income of $17.5 million for the year ended December 31, 2015
to an income of $0.7 million for the year ended December 31, 2016. This decrease is mainly related to the overlap in 2016 of the implementation of hedge
accounting in April 1, 2015 which drove the recognition of cumulative fair value gains of financial instruments in first quarter of 2015.
Net foreign exchange loss
Net foreign exchange loss changed by $52.6 million, from $3.9 million for the year ended December 31, 2015 to $56.5 million for the year ended December
31, 2016. This loss was mainly due to the impact of foreign exchange variation on the CVI from Argentine pesos to U.S. dollars in amount of $35.4 million.
Income tax expense
Income tax expense for the years ended December 31, 2015 and 2016 was $23.2 million and $5.2 million, respectively, a decline of $18.0 million. This
decline was due to lower profit before income tax in 2016 and due to the non-deductible costs/expenses recognized mainly in Mexico, Colombia and Brazil. The
aggregated effective tax rate for the year ended 2016 is 60.8%. The aggregated effective tax rate for the year ended December 31, 2016 is distorted because of the
contribution of losses in the holding companies to our profit before income tax. The tax expense for the year ended December 31, 2016 is derived from the
profitable subsidiaries which paid income taxes at the individual level. Excluding the holding companies, the aggregated effective tax rate for the year ended
December 31, 2016 is 51.3%. Higher tax expenses are primarily attributed to non-deductible expenses mainly in Colombia, Mexico and Brazil and due to the
reversion of the deferred tax asset in Brazil.
Profit for the year
Profit for the years ended December 31, 2015 and 2016 was $49.1 million and $0.2 million, respectively, as result of the factors discussed above.
EBITDA and Adjusted EBITDA
EBITDA decreased by $9.6 million, or 4.3%, from $223.3 million for the year ended December 31, 2015 to $213.7 million for the year ended December 31,
2016. Adjusted EBITDA decreased by $27.8 million, or 11.1%, from $249.7 million for the year ended December 31, 2015 to $221.9 million for the year ended
December 31, 2016. The difference between EBITDA and Adjusted EBITDA was due to the exclusion of items that were not related to our core results of
operations. Our Adjusted EBITDA is defined as EBITDA adjusted to exclude the acquisition and integration related costs, restructuring costs, sponsor management
fees, asset impairments, site relocation costs, financing fees and other items which are not related to our core results of operations. See “Summary Consolidated
Historical Financial Information” for a reconciliation of EBITDA and Adjusted EBITDA to profit/(loss).
Excluding the impact of foreign exchange, EBITDA increased by 5.4% and Adjusted EBITDA decreased by 3.6% impacted by the decrease in Telefónica
revenues in Argentina, Brazil, Mexico and Spain, partially compensated by the good performance from multisector clients and lower fixed and variable costs. In
addition to that, EBITDA was positively impacted by the CVI termination of $41.7 million, which was partially offset by non-recurring costs of $42.5 million,
mostly related to restructuring and site relocation costs.
Excluding the positive impact of the CVI termination, EBITDA decreased $51.3 million, or 23.0%, from $223.3 million for the year ended December 31,
2015 to $172.0 million in 2016.
Brazil
EBITDA in Brazil decreased by $17.8 million, or 15.3%, from $116.5 million for the year ended December 31, 2015 to $98.7 million for the year ended
December 31, 2016. Adjusted EBITDA decreased by $8.4 million, or 6.5%, from $129.4 million for the year ended December 31, 2015 to $121.0 million for the
year ended December 31, 2016. Excluding the impact of foreign exchange, EBITDA and Adjusted EBITDA decreased by 11.4% and 3.9%, respectively. The
difference between EBITDA and Adjusted EBITDA relates to the exclusion of non-recurring costs. During the year ended December 31, 2016 non-recurring costs
were impacted by labor force optimization and our site relocation program. EBITDA and Adjusted EBITDA were impacted by lower activity in the Brazilian
market in all client segments, mainly Telefónica. The decline was partially offset by operating efficiencies achieved from our margin transformational programs.
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Americas
EBITDA in the Americas increased by $17.8 million, or 17.1%, from $104.2 million for the year ended December 31, 2015 to $122.0 million for the year
ended December 31, 2016. Adjusted EBITDA decreased by $17.1 million, or 15.7%, from $109.1 million for the year ended December 31, 2015 to $92.0 million
for the year ended December 31, 2016. Excluding the impact of foreign exchange, EBITDA increased by 37.1%, while Adjusted EBITDA decreased by 1.5%.
Excluding the positive impact of the CVI termination in amount of $41.7 million, EBITDA decreased $23.9 million, or 22.9%, from $104.2 million for the
year ended December 31, 2015 to $80.3 million in 2016.
EMEA
EBITDA in EMEA decreased by $8.9 million, or 73.6%, from $12.1 million for year ended December 31, 2015 to $3.2 million for the year ended December
31, 2016. Adjusted EBITDA decreased by $2.3 million, or 12.4%, from $18.6 million for the year ended December 31, 2015 to $16.3 million for the year ended
December 31, 2016. Excluding the impact of foreign exchange, EBITDA decreased $8.6 million and Adjusted EBITDA decreased $1.9 million, mainly due to
lower revenues from Telefónica.
B. Liquidity and Capital Resources
We fund our ongoing capital and working capital requirements through a combination of cash flow from operations and financing activities. Based on our
current and anticipated levels of operations and conditions in our markets and industry, we believe that our cash on hand and cash flow from our operating,
investing and financing activities, including funds available under the Revolving Credit Facility, will enable us to meet our working capital, capital expenditure,
debt service and other funding requirements for the foreseeable future. We have ample liquidity: as of December 31, 2017, the total amount of credit available to us
was $104.2 million under our Revolving Credit Facility, of which remains $99.2 million undrawn as of December 31, 2017. In addition, we had cash and cash
equivalents of $141.8 million.
Our ability to fund our working capital needs, debt payments and other obligations, and to comply with the financial covenants under our debt agreements,
depends on our future operating performance and cash flow, which are subject to prevailing economic conditions, and other factors, many of which are beyond our
control. Any future acquisitions, joint ventures or other similar transactions will likely require additional capital and such capital may not be available to us on
acceptable terms, if at all.
As of December 31, 2017, our outstanding debt was $486.3 million, which includes $398.3 million of our 6.125% Senior Secured Notes due 2022, $21.1
million of Brazilian Debentures, $50.4 million of financing provided by BNDES, $10.5 million of finance lease payables and $6.0 million of other bank
borrowings.
For the year ended December 31, 2017, our cash flow from operating activities was $114.5 million, which includes interest paid of $76.5 million. Our cash
flow from operating activities, before giving effect to the payment of interest, was $191.0 million.
Cash Flows
As of December 31, 2017, we had cash and cash equivalents of $141.8 million. We believe that our current cash flow used in operating activities and
financing arrangements will provide us with sufficient liquidity to meet our working capital needs.
($ in millions)
Cash flows from operating activities
Cash flows used in investing activities
Cash flows from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Effect of changes in exchange rates
66
For the year ended December 31,
2014
2016
2017
37.0
(67.2)
36.6
6.4
(33.8)
141.9
(75.1)
(62.7)
4.2
5.8
114.5
(90.9)
(84.3)
(60.8)
8.6
Table of Contents
Cash Flows from Operating Activities
Year
Ended
December
31,
2016
Compared
to
Year
Ended
December
31,
2017
Cash flows from operating activities was $114.5 million for the year ended December 31, 2017 compared to $141.9 million for the year ended December 31,
2016. The decrease in cash from operating activities is mainly due to one-off impacts during 2016 in connection with MSA renegotiation, including a decrease on
Telefónica DSO.
Year
Ended
December
31,
2016
Compared
to
Year
Ended
December
31,
2015
Cash flows from operating activities was $141.9 million for the year ended December 31, 2016 compared to $37.0 million for the year ended December 31,
2015. The increase in cash from operating activities resulted from favorable changes in working capital as a result of lower DSO (Day Sales Outstanding).
Cash Flows used in Investing Activities
Year
Ended
December
31,
2016
Compared
to
Year
Ended
December
31,
2017
Cash flows used in investing activities was $90.9 million for the year ended December 31, 2017 compared to cash used in investment activities of
$75.1 million for the year ended December 31, 2016. The increase is mainly driven by the acquisition of Interfile in June 2017.
Year
Ended
December
31,
2016
Compared
to
Year
Ended
December
31,
2015
C ash flows used in investing activities was $75.1 million for the year ended December 31, 2016 compared to $67.2 million for the year ended December 31,
2015. Cash flows used in investing activities for the year ended December 31, 2016 mainly include payments for capital expenditure of $69.9 million.
Cash Flows from/(used in) Financing Activities
Year
Ended
December
31,
2016
Compared
to
Year
Ended
December
31,
2017
For the year ended December 31, 2017 cash used in financing activities was $84.3 million compared to cash used in financing activities of $62.7 million for
the same period in the prior year. In August 2017, with the debt refinance process, we issued $400.0 million of new Senior Secured Notes and prepaid $300.0
million of 2020 Senior Secured Notes and $129.5 million of Brazilian Debentures. Additionally, during 2017, there were also $22.2 million of BNDES contractual
amortization and $33.1 million of Brazilian Debentures prepayment. Also, in November 2017, occurred dividend payment of $25.0 million.
Year
ended
December
31,
2016
Compared
to
Year
ended
December
31,
2015
Cash used in financing activities was $62.7 million for the year ended December 31, 2016 compared to cash from financing activities of $36.6 million for the
year ended December 31, 2015. Cash used in financing activities during 2016 was mainly attributable to BNDES contractual amortization and Debentures
amortization, including an accelerated payment of BRL100.0 million (equivalent to $30.7 million).
Financing Arrangements
Certain of our debt agreements contain financial ratios as instruments to monitor the Company’s financial condition and as preconditions to certain
transactions (e.g. the incurrence of new debt, permitted payments). The following is a brief description of the financial ratios.
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Table of Contents
1.
2.
3.
Gross Leverage Ratio (applies to Atento S.A.) – measures the level of gross debt to EBITDA, as defined in the debt agreements. The contractual
ratio indicates that the gross debt should not surpass 2.8 times the EBITDA for the last twelve months. As of December 31, 2017, the current ratio
was 2.2 times.
Fixed Charge Coverage Ratio (applies to Atento S.A.) – measures the Company’s ability to pay interest expenses and dividends (fixed charges) in
relation to EBITDA, as described in the debt agreements. The contractual ratio indicates that the EBITDA for the last twelve months should
represent at least 2 times the fixed charge of the same period. As of December 31, 2017, the current ratio was 3.0 times.
Net Debt Brazilian Leverage Ratio (applies only to Brazil) – measures the level of net debt (gross debt, less cash and cash equivalents) to EBITDA –
each as defined in debt agreements. The contractual ratio indicates that Brazil net debt should not surpass 2.0 times the Brazilian EBITDA. As of
December 31, 2017, the current ratio was 0.4 times. This is the only ratio considered as a financial covenant.
The Company regularly monitors all financial ratios under the debt agreements. As of December 31, 2017, we were in compliance with the terms of our
covenants.
Description
Senior Secured Notes
Brazilian Debentures
BNDES
Finance Lease Payables
Other Borrowings
Total Debt
Senior
Secured
Notes
Currency
USD
BRL
BRL
BRL, COP, USD
MXN
Maturity
Interest rate
2022
2023
2020
2019
2018
6.125%
CDI+3.75%
Tranche A: TJLP + 2.5%
Tranche B: SELIC + 2.5%
Tranche C: 4%
Tranche D: 6%
Tranche E: TJLP
8.0%-12.6%
11.1%
As of December 31, 2017
($ in millions)
398.3
21.1
50.4
10.5
6.0
486.3
On January 29, 2013, Atento Luxco 1 S.A. issued $300.0 million U.S. dollars aggregate principal amount of Senior Secured Notes that would mature on
January 29, 2020. The 2020 Senior Secured Notes were senior secured obligations of Atento Luxco 1 and were guaranteed on a senior secured first-priority basis
by Atento Luxco 1 and certain of its subsidiaries excluding Argentina and Brazil subsidiaries. The Senior Secured Notes were also guaranteed on an unsecured
basis by Atento S.A. and Midco.
On August 19, 2017, in connection with the offering described below, Atento Luxco 1 redeemed all of the outstanding amount of the 2020 Senior Secured
Notes. The notes were called at a premium over face value of 103.688% per note, resulting in a total call cost of $11.1 million recorded in finance costs in August
2017, along with the remaining balance of the 2020 Senior Secured Notes issuance amortized cost of $4.9 million U.S. dollars.
On August 10, 2017, Atento Luxco 1 S.A., issued $400.0 million U.S. dollars aggregate principal amount of 6.125% Senior Secured Notes due 2022 in a
private placement transaction. The notes are due on August 2022. The 2022 Senior Secured Notes are guaranteed on a senior secured basis by certain of Atento’s
wholly-owned subsidiaries. The issuance costs of $12.0 million U.S. dollars related to this new issuance are recorded at amortized cost using effective interest
method.
The terms of the Indenture, among other things, limit, in certain circumstances, the ability of Atento Luxco 1 and its restricted subsidiaries to: incur certain
additional indebtedness; make certain dividends, distributions, investments and other restricted payments; sell the property or assets to another person; incur
additional liens; guarantee additional debt; and enter into transaction with affiliates. As of December 31, 2017, we were in compliance with these covenants. The
outstanding amount on December 31, 2017 is $398.3 million.
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Table of Contents
Revolving
Credit
Facility
On January 28, 2013, Atento Luxco 1 entered into a Super Senior Revolving Credit Facility (the “Revolving Credit Facility”), which provides borrowings
capacity of up to 50.0 million Euro (equivalent to $60.0 million as of December 31, 2017). The Revolving Credit Facility allowed borrowings in Euros, Mexican
Pesos and U.S. dollars and includes borrowings capacity for letters of credit and ancillary facilities (including an overdraft, guarantee, stand-by letter of credit,
short-term loan facility). This facility would mature on July 2019. In connection with the Refinancing process, this Revolving Credit Facility was ended on August
10, 2017.
On April 25, 2017, Atento Brasil S.A. entered into a bank credit certificate (cédula de crédito bancário) with Banco Santander (Brasil) S.A. in an aggregate
principal amount of up to BRL80.0 million (the “2017 Santander Bank Credit Certificate”), equivalent to approximately $24.2 million as of December 31, 2017.
The interest rate of the 2017 Santander Bank Credit Certificate equals to the average daily rate of the one day “over extra-group” – DI – Interfinancial Deposits (as
such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 2.70% per annum. The 2017 Santander Bank Credit Certificate
matured on July 25, 2017 and was extended until March 1, 2018 and the aggregate principal amount was modified to 75.0 million Brazilian Reais. As of December
31, 2017, there was no outstanding balance under the 2017 Santander Bank Credit Certificate.
On May 26, 2017, Atento Brasil S.A. entered into an agreement with Banco ABC Brasil for an amount of $12.2 million maturing on November 26, 2017
with an annual interest rate of 3.52%. In connection with the loan, Atento Brasil S.A. entered into a SWAP agreement through which it receives fixed interest rates
in U.S. dollars, in the same amount of the loan agreement, and pays variable interest rate at a rate per annum equal to the average daily rate of the one day “over
extragroup” – DI – Interfinancial Deposits (as such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 3.45% over 40.0
million Brazilian Reais. As of December 31, 2017, there was no outstanding balance with Banco ABC Brasil.
On June 7, 2017, Atento Brasil S.A. entered into a bank credit certificate (cédula de crédito bancário) with Banco Bradesco S.A. in an aggregate principal
amount of up to 25.0 million Brazilian Reais (the “2017 Bradesco Bank Credit Certificate”), equivalent to approximately $7.6 million as of December 31, 2017.
The interest rate of the 2017 Bradesco Bank Credit Certificate equals to the average daily rate of the one day “over extra-group” – DI – Interfinancial Deposits (as
such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 3.29% per annum. The 2017 Bradesco Bank Credit Certificate
matured on October 5, 2017. As of December 31, 2017, no amounts were released under the 2017 Bradesco Bank Credit Certificate.
On August 10, 2017, Atento Luxco 1 S.A. entered into a new Super Senior Revolving Credit Facility (the “Super Senior Revolving Credit Facility”) which
provides borrowings capacity of up to $50.0 million and will mature on February 10, 2022. Banco Bilbao Vizcaya Argentaria, S.A., as the agent, the Collateral
Agent and BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, Morgan Stanley Bank N.A. and Goldman Sachs Bank USA
are acting as arrangers and lenders under the Super Senior Revolving Credit Facility.
The Super Senior Revolving Credit Facility may be utilized in the form of multi-currency advances for terms of one, two, three or six months. The Super
Senior Revolving Credit Facility bears interest at a rate per annum equal to LIBOR or, for borrowings in euro, EURIBOR or, for borrowings in Mexican Pesos,
TIIE plus an opening margin of 4.25% per annum. The margin may be reduced under a margin ratchet to 3.75% per annum by reference to the consolidated senior
secured net leverage ratio and the satisfaction of certain other conditions.
The terms of the Super Senior Revolving Credit Facility Agreement limit, among other things, the ability of the Issuer and its restricted subsidiaries to (i)
incur additional indebtedness or guarantee indebtedness; (ii) create liens or use assets as security in other transactions; (iii) declare or pay dividends, redeem stock
or make other distributions to stockholders; (iv) make investments; (v) merge, amalgamate or consolidate, or sell, transfer, lease or dispose of substantially all of
the assets of the Issuer and its restricted subsidiaries; (vi) enter into transactions with affiliates; (vii) sell or transfer certain assets; and (viii) agree to certain
restrictions on the ability of restricted subsidiaries to make payments to the Issuer and its restricted subsidiaries. These covenants are subject to a number of
important conditions, qualifications, exceptions and limitations that are described in the Super Senior Revolving Credit Facility Agreement.
The Super Senior Revolving Credit Facility Agreement includes a financial covenant requiring the drawn super senior leverage ratio not to exceed 0.35:1.00
(the “SSRCF Financial Covenant”). The SSRCF Financial Covenant is calculated as the ratio of consolidated drawn super senior facilities debt to consolidated pro
forma EBITDA for the twelve-month period preceding the relevant quarterly testing date and is tested quarterly on a rolling basis, subject to the Super Senior
Revolving Credit Facility being at least 35% drawn (excluding letters of credit (or bank guarantees), ancillary facilities and any related fees or expenses) on the
relevant test date. The SSRCF Financial Covenant only acts as a draw stop to new drawings under the Revolving Credit Facility and, if breached, will not trigger a
default or an event of default under the Super Senior Revolving Credit Facility Agreement. The Issuer has four equity cure rights in respect of the SSRCF Financial
Covenant prior to the termination date of the Super Senior Revolving Credit Facility Agreement, and no more than two cure rights may be exercised in any four
consecutive financial quarters. As of December 31, 2017, we were in compliance with this covenant and no amounts were released under the Super Senior
Revolving Credit Facility.
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On September 14, 2017, Atento Luxco 1 S.A. and Atento Brasil S.A. entered into an Agreement for a Common Revolving Credit Facility Line with
Santander Brasil, Estabelecimento Financeiro de Crédito S.A. in respect of a bi-lateral, multi-currency revolving credit facilities. Up to $30.0 million of
commitments are available for the drawing of cash loans in Euro, Mexican Pesos (MXN) and Colombian Pesos (COP). The original borrowers under this facility
are Atento Colombia S.A, Atento Teleservicios España, S.A.U and Atento Servicios, S.A. de C.V. This facility is guaranteed by Atento Luxco 1 S.A. and Atento
Brasil S.A. on a joint and several basis. This facility matures one year after the date of the Agreement. As of December 31, 2017, the outstanding amount under this
facility was 99.9 million Mexican Pesos (equivalent to $5.1 million).
Brazilian
Debentures
On November 22, 2012, BC Brazilco Participações, S.A. (now merged into Atento Brasil S.A.) (the “Brazilian Issuer”) entered into an indenture for the
issuance of BRL915 million (equivalent to approximately $365 million) of Brazilian Debentures due December 12, 2019. The Brazilian Debentures bear interest at
a rate per annum equal to the average daily rate of the One Day “over extra¬group”—DI—Interfinancial Deposits (as such rate is disclosed by CETIP
S.A.
—
Mercados
Organizados
(“CETIP”), plus a spread of 3.70%.
On March 25, 2013 and June 11, 2013, Atento Brasil, S.A. repaid, in advance of the schedule date BRL71.6 million (equivalent to $35.5 million) and
BRL26.4 million (equivalent to $12.3 million), respectively.
On May 12, 2014, June 26, 2014 and August 28, 2014, Atento Brasil, S.A. repaid, in advance of the schedule date, BRL34.4 million (equivalent to $15.5.
million), BRL45.0 million (equivalent to $20.4 million) and BRL80.0 million (equivalent to $33.1 million), respectively of the Brazilian Debentures.
On December 12, 2016, Atento Brasil, S.A. repaid on the schedule date, BRL44.6 million (equivalent to $13.7 million) and on December 26, 2016, repaid in
advance of the schedule date, BRL100.0 million (equivalent to $30.7 million).
On April 27, 2017, Atento Brasil S.A. repaid in advance of the maturity date, BRL84.7 million (equivalent to $27.0 million) of the 1st Brazilian Debentures
due 2019. On August 21, 2017, Atento Brasil S.A. repaid in advance of the maturity date all the outstanding amount. The amount repaid was BRL428.4 million
(equivalent to $135.9 million) plus interest accrued of BRL10.9 million (equivalent to $3.5 million) and BRL2.1 million (equivalent to $0.7 million) of penalty fee
due to early repayment. In addition to the penalty fee, the remaining balance of the first Debentures issuance costs of BRL3.1 million (equivalent to $1.0 million)
were recorded in finance costs during August 2017. As of December 31, 2017, there was no outstanding amount related to the Debentures due 2019.
On May 2, 2017, Atento Brasil S.A. entered into an indenture (“Second Brazilian Debenture”) for the issuance of BRL70.0 million (equivalent to
approximately $22.1 million) of Brazilian Debentures due April 25, 2023. The Second Brazilian Debenture bear interest at a rate per annum equal to the average
daily rate of the one day “over extragroup” – DI – Interfinancial Deposits (as such rate is disclosed by CETIP
S.A
–
Mercados
Organizados
(“CETIP”), plus a
spread of 3.75%. The amortization schedule is: April 25, 2018: 9.1%; October 25, 2018: 9.1%; April 25, 2019: 9.1%; October 25, 2019: 9.1%; April 25, 2020:
9.1%; October 25, 2020: 9.1%; April 25, 2021: 9.1%; October 25, 2021: 9.1%; April 25, 2022: 9.1%; October 25, 2022: 9.1%; April 25, 2023: 9,0%. The
outstanding amount on December 31, 2017 is $21.1 million.
Under the term of the indenture, the Brazilian subsidiary must comply with the quarterly net financial debt / EBITDA ratio set out in the contract terms. As
of December 31, 2017, Atento Brasil S.A. was in compliance with this covenant.
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Brazil
BNDES
Credit
Facility
On February 3, 2014, Atento Brasil S.A. entered into a credit agreement with Banco
Nacional
de
Desenvolvimento
Econômico
e
Social
-
BNDES
(“BNDES”) in an aggregate principal amount of BRL300.0 million (the “BNDES Credit Facility”), equivalent to $90.7 million as of December 31, 2017.
The total amount of the BNDES Credit Facility is divided into five tranches subject to the following interest rates:
Tranche
Tranche A
Tranche B
Tranche C
Tranche D
Tranche E
Interest Rate
Long-Term Interest Rate ( Taxa
de
Juros
de
Longo
Prazo
-TJLP
) plus 2.5% per annum
SELIC Rate plus 2.5% per annum
4.0% per year
6.0% per year
Long-Term Interest Rate ( Taxa
de
Juros
de
Longo
Prazo
-TJLP
)
Each tranche intends to finance different purposes, as described below:
·
·
·
·
Tranche A and B: investments in workstations, infrastructure, technology, services and software development, marketing and commercialization,
within the scope of BNDES program – BNDES Prosoft.
Tranche C: IT equipment acquisition, covered by law 8.248/91, with national technology, necessary to execute the project described on tranches
“A” and “B”.
Tranche D: acquisitions of domestic machinery and equipment, within the criteria of FINAME, necessary to execute the project described on
tranches “A” and “B”.
Tranche E: investments in social projects to be executed by Atento Brasil S.A.
BNDES releases amounts under the credit facility once the debtor met certain requirements in the contract including delivering the guarantee (stand-by
letter) and demonstrating the expenditure related to the project. Since the beginning of the credit facility, the following amounts were released:
Date
March 27, 2014
April 16, 2014
July 16, 2014
August 13, 2014
Subtotal 2014
March 26, 2015
April 17, 2015
December 21, 2015
Subtotal 2015
October 27, 2016
Subtotal 2016
Total
(Thousands of U.S. dollars)
Tranche A
Tranche B
Tranche C
Tranche D
Tranche E
Total
7,661
3,184
-
18,922
29,767
5,550
11,101
8,729
25,380
-
-
3,782
1,592
-
2,067
7,441
1,388
2,775
2,176
6,339
-
-
55,147
13,780
71
5,295
2,229
-
3,039
10,563
1,970
3,939
-
5,909
-
-
16,472
378
159
-
327
864
161
323
-
484
-
-
1,348
-
-
181
-
181
-
-
212
212
230
230
623
17,116
7,164
181
24,355
48,816
9,069
18,138
11,117
38,324
230
230
87,370
Table of Contents
This facility should be repaid in 48 monthly installments. The first payment was made on March 15, 2016 and the last payment will be due on February 15,
2020.
The BNDES Credit Facility contains covenants that restrict Atento Brasil S.A.’s ability to transfer, assign, change or sell the intellectual property rights
related to technology and products developed by Atento Brasil S.A. with the proceeds from the BNDES Credit Facility. As of December 31, 2017, Atento Brasil
S.A. was in compliance with these covenants. The BNDES Credit Facility does not contain any other financial maintenance covenant.
The BNDES Credit Facility contains customary events of default including the following: (i) reduction of the number of employees without providing
program support for outplacement, as training, job seeking assistance and obtaining pre-approval of BNDES; (ii) existence of unfavorable court decision against the
Company for the use of children as workforce, slavery or any environmental crimes and (iii) inclusion in the by-laws of Atento Brasil S.A. of any provision that
restricts Atento Brasil S.A’s ability to comply with its financial obligations under the BNDES Credit Facility.
On September 26, 2016, Atento Brasil S.A. entered into a new credit agreement with BNDES in an aggregate principal amount of 22.0 million Brazilian
Reais, equivalent to $6.7 million as of December 31, 2017. The interest rate of this facility is Long-Term Interest Rate ( Taxa
de
Juros
de
Longo
Prazo
-
TJLP
)
plus 2.0% per annum. The facility should be repaid in 48 monthly installments. The first payment will be due on November 15, 2018 and the last payment will be
due on October 15, 2022. This facility is intended to finance an energy efficiency project to reduce power consumption by implementing new lightening, air
conditioning and automation technology. On November 24, 2017, BRL6.5 million (equivalent to $2.0 million) were released under this facility.
Finance leases
The Company holds the following assets under finance leases:
($ in millions)
Finance leases
Plant and machinery
Furniture, tools and other tangible assets
Software
Total
As of December 31,
2017
Net carrying amount of asset
(unaudited)
1.8
6.6
6.8
15.3
On April 25, 2017, Atento Brasil S.A. entered in a sale leaseback with HP Financial Services Arrendamento Mercantil S.A. in an amount of BRL23.6
million, equivalent to approximately $7.1 million as of December 31, 2017, which will be repaid in 36 monthly installments.
On August 25, 2017, Atento Brasil S.A. entered in a new sale leaseback with HP Financial Services Arrendamento Mercantil S.A. in an amount of BRL4.2
million, equivalent to approximately $1.3 million as of December 31, 2017, which will be repaid in 60 monthly installments.
On October 25, 2017, Atento Brasil, S.A. entered in a new sale leaseback with HP Financial Services Arrendamento Mercantil S.A. in an amount of BRL4.6
million, equivalent to approximately $1.4 million as of December 31, 2017, which will be repaid in 60 monthly installments.
The present value of future finance lease payments is as follow:
($ in millions)
Up to 1 year
Between 1 and 5 years
Total
72
2017
Net carrying amount of asset
(unaudited)
4.3
6.2
10.5
Table of Contents
C. Research and Development, Patents and Licenses, etc.
We believe the “Atento” trademark is a recognized and trusted brand in the CRM BPO services industry in each of the markets where we operate. We
believe we have a strong corporate brand that gives credibility to our products and may offer and facilitate our entrance and growth into future market. This also
allows us to attract and retain the best talent, to generate a sense of pride in our staff and to develop a relationship of commitment, confidence and trust with our
clients. In December 2012 Atento Spain Holdco S.L.U. purchased all trademarks and domain names relevant for its business. In relation to copyrights, under the
Berne Convention for the Protection of Literary and Artistic Works, copyrights are recognized in all countries that are signatories to the convention and no other
registration or license is required for its use. As of December 2016, all the countries in which we operate have signed the Berne Convention. We do not have any
other material intellectual property such as patents or licenses.
D. Trend Information
We believe that the following significant market trends are the most important trends affecting our results of operations, and we believe these will continue
to have a material impact on our results of operations in the future.
Trend for Further Outsourcing for CRM BPO Services
In recent years, companies have increasingly sought to outsource certain non-core business activities, such as customer care services and sales functions,
especially in the regions in which we have significant business operations, including Latin America. This trend towards outsourcing non-core business activities
has, in our view, principally been driven by rising costs, competitive pressures and increased operational complexity, resulting in the need for our clients to
outsource these non-core business activities so they can focus on their core competencies. The penetration within individual clients in the market for CRM BPO
services has increased significantly in recent years. We believe there are two main drivers of this increase: first, existing users of CRM BPO are outsourcing more
of their CRM operations to specialist third party BPO providers; secondly, new clients are adopting third party solutions for these services versus using in-house
solutions, largely to take advantage of lower labor costs, specialist knowledge and cost efficiencies.
Growth in Our Business Directly Linked to Growth in the Businesses of Key Clients
We structure our contracts with our clients such that, while the price of our services is agreed, the volume of CRM BPO services we deliver during a
particular period is dependent on the performance of our clients’ business. We have significant exposure to the telecommunications and banking and financial
services sectors and our business is dependent upon the continued growth of our clients’ business in these sectors. If the business of one of our key clients increases
and generates more customer activity, our business with that client also increases. Conversely, if the business of one of our key clients decreases and there is a
reduction of customer activity, our business with that client also decreases.
Development of CRM BPO Solutions
This industry is in transition as more complex multi-channel end-to-end solutions are being outsourced, thus creating an opportunity for CRM BPO
providers, including us, to up-sell and cross-sell our services. Our vertical industry expertise in telecommunications, banking and financial services and multi--
sector, allows us to develop tailored solutions for our clients, embedding us further into their value chain while we deliver impactful business results and increase
the portion of our client’s CRM BPO services that we provide. We have proactively diversified and expanded our solutions offering, increasing their sophistication
and developing customized solutions such as means of payment, credit management, trade marketing, insurance services management and other CRM BPO
processes. We expect the share of revenue from CRM BPO solutions to increase going forward.
New Pricing Models for Our CRM BPO Services
We operate in a competitive industry which from time to time, exhibits pressure on pricing for CRM BPO services. We believe we have a strong track
record in successful pricing negotiations with our clients by offering flexible pricing models with fixed pricing, variable pricing, and outcome-based pricing if
certain performance indicators are achieved, depending on the type of CRM BPO services our clients purchase from us and their business objectives. We also
believe that new contracts will increasingly be based on more outcome-based pricing and hybrid pricing models as means of making services more transparent
further driving demand for our CRM BPO services. In addition, our service contracts with most of our key clients include inflation based adjustments to offset
adverse inflationary effects which (depending on the movements in the applicable consumer price indices (“CPIs”) of the countries in which our clients operate)
will have the effect of increasing, if the CPI of an applicable jurisdiction increases, or decreasing, if the CPI decreases, the employee benefit expenses which we
can pass onto our clients. We believe that our flexible pricing models allow us to maximize our revenue in a price competitive environment while maintaining the
high quality of our CRM BPO services.
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Potential Customers May be Reluctant to Change Their CRM BPO Service Provider
As companies begin to use the services of CRM BPO services providers more extensively as their businesses grow, they become more reliant on the CRM
BPO services provider because the companies often expand the range and scope of the CRM BPO services which they use. For example, for the year ended
December 31, 2017, 42,3% of our revenue from client groups other than the Telefónica Group came from clients that had relationships with us for ten or more
years. Furthermore, for the years ended December 31, 2015, 2016 and 2017, our retention rates (calculated based on prior year revenue of clients retained in current
year, as a percentage of total prior year revenues) were 99.0%, 98.1% and 98.3%, respectively. We believe it is difficult for clients to switch a large number of
workstations to competitors principally because of the following factors: (i) the extensive training required for the service provider’s employees; (ii) the level of
process integration with the provider which can be time consuming and costly; and (iii) the potential disruption caused to the client’s customers by introducing a
new end-service provider. As a result, absent a compelling reason to change CRM BPO service provider, such as significant differences in quality or price,
companies generally tend to stay with their CRM BPO services provider, making it difficult for another CRM BPO services provider to acquire the client’s work.
E. Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements other than operating leases and guarantees.
The following table shows the increase in the number of the customer performance guarantees we have provided to third parties for the indicated periods, in
connection with agreements under which we provide our services and as part of our ordinary course of business. Of these guarantees, as of December 2016 the
majority relate to commercial purposes, financial and rental activities, the bulk of the remaining guarantees relates to tax and labor-related procedures.
The Company’s directors consider that no contingencies will arise from these guarantees in addition to those already recognized.
There has not been any material instance of a guarantee, outside of the ordinary course of the business, being drawn upon for the periods indicated, nor does
management anticipate any liability as a result of a draw upon a guarantee in the future.
($ in millions)
Guarantees
Financial, labor-related, tax and rental transactions
Contractual obligations
Total
F. Tabular Disclosure of Contractual Obligations
2015
As of December 31,
2016
2017
141.1
100.9
242.0
166.0
154.3
320.3
156.6
165.6
322.2
The following table presents our expected future cash outflows resulting from debt obligations, finance lease obligations, operating lease obligations and
other long-term liabilities as of December 31, 2017.
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($ in millions)
Debt obligations
Finance lease obligations
Derivative financial instrument
Operating lease obligations
Purchase obligations
Total Obligations
As of December 31, 2017
Payments due by period
Total
Less than 1 year
42.2
4.3
1.2
63.2
208.5
319.4
475.8
10.5
6.4
240.1
216.6
949.4
1-3 years
3-5 years
More than 5
years
34.5
5.2
-
108.6
8.1
156.4
397.2
1.0
5.2
16.3
-
419.7
1.9
-
-
52.1
-
54.0
Debt obligations are comprised of debentures, bonds and interest-bearing debt (as of December 31, 2017; see Note 16 to the Atento’s consolidated financial
statements). The debentures and bonds balance consist of the Senior Secured Notes and the Brazilian debentures, and interest-bearing debt mainly comprised of
Brazil Banco
Nacional
de
Desenvolvimento
Economico
e
Social
(BNDES) Credit Facility.
We enter into finance lease arrangements related to furniture, tools and other tangible assets. Our assets acquired under finance leases are located in
Colombia and Peru.
The operating lease where we act as lease are mainly facilities used as call centers. These leases have various termination dates, with the latest in 2028.
There were no contingent payments on operating leases recognized in the consolidated statements of operations for the year ended December 31, 2017. Further, at
December 31, 2017, the payment commitment for the early cancellation of these leases amounts to $137.7 million.
Purchase obligations include trade and other payables mainly related to suppliers and advances provided to personnel.
G. Safe Harbor
See the disclaimer with respect to Forward-Looking Statements.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
Below is a list of the names and ages (as of March 31, 2018) of Atento’s directors and executive officers and a brief account of the business experience of
each of them.
Name
Alejandro Reynal
Mauricio Teles Montilha
José Ignacio Cebollero Bueno
Mariano Castaños Zemborain
Virginia Beltramini Trapero
Michael Flodin
Mario Mota Camara (*)
Rodrigo Fernando Llaguno Carranco
Juan Enrique Gamé
José María Pérez Melber
Age
Position
44 Chief Executive Officer and Director
54 Chief Financial Officer
47 Chief People Officer
46 Commercial Director
45 Legal Director
54 US Nearshore Regional Director
56 Brazil Regional Director
43 México Director
57 South America Regional Director
46 Spain Director
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Name
Francisco Tosta Valim Filho
Melissa Bethell
Thomas Iannotti
Stuart Gent
Devin O'Reilly
David Garner
Age
Position
54 Director
43 Director
60 Director
46 Director
43 Director
60 Director
41 Director
Vishal Jugdeb
* Mr. Camara will be departing from the Company, and the Company expects to announce a new Brazil Regional Director once an appointment is made
Our Executive Officers
Alejandro Reynal, Chief Executive Officer and Director. Mr. Reynal has served as our Chief Executive Officer since October 2011. Mr. Reynal has served
also as a member of our board of directors since September 2014. Mr. Reynal boasts a long-standing international professional career in the BPO CRM,
telecommunications and consumer goods sectors. Since his appointment as Chief Executive Officer in 2011, Mr. Reynal has led Atento’s transition from a
subsidiary status to an up-and-coming business in Bain Capital’s private equity portfolio, eventually emerging as a public company on the NYSE following
Atento’s IPO in 2014. His successful professional career at Atento spans over fifteen years, during which time he has held leadership positions including, Atento
Regional Director for EMEA and Atento Corporate Strategy Director. Most recently, Mr. Reynal has spearheaded a strategic plan to consolidate and strengthen the
company's position as one of the global leaders of the BPO CRM sector while making Atento a great place to work Prior to his appointment as Chief Executive
Officer in 2011, he worked at Telefónica’s Headquarters as Corporate Strategy Director for the Telefónica Group. Before his time at Telefónica, he was a Director
at The Coca-Cola Company and Business Development Manager for the International Division of The Gap, Inc. He holds an MBA from Harvard Business School
and a Bachelor and Master of Engineering degrees from the Georgia Institute of Technology. We believe Mr. Reynal is qualified to serve on our board of directors
due to his extensive experience in the CRM BPO and telecommunications industries, corporate strategic development, financial reporting and his knowledge
gained from his service on the boards of various other companies.
Mauricio
Teles
Montilha,
Chief
Financial
Officer.
Mauricio has an extensive career heading the finance function at companies in different industries. Before
joining Atento’s team in 2013, Mauricio held the positions of CFO for SKY Brazil, CFO for Astra Zeneca Brazil, VP Financial Planning in Wal-Mart International
and CFO of Philips Oral Healthcare, among others. In his long career in the field of finance, Mauricio has also held senior roles for Pillsbury, Elma Chips (Pepsico
Brazil), Unilever Brazil and Arthur Andersen. Mauricio holds a Bachelor’s degree in Accounting from the Faculdade Paranaense-FACCAR and an MBA from the
Armando Alvares Penteado Foundation (FAAP).
José
Ignacio
Cebollero
Bueno,
Chief
People
Officer.
José Ignacio has extensive experience in HR, having worked in companies in the CRM/BPO, food and
drinks and construction industries. After joining Atento in 2008 he held the position of HR Director for Spain and the EMEA Region until 2011, when he was
appointed Atento’s Director of Human Resources, responsible for HR processes and policies, Internal Communications and Corporate Social Responsibility at the
global level. During his time as Human Resources Director, Atento was named Best Place to Work in 11 countries in 2014 by the Great Place to Work Institute and
was ranked in the 25 World’s Best Multinational Workplaces by the same institution. Prior to joining Atento he held HR leadership positions at Ahold Iberia, Leroy
Merlin España and CMS Construcciones. Iñaki holds a Bachelor’s degree in Political Science from Universidad Complutense of Madrid, a Master in RH
Management by University of California LA and a PDD (Management Development Program) from IESE in Spain.
Mariano
Castaños
Zemborain,
Commercial
Director
. Mariano has an extensive and successful professional career in the CRM/BPO sector with focus on
sales and marketing. His career at Atento spans over ten years and different leadership positions including Director of Sales, Marketing, New Products and Strategy
for Atento Argentina, Telefonica Account Director for Atento Spain, Country Director for Atento Spain and Director of the EMEA. He is Commercial Director
with global scope since 2014. Before joining our company, Mariano held managerial positions in sales and strategic alliances within the Clarin Group
(DataMarkets and PRIMA). Prior to this, he developed his career within the legal services sector in Argentina. Mariano holds a degree in Law from the Universidad
Catolica Argentina, a Master's degree in Company Law from Austral University, and a PDD (Management Development Program) from IESE in Spain.
Virginia
Beltramini
Trapero,
Legal
Director.
Virginia has more than thirteen years of experience in management positions in the legal field, in large
companies from different sectors. Prior to joining Atento, she held the position of Director of Legal Advice, at Oesia, a multinational consultancy specialized in
technology, present in Spain and Latin America, where she was responsible for the legal and corporate governance of the group. Previously, she held management
positions at Grupo Lar and Metrovacesa, and worked as a lawyer for 5 years at the firm EY, at its offices in Madrid and New York. She joined Atento in July 2011
and from that date until March 2017 she held the position of Corporate Legal Director. As of March 2017, she was named General Counsel and Secretary of the
Board. Virginia has a degree in Law and Legal Practice and a holds a Master's Degree in Legal Business Consulting from the IE Business School.
Michael
Flodin,
US
Nearshore
Regional
Director.
Michael is a renowned expert in customer experience transformation and contact centers strategy at the
international level. His professional career extends over twenty-five years helping companies by developing and implementing a customer-centric vision, driving
operations performance, designing consolidation strategies for contact centers with business and technology components, and helping organizations to work more
efficiently. Michael joined Atento in 2014 as Chief Operating Officer and as member of the company's Executive Committee; a position that he has held until he
was appointed Atento US & Nearshore Regional Director in 2017. Before joining Atento, Michael spent over seventeen years with Accenture, where he held the
position of Managing Partner in the Customer Relationship Management Practice and led the Global Service Operations team. Michael holds Bachelor's degrees in
both Philosophy and Psychology from Flagler College in the US.
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Mario
Mota
Camara,
Brazil
Regional
Director.
Mario Camara encompasses an extensive and successful career in the CRM/BPO industry. Mario Camara
joined Atento Brazil in 2000 and has served as Telecommunications Business Director and Multi-Sector Business Director. Prior to his appointment as Atento
Managing Director, he led the Banking and Financial Services business unit of Atento in Brazil. During his tenure, Atento Brazil has significantly expanded its
customer base and range of services, including providing services and solutions to blue-chip banking and financial services companies in the country.
Rodrigo
Fernando
Llaguno
Carranco,
México
Director.
Rodrigo combines more than 15 years’ experience in leadership roles within large and medium-
sized companies in Latin America with a strong focus on growth, customer services and contact centers. Before joining Atento, he held the position of Corporate
Vice-President, Customer Experience at Aeromexico, where he was responsible for the customer experience strategy, service culture efforts, customer processes
and analytics as well as customer care for the whole organization. From 2010 to 2016 he held the position of Vice-President, Customer Experience, at Avianca
Holdings. Previously, he held leadership positions within the areas of customer services, marketing and sales in other aviation sector companies such as TACA
Airlines and consumer products companies in Latin America. Rodrigo is a Chemical Engineer from the Monterrey Institute of Technology and Higher Education in
Mexico, and has an MBA from Harvard Business School.
Juan
Enrique
Gamé,
South
America
Regional
Director.
Juan boasts a successful career at companies in different business fields such as the industrial
manufacturing, textile and food and drinks industries. His career at Atento began in 2002 with his appointment as Multisector Market Business Director in Atento
Chile. In 2011 he was appointed Americas South Region Director, leading all the company’s activities in this region, later adding the role of Atento’s Chile
Director to this position. Prior to joining Atento, Juan held senior roles at companies such as Aldeasa Chile, Calzados Gino, Caimi S.A. and Costa S.A. Juan holds a
degree in Engineering from the Pontificial Catholic University of Valparaíso and a Master in Business Administration from the Adolfo Ibáñez University. He also
holds a diploma in Distribution and Logistics Management from Adolfo Ibáñez University.
José
María
Pérez
Melber,
Spain
Director.
José María is a renowned professional with over twelve years’ general management experience in the services
industry and the CRM/BPO sector in particular. He joined Atento in 2014 as Director of EMEA to lead all company activities in the region. Prior to joining Atento,
Jose María Pérez worked as General Director of Operations and was a member of the Management Committee of Orange Spain, leading customer service,
customer loyalty and retention, as well as billing and credit management at the company. José María was previously General Manager for Southern Europe, Latin
America and North Africa for Transcom, a BPO/CRM sector company at which he worked for most of his career. Before joining Transcom, José María led
marketing and customer relationships departments in the insurance sector for Mapfre and Hannover International. José María holds a degree in Business
Administration from the Pontifical University of Salamanca.
Our Directors
We believe that our board of directors is, and we intend that it continue to be, composed of individuals with sophistication and experience in many
substantive areas that impact our business. We believe that all of our current board members possess the professional and personal qualifications necessary for
board service, and have highlighted the specific experience, qualifications, attributes, and skills that led to the conclusion that each board member should serve as a
director in the individual biographies below (information with respect to Mr. Reynal, our Chief Executive Officer and a member of our board of directors, is set
forth above).
Francisco
Tosta
Valim
Filho,
Director.
Mr. Valim has served as a member of our board of directors since April 2014. Mr. Valim served as Chief Executive
Officer of Via Varejo from August 2013 until April 2014 and of Oi S.A. from August 2011 until January 2013. From January 2008 to July 2011, Mr. Valim was the
Chief Executive Officer of Experian for Latin America, Europe and the Middle East. Prior to working at Experian, he served as Chief Executive Officer of NET
Serviços de Comunicação S.A. from February 2003 to January 2008, Chief Financial Officer of Oi from January 2002 to February 2003; and Vice-President and
Chief Financial Officer of RBS Participações S.A. from September 1989 to December 2001. Mr. Valim holds an MBA from the Marshall School of Business—
University of Southern California and a bachelor of arts degree in Business Administration from Universidade Federal do Rio Grande do Sul (UFRGS) with
advanced studies degrees in Finance from Fundação Getulio Vargas and Planning and Organization from UFRGS.
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Melissa
Bethell,
Director.
Ms. Bethell is a Managing Director of Bain Capital, which she joined in 1999 and relocated from Boston to London in 2000 as a
member of Bain Capital’s European investment team. Prior to joining Bain Capital, Mrs. Bethell worked in the Capital Markets group at Goldman, Sachs & Co.,
with a focus on media and technology fundraising. Mrs. Bethell received her masters in business administration with distinction from Harvard Business School and
a bachelor of arts degree with honors in Economics and Political Science from Stanford University.
Thomas
Iannotti,
Director.
Mr. Iannotti has served as a member of our board of directors since November 2014. Mr. Iannotti has extensive international
experience, including direct leadership of HP’s services business in Latin America. Prior to his retirement in 2011, Mr. Iannotti served as Senior Vice President and
General Manager of HP Enterprise Services which provides applications, business process and infrastructure technology outsourcing services, consulting and
support to business and government clients around the world. During his last two roles at HP, he was directly responsible for, and had significant exposure to, Latin
America, focused on Brazil, Argentina, Chile, Columbia and Costa Rica. Earlier in his career, Mr. Iannotti served as the Vice President and General Manager of
Customer Service for the EMEA region at Compaq Computers. Mr. Iannotti holds a BA from Rhode Island College. He also pursued a management development
program from Harvard Business School in 1993.
Stuart
Gent,
Director.
Mr. Gent has served as a member of our board of directors since September 2014. Mr. Gent joined Bain Capital in 2007 and is a
Managing Director in the London office. Prior to joining Bain Capital, Mr. Gent was a Managing Director of Avis UK and a member of the Avis Europe Executive
Board. Previously, Mr. Gent was a Partner at Bain & Company where he worked in a variety of industries. Mr. Gent is currently on the Board of Directors of
WorldPay, Brakes Bros and EWOS. Mr. Gent received a BSc from Bristol University in England.
Devin
O’Reilly,
Director.
Mr. O’Reilly has served as a member of our board of directors since September 2014. Mr. O’Reilly joined Bain Capital in 2005
and is a Managing Director in the London office. Prior to joining Bain Capital, Mr. O’Reilly was a consultant at Bain & Company where he consulted for private
equity and healthcare industry clients. Previously, he spent several years in the software industry in corporate development and general management roles. Mr.
O’Reilly is currently on the Board of Directors of Bio Products Laboratory, Intermedica and Brakes Bros. Mr. O’Reilly received an MBA from The Wharton
School at the University of Pennsylvania, and graduated with a BA from Princeton University.
David
Garner,
Director.
From 2013 through March 2016, Mr. Garner served as executive Chairman and a member of the board of directors of
BellSystem24. From 2010 through 2013, he served as Chairman and Chief Executive Officer of Sitel Worldwide. From 1998 through 2003, Mr. Garner was
President and Chief Executive Officer of SHPS, Inc. Mr. Garner currently serves as a member of the board of directors of National Directory Assistance, LLC. He
holds a B.A. in Technical Communications from Louisiana Tech University.
Vishal
Jugdeb,
Director.
Mr. Jugdeb has served as a member of our board of directors since October 2015. Mr. Jugdeb is a Corporate Manager of Bain
Capital, LLC, Luxembourg, which he joined in 2014. Prior to that, he served as Senior Manager at Alter Domus Luxembourg S.à r.l., a provider of corporate and
management services. Mr. Jugdeb comes with over 15 years of experience in the financial services industry and currently acts as a board member on the holding
companies of various Bain Capital investments such as Apple Leisure, Bravida, Edcon, Ideal Standard, and Ibstock. Mr. Jugdeb is a Chartered Certified Accountant
and Fellow of the Association of Chartered Certified Accountants. He is also an Associate Member of the Society of Trust and Estate Practitioners.
B. Compensation
Long-Term Incentive Plan
Effective as of October 2014, Atento adopted the 2014 Omnibus Incentive Plan (the “2014 Incentive Plan” or “the Plan”). The plan provides for grants of
stock options, stock appreciation rights, restricted stock, other stockbased awards and other cash-based awards. Directors, officers and other employees of Atento
and its subsidiaries, are eligible for grants under the Plan.
On December 3, 2014, Atento granted the following:
• A Time Restricted Stock Unit Award (“TRSU”); and
• A Performance Restricted Stock Unit Award (“PRSU”).
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Atento’s TRSU is a one-time award with a two-year vesting period intended to recognize the executive’s contribution in the value creation since the
separation from Telefónica.
In addition, Atento has a PRSU with a three year vesting period. This vesting is subject to the Company’s performance based on Adjusted EBITDA growth
and Total Shareholder Return. Atento’s PRSU seeks to retain, attract and engage key executives by aligning them with shareholders through the provision of equity
and setting of strategically aligned performance measures.
In 2014, Atento distributed 1,187,323 Restricted Share Units (“RSU”) among their Board Directors, Chief Executive and other Executive Officers
considering both awards.
As of October 1, 2015, a total of 125,509 TRSUs vested and were exercised. No grant was made in 2015.
On July 1st, 2016, Atento granted the following:
• A Time Restricted Stock Unit Award (“TRSU”); and
• An Extraordinary Time Restricted Stock Unit Award (“TRSU”).
In 2016, Atento distributed 1,384,982 Time Restricted Share Units among their Board Directors, Chief Executive and other Executive Officers in a one-time
award with a three-year vesting period. In addition, an Extraordinary Grant of 81,257 Time Restricted Share Units to an Executive Officer in a one-time award with
a two-year vesting period.
As of October 3rd, 2016, a total of 157,925 TRSUs vested.
On July 3, 2017, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries (a
total of 886,187 RSUs).
Compensation of Atento’s Board Directors, Chief Executive and Other Executive Officers
Atento has established a Compensation Committee that is responsible for the administration of the compensation policies, plans and programs in alignment
with the Company’s compensation strategy.
This committee is also responsible for reviewing and approving: the compensation package for Atento’s Board Directors, Chief Executive and Other
Executive Officers; any employment agreements and other similar arrangements between Atento and the executive officers; and the administration of stock option
plans and other incentive compensation plans.
Atento’s Compensation Committee consists of Melissa Bethell, Stuart Gent and Thomas Iannotti. Our board of directors adopted a written charter for the
Compensation Committee, which is available on our corporate website at www.atento.com .
The approximate aggregated annual total cash received by all non-executive Board Director and Executive Officers for the year ended December 31, 2017,
was $5.2 million.
C. Board Practices
Board of Directors Composition
Our board of directors is divided into three classes of directors, with the classes as nearly equal in number as possible. As a result, approximately one third
of our board of directors will be elected each year. The classification of directors will have the effect of making it more difficult for stockholders to change the
composition of our board.
Our board of directors consists of eight members and it is composed by Thomas Iannotti and David Garner, as class I directors; Stuart Gent, Alejandro
Reynal and Vishal Judgeb as class II directors and Francisco Tosta Valim Filho, Devin O’Reilly and Melissa Bethell as class III directors.
Unless revoked in accordance with the Articles of Association, the term of office of the class I directors shall expire at the first annual meeting of
shareholders occurring after the date of publication of the general meeting of shareholders taken on September 29, 2014 (the “Filing Date”); the term of office of
the class II directors shall expire at the second annual meeting of shareholders occurring after the Filing Date; and the term of office of the class III directors shall
expire at the third annual meeting of shareholders occurring after the Filing Date. At each annual meeting after the first annual meeting of shareholders occurring
after the Filing Date, each director appointed to the class of directors expiring at such annual meeting shall be appointed to hold office until the third succeeding
annual meeting and until his or her successor shall have been duly elected and qualified, or until his or her earlier death, resignation, removal or retirement.
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Controlled Company and Foreign Private Issuer
Bain Capital controls a majority of the voting power of our outstanding ordinary shares. As a result, we are a “controlled company” under the New York
Stock Exchange corporate governance standards. As a controlled company we are exempt from certain corporate governance requirements, including the
requirements:
• that a majority of our board of directors consists of “independent directors,” as defined under the rules of the New York Stock Exchange;
• that we have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter addressing the
committee’s purpose and responsibilities;
• that we have a Compensation Committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and
responsibilities; and
• for an annual performance evaluation of the nominating and governance committees and Compensation Committee.
These exemptions do not modify the independence requirements for our Audit Committee requiring it to be comprised exclusively of independent directors,
and we comply with the applicable requirements of the Sarbanes-Oxley Act and rules with respect to our Audit Committee within the applicable time frames. These
rules require that our Audit Committee be composed of at least three members.
In addition to the controlled company exemptions, as a foreign private issuer, under the corporate governance standards of the New York Stock Exchange,
foreign private issuers are permitted to follow home country corporate governance practices instead of the corporate governance practices of the New York Stock
Exchange. Accordingly, we follow certain corporate governance practices of our home country, Luxembourg in lieu of certain of the corporate governance
requirements of the New York Stock Exchange. Specifically, we do not have a board of directors composed of a majority of independent directors or a
Compensation Committee or Nominating and Corporate Governance Committee composed entirely of independent directors.
As a foreign private issuer, we are exempt from the rules and regulations under the Exchange Act, related to the furnishing and content of proxy statements,
and our officers, directors and principal shareholders are exempt from the reporting and short swing profit recovery provisions contained in Section 16 of the
Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as
frequently or as promptly as domestic companies whose securities are registered under the Exchange Act.
Board Committees
Our board of directors established an Audit Committee and a Compensation Committee. The composition, duties and responsibilities of these committees is
as set forth below. In the future, our board may establish other committees, as it deems appropriate, to assist it with its responsibilities.
Audit
Committee.
The Audit Committee is responsible for, among other matters: (1) appointing, compensating, retaining, evaluating, terminating and
overseeing our independent registered public accounting firm; (2) discussing with our independent registered public accounting firm their independence from
management; (3) reviewing with our independent registered public accounting firm the scope and results of their audit; (4) approving all audit and permissible
non-audit services to be performed by our independent registered public accounting firm; (5) overseeing the financial reporting process and discussing with
management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; (6) reviewing and
monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; (7) overseeing
our legal compliance process; (8) establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal
controls or auditing matters; and (9) reviewing and approving related party transactions.
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Our Audit Committee consists of Francisco Tosta Valim Filho, David Garner and Thomas Iannotti. Our board of directors has determined that Francisco
Tosta Valim Filho qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K. Our board of directors
adopted a written charter for the Audit Committee, which is available on our corporate website at www.atento.com .
Compensation
Committee.
The Compensation Committee is responsible for, among other matters: (1) reviewing key associate compensation goals, policies,
plans and programs; (2) reviewing and approving the compensation of our directors, chief executive officer and other executive officers; (3) reviewing and
approving employment agreements and other similar arrangements between us and our executive officers; and (4) the administration of stock plans and other
incentive compensation plans.
Our Compensation Committee consists of Melissa Bethell, Stuart Gent and Thomas Iannotti. Our board of directors adopts a charter for the Compensation
Committee, which is available on our corporate website at www.atento.com .
Compensation Committee Interlocks and Insider Participation
No interlocking relationships exist between the members of our board of directors and the board of directors or Compensation Committee of any other
company.
Code of Ethics
We have adopted a Code of Ethic (the “Code”) applicable to all of our directors, officers and employees, including our principal executive officer, principal
financial officer and accounting officers, and all persons performing similar functions. A copy of the Code is available on our corporate website at www.atento.com
. We will provide any person, without charge, upon request, a copy of our Code. Such requests should be made in writing to the attention of our Legal Global
Director at the following address: C/Santiago de Compostela, 94, 9 th Floor, 28035, Madrid, Spain.
D. Employees
For the year ended December 31, 2017, our average and period end numbers of employees, excluding internships, were 151,817 and 153,522, respectively.
The following table sets forth the average number of employees, excluding internships, we had on a geographical basis for 2015, 2016 and 2017.
Brazil
Americas
EMEA
Corporate
Total
Yearly Average
2015
2016
2017
90,418
61,575
11,845
136
163,974
78,088
63,153
10,213
147
151,601
78,015
63,191
10,534
77
151,817
For the year ended December 31, 2015, an average of 85.7% of our staff had permanent employment contracts as compared to an average of 76.0% as of
December 31, 2016 and 89.0% as of December 31, 2017.
We believe that our people are key enablers to our business model and a strategic pillar to our competitive advantage. We focus on reinforcing a culture that
emphasizes teamwork, improvement of our processes and, most importantly, total dedication to the client. We believe that our distinctive culture is incorporated
within all relationships and processes of our organization and fits within our values and goals.
Our culture is sustained by four core values: (i) commitment, (ii) trust, (iii) passion and (iv) integrity. We aim to deliver growth by inspiring our people and
believe that our values help us deliver on our mission to “make companies successful by guaranteeing the best customer experience for their clients”. The critical
success factor is to ensure that our entire leadership is aligned with the drivers of our culture that best fit into our business strategy and vision. To that end, we have
developed key guiding principles that reinforce and exemplify our core values:
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• we work as a team, understanding our clients’ needs locally but leveraging our global capabilities and scale;
• we encourage the spirit of entrepreneurship and innovation;
• we strive to be efficient, agile and streamlined to create value for our clients;
• we put passion into everything we do, motivated by the desire to be better, with the ambition to achieve our goals;
• we are disciplined financially and operationally; and
• we are proud to build a great place to work.
As a result of that, we were named in 2015 one of the top 25 multinational companies globally to work for by Great Place to Work Institute. Furthermore,
we have received the most country level Great Place to Work prizes in the CRM BPO industry. Because our solutions are delivered through over 150,000 of our
employees, we believe that our high levels of demonstrated employee satisfaction enable us to deliver a differentiated customer experience compared to our
competitors and clients in-house.
Incentive
Model
Atento has established an incentive model in alignment with the Company’s strategy using as the key drivers (i) the creation of shareholder value, (ii)
increased growth in our business (especially with new clients), (iii) business profitability.
To pursue the delivery of our strategic goals, we periodically evaluate the contribution and development of our employees. The evaluation of our employees
is performed in our annual management review, which impacts many performance management processes, including compensation reviews, training and
development initiatives and mobility moves. The management review process is based on reviewing an employee’s performance, competencies and potential
assessment (i.e., director, managers and leaders).
Our compensation model is principally driven by our vision and mission, organizational culture, external and internal environment, business strategy and our
organizational model. These considerations are translated into a “Total Compensation Model,” under which we consider compensation, benefits, work/life balance,
performance and recognition, development and career opportunities to attract, retain, engage and motivate our current and future employees. The main pillars of the
model, particularly in relation to structure personnel, are job grading methodology, base salary, bonus scheme, long-term incentives, international mobility and
other benefits.
Employee
Training
and
Motivation
We focus on attracting and retaining talents. Our methodology consists in a global selection process with common phases for each profile and a consistent
methodology, as well as integrated selection tools and systems with well-defined criteria in identifying desired employee profiles. This integrated approach allows
us to create a consistent selection process across geographies, promoting adherence of new employees to our core values, with the ultimate goal of improving
business performance.
We also developed over time motivational initiatives (Rally program) designed for the operational staff to improve results and strengthen the sense of
belonging. This initiative was originally set up as an instrument for generating points of contact and relations between staff and our brand and values. The program
includes a series of quarterly events involving cultural, recreational, sports and social activities that are open to all employees.
Employee
Satisfaction
The level of employee satisfaction within the work environment is important to us. We participate in the “Great Place to Work” survey, held locally by the
Great Place to Work Institute. The survey measures perceptions of employees about the work environment and allows for comparison against other participating
companies at certain local and regional levels. In 2015, we were recognized as one of the top 25 companies to work for according to Great Place to Work Institute’s
ranking of the World’s Best Multinational Workplaces, putting it alongside companies. Additionally, we have won numerous Great Place to Work recognitions
regionally, in both South and Central America, and in the countries where we operate. In 2015, we were listed among the “Great Place to Work” companies in ten
of the fourteen countries where we operate (Brazil, Argentina, Colombia, Chile, El Salvador, Guatemala, Mexico, Peru, Puerto Rico and Uruguay). Notably, we
also received the #1 Great Place to Work in Colombia for two consecutive years.
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Labor/Collective
Negotiation
We closely monitor the management of labor relations and it is an important element for the success of our business and results of operations.
As of December 31, 2017, we had in place collective bargaining agreements in seven countries, including Argentina, Brazil, Chile, El Salvador, Mexico,
Peru and Spain, which govern our relationships with most of the employees in those countries. As of December 31, 2017, 72.8% of our employees were under
collective bargaining agreements. See “Item 3. Key Information—D. Risk Factors—Internal Risks—If we experience challenges with respect to labor relations, our
overall operating costs and profitability could be adversely affected and our reputation could be harmed”. Our collective bargaining agreements are generally
renegotiated on every one-to-three years with the principal labor unions in the countries where we have such agreements. In general, the collective bargaining
agreements include terms that regulate remuneration, minimum salary, salary complements, overtime, benefits, bonuses and partial disability.
In Brazil, our most important collective bargaining agreement is in São Paulo, and it is re-negotiated every year. In 2017, we agreed to raise salaries 4.0%
for all employees based in São Paulo and Rio de Janeiro.
In Mexico, our most significant collective bargaining agreement, in terms of number of employees, is in Mexico City and it is re-negotiated every year. In
2017, a 3.3% salary increase was agreed for all employees under the collective bargaining agreement, compared to a 2.13% increase in 2016.
In Spain, there is a collective bargaining agreement for all contact center companies in the country, which is negotiated through the “Asociación de Contact
Center Española,” a committee comprised of representatives from five of the six largest contact center companies in Spain, of which we are one. The current
collective bargaining agreement is automatically renewed unless a union opposes it, requesting a change in any of the current terms.
Termination
benefits
Termination benefits are paid to employees when the Atento Group decides to terminate their employment contracts prior to the usual retirement age or
when the employee agrees to voluntarily resign in exchange for these benefits. The Atento Group recognizes these benefits as an expense for the year, at the earliest
of the following dates: (a) when the Atento Group is no longer able to withdraw the offer for these benefits; or (b) when the Atento Group company recognizes the
costs of a restructuring effort as per IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”, and when this restructuring entails the payment of
termination benefits. When benefits are offered in order to encourage the voluntary resignation of employees, termination benefits are measured on the basis of the
number of employees expected to accept the offer. Benefits to be paid in more than twelve months from the reporting date are discounted to their present value.
E. Share Ownership
In July 2013, the Shareholders of Atento Group implemented a Management Incentive Plan (the “MIP”) pursuant to which certain of the Group’s senior
management are granted the opportunity to invest in the Group. The eligibility of managers to participate is determined by the Compensation Committee of the
Company.
Managers who participate in the MIP are required to subscribe for various classes of shares in a Luxembourg special purpose vehicle that is indirectly
invested in Atalaya Luxco Topco S.C.A (“Topco”), the ultimate parent company of the Group. The shares held by each MIP participant fall into two categories:
“co-investment shares” and “performance shares”. The co-investment shares effectively allow managers to participate in dividends and other distributions on a pro
rata and pari passu basis with Topco’s other shareholders. The performance shares only participate in dividends and other distributions if Topco’s majority
shareholder achieves certain specified returns on its investment in Topco, with the performance shares being entitled to receive a progressively larger share of all
dividends and other distributions (up to a pre-determined maximum percentage) as the total proceeds received by Topco’s majority shareholder reach certain pre-
agreed hurdles.
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In the event that a MIP participant’s employment is terminated, his/her shares can be bought back at a pre-specified price that is linked to the circumstances
surrounding the termination of the relevant manager’s employment and the length of time that such manager has held his/her shares.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
Beneficial ownership for the purposes of the following tables is determined in accordance with the rules and regulations of the SEC. These rules generally
provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the
disposition thereof or has the right to acquire such powers within 60 days. Shares subject to options that are currently exercisable or exercisable within 60 days of
March 31, 2018 are deemed to be outstanding and beneficially owned by the person holding the options. These shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person. Percentage of beneficial ownership of our ordinary shares is based on ordinary shares
outstanding as of March 31, 2018. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each
shareholder identified in the table possesses sole voting and investment power over all ordinary shares shown as beneficially owned by the shareholder. Unless
otherwise indicated in the table or footnotes below, the address for each beneficial owner is C/Santiago de Compostela, 94, 9 th floor, 28035, Madrid, Spain.
As of March 31, 2018, Atento had 73,909,056 ordinary shares. The table below presents certain information of March 31, 2018, regarding (i) any person
known to us as the owner of more than 5% of our outstanding ordinary shares, and (ii) the total amount of ordinary shares owned by the members of our Board of
Directors and Executive Officers:
Name
Principal Shareholder:
Atalaya PikCo S.C.A. (1)
Entities affiliated with Wellington Management Group LLP (2)
Executive Officers and Directors:
Alejandro Reynal (10)
Mauricio Montilha (10)
José Ignacio Cebollero
Michael Flodin (10)
Mario Mota Camara
Rodrigo LIaguno
Juan Enrique Gamé (10)
José María Pérez Melber
Virginia Beltramini
Mariano Castaños
Francisco Tosta Valim Filho (3)(10)
Melissa Bethell (4)
Vishal Jugdeb (5)
Thomas Iannotti (6)
David Garner (7)
Stuart Gent (8)
Devin O’Reilly (9)
All executive officers and directors as a group (17 persons) (10)
84
Shares Beneficially Owned
Number of Shares
Percentage
50,364,933
6,077,495
21,000
68.14%
8.22%
0.03%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,456
150,542
0.00003%
0.20%
-
-
-
-
-
-
Table of Contents
(1) The address for Atalaya PikCo S.C.A. is Da Vinci building, 4 rue Lou Hemmer, L-1748 Luxemburg Findel, Grand Duchy of Luxembourg. Atalaya PikCo
S.C.A. is controlled by Topco. Bain Capital holds 17,706,930 A shares (representing approximately 88.5%) of Topco as follow: 8,742,886 A shares held by
Bain Capital Fund X, L.P., a Cayman Islands exempted limited partnership (“Bain Capital Fund X”), 136,780 A shares held by BCIP Associates IV, L.P., a
Cayman Islands exempted limited partnership (“BCIP IV”), 37,540 A shares held by BCIP Trust Associates IV, L.P. a Cayman Islands exempted limited
partnership (“BCIP Trust IV”), 18,240 A shares held by BCIP Associates IV¬B, L.P., a Cayman Islands exempted limited partnership (“BCIP IV¬B”), 4,580
A shares held by BCIP Trust Associates IV¬B, L.P., a Cayman Islands exempted limited partnership (“BCIP Trust IV¬B”) and 8,766,904 A shares held by
Bain Capital Europe Fund III, L.P., a Cayman Islands exempted limited partnership (“Bain Europe Fund” and, collectively with Bain Capital Fund X, BCIP
IV, BCIP Trust IV, BCIP IV¬B and Bain Bain Capital Fund X. Bain Capital Partners Europe III, L.P., a Cayman Islands exempted limited partnership (“Bain
Capital Partners Europe”) is the general partner of Bain Europe Fund. Bain Capital Investors, LLC, a Delaware limited liability company (“BCI”) is the
general partner of each of Bain Capital Partners X, Bain Capital Partners Europe, BCIP IV, BCIP Trust IV, BCIP IV¬B and BCIP. As a result, BCI may be
deemed to share beneficial ownership of the shares held by each of the Bain Capital Entities. The governance, investment strategy and decision ¬making
process with respect to investments held by the Bain Capital Entities is directed by BCI’s Global Private Equity Board (“GPEB”), which is comprised of the
following individuals: Steven Barnes, Joshua Bekenstein, John Connaughton, Paul Edgerley, Stephen Pagliuca, Michel Plantevin, Dwight Poler, Jonathan Zhu
and Stephen Zide. By virtue of the relationships described in this footnote, GPEB may be deemed to exercise voting and dispositive power with respect to the
shares held by the Bain Capital Entities. Each of the members of GPEB disclaims beneficial ownership of such shares to the extent attributed to such member
solely by virtue of serving on GPEB. Each of the Bain Capital Entities has an address c/o Bain Capital Partners, LLC, John Hancock Tower, 200 Clarendon
Street, Boston, Massachusetts 02116.
(2) Consists of ordinary shares held by affiliates of Wellington Management Group LLP, based solely on information reported by such persons on a Schedule
13G filed with the SEC on February 8, 2018. Wellington Management Group LLP, Wellington Group Holdings LLP, and Wellington Investment Advisors
Holdings LLP each reported shared voting power over 6,077,495 ordinary shares and shared dispositive power over 6,077,495ordinary shares. Wellington
Management Company LLP reported shared voting power over 5,366,072 ordinary shares and shared dispositive power over 5,366,072 ordinary shares. Such
Schedule 13G indicates that these shares are owned of record by clients of one or more investment advisors directly or indirectly owned by Wellington
Management Group LLP. The business address of these persons is 280 Congress Street, Boston, MA 02110.
(3) The address for Mr. Valim is avenue Giovanni Gronchi 4864, São Paulo SP, 05724-002.
(4) The address for Ms. Bethell is Devonshire House, Mayfair Place, London, W1J8AJ, United Kingdom.
(5) The address for Mr. Jugdeb is Da Vinci building, 4 rue Lou Hemmer, L-1748 Luxemburg Findel, Grand Duchy of Luxembourg.
(6) Represents the vesting of restricted stock units on January 10, 2015 and on October 1, 2016. The address for Mr. Iannotti is 75 Prospect Farm Road,
Portsmouth, Rhode Island, 02871.
(7) The address for Mr. Garner is 716 Fields Lane Simpsonville, Kentucky 40067.
(8) The address for Mr. Gent is Devonshire House, Mayfair Place, London, W1J 8AJ, United Kingdom.
(9) The address for Mr. O’Reilly is Devonshire House, Mayfair Place, London, W1J 8AJ, United Kingdom.
(10) Separately, Atalaya Management Gibco holds 375,518 shares, or approximately 0.508% of our total shares outstanding. Certain members of our management
have an indirect equity interest in these shares, including (percentages are of the outstanding shares of the Company held by Atalaya Management Gibco):
Alejandro Reynal (64.5%), Mauricio Montilha (8.8%) Michael Flodin (0.1%), and Juan Enrique Gamé (10.9%).
Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is C/Santiago de Compostela, 94, 9 th floor, 28035, Madrid, Spain.
B. Related Party Transactions
Registration Rights Agreement
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Prior to the consummation of our IPO, we entered into a registration rights agreement whereby we granted certain registration rights to PikCo, and its
affiliates and certain of their transferees, including the right, under certain circumstances and subject to certain restrictions, to require us to register under the
Securities Act our ordinary shares held by them. In addition, we committed to file as promptly as possible after receiving a request from PikCo, a shelf registration
statement registering secondary sales of our ordinary shares held by PikCo. PikCo also will have the ability to exercise certain piggyback registration rights in
respect of ordinary shares held by them in connection with registered offerings requested by other registration rights holders or initiated by us.
2014 Incentive Plan
We adopted the 2014 Omnibus Incentive Plan (the “2014 Incentive Plan”). The 2014 Incentive Plan provided for grants of stock options, stock appreciation
rights, restricted stock, other stock-based awards and other cash-based awards. Directors, officers and other employees of us and our subsidiaries, as well as others
performing consulting or advisory services for us, are eligible for grants under the 2014 Incentive Plan. The purpose of the 2014 Incentive Plan is to provide
incentives that will attract, retain and motivate high performing officers, directors, employees and consultants by providing them with appropriate incentives and
rewards either through a proprietary interest in our long-term success or compensation based on their performance in fulfilling their personal responsibilities.
Limitations of Liability and Indemnification Matters
We have entered into indemnification agreements with each of our current directors and executive officers. These agreements will require us to indemnify
these individuals to the fullest extent permitted under Luxembourg law against liabilities that may arise by reason of their service to us, and to advance expenses
incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with our future
directors and executive officers.
Policies and Procedures with Respect to Related Party Transactions
We have adopted policies and procedures whereby our Audit Committee and Compliance Committee is responsible for reviewing and approving related
party transactions. In addition, our Code of Ethics requires that all of our employees and directors inform the Company of any material transaction or relationship
that comes to their attention that could reasonably be expected to create a conflict of interest. Further, at least annually, each director and executive officer is
required to report any business relationship that may give rise to a conflict of interest and all transactions in which we are involved and in which the executive
officer, a director or a related person has a direct or indirect material interest.
C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Consolidated Financial Statements
See “Item 18. Financial Statements”, which contains our audited consolidated financial statements prepared in accordance with IFRS as issued by IASB.
Legal Proceedings
In March 2018, Atento Brasil S.A. a indirect subsidiary of Atento S.A. received a tax notice from the Brazilian Federal Revenue Service, related to
Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) for the period from 2012 to 2015, due to the disallowance of the expenses on tax
amortization of goodwill and deductibility of certain financing costs originated of the acquisition of Atento Brasil S.A. by Bain Capital in 2012, and the
withholding taxes on payments made to certain of our former shareholders.
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The amount of the tax assessment from the Brazilian Federal Revenue Service, not including interest and penalties, was approximately $105.3 million, and
was assessed by the Company’s outside legal counsel as possible loss.
We disagree with the proposed tax assessment and we intend to defend our position, which we believe is meritorious, through applicable administrative and,
if necessary, judicial remedies. Based on our interpretation of the relevant law, and based on the advice of our legal and tax advisors, we believe the position we
have taken is sustainable. Consequently, no provisions are recognized regarding these proceedings.
We are subject to claims and lawsuits arising in the ordinary course of our business. We make provision for such claims and lawsuits in our annual financial
statements to the extent that losses are deemed both probable and quantifiable.
Tax Litigation
As of December 31, 2017, Atento Brasil, S.A. has 42 proceedings ongoing with the tax authorities and social security authorities, for various reasons
relating to infraction proceedings filed (46 in 2016). The total amount of these claims is approximately $59.4 million. According to the Company’s external
attorneys, materialization of the risk event is possible.
Labor Litigation
As of December 31, 2017, Atento Brasil was party to approximately 14,750 labor disputes initiated by our employees or former employees for various
reasons, such as dismissals or disputes over employment conditions in general. Atento Brasil estimates that the amount involved in these claims classified as
probable is $24.3 million and as possible is $162.7 million, based on inputs from external and internal counsels as well as historical statistics.
In Argentina, as a consequence of an unfavorable sentence on the case “ATUSA S.A. contra Administración Federal de Ingresos Públicos”, notified on
February 2017, the risk qualified so far as “remote” becomes now “probable” being this contingency estimated amount of approximately $2.5 million. A formal
appeal has been filed at the National Supreme Court of Justice”.
In addition, we are party to other various disputes with current and former employees in different jurisdictions.
Civil Litigation
Atento Brasil, S.A. has 8 civil lawsuits ongoing for various reasons (14 in 2016). The total amount of these claims is approximately $6.0 million ($4.9
million at December 31, 2016). According to the Company’s external attorneys, materialization of the risk event is possible.
Dividend Distributions
Although we are well capitalized and have sufficient liquidity, our ability to pay dividends on our ordinary shares is limited in the near-term by the indenture
governing our Senior Secured Notes (6% of the Company’s market value) and the Brazilian Debentures, and may be further restricted by the terms of any of our
future debt or preferred securities. In addition, under Luxembourg law, at least 5% of our net profits per year must be allocated to the creation of a legal reserve
until such reserve has reached an amount equal to 10% of our issued share capital. If the legal reserve subsequently falls below the 10% threshold, 5% of net profits
again must be allocated toward the reserve until such reserve returns to the 10% threshold. If the legal reserve exceeds 10% of our issued share capital, the legal
reserve may be reduced. The legal reserve is not available for distribution. Additionally, because we are a holding company, our ability to pay dividends on our
ordinary shares is limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us, including restrictions under the terms of the
agreements governing our indebtedness.
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Pursuant to our articles of incorporation, our board of directors has the power to distribute interim dividends in accordance with applicable Luxembourg law.
The amount to be distributed by the board of directors may not exceed the total profits made since the end of the last financial year for which the accounts have
been approved, plus any profits carried forward and sums drawn from reserves available for this purpose, less losses carried forward and any sums to be placed to
reserve pursuant to the requirements of Luxembourg law or of our articles of incorporation. Notwithstanding the foregoing, dividends may also be declared by a
simple majority vote of our shareholders at an annual general shareholders meeting, typically but not necessarily, based on the recommendation of our board of
directors. All shares of our capital stock grant pari passu rights with respect to the payment of dividends. Any future determination to pay dividends will be subject
to compliance with covenants in current and future agreements governing our indebtedness, and will depend upon our results of operations, financial condition,
capital requirements and other factors that our board of directors deems relevant.
On September 21, 2017, the Board of Directors approved a dividend policy for the Company with a goal of paying annual cash dividends pay-out in line
with industry peers and practices. The declaration and payment of any interim dividends will be subject to approval of Atento’s corporate bodies and will be
determined based upon, amongst other things, Atento’s performance, growth opportunities, cash flow, contractual covenants, applicable legal requirements and
liquidity factors. The Board of Directors intends to review the dividend policy regularly and so accordingly is subject to change at any time.
On October 31, 2017, our Board of Directors declared a cash interim dividend with respect to the ordinary shares of $0.3384 per share paid on November
28, 2017 to shareholders of record as of the close on November 10, 2017.
B. Significant Changes
Except as otherwise disclosed in our consolidated financial statements and in this Annual Report, there have been no significant changes in our business,
financial conditions or results since December 31, 2017.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Price Information
Ordinary Stock
The following table presents high and low market prices in U.S. dollars for Atento S.A. ordinary stock (ATTO) listed on the New York Security Exchange
for the periods shown below.
Closing Price ATTO - Annual Basis
Year
2017
2016
2015
2014
U.S. dollars per Share
High
12.60
10.10
14.38
12.96
Low
7.75
6.90
8.82
9.43
Closing
10.15
7.65
9.74
10.45
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Closing Price ATTO - Quarterly Basis
2017
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2016
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Closing Price ATTO - Monthly Basis
Month
April 2018 (Until April 20, 2018)
March 2018
February 2018
January 2018
December 2017
November 2017
October 2017
B. Plan of Distribution
Not applicable.
C. Markets
The Company’s ordinary shares trade on the NYSE under the symbol “ATTO”.
D. Selling Shareholders
Not applicable.
E. Dilution
89
U.S. dollars per Share
Low
8.90
11.00
8.65
7.75
U.S. dollars per Share
Low
6.90
8.42
7.42
7.08
U.S. dollars per Share
Low
7.60
7.80
9.25
9.45
9.65
8.90
11.15
Closing
10.15
11.60
11.15
9.15
Closing
7.65
8.48
8.91
8.19
Closing
7.75
7.80
9.55
9.75
10.15
9.70
12.20
High
12.60
12.00
11.15
9.60
High
9.10
10.10
9.20
9.49
High
8.05
9.60
10.00
10.35
10.15
12.60
12.25
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Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
The following is a summary of some of the terms of our ordinary shares, based on our articles of association and the Luxembourg Corporate Law. In this
section and the section entitled “Comparison of Shareholder Rights” we refer to our articles of association as amended and in effect as our “articles of association”.
The following summary is subject to, and is qualified in its entirety by reference to, the provisions of our articles of association, the form of which has been
filed as an exhibit to the registration statement of which this Annual Report is a part. You may obtain copies of our articles of association as described under
“Where You Can Find More Information” in this Annual Report.
General
Atento is a Luxembourg public limited liability company ( société
anonyme
). The Company’s legal name is “Atento S.A.” and was incorporated on March 5,
2014 as a Luxembourg public limited liability company ( société
anonyme
).
Atento is registered with the Luxembourg Registry of Trade and Companies under number B.185.761. Atento has its registered office at 4, rue Lou Hemmer,
L-1748 Luxembourg Findel, Grand Duchy of Luxembourg.
The corporate purpose of Atento, as stated in Article 2 of our articles of association (Purpose), may be summarized as follow:
The object of Atento, is the holding of participations, in any form whatsoever, in Luxembourg and foreign companies and in any other form of investment, the
acquisition by purchase, subscription, or in any other manner as well as the transfer by sale, exchange or otherwise of securities of any kind and the administration,
management, control and development of its portfolio.
Atento may further guarantee, grant security, grant loans or otherwise assist the companies in which it holds a direct or indirect participation or right of any
kind or which form part of the same group of companies as Atento.
Atento may raise funds especially through borrowing in any form or by issuing any kind of notes, securities or debt instruments, bonds and debentures and
generally issue any debt, equity and/or hybrid or other securities of any type in accordance with Luxembourg law.
Finally, Atento may carry out any commercial, industrial, financial, real estate or intellectual property or other activities which it considers useful for the
accomplishment of these purposes.
Share Capital
As of December 31, 2017, our issued share capital amounts to €33,304.18, represented by 73,909,056 shares. All issued shares were fully paid. A shareholder
in a Luxembourg société anonyme holding fully paid shares is not liable, solely because of his or her or its shareholder status, for additional payments to the
Company or the Company’s creditors.
Our articles of association authorize our board of directors to issue ordinary shares within the limits of the authorized share capital at such times and on such
terms as our board or its delegates may decide for a period ending five years after the date on which the minutes of the shareholders’ meeting approving such
authorization are published in the then in force Luxembourg official gazette Mémorial C, Recueil des Sociétés et Associations (unless such period is extended,
amended or renewed). Accordingly, our board is authorized to issue ordinary shares up to the authorized share capital until such date. We currently intend to seek
renewals and/or extensions as required from time to time.
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Our authorized share capital is determined by our articles of association and is set at € 999,997,697.82, as amended from time to time, and may be increased,
reduced or extended by amending the articles of association by approval of the extraordinary general shareholders’ meeting subject to the necessary quorum and
majority requirements (see “—General Meeting of Shareholders” and “—Amendment to the Articles of Association”).
Under Luxembourg law, existing shareholders benefit from a pre-emptive subscription right on the issuance of shares for cash consideration. However, our
shareholders have, in accordance with Luxembourg law, authorized the board of directors to suppress, waive or limit any pre-emptive subscription rights of
shareholders provided by law to the extent the board deems such suppression, waiver or limitation advisable for any issuance or issuances of shares within the
scope of our authorized share capital. Such shares may be issued above, at or below market value but in any event not below the accounting par value per ordinary
share as well as by way of incorporation of available reserves (including premium), except in limited cases provided for by Luxembourg law.
Form and Transfer of Shares
Our ordinary shares are issued in registered form only and are freely transferable under Luxembourg law and our articles of association. Our board of
directors may however impose transfer restrictions for shares that are registered, listed, quoted, dealt in, or that have been placed in certain jurisdictions in
compliance with the requirements applicable therein. Luxembourg law does not impose any limitations on the rights of Luxembourg or non-Luxembourg residents
to hold or vote our ordinary shares.
Under Luxembourg law, the ownership of registered shares is prima facie established by the inscription of the name of the shareholder and the number of
shares held by him or her in the shareholders register. Without prejudice to the conditions for transfer by book entry where shares are recorded in the shareholder
register on behalf of one or more persons in the name of a depository, each transfer of shares shall be affected by written declaration of transfer to be recorded in
the shareholder register, such declaration to be dated and signed by the transferor and the transferee or by their duly appointed agents. We may accept and enter into
the shareholder register any transfer affected pursuant to an agreement or agreements between the transferor and the transferee, true and complete copies of which
have been delivered to us.
Our articles of association provide that we may appoint registrars in different jurisdictions, each of whom may maintain a separate register for the shares
entered in such register and the holders of shares shall be entered into one of the registers. Shareholders may elect to be entered into one of these registers and to
transfer their shares to another register so maintained. Entries in these registers are reflected in the shareholders’ register maintained at our registered office.
In addition, our articles of association also provide that our ordinary shares may be held through a securities settlement system or a professional depository of
securities. Ordinary shares held in such manner have the same rights and obligations as ordinary shares recorded in our shareholders’ register. Furthermore,
ordinary shares held through a securities settlement system or a professional depository of securities may be transferred in accordance with customary procedures
for the transfer of securities in book-entry form.
Issuance of Shares
Pursuant to the Luxembourg Corporate Law, the issuance of ordinary shares requires the approval by the general meeting of shareholders at the quorum and
majority provided for the amendment of articles (see “—General Meeting of Shareholders” and “—Amendment to the Articles of Association”). The general
meeting may approve an authorized share capital and authorize the board of directors to issue ordinary shares up to the maximum amount of such authorized share
capital for a maximum period of five years as from the date of publication in the then in force Luxembourg official gazette ( Mémorial,
Recueil
des
Sociétés
et
Associations
) of the minutes of the relevant general meeting. The general meeting may amend, renew or extend such authorized share capital and such
authorization to the board of directors to issue shares.
Our articles of association provide that no fractional shares shall be issued.
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Our ordinary shares have no conversion rights and there are no redemption or sinking fund provisions applicable to our ordinary shares.
Pre-Emptive Rights
Unless limited, waived or cancelled by our board of directors (see “—Share Capital”), holders of our ordinary shares have a pro rata pre-emptive right to
subscribe for any new shares issued for cash consideration. Our articles of association provide that pre-emptive rights can be limited, waived or cancelled by our
board of directors for a period ending on the fifth anniversary of the date of publication of the notarial deed recording the minutes of the extraordinary general
shareholders’ meeting which adopted the authorized capital of the Company in the Recueil
électronique
des
sociétés
et
associations
in the event of an increase of
the share capital by the board of directors within the limits of the authorized share capital. The general meeting of shareholders duly convened to consider an
amendment to the articles of association may by majority vote also limit, waive or cancel such pre-emptive rights or to renew, amend or extend them, each time for
a period not to exceed five years.
Repurchase of Shares
We cannot subscribe for our own ordinary shares.
We may, however, repurchase issued ordinary shares or have another person repurchase issued ordinary shares for our account, subject to the following
conditions:
• prior authorization by a simple majority vote at an ordinary general meeting of shareholders, which authorization sets forth the terms and conditions of the
proposed repurchase and in particular the maximum number of ordinary shares to be repurchased, the duration of the period for which the authorization is given
(which may not exceed five years) and, in the case of repurchase for consideration, the minimum and maximum consideration per share;
• the repurchase may not reduce our net assets on a non-consolidated basis to a level below the aggregate of the issued and subscribed share capital and the
reserves that we must maintain pursuant to Luxembourg law or our articles of association; and
• only fully paid up shares may be repurchased.
The general meeting of shareholders authorized on September 29, 2014 the board of directors to repurchase shares representing up to 20% of the issued share
capital immediately after the closing of this IPO. The authorization is valid for a period ending on the earlier of five years from the date of such shareholder
authorization and the date of its renewal by a subsequent general meeting of shareholders. Pursuant to such authorization, the board of directors is authorized to
acquire and sell ordinary shares in the Company under the conditions set forth in Article 430-15 of the Luxembourg Corporate Law. Such purchases and sales may
be carried out for any authorized purpose or any purpose that is authorized by the laws and regulations in force. The purchase price per ordinary share to be paid
shall represent (i) not less than 50% of the lowest closing price per share and (ii) not more than 50% above the highest closing price per share, in each case as
reported by the New York City edition of the Wall Street Journal, or, if not reported therein, any other authoritative sources to be selected by the board of directors,
over the ten trading days preceding the date of the purchase (or the date of the commitment to the transaction).
In addition, pursuant to Luxembourg law, Atento, may directly or indirectly repurchase ordinary shares by decision of our board of directors without the prior
approval of the general meeting of shareholders if such repurchase is deemed by the board of directors to be necessary to prevent serious and imminent harm to us
or if the acquisition of shares has been made in view of the distribution thereof to employees.
Capital Reduction
Our articles of association provide that our issued share capital may be reduced, subject to the approval by the general meeting of shareholders at the quorum
and majority provided for the amendment of the articles of association (See “—Voting Rights—Extraordinary General Meeting”).
General Meeting of Shareholders
Any regularly constituted general meeting of shareholders of Atento represents the entire body of shareholders of the Company.
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Each of our ordinary shares entitles the holder thereof to attend our general meeting of shareholders, either in person or by proxy, to address the general
meeting of shareholders and to exercise voting rights, subject to the provisions of our articles of association. Each ordinary share entitles the holder to one vote at a
general meeting of shareholders. Our articles of association provide that our board of directors shall adopt all other regulations and rules concerning the attendance
to the general meeting, availability of access cards and proxy forms in order to enable shareholders to exercise their right to vote as it deems fit.
When convening a general meeting of shareholders, we will publish two notices (which must be published at least eight days apart and, in the case of the
second notice, at least eight days before the meeting) in the current Luxembourg official gazette ,
(Recueil
électronique
des
sociétés
et
associations
, the central
electronic platform of the Grand Duchy of Luxembourg), and in a Luxembourg newspaper. One or several shareholders holding together at least ten percent (10%)
of the share capital or the voting rights may submit questions in writing to the board of directors relating to transactions in connection with the management of the
Company as well as companies controlled by the Company; with respect to the latter, such questions shall be assessed in consideration of the relevant entities’
corporate interest. In the absence of a response within one (1) month, the relevant shareholders may request the president of the chamber of the district court of
Luxembourg dealing with commercial matters and sitting as in summary proceedings to appoint one or several experts in charge of drawing up a report on such
related transactions. Our articles of association provide that if our shares are listed on a regulated market, the general meeting will also be convened in accordance
with the publicity requirements of such regulated market applicable to us.
A shareholder may participate in general meetings of shareholders by appointing another person as his proxy, the appointment of which shall be in writing.
Our articles of association also provide that, in the case of shares held through the operator of a securities settlement system or depository, a holder of such shares
wishing to attend a general meeting of shareholders should receive from such operator or depository a certificate certifying the number of shares recorded in the
relevant account on the record date. Such certificates as well as any proxy forms should be submitted to us no later than three (3) business days before the date of
the general meeting unless our board of directors fixes a different period.
The annual ordinary general meeting of shareholders of Atento, is held at 10:00 a.m. (Central European Time) on May 31 of each year at the registered office
of the Company or in any other place in Luxembourg as notified to the shareholders. If that day is a legal or banking holiday in Luxembourg, the meeting will be
held on the next following business day.
Luxembourg law provides that the board of directors is obliged to convene a general meeting of shareholders if shareholders representing, in the aggregate,
10% of the issued share capital so request in writing with an indication of the meeting agenda. In such case, the general meeting of shareholders must be held
within one-month of the request. If the requested general meeting of shareholders is not held within one-month, shareholders representing, in the aggregate, 10% of
the issued share capital may petition the competent president of the district court in Luxembourg to have a court appointee convene the meeting. Luxembourg law
provides that shareholders representing, in the aggregate, 10% of the issued share capital may request that additional items be added to the agenda of a general
meeting of shareholders. That request must be made by registered mail sent to the registered office of the Company at least five days before the general meeting of
shareholders.
Voting Rights
Each share entitles the holder thereof to one vote at a general meeting of shareholders. Luxembourg law distinguishes general meetings of shareholders and
extraordinary general meetings of shareholders. Extraordinary general meetings of shareholders relate to proposed amendments to the articles of association and
certain other limited matters.
Ordinary General Meeting
At an ordinary general meeting there is no quorum requirement and resolutions are adopted by a simple majority of votes validly cast on such resolution is
sufficient. Abstentions are not considered votes.
Extraordinary General Meeting
Extraordinary resolutions are required for any of the following matters, among others: (a) an increase or decrease of the authorized or issued capital, (b) a
limitation or exclusion of preemptive rights, (c) approval of a statutory merger or de-merger (scission), (d) dissolution and liquidation of Atento, and (e) any and all
amendments to our articles of association. Pursuant to our articles of association, for any resolutions to be considered at an extraordinary general meeting of
shareholders the quorum shall be at least one half (50%) of the issued share capital of the Company unless otherwise mandatorily required by law. If the said
quorum is not present, a second meeting may be convened at which Luxembourg Corporate Law does not prescribe a quorum. Any extraordinary resolution shall
be adopted at a quorate general meeting (save as otherwise provided by mandatory law) by at least two thirds (2/3) majority of the votes validly cast on such
resolution. Abstentions are not considered votes.
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Appointment and Removal of Directors
Members of our board of directors may be elected by simple majority of the votes cast at a general meeting of shareholders. Our articles of association
provide that the directors shall be elected on a staggered basis, with one third (1/3) of the directors being elected each year, and each director elected for a period of
three years. Any director may be removed with or without cause by resolution at a general meeting of shareholders adopted by a simple majority of votes validly
cast at the meeting.
Our articles of association provide that in case of a vacancy the board of directors may fill such vacancy.
Neither Luxembourg law nor our articles of association contain any restrictions as to the voting of our shares by non-Luxembourg residents.
Amendment to the Articles of Association
Shareholder Approval Requirements
Luxembourg law requires an extraordinary general meeting of shareholders to resolve upon an amendment of the articles of association to be made by
extraordinary resolution. The agenda of the extraordinary general meeting of shareholders must indicate the proposed amendments to the articles of association. An
extraordinary general meeting of shareholders convened for the purposes of amending the articles of association must have a quorum of at least 50% of our issued
share capital. If the said quorum is not present, a second meeting may be convened at which Luxembourg Corporate Law does not prescribe a quorum. Irrespective
of whether the proposed amendments will be subject to a vote at any duly convened extraordinary general shareholders’ meeting, the amendment is subject to the
approval of at least two thirds (2/3) of the votes cast at such extraordinary general meeting of shareholders.
Formalities
Any resolutions to amend our articles of association must be taken before a Luxembourg notary and such amendments must be published in accordance with
Luxembourg law.
Merger and Demerger
A merger by absorption whereby one Luxembourg company after its dissolution without liquidation transfers to another company all of its assets and
liabilities in exchange for the issuance of shares in the acquiring company to the shareholders of the company being acquired, or a merger effected by transfer of
assets to a newly incorporated company, must, in principle, be approved at a general meeting by an extraordinary resolution of the Luxembourg company, and the
general meeting must be held before a notary. Similarly, a demerger of a Luxembourg company is generally subject to the approval by an extraordinary general
meeting of shareholders.
Dissolution and Liquidation
In the event of our dissolution and liquidation of the Company the assets remaining after allowing for the payment of all liabilities of the Company will be
paid out to the shareholders pro rata according to their respective shareholdings. The decisions to dissolve and liquidate require the approval by an extraordinary
general meeting of shareholders of the Company to be held before a notary.
No Appraisal Rights
Neither Luxembourg law nor our articles of association provide for any appraisal rights of dissenting shareholders.
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Dividend Distributions
Subject to Luxembourg law, if and when a dividend distribution is declared by the general meeting of shareholders or the board of directors in the case of
interim dividend distributions, each ordinary share is entitled to participate equally in such distribution of funds legally available for such purposes. Pursuant to our
articles of association, the general meeting of shareholders may approve a dividend distribution and the board of directors may declare an interim dividend
distribution, to the extent permitted by Luxembourg law.
Declared and unpaid dividend distributions held by us for the account of the shareholders shall not bear interest. Under Luxembourg law, claims for unpaid
dividend distributions will lapse in our favor five years after the date such dividend distribution were declared.
Annual Accounts
Under Luxembourg law, the board of directors must prepare each year annual accounts, i.e., an inventory of the assets and liabilities of Atento together with a
balance sheet and a profit and loss account each year. Our board of directors must also annually prepare consolidated accounts and management reports on the
annual accounts and consolidated accounts. The annual accounts, the consolidated accounts, the management report and the auditor’s reports must be available for
inspection by shareholders at our registered office at least 15 calendar days prior to the date of the annual ordinary general meeting of shareholders.
The annual accounts and the consolidated accounts, after approval by the annual ordinary general meeting of shareholders, will need to be filed with the
Luxembourg Registry of Trade and Companies within seven months of the close of the financial year.
Information Rights
Luxembourg law gives shareholders limited rights to inspect certain corporate records 15 calendar days prior to the date of the annual ordinary general
meeting of shareholders, including the annual accounts with the list of directors and auditors, the consolidated accounts, the notes to the annual accounts and the
consolidated accounts, a list of shareholders whose shares are not fully paid up, the management reports and the auditor’s report.
The annual accounts, the consolidated accounts, the auditor’s report and the management report are sent to registered shareholders at the same time as the
convening notice for the annual general meeting. In addition, any registered shareholder is entitled to receive a copy of such documents free of charge prior to the
date of the annual ordinary general meeting of shareholders.
Under Luxembourg law, it is generally accepted that a shareholder has the right to receive responses at the shareholders’ general meeting to questions
concerning items on the agenda of that general meeting of shareholders, if such responses are necessary or useful for a shareholder to make an informed decision
concerning such agenda item, unless a response to such questions could be detrimental to our interests.
Board of Directors
The management of Atento is vested in a board of directors. Our articles of association will provide that the board must comprise at least three members. The
board meets as often as Company interests require.
A majority of the members of the board present or represented at a board meeting constitutes a quorum, and resolutions are adopted by the simple majority
vote of the board members present or represented. The board may also take decisions by means of resolutions in writing signed by all directors. Each director has
one vote.
The general shareholders’ meeting elects’ directors and decides their respective terms. Under Luxembourg law, directors may be re-elected but the term of
their office may not exceed 6 years. Our articles of association will provide that the directors shall be elected on a staggered basis, with one third (1/3) of the
directors being elected each year. The general shareholders’ meeting may dismiss one or more directors at any time, with or without cause by a simple majority of
votes cast at a general meeting of shareholders. If the board has a vacancy, the remaining directors have the right to fill such vacancy on a temporary basis pursuant
to the affirmative vote of a majority of the remaining directors. The term of a temporary director elected to fill a vacancy expires at the end of the term of office of
the replaced director, provided, however, that the next general shareholders’ meeting shall be requested definitively to elect any temporary director.
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Within the limits provided for by law, our board may delegate to one or more persons the daily management of the Company and the authority to represent the
Company.
No director shall, solely as a result of being a director, be prevented from contracting with us, either with regard to his tenure in any office or place of profit or
as vendor, purchaser or in any other manner whatsoever, nor shall any contract in which any director is in any way interested be liable to be voided merely on
account of his position as director, nor shall any director who is so interested be liable to account to us or the shareholders for any remuneration, profit or other
benefit realized by the contract by reason of the director holding that office or of the fiduciary relationship thereby established.
Any director having an interest in a transaction submitted for approval to the board may not participate in the deliberations and vote thereon, unless the
transaction is not in the ordinary course of the Company’s business and that conflicts with the Company’s interest, in which case the director shall be obliged to
advise the board thereof and to cause a record of his statement to be included in the minutes of the meeting. He may not take part in these deliberations nor vote on
such a transaction. At the next general meeting, before any other resolution is put to a vote, a special report shall be made on any transactions in which any of the
directors may have had an interest that conflicts with our interest.
No shareholding qualification for directors is required.
Our articles of association provide that directors and officers, past and present, are entitled to indemnification from us to the fullest extent permitted by
Luxemburg law against liability and all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he is
involved by virtue of his being or having been a director or officer and against amounts paid or incurred by him in the settlement thereof. We may purchase and
maintain insurance for any director or other officer against any such liability.
No indemnification is provided against any liability to us or our shareholders (i) by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties of a director or officer; (ii) with respect to any matter as to which any director or officer shall have been finally adjudicated to have acted in
bad faith and not in the interest of the Company; or (iii) in the event of a settlement, unless approved by a court or the board of directors.
Transfer Agent and Registrar
The transfer agent and registrar for our ordinary shares is American Stock Transfer & Trust Company, LLC. with an address of 6201 15th Avenue,
Brooklyn, New York 11219.
C. Material Contracts
We are party to a Master Service Agreement with Telefónica. On November 7, 2016, Atento Luxco 1, S.A. (“Luxco”), a subsidiary of Atento S.A. (the
“Company”), entered into Amendment Agreement No.2 (the “Amendment”) to the Master Services Agreement by and between Luxco (f/k/a BC Luxco 1, S.A.)
and Telefónica, S.A. (“Telefónica”), dated December 11, 2012 (as amended, the “MSA”). The Amendment strengthens and extends the Company’s strategic
relationship with Telefónica, its largest client.
The Amendment provides for the following: a guaranty the Company will maintain at least our current share of Telefónica’s spending in all key contracts,
revised invoicing and collection processes in all key markets, a two-year extension of the MSA for Brazil and Spain until December 31, 2023 as well as a reset of
volume targets for these countries; and certain other amendments.
For a description of the MSA see “Item 4. Information on the Company—B. Business Overview—Our Clients—Telefónica Group Master Service
Agreement” as well as the full text of the agreement and its amendment executed in November 2016, a copy of which is filed as Exhibit 4.5.
D. Exchange Controls
There are no legislative or other legal provisions currently in force in Luxembourg or arising under ours articles of association that restrict the payment of
dividends to holders of Atento shares by reason of such holders not being resident in Luxembourg, except for regulations restricting the remittance of dividends and
other payments in compliance with United Nations and EU sanctions. There are no limitations, either under the laws of Luxembourg or in the articles of
association, on the right of non-Luxembourg nationals to hold or vote Atento shares.
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E. Taxation
Luxembourg Tax Considerations
The following is a summary discussion of the material Luxembourg tax considerations of the acquisition, ownership and disposition of your ordinary shares
that may be applicable to you if you acquire our ordinary shares.
It is not intended to be, nor should it be construed to be, legal or tax advice. This discussion is based on Luxembourg laws and regulations as they stand on the
date of this Annual Report and is subject to any change in law or regulations or changes in interpretation or application thereof (and which may possibly have a
retroactive effect). Prospective investors should therefore consult their own professional advisers as to the effects of state, local or foreign laws and regulations,
including Luxembourg tax law and regulations, to which they may be subject.
As used herein, a “Luxembourg individual” means an individual resident in Luxembourg who is subject to personal income tax ( impôt
sur
le
revenu
) and a
solidarity surcharge ( contribution
au
fonds
pour
l’emploi
) on his or her worldwide income from Luxembourg or foreign sources, and a “Luxembourg corporate
holder” means a company (that is, a fully taxable collectivity within the meaning of Article 159 of the Luxembourg Income Tax Law) resident in Luxembourg
subject to corporate income tax ( impôt
sur
le
revenu
des
collectivités
), municipal business tax ( impôt
commercial
communal
) and a solidarity surcharge (
contribution
au
fonds
pour
l’emploi
) on its worldwide income from Luxembourg or foreign sources. Luxembourg corporate holders may also be subject to net
wealth tax ( impôt
sur
la
fortune
) as well as other duties, levies and taxes. For purposes of this summary, Luxembourg individuals and Luxembourg corporate
holders are collectively referred to as “Luxembourg Holders”. A “non-Luxembourg Holder” means any investor in shares of the Company other than a
Luxembourg Holder.
Tax Regime Applicable to Capital Gains Realized Upon Disposal of Shares
Luxembourg Holders
Luxembourg
individual
holders.
For Luxembourg individuals holding (together, directly or indirectly, with his or her spouse or civil partner or underage
children) 10% or less of the share capital of the Company, capital gains will only be taxable if they are realized on a sale of shares, which takes place before their
acquisition or within the first six months following their acquisition. The capital gain or liquidation proceeds will be taxed at progressive income tax rates (ranging
from 0 to 45.78% in 2017 and 2018).
For Luxembourg individuals holding (together with his/her spouse or civil partner and underage children) directly or indirectly more than 10% of the capital
of the Company, capital gains will be taxable as follow:
• within six months from the acquisition, the capital gain or liquidation proceeds will be taxed at progressive income tax rates (currently ranging from 0 to
45.78%);
• after six months the capital gain or the liquidation proceeds will be taxed at a reduced tax rate (i.e. half of the investor’s global tax rate). An allowance of
€50,000 (doubled for taxpayers filing jointly), available during a ten-year period, is applicable.
Luxembourg
corporate
holders.
Capital gains realized upon the disposal of shares by a Luxembourg corporate holder will in principle be subject to corporate
income tax and municipal business tax. The combined applicable rate (including an unemployment fund contribution) is 27.08% for the fiscal year ending 2017 and
26.01% for the fiscal year ending 2018 for a Luxembourg corporate holder established in Luxembourg-City. An exemption from such taxes may be available to the
Luxembourg corporate holder pursuant to article 166 of the Luxembourg Income Tax law and by the Grand Ducal Decree of December 21, 2001 subject to anti-
abuse rules and to the fulfillment of the conditions set forth therein.
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Non-Luxembourg Holders
Subject to any applicable tax treaty, an individual non-Luxembourg Holder of shares (who has no permanent establishment or permanent representative in
Luxembourg to which the shares would be attributable) will only be subject to Luxembourg taxation on capital gains arising upon disposal of such shares if such
holder has (together with his or her spouse or civil partner or underage children) directly or indirectly held more than 10% of the capital of the Company, at any
time during the five years preceding the disposal, and either (i) such holder has been a resident of Luxembourg for tax purposes for at least 15 years and has
become a non-resident within the five years preceding the realization of the gain, subject to any applicable tax treaty, or (ii) the disposal of shares occurs within six
months from their acquisition (or prior to their actual acquisition). If we and a U.S. relevant holder are eligible for the benefits of the Convention between the
Government of the Grand Duchy of Luxembourg and the Government of the United States for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income and Capital (the “Luxembourg-U.S. Treaty”), such U.S. relevant holder generally should not be subject to Luxembourg
tax on the gain from the disposal of such shares unless such gain is attributable to a permanent establishment or permanent representative of such U.S. relevant
holder in Luxembourg. Subject to any restrictions imposed by the substantially and regularly traded clause in the limitation on benefits article of the Luxembourg--
U.S. treaty, we expect to be eligible for the benefits of the Luxembourg-U.S. Treaty.
A corporate non-Luxembourg Holder (that is, a collectivité
within the meaning of Article 159 of the Luxembourg Income Tax Law), which has a permanent
establishment or a permanent representative in Luxembourg to which or whom the shares would be attributable, will bear corporate income tax and municipal
business tax on a gain realized on a disposal of such shares as set forth above for a Luxembourg corporate holder. In the same way, gains realized on the sale of the
shares through a permanent establishment or a permanent representative may benefit from the full exemption provided for by Article 166 of the Luxembourg
Income Tax Law and by the Grand Ducal Decree of December 21, 2001 subject in each case to anti-abuse rules and to the fulfillment of the conditions set out
therein.
A corporate non-Luxembourg Holder, which has no permanent establishment or permanent representative in Luxembourg to which or whom the shares would
be attributable will not be subject to any Luxembourg tax on a gain realized on a disposal of such shares unless such holder holds, directly or through tax
transparent entities, more than 10% of the share capital of the Company, and the disposal of shares occurs within six months from their acquisition (or prior to their
actual acquisition), subject to any applicable tax treaty. If we and a U.S. corporate holder without a permanent establishment in Luxembourg to which or whom the
shares would be attributable are eligible for the benefits of the Luxembourg-U.S. Treaty, such U.S. corporate holder generally should not be subject to Luxembourg
tax on the gain from the disposal of such shares.
Tax Regime Applicable to Distributions
Withholding
Tax. Dividend distributions by the Company are subject to a withholding tax of 15%. Distributions by the Company sourced from a reduction of
capital as defined in Article 97 (3) of the Luxembourg Income Tax Law including, among others, share premium should not be subject to withholding tax provided
no newly accumulated fiscal profits, or profit reserves carried forward are recognized by the Company on a standalone basis. We or the applicable paying agent
will withhold on a distribution if required by applicable law.
Where a withholding needs to be applied, the rate of the withholding tax may be reduced pursuant to the double tax treaty existing between Luxembourg and
the country of residence of the relevant holder, subject to the fulfillment of the conditions set forth therein. If we and a U.S. relevant holder are eligible for the
benefits of the Luxembourg-U.S. Treaty, the rate of withholding on distributions generally is 15%, or 5% if the U.S. relevant holder is a beneficial owner that owns
at least 10% of our voting stock.
No withholding tax applies if the distribution is made to (i) a Luxembourg resident corporate holder (that is, a fully taxable collectivité within the meaning of
Article 159 of the Luxembourg Income Tax Law), (ii) a corporation which is resident of a Member State of the European Union and is referred to by article 2 of the
Council Directive 2011/96/EU of November 30, 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different
member states, (iii) a corporation or a cooperative resident in Norway, Iceland or Liechtenstein and subject to a tax comparable to corporate income tax as provided
by Luxembourg Income Tax Law, (iv) a corporation resident in Switzerland which is subject to corporate income tax in Switzerland without benefiting from an
exemption, (v) a corporation subject to a tax comparable to corporate income tax as provided by Luxembourg Income Tax Law which is resident in a country that
has concluded a tax treaty with Luxembourg and (vi) a Luxembourg permanent establishment of one of the above-mentioned categories, provided each time that at
the date of payment, the holder has held or commits itself to continue to hold directly or through a tax transparent vehicle, during an uninterrupted period of at least
twelve months, shares representing at least 10% of the share capital of the Company or which had an acquisition price of at least €1,200,000.
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Non-Luxembourg Holders
Non-Luxembourg holders of the shares who have neither a permanent establishment nor a permanent representative in Luxembourg to which or whom the
shares would be attributable are not liable for any Luxembourg tax on dividends paid on the shares, other than a potential withholding tax as described above.
Net Wealth Tax
Luxembourg
Holders.
Luxembourg net wealth tax will not be levied on a Luxembourg Holder with respect to the shares held unless the Luxembourg Holder
is an entity subject to net wealth tax in Luxembourg.
Net wealth tax is levied annually at the rate of 0.5% and 0.05% for the tranche exceeding EUR 500 million on the net wealth of enterprises resident in
Luxembourg, as determined for net wealth tax purposes. The shares may be exempt from net wealth tax subject to the conditions set forth by Article 60 of the Law
of October 16, 1934 on the valuation of assets ( Bewertungsgesetz
), as amended.
A minimum net wealth tax is levied on Luxembourg corporate holders. For entities for which the sum of fixed financial assets, transferable securities and cash
at bank exceeds 90% of their total gross assets and EUR 350,000, the minimum net wealth tax is set at EUR 4,815. For all other Luxembourg corporate holders
which do not fall within the scope of the EUR 4,815 minimum net wealth tax, the minimum net wealth tax ranges from EUR 535 to EUR 32,100, depending on the
Luxembourg corporate holders’s total gross assets.
Non-Luxembourg Holders
Luxembourg net wealth tax will not be levied on a non-Luxembourg Holder with respect to the shares held unless the shares are attributable to an enterprise or
part thereof which is carried on through a permanent establishment or a permanent representative in Luxembourg.
Stamp and Registration Taxes
No registration tax or stamp duty will be payable by a holder of shares in Luxembourg solely upon the disposal of shares or by sale or exchange unless
registered in a notarial deed or otherwise registered in Luxembourg.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
The Company makes its filings in electronic form under the EDGAR filing system of the U.S. Securities and Exchange Commission. Its filings are available
through the EDGAR system at www.sec.gov. The Company’s filings are also available to the public through the Internet at Atento’s website at www.atento.com.
Such filings and other information on its website are not incorporated by reference in this Annual Report. Interested parties may request a copy of this filing, and
any other report, at no cost, by writing to the Company at the following address: C/ Santiago de Compostela 94, 28035 Madrid—Spain or calling +34 917 407 440
or by e-mail at investor.relations@atento.com. In compliance with New York Stock Exchange Corporate Governance Rule 303A.11, the Company provides on its
website a summary of the differences between its corporate governance practices and those of U.S. domestic companies under the New York Stock Exchange
listing standards.
I. Subsidiary Information
Refer to Note 3 to the consolidated financial statements.
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our board of directors is currently responsible for overseeing our risk management process. The board of directors focuses on our general risk management
strategy and the most significant risks facing us, and ensures that appropriate risk mitigation strategies are implemented by management. The board of directors is
also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters and significant transactions.
Following the completion of the IPO, our board of directors delegated to the Audit Committee oversight of our risk management process. Our other board
committees also consider and address the risks as they perform their respective committee responsibilities. All committees report to the full board of directors as
appropriate, including when a matter rises to the level of a material or enterprise level risk.
Our management is responsible for day-to-day risk management. This oversight includes identifying, evaluating and addressing potential risks that may exist
at the enterprise, strategic, financial, operational, compliance and reporting levels.
The Atento Group’s activities are exposed to market risks: (foreign currency risk and interest rate risk). The Atento Group’s global risk management policy
aims to minimize the potential adverse effects of these risks on the Atento Group’s financial returns. The Atento Group also uses derivative financial instruments to
hedge certain risk exposures.
Interest
rate
risk
in
respect
of
cash
flow
and
fair
value
Interest rate risk arises mainly as a result of changes in interest rates which affect: finance costs of debt bearing interest at variable rates (or short-term
maturity debt expected to be renewed), as a result of fluctuations in interest rates, and the value of non-current liabilities that bear interest at fixed rates. Atento
Group’s finance costs are exposed to fluctuations in interest rates.
Atento Group’s finance costs are exposed to fluctuations in interest rates. At December 31, 2017, 12.8% of financial debt with third parties (excluding the
effect of financial derivative instruments) bore interests at variable rates, while at December 31, 2016 this amount was 40.6%. In 2016 and 2017 the greatest
exposure was to the Brazilian CDI rate.
As of December 31, 2017, the estimated fair value of the interest rate hedging instruments related to the Brazilian Debentures totaled a derivative liability of
$1.2 million ($1.3 million derivative asset as of December 31, 2016), which was recorded as a financial liability. Based on our total indebtedness of $486.3 million
as of December 31, 2017 and not taking into account the impact of our interest rate hedging instruments referred to above, a 1% change in interest rates would
impact our net interest expense by $1.6 million.
The Atento Group’s policy is to monitor exposure to this risk. In that regard, as described in Note 14 of the consolidated financial statements, the Atento
Group has arranged interest rate swaps that have the economic effect of converting floating rate borrowing into loans at fixed interest rates. The table below shows
the impact of a +/-10 basis points variation in the CDI interest rate curves on fair value of these derivatives.
INTEREST RATE
FAIR VALUE
0.10%
-0.10%
Foreign
currency
risk
Thousands of U.S. dollars
2017
(1,212)
(1,174)
(1,248)
Our foreign currency risk arises from our local currency revenues, receivables and payables, while the U.S. dollar is our functional and reporting currency.
We benefit to a certain degree from the fact that the revenue we collect in each country, in which we have operations, is generally denominated in the same
currency as the majority of the expenses we incur.
In accordance with our risk management policy, whenever we deem it appropriate, we manage foreign currency risk by using derivatives to hedge any
exposure incurred in currencies other than those of the functional currency of the countries.
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As of December 31, 2017, the estimated fair value of the cross-currency swaps designated as hedging instruments totaled an asset of $3.0 million (asset of
$76.0 million as of December 31, 2016).
Upon issuance of the Senior Secured Notes due 2022 issued in U.S. dollars, we entered into new cross-currency swaps pursuant to which we exchanged an
amount of U.S. dollars for an amount of Euro, Mexican Pesos, Peruvian Soles and Brazilian Reais.
The table below shows the impact of a +/-10 basis points variation in the interest rate curve on the value of the cross-currency swaps.
CROSS-CURRENCY
FAIR VALUE
0.10%
-0.10%
Thousands of U.S. dollars
2017
3,037
2,718
3,838
For additional information on the interest rate risk and foreign currency risk, see Notes 4 and 14 to our consolidated financial statements .
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depository Shares
Not applicable.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
As of December 31, 2017, under management’s supervision and with its participation, including our Chief Executive Officer and Chief Financial Officer,
we performed an evaluation of our disclosure controls and procedures for the period relating to the information contained in this Annual Report. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2017
to enable the Company to record, process, summarize, and report information required to be included in the reports that it files or submits under the Securities
Exchange Act of 1934, within the time periods required.
B. Management’s Annual Report on Internal Control over Financial Reporting
The Management of Atento S.A. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-
15(f) and 15d-15(f) under the Securities Exchange Act of 1934.
The Company’s internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief
Financial Officer, and effected by our Board of Directors, Management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards.
The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial
statements. Because of inherent limitations of internal control over financial reporting, including the possibility of collusion or improper Management override of
controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statements preparation and presentation.
Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 based on the criteria
established in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on such assessment and criteria, Management has concluded that the Company’s internal controls over financial reporting are effective as of
December 31, 2017.
C. Attestation Report of the Registered Public Accounting Firm
Ernst & Young Auditores Independentes S.S., the independent registered public accounting firm that has audited our consolidated financial statements, has
issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2017 dated April 26, 2018 and included herein,
expressed an unqualified opinion. This attestation report appears on page F-2.
D. Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting for the year ended December 31, 2017 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
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ITEM 15T. CONTROLS AND PROCEDURES
Not applicable.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our Audit Committee consists of Francisco Tosta Valim Filho, Thomas Iannotti and David Garner. Our board of directors has determined that Francisco
Tosta Valim Filho qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K. Our board of directors has
adopted a written charter for the Audit Committee, which is available on our corporate website at www.atento.com . Our website is not part of this Annual Report.
ITEM 16B. CODE OF ETHICS
We have adopted a Code of Ethics applicable to all of our directors, officers and employees, including our principal executive officer, principal financial
officer and accounting officers, and all persons performing similar functions. A copy of the Code is available on our corporate website at www.atento.com . The
Code of Ethics as of December 31, 2017 is set forth in Exhibit 11.1 to this Annual Report.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth by category of service the total feeds for services performed in 2016 and 2017 by our principal accountants, Ernst & Young
Auditores Independentes S.S., including fees from member firms Ernst & Young.
Audit-fees (*)
Audit-related fees (**)
Total
Thousands of U.S. dollars
2016
2017
1,818
-
1,818
1,812
654
2,466
(*) Audit fees: includes audit of the annual financial statements, the review of the Form 20-F Report filed with the Securities and Exchange Commission (SEC),
local statutory audits of subsidiaries of the Atento Group.
(**) Audit-related fees: includes fees related to issue comfort letters in connection with the notes and secondary offerings in 2017.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
Our ordinary shares are listed on the NYSE. For purposes of NYSE rules, so long as we are a foreign private issuer, we are eligible to take advantage of
certain exemptions from NYSE corporate governance requirements provided in the NYSE rules. We are required to disclose the significant ways in which our
corporate governance practices differ from those that apply to U.S. companies under NYSE listing standards. Set forth below is a summary of these differences:
Director
Independence
—The NYSE rules require domestic companies to have a majority of independent directors, but as a foreign private issuer we are
exempt from this requirement. Our board of directors consists of eight members and we believe that three of our board members satisfy the “independence”
requirements of the NYSE rules.
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Board
Committees
—The NYSE rules require domestic companies to have a Compensation Committee and a nominating and corporate governance
committee composed entirely of independent directors, but as a foreign private issuer we are exempt from these requirements. We have a Compensation Committee
comprised of three members, one of which we believe satisfies the “independence” requirements of the NYSE rules. We do not have a nominating and corporate
governance committee. However, we have an audit committee that we believe consists entirely of “independent” directors, as required by the NYSE listing
standards.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
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PART III
ITEM 17. FINANCIAL STATEMENTS
The Company has responded to Item 18 in lieu of this item.
ITEM 18. FINANCIAL STATEMENTS
Consolidated financial statements of Atento S.A. are filed as part of this Annual Report.
ITEM 19. EXHIBITS
(a) Index to Consolidated Financial Statements
Consolidated Financial Statements of Atento S.A.
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Position as of December 31, 2016 and 2017
Consolidated Statements of Operations for the years ended December 31, 2015, 2016 and 2017
Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2015, 2016 and 2017
Consolidated Statements of Changes in Equity for the years ended December 31, 2015, 2016 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2016 and 2017
Notes to the Consolidated Financial Statements for the years ended December 31, 2015, 2016 and 2017
(b) List of Exhibits
Page
F-1
F-2
F-3
F-5
F-6
F-7
F-8
F-10
Exhibit
Number
1.1
2.1
4.1
4.2
4.3
4.4
4.5
Description
Amended and Restated Articles of Association of Atento S.A., incorporated by reference to Exhibit 1.1 to Atento S.A.’s Amendment No. 1 to
Annual Report on Form 20-F (File No. 001-36671), initially filed on April 20, 2016.
Indenture, dated as of August 10, 2017, among Atento Luxco 1 S.A., the guarantors from time to time party thereto, Wilmington Trust, National
Association, as trustee, and Wilmington Trust (London) Limited, in its capacity as security agent under the intercreditor agreement, as collateral
agent, incorporated by reference to Exhibit 4.1 to Atento S.A.’s Report on Form 6-K (File No. 001-36671), filed on August 15, 2017.
Transaction Services Agreement between Spain Holdco and Bain Capital Partners, LLC, dated December 12, 2012, incorporated by reference to
Exhibit 10.1 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611), initially filed on May 1, 2014.
Management Services Agreement between Spain Holdco, Mexico Holdco, Spain Holdco 2, Spain Holdco 5 and Spain Holdco 6, dated December
12, 2012, incorporated by reference to Exhibit 10.3 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611), initially filed on
May 1, 2014.
Subscription and Securityholder’s Agreement, dated as of December 4, 2012, by and among BC Luxco Topco, BC Luxco and each of the
investors party thereto, incorporated by reference to Exhibit 10.4 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611),
initially filed on May 1, 2014.
Subscription and Securityholder’s Agreement, dated as of December 4, 2012, by and among BC Luxco Topco, BC Luxco and each of the
investors party thereto, incorporated by reference to Exhibit 10.5 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611),
initially filed on May 1, 2014.
Master Services Agreement between BC Luxco 1 and Telefónica S.A., dated as of December 11, 2012, as amended by Amendment Agreement
No. 1 thereto dated as of May 16, 2014, and as amended by Amendment Agreement No.2 dated November 10, 2016, incorporated by reference to
Exhibit 10.6 to Atento S.A.’s Registration Statement on Form F-1 (File No. 333-195611), initially filed on May 1, 2014.**
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Table of Contents
4.6
4.8
4.9
4.10
4.11
Exhibit
Number
4.12
4.13
4.14
4.15
8.1
11.1
12.1
12.2
13.1
13.2
Super Senior Revolving Credit Facilities Agreement, dated as of August 8, 2017, among Atento Luxco 1 S.A., the guarantors party thereto,
BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, Goldman Sachs Bank USA and Morgan Stanley
Senior Funding, Inc., as arrangers, Banco Bilbao Vizcaya Argentaria, S.A., as agent, and Wilmington Trust (London) Limited, as security agent,
incorporated by reference to Exhibit 4.2 to Atento S.A.’s Report on Form 6-K (File No. 001-36671), filed on August 15, 2017.
Instrumento Particular de Escritura (Brazilian debentures), incorporated by reference to Exhibit 10.9 to Atento S.A.’s Registration Statement on
Form F-1 (File No. 333-195611), initially filed on May 1, 2014.
2014 Omnibus Incentive Plan, incorporated by reference to Exhibit 4.2 to Atento S.A.’s Registration Statement on Form S-8 (File No. 333-
203101), filed on March 30, 2015.
Form of Performance Restricted Stock Unit Agreement, incorporated by reference to Exhibit 10.11 to Atento S.A.’s Registration Statement
on Form F-1 (File No. 333-195611), initially filed on May 1, 2014.
Form of Time Restricted Stock Unit Agreement, incorporated by reference to Exhibit 10.12 to Atento S.A.’s Registration Statement on Form F-1
(File No. 333-195611), initially filed on May 1, 2014.
Description
Registration Rights Agreement, incorporated by reference to Exhibit 4.12 to Atento S.A.’s Annual Report on Form 20-F (File No. 001-36671),
filed on March 31, 2015.
Consulting Services and Information Rights Agreement, incorporated by reference to Exhibit 4.13 to Atento S.A.’s Annual Report on Form 20-F
(File No. 001-36671), filed on March 31, 2015.
Form of Directors and Officers Indemnification Agreement, incorporated by reference to Exhibit 10.15 to Atento S.A.’s Registration Statement
on Form F-1 (File No. 333-195611), initially filed on May 1, 2014.
Amendment Agreement No. 2, dated as of November 8, 2016, to the Master Services Agreement, by and between Luxco (f/k/a BC Luxco 1,
S.A.) and Telefónica, S.A., dated as of December 11, 2012, incorporated by reference to Exhibit 99.1 to Atento S.A.’s Report on Form 6-K (File
No. 001-36671), filed on November 10, 2016.**
List of subsidiaries of Atento S.A., incorporated by reference to Exhibit 8.1 to Atento S.A.’s Annual Report on Form 20-F (File No. 001-36671),
filed on March 31, 2015.*
Code of ethics, incorporated by reference to Exhibit 11.1 to Atento S.A.’s Annual Report on Form 20-F (File No. 001-36671), filed on March 31,
2015.
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.*
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.*
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
101.PRE
* Filed herewith.
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
** Application has been granted by the Securities and Exchange Commission for confidential treatment of certain provisions of these exhibits. Omitted material
for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission.
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: April 26, 2018
ATENTO S.A.
By: /s/ Alejandro Reynal
Name: Alejandro Reynal
Title: Chief Executive Officer
By: /s/ Mauricio Montilha
Name: Mauricio Montilha
Title: Chief Financial Officer
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Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Atento S.A.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Atento S.A. and subsidiaries (the “Company”) as of December 31, 2017 and
2016, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows, for each of the three years in the period
ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2017, in conformity with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board - IASB.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal
control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April 26, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/s/ ERNST & YOUNG
Auditores Independentes S.S.
We have served as the Company’s auditor since 2005.
São Paulo, Brazil,
April 26, 2018
F- 1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Atento S.A.
Opinion on Internal Control over Financial Reporting
We have audited Atento S.A. and subsidiaries’ internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control
— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our
opinion, Atento S.A. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31,
2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
consolidated statements of financial position as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income
(loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and our report dated April 26,
2018 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
/s/ ERNST & YOUNG
Auditores Independentes S.S.
São Paulo, Brazil,
April 26, 2018
F- 2
Table of Contents
ASSETS
NON-CURRENT ASSETS
Intangible assets
Goodwill
Property, plant and equipment
Non-current financial assets
Trade and other receivables
Other non-current financial assets
Derivative financial instruments
Other taxes receivable
Deferred tax assets
CURRENT ASSETS
Trade and other receivables
Trade and other receivables
Current income tax receivable
Other taxes receivable
Other current financial assets
Cash and cash equivalents
TOTAL ASSETS
ATENTO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2016 and 2017
(In thousands of U.S. dollars, unless otherwise indicated)
Notes
2016
December 31,
6
7
9
13
12
14
20c)
20b)
13
20c)
20c)
12
15
802,944
226,553
146,015
165,270
138,950
20,911
40,565
77,474
7,815
118,341
2017
764,127
230,104
153,144
152,195
90,076
21,677
60,222
8,177
7,282
131,326
574,674
566,178
373,047
350,902
22,145
6,452
1,140
194,035
410,534
388,565
21,969
12,072
1,810
141,762
1,377,618
1,330,305
The accompanying notes are an integral part of the consolidated financial statements.
F- 3
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2016 and 2017
(In thousands of U.S. dollars, unless otherwise indicated)
EQUITY AND LIABILITIES
TOTAL EQUITY
EQUITY ATTRIBUTABLE TO:
NON-CONTROLLING INTEREST
OWNERS OF THE PARENT COMPANY
Share capital
Reserve for acquisition of non-controlling interest
Share premium
Retained losses
Translation differences
Hedge accounting effects
Stock-based compensation
NON-CURRENT LIABILITIES
Deferred tax liabilities
Debt with third parties
Derivative financial instruments
Provisions and contingencies
Non-trade payables
Option for the acquisition of non-controlling interest
Other taxes payable
CURRENT LIABILITIES
Debt with third parties
Derivative financial instruments
Trade and other payables
Trade payables
Income tax payables
Other taxes payables
Other non-trade payables
Provisions and contingencies
TOTAL EQUITY AND LIABILITIES
The accompanying notes are an integral part of the consolidated financial statements.
F- 4
Notes
2016
December 31,
430,203
(718)
430,921
48
(1,057)
639,435
(53,598)
(193,529)
35,521
4,101
598,808
45,597
480,359
184
69,895
618
1,057
1,098
348,607
54,576
-
279,313
75,268
4,030
68,800
131,215
14,718
1,377,618
19
19
20b)
17
14
21
18
20c)
17
14
18
20c)
20c)
18
21
2017
377,839
9,476
368,363
48
(23,531)
639,435
(94,535)
(170,063)
9,594
7,415
582,870
43,942
439,731
5,140
61,186
8,094
23,752
1,025
369,596
46,560
1,212
302,756
94,078
8,058
86,166
114,454
19,068
1,330,305
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2015, 2016 and 2017
(In thousands of U.S. dollars, unless otherwise indicated)
Revenue
Other operating income
Other gains and own work capitalized (1)
Operating expenses:
Supplies
Employee benefit expenses
Depreciation
Amortization
Changes in trade provisions
Other operating expenses
OPERATING PROFIT
Finance income
Finance costs (1)
Change in fair value of financial instruments
Net foreign exchange loss (1)
NET FINANCE EXPENSE
PROFIT/(LOSS) BEFORE INCOME TAX
Income tax expense
PROFIT/(LOSS) FROM CONTINUING OPERATIONS
LOSS FROM DISCONTINUED OPERATIONS (**)
PROFIT/(LOSS) FOR THE YEAR
PROFIT/(LOSS) ATTRIBUTABLE TO:
OWNERS OF THE PARENT
NON-CONTROLLING INTEREST
PROFIT/(LOSS) FOR THE YEAR
EARNINGS/(LOSS) PER SHARE:
Basic earnings/(loss) per share from continuing operations (in U.S. dollars)
Basic loss per share from discontinued operations (in U.S. dollars)
Diluted earnings/(loss) per share from continuing operations (in U.S. dollars)
Diluted loss per share from discontinued operations (in U.S. dollars)
Notes
22a)
22b)
22c)
22d)
22e)
22e)
22f)
22g)
22g)
22g)
22g)
20a)
24
24
24
24
For the years ended December 31,
2016 (*)
2015 (*)
2017
1,949,883
4,325
-
(77,604)
(1,410,526)
(50,077)
(51,430)
(1,319)
(241,478)
121,774
15,459
(75,469)
17,535
(3,919)
(46,394)
75,380
(23,150)
52,230
(3,082)
49,148
49,148
-
49,148
0.71
(0.04)
0.70
(0.04)
1,757,498
5,880
41,748
(65,598)
(1,309,901)
(46,448)
(50,916)
(1,902)
(214,015)
116,346
7,188
(59,151)
675
(56,494)
(107,782)
8,564
(5,207)
3,357
(3,206)
151
65
86
151
0.05
(0.04)
0.05
(0.04)
1,921,311
16,437
372
(74,899)
(1,429,076)
(49,226)
(55,195)
(627)
(236,648)
92,449
7,858
(78,145)
230
(23,427)
(93,484)
(1,035)
(12,533)
(13,568)
-
(13,568)
(16,790)
3,222
(13,568)
(0.18)
-
(0.18)
-
(1) The year ended December 31, 2016 contains the impacts of the CVI termination. The reversal of the principal amount of 41,749 thousand U.S. dollars was
recognized in "Other gains and own work capitalized", the interest reversal of 19,936 thousand U.S. dollars was recognized in "Finance costs" and the loss of
35,373 thousand U.S. dollars on the conversion of Argentine pesos to U.S. dollars was recognized in "Net foreign exchange loss".
(*) Exclude discontinued operations - Morocco.
(**) Discontinued operations did not generate any income tax expense.
The accompanying notes are an integral part of the consolidated financial statements.
F- 5
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
For the years ended December 31, 2015, 2016 and 2017
(In thousands of U.S. dollars, unless otherwise indicated)
Profit/(loss) from continuing operations
Loss from discontinued operations (*)
Profit/(loss) for the year
Other comprehensive income/(loss)
Other comprehensive income/(loss) to be reclassified to profit and loss in subsequent periods:
Cash flow/net investment hedge
Tax effect on hedge
Translation differences
Other comprehensive (loss)/income
Total comprehensive (loss)/income
Total comprehensive (loss)/income attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive (loss)/income
(*) Exclude discontinued operations - Morocco.
The accompanying notes are an integral part of the consolidated financial statements.
F- 6
For the years ended December 31,
2015
2016
2017
52,230
(3,082)
49,148
18,955
314
(137,474)
(118,205)
(69,057)
(69,057)
-
(69,057)
3,357
(3,206)
151
13,971
2,921
15,701
32,593
32,744
32,652
92
32,744
(13,568)
-
(13,568)
(26,329)
402
22,934
(2,993)
(16,561)
(19,251)
2,690
(16,561)
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2015, 2016 and 2017
(In thousands of U.S. dollars, unless otherwise indicated)
Balance at January 1, 2015
Comprehensive income/(loss) for the period
Profit for the year
Other comprehensive income/(loss), net of taxes
Stock-based compensation
Balance at December 31, 2015
Balance at January 1, 2016
Comprehensive income/(loss) for the year
Profit for the year
Other comprehensive income/(loss), net of taxes
Reserve for acquisition of non - controlling
interest
Stock-based compensation
Non-controlling interest
Balance at December 31, 2016
Balance at January 1, 2017
Comprehensive income/(loss) for the year
Loss for the year
Other comprehensive income/(loss), net of taxes
Dividends
Reserve for acquisition of non - controlling
interest
Stock-based compensation
Non-controlling interest
Balance at December 31, 2017
Reserve
for
acquisition
of non-
controlling
interest
-
-
-
-
-
-
Reserve
for
acquisition
of non-
controlling
interest
-
-
-
-
Retained
earnings/
(losses)
(102,811)
49,148
49,148
-
Translation
differences
(71,750)
(137,474)
-
(137,474)
-
-
Hedge
accounting
effects
(640)
19,269
-
19,269
-
(53,663)
(209,224)
18,629
Retained
earnings/
(losses)
(53,663)
65
65
-
Translation
differences
(209,224)
15,695
-
15,695
Hedge
accounting
effects
18,629
16,892
-
16,892
(1,057)
-
-
-
-
-
-
-
-
-
-
-
Stock-based
compensation
Total
owners of
the
parent
company
584 464,866
(69,057)
49,148
(118,205)
-
1,982
1,982
2,566 397,791
-
-
Stock-based
compensation
-
Total
owners of
the
parent
company
2,566 397,791
32,652
65
32,587
(1,057)
1,535
-
1,535
-
-
-
-
(1,057)
(53,598)
(193,529)
35,521
4,101 430,921
Reserve
for
acquisition
of non-
controlling
interest
(1,057)
-
-
-
-
Retained
earnings/
(losses)
(53,598)
(16,790)
(16,790)
-
(24,147)
Translation
differences
(193,529)
23,466
-
23.466
-
Hedge
accounting
effects
35,521
(25,927)
-
(25,927)
-
(22,474)
-
-
-
-
-
-
-
-
-
-
-
Stock-based
compensation
-
Total
owners of
the
parent
company
4,101 430,921
(19,251)
(16,790)
(2,461)
(24,147)
(22,474)
3,314
-
3,314
-
-
-
-
-
(23,531)
(94,535)
(170,063)
9,594
7,415 368,363
Share
capital
Share
premium
48 639,435
-
-
-
-
-
-
-
-
48 639,435
Share
capital
Share
premium
48 639,435
-
-
-
-
-
-
-
-
-
-
-
-
48 639,435
Share
capital
Share
premium
48 639,435
-
-
-
-
-
-
-
-
-
-
-
-
-
-
48 639,435
The accompanying notes are an integral part of the consolidated financial statements.
F- 7
Non-
controlling
interest
-
-
-
-
-
-
Total equity
464,866
(69,057)
49,148
(118,205)
1,982
397,791
Non-
controlling
interest
-
Total equity
397,791
92
86
6
32,744
151
32,593
-
(1,057)
-
(810)
(718)
1,535
(810)
430,203
Non-
controlling
interest
Total equity
430,203
(718)
2,690
3,222
(532)
(332)
(16,561)
(13,568)
(2,993)
(24,479)
-
(22,474)
-
7,836
9,476
3,314
7,836
377,839
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2015, 2016 and 2017
(In thousands of U.S. dollars, unless otherwise indicated)
Operating activities
Profit/(loss) before income tax
Adjustments to reconcile profit/(loss) before tax to net cash flows:
Amortization and depreciation
Impairment losses
Changes in provisions
Grants released to income
Net losses on disposal of fixed assets
Finance income
Finance costs
Net foreign exchange differences
Change in fair value of financial instruments
Changes in other gains/(losses) and own work capitalized
Changes in working capital:
Changes in trade and other receivables
Changes in trade and other payables
Other payables
Interest paid
Interest received
Income tax paid
Other payments
Net cash flows from operating activities
Investing activities
Payments for acquisition of intangible assets
Payments for acquisition of property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
Proceeds from sale of PP&E and intangible assets
Disposals of financial instruments
Proceeds from sale of subsidiaries
Net cash flows used in investing activities
Financing activities
Proceeds from borrowings from third parties
Repayment of borrowings from third parties
Dividends paid
Notes
2015
For the years ended December 31,
2016
2017
72,933
8,564
(1,035)
22e)
22b)
22g)
22g)
22g)
22g)
5
F- 8
102,858
1,230
344
(626)
703
(15,459)
75,682
3,979
(17,535)
1,080
152,256
(74,366)
(14,321)
(19,614)
(108,301)
(66,178)
17,760
(16,212)
(15,280)
(79,910)
36,978
(15,137)
(81,310)
-
2,386
26,866
-
(67,195)
38,739
(2,101)
-
97,364
1,902
20,312
(673)
1,063
(7,188)
59,151
56,494
(675)
(49,540)
178,210
62,409
22,004
(16,264)
68,149
(73,168)
3,683
(24,294)
(19,198)
(112,977)
141,946
(30,000)
(39,851)
(8,638)
978
-
2,435
(75,076)
235
(62,930)
-
104,421
627
4,364
(860)
4,106
(7,858)
78,145
23,427
(230)
2,422
208,562
(31,486)
11,507
(7,947)
(27,926)
(76,496)
49,014
(20,587)
(17,080)
(65,149)
114,452
(28,439)
(48,423)
(14,512)
431
-
-
(90,943)
474,465
(534,460)
(24,353)
Table of Contents
Net cash flows from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Foreign exchange differences
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
The accompanying notes are an integral part of the consolidated financial statements.
F-9
36,638
6,421
(33,841)
211,440
184,020
(62,695)
4,175
5,840
184,020
194,035
(84,348)
(60,839)
8,566
194,035
141,762
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2015, 2016 and 2017
(In thousands of U.S. dollars, unless otherwise indicated)
1) COMPANY ACTIVITY AND CORPORATE INFORMATION
(a) Description of business
Atento S.A. (the “Company”) and its subsidiaries (“Atento Group”) offer customer relationship management services to their clients through contact centers
or multichannel platforms.
The Company was incorporated on March 5, 2014 under the laws of the Grand - Duchy of Luxembourg, with its registered office in Luxembourg at 4, Rue
Lou Hemmer.
The Atento Group was acquired in 2012 by Bain Capital Partners, LLC (“Bain Capital”). Bain Capital is a private investment fund that invests in companies
with a high growth potential. Notable among its investments in the Customer Relationship Management (“CRM”) sector is in Bellsystem 24, a leader in customer
service in Japan, and Genpact, the largest business management services company in the world.
In December 2012, Bain Capital entered into a final agreement with Telefónica, S.A. for the transfer of nearly 100% of the CRM business carried out by the
Atento Group (the “Acquisition”), the parent company of which was Atento Inversiones y Teleservicios, S.A. (“AIT”). The Venezuelan based subsidiaries of the
group headed by AIT, and AIT , except for some specific assets and liabilities, were not included in the Acquisition. Control was transferred for the purposes of
creating the consolidated Atento Group on December 1, 2012.
The majority direct shareholder of the Company, ATALAYA Luxco PIKCo, S.C.A. (Luxembourg), is a holding company incorporated under the laws of the
Grand-Duchy of Luxembourg.
The Company may also act as the guarantor of loans and securities, as well as assisting companies in which it holds direct or indirect interests or that form
part of its group. The Company may secure funds, with the exception of public offerings, through any kind of lending, or through the issuance of bonds, securities
or debt instruments in general.
The Company may also carry on any commercial, industrial, financial, real estate business or intellectual property related activity that it deems necessary to
meet the aforementioned corporate purposes.
The corporate purpose of its subsidiaries, with the exception of the intermediate holding companies, is to establish, manage and operate CRM centers
through multichannel platforms; provide telemarketing, marketing and “call center” services through service agencies or in any other format currently existing or
which may be developed in the future by the Atento Group; provide telecommunications, logistics, telecommunications system management, data transmission,
processing and internet services and to promote new technologies in these areas; offer consultancy and advisory services to clients in all areas in connection with
telecommunications, processing, integration systems and new technologies, and other services related to the above. The Company’s ordinary shares are traded on
NYSE under the symbol “ATTO”.
2) BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS
a) Statement of compliance with IFRS and basis of preparation
The consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International
Accounting Standard Board (“IASB”) prevailing at December 31, 2017. The consolidated financial statements have been prepared on a historical costs basis, with
the exception of derivative financial instruments and financial liability related to the option for acquisition of non-controlling interest, which have been measured at
fair value.
F- 10
Table of Contents
The consolidated financial statements have been approved by the Board of Directors (the “Board”) and Audit Committee of the Company, Atento S.A. in
Luxembourg on April 19, 2018. These consolidated financial statements have not been yet approved by the General Shareholders Meeting of the Parent Company.
However, the Board of Directors expects them to be approved without amendments.
The preparation of financial statements under IFRS as issued by the IASB requires the use of certain key accounting estimates. IFRS also requires
Management to exercise judgment throughout the process of applying the Atento Group’s accounting policies. Note 3r discloses the areas requiring a more
significant degree of judgment or complexity and the areas where assumptions and estimates are more relevant to the consolidated financial statements. Also, Note
3 contains a detailed description of the most significant accounting policies used to prepare these consolidated financial statements.
The amounts in these consolidated financial statements, comprising the consolidated statements of financial position, the consolidated statements of
operations, the consolidated statements of comprehensive income/(loss), the consolidated statements of changes in equity, the consolidated statements of cash
flows, and the notes thereto are expressed in thousands of U.S. dollars, unless otherwise indicated.
b) Comparative information
The main changes are:
On September 2, 2016, the Company through its direct subsidiary Atento Brasil acquired 81,49%, the controlling interest of RBrasil Soluções S.A. (RBrasil)
and on September 30, 2016 the Company through its direct subsidiary Atento Teleservicios España sold 100% of Atento Morocco. In accordance with IFRS 5 the
results of the operations in Morocco are presented in consolidated statements of operations as discontinued operations for the years ended December 31, 2016 and
2015.
On June 9, 2017, the Company, through its subsidiary Atento Brasil, acquired control of Interfile Serviços de BPO Ltda. and of Interservicer – Serviços em
Crédito Imobiliário Ltda. (jointly, “Interfile”), a leading provider of BPO services and solutions, including credit origination, for the banking and financial services
sector in Brazil. Through this acquisition, the Company expects to be able to expand the capabilities in the financial services sector, especially in credit origination,
accelerate the penetration into higher value-added solutions, strengthen the leadership position in the Brazilian market and facilitate the expansion of the credit
origination sector into other Latin American markets. See more details of this acquisition in Note 5.
c) Consolidated statements of cash flows
The consolidated statements of cash flows has been prepared using the indirect method pursuant to IAS 7, “Statement of Cash Flow”. Foreign currency
transactions are translated at the average exchange rate for the period, in those cases where the currency differs from the presentation currency of Atento Group
(U.S. dollar), as indicated in Note 3c. The effect of exchange rate fluctuations on cash and cash equivalents, maintained or owed, in foreign currency, is presented
in the statements of cash flows to reconcile cash and cash equivalents at the beginning of the year and at year-end.
3) ACCOUNTING POLICIES
The main accounting policies used to prepare the accompanying consolidated financial statements are set out below.
a) Principles of consolidation, business combinations and goodwill
(i)
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Atento Group has control. The Atento Group controls an entity when the Atento
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from the date on which control is obtained by the Group, until the Group loses control of the entity.
F- 11
Table of Contents
Intercompany transactions, balances and unrealized gains on transactions between the Atento Group companies are eliminated on consolidation, except
those arisen from exchange variations. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Atento Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of operations, statement of
comprehensive income/(loss), statement of changes in equity and financial position, respectively.
(ii)
Business
combinations
and
goodwill
The Atento Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is
the fair value of the assets acquired, the liabilities assumed vis - à-vis the former owners of the acquire, and any equity instruments therein issued by the Atento
Group. The consideration transferred includes the fair value of any asset or liability resulting from any contingent consideration.
Any contingent consideration to be transferred by the Atento Group is recognized at its fair value as of the acquisition date. Subsequent changes in the fair
value of any contingent consideration deemed an asset or a liability are recognized in the statements of operations or as a change in other comprehensive
income/(loss), in accordance with IAS 39, “Financial Instruments: Recognition and Measurement”. Contingent consideration classified as equity is not remeasured,
and any subsequent settlement thereof is also recognized in equity. Costs related to the acquisition are recognized as expenses in the year in which they are
incurred.
Identifiable assets acquired and identifiable liabilities and contingent liabilities assumed in a business combination are initially measured at fair value as of
the acquisition date.
Goodwill is initially measured as any excess of the total consideration paid over the net identifiable assets acquired and liabilities assumed. If the fair value
of the net assets acquired is greater than the aggregate consideration transferred, the difference is recognized in the statements of operations as a gain or bargain
purchase. Goodwill acquired in a business combination is allocated to each cash-generating unit, or group of cash-generating units, that are expected to benefit
from the synergies arising in the business combination. Goodwill is tested for impairment annually or whrenever if there are certain events or changes in
circumstances indicating potential impairment. The carrying amount of the assets allocated to each cash-generating unit is then compared with its recoverable
amount, which is the greater of its value in use or fair value less costs to sell. Any impairment loss is immediately taken to the statements of operations, and may
not be reversed (see Note 3h).
b) Functional and presentation currency
Items included in the financial statements of each of the Atento Group’s entities are measured using the currency of the primary economic environment in
which the entities operate (‘the functional currency’). The consolidated financial statements are presented in thousands of U.S. dollars, which is the presentation
currency of the Atento Group.
c) Foreign currency translation
The results and financial position of all Atento Group entities whose functional currency is different from the presentation currency are translated into the
presentation currency as follow:
• Statements of financial position assets and liabilities are translated at the exchange rate prevailing at the reporting date.
• Statements of operations items are translated at average exchange rates for the year (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions).
F- 12
Table of Contents
• Proceeds and payments shown on the statements of cash flows are translated at the average exchange rates for the period (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on
the dates of the transactions).
• Retained earnings are translated at historical exchange rates.
• All resulting exchange differences are recognized in other comprehensive income/(loss).
Goodwill and fair value adjustments to net assets arising from the acquisition of a foreign company are considered to be assets and liabilities of the foreign
company and are translated at year - end exchange rates. Exchange differences arising are recognized in other comprehensive income/(loss).
d) Foreign currency transactions
Transactions in foreign currency are translated into the functional currency using the exchange rates prevailing at the date of the transactions or valuation
date, in the case of items being remeasured. Foreign exchange gains and losses resulting from the settlement of these transactions and from the translation at
reporting date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statements of operations, except when
deferred in other comprehensive income/(loss).
All differences arising on non–trading activities are taken to other operating income/expense in the statements of operations, with the exception of the
effective portion of the differences on cash flows and net investment hedge that are accounted for as an effective hedge against a net investment in a foreign entity.
These differences are recognised in other comprehensive income/(loss) (OCI) until the hedge settlement and disposal of the net investment, at which time, they are
recognised in the statements of operations. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI.
Non–monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the date of recognition.
e) Segment information
Segment information is presented in accordance with management information reviewed by the Chief Operating Decision Maker (“CODM”). The CODM,
responsible for allocating resources and assessing performance of operational segments, has been identified as the Chief Executive Officer (“CEO”) responsible for
strategic decisions.
The CODM considers the business from a geographical perspective and analyzes it across three operational segments—EMEA, Americas and Brazil.
f) Intangible assets
Intangible assets are stated at acquisition cost, less any accumulated amortization and any accumulated impairment losses.
The intangible assets acquired in a business combination are initially measured at their fair value as of the acquisition date.
The useful lives of intangible assets are assessed on a case - by-case basis to be either finite or indefinite. Intangible assets with finite lives are amortized on
a straight line basis over their estimated useful life and assessed for impairment whenever events or changes indicate that their carrying amount may not be
recoverable. Intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. The amortization charge on
intangible assets is recognized in the consolidated statements of operations under “Amortization”.
F- 13
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Amortization methods and useful lives are revised annually at the end of each reporting period and, where appropriate, adjusted prospectively.
Customer
bases
Customer bases acquired in a business combination are recognised at fair value at the acquisition date and have finite useful lives and are subsequently
carried at cost less accumulated amortization, which has been estimated to be between seven and twelve years. The customer bases relate to all agreements, tacit or
explicit, entered into between the Atento Group and the former owner of the Atento Group and between the Atento Group and other customers, in relation to the
provision of services, and that were acquired as part of the business combinations indicated in Note 5.
Software
Software is measured at cost (at acquisition or development costs) and amortized on a straight line basis over its useful life, generally estimated to be
between three and five years. Maintenance cost of software is expensed as incurred.
Development costs directly attributable to the design and creation of software that are identifiable and unique, and that may be controlled by the Group, are
recognized as an intangible asset providing the following conditions are met:
• It is technically feasible for the intangible asset to be completed so that it will be available for use or sale.
• Management intends to complete the asset for use or sale.
• The Group has the capacity to use or sell the asset.
• It is possible to show evidence of how the intangible asset will generate probable future economic benefits.
• Adequate technical, financial and other resources are available to complete the development and to use or sell the intangible asset.
• The outlay attributable to the intangible asset during its development can be reliably determined.
Directly attributable costs capitalized in the value of the software include the cost of personnel developing the programs and an appropriate percentage of
overheads.
Costs that do not meet the criteria listed above are recognized as an expense as incurred. Expenditure for an intangible asset that is initially recognized
within expenses for the period may not be subsequently recognized as intangible assets.
Other
intangible
assets
Other intangible assets mainly include payment of loyalty incentives which are amortized on a straight line basis over the term of the agreements which
range from four to ten years.
g) Property, plant and equipment
Property, plant and equipment are measured at cost, less accumulated depreciation and any impairment losses. Land is not depreciated.
Acquisition costs include, when appropriate, the initial estimates of decommissioning, withdrawal and site reconditioning costs when the Atento Group is
obliged to bear this expenditure as a condition of using the assets. Repairs that do not prolong the useful life of the assets and maintenance costs are recognized
directly in the statements of operations. Costs that prolong or improve the life of the asset are capitalized as an increase in the cost of the asset.
F- 14
Table of Contents
Property, plant and equipment acquired in a business combination are initially measured at fair value as of the acquisition date.
The Atento Group assesses the need to write down, if appropriate, the carrying amount of each item of property, plant and equipment to its period - end
recoverable amount whenever there are indications that the assets’ carrying amount may not be fully recoverable through the generation of sufficient future
revenue. The impairment allowance is reversed if the factors giving rise to the impairment cease to exist.
The depreciation charge for items of property, plant and equipment is recognized in the consolidated statements of operations under “Depreciation”.
Depreciation is calculated on a straight line basis over the useful life of the asset applying individual rates to each type of asset, which are reviewed at the
end of each reporting period.
The useful lives generally used by the Atento Group are as follow:
Buildings
Plant and machinery
Furniture, tools
Other tangible assets
h) Impairment of non - current assets
Years of useful life
5 - 40
3 - 6
1 - 10
5 - 8
The Atento Group assesses as of each reporting date whether there is an indicator that a non - current asset may be impaired. If any such indicator exists, or
when annual impairment testing for an asset is required (e.g. goodwill), the Atento Group estimates the asset’s recoverable amount. An asset’s recoverable amount
is the higher of its fair value less costs to sell or its value in use. In assessing the value in use, the estimated future cash flow is discounted to its present value using
a pre - tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an
asset exceeds its recoverable amount, the asset is considered to be impaired. In this case, the carrying amount is written down to its recoverable amount, and the
resulting loss is recognized in the statements of operations. Future depreciation/amortization charges are adjusted to reflect the asset’s new carrying amount over its
remaining useful life. Management analyzes the impairment of each asset individually, except in the case of assets that generate cash flow which are interdependent
on those generated by other assets (cash generating units – “CGU”).
The Atento Group bases the calculation of impairment on the business plans of the various cash generating units to which the assets are allocated. These
business plans cover five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.
When there are new events or changes in circumstances that indicate that a previously recognized impairment loss no longer exists or has been decreased, a
new estimate of the asset’s recoverable amount is made. A previously recognized impairment loss is reversed only if there has been a change in the estimates used
to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its
recoverable amount. The reversal is limited to the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior
years. This reversal is recognized in the statements of operations and the depreciation charge is adjusted in future periods to reflect the asset’s revised carrying
amount. Impairment losses relating to goodwill cannot be reversed in future periods.
F- 15
Table of Contents
i) Financial assets and liabilities
Financial
assets
Upon initial recognition, the Atento Group classifies its financial assets into one of four categories: financial assets at fair value through profit or loss, loans
and receivables, held - to-maturity investments and available-for - sale financial assets. These classifications are reviewed at the end of each reporting period and
modified if appropriate.
The Atento Group has classified all of its financial assets as loans and receivables, except for derivative financial instruments.
All purchases and sales of financial assets are recognized on the statement of financial position on the transaction date, i.e. when the commitment is made to
purchase or sell the asset.
A financial asset is fully or partially derecognized from the statement of financial position only when:
1. The rights to receive cash flow from the asset have expired.
2. The Atento Group has assumed an obligation to pay the cash flow received from the asset to a third party or
3. The Atento Group has transferred its rights to receive cash flow from the asset to a third party, thereby substantially transferring all of the risks and
rewards of the asset.
Financial assets and financial liabilities are offset and presented on a net basis in the statement of financial position when a legally enforceable right exists to
offset the amounts recognized and the Atento Group intends to settle the assets and liabilities net or to simultaneously realize the asset and cancel the liability.
Loans and receivables include fixed - maturity financial assets not listed in active markets and which are not derivatives. They are classified as current
assets, except for those maturing more than twelve months after the reporting date, which are classified as non - current assets. Loans and receivables are initially
recognized at fair value plus any transaction costs, and are subsequently measured at amortized cost, using the effective interest method. Interest calculated using
the effective interest method is recognized under finance income in the statements of operations.
The Atento Group assesses at each reporting date whether a financial asset is impaired. Where there is objective evidence of impairment of a financial asset
valued at amortized cost, the amount of the loss to be taken to the statements of operations is measured as the difference between the carrying amount and the
present value of estimated future cash flow (without taking into account future losses), discounted at the asset’s original effective interest rate. The carrying amount
of the asset is reduced and the amount of the impairment loss is expensed in the consolidated statements of operations.
Trade
receivables
Trade receivables are amounts due from customers for the sale of services in the normal course of business. Receivables slated for collection in twelve
months or less are classified as current assets; otherwise, the balances are considered non - current assets.
Trade receivables are recognized at the original invoice amount. An impairment provision is recorded when there is objective evidence of collection risk.
The amount of the impairment provision is calculated as the difference between the carrying amount of the doubtful trade receivables and their recoverable amount.
In general, cash flow relating to short-term receivables is not discounted.
Cash
and
cash
equivalents
Cash and cash equivalents comprise cash on hand and in banks, demand deposits and other highly liquid investments with an original maturity of three
months or less, which are subject to an insignificant risk of changes in value.
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Table of Contents
Financial
liabilities
Debt
with
third
parties
(Borrowing)
Debt with third parties is initially recorded at the fair value of the consideration received, less any directly attributable transaction costs. After initial
recognition, these financial liabilities are measured at amortized cost using the effective interest method. Any difference between the cash received (net of
transaction costs) and the repayment value is recognized in the statements of operations over the life of the debt. Debt with third parties is considered to be non - -
current when the maturity date is longer than twelve months from the reporting date, or when the Atento Group has full discretion to defer settlement for at least
another twelve months from that date.
Financial liabilities are derecognized in the statement of financial position when the respective obligation is settled, cancelled or matures.
Trade
payables
Trade payables are payment obligations in respect of goods or services received from suppliers in the ordinary course of business. Trade payables falling
due in twelve months or less are classified as current liabilities; otherwise, the balances are considered as non - current liabilities.
j) Derivative financial instruments and hedging
Derivative financial instruments are initially recognized at their fair values on the date on which the derivative contract is entered into and are subsequently
re-measured at their fair value.
Any gains or losses resulting from changes in the fair value of a derivative instrument are recorded in the statements of operations, except for the effective
portion of cash flow hedges, which is recognized in other comprehensive income/(loss) and later reclassified to profit or loss when the hedge item affects the
statements of operations.
At the inception of the derivative instrument contract, the Atento Group documents the relationship between the hedging instruments and the hedged items,
as well as the risk management objectives and the strategy for groups of hedges. The Atento Group also documents its assessment, both at the inception of the
hedge and throughout the term thereof, of whether the derivatives used are highly effective at offsetting changes in the fair value or cash flow of the hedged items.
The fair value of a hedging derivative is classified as a non-current asset or liability, as applicable, if the remaining maturity of the hedged item exceeds
twelve months, otherwise it is classified as a current asset or liability.
For purpose of hedge accounting the Atento Group designates certain derivatives as either:
Cash
flow
hedges
Cash flow hedge is defined as a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or
liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction that could affect profit or loss.
The effective portion of the gain or loss on the hedging instrument is recognized in other comprehensive income in the cash flow hedge reserve in equity. If
a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, any gain or loss on the hedging instrument that
was previously recognized directly in equity is recycled from reserves into the statements of operations in the same period(s) in which the financial asset or liability
affects profit or loss.
Net
investment
hedges
Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized in other comprehensive income. Gains or losses
relating to the ineffective portion are recognized in the statements of operations. Gains and losses accumulated in equity are included in the statements of operations
when the foreign operation is partially disposed of or sold.
k) Share capital
The ordinary shares of the Company are classified in equity (see Note 19).
Issuance costs directly attributable to the issuance of new shares or options are deducted from the proceeds raised in equity, net of the tax effect.
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Table of Contents
l) Provisions
Provisions are recognized when the Atento Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions for
restructuring include penalties for the cancellation of leases and other contracts, as well as employee termination payments. Provisions are not recognized for future
operating losses.
When the Atento Group is virtually certain that some or all of a provision is to be reimbursed, for example under an insurance contract, a separate asset is
recognized in the statement of financial position, and the expense relating to the provision is recorded in the statements of operations, net of the expected
reimbursement.
Provisions are measured at the present value of expenditure expected to be required to settle the obligation, using a pre - tax rate that reflects current market
assessments of the time value of money and the specific risks inherent to the obligation. Any increase in the provision due to the passage of time is recognized as a
finance cost.
Contingent liabilities represent possible obligations to third parties, and existing obligations that are not recognized, given that it is not likely that an outflow
of economic resources will be required in order to settle the obligation or because the amount cannot be reliably estimated. Contingent liabilities are not recognized
on the consolidated statement of financial position unless they are recorded as part of a business combination.
m) Employee benefit
Share
-
based
payments
Atento S.A. has a share - based compensation plan, under which the subsidiaries of Atento S.A. receive services from employees as consideration for the
equity instruments of Atento S.A. The subsidiaries themselves are not party to any of the contracts; Atento S.A. settles these agreements. The plan offers various
instruments (award agreements, stock options, restricted stock units, etc.), but so far only five types of restricted stock units (“RSUs”) have been granted to selected
employees, being two on December 3, 2014, two on July 1, 2016 and one on July 3, 2017.
The fair value of the employee services received in exchange for the grant of the RSUs is recognized as an expense in the consolidated financial statements
of Atento S.A. The total amount to be expensed is determined with reference to the fair value of the RSUs granted:
• Including any market performance conditions (for example, an entity’s share price);
• Excluding the impact of any service and non - market performance vesting conditions (for example, profitability, sales growth targets and
remaining an employee of the entity over a specified time period); and
• Including the impact of any non - vesting conditions (for example, the requirement for employees to save or hold shares for a specific period of
time).
At the end of each reporting period, the group revises its estimates of the number of RSUs that are expected to vest based on the non - market vesting
conditions and service conditions. It recognizes the impact of the revisions to original estimates, if any, in the statements of operations, with a corresponding
adjustment to equity.
When the RSUs vest, Atento S.A. issues new shares or buys them back in the market. The proceeds received, net of any directly attributable transaction
costs, are credited to share capital (nominal value) and share premium.
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Table of Contents
The social security contributions payable in connection with the granting of the share options is considered an integral part of the grant itself, and the charge
will be treated as a cash-settled transaction.
Termination
benefits
Termination benefits are paid to employees when the Atento Group decides to terminate their employment contracts prior to the usual retirement age or
when the employee agrees to resign voluntarily in exchange for these benefits. The Atento Group recognizes these benefits as an expense for the year, at the earliest
of the following dates: (a) when the Atento Group is no longer able to withdraw the offer for these benefits; or (b) when the Atento Group company recognizes the
costs of a restructuring effort as per IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”, and when this restructuring entails the payment of
termination benefits. When benefits are offered in order to encourage the voluntary resignation of employees, termination benefits are measured on the basis of the
number of employees expected to accept the offer. Benefits to be paid in more than twelve months from the reporting date are discounted to their present value.
n) Income tax
The income tax expense includes all the expenses and credits arising from the corporate income tax levied on all the Atento Group companies.
Income tax expenses for each period represent the aggregate amounts of current and deferred taxes, if applicable.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities.
The tax rates and tax laws used to compute the amounts are those that are enacted at the reporting date in each country in which the Atento Group operates. The
Atento Group determines deferred tax assets and liabilities by applying the tax rates that will be effective when the corresponding asset is received or the liability
settled, based on tax rates and tax laws that are enacted (or substantively enacted) at the reporting date.
Deferred taxes are calculated on temporary differences arising from differences between the tax basis of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred tax assets also arise from unused tax credits and tax loss carryforwards.
The carrying amounts of deferred income tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient
future taxable profits will be available to allow all or part of that deferred tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each
reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax liabilities associated with investments in subsidiaries and branches are not recognized when the timing of the reversal can be controlled by the
parent company, and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax relating to items directly recognized in equity is also recognized in equity. Deferred tax assets and liabilities resulting from business
combinations are added to or deducted from goodwill.
Deferred tax assets and liabilities are offset only if a legally enforceable right exists to offset current tax assets against current income tax liabilities and the
deferred taxes relate to the same taxable entity and the same taxation authority.
o) Revenue and expenses
Revenue and expenses are recognized on the statements of operations on an accruals basis, i.e. when the services are rendered, regardless of when actual
payment or collection occurs.
F- 19
Table of Contents
Revenue is measured at the fair value of the consideration received or to be received, and represents the amounts expected to be collected for services sold,
net of discounts, returns and value added tax. Revenue is recognized when it can be reliably measured, when it is probable that the Group will receive a future
economic benefit, and when certain conditions are met for each Group activity carried out.
Services revenues are recognized when services are rendered, when the revenue and costs of the services contract, can be reliably estimated, and it is
probable that the related receivables will be recovered.
The Atento Group obtains revenue mainly from services provided to customer, recognizing the revenue when the call center services are performed or when
certain contact center consulting work is carried out.
Expenses are recognized in the statements of operations an accrual basis, regardless of when actual payment or collection occurs.
The Atento Group’s incorporation, start - up and research expenses, as well as expenses that do not qualify for capitalization under IFRS, are recognized in
the consolidated statements of operations when incurred and classified in accordance with their nature.
p) Interest income and expenses
Interest expenses incurred in the construction of any qualified asset are capitalized during the time necessary to complete the asset and prepare it for the
intended use. All other interest expenses are expensed as incurred.
Interest income is recognized using the effective interest method. When a loan or a receivable has been impaired, the carrying amount is reduced to the
recoverable amount, discounting the estimated future cash flow at the instrument’s original effective interest rate and recognizing the discount as a decrease in
interest income. Interest income on impaired loans is recognized when the cash is collected or on the basis of the recovery of the costs when the loan is secured.
q) Leases (as lessee)
The Atento Group rents certain properties. Leases where the lessor does not transfer substantially all of the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease payments are recognized as an expense in the statements of operations on a straight line basis over the lease term.
Those lease arrangements under which the Atento Group holds the significant risks and benefits inherent in owning the leased item are treated as finance
leases. Finance leases are capitalized as an asset at the inception of the lease period and classified according to their nature. Finance leases are capitalized at the
lower of the present value of the minimum lease payments agreed, and the fair value of the leased asset. Lease payments are proportionally allocated to the
principal of the lease liability and to finance charges. Finance charges are reflected in the statements of operations over the lease term so as to achieve a constant
rate of interest on the balance pending repayment in each period.
r) Critical accounting estimates and assumptions
The preparation of consolidated financial statements under IFRS as issued by the IASB requires the use of certain assumptions and estimates that affect the
carrying amount of assets and liabilities within the next financial year.
Some of the accounting policies applied in preparing the accompanying consolidated financial statements required Management to apply significant
judgments in order to select the most appropriate assumptions for determining these estimates. These assumptions and estimates are based on Management
experience, the advice of consultants and experts, forecasts and other circumstances and expectations prevailing at year end. Management’s evaluation takes into
account the global economic situation in the sector in which the Atento Group operates, as well as the future outlook for the business. By virtue of their nature,
these judgments are inherently subject to uncertainty. Consequently, actual results could differ substantially from the estimates and assumptions used. Should this
occur, the values of the related assets and liabilities would be adjusted accordingly.
F- 20
Table of Contents
Although these estimates were made on the basis of the best information available at each reporting date on the events analyzed, events that take place in the
future might make it necessary to change these estimates in coming years. Changes in accounting estimates would be applied prospectively in accordance with the
requirements of IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, recognizing the effects of the changes in estimates in the related
consolidated statements of operations.
An explanation of the estimates and judgments that entail a significant risk of leading to a material adjustment in the carrying amounts of assets and
liabilities is as follow:
Useful
lives
of
property,
plant
and
equipment
and
intangible
assets
The accounting treatment of items of property, plant and equipment and intangible assets entails the use of estimates to determine their useful lives for
depreciation and amortization purposes. In determining the useful life, it is necessary to estimate the level of use of assets as well as forecast technological trends in
the assets. Assumptions regarding the level of use, the technological framework and the future development require a significant degree of judgment, bearing in
mind that these aspects are rather difficult to foresee. Changes in the level of use of assets or in their technological development could result in a modification of
their useful lives and, consequently, in the associated depreciation or amortization.
Impairment
of
goodwill
The Atento Group tests goodwill for impairment annually, in accordance with the accounting principle described in Note 3h. Goodwill is subject to
impairment testing as part of the cash - generating unit to which it has been allocated. The recoverable amounts of cash - generating units defined in order to
identify potential impairment in goodwill are determined on the basis of value in use, applying five - year financial forecasts based on the Atento Group’s strategic
plans, approved and reviewed by Management. These calculations entail the use of assumptions and estimates, and require a significant degree of judgment. The
main variables considered in the sensitivity analyses are growth rates, discount rates using the Weighted Average Cost of Capital (“WACC”) and the key business
variables.
Deferred
taxes
The Atento Group assesses the recoverability of deferred tax assets based on estimates of future earnings. The ability to recover these deferred amounts
depends ultimately on the Atento Group’s ability to generate taxable earnings over the period in which the deferred tax assets remain deductible. This analysis is
based on the estimated timing of the reversal of deferred tax liabilities, as well as estimates of taxable earnings, which are sourced from internal projections.
The appropriate classification of tax assets and liabilities depends on a series of factors, including estimates as to the timing and realization of deferred tax
assets and the projected tax payment schedule. Actual income tax receipts and payments could differ from the estimates made by the Atento Group as a result of
changes in tax legislation or unforeseen transactions that could affect the tax balances (see Note 20).
The Atento Group has recognized deferred tax assets corresponding to losses carried forward since, based on internal projections, it is probable that it will
generate future taxable profits against which they may be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting date, and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of that deferred tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting
date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Provisions
and
contingencies
Provisions are recognized when the Atento Group has a present obligation as a result of a past event, it is probable that an outflow of resources will be
required to settle the obligation and a reliable estimate can be made of the amount of the obligation. This obligation may be legal or constructive, deriving from,
inter alia, regulations, contracts, customary practice or public commitments that would lead third parties to reasonably expect that the Atento Group will assume
certain responsibilities. The amount of the provision is determined based on the best estimate of the outflow of resources embodying economic benefit that will be
required to settle the obligation, taking into account all available information as of the reporting date, including the opinions of independent experts such as legal
counsel or consultants.
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Table of Contents
No provision is recognized if the amount of liability cannot be estimated reliably. In such cases, the relevant information is disclosed in the notes to the
consolidated financial statements.
Given the uncertainties inherent in the estimates used to determine the amount of provisions, actual outflows of resources may differ from the amounts
recognized originally on the basis of these estimates (see Note 21).
Fair
value
of
derivatives
The Atento Group uses derivative financial instruments to mitigate risks, primarily derived from possible fluctuations in interest rates. Derivatives are
recognized at the inception of the contract at fair value.
The fair values of derivative financial instruments are calculated on the basis of observable market data available, either in terms of market prices or through
the application of valuation techniques. The valuation techniques used to calculate the fair value of derivative financial instruments include the discounting of
future cash flow associated with the instruments, applying assumptions based on market conditions at the valuation date or using prices established for similar
instruments, among others. These estimates are based on available market information and appropriate valuation techniques. The fair values calculated could differ
significantly if other market assumptions and/or estimation techniques were applied.
s) Interest in subsidiaries
All subsidiaries are fully consolidated. Where necessary, the accounting policies of subsidiaries have been aligned to those adopted in the Atento Group.
The details of Atento Group subsidiaries at December 31, 2017 are as follow:
Name
Atento Luxco Midco, S.à.r.l.
Atento Luxco 1 S.A.
Atalaya Luxco 2. S.à.r.l.
Atalaya Luxco 3. S.à.r.l.
Atento Argentina. S.A
Global Rossolimo. S.L.U
Atento Spain Holdco. S.L.U
Atento Spain Holdco 6. S.L.U
Atento Spain Holdco 2. S.A.U
Atento Teleservicios España. S.A.U
Line of business
Registered address
Holding company
Luxembourg
Holding company
Luxembourg
Holding company
Luxembourg
Holding company
Luxembourg
Buenos Aires (Argentina) Operation of call
Holding company
Madrid (Spain)
Holding company
Madrid (Spain)
Holding company
Madrid (Spain)
Holding company
Madrid (Spain)
Operation of call
Madrid (Spain)
centers
Execution of
technological projects
and services, and
consultancy services
centers
F- 22
% interest
100
100
100
100
90
10
100
100
100
100
100
Holding company
Atento S.A.
Atento Luxco Midco, S.à.r.l
Atento Luxco 1. S.A.
Atento Luxco 1. S.A.
Atalaya Luxco 2. S.à.r.l.
Atalaya Luxco 3. S.à.r.l.
Atento Spain Holdco. S.L.U.
Atento Luxco 1. S.A.
Atento Spain Holdco. S.L.U.
Atento Spain Holdco 6. S.L.U.
Atento Spain Holdco 2. S.A.U.
100
Atento Teleservicios España S.A.U.
Atento Servicios Técnicos y Consultoría S.A.U Madrid (Spain)
Table of Contents
Atento Impulsa. S.A.U
Barcelona (Spain)
Atento Servicios Auxiliares de Contact
Center. S.A.U
Madrid (Spain)
Management of
specialized employment
centers for disabled
workers
Execution of
technological projects
and services, and
consultancy services
100
100
Atento B V
Amsterdam (Netherlands) Holding company
Teleatento del Perú. S.A.C
Lima (Peru)
Woknal. S.A.
Montevideo (Uruguay)
Operation of call
centers
Operation of call
centers
Atento Colombia. S.A.
Bogotá DC (Colombia)
Operation of call
centers
Atento Holding Chile. S.A.
Atento Chile. S.A.
Atento Educación Limitada
Atento Centro de Formación Técnica
Limitada
Atento Spain Holdco 4. S.A.U
Atento Brasil. S.A
R Brasil Soluções S.A.
centers
Santiago de Chile (Chile) Holding company
Santiago de Chile (Chile) Operation of call
Santiago de Chile (Chile) Operation of call
Santiago de Chile (Chile) Operation of call
Holding company
Madrid (Spain)
Operation of call
São Paulo (Brazil)
centers
Operation of call
centers
São Paulo (Brazil)
centers
centers
Atento Spain Holdco 5. S.L.U
Atento Mexico Holdco S. de R.L. de C.V.
Madrid (Spain)
Mexico
Atento Puerto Rico. Inc.
Contact US Teleservices Inc.
Guaynabo (Puerto Rico)
Houston, Texas (USA)
Atento Panamá. S.A.
Panama City
Atento Atención y Servicios. S.A. de C.V.
Mexico City (Mexico)
Atento Servicios. S.A. de C.V.
Atento Centroamérica. S.A.
Mexico City (Mexico)
Guatemala (Guatemala)
Holding company
Holding company
Operation of call
centers
Operation of call
centers
Operation of call
centers
Administrative,
professional and
consultancy services
Sale of goods and
services
Holding company
F- 23
100
83,3333
(Class A)
16,6667
(Class B)
100
94.97871
0.00424
0.00854
5.00427
0.00424
99.9999
0.0001
99.99
0.01
99
1
99
1
100
99.999
0.001
81.4885
9.25
9.25
100
99.966
0.004
100
100
100
99.998
0.002
99.998
0.002
99.9999
0.0001
Atento Teleservicios España S.A.U.
Atento Teleservicios España. S.A.U.
Atento Spain Holdco 2. S.A.U.
Atento B.V.
Atento Holding Chile. S.A.
Atento B.V.
Atento B.V.
Atento Servicios Auxiliares de Contact Center. S.L.U.
Atento Servicios Técnicos y Consultoría. S.L.U.
Atento Teleservicios España. S.A.U.
Teleatento del Perú SAC.
Atento B.V.
Atento Spain Holdco 2
Atento Holding Chile. S.A.
Atento B.V.
Atento Chile. S.A.
Atento Holding Chile. S.A.
Atento Chile. S.A.
Atento Holding Chile. S.A.
Atento Spain Holdco. S.L.U.
Atento Spain Holdco 4. S.A.U.
Atento Spain Holdco. S.L.U.
Atento Brasil. S.A.
Flávio Luiz Rossetto
Jorge Luiz Rossetto
Atento Spain Holdco. S.L.U.
Atento Spain Holdco 5. S.L.U.
Atento Spain Holdco. S.L.U.
Atento Mexico Holdco S. de R.L. de C.V.
Atento Mexico Holdco S. de R.L. de C.V.
Atento Mexico Holdco S. de R.L. de C.V.
Atento Mexico Holdco S. de R.L. de C.V.
Atento Servicios. S.A. de C.V.
Atento Mexico Holdco S. de R.L. de C.V.
Atento Atención y Servicios. S.A. de C.V.
Atento Mexico Holdco S. de R.L. de C.V.
Atento El Salvador S.A. de C.V.
Table of Contents
Atento de Guatemala. S.A.
Atento El Salvador. S.A. de C.V.
Atento Nicaragua S.A.
Atento Costa Rica S.A.
Interservicer - Serviços de BPO Ltda.
Interfile Serviços de BPO Ltda.
Nova Interfile Holding Ltda.
Guatemala (Guatemala)
City of San Salvador (El
Salvador)
Nicaragua
Costa Rica
São Paulo (Brasil)
São Paulo (Brasil)
São Paulo (Brasil)
Operation of call
centers
Operation of call
centers
Operation of call
centers
Operation of call
centers
Operation of call
centers
centers
Operation of call
Holding company
99.99999
0.00001
7.4054
92.5946
4.35
95.65
99.999
0.0001
50.00002
Atento Centroamérica. S.A.
Atento El Salvador S.A. de C.V.
Atento Centroamerica. S.A.
Atento de Guatemala. S.A.
Atento Centroamerica. S.A.
Atento Mexico Holdco S. de R.L. de C.V.
Atento Mexico Holdco S. de R.L. de C.V.
Atento Centroamerica. S.A.
Nova Interfile e Holding Ltda.
50.00002
Nova Interfile e Holding Ltda.
100
Atento Brasil. S.A.
At December 31, 2015, 2016 and 2017, none of the Group’s subsidiaries is listed on a stock exchange, except for Atento Luxco 1 S.A., which has debt
securities listed in the International Stock Exchange (TISE) in Guernsey. All subsidiaries use year-end December 31 as their reporting date.
t) New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing on or after January 1, 2017:
·
Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12; and
·
Disclosure Initiative – Amendments to IAS 7.
The adoption of these amendments did not have any material impact on the current period or any prior period and is not likely to affect future periods.
u) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for December 31, 2017 reporting periods and have not
been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below:
Title of standard
IFRS 9 Financial Instruments
Nature of change
IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities, introduces new
rules for hedge accounting and a new impairment model for financial assets.
Impact
The Group has reviewed its financial assets and liabilities and is expecting the following impact from the adoption of the new
standard on January 1, 2018:
Financial assets
The Company’s loans and receivables as per IAS 39 that are held to collect contractual cash flows that solely represent
payments and interest satisfy the conditions for classification as at amortized cost for IFRS 9 and hence there will be no
change to the accounting for these assets.
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Table of Contents
Impact
We also expect no changes for derivatives, that as per IAS 39 are classified at fair value through profit or loss (unless they are
designated as hedges) and would appear to be classified as FVPL as per IFRS 9.
Accordingly, the Atento Group does not expect the new guidance to have a significant impact on the classification and
measurement of its financial assets.
Financial liabilities
There will be no impact on the Atento Group’s accounting for financial liabilities, as the new requirements only affect the
accounting for financial liabilities that are designated at fair value through profit or loss and the Atento Group does not have
such liabilities other than derivatives, that as per IAS 39 are classified at fair value through profit or loss (unless they are
designated as hedges) and will be classified as FVPL (fair value through profit or loss) as per IFRS 9. The derecognition rules
have been transferred from IAS 39 Financial
Instruments:
Recognition
and
Measurement
and have not been changed.
The new hedge accounting rules will align the accounting for hedging instruments more closely with the Atento Group’s risk
management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard
introduces a more principles-based approach. The Atento Group’s current hedge relationships will qualify as continuing
hedges upon the adoption of IFRS 9. Accordingly, the Atento Group does not expect a significant impact on the accounting
for its hedging relationships.
The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather
than only incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortized cost, debt
instruments measured at FVOCI (fair value through other comprehensive income), contract assets under IFRS 15 Revenue
from
Contracts
with
Customers, lease receivables, loan commitments and certain financial guarantee contracts. Management
does not expect a significant increase in the credit losses, as well as losses on investments held at amortized cost.
Mandatory application date/
Date of adoption by the Group
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to
change the nature and extent of the Atento Group’s disclosures about its financial instruments particularly in 2018.
Must be applied for financial years commencing on or after January 1, 2018.
The Group will apply the new rules retrospectively from January 1, 2018, with the practical expedients permitted under the
standard. Comparatives for 2017 will not be restated.
Title of standard
IFRS 15 Revenue from Contracts with Customers
Nature of change
The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for goods
and services and IAS 11 which covers construction contracts.
Impact
The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a
customer.
Management has assessed the effects of applying the new standard on the Atento Group’s financial statements and has
identified the following services that are likely to be affected:
ü Accounting for certain costs incurred in fulfilling a contract – certain costs which are currently expensed may need to be
recognised as an asset under IFRS 15.
ü Variable consideration – IFRS 15 establishes that the Atento Group includes in the transaction price of services the amount
of variable consideration estimated only to the extent that it is probable that a significant reversal in the amount of
cumulative revenue recognized will not occur. Some contracts with customer may be impacted for this requirement due
to the existence of clauses containing service level requirements, trade discounts, penalties or volume rebates. This could
result in different amounts being recognized and/or delay the recognition of a portion of the revenue.
ü Presentation disclosure - IFRS 15 provides presentation and disclosure requirements, which are more detailed than under
current IFRS. The presentation requirements represent a significant change from current practice and significantly
increases the volume of disclosures required in Atento Group’s financial statements. Many of the disclosure requirements
in IFRS 15 are completely new. The Atento Group is reassessing its systems, internal controls, policies and procedures
necessary to collect and disclose the required information.
Mandatory application date/
Date of adoption by the Group
The Atento’s Group continue to evaluate customer contracts to determine the estimated variable consideration as disclosed
above. Based on the assessment conducted in 2017, the Company and its subsidiaries do not foresee a significant impact
through the adoption of IFRS 15.
The Group intends to adopt the standard using the modified retrospective approach as of January 1, 2018 and the comparatives
will not be restated.
F- 25
Table of Contents
Title of standard
IFRS 16 Leases
Nature of change
IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction
between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a
financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.
Impact
The accounting for lessors will not significantly change.
The standard will affect primarily the accounting for the Atento Group’s operating leases. As at the reporting date, the Atento
Group has operating lease commitments of 240,113 thousand U.S. dollars. However, the Atento Group has not yet determined
to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will
affect the Atento Group’s profit and classification of cash flows.
Mandatory application date/
Date of adoption by group
Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may
relate to arrangements that will not qualify as leases under IFRS 16.
Mandatory for financial years commencing on or after January 1, 2019. At this stage, the Atento Group does not intend to adopt
the standard before its effective date.
Title of standard
IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2
Key requirements
The IASB issued amendments to IFRS 2 Share-based
Payment
that address three main areas:
ü the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction;
ü the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and
ü accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification
from cash settled to equity settled.
Mandatory application date/
Date of adoption by group
On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is
permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods
beginning on or after January 1, 2018, with early application permitted.
Expected date of adoption by the Atento Group is January 1, 2018.
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Table of Contents
Title of standard
IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration
Key requirements
Mandatory application date/
Date of adoption by group
The Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the
related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to
advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or
non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the
entity must determine the transaction date for each payment or receipt of advance consideration. Entities may apply the
amendments on a fully retrospective basis.
Alternatively, an entity may apply the Interpretation prospectively to all assets, expenses and income in its scope that are
initially recognised on or after:
(i) The beginning of the reporting period in which the entity first applies the interpretation; or
(ii) The beginning of a prior reporting period presented as comparative information in the financial statements of the reporting
period in which the entity first applies the interpretation.
The Interpretation is effective for annual periods beginning on or after January 1, 2018. Early application of interpretation is
permitted and must be disclosed.
Expected date of adoption by the Atento Group is January 1, 2018.
Title of standard
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment
Key requirements
The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the
application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include
requirements relating to interest and penalties associated with uncertain tax treatments.
The Interpretation specifically addresses the following:
· Whether an entity considers uncertain tax treatments separately;
· The assumptions an entity makes about the examination of tax treatments by taxation authorities;
· How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates;
Mandatory application date/
Date of adoption by group
· How an entity considers changes in facts and circumstances.
An entity must determine whether to consider each uncertain tax treatment separately or together with one or more other
uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed.
The interpretation is effective for annual reporting periods beginning on or after January 1, 2019, but certain transition reliefs
are available. The Group will apply interpretation from its effective date.
There are no other standards that are not yet effective and that would be expected to have a material impact on the Atento Group in the current or future
reporting periods and on foreseeable future transactions.
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Table of Contents
4) MANAGEMENT OF FINANCIAL RISK
4.1 Financial risk factors
The Atento Group’s activities are exposed to various types of financial risk: market risk (including foreign currency risk and interest rate risk), credit risk
and liquidity risk. The Atento Group’s global risk management policy aims to minimize the potential adverse effects of these risks on the Atento Group’s financial
returns. The Atento Group also uses derivative financial instruments to hedge certain risk exposures.
a) Market risk
Interest
rate
risk
in
respect
of
cash
flow
and
fair
value
Interest rate risk arises mainly as a result of changes in interest rates which affect: finance costs of debt bearing interest at variable rates (or short-term
maturity debt expected to be renewed), as a result of fluctuations in interest rates, and the value of non - current liabilities that bear interest at fixed rates. Atento
Group’s finance costs are exposed to fluctuations in interest rates. As of December 31, 2017, 12.8% of Atento Group’s finance costs are exposed to fluctuations in
interest rates (excluding the effect of financial derivative instruments), compared to 40.6% as of December 31, 2016.
The Atento Group’s policy is to monitor the exposure to interest at risk. As described in Note 14, the Atento Group has entered to interest rate swaps that
have the economic effect of converting floating-rate borrowings into fixed interest rate borrowings.
As of December 31, 2017, the estimated fair value of the interest rate hedging instruments related to the Brazilian Debentures totaled 1,212 thousand U.S.
dollars (1,330 thousand U.S. dollars financial asset as of December 31, 2016), which was recorded as a financial liability. Based on the total indebtedness of
486,291 thousand U.S. dollars as of December 31, 2017 and not taking into account the impact of the interest rate hedging instruments referred to above, a 1%
change in interest rates would impact our net interest expense by 1,648 thousand U.S. dollars (2,353 thousand U.S. dollars as of December 31, 2016).
The table below shows the impact of a +/ - 10 basis points variation in the CDI interest rate curves on these derivatives.
INTEREST RATE
FAIR VALUE
0.10%
-0.10%
Foreign
currency
risk
Thousands of U.S. dollars
2017
(1,212)
(1,174)
(1,248)
Our foreign currency risk arises from local currency revenues, receivables and payables, while the U.S. dollar is our functional and reporting currency. We
benefit to a certain degree from the fact that the revenue we collect in each country, in which we have operations, is generally denominated in the same currency as
the majority of the expenses we incur.
In accordance with our risk management policy, whenever we deem it appropriate, we manage foreign currency risk by using derivatives to hedge any
exposure incurred in currencies other than those of the functional currency of the subsidiary.
Upon issuance of the Senior Secured Notes due 2022 denominated in U.S. dollars, we entered into new cross-currency swaps pursuant to which we
exchanged an amount of U.S. dollars for an amount of Euro, Mexican Pesos, Peruvian Soles and Brazilian Reais.
The table below shows the impact of a +/-10 basis points variation in the interest rate curve on the value of the cross-currency swaps.
F- 28
Table of Contents
CROSS-CURRENCY
FAIR VALUE
0.10%
-0.10%
Thousands of U.S. dollars
2017
3,037
2,718
3,838
As of December 31, 2017, the estimated fair value of the cross-currency swaps designated as hedging instruments totaled an asset of 3,037 thousand U.S.
dollars (asset of 75,960 thousand U.S. dollars as of December 31, 2016).
F- 29
Table of Contents
2016
Financial assets (*)
Financial liabilities (*)
Functional currency -
financial
asset/liability currency
Euro - Colombian
Pesos
Euro - Dirham
Moroccan
Euro - Peruvian
Nuevos Soles
Euro - USD
Chilean Pesos – USD
Mexican Pesos – USD
Brazilian Reais – USD
Guatemalan Quetzal –
USD
Colombian Pesos –
USD
Peruvian Nuevos Soles
- USD
United States Dolar -
Euro
United States Dolar -
MXN
Chilean Pesos – Euro
Functional
currency
(thousands)
244
252
64
3,515
212
6
6
2,442
590,271
23,484
11,068
79
292
Asset
currency
(thousands)
817,344
2,848
241
3,705
-
-
2
325
197
6,998
10,500
1,627
-
U.S. Dollar
(thousands)
Functional
currency
(thousands)
Liability
currency
(thousands)
U.S. Dollar
(thousands)
272
281
72
3,705
-
-
2
325
197
6,998
11,068
79
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,138
1,531
1,531
-
-
-
-
-
-
-
-
-
3.1838036
0.0013487
0.9486900
Appreciation of
asset/liability
currency vs
functional currency
10% 2,846.7435699
10%
9.6064349
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
18.5574600
0.0002999
0.0012795
0.8538089
0.2681764
0.1196470
0.2761499
0.0436482
Sensitivity analysis
Appreciation
of financial
assets in
functional
currency
Statements of
operations
(thousands of
U.S. dollar)
Appreciation
of financial
liabilities in
functional
currency
Statements of
operations
(thousands of
U.S. dollar)
287
297
76
3,905
235
-
7
2,713
655,857
26,094
12,298
88
324
45
47
12
412
-
-
-
36
22
778
1,230
9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,709
(170)
-
-
-
-
-
-
(*) Financial liabilities correspond to borrowing in currencies other than functional currencies. Financial assets correspond to cash and cash equivalents in currencies other than functional currencies.
F-30
Table of Contents
2017
Financial assets (*)
Financial liabilities (*)
Sensitivity analysis
Functional currency -
financial asset/liability
currency
Functional
currency
(thousands)
Euro - Colombian
Pesos
Euro - Dirham
Moroccan
Euro - Peruvian
Nuevos Soles
Euro - USD
Chilean Pesos – USD
Mexican Pesos – USD
Brazilian Reais – USD
Guatemalan Quetzal –
USD
Colombian Pesos –
USD
Peruvian Nuevos Soles
- USD
United States Dolar -
Euro
United States Dolar -
MXN
253
527
37
2,999
7,982
970
27
82
610,695
26,358
8
10
Chilean Pesos – Euro
132,016
Asset
currency
(thousands)
904,880
5,915
144
3,597
13
-
8
11
205
8,123
6
202
179
U.S. Dollar
(thousands)
Functional
currency
(thousands)
Liability
currency
(thousands)
U.S. Dollar
(thousands)
Appreciation of
asset/liability
currency vs
functional currency
Appreciation
of financial
assets in
functional
currency
Statements of
operations
(thousands of
U.S. dollar)
Appreciation
of financial
liabilities in
functional
currency
Statements of
operations
(thousands of
U.S. dollar)
303
632
44
3,597
13
49
8
11
205
8,123
8
10
215
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,822
1,794
-
-
-
-
-
-
0.0014629
1.0793700
0.0457715
3.5025557
- 10% 3,220.8400800
- 10%
10.1000968
- 10%
- 10%
- 10%
- 10%
- 10%
- 10%
- 10%
10%
- 10%
- 10%
- 10%
17.6966100
0.7504378
0.0003016
0.0012198
0.1225362
0.2773498
0.2720677
1,794
281
586
41
3,332
8,875
-
30
91
678,550
29,287
9
11
146,423
34
70
5
400
1
(49)
1
1
23
903
1
1
20
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,469
(199)
-
-
-
-
-
-
(*) Financial liabilities correspond to borrowing in currencies other than functional currencies. Financial assets correspond to cash and cash equivalents in currencies other than functional currencies.
F- 31
Table of Contents
b) Credit risk
The Atento Group seeks to conduct all of its business with reputable national and international companies and institutions established in their countries of
origin, to minimize credit risk. As a result of this policy, the Atento Group has no material adjustments to make to its credit accounts (see Note 13).
Accordingly, the Atento Group’s commercial credit risk management approach is based on continuous monitoring of the risks assumed and the financial
resources necessary to manage the Group’s various units, in order to optimize the risk - reward relationship in the development and implementation of business
plans in the course of their regular business.
Credit risk arising from cash and cash equivalents is managed by placing cash surpluses in high quality and highly liquid money-market assets. These
placements are regulated by a master agreement revised annually on the basis of the conditions prevailing in the markets and the countries where Atento operates.
The master agreement establishes: (i) the maximum amounts to be invested per counterparty, based on their ratings (long- and short-term debt ratings); (ii) the
maximum period of the investment; and (iii) the instruments in which the surpluses may be invested.
The Atento Group’s maximum exposure to credit risk is primarily limited to the carrying amounts of its financial assets (see Notes 11 to 15). The Atento
Group holds no guarantees as collection insurance. As disclosed in Note 23, the Atento Group carries out significant transactions with the Telefónica Group, which
represents 39.2% in 2017 and 33.7% in 2016.
c) Liquidity risk
The Atento Group seeks to match its debt maturity schedule to its capacity to generate cash flows to meet the payments falling due, factoring in a degree of
cushion. In practice, this has meant that the Atento Group’s average debt maturity must be longer enough to support business operation normal conditions
(assuming that internal projections are met). A maturity schedule for the Atento Group’s financial liabilities is provided in Note 16.
4.2 Capital Management
The Atento Group’s Finance Department, which is in charge of the capital management, takes various factors into consideration when determining the
Group’s capital structure.
The Atento Group’s capital management goal is to determine the financial resources necessary both to continue its recurring activities and to maintain a
capital structure that optimizes own and borrowed funds.
The Atento Group sets an optimal debt level in order to maintain a flexible and comfortable medium-term borrowing structure, in order to be able to carry
out its routine activities under normal conditions and to address new opportunities for growth. Debt levels are kept in line with forecasted future cash flows and
with quantitative restrictions imposed under financing contracts.
As indicated in Note 17, among the restrictions imposed under financing arrangements, the debenture contract lays out certain general obligations and
disclosures in respect of the lending institutions, specifically, Atento Brasil S.A. must comply with the quarterly net financial debt/EBITDA ratio set out in the
contract terms.
In addition to these general guidelines, we take into account other considerations and specifics when determining our financial structure, such as country
risk, tax efficiency and volatility in cash flow generation.
The contract also sets out additional restrictions, including limitations on dividends, payments and distributions to shareholders and capacity to incur
additional debt.
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Table of Contents
The Super Senior Revolving Credit Facility, described in Note 17, carries no financial covenant obligations regarding debt levels. However, the notes do
impose limitations on the distributions on dividends, payments or distributions to the shareholders, the incurring of additional debt, and on investments and disposal
of assets.
As of the date of these consolidated financial statements, the Atento Group was in compliance with all restrictions established in the aforementioned
financing contracts, and does not foresee any future non - compliance. To that end, the Atento Group regularly monitors figures for net financial debt with third
parties and EBITDA.
Net financial debt with third parties at December 31, 2016 and 2017 is as follow:
Senior Secured Notes (Note 17)
Brazilian bonds - Debentures (Note 17)
Bank borrowings (Note 17)
Finance lease payables (Note 17)
Less: Cash and cash equivalents (Note 15)
Net financial debt with third parties
4.3 Fair value estimation
Thousands of U.S. dollars
2016
303,350
156,596
71,353
3,636
(194,035)
340,900
2017
398,346
21,055
56,392
10,498
(141,762)
344,529
a) Level 1: The fair value of financial instruments traded on active markets is based on the quoted market price at the reporting date.
b) Level 2: The fair value of financial instruments not traded in active market (i.e. OTC derivatives) is determined using valuation techniques. Valuation
techniques maximize the use of available observable market data, and place as little reliance as possible on specific company estimates. If all of the significant
inputs required to calculate the fair value of a financial instrument are observable, the instrument is classified in Level 2. The Atento Group’s Level 2
financial instruments comprise interest rate swaps used to hedge floating rate loans and cross-currency swaps.
c) Level 3: If one or more significant inputs are not based on observable market data, the instrument is classified in Level 3.
The Atento Group’s assets and liabilities measured at fair value as of December 31, 2016 and 2017 are classified in Level 2. No transfers were carried out
between the different levels during the period.
The assets measured at fair value are the derivative financial instruments. The liabilities measured at fair value are the derivative financial instruments and
the options for acquisitions of NCI.
5) BUSINESS COMBINATIONS
a) RBrasil Soluções S.A.
On September 2, 2016, the Company through its indirect subsidiary Atento Brasil S.A. acquired the control and 81.49%, of the shares of RBrasil Soluções
S.A. (“RBrasil”), a leading provider of late-stage collection services in Brazil.
The total amount paid for this acquisition was 27,095 thousand Brazilian Reais (8,638 thousand U.S. dollars), net of cash acquired. The Purchase and Sale
Agreement also included a contingent consideration that can vary from zero to 8,150 thousand Brazilian Reais (2,501 thousand U.S. dollars), according to the result
of the operation, which will be measured through RBrasil's EBITDA. Therefore, based on projections the Company also recorded a contingent consideration of
8,150 thousand Brazilian Reais (2,501 thousand U.S. dollars), representing its fair value as of the acquisition date. As a result, the total consideration transferred to
36,273 thousand Brazilian Reais (11,130 thousand U.S. dollars).
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Table of Contents
Valuations were carried out to measure the fair value of intangible assets and liabilities and allocation of the acquisition price, in accordance with the
requirements specified in IFRS 3. The goodwill recognized in the transaction represent future benefits of the expected synergies in the business combinations and
will be income tax deductible when RBrasil is merged into the Company. These benefits are not recognized separately from the goodwill because they do not meet
the criteria for recognition of identifiable intangible assets.
The fair value in U.S.dollars of identifiable assets acquired and liabilities assumed of RBrasil on the date of acquisition is as follows:
Thousands of U.S. dollars
Assets
Cash and cash equivalents
Accounts receivable
Escrow account
Deferred taxes assets
Other credits
Property, plant and equipment
Intangibles (b)
Liabilities
Other obligations
Provisions for legal proceedings and contingent liabilities
Total net liabilities assumed at fair value
Non-controlling interest measured at fair value
Goodwill on acquisition
Total of the consideration
Purchase price consideration
Consideration paid
Contingent consideration
Total consideration
Analysis of the cash flow of the acquisition
Consideration paid
Net cash acquired
Outflow cash, net (a)
(a) Included in the cash flow from investing activities
315
2,273
2,884
2,079
679
491
2,628
(2,932)
(13,105)
(4,688)
928
15,214
11,454
8,953
2,501
11,454
8,953
(315)
8,638
(b) Refer to customer base, non-compete agreement, backlog and database identified as part of the purchase price allocation.
The acquisition transaction costs totaling 890 thousand Brazilian Reais (273 thousand U.S. dollars) were recognized in the statements of operations.
Since the acquisition date, RBrasil contributed to the Company with revenues of 5,951 thousand U.S. dollars and pre-tax profit of 858 thousand U.S. dollars.
If the acquisition had occurred on January 1, 2016, the contribution of net revenues and pre-tax result in the Company’s consolidated financial statements for the
year ended December 31, 2016, would amount 18,392 and (2,254) thousand U.S. dollars, respectively.
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Guarantees
The amount equivalent to 9,400 Brazilian Reais (2,884 thousand U.S. dollars) of the consideration transferred to the sellers that no longer are shareholders
of RBrasil was transferred to an escrow account in order to guarantee payment for any loss that is indemnifiable by them.
The guarantee of the payment of any potential loss identifiable by the sellers who continue being minority shareholders of RBrasil to the Company pledged
their rights to all dividends, interest in own capital, incomes, distributions, salaries, bonuses, remuneration, capital reimbursement and any other amounts that may
come to be credited, paid, distributed or otherwise delivered, for any reason, by RBrasil to these shareholders.
Put/Call options
As per the Shareholders' Agreement, the Company has a purchase option, where non-controlling shareholders irrevocably and irreversibly grant to the
Company, through that instrument, the right, but not the obligation, at the sole discretion of the Company, to acquire all of their shares, and the non-controlling
shareholders, through the exercise of that right, shall be obliged to sell their shares to the Company ("call option"). The call option may be exercised by any
controlling shareholder between January 1, 2019 and December 31, 2020. The Shareholders' Agreement also provides for a put option, where the non-controlling
shareholders have the right, irrevocable and irreversible, but not the obligation, to sell all of their shares to the Company ("put option"). The put option may be
exercised by non-controlling shareholders between January 1, 2019 and December 31, 2020.
The exercise price of the call option will be determined by multiples, already defined in the Shareholders' Agreement, of the EBITDA of the year
immediately prior to the exercise of the option, multiplied by the percentage of participation to be acquired.
IFRS 3 does not provide specific guidance on how such contracts should be accounted for in a business combination. To determine the appropriate
accounting treatment, IAS 39 - financial Instruments: recognition and measurement and IAS 32- financial instruments: presentation, were considered.
On the basis of the above, the Company recognized a financial liability related to the potential for acquisition of non-controlling interest for an amount of
3,444 Brazilian Reais (1,057 thousand U.S. dollars). The financial liability was recognized against specific reserve in shareholders' equity, considering that these
are transactions between shareholders.
b) Nova Interfile Holding Ltda
On June 9, 2017, the Company through its indirect subsidiary Atento Brasil S.A. acquired the control and 50,00002% of Interfile Serviços de BPO Ltda.
and 50,00002% of Interservicer – Serviços em Crédito Imobiliário Ltda, (“Interfile”) leading providers of BPO services and solutions, including credit origination,
for the banking and financial services sector in Brazil.
The total amount paid for this acquisition was 14,664 thousand U.S. dollars, net of cash acquired.
Valuations were carried out to measure the preliminary fair value of assets acquired and liabilities assumed for the allocation of the acquisition price, in
accordance with the requirements of IFRS 3 in this interim consolidated financial statements. The preliminary goodwill recognized in the transaction represents
expected future synergies of the business combinations and will be deductible for income tax when the acquired entities are merged into the Atento Brasil S.A.
These benefits are not recognized separately from goodwill because they do not meet the criteria for recognition of identifiable intangible assets.
Details of the preliminary purchase price allocation of the fair values of Interfile and Intersevice, the net assets acquired and liabilities assumed are as
follows:
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Table of Contents
Assets
Cash and cash equivalents
Accounts receivable
Deferred taxes assets
Other credits
Property, plant and equipment
Intangibles (b)
Liabilities
Other obligations
Contingent liabilities
Provisions for legal proceedings
Deferred taxes liabilities
Net identifiable assets acquired
Non-controlling interest measured at fair value
Goodwill on acquisition
Total of the consideration
Analysis of the cash flow of the acquisition
Consideration paid
Net cash acquired
Consideration net of cash acquired (a)
Thousands of U.S.
dollars
1,572
5,463
2,366
2,486
2,628
16,456
(6,203)
(1,527)
(4,881)
(2,688)
15,672
(7,836)
8,400
16,236
16,236
(1,572)
14,664
(a) Presented as investing activities in the statement of cash flows.
(b) Intangible assets acquired which meet the criteria for recognition comprise customer relationships, software database and a non-compete agreement
(classified as other intangible assets in Note 6) identified as part of the purchase price allocation.
The fair value amount for accounts receivables is 5,463 thousand U.S. dollars. The gross contractual amount for trade receivables due 5,643 thousand U.S.
dollars.
Transaction costs totaling 192 thousand U.S. dollars are recorded in the statements of operations.
From the date of acquisition, Nova Interfile contributed to the Company with net revenues of 22,472 thousand U.S. dollars and pre-tax result of 3,682
thousand U.S. dollars. If the acquisition had occurred on January 1, 2017 the contribution of net revenues and pre-tax result in the Company’s consolidated
financial statements for the year ended December 31, 2017, would amount 38,558 and (332) thousand U.S. dollars, respectively.
Put/Call options
As per the Shareholders' Agreement, the Company has a purchase option, where non-controlling shareholders granted to Atento Brasil S.A., through that
instrument, the right, to acquire all of their shares, and the non-controlling shareholders, through the exercise of that right, shall be obliged to sell their shares to
Atento Brasil S.A. ("call option"). The call option may be exercised by Atento Brasil S.A. between January 1, 2020 and April 15, 2020. The Shareholders'
Agreement also provides for put options, where the non-controlling shareholders have the right, to sell partial or all of their shares to the Atento Brasil S.A. ("put
options"). Many put options were understood by Management as protective clauses with remote possibility of being exercised. The assessment of the put options
were made taking into account the following; (i) probability of occurrence; (ii) degree of importance (primary or secondary, in this case as term extension or
acceleration of other options) and (iii) function: effective options or clauses protecting the parties.
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Table of Contents
Considering the valuation of the acquired entity and Management’s best estimates, the put option that will likely to be exercised by the non-controlling
shareholders is between January 1, 2020 and April 15, 2020 – which is symmetrical with the call option. According to IAS 32, a parent must recognize a financial
liability when it has an obligation to pay cash in the future to purchase the minority’s shares, even if the payment is conditional on the option being exercised by the
holder.
The exercise price of the put option will be determined by multiples, already defined in the Shareholders' Agreement, of the EBITDA of the year
immediately prior to the exercise of the option, multiplied by the percentage of participation to be acquired.
IFRS 3 does not provide specific guidance on how such contracts should be accounted for in a business combination. To determine the appropriate
accounting treatment, IAS 39 – Financial Instruments: Recognition and Measurement, IAS 32 – Financial Instruments: Presentation and IFRS 10 – Consolidated
Financial Statements were considered.
On the basis of the above, the Company recognized a financial liability related to the potential acquisition of non-controlling interest of 23,777 thousand
U.S. dollars. The financial liability was recognized against specific reserve in equity, considering that these are transactions between shareholders.
6) INTANGIBLE ASSETS
The following table presents the breakdown of intangible assets at December 31, 2016 and 2017 and respective changes in the year:
Cost
Development
Customer base
Software
Other intangible assets
Work in progress
Total cost
Accumulated amortization
Development
Customer base
Software
Other intangible assets
Total accumulated amortization
Impairment
Net intangible assets
Balance at
December 31,
2015
Additions
Acquisitions
from business
combination
Disposals
Transfers
Translation
differences
Balance at
December 31,
2016
Thousands of U.S. dollars
2,422
254,110
90,278
39,492
1,198
387,500
(282)
(77,443)
(36,637)
(24,665)
(139,027)
(22,213)
226,260
1,231
-
8,140
980
2,693
13,044
(241)
(24,175)
(21,953)
(4,547)
(50,916)
-
(37,872)
-
2,522
105
1
-
2,628
-
-
-
-
-
-
2,628
(52)
-
(7,546)
(2,422)
(6)
(10,026)
33
-
6,716
287
7,036
-
(2,990)
F- 37
-
-
-
-
-
-
-
(872)
-
872
-
-
-
306
7,525
47,073
6,788
(1,062)
60,630
15
(2,806)
(16,264)
(3,754)
(22,809)
706
38,527
3,907
264,157
138,050
44,839
2,823
453,776
(475)
(105,296)
(68,138)
(31,807)
(205,716)
(21,507)
226,553
Table of Contents
Cost
Development
Customer base
Software
Other intangible assets
Work in progress
Total cost
Accumulated amortization
Development
Customer base
Software
Other intangible assets
Total accumulated amortization
Impairment
Net intangible assets
Balance at
December 31,
2016
Additions
Acquisitions
from business
combination
(Note 5)
Disposals
Transfers
Translation
differences
Balance at
December 31,
2017
Thousands of U.S. dollars
3,907
264,157
138,050
44,839
2,823
453,776
(475)
(105,296)
(68,138)
(31,807)
(205,716)
(21,507)
226,553
1,513
2,552
12,463
18,960
-
35,488
(235)
(25,222)
(24,669)
(5,069)
(55,195)
-
(19,706)
-
14,931
1,468
57
-
16,456
-
-
-
-
-
-
16,456
(7)
(9)
(3,085)
(533)
(259)
(3,893)
7
-
147
373
527
-
(3,366)
(627)
-
2,115
1,155
(2,073)
570
(1)
-
(179)
(390)
(570)
-
-
(90)
10,267
7,024
775
(29)
17,947
13
(3,140)
(1,066)
(624)
(4,817)
(2,962)
10,168
4,696
291,898
158,035
65,253
462
520,344
(691)
(133,658)
(93,905)
(37,517)
(265,771)
(24,469)
230,104
“Customer base” represents the fair value, of the intangible assets arising from customer relationships (tacit or explicitly formulated in contracts) with
Telefónica Group and with other customers identified in business combination transactions. The addition in 2017 of new entity in the customer base is related of
the acquisition of Interfile, as mentioned in Note 5.
Of the total customer base in 2017, the fair value assigned to commercial relationships with Telefónica at the acquisition date amounts to 183,658 thousand
U.S. dollars, while the remaining amount relates to other customers. In terms of geographic distribution, the total amount of customer base net of impairment
corresponds to businesses in Brazil (131,321 thousand U.S. dollars), Spain (52,939 thousand U.S. dollars) net of impairment, Mexico (48,173 thousand U.S.
dollars), Peru (16,295 thousand U.S. dollars), Colombia (3,383 thousand U.S. dollars), Chile (10,110 thousand U.S. dollars) and Argentina and Uruguay (5,208
thousand U.S. dollars).
“Other intangible assets” mainly include payment of loyalty incentives established with customers of the Atento Brasil S.A. and the intangible asset arising
from the directory services business in Atento Teleservicios España.
“Work in progress” mainly include the ERP implementation costs which are currently in progress.
In 2016 and 2017, no impairment was recognized in respect of intangible assets.
7) GOODWILL
Goodwill was mainly generated on December 1, 2012 from the acquisition of the Customer Relationship Management (“CRM”) business from Telefónica,
S.A and on December 30, 2014 from the acquisition of CBCC. On September 2, 2016, additional goodwill was generated from the acquisition of RBrasil.
The main change in goodwill in the year ended December 31, 2017 is related to the acquisition of Interfile in the amount of 8,400 thousand U.S. dollars on
June 9, 2017, as described in Note 5.
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Table of Contents
The breakdown and changes in goodwill in 2016 and 2017 are as follow:
Peru
Chile
Colombia
Mexico
Brazil (*)
Argentina
Total
Thousands of U.S. dollars
12/31/2015
Acquisitions
Translation
differences
12/31/2016
Acquisitions
Translation
differences
12/31/2017
28,783
16,269
5,946
2,101
47,770
23,138
124,007
-
-
-
-
15,214
-
15,214
485
1,045
303
(343)
9,455
(4,150)
6,795
29,268
17,314
6,249
1,758
72,439
18,988
146,015
-
-
-
-
8,400
-
8,400
1,001
1,466
35
84
(1,048)
(2,809)
(1,271)
30,269
18,780
6,284
1,842
79,790
16,179
153,144
(*) As of December 31, 2017 the total amount of goodwill is composed by 14,989 thousand U.S. dollars from the acquisition of RBrasil, 8,313 thousand U.S.
dollars from the acquisition of Interfile and 56,488 thousand from Atento Brasil.
8) IMPAIRMENT OF ASSETS
As of December 31, 2017, the impairment assessment on goodwill performed by the Atento Group’s management indicated that the carrying amount of
goodwill is recoverable. Such assessment was based on the calculation of the recoverable amount of goodwill through the calculation of the expected future cash
flow from the cash-generating units to which goodwill is allocated.
Atento has no other assets with indefinite useful lives, and therefore carries out no impairment tests of this type.
The Atento Group carries out its goodwill impairment tests using the various cash ¬generating units’ five¬ year strategic plans and budgets, approved by
Management.
Recoverable amount is based on value in use calculated using cash flow from projected results adjusted for amortization/depreciation, finance costs, and
taxes, based on the last period, and using the expected growth rates obtained from studies published in the sector and assuming said growth to be constant from the
fifth year. Estimated cash flow determined in this manner is discounted using the WACC applicable to that CGU. The discount rates used reflect the current
assessment of specific market risks in each of the cash ¬generating units, considering the time value of money and individual country risks not included in the cash
flow estimates. WACC takes both the cost of debt and capital into account. The latter is obtained based on the return expected by the shareholders of the Atento
Group, while the former is obtained based on the Atento Group’s finance costs. In addition, the risks specific to each country were included in the WACC using
corrective factors.
These tests are performed annually and whenever it is considered that the recoverable amount of goodwill may be impaired.
At December 31, 2016 and 2017, the tests conducted did not reveal any impairment in the value of goodwill, since the related recoverable amounts
calculated using value in use were in all cases higher than the carrying amount of the related cash-generating units, even after sensitivities were applied to the
variables used.
The pre-tax discount rates, which factor in country and business risks, and the projected growth rates were as follow:
December 2016
December 2017
December 2016
December 2017
Brazil
Mexico
Spain
Discount rate
Colombia
Peru
Chile
Argentina
13.99%
12.74%
10.18%
12.09%
8.43%
10.62%
12.25%
12.48%
11.02%
11.54%
10.91%
11.35%
27.79%
30.25%
Brazil
Mexico
Spain
Growth rate
Colombia
4.70%
3.85%
3.50%
4.00%
2.10%
1.60%
3.70%
3.40%
Peru
Chile
Argentina
4.20%
2.50%
3.00%
2.40%
16.60%
19.30%
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Table of Contents
The recoverable amounts per country were as follow:
Thousand U.S. dollars
Recoverable Amounts
December 2017
879,303
25,400
59,643
226,881
60,607
90,143
Brazil (*)
Mexico
Colombia
Peru
Chile
Argentina
(*) The total recoverable amount of is composed by 33,618 thousand U.S. dollars from the acquisition of RBrasil, 140,373 thousand U.S. dollars from the
acquisition of Interfile and 705,312 thousand from Atento Brasil.
In the event of a 10% increase or decrease in the discount rate used to calculate the recoverable amount of the CGUs in each country, with the other
variables remaining unchanged, the recoverable amount would still be higher than the corresponding carrying amount. Management also considers that the
appearance of potential competitors in the market in which the Atento Group operates could negatively affect the growth of its CGUs. In addition, if as a result of a
fall in demand or an increase in costs, results before amortization/depreciation, finance cost and taxes margin (EBITDA margin) used for estimating cash flow were
to keep constant for the five years in each country, with all other variables remaining unchanged, the recoverable amount from each cash generating unit would
continue to be higher than its corresponding carrying amount.
In addition to the above, specifically for certain countries, the following assumptions were used:
Cash flow for the Brazil, Mexico, Spain, Colombia, Peru, Chile and Argentina CGUs were estimated based on growth projections considering past business
performance, using predicted inflation levels taken from external sources. For calculations regarding the Spanish CGU, negative and positive business forecasts
were used which contemplate macroeconomic trends and changes in the environment.
9) PROPERTY, PLANT AND EQUIPMENT (PP&E)
Details of property, plant and equipment at December 31, 2016 and 2017 are as follow:
Cost
Land and natural resources
Buildings
Plant and machinery
Furniture, tools and other tangible
assets
PP&E under construction
Total cost
Accumulated depreciation
Buildings
Plant and machinery
Furniture, tools and other tangible
assets
Total accumulated depreciation
Property, plant and equipment
Balance at
December 31,
2015
Additions
Acquisitions
from business
combination
Disposals
Transfers
Translation
differences
Balance at
December 31,
2016
Thousands of U.S. dollars
37
9,733
9,330
243,166
36,267
298,533
(3,626)
(4,171)
(99,058)
(106,855)
191,678
-
-
144
20,984
11,496
32,624
(108)
(1,130)
(45,210)
(46,448)
(13,824)
-
-
-
477
14
491
-
-
-
-
491
(38)
-
(86)
(26,155)
(113)
(26,392)
402
370
19,744
20,516
(5,876)
-
285
536
12,310
(13,131)
-
-
-
-
-
-
1
(226)
(3,081)
66,446
(25,269)
37,871
100
863
(46,033)
(45,070)
(7,199)
-
9,792
6,843
317,228
9,264
343,127
(3,232)
(4,068)
(170,557)
(177,857)
165,270
F-40
Table of Contents
Cost
Land and natural resources
Buildings
Plant and machinery
Furniture, tools and other tangible
assets
PP&E under construction
Total cost
Accumulated depreciation
Buildings
Plant and machinery
Furniture, tools and other tangible
assets
Total accumulated depreciation
Property, plant and equipment
Balance at
December 31,
2016
Additions
Acquisitions
from business
combination
Disposals
Transfers
Translation
differences
Balance at
December 31,
2017
Thousands of U.S. dollars
-
9,792
6,843
317,228
9,264
343,127
(3,232)
(4,068)
(170,557)
(177,857)
165,270
-
272
211
27,800
21,893
50,176
(839)
(1,049)
(47,338)
(49,226)
950
1,381
-
575
672
-
2,628
-
-
-
-
2,628
-
-
-
(32,300)
(10,637)
(42,937)
653
13
17,827
18,493
(24,444)
-
-
437
3,117
(3,554)
-
-
-
-
-
-
-
1,379
593
11,160
2.042
15,174
(460)
(583)
(6,340)
(7,383)
(7,791)
1,381
11,443
8,659
327,677
19,008
368,168
(3,878)
(5,687)
(206,408)
(215,973)
152,195
Additions for the year mainly represent investments made in Brazil in response to our business and the upgrading of existing infrastructure (20,127 thousand
U.S. dollars), construction of a new call center and upgrading of the infrastructure in place in Mexico (7,065 thousand U.S. dollars); and to new equipment under
finance leases and upgrading of the current infrastructure in Peru (5,008 thousand U.S. dollars).
“Furniture, tools and other tangible assets” primarily comprises net items of that description in Brazil and Mexico amounting to 76,020 thousand U.S.
dollars and 13,137 thousand U.S. dollars, respectively, (94,040 thousand U.S. dollars and 14,472 thousand U.S. dollars, respectively in 2016) in connection with
furnishings and fixtures in customer service centers in those countries.
The acquisition from business combinations recorded in “Furniture, tools and other tangible assets” and “PP&E under construction” are related to the
RBrasil and Interfile acquisitions, as described in Note 5.
No impairment was recognized on items of property, plant and equipment in 2016 and 2017.
All Atento Group companies have contracted insurance policies to cover potential risks to their items of PP&E. Management considers that coverage of
these risks was sufficient at December 31, 2016 and 2017.
10) LEASES AND SIMILAR ARRANGEMENTS
a) Finance leases
The Atento Group holds the following assets under finance leases:
F- 41
Table of Contents
Finance leases
Plant and machinery
Furniture, tools and other tangible assets
Software
Total
Thousands of U.S. dollars
Net carrying amount of asset
2016
2017
2,386
1,422
-
3,808
1,847
6,619
6,796
15,262
On April 25, 2017, Atento Brasil S.A. entered in a sale leaseback with HP Financial Services Arrendamento Mercantil S.A. in an amount of 23,615 thousand
Brazilian Reais, equivalent to 7,139 thousand U.S. dollars as of December 31, 2017, which will be repaid in 36 monthly installments.
On July 24, 2017, Atento Brasil S.A. entered in a new sale leaseback with HP Financial Services Arrendamento Mercantil S.A. in an amount of 4,220
thousand Brazilian Reais, equivalent to 1,276 thousand U.S. dollars as of December 31, 2017, which will be repaid in 60 monthly installments.
On August 24, 2017, Atento Brasil S.A. entered in a new sale leaseback with HP Financial Services Arrendamento Mercantil S.A. in an amount of 4,570
thousand Brazilian Reais, equivalent to 1,381 thousand U.S. dollars as of December 31, 2017, which will be repaid in 60 monthly installments.
The assets acquired under finance leases are located in Brazil, Colombia and Peru. The present value of future finance lease payments is as follow:
Up to 1 year (Note 17)
Between 1 and 5 years (Note 17)
Total
11) FINANCIAL ASSETS
Thousands of U.S. dollars
2016
2017
2,205
1,431
3,636
4,260
6,238
10,498
As of December 31, 2016 and 2017 all the financial assets of the Company are classified as loans and receivables, except for the derivative financial
instruments that are categorized as fair value through profit or loss.
Credit risk arises from the possibility that the Atento Group might not recover its financial assets at the amounts recognized and in the established terms.
Atento Group Management considers that the carrying amount of financial assets is similar to the fair value.
As of December 31, 2017, Atento Teleservicios España S.A., Atento Chile S.A., Atento Colombia S.A., Teleatento del Perú S.A.C and Atento Brasil S.A.
have entered into factoring agreements without recourse, anticipating an amount of 280,449 thousand U.S. dollars, receiving cash net of discount, the related trade
receivables were realized and interest expenses was recognized in the statement of operations.
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Table of Contents
12) OTHER FINANCIAL ASSETS
Details of other financial assets at December 31, 2016 and 2017 are as follow:
Other non-current receivables (*)
Non-current guarantees and deposits
Total non-current
Other current receivables
Current guarantees and deposits
Total current
Total
Thousands of U.S. dollars
2016
2017
-
40,565
40,565
-
1,140
1,140
41,705
11,125
49,097
60,222
805
1,005
1,810
62,032
(*) “Other non-current receivables” as of December 31, 2017 primarily comprise a loan granted by the subsidiary RBrasil to third parties. The effective annual
interest rate is CDI + 3.75% p.a., maturing up to five years beginning in May 4, 2017, when the value of the loan will be amortized in a single installment.
13) TRADE AND OTHER RECEIVABLES
The breakdown of “Trade and other receivables” at December 31, 2016 and 2017 is as follow:
Non-current trade receivables
Other non-financial assets (*)
Total non-current
Current trade receivables
Other receivables
Prepayments
Personnel
Total current
Total
Thousands of U.S. dollars
2016
2017
7,824
13,087
20,911
321,608
15,302
4,693
9,299
350,902
371,813
6,923
14,754
21,677
358,311
13,225
7,849
9,180
388,565
410,242
(*) "Other non-financial assets" as of December 31, 2017 primarily comprise the litigation underway with the Brazilian social security authority ( Instituto
Nacional
do
Seguro
Social
), recorded in Atento Brasil S.A.
Trade receivables
Allowances of trade receivables
Trade receivables, net
F- 43
Thousands of U.S. dollars
2016
2017
333,711
(4,279)
329,432
371,333
(6,099)
365,234
Table of Contents
As of December 31, 2017, trade receivables not yet due for which no provision has been made amounted to 338,350 thousand U.S. dollars (299,327
thousand U.S. dollars as of December 31, 2016).
As of December 31, 2017, trade receivables due for which no provision has been made amounted to 26,884 thousand U.S. dollars (30,105 thousand U.S.
dollars as of December 31, 2016). These balances relate to certain customers with no recent history of default. The aging analysis of these accounts is as follow:
Less than 90 days
Between 90 and
180 days
Between 180 and
360 days
Over
360 days
Thousands of U.S. dollars
12/31/2016
12/31/2017
22,047
20,268
2,146
1,476
1,398
1,734
4,514
3,406
Total
30,105
26,884
Changes in allowances of trade receivables in 2016 and 2017 were as follow:
Opening balance
Allowance of trade receivables
Reversal
Translation differences
Total
Thousands of U.S. dollars
2016
2017
(4,437)
(3,097)
2,712
543
(4,279)
(4,279)
(3,061)
553
688
(6,099)
The Atento Group’s maximum exposure to credit risk at the reporting date is equivalent to the carrying amount of each of the aforementioned trade
receivables categories. The Atento Group holds no guarantees as collection insurance.
14) DERIVATIVE FINANCIAL INSTRUMENTS
Details of derivative financial instruments at December 31, 2016 and 2017 are as follow:
Interest rate swaps
Cross-currency swaps - net investment hedges
Cross-currency swaps - that do not qualify for hedge accounting
Total
Non-current portion
Current portion
Thousands of U.S. dollars
2016
2017
Assets
Liabilities
Assets
Liabilities
1,330
76,144
-
77,474
77,474
-
-
(184)
-
(184)
(184)
-
-
7,429
748
8,177
8,177
-
(1,212)
(5,140)
-
(6,352)
(5,140)
(1,212)
Derivatives held for trading are classified as current assets or current liabilities. The fair value of a hedging derivative is classified as a non-current asset or a
non-current liability, as applicable, if the remaining maturity of the hedged item exceeds twelve months. Otherwise, it is classified as a current asset or liability.
In connection with the Refinancing process and the repayment of the first Brazilian Debentures, the hedge accounting for the interest rate swap was
discontinued and the OCI balance was transferred to finance cost. Thereafter, any changes in fair value will be directly recognized in statement of operations.
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Table of Contents
On May 26, 2017, Atento Brasil S.A. entered into a cross-currency swap to hedge a USD loan of 12,232 thousand U.S. dollars at a fixed rate of 3.25%
exchanged to a 40,000 thousand Brazilian Reais with interest rate of the average daily rate of the one day “over extra-group” – DI – Interfinancial Deposits - plus a
spread of 3.45% per annum. As of December 31, 2017, the cross-currency swap was settled.
On April 1, 2015, the Company started a hedge accounting for net investment hedge related to exchange risk between the U.S. dollar and foreign operations
in Euro (EUR), Mexican Peso (MXN), Colombian Peso (COP) and Peruvian Nuevo Sol (PEN). In connection with the Refinancing process, 8 of the 10 derivatives
contracts designated as Net Investment Hedges were terminated between August 1, 2017 and August 4, 2017, generating positive cash of 46,080 thousand U.S.
dollars, net of charges. During August 2017, Atento Luxco 1 also entered into new Cross-Currency Swaps related to exchange risk between U.S. dollars and Euro
(EUR), Mexican Peso (MXN), Brazilian Reais (BRL) and Peruvian Nuevo Sol (PEN). Except for the Cross-Currency Swap between U.S. dollars and Brazilian
Reais, all other Cross-Currency Swaps were designated for hedge accounting as net investment hedge.
At December 31, 2016 and 2017, details of interest rate swap, cross-currency swaps that do not qualify for hedge accounting and net investment hedges
were as follows:
2016
Bank
Maturity
Notional
currency
Index
Notional in
contract
currency
(thousands)
Interest Rate Swap
Itau
18-Dez
BRL
BRL CDI
245,000
Bank
Maturity
Purchase
currency
Selling
currency
Notional
(thousands)
Net Investment Hedges
Other
comprehensive
income, net of
taxes
D/(C)
Change in
OCI
D/(C)
Income
statements
D/(C)
(780)
(780)
8,591
8,591
(96)
(96)
Fair value
assets
D/(C)
1,330
1,330
Fair value
assets
D/(C)
Other
comprehensive
income
D/(C)
Change in
OCI
D/(C)
Income
statements
D/(C)
Santander
Santander
Goldman Sachs
Goldman Sachs
Nomura International
Nomura International
Goldman Sachs
BBVA
Goldman Sachs
BBVA
20-Jan
20-Jan
20-Jan
20-Jan
20-Jan
20-Jan
18-Jan
18-Jan
18-Jan
18-Jan
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
Total
Derivative financial instrument - asset
Derivative financial instrument - liability
20,000
11,111
48,000
40,000
23,889
22,000
13,800
55,200
7,200
28,800
EUR
MXN
EUR
MXN
MXN
EUR
PEN
PEN
COP
COP
F- 45
4,786
7,609
11,483
27,430
16,388
5,223
324
1,301
283
1,133
75,960
77,290
77,474
(184)
(780)
(4,524)
(1,864)
(16,272)
(9,715)
(856)
(40)
(159)
(106)
(425)
(34,741)
(35,521)
(865)
(2,889)
(2,071)
(10,392)
(6,205)
(951)
103
413
59
236
(22,562)
(13,971)
(25)
48
(52)
175
105
(21)
(78)
(312)
(69)
(275)
(504)
(600)
Statements
of
operations
- Change
in fair
value
D/(C)
-
-
Statements
of
operations
- Change
in fair
value
D/(C)
Table of Contents
2017
Interest Rate Swap
Bank
Maturity
Notional
currency
Index
Notional in
contract
currency
(thousands)
Itau
Dec-18 BRL
BRL CDI
135,000
Other
comprehensive
income, net of
taxes
D/(C)
Change in
OCI, net of
taxes
D/(C)
Statements
of
operations
- Finance
cost
D/(C)
-
-
(781)
(781)
954
954
Fair value
liability
D/(C)
(1,212)
(1,212)
Cross-Currency Swaps - that do not qualify for hedge accounting
Bank
Maturity
Purchase
currency
Selling
currency
Notional
(thousands)
ABC Brasil S.A.
Nov-17 USD
BRL
12,232
Goldman Sachs
Aug-22
BRL
USD
754,440
Fair value
asset
D/(C)
Other
comprehensive
income
D/(C)
Change in
OCI, net of
taxes
D/(C)
Statements
of
operations
- Finance
cost
D/(C)
-
748
748
-
-
-
-
-
-
(1,863)
-
-
(1,863)
(748)
(748)
Net Investment Hedges
Bank
Maturity
Purchase
currency
Selling
currency
Notional
(thousands)
Nomura International
Goldman Sachs
Goldman Sachs
Santander
Santander
Goldman Sachs
Goldman Sachs
Nomura International
Nomura International
Goldman Sachs
BBVA
Goldman Sachs
BBVA
Aug-22
Aug-22
Aug-22
Jan-20
Jan-20
Jan-20
Jan-20
Jan-20
Jan-20
Jan-18
Jan-18
Jan-18
Jan-18
EUR
MXN
PEN
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
EUR
MXN
EUR
MXN
MXN
EUR
PEN
PEN
COP
COP
34,109
1,065,060
194,460
20,000
11,111
48,000
40,000
23,889
22,000
13,800
55,200
7,200
28,800
Total
Derivative financial instrument - asset
Derivative financial instrument - liability
F- 46
Fair value
asset/(liability)
D/(C)
Other
comprehensive
income
D/(C)
Change in
OCI
D/(C)
Income
statement -
Finance
Cost
D/(C)
Income
statement -
Change in
fair value
D/(C)
382
(7,256)
4,758
1,742
(2,113)
3,587
(7,600)
(4,357)
1,620
19
71
(88)
(359)
(9,594)
(9,594)
(382)
7,256
(4,758)
(2,522)
(2,411)
(5,452)
(8,671)
(5,358)
(2,476)
(59)
(229)
(19)
(65)
(25,146)
(25,927)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(909)
-
-
-
88
21
217
(47)
105
99
6
23
(1)
7
518
(230)
(382)
7,256
(4,758)
-
-
-
-
-
-
84
-
89
-
2,289
1,825
8,177
(6,352)
Table of Contents
Gains and losses on net investment hedges accumulated in equity will be taken to the statement of operations when the foreign operation is partially
disposed of or sold.
15) CASH AND CASH EQUIVALENTS
Deposits held at call
Short-term financial investments
Total
Thousands of U.S. dollars
2016
2017
124,777
69,258
194,035
111,495
30,267
141,762
“Short-term financial investments” comprises short-term fixed - income securities in Brazil, which mature in less than 90 days and accrue interest pegged to the
CDI.
16) FINANCIAL LIABILITIES
As of December 31, 2016 and 2017 all the financial liabilities of the Company are classified as other financial liabilities at amortized cost, except for the
derivative financial instruments and options for acquisitions of NCI that are classified as financial liability at fair value through profit or loss.
The payments schedule for other financial liabilities, trade and other payables and liabilities at December 31, 2016 and 2017 , including estimated future
interest payments, calculated based on interest rates and foreign exchange rates applicable as at December 31, 2016 and 2017 are as follow:
Thousands of U.S. dollars
Maturity (years)
2016
2017
2018
2019
2020
2021
More than 5
years
Total
Senior Secured Notes
Brazilian bonds—Debentures
Finance leases
Bank borrowings
Trade and other payables
Total financial liabilities
22,128
42,188
2,010
27,537
206,483
300,346
22,128
78,593
1,079
25,785
618
128,203
22,128
90,081
491
24,215
-
333,192
-
56
1,948
-
136,915
335,196
-
-
-
-
-
-
-
-
-
-
-
-
399,576
210,862
3,636
79,485
207,101
900,660
2017
2018
2019
2020
2021
2022
More than 5
years
Total
Thousands of U.S. dollars
Maturity (years)
Senior Secured Notes
Brazilian bonds—Debentures
Finance leases
Bank borrowings
Trade and other payables
Total financial liabilities
24,500
5,943
5,128
30,994
208,532
275,097
24,500
5,566
4,261
24,225
8,094
66,646
F- 47
24,500
5,276
1,907
4,373
-
36,056
24,500
4,901
887
558
-
30,846
424,500
4,458
442
438
-
429,838
-
2,026
-
-
-
2,026
522,500
28,170
12,625
60,588
216,626
840,509
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17) FINANCIAL DEBT WITH THIRD PARTIES
Details of debt with third parties at December 31, 2016 and 2017 are as follow:
Senior Secured Notes
Brazilian bonds—Debentures
Bank borrowing
Finance lease payables (Note 10)
Total non-current
Senior Secured Notes
Brazilian bonds—Debentures
Bank borrowing
Finance lease payables (Note 10)
Total current
TOTAL DEBT WITH THIRD PARTIES
Senior Secured Notes
Thousands of U.S. dollars
2016
2017
294,068
136,231
48,629
1,431
480,359
9,282
20,365
22,724
2,205
54,576
534,935
388,818
16,797
27,878
6,238
439,731
9,528
4,258
28,514
4,260
46,560
486,291
On January 29, 2013, Atento Luxco 1 S.A. issued 300,000 thousand U.S. dollars aggregate principal amount of Senior Secured Notes that would mature on
January 29, 2020. The 2020 Senior Secured Notes were senior secured obligations of Atento Luxco 1 and were guaranteed on a senior secured first-priority basis
by Atento Luxco 1 and certain of its subsidiaries excluding Argentina and Brazil subsidiaries. The Senior Secured Notes were also guaranteed on an unsecured
basis by Atento S.A. and Midco.
The indenture governing the 2020 Senior Secured Notes contained covenants that, among other things, restricted the ability of Atento Luxco 1 and certain of
its subsidiaries to: incur or guarantee additional indebtedness; pay dividends or make distributions or redeem or repurchase capital stock; issue, redeem or
repurchase certain debt; issue certain preferred stock or similar equity securities; make loans and investments; sell assets; incur liens; enter into transaction with
affiliates; enter into agreements restricting certain subsidiaries’ ability to pay dividends; and consolidate, merge or sell all or substantially all of our assets. These
covenants were subject to a number of important exceptions and qualifications. In addition, in certain circumstances, if Atento Luxco 1 sell assets or experiences
certain changes of control, it must offer to purchase the 2020 Senior Secured Notes.
On August 19, 2017, in connection with the offering described below, Atento Luxco 1 redeemed all of the outstanding amount of the 2020 Senior Secured
Notes. The notes were called at a premium over face value of 103.688% per note, resulting in a total call cost of 11,064 thousand U.S. dollars recorded in finance
costs during August 2017, along with the remaining balance of the 2020 Senior Secured Notes issuance amortized cost of 4,920 thousand U.S. dollars.
On August 10, 2017, Atento Luxco 1 S.A., closed an offering of 400,000 thousand U.S. dollars aggregate principal amount of 6.125% Senior Secured Notes
due 2022 in a private placement transaction. The notes are due on August 2022. The 2022 Senior Secured Notes are guaranteed on a senior secured basis by certain
of Atento’s wholly-owned subsidiaries. The issuance costs of 11,979 thousand U.S. dollars related to this new issuance are recorded at amortized cost using the
effective interest method.
The terms of the Indenture, among other things, limit, in certain circumstances, the ability of Atento Luxco 1 and its restricted subsidiaries to: incur certain
additional indebtedness; make certain dividends, distributions, investments and other restricted payments; sell the property or assets to another person; incur
additional liens; guarantee additional debt; and enter into transaction with affiliates. As of December 31, 2017, we were in compliance with these covenants. The
outstanding amount on December 31, 2017 is 398,346 thousand U.S. dollars.
All interest payments are made on a half yearly basis.
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Table of Contents
The fair value of the Senior Secured Notes, calculated on the basis of their quoted price at December 31, 2017, is 414,927 thousand U.S. dollars.
The fair value hierarchy of the Senior Secured Notes is Level 1 as the fair value is based on the quoted market price at the reporting date.
Details of the corresponding debt at each reporting date are as follow:
Thousands of U.S. dollars
2016
2017
Currency
Principal
Accrued interests
Total debt
Principal
Accrued interests
Total debt
U.S. dollar
U.S. dollar
294,068
-
9,282
-
303,350
-
-
388,818
-
9,528
-
398,346
Maturity
2020
2022
Debentures
On November 22, 2012, BC Brazilco Participações, S.A. (merged into Atento Brasil S.A.) (the “Brazilian Issuer”) entered into an indenture for the issuance
of 915 million Brazilian Reais (equivalent to approximately $365 million) of Brazilian Debentures due December 12, 2019. The Brazilian Debentures bear interest
at a rate per annum equal to the average daily rate of the One Day “over extragroup”—DI—Interfinancial Deposits (as such rate is disclosed by CETIP S.A. —
Mercados Organizados (“CETIP”) in the daily release available on its web page), plus a spread of 3.70%.
On December 12, 2016, Atento Brasil S.A. repaid on the schedule date, 44,562 thousand Brazilian Reais (equivalent to 13,673 thousand U.S. dollars) and on
December 26, 2016, repaid in advance of the schedule date, 100,000 thousand Brazilian Reais (equivalent to 30,683 thousand U.S. dollars).
On April 27, 2017, Atento Brasil S.A. repaid in advance of the maturity date, 84,700 thousand Brazilian Reais (equivalent to 27,007 thousand U.S. dollars)
of the 1st Brazilian Debentures due 2019. On August 21, 2017, Atento Brasil S.A. repaid in advance of the maturity date all the outstanding amount. The amount
repaid was 428,350 thousand Brazilian Reais (equivalent to 135,945 thousand U.S. dollars) plus interest accrued of 10,944 thousand Brazilian Reais (equivalent to
3,473 thousand U.S. dollars) and 2,142 thousand Brazilian Reais (equivalent to 680 thousand U.S. dollars) of penalty fee due to early repayment. In addition to the
penalty fee, the remaining balance of the first Debentures issuance of 3,050 thousand Brazilian Reais (equivalent to 968 thousand U.S. dollars) were recorded in
finance costs in August 2017. As of December 31, 2017, there was no outstanding amount related to the Debentures due 2019.
On May 2, 2017, Atento Brasil S.A. entered into an indenture (“Second Brazilian Debenture”) for the issuance costs of 70,000 thousand Brazilian Reais
(equivalent to approximately 22,096 thousand U.S. dollars) of Brazilian Debentures due April 25, 2023. The Second Brazilian Debenture bear interest at a rate per
annum equal to the average daily rate of the one day “over extragroup” – DI – Interfinancial Deposits (as such rate is disclosed by CETIP
S.A
–
Mercados
Organizados
(“CETIP”) in the daily release available on its web page, plus a spread of 3.75%. The amortization schedule is: April 25, 2018: 9.1%; October 25,
2018: 9.1%; April 25, 2019: 9.1%; October 25, 2019: 9.1%; April 25, 2020: 9.1%; October 25, 2020: 9.1%; April 25, 2021: 9.1%; October 25, 2021: 9.1%; April
25, 2022: 9.1%; October 25, 2022: 9.1%; April 25, 2023: 9,0%. The outstanding amount on December 31, 2017 is 21,055 thousand U.S. dollars.
Under the term of the indenture, the Brazilian subsidiary must comply with the quarterly net financial debt / EBITDA ratio set out in the contract terms. As
of December 31, 2017, Atento Brasil S.A. was in compliance with this covenant.
Details of the corresponding debt at each reporting date are as follow:
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Table of Contents
Thousands of U.S. dollars
2016
2017
Maturity
Currency
Principal
Accrued interests
Total debt
Principal
Accrued interests
Total debt
2019
2023
Brazilian Reais
Brazilian Reais
156,083
-
513
-
156,596
-
-
16,797
-
4,258
-
21,055
The fair value as of December 31, 2017 calculated based on discounted cash flow is 22,975 thousand U.S. dollars.
Bank borrowings
On February 3, 2014, Atento Brasil S.A. entered into a credit agreement with Banco
Nacional
de
Desenvolvimento
Econômico
e
Social
-
BNDES
(“BNDES”) in an aggregate principal amount of 300,000 thousand Brazilian Reais (the “BNDES Credit Facility”), equivalent to 90,698 thousand U.S. dollars as of
December 31, 2017.
The total amount of the BNDES Credit Facility is divided into five tranches subject to the following interest rates:
Tranche
Tranche A
Tranche B
Tranche C
Tranche D
Tranche E
Long-Term Interest Rate ( Taxa
de
Juros
de
Longo
Prazo
—
TJLP
) plus 2.5% per annum
SELIC Rate plus 2.5% per annum
4.0% per year
6.0% per year
Long-Term Interest Rate ( Taxa
de
Juros
de
Longo
Prazo
—
TJLP
)
Interest Rate
Each tranche intends to finance different purposes, as described below:
• Tranche A and B: investments in workstations, infrastructure, technology, services and software development, marketing and commercialization, within
the scope of BNDES program –
BNDES Prosoft.
• Tranche C: IT equipment acquisition, covered by law 8.248/91, with national technology, necessary to execute the project described on tranches “A” and
“B”.
• Tranche D: acquisitions of domestic machinery and equipment, within the criteria of FINAME, necessary to execute the project described on tranches
“A” and “B”.
• Tranche E: investments in social projects to be executed by Atento Brasil S.A.
BNDES releases amounts under the credit facility once the debtor met certain requirements in the contract including delivering the guarantee (stand-by
letter) and demonstrating the expenditure related to the project. Since the beginning of the credit facility, the following amounts were released:
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Table of Contents
Date
March 27, 2014
April 16, 2014
July 16, 2014
August 13, 2014
Subtotal 2014
March 26, 2015
April 17, 2015
December 21, 2015
Subtotal 2015
October 27, 2016
Subtotal 2016
Total
Tranche A
Tranche B
(Thousands of U.S. dollars)
Tranche D
Tranche C
Tranche E
Total
7,661
3,184
-
18,922
29,767
5,550
11,101
8,729
25,380
-
-
3,782
1,592
-
2,067
7,441
1,388
2,775
2,176
6,339
-
-
55,147
13,780
5,295
2,229
-
3,039
10,563
1,970
3,939
-
5,909
-
-
16,472
378
159
-
327
864
161
323
-
484
-
-
1,348
-
-
181
-
181
-
-
212
212
230
230
623
17,116
7,164
181
24,355
48,816
9,069
18,138
11,117
38,324
230
230
87,370
This facility should be repaid in 48 monthly installments. The first payment was made on March 15, 2016 and the last payment will be due on February 15,
2020.
The BNDES Credit Facility contains covenants that restrict Atento Brasil S.A.’s ability to transfer, assign, change or sell the intellectual property rights
related to technology and products developed by Atento Brasil S.A. with the proceeds from the BNDES Credit Facility. As of December 31, 2017, Atento Brasil
S.A. was in compliance with these covenants. The BNDES Credit Facility does not contain any other financial maintenance covenant.
The BNDES Credit Facility contains customary events of default including the following: (i) reduction of the number of employees without providing
program support for outplacement, as training, job seeking assistance and obtaining pre-approval of BNDES; (ii) existence of unfavorable court decision against the
Company for the use of children as workforce, slavery or any environmental crimes and (iii) inclusion in the by-laws of Atento Brasil S.A. of any provision that
restricts Atento Brasil S.A’s ability to comply with its financial obligations under the BNDES Credit Facility.
On September 26, 2016, Atento Brasil S.A. entered into a new credit agreement with BNDES in an aggregate principal amount of 22,000 thousand Brazilian
Reais, equivalent to 6,651 thousand U.S. dollars as of December 31, 2017. The interest rate of this facility is Long-Term Interest Rate (Taxa de Juros de Longo
Prazo - TJLP) plus 2.0% per annum. The facility should be repaid in 48 monthly installments. The first payment will be due on November 15, 2018 and the last
payment will be due on October 15, 2022. This facility is intended to finance an energy efficiency project to reduce power consumption by implementing new
lightening, air conditioning and automation technology. On November 24, 2017, 6,500 thousand Brazilian Reais (equivalent to 1,993 thousand U.S. dollars) were
released under this facility.
On January 28, 2013, Atento Luxco 1 entered into a Super Senior Revolving Credit Facility (the “Revolving Credit Facility”), which provides borrowings
capacity of up to 50,000 thousand Euro (equivalent to 59,966 thousand U.S. dollars as of as of December 31, 2017). The Revolving Credit Facility allows
borrowings in Euros, Mexican Pesos and U.S. dollars and includes borrowings capacity for letters of credit and ancillary facilities (including an overdraft,
guarantee, stand-by letter of credit, short-term loan facility). This facility matures on July 2019. In connection with the Refinancing process, this Revolving Credit
Facility was ended on August 10, 2017.
On April 25, 2017, Atento Brasil S.A. entered into a bank credit certificate (cédula de crédito bancário) with Banco Santander (Brasil) S.A. in an aggregate
principal amount of up to 80,000 thousand Brazilian Reais (the “2017 Santander Bank Credit Certificate”), equivalent to approximately 22,672 thousand U.S.
dollars as of December 31, 2017. The interest rate of the 2017 Santander Bank Credit Certificate equals to the average daily rate of the one day “over extra-group”
– DI – Interfinancial Deposits (as such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 2.70% per annum. The 2017
Santander Bank Credit Certificate matured on July 25, 2017 and was extended until March 1, 2018 and the aggregate principal amount was modified to 75,000
thousand Brazilian Reais, equivalent to approximately 22,672 thousand Brazilian Reais. As of December 31, 2017, there was no outstanding balance under the
2017 Santander Bank Credit Certificate.
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Table of Contents
On May 26, 2017, Atento Brasil S.A. entered into an agreement with Banco ABC Brasil for an amount of 12,232 thousand U.S. dollars maturing on
November 26, 2017 with an annual interest rate of 3.52%. In connection with the loan, Atento Brasil S.A. entered into a SWAP agreement through which it
receives fixed interest rates in U.S. dollars, in the same amount of the loan agreement, and pays variable interest rate at a rate per annum equal to the average daily
rate of the one day “over extragroup” – DI – Interfinancial Deposits (as such rate is disclosed by CETIP in the daily release available on its web page), plus a
spread of 3.45% over 40 thousand Brazilian Reais. As of December 31, 2017, there was no outstanding balance with Banco ABC Brasil.
On June 7, 2017, Atento Brasil S.A. entered into a bank credit certificate (cédula de crédito bancário) with Banco Bradesco S.A. in an aggregate principal
amount of up to 25,000 thousand Brazilian Reais (the “2017 Bradesco Bank Credit Certificate”), equivalent to approximately 7,557 thousand U.S. dollars as of
December 31, 2017. The interest rate of the 2017 Bradesco Bank Credit Certificate equals to the average daily rate of the one day “over extra-group” – DI –
Interfinancial Deposits (as such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 3.29% per annum. The 2017 Bradesco
Bank Credit Certificate will be due on October 5, 2017. As of December 31, 2017, no amounts were released under the 2017 Bradesco Bank Credit Certificate.
On August 10, 2017, Atento Luxco 1 S.A. entered into a new Super Senior Revolving Credit Facility (the “Super Senior Revolving Credit Facility”) which
provides borrowings capacity of up to 50,000 thousand U.S. dollars and will mature on February 10, 2022. Banco Bilbao Vizcaya Argentaria, S.A., as the agent, the
Collateral Agent and BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, Morgan Stanley Bank N.A. and Goldman Sachs
Bank USA are acting as arrangers and lenders under the Super Senior Revolving Credit Facility.
The Super Senior Revolving Credit Facility may be utilized in the form of multi-currency advances for terms of one, two, three or six months. The Super
Senior Revolving Credit Facility bears interest at a rate per annum equal to LIBOR or, for borrowings in euro, EURIBOR or, for borrowings in Mexican Pesos,
TIIE plus an opening margin of 4.25% per annum. The margin may be reduced under a margin ratchet to 3.75% per annum by reference to the consolidated senior
secured net leverage ratio and the satisfaction of certain other conditions.
The terms of the Super Senior Revolving Credit Facility Agreement limit, among other things, the ability of the Issuer and its restricted subsidiaries to (i)
incur additional indebtedness or guarantee indebtedness; (ii) create liens or use assets as security in other transactions; (iii) declare or pay dividends, redeem stock
or make other distributions to stockholders; (iv) make investments; (v) merge, amalgamate or consolidate, or sell, transfer, lease or dispose of substantially all of
the assets of the Issuer and its restricted subsidiaries; (vi) enter into transactions with affiliates; (vii) sell or transfer certain assets; and (viii) agree to certain
restrictions on the ability of restricted subsidiaries to make payments to the Issuer and its restricted subsidiaries. These covenants are subject to a number of
important conditions, qualifications, exceptions and limitations that are described in the Super Senior Revolving Credit Facility Agreement.
The Super Senior Revolving Credit Facility Agreement includes a financial covenant requiring the drawn super senior leverage ratio not to exceed 0.35:1.00
(the “SSRCF Financial Covenant”). The SSRCF Financial Covenant is calculated as the ratio of consolidated drawn super senior facilities debt to consolidated pro
forma EBITDA for the twelve-month period preceding the relevant quarterly testing date and is tested quarterly on a rolling basis, subject to the Super Senior
Revolving Credit Facility being at least 35% drawn (excluding letters of credit (or bank guarantees), ancillary facilities and any related fees or expenses) on the
relevant test date. The SSRCF Financial Covenant only acts as a draw stop to new drawings under the Revolving Credit Facility and, if breached, will not trigger a
default or an event of default under the Super Senior Revolving Credit Facility Agreement. The Issuer has four equity cure rights in respect of the SSRCF Financial
Covenant prior to the termination date of the Super Senior Revolving Credit Facility Agreement, and no more than two cure rights may be exercised in any four
consecutive financial quarters. As of December 31, 2017, we were in compliance with this covenant.
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Table of Contents
a) Financing activities
See below the changes in debt with third parties arising from financing activities:
2015
December
31, 2014
New
borrowing Amortization
New
leases
Interest
accrued
Interest
paid (*)
Fair value
adjustment
Cash flows from/(used in
financing activities)
Foreign
exchange
losses
Amortization
(addition)
fees
Translation
differences
Other
December
31, 2015
Thousands of U.S. dollars
Senior Secured Notes
Brazilian bonds -
Debentures
CVI
Finance lease payables
Other borrowings
Total
300,269
245,932
36,379
9,010
61,720
653,310
-
-
-
-
38,739
38,739
-
-
-
-
-
(1,887)
(214)
(2,101)
-
2,184
-
2,184
22,062
33,196
-
700
5,910
61,868
(22,128)
(31,242)
-
(700)
(5,393)
(59,463)
-
-
-
5,694
-
-
5,694
-
(11,923)
(400)
-
(12,323)
1,510
712
-
-
-
2,222
-
(80,507)
(3,910)
(4,170)
(25,977)
(114,564)
-
-
-
-
-
-
301,713
168,091
26,240
4,737
74,785
575,566
2016
December
31, 2015
New
borrowing Amortization
New
leases
Interest
accrued
Interest
paid (*)
Fair value
adjustment
Cash flows from/(used in
financing activities)
Foreign
exchange
losses
Amortization
(addition)
fees
Translation
differences
Other
December
31, 2016
Thousands of U.S. dollars
Senior Secured Notes
Brazilian bonds -
Debentures
CVI
Finance lease payables
Other borrowings
Total
301,713
168,091
26,240
4,737
74,785
575,566
-
-
-
-
235
235
-
(44,356)
-
(542)
(18,032)
(62,930)
-
-
-
-
-
-
22,128
33,013
-
303
7,265
62,709
(22,128)
(36,598)
-
(303)
(7,058)
(66,087)
-
-
-
2,314
-
-
2,314
-
(27,762)
(805)
-
(28,567)
1,637
764
-
-
-
2,401
-
35,682
(792)
246
14,158
49,294
-
-
-
-
-
-
303,350
156,596
-
3,636
71,353
534,935
2017
December
31, 2016
New
borrowing Amortization
New
leases
Interest
accrued
Interest
paid (*)
Fair value
adjustment
Cash flows from/(used in
financing activities)
Foreign
exchange
losses
Amortization
(addition)
fees
Translation
differences
Other
December
31, 2017
Thousands of U.S. dollars
Senior Secured Notes
Brazilian bonds -
Debentures
Finance lease payables
Other borrowings
Total
303,350
156,596
3,636
71,353
534,935
400,000
22,320
-
52,145
474,465
(300,000)
(162,591)
(2,816)
(69,053)
(534,460)
-
-
10,302
-
10,302
23,609
15,373
425
5,485
44,892
(23,361)
(15,331)
(425)
(5,051)
(44,168)
-
-
-
-
-
-
-
-
-
-
(5,252)
837
-
-
(4,415)
-
3,851
(624)
1,513
4,740
-
-
-
-
-
398,346
21,055
10,498
56,392
486,291
(*) For the purposes of the statements of cash flows, it is classified as "interest paid" in operting activities.
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18) TRADE AND OTHER NON-TRADE PAYABLES
Details of trade and other payables at December 31, 2016 and 2017 are as follow:
Other payables
Suppliers
Total non-current non-trade payables
Suppliers
Advances
Total current trade payables
Suppliers of fixed assets
Personnel
Other payables
Advances from customers
Total current other non-trade payables
Total current
Total
Thousands of U.S. dollars
2016
2017
283
335
618
74,721
547
75,268
31,104
88,585
11,097
429
131,215
206,483
207,101
7,750
344
8,094
92,216
1,862
94,078
15,598
80,631
17,787
438
114,454
208,532
216,626
The carrying amount of trade and other non-trade payables is similar to the fair value.
19) EQUITY
Share capital
As of December 31, 2017, share capital stood at 48 thousand U.S. dollars (€33,304), divided into 73,909,056 shares. PikCo owns 68.14% of ordinary shares
of Atento S.A.
Share premium
The share premium refers to the difference between the subscription price that the shareholders paid for the shares and their nominal value. Since this is a
capital reserve, it can only be used to increase capital, offset losses, redeem, reimburse or repurchase shares.
Reserve for acquisition of non-controlling interest
Refers to options attributable to the parent company in the acquisition of RBrasil and Interfile in the total amount of 23,531 thousand U.S. dollars as of
December 31, 2017 and 1,057 thousand of U.S. dollars for acquisition of RBrasil as of December 31, 2016.
Dividends
On October 31, 2017, our Board of Directors declared a cash interim dividend of 24,147 thousand U.S. dollars with dividends declared per share of $0.33,
paid on November 28, 2017.
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Table of Contents
Legal reserve
According to commercial legislation in Luxembourg, Atento S.A. must transfer 5% of its year profits to legal reserve until the amount reaches 10% of share
capital. The legal reserve cannot be distributed.
At December 31, 2016 and 2017, no legal reserve had been established, mainly due to the losses incurred by Atento S.A.
Translation differences
Translation differences reflect the differences arising on account of exchange rate fluctuations when converting the net assets of fully consolidated foreign
companies from local currency into Atento Group’s presentation currency (U.S. dollars).
Stock-based compensation
a) Description of sharebased payment arrangements
In 2014, Atento granted the following two share-based payment arrangements to directors, officers and other employees, for the Company and its
subsidiaries;
1. Time Restricted Stock Units (“RSU”) (equity settled)
• Grant date: December 3, 2014
• Amount: 256,134 RSUs
• Vesting period: 50% vests on October 1, 2015 and the remaining 50% vests on October 1, 2016.
• There are no other vesting conditions.
2. Performance RSU (equity settled)
• Grant date: December 3, 2014
• Amount: 931,189 RSUs
• Vesting period: 100% of the RSUs vest on October 1, 2017.
• Performancebased vesting conditions:
• TSR Tranche: 50% of the RSUs shall satisfy the performancevesting condition, if at all, based on the Total Shareholder Return (“TSR”) thresholds set
forth, and measured from October 1, 2014 through the end of the financial quarter immediately preceding October 1, 2017; provided, that the baseline price for
purposes of measuring the TSR compound annual growth will be $15.00. The thresholds are as follow:
• Below 10% compound annual growth: nil RSUs vest;
• 10% compound annual growth: 25% of the RSUs vest;
• 22% compound annual growth: 100% of the RSUs vest; and
• Compound annual growth between 10% and 22%: RSUs vest based on a linear relationship
• Adjusted EBITDA Tranche: The remaining 50% of the RSUs shall satisfy the performance vesting condition, if at all, based on the Adjusted EBITDA
thresholds set forth; provided, that for purposes of measuring the Adjusted EBITDA Tranche, the Performance Period shall include the time period between end of
the financial quarter immediately preceding October 1, 2014 through the end of the financial quarter immediately preceding October 1, 2017. The thresholds are as
follow:
• Below 8% compound annual growth: nil RSUs vest;
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Table of Contents
• 8% compound annual growth: 25% of the RSUs vest;
• 13.5% compound annual growth: 100% of the RSUs vest; and
• Compound annual growth between 8% and 13.5%: RSUs vest based on a linear relationship.
The TSR Tranche and the Adjusted EBITDA Tranche are treated separately. Thus, for example, even if the TSR threshold is not met, provided the Adjusted
EBITDA threshold is met, PRSUs will vest.
On July 1, 2016, Atento granted the following share-based payment arrangement to directors, officers and other employees, for the Company and its
subsidiaries:
1. Time Restricted Stock Units (“RSU”) (equity settled)
• Grant date: July 1, 2016
• Amount: 1,384,982 RSUs
• Vesting period: 100% of the RSUs vest on January 4, 2019
• There are no other vesting conditions
On July 3, 2017, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries:
1. Time Restricted Stock Units (“RSU”) (equity settled)
• Grant date: July 3, 2017
• Amount: 886,187 RSUs
• Vesting period: 100% of the RSUs vest on January 2, 2020
• There are no other vesting conditions
b) Measurement of fair value
The fair value of the RSUs, for all arrangements, has been measured using the Black-Scholes model. For all arrangements are equity settled and the fair
value of RSUs is measured at grant date and not remeasured subsequently. The inputs used in the measurement of the fair values at the grant date are presented here
below.
The 2014 Plan:
Time RSU
Time RSU Time RSU
Adj.
EBITDA
Performance RSU
TSR 1
TSR 2
Comments
Variable
Stock price
(USD)
Strike price
(USD)
Time (years)
Risk free rate
Expected
volatility
11.06
0.01
1
18.00%
4.11%
11.06
11.06
0.01
0.01
2
0.57%
4.11%
3
1.04%
4.11%
11.06
19.97
3
1.04%
4.11%
11.06 Stock price of Atento S.A. in USD at grant date December 3,
2014
27.74 Value close to nil will be paid
3 Time to vest as per the contract
1.04% USD risk free rate obtained from Bloomberg
4.11% Assumption is made to base volatility on the average volatility
of main competitors because Atento S.A. itself is listed in
October 2014
Dividend yield
2.00%
2.00%
2.00%
2.00%
2.00% Assumption is made to set dividend yield at 2% because 1)
there will be a limited ability to pay dividends in the near term
and 2) it is in line with the dividend yield of the main
competitors
Value RSU in
USD
10.83
10.62
10.41
0
0
F- 56
Table of Contents
The Time RSU has been split into two options for valuation purposes to reflect correctly the fact that 50% of the Time RSUs vests on October 1, 2016 and
the remaining 50% will vest on October 1, 2017.
The Performance RSU has one market condition which needs to be taken into account when determining the grant date fair value. Two scenarios have been
used to determine this fair value. For scenario “TSR 1” a compound annual growth of 10% was used; and for scenario “TSR 2” a compound annual growth rate of
22%. Given the base line price of USD15.00 (which was the opening price when Atento went to the stock exchange), a current stock price of USD 11.06 and a low
expected volatility, it is unlikely that the PRSUs of the TSR Tranche will vest. This results in a low valuation.
The Adjusted EBITDA Tranche is not included in the fair value condition as this tranche has a nonmarket performance condition.
The 2016 Plan:
Variable
Stock price (USD)
Strike price (USD)
Time (years)
Risk free rate
Expected volatility
Dividend yield
Value RSU in USD
Time RSU
Comments
9.07 Stock price of Atento S.A. in USD at grant date July 1, 2016
0.01 For valuation purposes set to 0.01
2.5 Time to vest as per the contract
0.86% USD risk free rate obtained from Bloomberg
24.40% Assumption is made to base volatility on the average volatility of main competitors because Atento S.A.
itself is listed in October 2014
0.01% Assumption is made here that no dividends will be paid out as this is not in the line of expectations
9.06
The Time RSU reflects the fact that 100% of the Time RSUs will vest on January 4, 2019.
The 2016 Extraordinary Plan:
Time RSU
Time RSU
Comments
Variable
Stock price (USD)
Strike price (USD)
Time (years)
Risk free rate
Expected volatility
Dividend yield
9.07
0.01
0.25
18.00%
36.29%
0.01%
9.07 Stock price of Atento S.A. in USD at grant date July 1, 2016
0.01 For valuation purposes set to 0.01
1.5 Time to vest as per the contract
85.00% USD risk free rate obtained from Bloomberg
36.87% Volatility based on shares prices from Atento S.A.
0.01%
Assumption is made here that no dividends will be paid out as this is not in the line of
expectations
Value RSU in USD
9.06
9.06
The Time RSU has been split into two options for valuation purposes to reflect correctly the fact that 66.67% of the Time RSUs vests on October 1, 2016
and the remaining 33.33% were forfeited in the first quarter of 2017.
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The 2017 Plan:
Variable
Stock price (USD)
Strike price (USD)
Time (years)
Risk free rate
Expected volatility
Dividend yield
Value RSU in USD
Time RSU
Comments
11 Stock price of Atento S.A. in USD at grant date July 3, 2017
0.01 For valuation purposes set to 0.01
2.5 Time to vest as per the contract
1.51% USD risk free rate obtained from Bloomberg
24.83%
Assumption is made to base volatility on the average volatility of main competitors because Atento S.A.
itself is listed in October 2014
0.01% Assumption is made here that no dividends will be paid out as this is not in the line of expectations
10.99
The Time RSU reflects the fact that 100% of the Time RSUs will vest on January 2, 2020.
c) Outstanding RSUs
As of December 31, 2017, there are 1,148,625 Time RSUs outstanding related to 2016 Grant and 861,863 Time RSUs outstanding related to 2017 Grant.
Holders of RSUs will receive the equivalent in shares of Atento S.A. without cash settlement of stock values when the RSUs vest.
For the Time RSU, the Management has made the following assumptions regarding the service conditions:
The 2016 Grant:
• For the first, second and third year, it is expected that 80% of the holders of the Time RSUs will meet the service condition for three years.
The 2017 Grant:
• For the first, second and third year, it is expected that 80% of the holders of the Time RSUs will meet the service condition for three years.
The
2014
Plan
Outstanding December 31, 2015
Forfeited (*)
Vested (*)
Outstanding December 31, 2016
(*) RSUs are forfeited during the year due to employees failing to satisfy the service or non-market performance conditions.
Time RSU
119,634
(15,880)
(103,754)
-
Time RSU
871,649
(871,649)
-
-
(**) As of October 1, 2016, a total of 103,754 Time RSUs of the Time Restricted Stock Unit Award Agreement became vested and were exercised.
The
2016
Plan
Outstanding December 31, 2016
Forfeited (*)
Outstanding December 31, 2017
(*) RSUs are forfeited during the year due to employees failing to satisfy the service conditions.
F- 58
Time RSU
1,367,896
(219,271)
1,148,625
Table of Contents
The
2016
Plan
Extraordinary
Plan
Granted July 1, 2016
Vested (*)
Outstanding December 31, 2016
Forfeited (**)
Outstanding December 31, 2017
(*) As of October 1, 2016, a total of 54,171 Time RSUs of the Time Restricted Stock Unit Award Agreement became vested and were exercised.
Time RSU
82,157
(54,171)
27,986
(27,986)
-
(**) RSUs are forfeited in first quarter of 2017 due to employees failing to satisfy the service conditions.
The
2017
Plan
Granted July 3, 2017
Forfeited (*)
Outstanding December 31, 2017
(*) RSUs are forfeited during the year due to employees failing to satisfy the service conditions
Time RSU
886,187
(24,324)
861,863
The
2014
Plan
Country
Argentina
Brazil
Chile
Spain
France
Guatemala
Mexico
Morocco
Peru
United States
Total
The
2016
Plan
Country
Argentina
Brazil
Chile
Colombia
Spain
Guatemala
Mexico
Peru
United States
Total
Balance as of
December 31,
2015
Time RSU
Forfeited
Vested
Balance
December 31,
2016
Balance as of
December 31,
2015
Performance RSU
Forfeited
Balance
December 31,
2016
6,095
49,564
4,925
15,183
2,060
1,024
22,933
1,468
2,602
13,780
119,634
(1,099)
(13,510)
(1)
49
(2,060)
(1)
(13,192)
-
1,097
12,837
(15,880)
(4,996)
(36,054)
(4,924)
(15,232)
-
(1,023)
(9,741)
(1,468)
(3,699)
(26,617)
(103,754)
-
-
-
-
-
-
-
-
-
-
-
Balance as of
December 31, 2016
21,981
214,764
67,395
10,940
124,761
-
143,052
16,462
768,541
1,367,896
F- 59
18,229
306,743
48,345
94,371
3,845
1,911
102,938
2,742
8,096
284,429
871,649
Time RSU
Forfeited
(18,229)
(306,743)
(48,345)
(94,371)
(3,845)
(1,911)
(102,938)
(2,742)
(8,096)
(284,429)
(871,649)
-
-
-
-
-
-
-
-
-
-
-
Balance December 31,
2017
(5,458)
(13,715)
(5,870)
-
(23,271)
798
(35,557)
(11,176)
(125,022)
(219,271)
16,523
201,049
61,525
10,940
101,490
798
107,495
5,286
643,519
1,148,625
Table of Contents
The
2016
Extraordinary
Plan
Country
United States
Total
The
2017
Plan
Country
Brazil
Chile
Spain
United States
Total
Balance as of
December 31,
2015
Balance as of
December 31,
2016
Time RSU
Granted
Vested
Forfeited
81,257
81,257
(54,171)
(54,171)
(27,086)
(27,086)
Time RSU
Granted
Forfeited
141,991
66,028
69,398
608,770
886,187
(24,324)
-
-
-
(24,324)
Balance
December 31,
2017
117,667
66,028
69,398
608,770
861,863
-
-
-
-
-
-
-
d) Impacts in Profit or Loss
In 2017, 4,923 thousand U.S. dollars (1,535 thousand U.S. dollars as at December 31, 2016 and 1,982 thousand U.S. dollars as at December 31, 2015)
related to stock-based compensation were recorded as Employee benefit expenses.
20) TAX MATTERS
a) Income tax
The reconciliation between the income tax expense that would result in applying the statutory tax rate and the income tax expense recorded is as follow:
Profit/(loss) before income tax
Income tax applying the statutory tax rate
Permanent differences
Adjustments due to international tax rates
Tax credits
Branches income tax
Change in federal statutory rate in Spain (a)
Total income tax expense
Thousands of U.S. dollars
For the years ended December 31,
2015 (*)
2016
2017
75,380
21,296
12,845
(12,541)
(497)
688
1,359
23,150
8,564
2,484
13,655
(11,526)
(791)
1,385
-
5,207
(1,035)
(310)
12,635
445
(1,112)
875
-
12,533
(*) Exclude discontinued operations – Morroco.
(a) This item is related to the amendment of the tax legislation in Spain that reduced the income tax rate from 28% for the calendar year of 2015 to 25% for the
calendar year of 2016 and for subsequent years.
Permanent differences in 2017 are mainly related to non-deductible expenses mainly in Brazil, Spain and Mexico, which are not deductible for tax purposes.
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The breakdown of the Atento Group’s income tax expense is as follow:
Current tax expense
Deferred tax
Total income tax expense
(*) Exclude discontinued operations – Morroco.
b) Deferred tax assets and liabilities
Thousands of U.S. dollars
For the years ended December 31,
2015 (*)
2016
2017
(26,968)
3,818
(23,150)
(22,852)
17,645
(5,207)
(20,175)
7,642
(12,533)
The breakdown and balances of deferred tax assets and deferred tax liabilities at December 31, 2016 and 2017 are as follow:
Income Statement
Thousands of U.S. dollars
Equity
Increases
Decreases
Increases
Decreases
Translation
differences
Balance at
12/31/2016
35,334
11,376
875
23,084
-
-
(18,955)
(2,859)
(56)
(16,041)
1,266
1,266
1,984
-
-
1,984
-
-
(4,747)
(4,747)
-
-
3,224
3,224
(3,111)
(15)
391
(3,487)
5,974
118,341
16,954
3,693
97,694
(45,597)
5,974
(45,597)
Balance at
12/31/2015
107,836
13,199
2,483
92,154
(56,062)
(56,062)
DEFERRED TAX ASSETS
Unused tax losses (*)
Unused tax credits
Deferred tax assets (temporary
differences)
DEFERRED TAX LIABILITIES
Deferred tax liabilities (temporary
differences)
(*) Tax credits for loss carryforwards.
Income Statement
Thousands of U.S. dollars
Equity
Acquisition of
Business
Combinations
Balance at
12/31/2016
Increases Decreases Increases Decreases
Others
(**)
Translation
differences
Balance at
12/31/2017
DEFERRED TAX ASSETS
Unused tax losses (*)
Unused tax credits
Deferred tax assets (temporary
differences)
DEFERRED TAX LIABILITIES
Deferred tax liabilities (temporary
differences)
118,342
16,954
3,694
37,723
17,671
2,171
(35,215)
(7,560)
(815)
97,694
(45,597)
17,881
(1,888)
(26,840)
7,022
(45,597)
(1,888)
7,022
-
-
-
-
-
-
-
-
-
-
403
403
2,366
714
-
1,652
(2,688)
(2,688)
(570)
(570)
-
8,680
2,454
331
131,326
29,663
5,381
-
-
-
5,895
(1,194)
96,282
(43,942)
(1,194)
(43,942)
(*) Tax credits for loss carryforwards.
(**) Refer to the use of tax losses for the purpose discharge debts of Withholding Tax (Imposto
de
Renda
Retido
na
Fonte
-
“IRRF”)
, Social Integration Program
(Programa
de
Integração
Social
-
“PIS”)
, Social Security Contribution (Contribuição
para
Financiamento
da
Seguridade
Social
-
“COFINS”)
, and Social
Contribution Tax on Profits (Contribuição
Social
sobre
o
Lucro
Líquido
-
“CSLL”)
, according to the Special Tax Regularization Program (Programa
Especial
de
Regularização
Tributária
-
“PERT”)
. This compensation was made with liability balances and therefore did not affect the income tax expense for the period.
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Table of Contents
As a result of the business combination of RBrasil described in Note 5a, the Company recognized deferred tax assets amounting to 2,079 thousand U.S.
dollars due to the difference between the tax value of the customer base and the fair value allocated in the business combination. Also, as a result of the business
combination of Nova Interfile Holding Ltda described in Note 5b, the Company recognized deferred tax assets amounting to 2,366 thousand U.S. dollars and
deferred tax liabilities of 2,688 thousand U.S. dollars due to the difference between the tax value of the customer base and the fair value allocated in the business
combination.
There is not estimation of distribute future dividends until this report date. Dividends distribution must be subject to Board approval, and will depend on the
Company’s future earnings, cash flow, financial condition, financial covenants and other relevant factors. There are no income tax consequences attached to the
payment of dividends in either 2017 or 2016 by the Company to its shareholders.
The following table presents the schedule for the reversal of recognized and unrecognized deferred tax assets and liabilities in the statement of financial
position based on the best estimates available at the respective estimation dates:
2016
Tax losses
Deductible temporary differences
Tax credits for deductions
Total deferred tax assets
Total deferred tax liabilities
2017
Tax losses
Deductible temporary differences
Tax credits for deductions
Total deferred tax assets
Total deferred tax liabilities
c) Taxes receivables/payables
Thousands of U.S. dollars
2017
2018
2019
2020
2021
2022
Subsequent
years
828
995
3,017
4,840
4,603
1,800
9,539
676
12,016
4,603
2,124
18,086
-
20,210
4,603
2,505
24,221
-
26,726
4,603
2,991
33,667
-
36,658
4,603
3,505
995
-
4,500
4,603
3,201
10,191
-
13,391
17,979
2018
2019
2020
Thousands of U.S. dollars
2021
2022
2023
2,431
12,578
1,266
16,275
4,436
4,849
14,018
1,266
20,133
4,436
5,368
14,401
1,266
21,035
4,436
1,800
15,065
1,266
18,131
4,436
749
15,066
317
16,133
4,436
Subsequent years
11,753
17,079
-
28,831
17,326
2,713
8,075
-
10,788
4,436
Details of taxes receivables and payables at December 31, 2016 and 2017 are as follow:
Receivables
Non-current
Indirect taxes
Current
Indirect taxes
Other taxes
Income tax
Total
Thousands of U.S. dollars
As of December 31,
2016
2017
7,815
1,400
5,052
22,145
36,412
F- 62
Total
16,954
97,694
3,693
118,341
45,597
Total
29,663
96,282
5,381
131,326
43,942
7,282
4,764
7,308
21,969
41,323
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Payables
Non-current
Social security
Current
Indirect taxes
Other taxes
Income tax
Total
Thousands of U.S. dollars
As of December 31,
2016
2017
1,098
23,033
45,767
4,030
73,928
1,025
28,024
58,142
8,058
95,249
21) PROVISIONS AND CONTINGENCIES
Movements in provisions in 2016 and 2017 are as follow:
Non-current
Provisions for liabilities
Provisions for taxes
Provisions for dismantling
Other provisions
Total non-current
Current
Provisions for liabilities
Provisions for taxes
Provisions for dismantling
Other provisions
Total current
12/31/2015
Additions
Additions
from business
combination
(Note 5)
Payments
Reversal
Transfers
Translation
differences
12/31/2016
Thousands of U.S. dollars
29,532
13,283
12,065
140
55,020
6,205
876
1,271
3,090
11,442
10,331
3,690
1,452
2,890
18,363
1,079
115
55
3,851
5,100
(18,569)
-
(13)
(61)
(18,643)
(540)
-
-
(15)
(555)
4,212
5,654
-
-
9,866
3,239
-
-
-
3,239
F- 63
(2,174)
(3,923)
(259)
(54)
(6,410)
(1,015)
-
(1,512)
(1,230)
(3,757)
-
-
(207)
-
(207)
-
-
207
-
207
7,062
2,743
2,300
(199)
11,906
(808)
15
192
(357)
(958)
30,394
21,447
15,338
2,716
69,895
8,160
1,006
213
5,339
14,718
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Non-current
Provisions for liabilities
Provisions for taxes
Provisions for dismantling
Other provisions
Total non-current
Current
Provisions for liabilities
Provisions for taxes
Provisions for dismantling
Other provisions
Total current
12/31/2016 Additions
30,394
21,447
15,338
2,716
69,895
8,160
1,006
213
5,339
14,718
18,474
1,286
1,416
944
22,120
8,197
4,580
1
9,88
13,766
Thousands of U.S. dollars
Additions
from
business
combination
(Note 5)
Payments
Reversal
Transfers
Translation
differences 12/31/2017
4,134
2,274
-
-
6,408
-
-
-
-
-
(6,520)
-
(48)
(2,382)
(8,950)
(2,479)
-
6
(5,181)
(7,654)
(10,687)
(6,607)
(7,382)
(2,733)
(27,409)
(104)
-
(219)
(15)
(338)
(73)
2,108
-
(2,035)
-
-
-
-
-
-
(4,912)
(675)
(75)
4,784
(878)
(3,231)
55
(1)
1,754
(1,423)
30,810
19,833
9,249
1,294
61,186
10,543
5,641
-
2,884
19,068
“Provisions for liabilities” primarily relate to provisions for legal claims underway in Brazil. Atento Brasil S.A. has made payments in escrow related to
legal claims from ex-employees, amounting to 33,678 thousand U.S. dollars and 42,217 thousand U.S. dollars as of December 31, 2016 and 2017, respectively.
“Provisions for taxes” mainly relate to probable contingencies in Brazil with respect to social security payments and other taxes, which are subject to
interpretations by tax authorities. Atento Brasil S.A. has made payments in escrow related to taxes claims 4,619 thousand U.S. dollars and 4,407 thousand U.S.
dollars as of December 31, 2016 and 2017, respectively.
The amount recognized under “Provision for dismantling” corresponds to the necessary cost of dismantling of the installations held under operating leases to
bring them to its original condition.
As of December 31, 2017, lawsuits still before the courts as follow:
Brazil
At December 31, 2017, Atento Brasil was involved in approximately 14,750 labor-related disputes (12,364 labor disputes as of December 31, 2016), filed by
Atento’s employees or ex-employees for various reasons, such as dismissals or claims over employment conditions in general. The total amount of the main claims
classified as possible was 162,701 thousand U.S. dollars (134,244 thousand U.S. dollars on December 31, 2016).
In addition, at December 31, 2017, there are labor-related disputes belonging to the company Atento Brasil 1 (formely Casa Bahia Contact Center Ltda –
“CBCC”) totaling 749 thousand U.S. dollars. According to the Company’s external attorneys, materialization of the risk event is probable.
Moreover, as of December 31, 2017, Atento Brasil was party to 14 civil public actions filed by the Labor Prosecutor’s Office due to alleged irregularities
mainly concerning daily and general working routine, lack of overtime control and improper health and safety conditions in the workplace. The total amount
involved in these claims was approximately 27,870 thousand Brazilian Reais (28,132 thousand U.S. dollars), of which 856 thousand Brazilian Reais relate to claims
that have been classified as probable by our internal and external lawyers, for which amount Atento Brasil has recorded a provision, as indicated in the paragraph
above. We expect that our ultimate liability for these claims, if any, will be substantially less than the full amount claimed. These claims are generally brought with
respect to specific jurisdictions in Brazil, and it is possible that in the future similar claims could be brought against us in additional jurisdictions. We cannot assure
that these current claims or future claims brought against us will not result in liability to the Company, and that such liability would not have a material adverse
effect on our business, financial condition and results of operations.
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As of December 31, 2017, Atento Brasil S.A. has 8 civil lawsuits ongoing for various reasons (14 on December 31, 2016) which, according to the
Company’s external attorneys, materialization of the risk event is possible. The total amount of the claims is approximately 5,953 thousand U.S. dollars (4,948
thousand U.S. dollars on December 31, 2016).
In addition, at December 31, 2017, Atento Brasil S.A. has 42 disputes ongoing with the tax authorities and social security authorities, for various reasons
relating to infraction proceedings filed (46 on December 31, 2016). The total amount of these claims is approximately 59,445 thousand U.S. dollars (30,885
thousand U.S. dollars on December 31, 2016). According to the Company’s external attorneys, risk of material loss is possible.
In addition, as of December 31, 2017, there are tax authorities disputes belonging to the company CBCC totaling 2,640 thousand U.S. dollars. According to
the Company’s external attorneys, materialization of the risk event is probable.
Furthermore, it is important to highlight out that the Superior Labor Court of Appeals (Tribunal Superior do Trabalho) during the month of August 2015
decided to amend the indexation rate related to labor contingencies. The decision alters the Reference Rate Index (TR) usually used to adjust the amount of the
contingencies to the Special Broad Consumer Price Index ( Índice
de
Preços
ao
Consumidor
Amplo
Especial
–
IPCA-E)
. There are several questions about this
matter, especially the period to which change should be applied as well as if the new index is appropriate. In addition, during October 2015, the Supreme Court
(STF) issued a “writ of Mandamus” to the Federation of Brazilian Banks (FEBRABAN) suspending the application of the new index (IPCA-E). On September 31,
2017, a new decision of the Superior Labor Court of Appeals on the application of the index IPCA-E was amended, changing the initial date of the application of
the index from June 30, 2009 to March 25, 2015. As early as December 2017 came the judgment of the Brazilian Bank Federation (FEBRABAN), declaring
unfounded the suit proposed by FEBRABAN. With this unfounded, the effects of the injunction that had been granted by the STF were ceased. However,
considering that this recent Supreme Court decision was rendered after the entry into force of Law 13,467 / 17 (Labor Reform), the conclusion that can be sustain it
is that its effects would be limited to 25 March 2015 to 10 November 2017 because the new law gave a new text to the Article 879 of the Consolidated Labor Laws
(CLT), to expressly determine that it will be apply the TR to upgrading of workers' claims arising from criminal conviction.
Thus, the Company considered this quarter the new modulation projection of the IPCA-E in labor, and this, the external opinion of our lawyers also
considering as “possible” the probability of loss in an eventual dispute. The amount involved in the period from March 25, 2015 to November 10, 2017 is
approximately 755 thousand U.S. dollars. We will monitor this issue during 2018.
On December 31, 2017, the subsidiary RBrasil Soluções S.A. holds contingent liabilities of labor nature classified as possible in the approximate amount of
377 thousand U.S. dollars.
On December 31, 2017, the subsidiary Interfile holds contingent liabilities of labor nature and social charges classified as possible in the approximate
amount of 2,297 thousand U.S. dollars.
Additionally, there are other contingencies which are classified as possible by the Company amounting to 5,849 thousand U.S. dollars.
Spain
At December 31, 2017, Atento Teleservicios España S.A.U. including its branches and our other Spanish companies were party to labor-related disputes
filed by Atento employees or former employees for different reasons, such as dismissals and disagreements
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regarding employment conditions, totaling 3,538 thousand U.S. dollars. According to the Company’s external lawyers, materialization of the risk event is
possible.
Mexico
At December 31, 2017, Atento Mexico through its two entities (Atento Servicios, S.A. de C.V. and Atento Atencion y Servicios, S.A. de C.V.) is a party of
labor related disputes filed by Atento employees that abandoned their employment or former employees that base their claim on justified termination reasons,
totaling 7,187 thousand U.S. dollars (Atento Servicios, S.A. de C.V. 4,318 thousand U.S. dollars and Atento Atencion y Servicios, S.A. de C.V. 2,869 thousand
U.S. dollars), according to the external labor law firm for possible risk labor disputes.
Argentina
In Argentina, as a consequence of an unfavourable sentence on the case “ATUSA S.A.” issued by Argentinian Internal Revenue Services (“Administración
Federal de Ingresos Públicos”), notified on February 2017, the risk qualified so far as “remote” becomes now “possible” being this contingency estimated amount
of approximately 2,454 thousand U.S. dollars at December 31, 2017 (3,147 thousand U.S. dollars on December 31, 2016). A formal appeal has been filed at the
National Supreme Court of Justice.
Given the nature of the risks covered by these provisions, it is not possible to determine a reliable schedule of potential payments, if any.
22) REVENUE AND EXPENSES
a) Revenue
The breakdown of revenue for the years ended December 31, 2015, 2016 and 2017 is as follow:
Revenue
Services rendered
Total
(*) Exclude discontinued operations - Morocco.
b) Other operating income
2015 (*)
Thousands of U.S. dollars
2016 (*)
2017
1,949,883
1,949,883
1,757,498
1,757,498
1,921,311
1,921,311
Details of other operating income for the years ended December 31, 2015, 2016 and 2017 are as follow:
Other operating income
Other operating income
Grants
Income from indemnities and other non-recurring income
Gains on disposal of non-current assets
Total
(*) Exclude discontinued operations - Morocco.
F- 66
Thousands of U.S. dollars
2015 (*)
2016
2017
2,282
626
1,407
10
4,325
3,991
673
872
344
5,880
5,755
860
939
8,883
16,437
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c) Supplies
Details of amounts recognized under “Supplies” during the years ended December 31, 2015, 2016 and 2017 are as follow:
Supplies
Subcontracted services
Infrastructure leases (Note 25b)
Purchases of materials
Communications
Expenses with labor unions
Other
Total
(*) Exclude discontinued operations - Morocco.
d) Employee benefit expenses
2015 (*)
Thousands of U.S. dollars
2016 (*)
2017
34,088
4,236
1,434
31,714
-
6,132
77,604
29,940
3,376
986
24,929
1,204
5,163
65,598
26,885
11,889
628
25,003
1,156
9,338
74,899
Details of amounts recognized under “Employee benefit expenses” during the years ended December 31, 2015, 2016 and 2017 are as follow:
Employee benefit expenses
Salaries and wages
Social security
Supplementary pension contributions
Termination benefits
Other welfare costs
Total
(*) Exclude discontinued operations - Morocco.
e) Depreciation and amortization
Thousands of U.S. dollars
2015 (*)
2016
2017
1,087,390
131,268
3,240
35,654
152,974
1,410,526
1,014,830
120,923
2,848
34,654
136,646
1,309,901
1,076,810
131,524
2,861
33,744
184,137
1,429,076
The depreciation and amortization expenses for the years ended December 31, 2015, 2016 and 2017 are as follow:
Depreciation and amortization
Intangible assets (Note 6)
Property, plant and equipment (Note 9)
Total
(*) Exclude discontinued operations - Morocco.
F- 67
2015 (*)
Thousands of U.S. dollars
2016 (*)
2017
51,430
50,077
101,507
50,916
46,448
97,364
55,195
49,226
104,421
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f) Other operating expenses
The breakdown of “Other operating expenses” for the years ended December 31, 2015, 2016 and 2017 is as follow:
Other operating expenses
Services provided by third parties
Losses on disposal of fixed assets
Taxes other than income tax
Other management expenses
Total
(*) Exclude discontinued operations - Morocco.
Details of “Services provided by third parties” under “Other operating expenses” are as follow:
Services provided by third parties
Leases (Note 25b)
Installation and maintenance
Lawyers and law firms
Tax advisory services
Consultants
Audits and other related services
Studies and work performed
Other external professional services
Publicity, advertising and public relations
Insurance premiums
Travel expenses
Utilities
Banking and similar services
Other
TOTAL
(*) Exclude discontinued operations - Morocco.
2015 (*)
Thousands of U.S. dollars
2016 (*)
2017
222,891
800
9,087
8,700
241,478
193,213
1,432
7,491
11,879
214,015
202,146
12,989
13,580
7,933
236,648
2015 (*)
Thousands of U.S. dollars
2016 (*)
2017
75,573
25,159
6,055
504
12,117
3,347
372
40,863
7,643
231
8,502
33,700
2,191
6,634
222,891
63,014
24,237
5,198
302
8,056
2,493
76
40,669
6,089
207
6,047
28,743
1,006
7,076
193,213
66,923
22,799
6,887
467
8,578
2,677
7
45,955
5,458
636
6,288
27,392
1,391
6,688
202,146
The amounts recognized under “Consultants” and “Other external professional services” for the years ended December 31, 2015, 2016 and 2017 mainly
refers to consulting and other costs in connection with efficiencies and costs reduction projects implemented in Brazil and EMEA.
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g) Net finance expense
The breakdown of “Finance income” and “Finance costs” for the years ended December 31, 2015, 2016 and 2017 are as follow:
Finance income
Interest received from third parties
Total finance income
Finance costs
Interest accrued to Group companies
Interest accrued to third parties
Discounts to the present value of provisions and other liabilities (**)
Total finance costs
(*) Exclude discontinued operations - Morocco.
2015 (*)
Thousands of U.S. dollars
2016 (*)
2017
15,459
15,459
496
(74,418)
(1,547)
(75,469)
7,188
7,188
-
(75,090)
15,939
(59,151)
7,858
7,858
-
(71,404)
(6,741)
(78,145)
(**) The year ended December 31, 2016 contains the impacts of the CVI termination. The interest reversal of 19,936 thousand U.S. dollars was recognized in
"Finance costs".
The breakdown of “Change in fair value of financial instruments” and “Net foreign exchange gain/(loss)” is shown in the table below:
Thousands of U.S. dollars
Fair value of financial instruments
Fair value of financial instruments
Foreign exchange gains/(losses)
Loans and receivables
Other financial transactions
Current transactions
Disposal of Financial assets
Total
(*) Exclude discontinued operations - Morocco.
Thousands of U.S. dollars
Fair value of financial instruments
Fair value of financial instruments
Foreign exchange gains/(losses)
Loans and receivables
Other financial transactions
Current transactions
Total
Gains
2015 (*)
Losses
Net
29,915
29,915
86,936
3,101
16,711
34
106,782
(12,380)
(12,380)
(77,520)
(8,789)
(24,362)
(30)
(110,701)
Gains
2016 (*)
Losses
675
675
868
12,381
18,996
32,245
-
-
(12,200)
(45,784)
(30,755)
(88,739)
17,535
17,535
9,416
(5,688)
(7,651)
4
(3,919)
Net
675
675
(11,332)
(33,403)
(11,759)
(56,494)
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Table of Contents
Thousands of U.S. dollars
Fair value of financial instruments
Fair value of financial instruments
Foreign exchange gains/(losses)
Loans and receivables
Other financial transactions
Current transactions
Total
23) SEGMENT INFORMATION
Gains
2017
Losses
230
230
38,220
16,407
8,969
63,596
-
-
(57,187)
(14,405)
(15,431)
(87,023)
Net
230
230
(18,967)
2,002
(6,462)
(23,427)
The CEO is the Chief Operating Decision Maker (“CODM”). Management has determined the operating segments on the basis of the information reviewed
by the CEO for the purposes of allocating resources and assessing performance. The results measurement used by the CEO to assess the performance of the Atento
Group’s segments is the EBITDA and Adjusted EBITDA (as defined below).
The CEO considers the business from the geographical perspective in the following areas:
• EMEA, which combines the activities carried out regionally in Spain and Morocco 1 .
• The Americas, which includes the activities carried out by the various Spanish-speaking companies in Mexico, Central and South America. It
also includes transactions in the United States.
• Brazil, which is managed separately in view of its different language and major importance.
Inter-segment transactions are carried out at market prices.
The Atento Group uses EBITDA and Adjusted EBITDA to track the performance of its segments and to establish operating and strategic targets.
Management believes that EBITDA and Adjusted EBITDA provides an important measure of the segment’s operating performance because it allows management
to evaluate and compare the segments’ operating results, including their return on capital and operating efficiencies, from period to period by removing the impact
of their capital structure (interest expenses), asset bases (depreciation and amortization), and tax consequences. EBITDA is defined as profit/(loss) for the period
from continuing operations before net finance expense (which includes finance income, finance costs, change in fair value of financial instruments and net foreign
exchange losses), income taxes and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted to exclude acquisition and integration related
costs, restructuring costs, site relocation costs, financing fees, asset impairments and other items which are not related to our core operating results.
EBITDA and Adjusted EBITDA are a commonly reported measure and are widely used among analysts, investors and other interested parties in the Atento
Group’s industry, although not a measure explicitly defined in IFRS, and therefore, may not be comparable to similar indicators used by other companies. EBITDA
and Adjusted EBITDA should not be considered as an alternative to the profit for the year as a measurement of our consolidated earnings or as an alternative to
consolidated cash flow from operating activities as a measurement of our liquidity.
1 Until September 2016.
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The following tables present financial information for the Atento Group’s operating segments for the years ended December 31, 2015, 2016 and 2017 (in
thousand U.S. dollars):
For the year ended December 31, 2015
Sales to other companies
Sales to Telefónica Group
Sales to other group companies
Other operating income and expense
EBITDA
Depreciation and amortization
Operating profit/(loss)
Net finance expense
Income tax
Profit/(loss) from continuing operations
Profit/(loss) from discontinued operations
Profit/(loss) for the year
EBITDA
Acquisition and integration related costs
Restructuring costs
Site relocation costs
Financing and IPO fees
Asset impairments and Other
Adjusted EBITDA (unaudited)
Capital expenditure
Intangible, Goodwill and PP&E
Allocated assets
Allocated liabilities
EMEA (*)
Americas
Brazil
Other and
eliminations
Total Group
Thousands of U.S. dollars
71,524
160,148
32
(219,713)
11,991
(12,360)
(369)
(12,343)
3,233
(9,479)
(3,082)
(12,561)
11,991
-
6,299
-
-
175
18,465
7,332
62,014
417,828
278,871
411,651
376,347
1,775
(685,565)
104,208
(38,371)
65,837
(8,678)
(20,157)
37,002
-
37,002
104,208
108
3,107
27
-
1,610
109,060
39,207
211,105
590,884
327,042
577,519
352,675
-
(813,701)
116,493
(49,979)
66,514
(25,257)
(14,010)
27,247
-
27,247
116,493
-
5,613
3,383
-
3,892
129,381
74,248
266,454
618,925
456,823
-
-
(1,788)
(7,623)
(9,411)
(797)
(10,208)
(116)
7,784
(2,540)
-
(2,540)
(9,411)
-
780
-
313
1,098
(7,220)
427
2,372
(249,221)
(82,111)
1,060,694
889,170
19
(1,726,602)
223,281
(101,507)
121,774
(46,394)
(23,150)
52,230
(3,082)
49,148
223,281
108
15,799
3,410
313
6,775
249,686
121,214
541,945
1,378,416
980,625
(*) Exclude discontinued operations - Morocco.
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Table of Contents
For the year ended December 31, 2016
Sales to other companies
Sales to Telefónica Group
Sales to other group companies
Other operating income and expense
EBITDA
Depreciation and amortization
Operating profit/(loss)
Net finance expense
Income tax
Profit/(loss) from continuing operations
Profit/(loss) from discontinued operations
Profit/(loss) for the year
EBITDA
Restructuring costs
Site relocation costs
Asset impairments and Other
Adjusted EBITDA (unaudited)
Capital expenditure
Intangible, Goodwill and PP&E
Allocated assets
Allocated liabilities
For the year ended December 31, 2017
Sales to other companies
Sales to Telefónica Group
Sales to other group companies
Other operating income and expense
EBITDA
Depreciation and amortization
Operating profit/(loss)
Net finance expense
Income tax
Profit/(loss) for the year
EBITDA
Restructuring costs
Other
Shared services expenses
Adjusted EBITDA (unaudited)
Capital expenditure
Intagible, Goodwill and PP&E
Allocated assets
Allocated liabilities
EMEA
Americas
Brazil
Other and
eliminations
Total Group
Thousands of U.S. dollars
72,750
151,176
4
(220,645)
3,285
(10,712)
(7,427)
(12,319)
4,933
(14,813)
(3,206)
(18,019)
3,285
10,390
18
2,709
16,402
2,124
48,342
396,298
272,082
394,961
322,237
1,718
(596,963)
121,953
(33,757)
88,196
(31,092)
(15,823)
41,281
-
41,281
121,953
10,562
168
(40,668)
92,015
23,042
189,036
558,657
259,352
542,953
273,420
-
(717,683)
98,690
(52,356)
46,334
(40,074)
(3,070)
3,190
-
3,190
98,690
10,994
9,137
2,131
120,952
23,000
298,920
677,794
490,172
1
-
(1,722)
(8,497)
(10,218)
(539)
(10,757)
(24,297)
8,753
(26,301)
-
(26,301)
(10,218)
1,700
-
1,011
(7,507)
-
1,540
(255,131)
(74,191)
1,010,665
746,833
-
(1,543,788)
213,710
(97,364)
116,346
(107,782)
(5,207)
3,357
(3,206)
151
213,710
33,646
9,323
(34,817)
221,862
48,166
537,838
1,377,618
947,415
EMEA
Americas
Brazil
Other and
eliminations
Total Group
Thousands of U.S. dollars
435,195
317,849
4,997
(688,949)
69,092
(37,640)
31,452
(13,206)
(9,667)
8,579
69,092
8,473
4,208
1,734
83,507
24,503
178,485
603,770
280,575
80,020
143,424
1
(215,860)
7,585
(9,340)
(1,755)
(16,834)
5,031
(13,558)
7,585
3,831
115
3,259
14,790
3,948
49,101
401,332
126,575
F- 72
652,696
292,110
-
(832,377)
112,429
(56,908)
55,521
(33,038)
(8,822)
13,661
112,429
4,011
119
8,155
124,714
38,825
306,672
677,149
499,670
-
(1)
(4,980)
12,745
7,764
(533)
7,231
(30,406)
925
(22,250)
7,764
464
2,875
(13,148)
(2,045)
259
1,185
(351,946)
45,646
1,167,911
753,382
18
(1,724,441)
196,870
(104,421)
92,449
(93,484)
(12,533)
(13,568)
196,870
16,779
7,317
-
220,966
67,535
535,443
1,330,305
952,466
Table of Contents
"Other and eliminations" includes activities of the intermediate holdings in Spain (Atento Spain Holdco, S.L.U.), Luxembourg holdings, as well as inter-
group transactions between segments.
The breakdown of sales to customers by the main countries where the Atento Group operates is as follow:
Country
Spain
Other and eliminations (*)
EMEA
Argentina
Chile
Colombia
El Salvador
United States
Guatemala
Mexico
Peru
Puerto Rico
Uruguay
Panama
Other and eliminations (*)
Americas
Brazil
Other and eliminations (*)
Total revenue
For the years ended December 31,
2015 (*)
2016
2017
233,041
(1,336)
231,705
162,143
79,626
59,546
19,238
28,865
17,091
242,426
145,413
13,982
3,652
4,617
13,174
789,773
930,194
(1,789)
1,949,883
223,956
(25)
223,931
119,589
80,106
61,042
16,741
36,968
15,771
199,634
151,755
14,629
3,475
4,990
14,217
718,917
816,373
(1,723)
1,757,498
223,445
(1)
223,444
142,473
97,196
75,373
12,527
48,341
16,732
178,537
151,681
10,156
3,184
4,466
17,375
758,041
944,806
(4,980)
1,921,311
(*) Includes holding company level revenues and consolidation adjustments.
The Atento Group signed a framework contract with Telefónica that expires on December 31, 2021. In 2017, 39.2% of service revenue were generated from
business with Telefónica Group companies (42,5% in 2016 and 45,2% in 2015).
24) EARNINGS/(LOSS) PER SHARE
Basic earnings/(loss) per share is calculated by dividing the profits/(losses) attributable to equity owners of the Company by the weighted average number of
ordinary shares outstanding during the periods as demonstrated below:
Result attributable to equity owners of the Company
Atento’s profit/(loss) attributable to equity owners of the parent from continuing operations (in
thousands of U.S. dollars)
Atento’s loss attributable to equity owners of the parent from discontinued operations (in thousands
of U.S. dollars)
Weigthed average number of ordinary shares
Basic earnings/(loss) per share from continuing operations
Basic loss per share from discontinued operations
F- 73
2015 (*)
Thousands of U.S. dollars
2016 (*)
2017
52,230
3,357
(13,568)
(3,082)
73,648,760
0.71
(0.04)
(3,206)
73,816,933
0.05
(0.04)
-
73,909,056
(0.18)
-
Table of Contents
Diluted results per share are calculated by adjusting the weighted average number of ordinary shares outstanding to reflect the conversion of all dilutive
ordinary shares. The weighted average number of ordinary shares outstanding used to calculate both basic and diluted earnings per share attributable to common
stockholders is the same.
Result attributable to equity owners of the Company
Atento’s profit/(loss) attributable to equity owners of the parent from continuing operations (in
thousands of U.S. dollars) (1)
Atento’s loss attributable to equity owners of the parent from discontinued operations (in thousands
of U.S. dollars) (1)
Potential increase in number of ordinary shares outstanding in respect of share-based plan
Adjusted weighted average number of ordinary shares
Diluted earnings/(loss) per share from continuing operations
Diluted loss per share from discontinued operations
Thousands of U.S. dollars
2015 (*)
2016 (*)
2017
52,230
3,357
(13,568)
(3,082)
1,026,207
74,674,967
0.70
(0.04)
(3,206)
272,791
74,089,724
0.05
(0.04)
-
-
73,909,056
(0.18)
-
(*) Exclude discontinued operations – Morocco.
(1) As of December 31, 2017, potential ordinary shares of 1,090,060, relating to the stock option plan were excluded from the calculation of diluted loss per share
as the loss in 2017 is anti-dilutive.
25) COMMITMENTS
a) Guarantees and commitments
As of December 31, 2016 and 2017, the Atento Group has guarantees and commitments to third parties of 320,300 thousand U.S. dollars and 322,233
thousand U.S. dollars, respectively.
The transactions guaranteed and their respective amounts at December 31, 2016 and 2017 are as follow:
Guarantees
Financial, labor-related, tax and rental transactions
Contractual obligations
Other
Total
Thousands of U.S. dollars
2016
2017
166,036
154,239
25
320,300
156,579
165,624
30
322,233
The Company’s directors do not believe that any contingencies will arise from these guarantees other than those already recognized.
The breakdown shown in the table above relates to guarantees extended by Atento Group companies, classified by purpose. Of these guarantees, the
majority relate to commercial purposes and rental activities, the remaining guarantees relates to tax and labor proceedings.
F- 74
Table of Contents
b) Operating leases
The breakdown of total minimum future lease payments under non-cancellable operating leases is as follow:
Up to 1 year
Between 1 and 5 years
More than 5 years
Total
Thousands of U.S. dollars
2016
2017
54,965
116,182
36,462
207,609
63,178
124,913
52,021
240,112
Total operating lease expenses recognized in the consolidated statements of operations for the year ended December 31, 2017 amount to 11,889 thousand
U.S. dollars (3,376 thousand U.S. dollars in 2016 and 4,236 thousand U.S. dollars in 2015) under “Infrastructure leases” (see Note 22c) and 66,923 thousand U.S.
dollars (63,014 thousand U.S. dollars in 2016 and 75,573 thousand U.S. dollars in 2015) under “Services provided by third parties” (see Note 22f).
No contingent payments on operating leases were recognized in the consolidated statements of operations for the years ended December 31, 2015, 2016 and
2017.
The operating leases where the Company acts as lessee are mainly on premises intended for use as call centers. These leases have various termination dates,
with the latest in 2028.
At December 31, 2017, the payment commitment for the early cancellation of these leases is 137,684 thousand U.S. dollars (122,480 thousand U.S. dollars
in 2016 and 127,531 thousand U.S. dollars in 2015).
26) RELATED PARTIES
The following table shows the breakdown of the total remuneration paid to the Atento Group’s key management personnel in 2015, 2016 and 2017:
Salaries and variable remuneration
Salaries
Variable remuneration
Payment in kind
Medical insurance
Life insurance premiums
Other
Total
Thousands of U.S. dollars
2016
2015
2017
6,999
3,897
3,102
1,156
135
10
1,011
8,155
3,826
3,826
0
980
117
27
836
4,806
4,374
3,303
1,071
858
138
28
692
5,232
F- 75
Table of Contents
27. SUBSEQUENT EVENT
In March 2018, Atento Brasil S.A. a indirect subsidiary of Atento S.A. received a tax notice from the Brazilian Federal Revenue Service, related to Corporate
Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) for the period from 2012 to 2015, due to the disallowance of the expenses on tax amortization
of goodwill and deductibility of certain financing costs originated of the acquisition of Atento Brasil S.A. by Bain Capital in 2012, and the withholding taxes on
payments made to certain of our former shareholders.
The amount of the tax assessment from the Brazilian Federal Revenue Service, not including interest and penalties, was approximately 105,268 thousand U.S.
dollars, and was assessed by the Company’s outside legal counsel as possible loss.
We disagree with the proposed tax assessment and we intend to defend our position, which we believe is meritorious, through applicable administrative and, if
necessary, judicial remedies. Based on our interpretation of the relevant law, and based on the advice of our legal and tax advisors, we believe the position we have
taken is sustainable. Consequently, no provisions are recognized regarding these proceedings.
F- 76
LIST OF SUBSIDIARIES OF ATENTO S.A.
Exhibit 8.1
Name
Atento Luxco Midco, S.à.r.l.
Atento Luxco 1 S.A.
Atalaya Luxco 2. S.à.r.l.
Atalaya Luxco 3. S.à.r.l.
Atento Argentina. S.A
Global Rossolimo. S.L.U
Atento Spain Holdco. S.L.U
Atento Spain Holdco 6. S.L.U
Atento Spain Holdco 2. S.A.U
Atento Teleservicios España. S.A.U
Atento Servicios Técnicos y Consultoría S.A.U
Atento Impulsa. S.A.U
Atento Servicios Auxiliares de Contact Center. S.A.U
Atento B V
Teleatento del Perú. S.A.C
Woknal. S.A.
Atento Colombia. S.A.
Atento Holding Chile. S.A.
Atento Chile. S.A.
Atento Educación Limitada
Atento Centro de Formación Técnica Limitada
Atento Spain Holdco 4. S.A.U
Atento Brasil. S.A
R Brasil Soluções S.A.
Atento Spain Holdco 5. S.L.U
Atento Mexico Holdco S. de R.L. de C.V.
Atento Puerto Rico. Inc.
Contact US Teleservices Inc.
Atento Panamá. S.A.
Atento Atención y Servicios. S.A. de C.V.
Atento Servicios. S.A. de C.V.
Atento Centroamérica. S.A.
Atento de Guatemala. S.A.
Atento El Salvador. S.A. de C.V.
Atento Nicaragua S.A.
Atento Costa Rica S.A.
Interservicer - Serviços de BPO Ltda.
Interfile Serviços de BPO Ltda.
Nova Interfile e Holding Ltda.
Registered address
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Buenos Aires (Argentina)
Madrid (Spain)
Madrid (Spain)
Madrid (Spain)
Madrid (Spain)
Madrid (Spain)
Madrid (Spain)
Barcelona (Spain)
Madrid (Spain)
Amsterdam (Netherlands)
Lima (Peru)
Montevideo (Uruguay)
Bogotá DC (Colombia)
Santiago de Chile (Chile)
Santiago de Chile (Chile)
Santiago de Chile (Chile)
Santiago de Chile (Chile)
Madrid (Spain)
São Paulo (Brazil)
São Paulo (Brazil)
Madrid (Spain)
Mexico
Guaynabo (Puerto Rico)
Houston, Texas (USA)
Panama City
Mexico City (Mexico)
Mexico City (Mexico)
Guatemala (Guatemala)
Guatemala (Guatemala)
City of San Salvador (El Salvador)
Nicaragua
Costa Rica
São Paulo (Brasil)
São Paulo (Brasil)
São Paulo (Brasil)
Exhibit 12.1
I, Alejandro Reynal, certify that:
1. I have reviewed this annual report on Form 20-F of Atento S.A.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: April 26, 2018
/s/ Alejandro Reynal
Alejandro Reynal
Chief Executive Officer
Exhibit 12.2
I, Mauricio Montilha, certify that:
1. I have reviewed this annual report on Form 20-F of Atento S.A.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: April 26, 2018
/s/ Mauricio Montilha
Mauricio Montilha
Chief Financial Officer
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO § 906
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 13.1
In connection with the filing of the Annual Report on Form 20-F of Atento S.A., a public limited liability company (société anonyme) organized and existing
under the laws of the Grand Duchy of Luxembourg (the “Company”), for the year ended December 31, 2017, as originally filed with the Securities and Exchange
Commission on April 26, 2018 and as amended on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. § 1350,
as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the
dates and for the periods expressed in the Report.
Date: April 26, 2018
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure
document.
/s/ Alejandro Reynal
Alejandro Reynal
Chief Executive Officer
CERTIFICATION BY CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO § 906
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 13.2
In connection with the filing of the Annual Report on Form 20-F of Atento S.A., a public limited liability company (société anonyme) organized and existing
under the laws of the Grand Duchy of Luxembourg (the “Company”), for the year ended December 31, 2017, as originally filed with the Securities and Exchange
Commission on April 26, 2018 and as amended on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. § 1350,
as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the
dates and for the periods expressed in the Report.
Date: April 26, 2018
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure
document.
/s/ Mauricio Montilha
Mauricio Montilha
Chief Financial Officer