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, 2018
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.
75,070,926 ordinary shares
(cid:1) Yes (cid:1) 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.
(cid:1) Yes (cid:1) 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.
(cid:2) Yes (cid:1) 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).
(cid:2) Yes (cid:1) 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 (cid:1)
Non-accelerated filer (cid:2)
Accelerated filer (cid:2)
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
US GAAP (cid:1)
International Financial Reporting Standards as issued
by the International Accounting Standards Board (cid:2)
Other (cid:1)
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.
(cid:1) Item 17 (cid:1) Item 18
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).
(cid:1) Yes (cid:2) No
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
4
4
4
6
6
6
6
6
6
6
6
6
6
14
14
14
34
34
35
46
46
48
48
50
64
71
72
73
74
74
75
75
78
79
81
84
84
84
86
86
86
86
88
89
89
90
90
90
90
90
90
90
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
97
97
97
100
100
100
100
100
103
103
103
103
103
103
103
103
103
103
103
104
104
104
104
104
104
104
105
105
106
106
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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.
On November 6, 2018, the Board approved a share capital increase and issued 1,161,870 shares, increasing the number of outstanding
shares to 75,070,926.
On January 18, 2019, the Board approved a share capital increase and issued 335,431 shares, increasing the number of outstanding shares
to 75,406,357.
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 48,520,671 ordinary shares in Atento, representing 64.34% of the outstanding shares.
On July 26, 2018, our Board of Directors approved the share buyback program. We estimated a repurchased amount of 30 million US.
Dollars to be concluded in up to 12 months. The total shares repurchased was 1.106.158 corresponding to $8.2 million.
Exchange Rate Information
In this Annual Report, all references to “U.S. dollar” and “$” 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.
2014
2015
2016
2017
2018
Average
December
31
Average
December
31
Average
December
31
Average
December
31
Average
December
31
Euro (EUR)
Brazil (BRL)
Mexico (MXN)
0.75
2.35
13.33
0.82
2.66
14.74
0.93
3.34
15.88
0.92
3.90
17.25
0.90
3.48
18.69
0.95
3.26
20.62
0.89
3.19
18.92
0.83
3.31
19.66
0.85
3.65
19.24
0.87
3.87
19.65
Colombia (COP)
2,000.23
2,390.44
2,745.55
3,153.54
3,054.33
3,000.71
2,951.28
2,984.00
2,955.34
3,249.75
Chile (CLP)
Peru (PEN)
Argentina (ARS)
570.51
606.75
654.76
710.16
676.73
667.29
648.86
615.22
641.38
695.69
2.84
8.12
2.98
8.55
3.19
9.26
3.41
13.04
3.38
14.78
3
3.36
15.89
3.26
16.56
3.25
18.65
3.29
28.12
3.38
37.70
Table of Contents
We present our historical financial information under International Financial Reporting Standards (“IFRS”) as issued by the
PRESENTATION OF FINANCIAL INFORMATION
International Accounting Standards Board (the “IASB”).
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, 2014, 2015, 2016, 2017 and 2018.
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
to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and trade names.
symbols, but such references are not intended to indicate, in any way, that we will not assert,
or
®
TM
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;
4
Table of Contents
• 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;
• 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 and other cybersecurity issues;
• the effect of labor disputes on our business; and
5
Table of Contents
• 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.
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.
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, 2014, 2015, 2016, 2017 and 2018.
6
Table of Contents
Selected Consolidated Other Financial
Information
($ in millions other than share and per share data)
(*)
2014
(*)
2015
(*)
2016
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
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
1,657.9
464.9
0.048
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
1,378.4
397.8
0.048
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
1,377.6
430.2
0.048
(*) Exclude discontinued operations - Morocco.
Summary Consolidated Historical Financial Information
2017
2018
1,921.3
1,818.2
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
89.5
20.5
-
20.5
0.28
-
0.28
-
-
75,070,926
73,841,447
74,778,062
1,213.4
340.1
0.049
($ in millions)
2014 (*)
2015 (*)
2016 (*)
2017
As of and
for the year
ended
December
31,
2018
Change
(%)
Change
excluding
FX (%)
Change
(%)
Change
excluding
FX (%)
2,278.2
1,949.9
1,757.5
1,921.3
5.1
1,818.2
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
(41.6)
(0.5)
(42.1)
205.9
305.3
89.2
1.21
89.2
1.21
(120.1)
653.3
Cash and cash equivalents
Net debt with third parties (5)
(*) Exclude discontinued operations - Morocco.
238.3
415.0
N.M. means not meaningful
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
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
9.3
N.M.
(13.6)
N.M.
-
(100.0)
(100.0)
N.M.
(7.9)
(0.4)
21.2
21.6
14.8
14.9
40.1
(9.1)
(26.9)
1.1
N.M.
(13.0)
(4.7)
21.4
21.3
14.9
14.8
31.9
(9.1)
(30.1)
3.8
(13.6)
196.9
221.0
58.4
0.79
55.2
0.75
(67.5)
486.3
141.8
344.5
7
(5.4)
N.M.
N.M.
N.M.
(6.2)
(16.4)
1.1
0.9
3.6
3.7
33.2
(5.4)
(5.8)
(5.3)
4.3
N.M.
N.M.
N.M.
2.2
(9.2)
42.7
42.9
24.5
24.6
N.M.
(9.1)
5.0
(6.0)
20.5
-
20.5
184.8
184.8
59.1
0.80
57.2
0.77
(89.9)
459.8
133.5
326.2
Table of Contents
(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.
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.
EBITDA and adjusted EBITDA reported are presented applying the accounting and disclosure standard in highly inflationary
economy our operations in Argentina.
(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.
8
Table of Contents
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.
(3) Adjusted Earnings per share is calculated based on weighted average number of ordinary shares outstanding of 74,778,062,
73,909,056 and 73,816,933 as of December 31, 2018, 2017 and 2016, respectively.
(4) We define capital expenditure as the sum of the additions to property, plant and equipment and the additions to intangible assets
during the period.
(5) 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.
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
2014
2015
For the year ended
December 31,
2016
2017
2018
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
114.5
(90.9)
(84.3)
(60.8)
8.6
194.0
141.8
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)
2014 (*)
For the year ended December 31,
2016 (*)
2015 (*)
2017
52.2
46.4
23.2
101.5
223.3
0.1
15.8
-
3.4
0.3
-
6.8
26.4
249.7
(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
9
3.4
107.8
5.2
97.3
213.7
-
33.7
-
9.3
-
(41.7)
6.9
8.2
221.9
(13.6)
93.5
12.5
104.4
196.9
-
16.8
-
-
-
-
7.3
24.1
221.0
81.2
(41.2)
(33.7)
6.3
(14.5)
141.8
133.5
2018
20.5
55.6
13.4
95.2
184.8
-
-
-
-
-
-
-
-
184.8
Table of Contents
(*) 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 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, 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) Restructuring costs incurred in 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, 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 expensed during 2014. The
advisory agreement was terminated in connection with the initial public offering.
(d) Site relocation costs incurred for the years ended December 31, 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, are 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, 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 $3.2 million are related to third quarter of 2017 and
includes costs that were incurred but could not be charged to customers (mainly salaries and benefits) and other extraordinary costs
related to the natural disasters. In addition, there were costs incurred on the secondary offer process occurred in November 2017.
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Table of Contents
Reconciliation of Adjusted Earnings to profit/(loss):
($ 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
2014 (*)
For the year ended December 31,
2016 (*)
2015 (*)
2017
2018
(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
52.2
0.1
27.5
15.8
-
3.4
0.3
-
6.8
1.5
(17.5)
4.0
-
-
-
(16.2)
25.7
3.4
-
24.2
33.6
-
9.3
-
-
6.9
-
(0.7)
21.1
(26.2)
-
-
(23.5)
44.7
(13.6)
-
22.4
16.8
-
-
-
-
7.3
-
(0.2)
23.4
-
17.7
2.8
(18.2)
72.0
20.5
-
21.2
-
-
-
-
-
-
-
-
28.8
-
-
-
(11.3)
38.7
Adjusted Earnings (non-GAAP) (unaudited)
Adjusted basic Earnings per share (in U.S. dollars)
(***) (unaudited)
(*) 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:
1.06
1.21
0.65
0.80
0.79
77.9
58.4
48.2
89.2
59.1
(a) Acquisition and integration related costs incurred in 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, 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.
11
Table of Contents
(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.
(c) Restructuring costs incurred in 2014, 2015 and 2016 primarily included several restructuring activities and other personnel costs that
were not related to our core result of operations. 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,
are 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, 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.
12
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)
(k)
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.
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. The interest reversal of $19,9 million
was recognize on “Finance Cost”.
(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 $1.0 million.
(n) Non-recurring depreciation relates to the provision for accelerated depreciation of fixed assets in Puerto Rico and Mexico, due to the
recent natural disasters (See “Cautionary note regarding forward looking statements”).
(o) The tax effect represents the impact of the taxable adjustments based on tax nominal rate by country. For 2017 and 2018, the effective
tax rate after removing non-recurring items is 32.3% and 36.3%.
(***) Adjusted Earnings per share is calculated based on the weighted average number of ordinary shares outstanding of
73,841,447, 73,909,056 and 73,816,933 as of December 31, 2018, 2017 and 2016, respectively.
13
Table of Contents
Reconciliation of total debt to net debt with
third parties
($ in millions, except Net Debt/Adj. EBITDA
LTM)
Debt:
Senior Secured Notes
Brazilian Debentures
Contingent Value Instrument (1)
Finance Lease Payables
Other Borrowings
Total Debt
Total Debt excluding PECs
Cash and cash equivalents
Short-term financial investments
Net debt with third parties (2) (unaudited)
Adjusted EBITDA LTM (3) (non-GAAP)
(unaudited)
Net Debt/Adjusted EBITDA LTM (non-
GAAP) (unaudited)
As of December 31,
2014
2015
2016
2017
2018
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
1.6x
398.3
21.1
10.5
56.4
486.3
486.3
(141.8)
-
344.5
221.0
1.6x
400.0
14.7
-
5.5
39.5
459.8
459.8
(133.5)
-
326.2
184.8
1.8x
(1) Reflects the prepayment to Telefónica of the entire indebtedness under the Vendor Loan Note. The loan was liquidated in connection
with the IPO.
(2) The CVI was terminated on November 8, 2016 as part of the Telefónica MSA renegotiation.
(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
itemsnot 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
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Table of Contents
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.
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, 2018, we derived 39.0% of our revenue from the Americas and 48.3% 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:
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
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 2018. 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, 2018, 45.8% of our revenue was derived from clients in the telecommunications industry and 34.8% 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.
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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 87.4%, 88.6% and 87.3% of our
revenue respectively, for the years ended December 31, 2016, 2017 and 2018. In addition, key markets such as the telecommunications and
financial services industries comprised 80.6% of our revenue for the year ended December 31, 2018.
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 $1,309.9 million in 2016, $1,429.1 million in 2017 and $1,365.2
million in 2018, or 74.5%, 74.4% and 75.1%, 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.”
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.
Brazil has approved changes in the payroll exemption policy for most of the sectors then benefited. The modifications were made by Law
13.670, dated May 30, 2018. Taxation on the gross revenue of call center companies, with a 3% tax on gross revenue was maintained.
For our economic activity, it is much more advantageous to collect an aliquot ranging from 1% to 4.5% on gross revenue, called
Social Security Contribution on Gross Revenue (CPRB), as predicted by the law, than to collect a 20% social security contribution on the
payroll , as occurs with companies outside the tax exemption system.
The new law stipulates the end of taxation on gross revenue for all sectors as of December 31, 2020, when it comes into effect the
payment to the Social Security contribution of 20% on payroll. The new Brazilian Government, installed on the 1st. January 2019 announced
it is examining a new modification in relation to the theme, wishing to continue with the exemption of payroll for the whole productive
sector, circumstance to be continued monitored
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.
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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.
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, 2018, the mainly 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
Argentina 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, except for Argentina. 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, 2014, 2015, 2016, 2017 and 2018, these fluctuations had a significant effect on our results of operations.
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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.
For the years ended December 31, 2018, 2017 and 2016, revenue from our operations in Brazil accounted for 48.3%, 49.2% and
46.5% of our total revenue, respectively and Adjusted EBITDA from our operations in Brazil accounted for 53.8%, 56.4% and 54.5% 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:
(cid:1) devaluations and other currency fluctuations;
(cid:1) inflation rates;
(cid:1) interest rates;
(cid:1) liquidity of domestic capital and lending markets;
(cid:1) energy shortages;
(cid:1) exchange controls and restrictions on remittances abroad (such as those that were briefly imposed in 1989 and early 1990);
(cid:1) monetary policy;
(cid:1) minimum wage policy;
(cid:1) tax policy; and
(cid:1) 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.
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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.
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 2018, 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 2018, the Argentine
peso depreciated approximately 51% 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.
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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.
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.
During 2018, Atento implemented the new obligations of the GDPR – Global Data Protection Regulation through the review of it’s
main processes relating to employees, clients and providers of Spanish companies, working hand in hand with Information Security, this
implementation has required:
• re-definition of certain processes
• update or drafting of new policies and
• renegotiation of many agreements with clients and providers to include the new provisions of the GDPR and to assign certain new
responsibilities.
• Also staff training materials have been elaborated and GDRP training sessions have been given throughout the different sites.
Brazil has adopted in 2018, a General Data Protection Law (LGPD). The law will come into effect after a 18 months adaptation
period, in early 2020. At the moment, Atento Brazil is devoted to the analysis and implementation of the new obligations and process that
this regulation brings along. The LGPD has transversal and multi-sectoral application, both in public and private sectors, online and offline.
It deals with the concept of personal data and lists the legal bases that authorize its use, basic rights of the data subject— such as right to
access, exclusion of data and to explanation; and the obligations and limits that should be applied to any entity that processes personal data
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.
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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.
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.
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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, 2016, 2017 and 2018, we generated, 42.5%, 39.2%
and 39.0%, respectively, of our revenue from the services provided to the Telefónica Group. Our contracts with Telefónica Group companies
in Brazil and Spain comprised 56.4%, 57.8% and 58.8%, respectively, of our revenue from the Telefónica Group for the years ended
December 31, 2016, 2017 and 2018. Our 15 largest client groups (including the Telefónica Group) on a consolidated basis accounted for a
total of 75.2% of our revenue for the year ended December 31, 2018.
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, 32 companies within the Telefónica Group were a party to 132 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.
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.
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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 75.3% 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.
For Atento Argentina, the recent Resolution n°810 issued by the Ministry of Production and Labor, has extended the application of
the Collective Labor Agreement 688/14 (celebrated by the ATACC -Association of Argentine Workers of Contact Centers) to the city of
Buenos Aires, Province of Buenos Aires, Buenos Aires, Tucumán, Chaco, San Luis, Mendoza and Salta. Since the administrative acts are
considered legitimate since its enactment and taking into account that Atento has not been notified of any measure (administrative or
judicial) ordering the suspension of the effects of such 810 resolution, the staff of Atento Argentina SA will no longer be governed by CCT
130/75 (corresponding to the Commerce Employees Union) and will be governed by CCT 688/14.
Rapid growth may make it difficult for us to maintain our internal operational and financial systems.
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 increased from 89,082 as of December 31, 2016 to 92,264 as of
December 31, 2017 and increased to 92,271 as of December 31, 2018. The average number of employees (excluding internships) increased
from 151,601 for the year ended December 31, 2016 to 151,817 for the year ended December 31, 2017 and increased to 153,038 for the year
ended December 31, 2018.
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.
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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, 2018, our average days sales outstanding (“DSO”) was
approximately 57 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.
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.
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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 $125.2
million of which $20.8 million have been classified as probable, $47.1 million classified as possible and $57.3 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 $45.7 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, 2018, we have recognized $20.8 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, 2018, we had total indebtedness of $ 459.8 million. Our level of indebtedness may have significant negative
effects on our future operations, including:
(cid:1) 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;
(cid:1) 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;
(cid:1) increasing the possibility of an event of default under the financial and operating covenants contained in our debt instruments; and
(cid:1) 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.
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.
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Bain Capital controls Topco and PikCo, and owns, directly or indirectly, approximately 64.34% 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:
(cid:1) variations in our operating performance and the performance of our competitors;
(cid:1) actual or anticipated fluctuations in our quarterly or annual operating results;
(cid:1) changes in our revenue or earnings estimates or recommendations by securities analysts;
(cid:1) publication of research reports by securities analysts about us or our competitors or our industry;
(cid:1) our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the
market;
(cid:1) additions or departures of key personnel;
(cid:1) strategic decisions by us or our competitors, such as acquisitions, divestitures, spinoffs, joint ventures, strategic investments or
changes in business strategy;
(cid:1) announcement of technological innovations by us or our competitors;
(cid:1) the passage of legislation, changes in interpretations of laws or other regulatory events or developments affecting us;
(cid:1) speculation in the press or investment community;
(cid:1) changes in accounting principles;
(cid:1) terrorist acts, acts of war or periods of widespread civil unrest;
(cid:1) changes in general market and economic conditions;
(cid:1) changes or trends in our industry;
(cid:1) investors’ perception of our prospects; and
(cid:1) 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.
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.
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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 cyber-
attacks 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
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, 2018, we experienced monthly turnover rates around 6.2% 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.
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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.
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.
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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.
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.
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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, 2018 represented 75.2% of our revenue. Excluding revenue generated from the Telefónica
Group, our next 15 largest client groups for the year ended December 31, 2018 represented in aggregate 38.1% 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.
The company's performance in Brazil was strengthened by the creation of a legal framework for outsourcing activities, embodied
by a specific law for the sector and that allows outsourcing activity indistinctly. Likewise, the Federal Supreme Court decided that
for the period prior to the creation of the aforementioned legal framework, the indistinct outsourcing activity was authorized by the
Federal Constitution.
This set of factors has changed the perspectives that had existed until then due to decisions that were contrary to outsourcing by
the Labor Courts, had a favorable impact on our business, including financial conditions, results of operations and prospects for
business expansion.
With the new law regulating outsourcing as of March 31, 2017, the National Congress in Brazil approved a law, sanctioned by the
president of the Republic, all outsourced labor relations were made possible, 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. Thus, outsourcing as of March 31, 2017 has gained a legal
framework that has brought stability to our business sector. There remained a decision regarding outsourcing exercised before March 31,
2017.
As before March 31, 2017, there was no specific legislation in Brazil on the subject, 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.
In this sense, at the end of 2018, when appreciating the merit on processes ADPF 324 AND RE 958252 AT 08/30/18 (outsourcing in
general and outsourcing in the telecommunications sector respectively) the STF rulled the Jurisprudence Guideline 331 of the Superior Labor
Court (TST) was canceled and outsourcing was considered a constitutional issue and allowed in Brazil with the 1988 Constitution. It awaits
the publication of the ruling of the decision so that its effects are modulated in the face of the processes which were based on TST's Summary
331. With this decision on the merit, such interpretation of the STF is a binding precedent that must be adhered to by all lower courts in the
country.
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Presently it is considered lawful the outsourcing in Brazil for all stages of the production process, and so, in a decision of general
repercussion it was stated that “It is possible to outsource or any other form of division of labor between different legal entities, regardless
the corporate purpose of the companies involved”
Thus, in relation to the risk of the outsourced activity, only the possibility of unlawful outsourcing remains, based on the country's
ordinary labor legislation, in case the service provider receives direct or indirect orders from the contracting company. If the requirements of
the employment relationship are fulfilled, there is a possibility of recognition of the employment relationship with the contracting company,
with subsidiary responsibility of the call center company.
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:
(cid:1) the judgment of the U.S. court is enforceable (exécutoire) in the United States;
(cid:1) 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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(cid:1) 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);
(cid:1) 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;
(cid:1) the U.S. court has acted in accordance with its own procedural rules; and
(cid:1) 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 75.1 million ordinary shares
outstanding as of December 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.
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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.
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, L1748 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,
04719040, São Paulo, Brazil, telephone number +55 11 3293 5926 / +55 11 3779 8119, 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 startup 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 longterm 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 valueadded services and building and maintaining
longterm relationships. We also expanded our geographical presence in 2008 in the Czech Republic and in 2009 we began operations in the
United States.
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In December 2012, Atento was acquired by funds affiliated with Bain Capital. 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).
In October 2014, Atento became a publicly listed company on the New York Stock Exchange (NYSE), under the ticker “ATTO”.
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.
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.
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
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.
Capital Expenditure
Our business requires capital expenditure, for both growth and maintenance. This includes the construction and initial fitout 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 EBITDA generation. The table below shows
our capital expenditure by segment for the years ended December 31, 2016, 2017 and 2018:
For the year ended December 31,
2017
2018
2016
($ in millions)
Brazil
Americas
EMEA
Other and eliminations
Total capital expenditure
B.
Business Overview
Our Company
23.0
23.0
2.1
-
48.1
38.8
24.5
3.9
0.3
67.5
42.2
41.5
6.2
-
89.9
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”.
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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 $10.5 billion in 2017.
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.
We are the largest provider of CRM BPO services in Latin America, where we had a market share of 17.3% for the year ended
December 31, 2017, 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 (domestic market), Peru, Argentina and Chile, based on
revenues for the year ended December 31, 2017. We have achieved our leadership position over our 20-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.
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 2018, CRM BPO solutions and individual services comprised 26.6% and 73.4% of our revenue, respectively. Brazil
has the highest penetration of CRM BPO solutions of our segments, and we change solutions from 37.5% of revenue in 2017 to 41.7% of
revenue in Brazil in 2018.
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 2018, our revenue from clients in telecommunications, financial services and multisector
represented 45.8%, 34.8% and 19.4% 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 2018, compared to 10.0% of our total revenue when we were founded in 1999.
Atento benefits from a highly engaged employee base. Our over 153,000 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 2018 we were also recognized for the eighth 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 32 companies of the Telefónica Group under 132 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.
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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 $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;
• 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.
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Our revenue for the year ended December 31, 2018, was $1,818.2 million, our Adjusted EBITDA was $184.8 million and our profit
for the year was $ 20.5 million. For the years ended December 31, 2017 and 2018, our revenue increased by 9.3% (2016x2017), and
decreased by 5.4% (2017x2018), respectively, and our Adjusted EBITDA decreased by 0.4% and 16.4%, respectively. The following table
sets forth a breakdown of revenue based on geographical region for the years ended December 31, 2016, 2017 and 2018:
($ in millions, except percentage changes)
Brazil
Americas
EMEA
Other and eliminations (1)
Total
(1)
Includes holding company level revenues and consolidation adjustments.
For the year ended December 31,
2016
2017
2018
816.4
718.9
223.9
(1.7)
944.8
758.0
223.4
(5.0)
877.7
708.7
240.9
(9.1)
1,757.5
1,921.3
1,818.2
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, 2018, Brazil accounted for 48.3% of our revenue and
1.5% of our Adjusted EBITDA; Americas accounted for 39.0% of our revenue and -6.3% of our Adjusted EBITDA; EMEA accounted for
13.2% of our revenue and -2.0% 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, 2016, 2017 and 2018:
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
For the year ended December 31,
2016
2017
2018
% of Total
revenue
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
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
240.9
-
240.9
134.6
112.7
71.2
14.3
50.0
16.2
177.6
136.3
9.4
2.9
4.1
(20.4)
708.7
816.4
(1.7)
1,757.5
944.8
(5.0)
1,921.3
877.7
(9.1)
1,818.2
13.2
-
13.2
7.4
6.2
3.9
0.8
2.8
0.9
9.8
7.5
0.5
0.2
0.2
(1.1)
39.0
48.3
(0.5)
100.0
(*) Includes holding company level revenues and consolidation adjustments.
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The amounts of revenue by country reported 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 yearend 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 yearend 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.
Growth strategy
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
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• 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.
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, 2018, our share of CRM
BPO solutions represented 26.6% of revenue, up 10 basis points yearonyear.
Our Atento Digital Business Unit, launched in the mid-2017, are plenty structured to develop and deliver digital solutions, ensuring
our customer centric vision, which includes four pillars:
• Data Driven: Integration and use of client’s data & analytics to understand profiles, habits, likes, in order to develop models of
propensity;
• User Experience: We understand customer interaction and experience with design, interface, usability and operation diagnostics;
• Omnichannel & Social: With this map, we understand where and how clients prefer to interact and we act in an integrated, fluid and
resilient way, with lean & agile development, RPA use and systems integration;
• Journey Automation: Based on UX, we design new journeys for customers and automate repetitive processes through digital tools,
use of artificial intelligence and semantic technology.
The Atento Digital also adopted the Lean Digital Transformation (LDT) methodology, which allow us to implement digital operations
faster, through new skills and team capabilities (Agile Squads and DevOps, for example).
We have continued the efforts to improve the digital features of our solutions portfolio (sales, customer care and collections), by
enhancing the artificial intelligence and automation capabilities from our omnichannel platform with Keepcon semantic technology,
expanding assertiveness in understanding and resolving consumer needs, in real-time and generating business insights from our Data Science
team, at the same time.
Along with the digital initiatives, we also consolidated our Back Office solutions, mainly in Credit Origination (auto loans, mortgage,
personal loans and credit cards), Healthcare and BPT (Business Process Transformation).
From a geographic perspective, our 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 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 61.0% in 2018. 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 inhouse 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, across our footprint. Going forward, we are focused on growing these new relationships to scale.
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Outside of (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 (telecommunications companies) and financial services remain
key drivers for growth, we are focusing our commercial efforts in other fast growing sectors such as healthcare, retail, travel & hospitality or
consumer electronics where outsourcing is growing fast in Latin America.
We also recognize that the market for providing outsourcing services to U.S. clients from Latin America is a sizable and fastgrowing
opportunity for us. We believe our strong relationships with multinational clients throughout Latin America positions us well to also serve
their offshoring needs in the United States, as exemplified by our nearshoring relationships, and have continued investing in U.S. Nearshore
infrastructure.
Finally, we are committed to continue expanding capabilities and addressable markets via strategic operations.
WorldClass Operation
We are continuing to see benefits in our operational excellence initiatives, which continue to support future profitable growth.
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. We are focused on a variety of initiatives to enhance agent
productivity. We have established operational command centers in Peru, Brazil, Madrid and Mexico City finalizing our global strategy for
establishing command centers in each of our regions. 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.
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.
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.
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 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.
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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.
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.
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 2018, CRM BPO solutions
and individual services comprised 26.6% and 73.4% of our revenue, respectively. For our clients in Brazil, our largest market, CRM BPO
solutions and individual services comprised 41.7% and 58.3% of our revenue, respectively, for the year ended December 31, 2018.
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, 2018, our revenue from clients in telecommunications, financial services and multisector represented 45.8%, 34.8% and
19.4% of total revenue, respectively.
For December 31, 2018, our top 15 clients accounted for 75.2% of our revenue, and, excluding the Telefónica Group companies, our
next 15 clients accounted for 38.1% of our revenue. With each of these clients we have worked closely over many years across multiple
countries, building strong partnerships and commercial relationships.
Development of Client Base
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As of December 31, 2018, 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, 2016, 2017 and 2018, we generated 42.5%, 39.2% and 39.0% and respectively, of our
revenue from Telefónica Group companies.
As of December 31, 2018, 32 companies within the Telefónica Group were party to 132 arm’slength 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(cid:1)Liquidity and Capital Resources—Financing Arrangements—Vendor Loan
Note”.
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, (Telefonica’s Subsidiary) 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.
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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 2018:
(cid:1) Great Place to Work Awards.
In 2016, for the fourth year running, Atento was one of the 25 Best Multinationals to Work in the World. The Company was
also one of the 25 Best Multinationals to Work for in Latin America in 2018 for the eighth consecutive year, according to
Great Place to Work. In 2018, eight of the Company's national operations were included in the Great Place to Work®.
(cid:1) 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 2018, Atento was won 7 trophies in the 2018 in partnership with its
clients Bradesco, Unilever, Santander, Unimed BH and Telefónica
(cid:1)
(cid:1)
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 three IMT awards in the 2018 edition. The Company has received the Gold Awards for the Best Sales
Strategy, Best Customer Experience Strategy and Best Talent Management.
Platinum Contact Center Awards.
The Platinum Contact Center awards recognize the work of banking, insurance, telecommunications and industry companies
that understand contact centers as value creators for their organization. In the 2018 edition, Atento Spain was recognized
with awards Best Customer Experience in the Insurance Sector for its work with Liberty Seguros
(cid:1) 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 has been recognized with the Best Outsourcer in Customer
Service Award in Spain for its service and operation with Endesa
(cid:1)
Top Employer.
Atento received the Top Employer certificate awarded by the CRF institute (Corporate Research Foundation) in Spain and
Brazil in 2018.
(cid:1) Ranking Valor Inovação
Atento was recognized as the 2nd most innovative company in Brazil's service sector in the Ranking Valor Inovação. The
study is prepared by the journal Valor Econômico, one of the country's most renowned business publications, in partnership
with Strategy&, the strategic consultancy firm of the PwC Network.
(cid:1) Digital Maturity Index: Brazil
In 2018. Atento has been recognized as one of the companies with the highest digital maturity level in Brazil and the number
one in digital maturity in the Telecommunications and Technology sector. Atento attained this position in the "Digital
Maturity Index: Brazil” ranking, created by Valor Economico, one of the most influential economic publications in the
country, and the consulting firm McKinsey & Company
Competitive Landscape
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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 regional position with 17.3% of the share, 8 p.p.
ahead of our closest competitor. Atento also hold number one positions in most countries in which we operate including Brazil, the largest
market, Perú, México (domestic market), Chile and Argentina.
We have been positioned among the top 5 leading global players in Gartner’s Magic Quadrant for Customer Management Contact
Center BPO for years. The latest edition of this Magic Quadrante corresponding to 2017 report the following highlights about Atento:
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.
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C. Organizational Structure
At December 31, 2016, 2017 and 2018, 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.
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,
2018, 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, 2018,
the rest of our service delivery centers around the world were under lease agreements. Our lease agreements are generally longterm, between
one to ten years, some of which provide for extensions.
Lease Total operating lease expenses recognized in the consolidated statements of operations for the year ended December 31, 2018
amount to 13,9, 11,9 and 3,4 in 2016) under “Infrastructure leases” and 67,9, 66,9 and 63,0 in 2016) under “Services provided by third
parties”.
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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 onshoring, offshoring or near-
shoring, as required. Our deployment team is trained to achieve timely implementation to minimize our clients’ timetomarket. 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, 2018, we had
92,271 workstations globally, with 49,185 in Brazil, 37,610 in the Americas (excluding Brazil) and 5,476 in EMEA. As of December 31,
2018, we had 101 delivery centers globally, 34 in Brazil, 52 in the Americas (excluding Brazil) and 15 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, 2016, 2017, 2018.
Number of Workstations
2017
2016
2018
Number of Service Delivery Centers (1)
2016
2018
2017
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
49,185
37,610
4,455
2,424
2,948
8,477
9,384
8,569
1,353
5,476
5,476
92,271
31
50
11
5
3
9
15
4
3
14
14
95
35
51
12
4
3
10
15
4
3
14
14
100
34
52
12
4
4
10
15
4
3
15
15
101
Brazil
Americas
Argentina (2)
Central America (3)
Chile
Colombia
Mexico
Peru
United States (4)
EMEA
Spain
Total
(1)
Includes service delivery centers at facilities operated by us and those owned by our clients where we provide operations personnel and
workstations.
Includes Uruguay.
Includes Guatemala and El Salvador.
Includes Puerto Rico.
(2)
(3)
(4)
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The following is a list of our principal workstations as of December 31, 2016, 2017, 2018:
Brazil
São Bernando do Campo
São Paulo (Belenzinho)
São Paulo (Nova São Paulo)
São Paulo (Santana)
São Paulo (São Bento I)
Rio de Janeiro (Madureira)
Bra-Uruguay
São Jose dos Campos
São Paulo (Santo Antonio)
Santos - II
Americas
Peru-LaMolina
Peru-Maquinarias
Colombia-Telares
Colombia-Bucaramanga
Mexico-Airport
Colombia-Royal
EMEA
Spain-Ilustración
Spain-Glorias
Spain-Getafe
Spain- Indotorre
Number of Workstations
2016
2017
2018
3,043
2,520
2,385
2,375
2,552
1,916
1,974
2,018
2,059
1,745
5,713
2,312
1,455
1,321
1,484
1,312
1,240
870
507
353
3,139
2,470
2,155
2,103
2,335
2,119
2,059
1,983
2,059
1,794
5,581
2,312
1,905
1,472
1,449
1,307
1,005
877
507
350
3,134
2,351
2,229
2,227
2,204
2,151
2,106
2,088
1,980
1,787
5,275
2,209
2,169
1,553
1,335
1,222
931
875
507
351
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 cashgenerating 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 fiveyear
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
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Table of Contents
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.
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 exchange
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 e 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, 2016, 2017 and 2018 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, 2016, 2017
and 2018, 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, 2018, Brazil accounted for 48.3% of our revenue, Americas
accounted for 39% of our revenue and EMEA accounted for 13.2% of our revenue (in each case, before holding company level revenue and
consolidation adjustments).
Our number of workstations increased from 92,264 as of December 31, 2017 to 92,271 as of December 31, 2018. 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.
For a table showing the number of delivery centers and workstations in each of the jurisdictions in which we operated as of December
31, 2016, 2017 and 2018, see “Item 4. Information on the Company—D. Property, Plant and Equipment”.
For the years ended December 31, 2016, 2017 and 2018, revenue generated from our 15 largest client groups represented 80.3%,
76.4% and 75.2% of our revenue, respectively. Excluding revenue generated from the Telefónica Group, for the years ended December 31,
2016, 2017 and 2018, our next 15 largest client groups represented 38.7%, 38.2% and 38.1% 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, 2016, 2017 and 2018, CRM BPO solutions comprised
25.3%, 26.5% and 26.6% of our revenue, respectively, and individual services comprised 74.7%, 73.5% and 73.4% of our revenue,
respectively.
During the years ended December 312016, 2017 and 2018, telecommunications represented 48.5%, 46.7% and 45.8% of our revenue,
respectively, and financial services represented 35.0%, 31.7% and 34.8% 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
For the year ended December 31,
2016
2017
2018
49.0%
16.6%
10.1%
10.8%
9.4%
4.1%
48.4%
16.8%
8.8%
12.9%
9.1%
4.0%
50.7%
17.7%
8.2%
12.9%
6.9%
3.6%
100.0%
100.0%
100.0%
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Average headcount
The average headcount in the Atento Group in 2016, 2017 and 2018 and the breakdown by country is presented as follow:
Brazil
Central America
Chile
Colombia
Spain
Mexico
Peru
Puerto Rico
United States
Argentina and Uruguay
Corporate
Total
December 31,
2016
2017
2018
78,088
5,734
4,720
8,288
10,213
19,439
15,907
857
679
7,529
78,015
4,940
5,438
9,809
10,534
18,409
15,515
739
732
7,609
81,158
5,020
5,902
8,742
11,345
17,128
14,550
455
512
8,154
147
151,601
77
151,817
72
153,038
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Consolidated Statements of Operations for the Year Ended December 31, 2016, 2017 and 2018
($ in millions, except percentage changes)
2016 (*)
2017
Change (%)
For the year ended
December 31,
For the
year ended
December
31,
2018
Change (%)
Change
excluding
FX (%)
Change
excluding
FX (%)
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
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
Discontinued operations:
Profit/(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
Other financial data:
EBITDA (2) (unaudited)
Adjusted EBITDA (2) (unaudited)
1,757.5
1,921.3
5.8
41.8
16.4
0.4
(65.6)
(74.9)
(1,309.9)
(1,429.1)
(46.4)
(50.9)
(1.9)
(214.0)
(49.2)
(55.2)
(0.6)
(236.6)
(1,688.7)
(1,845.7)
116.4
7.2
(59.2)
0.7
(56.5)
(107.8)
8.6
(5.2)
3.4
(3.2)
0.2
0.1
0.1
0.2
92.4
7.9
(78.1)
0.2
(23.4)
(93.5)
(1.0)
(12.5)
(13.6)
-
(13.6)
(16.8)
3.2
(13.6)
213.7
221.9
196.9
221.0
9.3
N.M.
(99.1)
14.2
9.1
6.1
8.4
(67.0)
10.6
9.3
(20.6)
9.1
32.0
(67.2)
(58.5)
(13.3)
(112.0)
141.0
N.M.
(100.0)
N.M.
N.M.
N.M.
N.M.
(7.9)
(0.4)
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)
(110.1)
144.1
N.M.
(100.0)
N.M.
N.M.
N.M.
N.M.
(13.0)
(4.7)
1,818.2
19.4
0.2
(70.8)
(1,365.2)
(36.6)
(58.7)
(1.0)
(215.9)
(1,748.2)
89.5
18.8
(45.6)
-
(28.8)
(55.6)
33.9
(13.4)
20.5
-
20.5
18.5
1.9
20.5
184.8
184.8
(5.4)
17.9
(51.7)
(5.5)
(4.5)
(25.7)
6.3
64.3
(8.8)
(5.3)
(3.2)
139.8
(41.6)
(100.0)
23.1
(40.5)
N.M.
7.0
N.M.
N.M.
N.M.
N.M.
(39.6)
N.M.
(6.2)
(16.4)
4.3
40.0
(46.6)
6.6
5.4
(19.8)
15.6
102.2
0.8
4.5
5.9
18.2
(40.6)
(100.0)
43.8
(25.7)
N.M.
11.9
N.M.
N.M.
N.M.
N.M.
(26.5)
N.M.
2.2
(9.2)
(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 $35.4 million on the
conversion of Argentine pesos to U.S. dollars was recognized in "Net foreign exchange loss".
(2) For the reconciliation of these non-GAAP measures to the closest comparable IFRS measure, see section "Summary Consolidated Historical Financial
Information - Reconciliation of EBITDA and Adjusted EBITDA to profit/(loss)".
(*) Exclude discontinued operations - Morocco.
N.M. means not meaningful
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Table of Contents
Consolidated Income Statements by Segment for the Year Ended December 31, 2016, 2017 and 2018
($ in millions, except percentage changes)
2016
2017
Change (%)
For the year ended
December 31,
For the
year ended
December
31,
2018
Change (%)
Change
Excluding
FX (%)
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)
EMEA
Other and eliminations (1)
Profit/(loss) for the year
816.4
718.9
223.9
(1.7)
1,757.5
(771.1)
(676.0)
(232.6)
(9.0)
(1,688.7)
46.3
88.2
(7.5)
(10.6)
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
(18.1)
(26.1)
0.2
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
(13.6)
(22.2)
(13.6)
54
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.
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)
(100.0)
N.M.
(79.2)
(25.1)
(14.8)
N.M.
N.M.
(80.7)
(26.2)
(16.6)
N.M.
877.7
708.7
240.9
(9.1)
1,818.2
(847.6)
(701.4)
(240.2)
41.0
(1,748.2)
33.1
21.5
2.5
32.3
89.5
(30.3)
(5.5)
(1.6)
(18.1)
(55.6)
(1.4)
(2.1)
(0.9)
(9.0)
(13.4)
1.4
13.9
0.0
5.1
20.5
-
1.4
13.9
0.0
5.1
20.5
(7.1)
(6.5)
7.8
82.4
(5.4)
(5.7)
(4.5)
5.9
N.M.
(5.3)
(40.3)
(31.5)
N.M.
N.M.
(3.2)
(8.3)
(58.1)
(90.4)
(40.3)
(40.5)
(83.9)
(78.8)
(117.8)
N.M.
7.0
(89.7)
62.5
100.2
123.0
N.M.
N.M.
(89.7)
62.5
100.2
123.0
N.M.
5.9
3.5
2.7
83.0
4.3
7.4
6.1
1.1
N.M.
4.5
(32.2)
(31.4)
N.M.
N.M.
5.9
5.2
28.5
(90.7)
(38.7)
(25.7)
(81.8)
(84.6)
(118.5)
N.M.
11.9
(88.5)
(53.4)
(100.2)
(123.1)
N.M.
N.M.
(88.5)
(53.4)
(100.2)
(123.1)
N.M.
Table of Contents
(Loss)/profit attributable to:
Owners of the parent
Non-controlling interest
Other financial data:
EBITDA (3):
Brazil
Americas
EMEA
Other and eliminations (1)
Total EBITDA (unaudited)
Adjusted EBITDA (3):
Brazil
Americas
EMEA
Other and eliminations (1)
Total Adjusted EBITDA (unaudited)
0.1
0.1
(16.8)
3.2
98.7
122.0
3.2
(10.2)
213.7
121.0
92.0
16.3
112.4
69.1
7.6
7.8
196.9
124.7
83.5
14.8
(7.4)
221.9
(2.0)
221.0
N.M.
N.M.
13.9
(43.4)
137.0
N.M.
(7.9)
3.1
(9.2)
(9.3)
(72.4)
N.M.
N.M.
6.3
(45.8)
115.5
N.M.
(13.0)
(4.1)
(9.1)
(13.4)
(71.8)
18.5
1.9
83.5
56.2
12.3
32.8
184.8
99.4
73.5
19.5
(7.6)
184.8
N.M.
(39.6)
(25.7)
(18.6)
61.8
N.M.
(6.2)
(20.3)
(12.0)
31.6
N.M.
N.M.
(26.5)
(15.5)
(14.2)
44.4
N.M.
2.1
(12.0)
(9.7)
36.3
N.M.
(9.2)
(1) Included revenue and expenses at the holding-company level (such as corporate expenses and acquisition related expenses), as applicable, as well as
consolidation adjustments.
(16.4)
(4.7)
(0.4)
(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 the reconciliation of these non-GAAP measures to the closest comparable IFRS measure, see section "Summary Consolidated Historical Financial
Information - Reconciliation of EBITDA and Adjusted EBITDA to profit/(loss)".
N.M. means not meaningful
55
Table of Contents
Year Ended December 31, 2017 Compared to Year Ended December 31, 2018
Revenue
Revenue decreased by $103.1 million, or 5.4%, from $1,921.3 million for the years ended December 31, 2017 to $1,818.2 million
for the years ended December 31, 2018, mostly explained by foreign exchange translation into U.S. dollars. Excluding the impact of foreign
exchange, revenue increased 4.3%.
Revenues from Multisector clients decreased by $57.9 million, or 5.0%, from $1,167.9 million for the years ended December 31,
2017 to $1,110.0 million for the years ended December 31, 2018,mostly explained by foreign exchange translation into U.S. dollars.
Excluding the impact of foreign exchange, revenue from multisector clients increased 6.1%, supported by gains in all regions, coming mostly
from financial services on higher volume from current clients.
Revenue from Telefónica presented a decrease of $45.2 million, or 6.0%, to $708.2 million in revenue for the years ended
December 31, 2018, against $753.4 million for the years ended December 31, 2017, mostly explained by foreign exchange translation into
U.S. dollars. Excluding the impact of foreign exchange, revenue from Telefónica clients increased by 1.6%, due to higher volumes in Brazil
and Americas, partially offset by lower volumes in EMEA.
For the years ended December 31, 2018, revenue from multisector clients was 61.0% of total revenue.
The following chart sets forth a breakdown of revenue by geographical region for the years ended December 31, 2017 and 2018 and
as a percentage of revenue and the percentage change between those periods with and net of foreign exchange effects.
($ in millions, except percentage
changes)
2017
(%)
2018
(%)
Change (%)
Change
excluding FX
(%)
For the year ended December 31,
Brazil
Americas
EMEA
Other and eliminations (1)
Total
944.8
758.0
223.4
(5.0)
1,921.3
49.2
39.5
11.6
(0.3)
100.0
877.7
708.7
240.9
(9.1)
1,818.2
48.3
39.0
13.2
(0.5)
100.0
(7.1)
(6.5)
7.8
82.4
(5.4)
5.9
3.5
2.7
83.0
4.3
(1) Includes holding company level revenues and consolidation adjustments.
Brazil
Revenue in Brazil for the years ended December 31, 2017 and 2018 totaled $944.8 million and $877.7 million, respectively, a
decrease of $67.1 million, or 7.1%. Excluding the impact of foreign exchange, revenue increased by 5.9%. Revenue from multisector clients
increased by 6.7%, supported by new contracts with existing clients in the financial services vertical and higher volumes with telecom clients
other than Telefónica. Revenue from Telefónica increased by 3.9% driven mainly by higher volumes in the last quarter of 2018.
Americas
Revenue in Americas for the years ended December 31, 2017 and 2018 was $758.0 million and $708.7 million, respectively, a
decrease of $49.3 million, or 6.5%. Excluding the impact of foreign exchange, revenue increased 3.5%. Excluding the impact of foreign
exchange, revenue from multisector clients increased by 5.4%, supported by higher volumes in Chile and Mexico, mostly from other clients.
On the same way, excluding the impact of foreign exchange, revenue from Telefónica increased by 0.8%, driven by higher volumes in Chile
and Mexico.
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Due to the first year of implementation of “IAS 29 – hyperinflation” in Argentina the translation of local figures to US. Dollars
generated a negative impact of $13.3 million in revenue;
EMEA
Revenue in EMEA for the years ended December 31, 2017 and 2018 was $223.4 million and $240.9 million, respectively, an
increase of $17.4 million, or 7.8%, mainly supported by multisector. Excluding the impact of foreign exchange, revenue in EMEA increased
2.7%. The increase was, driven by growth of 8.8%, from multisector clients fueled by higher volumes from telecom clients other than
Telefónica as well as other multisector clients, offsetting the 1.0% decrease in revenue from Telefónica.
Other operating income
Other operating income totaled $16.4 million and $19.4 million for the years ended December 31, 2017 and 2018, respectively. The
2018 number includes $10 million of partial insurance indemnity in Puerto Rico as a result of impacts from the natural disasters in the
country.
Total operating expenses
Total operating expenses decreased by $97.4 million, or 5.3%, from $1,845.7 million for the years ended December 31, 2017 to
$1,748.2 million for the years ended December 31, 2018. Excluding the impact of foreign exchange, operating expenses increased by 4.5%,
in line with revenue growth and mostly coming from employee benefit expenses and higher activity in Americas. Therefore as a percentage
of revenue, operating expenses remained flat at 96.1% for the years ended December 31, 2017 and 2018.
Supplies: Supplies expenses decreased by $4.1 million, or 5.5%, from $74.9 million for the years ended December 31, 2017 to $70.8
million for the years ended December 31, 2018. Excluding the impact of foreign exchange, supplies expenses increased by 6.6%. As a
percentage of revenue, supplies represented 3.9% for both years ended December 31, 2017 and 2018.
Employee benefit expenses: Employee benefit expenses decreased by $63.9 million, or 4.5%, from $1,429.1 million for the years
ended December 31, 2017 to $1,365.2 million for the years ended December 31, 2018. Excluding the impact of foreign exchange, employee
benefit expenses increased by 5.4%, impacted by $10.0 million costs related to changes in management. As a percentage of revenue,
employee benefit expenses represented 74.4% and 75.1% for the years ended December 31, 2017 and 2018, respectively.
Depreciation and amortization: Depreciation and amortization expenses decreased by $9.2 million, or 8.8%, from $104.4 million
for the years ended December 31, 2017 to $95.2 million for the years ended December 31, 2018. Excluding the impact of foreign exchange,
depreciation and amortization expense decreased by 1.3% driven by decrease in capital expenditures.
Other operating expenses: Other operating expenses decreased by $20.6 million, or 8.7%, from $236.6 million for the years ended
December 31, 2017 to $216.0 million for the years ended December 31, 2018. Excluding the impact of foreign exchange, other operating
expenses decreased by 0.8%. As a percentage of revenue, other operating expenses were 12.3% and 11.9% for the years ended December 31,
2017 and 2018, respectively.
Brazil
Total operating expenses in Brazil decreased by $51.7 million, or 5.7%, from $899.2 million for the years ended December 31, 2017
to $847.6 million for the years ended December 31, 2018. Excluding the impact of foreign exchange, operating expenses in Brazil increased
by 7.4%, mainly impacted by higher employee benefit expenses on the back of the increase in the average number of employees (from
78,015 in 2017 to 81,158 in 2018), reflecting higher operating activity. Operating expenses as a percentage of revenue increased from 95.2%
to 96.6%, for the years ended December 31, 2017 and 2018, respectively.
Americas
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Total operating expenses in the Americas decreased by $33.2 million, or 4.5%, from $734.6 million for the years ended December
31, 2017 to $701.4 million for the years ended December 31, 2018. Excluding the impact of foreign exchange, operating expenses in
Americas increased by 6.1%, mainly impacted by the most part of the related to changes in management (booked in employee benefit
expenses and other operating expenses) reflecting the higher operating activity in the region. Operating expenses as a percentage of revenue
increased from 96.9% to 99.0%, for the years ended December 31, 2017 and 2018, respectively.
Due to the first year of implementation of IAS 29 – Financial Reporting in Hyperinflationary Economy net effect of hyperinflation
adjustment and the translation of local figures to US. Dollars reducing operating expenses in $14 million;
EMEA
Total operating expenses in EMEA increased by $13.3 million, or 5.9%, from $226.8 million for the years ended December 31,
2017 to $240.2 million for the years ended December 31, 2018. Excluding the impact of foreign exchange, operating expenses in EMEA
increased by 1.1% below revenue growth on the back of the reduction in employee benefit expenses in the period. Operating expenses as a
percentage of revenue decreased from 101.5% to 99.7%, for the years ended December 31, 2017 and 2018, respectively.
Operating profit
Operating profit decreased by $2.9 million, from $92.4 million for the years ended December 31, 2017 to $89.5 million for the years ended
December 31, 2018, an increase of 3.2%. Excluding the impact of foreign exchange, operating profit increased 5.9%. Operating profit
margin increased of 0.1 percentage points from 4.8% for the years ended December 31, 2017 to 4.9% for the years ended December 31,
2018.
Brazil
Operating profit in Brazil decreased by $22.4 million, from $55.5 million for the years ended December 31, 2017 to $33.1 million
for the years ended December 31, 2018. Excluding the impact of foreign exchange, operating profit decreased by 32.2%, reflecting the lower
profitability in the first half of 2018 from certain clients’ programs. It is important to highlight that, as guided by Management, profitability
recovered in the second half of 2018 to a more normalized level. Operating profit margin in Brazil decreased from 5.9% for years ended
December 31, 2017 to 3.8% for the years ended December 31, 2018.
Americas
Operating profit in Americas decreased by $ 10.0 million, from $31.5 million for the years ended December 31, 2017 to $21.5
million for the years ended December 31, 2018. Excluding the impact of foreign exchange, operating profit decreased by 31.4%, reflecting
the deterioration of business environment in certain countries, such as Argentina and Mexico, in the second half of 2018 and the negative
impact of the most part of the costs related to changes in management. Operating profit margin in Americas decreased from 4.1% for the
years ended December 31, 2017 to 3.0% for the years ended December 31, 2018.
EMEA
Operating profit in EMEA increased by $4.3 million, from a loss of $1.8 million for the years ended December 31, 2017 to a gain of
$2.5 million for the years ended December 31, 2018. Excluding the impact of foreign exchange, operating profit increased by $3.9 million
reflecting higher volumes from multisector, especially telecom clients other than Telefónica as well as other multisector clients. Operating
profit margin improved from negative 0.8% for the years ended December 31, 2017 to positive 1.1% for the years ended December 31, 2018.
Finance income
Finance income was $18.8 million for the years ended December 31, 2018, compared to $7.9 million for the years ended December
31, 2017. Excluding the impact of foreign exchange, finance income decreased by 18.2% during the years ended December 31, 2018 mainly
due to lower average cash position.
The year ended December 31, 2018 contains a positive impact of $10.7 million due to the application of the IAS 29 Financial
Reporting in Hyperinflationary Economies in Argentina. This impact is mainly explained by the effects of monetary correction of the
goodwill generated on December 1, 2012 from the acquisition of the Customer Relationship Management (“CRM”) business from
Telefónica, S.A;
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Finance costs
Finance costs decreased by $32.5 million, or 41.6%, from $78.1 million for the years ended December 31, 2017 to $45.6 million for
the years ended December 31, 2018. Excluding the impact of foreign exchange, finance costs decreased by 40.6% during the years ended
December 31, 2018. The decrease in finance costs was driven by lower interest expenses from the debt refinancing program concluded in
August 2017, combined with a negative effect in the years ended December 31, 2017 of $19.0 million related to the debt refinancing.
Net foreign exchange gain/(loss)
Net foreign exchange loss increased by $5.4 million, from a loss of $23.4 million for the years ended December 31, 2017 to a loss of
$28.8 million for the years ended December 31, 2018. This change reflects the Brazilian Real and Argentine Peso depreciation against the
U.S. dollar that impacted our intercompany balances and therefore has no cash impact.
Income tax expense
Income tax expense for the years ended December 31, 2017 and 2018 totaled $12.5 million and $13.4 million, respectively. This
change is due to the positive profit before income tax in 2018.
Profit/(loss) for the year
Profit/(loss) for the year changed from a loss of $13.6 million for the years ended December 31, 2017 to a profit of $20.5 million for
the years ended December 31, 2018, as a result of the factors discussed above.
EBITDA and Adjusted EBITDA
EBITDA decreased by $12.1 million, or 6.2% from $196.9 million for the years ended December 31, 2017 to $184.8 million for the
years ended December 31, 2018. Excluding the impact of foreign exchange, EBITDA increased by 2.2%. Also, EBITDA includes a $10
million related to changes in management.
Brazil
Adjusted EBITDA decreased by $25.3 million, or 20.3%, from $124.7 million for the years ended December 31, 2017 to $99.4
million for the years ended December 31, 2018. Excluding the impact of foreign exchange, Adjusted EBITDA decreased by 12.0%. This
decrease in Adjusted EBITDA reflects the lower profitability from certain clients’ programs in the first half of 2018. It is important to
highlight that, as guided by Management, profitability recovered in the second half of 2018 to a more normalized level.
Americas
Adjusted EBITDA decreased by $10.0 million, or 12.0%, from $83.5 million for the years ended December 31, 2017 to $73.5
million for the years ended December 31, 2018. Excluding the impact of foreign exchange, Adjusted EBITDA decreased by $10.0 million, or
8.9% respectively, reflecting the deterioration of business environment in certain countries, such as Argentina and Mexico, in the second half
of 2018 and the negative impact of the most part of the costs related to changes in management.
EMEA
Adjusted EBITDA increased by $4.7 million, or 31.8%, from $14.8 million for the years ended December 31, 2017 to $19.5 million
for the years ended December 31, 2018. Excluding the impact of foreign exchange, Adjusted EBITDA increased by $2.8 million, or 36.5%.
The increase in Adjusted EBITDA reflects higher volumes from Multisector clients, especially telecom clients other than Telefónica as well
as other multisector clients.
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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 $157.2 million, or 15.6%, from $1,010.7 million for
the year ended December 31, 2016 to $1,167.9 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 $6.6 million, or 0.9%, from $746.8 million for the year ended December 31, 2016 to $753.4
million for the year ended December 31, 2017. Excluding the impact of foreign exchange, revenue from Telefónica clients decreased 3.0%,
mainly by the volume reduction in Mexico, Spain, Brazil and Peru.
For the year ended December 31, 2017, revenue from multisector clients was 60.8% of total revenue compared to 57.5% for the year
ended December 31, 2016, an increase of 3.5 percentage points.
The following chart sets forth a breakdown of revenue by geographical region for the year ended December 31, 2016 and 2017 and as
a percentage of revenue and the percentage change between those periods with and net of foreign exchange effects.
For the year ended December 31,
($ in millions, except percentage
changes)
Brazil
Americas
EMEA (*)
Other and eliminations (1)
Total
2016
(%)
2017
(%)
Change (%)
816.4
718.9
223.9
(1.7)
53.8
43.1
12.7
(9.6)
944.8
758.0
223.4
(5.0)
1,757.5
100.0
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.
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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.
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%).
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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.
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.
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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.
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,
$11.9 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 $12.9 million in 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.
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, 2018, the total amount of credit available to us was $95.0 million under our Revolving Credit Facility,
all of which remains undrawn as of December 31, 2018. In addition, we had cash and cash equivalents of $133.5 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, 2018, our outstanding debt was $459.8 million, which includes $400.0 million of our 6.125% Senior Secured
Notes due 2022, $14.7 million of Brazilian Debentures, $24.0 million of financing provided by BNDES, $5.5 million of finance lease
payables and $15.6 million of other bank borrowings.
For the year ended December 31, 2018, our cash flow from operating activities was $81.2 million, which includes interest paid of
$49.5 million. Our cash flow from operating activities, before giving effect to the payment of interest, was $130.7 million.
Cash Flows
As of December 31, 2018, we had cash and cash equivalents of $133.5 million. We believe that our current cash flow used in
operating activities and financing arrangements will provide us with sufficient liquidity to meet our working capital needs.
($ 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
64
For the year ended December 31,
2016
2017
2018
141.9
(75.1)
(62.7)
4.2
5.8
114.5
(90.9)
(84.3)
(60.8)
8.6
81.2
(41.2)
(33.7)
6.31
(14.5)
Table of Contents
Cash Flows from Operating Activities
Years Ended December 31, 2018 Compared to Years Ended December 31, 2017
Cash flows from operating activities was $ 81.2 million for the years ended December 31, 2018 compared to $ 114.5 million for the years
ended December 31, 2017. The decrease in cash from operating activities is mainly due to lower EBITDA margin.
Years Ended December 31, 2017 Compared to Years Ended December 31, 2016
Cash flows from operating activities was $ 114.5 million for the years ended December 31, 2017 compared to $ 141.9 million for the
years ended December 31, 2016. The decrease in cash from operating activities was mainly due to one-off positive impacts during 2016 in
connection with MSA renegotiation.
Cash Flows used in Investing Activities
Years Ended December 31, 2018 Compared to Years Ended December 31, 2017
Cash flows used in investing activities was $ 41.2 million for the years ended December 31, 2018 compared to cash used in investment
activities of $ 90.9 million for the years ended December 31, 2017. The decrease is mainly due to the acquisition of Interfile in June 2017
and reduction in Capex in 2018.
Years Ended December 31, 2017 Compared to Years Ended December 31, 2016
Cash flows used in investing activities was $ 90.9 million for the years ended December 31, 2017 compared to $ 75.1 million for the
years ended December 31, 2016. Cash flows used in investing activities for the years ended December 31, 2017 mainly include payments for
the acquisition of Interfile in June 2017.
Cash Flows from/(used in) Financing Activities
Years Ended December 31, 2018 Compared to Years Ended December 31, 2017
For the years ended December 31, 2018 cash used in financing activities was $ 33.7 million compared to cash used in financing
activities of $ 84.3 million for the year ended December 31, 2017. This variance is mainly due to monthly contractual BNDES amortization,
semi-annual contractual Debentures amortization and repayment of certain short-term loans for working capital needs.
Years Ended December 31, 2017 Compared to Years Ended December 31, 2016
For the years 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 year ended December 31, 2017. 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 $132.8 million of Brazilian Debentures.
Additionally, during 2017, there were also $22.2 million of BNDES contractual amortization and $33.8 million of Brazilian Debentures
prepayment. Also, in November 2017, there was a dividend payment of $24.147 million.
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Financing Arrangements
Certain of our debt agreements contain financial ratios as instruments to monitor the Company’s financial condition and as
preconditions to certain transactions (e.g. the incurrence of new debt, permitted payments). The following is a brief description of the
financial ratios.
1. Gross Leverage Ratio (applies to Atento S.A.) – measures the level of gross debt to EBITDA, as defined in the debt agreements.
The contractual ratio indicates that the gross debt should not surpass 2.8 times the EBITDA for the last twelve months. As of
December 31, 2018, the ratio was 2.4 times.
2. Fixed Charge Coverage Ratio (applies to Atento S.A.) – measures the Company’s ability to pay interest expenses and dividends
(fixed charges) in relation to EBITDA, as described in the debt agreements. The contractual ratio indicates that the EBITDA for
the last twelve months should represent at least 2 times the fixed charge of the same period. As of December 31, 2018, the ratio
was 6.1 times.
3. Net Debt Brazilian Leverage Ratio (applies only to Brazil) – measures the level of net debt (gross debt, less cash and cash
equivalents) to EBITDA – each as defined in debt agreements. The contractual ratio indicates that Brazil net debt should not
surpass 2.0 times the Brazilian EBITDA. As of December 31, 2018, the ratio was 0.14 times. This is the only ratio considered as
a financial covenant.
The Company regularly monitors all financial ratios under the debt agreements. As of December 31, 2018, we were in compliance
with the terms of our covenants.
Description
Currency
Maturity
Interest rate
As of December 31, 2018
($ in millions)
Senior Secured Notes
Brazilian Debentures
BNDES
USD
BRL
BRL
Finance Lease Payables
BRL, COP, USD
Other Borrowings
Total Debt
Senior Secured Notes
BRL
2022
2023
2020
2019
2019
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%
7.7%-10%
400.0
14.7
24.0
5.5
15.5
459.8
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.
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.
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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, 2018, we were in compliance with these covenants. The outstanding amount on December 31, 2018 is $400.0 million.
All interest payments are made on a half yearly basis.
The fair value of the Senior Secured Notes, calculated on the basis of their quoted price at December 31, 2018, is 379,233 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
On August 19, 2017, in connection with the offering described above. Atento Luxco 1 redeemed all 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 cost in August 2017, along with the remaining balance of the 2020 Senior Secured Notes issuance amortized cost
of $4.9 million U.S dollars.
2017 Santander Bank Credit Certificate
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
$20.6 million as of December 31, 2018. 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 September
3, 2018 and the aggregate principal amount was modified to 75.0 million Brazilian Reais. On October 11, 2018, the maturity was extended
until April 11, 2019 and the aggregate principal amount was modified to 100.0 million Brazilian Reais, equivalent to approximately $25.8
million as of December 31, 2018. As of December 31, 2018, there was no outstanding balance under the 2017 Santander Bank Credit
Certificate.
As of December 31, 2018, there was no outstanding balance under the 2017 Santander Bank Credit Certificate.
On March 5, 2018, Atento Brasil S.A. entered into an agreement with Banco ABC Brasil for an amount of $ 10.1 million maturing on
September 3, 2018 with an annual interest rate of 3.40%. 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 2.10% over 33,000 thousand Brazilian Reais. As of December 31,
2018, the outstanding balance was zero.
Revolving Credit Facility
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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, 2018, we were in compliance with this covenant and no amounts
were released under the Super Senior Revolving Credit Facility.
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 $20.0 million of commitments are available for the drawing of cash loans in Euro and Mexican Pesos (MXN). The original
borrowers under this facility are 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, 2018, the outstanding amount under this facility was zero.
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 av erag e daily rate of the One Day “o v er
extra¬group”—DI—Interfinancial Deposits (as such rate is disclosed by CETIP S.A. —Mercados Organizados (“CETIP”), plus a spread of
3.70%.
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.
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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, 2018, 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, 2018 is
$14.7 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, 2018, Atento Brasil S.A. was in compliance with this covenant.
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 $77.4
million as of December 31, 2018.
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:
(cid:1)
(cid:1)
(cid:1)
(cid:1)
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.
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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
Tranche A
Tranche B
(Thousands of U.S. dollars)
Tranche D
Tranche C
Tranche E
Total
6,5
2,7
-
16,2
25,4
4,7
9,5
7,5
21,7
-
-
47,1
3,2
1,4
-
1,8
6,4
1,2
2,4
1,9
5,4
-
-
11,8
4,5
1,9
-
2,6
9,0
1,7
3,4
-
5,0
-
-
14,1
0.3
0.1
-
0.3
0.7
0.1
0.3
-
0.4
-
-
1,2
-
-
0.2
-
0.2
-
-
0.2
0.2
0.2
0.2
0.5
14,6
6,1
0.2
20,8
41,7
7,7
15,5
9,5
32,7
0.2
0.2
74,6
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, 2018, 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
22,100 in millions Brazilian Reais, equivalent to 5,703 in millions U.S. dollars as of December 31, 2018. 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 was 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 in millions Brazilian Reais (equivalent to 1,686 in millions U.S. dollars) were
released under this facility.
As of December 31, 2018, the outstanding amount under BNDES Credit Facility was 23,974 in millions U.S. dollars.
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Finance leases
The Company holds the following assets under finance leases:
($ in millions)
Finance leases
Plant and machinery
Furniture, tools and other tangible assets
Total
As of December 31,
2017
2018
Net carrying amount of
asset
Net carrying amount of
asset
1.8
6.6
8.4
1.0
4.8
5.8
On April 25, 2017, Atento Brasil S.A. entered in a sale leaseback agreement with HP Financial Services Arrendamento Mercantil S.A.
in an amount of BRL23.6 million, equivalent to approximately $6.1 million as of December 31, 2018, which will be repaid in 36 monthly
installments.
On August 25, 2017, Atento Brasil S.A. entered in a new sale leaseback agreement with HP Financial Services Arrendamento
Mercantil S.A. in an amount of BRL4.2 million, equivalent to approximately $1.1 million as of December 31, 2018, which will be repaid in
60 monthly installments.
On October 25, 2017, Atento Brasil, S.A. entered in a new sale leaseback agreement with HP Financial Services Arrendamento
Mercantil S.A. in an amount of BRL4.6 million, equivalent to approximately $1.2 million as of December 31, 2018, which will be repaid in
60 monthly installments.
The present value of future finance lease payments is as follow:
($ in millions)
Up to 1 year
Between 1 and 5 years
Total
As of December 31,
2018
Net carrying
amount of asset
(unaudited)
3.2
2.4
5.5
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.
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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.
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 noncore 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 noncore 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 noncore 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 three 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 inhouse
solutions, largely to take advantage of lower labor costs, specialist knowledge and cost efficiencies, finally we believe the digital
transformation processes that our clients face provide opportunities for Atento to go deeper in the value chain of our clients and expand the
range of services and solutions that we can deliver to these clients thanks to our expanded digital and business process automatization
capabilities
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 multichannel end-to-end and digital solutions are being outsourced, thus creating an
opportunity for CRM BPO providers, including us, to upsell and crosssell our services as well as expand the range of services we provide by
leveraging our digital capabilities. Our vertical industry expertise in telecommunications, banking and financial services and other customer
intensive industry verticals, 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. Most recently we have expanded our digital, business process automatization
and business process consulting capabilities to increase the value we can generate to our clients and develop a wide range of innovative
customer experience solutions adapted to the digital era.
Growth in technologies related to automation
Front-office customer management (CM), or customer experience management, business process outsourcing (BPO) services are
rapidly evolving. This is due to increasing functional and process complexity; prolific use of digital channels (such as mobile applications,
social and chat); and self-service channels. In addition, service innovation is being delivered through key technologies related to automation,
such as robotic process automation (RPA), virtual customer assistants (VCAs), artificial intelligence (AI), advanced analytics and a growing
number of interaction channels. This evolution is taking place while traditional voice-based agent services are going through their own
redesign or quasi-evolution, with a keen focus on customer experience (CX). CM BPO services through technologies that help enable digital
services — such as mobile applications, chat and social CRM — continue to expand, with adoption rates gradually expected to peak through
2019. New opportunities in visual- and video-based services, enabled through various technologies such as virtual assistants, natural-
language processing (NLP), speech analytics and facial recognition, will gain traction over the next two to three years. The catalysts for the
adoption of visual- and video-based services will be technological advancements and social acceptance driven by millennials and Gen Y.
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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 outcomebased 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.
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, 2016, 2017 and 2018, 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 endservice 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 offbalance 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 2018 the majority relate to commercial purposes, financial and rental activities, the bulk of the remaining
guarantees relates to tax and laborrelated 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
73
2016
As of December 31,
2017
2018
166.0
154.3
320.3
156.6
165.6
322.2
125.4
257.8
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Table of Contents
F. Tabular Disclosure of Contractual Obligations
The following table presents our expected future cash outflows resulting from debt obligations, finance lease obligations, operating
lease obligations and other longterm liabilities as of December 31, 2018.
($ in millions)
Debt obligations
Finance lease obligations
Derivative financial instrument
Operating lease obligations
Total Obligations
As of December 31,
Payments due by period
Total
Less than 1
year
1-3 years
3-5 years
More than 5
years
454.3
5.5
0.7
153.3
613.8
39.6
3.1
-
41.2
83.9
9.8
2.1
-
55
66.9
404.9
0.3
0.7
26.7
432.6
-
-
-
30.4
30.4
Debt obligations are comprised of debentures, bonds and interest-bearing debt (as of December 31, 2018; 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, 2018. Further, at December 31, 2018, the payment commitment for the early cancellation of these leases amounts
to 153.3 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 ForwardLooking Statements.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
Below is a list of the names and ages (as of March 1, 2019) of Atento’s directors and executive officers and a brief account of the
business experience of each of them.
Name
Carlos López-Abadía
Mauricio Teles Montilha
José Ignacio Cebollero Bueno
Mariano Castaños Zemborain
Virginia Beltramini Trapero
Michael Flodin
Dimitrius de Oliveira
Rodrigo Fernando Llaguno Carranco
Juan Enrique Gamé
José María Pérez Melber
Name
Carlos López-Abadía
Antonio Viana-Baptista
David Danon
Thomas Iannotti
Stuart Gent
Charles Megaw
David Garner
Vishal Jugdeb
Our Executive Officers
Age
Position
56 Chief Executive Officer and Director
55 Chief Financial Officer
48 Chief People Officer
47 Commercial Director
46 Chief Legal Officer
55 US Nearshore Regional Director
46 Brazil Regional Director
44 México Director
58 South America Regional Director
47 Spain Director
Age
Position
56 Director
61 Director
37 Director
61 Director
47 Director
48 Director
61 Director
42 Director
Carlos López-Abadía, Chief Executive Officer and Director. Mr. López-Abadía boasts a long-standing international professional
career in the technology, consulting and digital transformation sectors at the global level. His successful professional career spans over thrity
years. Prior to his appointment as Atento’s Chief Executive Officer, he served as DXC Technology’s Vice President and General Manager
Consulting, responsible for digital transformation advisory services, including strategic partnerships in the consulting domain. Previously he
served as Vice President Global Services for Misys where he led the transformation of the services and software support business and
managed a global service delivery network based in major global financial centers and offshore locations. Prior experience also includes,
Managing Partner at Accenture and leadership positions at Level 3, McKinsey&Co and AT&T. He holds an MS in electrical engineering
from Purdue University and an MBA from Washington University, where he was a Charles F. Knight Scholar. He has recently been named
to the Hispanic IT Executive Council’s HITEC Top 100, Class of 2017-2018, for his career achievements in information technology.
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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, Chief Legal Öfficer. 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.
Dimitrius de Oliveira, Brazil Regional Director. Dimitrius has more than 20 years’ experience in the technology and business services
sectors leading sales, after-sales and operations functions for multinational companies such as Atento, Avaya, Ericsson, Nokia, Siemens,
Genesys and Contax. Most recently he has served as Vice President of Operations for Mutant, former Genesys Prime, a leading provider of
digital customer experience solutions in Brazil. Before joining Mutant, de Oliveira served as Atento Global Commercial Director and Brazil
Multisector Director from 2015 to 2017. Dimitrius de Oliveira has a degree in engineering, with a specialization in building and leading
customer centric organizations, from Harvard Business School, as well as an MBA in Marketing from ESPM School of Advertising and
Marketing, a specialization in Leadership from the São Paulo Business School and an electrical engineering degree from Universidade de
Mogi das Cruzes in Brazil.
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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.
López-Abadía, our Chief Executive Officer and a member of our board of directors, is set forth above).
Antonio Viana-Baptista, Director. Mr. Viana-Baptista boasts a long-standing and distinguished career in the telecommunications,
technology and investment banking sectors as well as in strategic consultancy. He has been over the years an active investor and advisor in
technology companies. Most recently, he held the role of Credit Suisse Senior Advisor for Portugal and from 2011 to 2015, Chief Executive
Officer for Spain and Portugal. Before joining Credit Suisse, he spent over a decade in a number of chief executive roles at Telefonica,
including CEO of Telefonica International, Telefonica Spain and Chairman and CEO of Telefonica Moviles among others. Prior to this, he
spent seven years at Banco Portugues de Investimento (BPI) as an Executive Board member and was a Partner in the Iberia office of
McKinsey & Co. He is currently a Non-Executive Board member at Semapa and Jeronimo Martins. Mr. Viana-Baptista holds a degree in
Economics and a Master’s in European Economics from Universidad Catolica Portuguesa and an M.B.A. from INSEAD.
David Danon, Director. Mr. Danon has 13 years of experience in the private equity industry. He is currently a Principal of Bain
Capital Private Equity (Europe) LP and a board member of Autodistribution, MSX International and Italmatch. Prior to his position at Bain,
Mr. Danon worked as an analyst in Lehman Brother’s Merchant Banking division from 2005 to 2008. Mr. Danon has a Master’s in Business
from HEC Paris.
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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.
Charles Megaw, Director. Mr. Megaw has over 22 years of experience in the business and financial services industry. Mr. Megaw
joined Bain Capital in 2007 and is an Operating Partner in the London office. Prior to joining Bain Capital, Mr. Megaw was a Partner at Bain
& Company where he worked in a variety of industries. He is currently a member of the Board of Directors of MSX International. Mr.
Megaw holds an MA and PhD from the University of Cambridge in the United Kingdom.
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
LongTerm 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 cashbased 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”).
Atento’s TRSU is a onetime 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.
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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 1, 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 onetime 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 3, 2016, a total of 157,925 TRSUs vested.
On May 31 and June 2, 2017, Atento granted a new share-based payment arrangement to Board directors (a total of 29,300 RSUs) in a
one-time award with a one-year vesting period.
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).
On April 19, 2018, Atento granted a new share-based payment arrangement to Board directors (a total of 23,232 RSUs) in a one-time
award with a one-year vesting period.
On July 2, 2018, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company
and its subsidiaries (a total of 1,065,220 RSUs) in a one¬-time award with a three-year vesting period.
As of January 4th, 2019, a total of 1,161,870 TRSUs vested.
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 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 executive Board Director and Executive Officers for the year ended
December 31, 2018, was $12 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.
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Our board of directors consists of eight members and it is composed by Thomas Iannotti and David Garner, as class I directors; Stuart
Gent, Carlos López-Abadía and Vishal Judgeb as class II directors and Antonio Viana, David Danon and Charles Megaw 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.
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 SarbanesOxley 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.
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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 nonaudit 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.
Our Audit Committee consists of Antonio Viana, David Garner and Thomas Iannotti. Our board of directors has determined that
Antonio Viana 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 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
th
requests should be made in writing to the attention of our Legal Global Director at the following address: C/Santiago de Compostela, 94, 9
Floor, 28035, Madrid, Spain.
D. Employees
For the year ended December 31, 2018, our average and period end numbers of employees, excluding internships, were 153,038 and
153,345, respectively. The following table sets forth the average number of employees, excluding internships, we had on a geographical
basis for 2016, 2017 and 2018.
Brazil
Americas
EMEA
Corporate
Total
Yearly Average
2016
2017
2018
78,088
63,153
10,213
147
78,015
63,191
10,534
77
81,158
60,463
11,345
72
151,601
151,817
153,038
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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, 89.0% as of December 31, 2017 and 88,1% as of December 31, 2018.
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:
• 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 153,000 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 inhouse.
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, longterm 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 welldefined 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.
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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.
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, 2018, we had in place collective bargaining agreements in six countries, including Argentina, Brazil, Chile,
Uruguay, Mexico and Spain, which govern our relationships with most of the employees in those countries. As of December 31, 2018, 75.3%
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 renegotiated every year. In 2018, we agreed to
raise salaries 1.81% 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 2018, a 5% salary increase was agreed for all employees under the collective bargaining agreement, compared to a
2.13% increase in 2017 and a 3,3% increase in 2017.
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.
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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: “coinvestment shares” and “performance shares”. The coinvestment 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 preagreed hurdles.
In the event that a MIP participant’s employment is terminated, his/her shares can be bought back at a prespecified 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, 9th floor,
28035, Madrid, Spain.
As of March 18, 2019, Atento had 75,406,357 ordinary shares. The table below presents certain information of March 18, 2019,
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)
Santa Lucia S.A. Compania de Seguros y Reaseguros(3)
Executive Officers and Directors:
Mauricio Montilha(11) (12)
José Ignacio Cebollero(12)
Virginia Beltramini Trapero(12)
Mariano Castaños Zemborain(12)
Michael Flodin(11) (12)
Dimitrius de Oliveira
Rodrigo Fernando Llaguno Carranco
Juan Enrique Gamé(11)
José María Pérez Melber
Vishal Jugdeb(4)
Antonio Viana-Baptista(5)
Thomas Iannotti(6)
David Garner(7)
Stuart Gent(8)
David Danon(9)
Charles Megaw(10)
Shares Beneficially Owned
Number of Shares
Percentage
48,520,671
64.34%
6,401,922
3,707,404
-
61.789
22.023
2,387
20,771
35.723
-
-
-
-
-
-
8.48%
5.00%
-
0.08%
0.03%
0.003%
0.02%
0.04%
-
-
-
-
-
-
49.722
205.000
0.06%
0.27%
-
-
-
-
-
-
All executive officers and directors as a group (16 persons) (10)
-
-
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(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
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 Luxco Topco S.C.A., a corporation (société anonyme) organized under the laws of the Grand Duchy of
Luxembourg ("TopCo"), owns 99.99% of the equity interests of Atalaya PikCo S.C.A. ("PikCo"). Atalaya PikCo S.à r.l., a limited
liability company (société à responsibilité limitée) organized under the laws of the Grand Duchy of Luxembourg ("PikCo GP"), is the
general partner of PikCo. Atalaya Luxco S.à r.l., a limited liability company (société à responsibilité limitée) organized under the
laws of the Grand Duchy of Luxembourg ("TopCo GP" and, together with PikCo, Topco and Pikco GP, the "LuxCos"), is the general
partner of Topco. Topco GP is 50% owned by each of Bain Capital Fund X, L.P., an exempted limited partnership organized under
the laws of the Cayman Islands ("Bain Capital Fund X"), and Bain Capital Europe Fund III, L.P., an exempted limited partnership
organized under the laws of the Cayman Islands ("Bain Europe Fund"). Bain Capital Partners X, L.P., an exempted limited
partnership organized under the laws of the Cayman Islands ("Bain Capital Partners X"), is the general partner of Bain Capital Fund
X. Bain Capital Partners Europe III, L.P., an exempted limited partnership organized under the laws of the Cayman Islands ("Bain
Capital Partners Europe"), is the general partner of Bain Europe Fund. Bain Capital Investors, LLC, a limited liability company
organized under the laws of the State of Delaware ("BCI"), is the general partner of each of Bain Capital Partners X and Bain Capital
Partners Europe. The governance, investment strategy and decision-making process with respect to the investments held by PikCo is
directed by BCI's Global Private Equity Board. As a result, BCI may be deemed to share voting and dispositive power with respect to
the Ordinary Shares held by PikCo. Each of the Bain Capital Entities has an address c/o Bain Capital Partners, LLC, John Hancock
Tower, 200 Clarendon Street, Boston, Massachusetts 02116. Ownership stake as of March 18, 2019.
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.Ownership stake as of
February 12, 2019.
Consists of ordinary shares beneficially owned by Santa Lucia S.A. Compania de Seguros y Reaseguros, Alpha Plus Gestora,
S.G.I.I.C., S.A.U., Santa Lucia Vida y Pensiones, S.A., Compania de Seguros y Reaseguros, Unicorp Vida, Compania de Seguros y
Reaseguros S.A., Caja Espana Vida, Compania de Seguros y Reaseguros S.A. based solely on information reported by such persons
on a Schedule 13G filed with the SEC on August 24, 2018. The business address of these persons is c/o Santa Lucia S.A. Compania
de Seguros y Reaseguros Plaza de Espana, 15 Madrid, Spain 28008.Ownership stake as of August 24, 2018.
The address for Mr. Jugdeb is Da Vinci building, 4 rue Lou Hemmer, L-1748 Luxemburg Findel, Grand Duchy of Luxembourg.
The address for Mr. Viana is Da Vinci building, 4 rue Lou Hemmer, L-1748 Luxemburg Findel, Grand Duchy of Luxembourg.
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.Ownership stake as of March 18, 2019.
The address for Mr. Garner is 716 Fields Lane Simpsonville, Kentucky 40067.Ownership stake as of March 18, 2019.
The address for Mr. Gent is Devonshire House, Mayfair Place, London, W1J 8AJ, United Kingdom.
The address for Mr. Danon is Da Vinci building, 4 rue Lou Hemmer, L-1748 Luxemburg Findel, Grand Duchy of Luxembourg.
The address for Mr. Megaw is Da Vinci building, 4 rue Lou Hemmer, L-1748 Luxemburg Findel, Grand Duchy of Luxembourg.
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): Mauricio Montilha (8.8%) Michael Flodin (0.1%), and Juan Enrique Gamé
(10.9%).
(12)
Ownership stake as of March 18, 2019.
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.
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B. Related Party Transactions
Registration Rights Agreement
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
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In March 2018, Atento Brasil S.A. a direct 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 the 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 $105.3 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 were 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, 2018, Atento Brasil, S.A. has 30 proceedings ongoing with the tax authorities and social security authorities, for
various reasons relating to infraction proceedings filed (42 in 2017). The total amount of these claims is approximately $39.5 million.
According to the Company’s external attorneys, materialization of the risk event is possible.
Labor Litigation
As of December 31, 2018, Atento Brasil was party to approximately 11,486 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 $20.8 million and as possible is $46.7 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 $1.3 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 7 civil lawsuits ongoing for various reasons (8 in 2017). The total amount of these claims is approximately
$5.6 million ($6.0 million at December 31, 2017). According to the Company’s external attorneys, materialization of the risk event is
possible.
Dividend Distributions
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Although we are well capitalized and have sufficient liquidity, our ability to pay dividends on our ordinary shares is limited in the
nearterm 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.
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, 2018.
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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
2018
2017
2016
2015
2014
Closing Price ATTO - Quarterly Basis
2018
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2017
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
U.S. dollars per Share
Low
3.55
7.75
6.90
8.82
9.43
U.S. dollars per Share
Low
3.55
5.45
6.45
7.60
U.S. dollars per Share
Low
8.90
11.00
8.65
7.75
Closing
4.01
10.15
7.65
9.74
10.45
Closing
4.01
7.50
6.85
7.80
Closing
10.15
11.60
11.15
9.15
High
10.45
12.60
10.10
14.38
12.96
High
7.96
8.45
8.35
10.45
High
12.60
12.00
11.15
9.60
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Closing Price ATTO - Monthly Basis
Month
March 2019 (Until March 15, 2019)
February 2019
January 2019
December 2018
November 2018
October 2018
September 2018
B. Plan of Distribution
Not applicable.
C. Markets
The Company’s ordinary shares trade on the NYSE under the symbol “ATTO”.
U.S. dollars per Share
Low
3.57
3.83
3.69
3.55
4.98
5.98
7.30
Closing
3.85
3.98
3.95
4.01
5.01
6.14
7.50
High
4.09
4.34
4.84
5.17
6.50
7.96
8.45
D. Selling Shareholders
Not applicable.
E. Dilution
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
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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, L1748 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, 2018, our issued share capital amounts to €33,827.00, represented by 75,070,926 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.
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 preemptive 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 preemptive 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 nonLuxembourg 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.
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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 bookentry 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.
Our ordinary shares have no conversion rights and there are no redemption or sinking fund provisions applicable to our ordinary shares.
PreEmptive Rights
Unless limited, waived or cancelled by our board of directors (see “—Share Capital”), holders of our ordinary shares have a pro rata
preemptive right to subscribe for any new shares issued for cash consideration. Our articles of association provide that preemptive 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 preemptive 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;
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• the repurchase may not reduce our net assets on a nonconsolidated 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.
On July 26, 2018, our Board of Directors approved a share buyback program in the total amount of $30 million to be concluded in up to
12 months. The buyback program was communicated to the market in the Second Quarter Earnings Release, dated July 30, 2018. During
2018, the Company repurchased 1,106,158 shares at the total cost of $8,178,000. These shares are being held in treasury.
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.
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.
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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 onemonth of the request. If the requested general meeting of shareholders is not held
within onemonth, 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 demerger (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.
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 nonLuxembourg
residents.
Amendment to the Articles of Association
Shareholder Approval Requirements
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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.
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.
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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.
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.
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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.
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.
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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 2018 and 2019).
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 tenyear 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 26.01% for the fiscal year ending 2018 and 26.01% for the fiscal year ending 2019 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.
NonLuxembourg Holders
Subject to any applicable tax treaty, an individual nonLuxembourg Holder of shares (who has no permanent establishment or permanent
representative in Luxembourg to which or to whom 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 nonresident 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 “LuxembourgU.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 LuxembourgU.S. treaty, we expect to be eligible for the benefits of the
LuxembourgU.S. Treaty.
A corporate non-Luxembourg Holder, 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 nonLuxembourg 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 LuxembourgU.S. Treaty, such U.S. corporate holder generally should not be subject to Luxembourg tax on the gain from the
disposal of such shares.
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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 LuxembourgU.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 abovementioned 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.
NonLuxembourg Holders
NonLuxembourg 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.
NonLuxembourg Holders
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Luxembourg net wealth tax will not be levied on a nonLuxembourg 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 email 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.
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 noncurrent liabilities
that bear interest at fixed rates. Atento Group’s finance costs are exposed to fluctuations in interest rates.
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Atento Group’s finance costs are exposed to fluctuations in interest rates. At December 31, 2018, 7.4% of financial debt with third
parties bore interests at variable rates, while at December 31, 2017 this amount was 12.8%. In both 2017 and 2018, the exposure was to the
Brazilian CDI rate and the TJLP (Brazilian Long Term Interest 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, which was recorded as a financial liability. As of December 31, 2018, there were no outstanding interest
rate hedging instruments related to the Brazilian Debentures.
Foreign currency risk
Our foreign currency risk arises from our local currency revenues, receivables and payables, while the U.S. dollar is our 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.
The main source of our foreign currency risk is related to the Senior Secured Notes due 2022 denominated in U.S. dollars. Upon
issuance of the Notes, we entered into cross-currency swaps pursuant to which we exchange an amount of U.S. dollars for a fixed amount of
Euro, Mexican Pesos, Peruvian Soles and Brazilian Reais. The total amount of interest (coupon) payments are covered (until maturity date)
and also a portion of the principal (until January 2020).
As of December 31, 2018, the estimated fair value of the cross-currency swaps totaled an net asset of $10.6 million (asset of $3.0
million as of December 31, 2017).
The table below shows the impact of a +/10 basis points variation in the exchange rate on the value of the cross-currency swaps.
CROSS-CURRENCY
FAIR VALUE
0.10%
-0.10%
Thousands of U.S. dollars
2018
10,630
(3,522)
862
For additional information on the interest rate risk and foreign currency risk, see Notes 4 and 14 to our consolidated financial
statements.
Sensitivity analysis of foreign currency risk
The Atento Group has reasonable control over its foreign currency risks, as its financial assets (cash and cash equivalents) and
financial liabilities (Finance Leases and other borrowings) denominated in currencies other than their functional are adequately matched. We
performed a sensitivity analysis based on the outstanding volume of financial assets and liabilities and we applied a 10% appreciation of each
asset/liability currency versus the functional currency which highlights the limited impact that such event would have on the income
statements is U.S. dollars. A sensitivity analysis of foreign currency risk for the Atento Group’s is provided in Note 4 of the consolidated
financial statements.
Country risk
To manage or mitigate country risk, we repatriate the funds generated in the Americas and Brazil that are not required for the pursuit
of new profitable business opportunities in the region and subject to the restrictions of our financing agreements.
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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.
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. The Atento
Group holds no guarantees as collection insurance.
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 of the consolidated financial statements.
($ in millions, except Net Debt/Adj. EBITDA LTM)
Cash and cash equivalents
Debt:
Senior Secured Notes
Brazilian Debentures
Finance Lease Payables
BNDES
Other Borrowings
Total Debt
Net Debt with third parties (2) (unaudited)
Adjusted EBITDA LTM (3) (*) (non-GAAP) (unaudited)
Net Debt/Adjusted EBITDA LTM (non-GAAP) (unaudited)
As of December 31,
2016
2017
2018
194.0
303.3
156.6
3.6
71.4
-
534.9
340.9
221.9
1.6x
141.8
398.3
21.1
10.5
50.4
6.0
486.3
344.5
221.0
1.6x
133.5
400.0
14.7
5.5
24.0
15.5
459.8
326.2
184.8
1.8x
(1)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.
(2)Adjusted EBITDA LTM (Last Twelve Months) is defined as EBITDA adjusted to exclude acquisition and integration related costs,
restructuring costs, site relocation costs, financial fees, asset impairments and other items not related to our core results of operations.
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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.
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, 2018, 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, 2018 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.
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Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018 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, 2018.
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,
2018 dated March 19, 2019 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 years ended December 31, 2018 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 15T. CONTROLS AND PROCEDURES
Not applicable.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our Audit Committee consists of Antonio Viana, Thomas Iannotti and David Garner. Our board of directors has determined that
Antonio Viana qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5)(ii) of Regulation SK. 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, 2018 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 2017 and 2018 by our principal
accountants, Ernst & Young Auditores Independentes S.S., including fees from member firms Ernst & Young.
Audit-fees (*)
Audit-related fees (**)
All other fees (***)
Total
All services and fees were pre-approved by the Audit Committee.
104
Thousands of U.S. dollars
2017
2018
1,812
654
2,466
1,715
258
541
2,514
Table of Contents
(*) 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) and local statutory audits of subsidiaries of the Atento Group.
(**) Audit-related fees: includes fees related to issue comfort letters for Atento internal purposes.
(***) Other fees related include service of evaluating industries key trends and potential strategic for the Brazilian market. The fees which
were pre-approved by Audit Committee as determined by the section 201 and 202 of the Sarbanes Oxley Act.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following table reflects purchases of our equity securities by us or our affiliates in 2018.
Atento S.A. – Buyback Program
Period
Total Number of
Shares Purchased (3)
Average Price Paid
per Share in USD (4)
August 2018
September 2018
October 2018
Total
212.236
498.261
395.661
1,106,158
6.73
7.84
7.25
7.39
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1) (5)
212.236
Maximum Number (or
Approximate Dollar
Value) of Shares that May
Yet Be Purchased Under
the Plans or Programs (2)
498.261
395.661
1,106,158
30,000,000
(1) The buyback program, as approved by our board of directors on July 30, 2018, for the period from July 31, 2018 to July 31, 2019.
(2) The number entered in the “Total” row of the column “Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be
Purchased Under the Plans or Programs” refers to the Dollar value which may be repurchased in the period from July 31, 2018 to July
31, 2019. The Dollar value that may be repurchased for the period from July 31, 2018 to July 31, 2019 as approved by our board of
directors is 30,000,000.
(3) The “Total Number of Units Purchased” was 212,236 in August 2018, 498,261 in September 2018 and 395,661 in October 2018.
(4) The “Average Price Paid per Unit in USD” was USD 6.73 in August 2018, USD 7.84 in September 2018 and USD 7.25 in October 2018.
(5) The “Total Number of Units Purchased as Part of Publicly Announced Plans or Programs” was 212,236 in August 2018, 498,261 in
September 2018 and 395,661 in October 2018.
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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.
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 line 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, 2017 and 2018
Consolidated Statements of Operations for the years ended December 31, 2016, 2017 and 2018
Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2016, 2017 and 2018
Consolidated Statements of Changes in Equity for the years ended December 31, 2016, 2017 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2017 and 2018
Notes to the Consolidated Financial Statements for the years ended December 31, 2016, 2017 and 2018
(b) List of Exhibits
Page
F-1
F-2
F-3
F-4
F-7
F-8
F-10
F-12
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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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.*
* Filed herewith.
** 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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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: March 19, 2019
ATENTO S.A.
By: /s/ Carlos López-Abadía
Name: Carlos López-Abadía
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, 2018 and 2017, 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, 2018, 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, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2018, 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, 2018, 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
March 19, 2019 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,
March 19, 2019
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, 2018, 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, 2018, 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, 2018 and 2017, 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,
2018, and the related notes and our report dated March 19, 2019 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,
March 19, 2019
F - 2
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2017 and 2018
(In thousands of U.S. dollars, unless otherwise indicated)
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
Notes
2017
2018
December 31,
764,127
716,886
6
7
9
13
12
14
20c)
20b)
13
20c)
20c)
12
15
230,104
153,144
152,195
90,076
21,677
60,222
8,177
7,282
131,326
211,202
154,989
123,940
95,531
19,148
65,070
11,313
6,061
125,163
566,178
496,467
410,534
388,565
21,969
12,072
1,810
141,762
342,075
315,654
26,421
19,975
891
133,526
1,330,305
1,213,353
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, 2017 and 2018
(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
Treasury shares
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
Notes
2017
2018
December 31,
377,839
340,092
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
8,541
331,551
49
(23,531)
615,288
(8,178)
(16,325)
(257,122)
8,404
12,966
528,869
30,221
408,426
682
51,174
14,391
20,830
3,145
369,596
344,392
46,560
1,212
302,756
94,078
8,058
86,166
114,454
19,068
51,342
-
274,000
76,912
10,615
78,511
107,962
19,050
1,330,305
1,213,353
19
19
20b)
17
14
21
18
20c)
17
14
18
20c)
20c)
18
21
The accompanying notes are an integral part of the consolidated financial statements.
F - 4
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 2016, 2017 and 2018
(In thousands of U.S. dollars, unless otherwise indicated)
Notes
22a)
22b)
22c)
22d)
22e)
22e)
22f)
22g)
22g)
22g)
22g)
20a)
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)
24
24
24
24
For the year ended December 31,
2016 (*)
2017
2018
1,757,498
1,921,311
1,818,180
5,880
41,748
16,437
372
19,377
180
(1,688,780)
(1,845,671)
(1,748,232)
(65,598)
(74,899)
(70,816)
(1,309,901)
(1,429,076)
(1,365,181)
(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)
(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)
-
(36,566)
(58,679)
(1,032)
(215,958)
89,505
18,843
(45,612)
179
(29,015)
(55,605)
33,900
(13,414)
20,486
-
20,486
18,540
1,946
20,486
0.28
-
0.28
-
(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 year ended December 31, 2016, 2017 and 2018
(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 income/(loss)
Total comprehensive income/(loss)
Total comprehensive income/(loss) attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income/(loss)
(*) Exclude discontinued operations - Morocco.
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
For the year ended December 31,
2016
2017
2018
3,357
(3,206)
151
(13,568)
-
(13,568)
20,486
-
20,486
13,971
2,921
15,701
32,593
32,744
32,652
92
32,744
(26,329)
402
22,934
(2,993)
(16,561)
(19,251)
2,690
(16,561)
(1,190)
-
(88,755)
(89,945)
(69,459)
(69,709)
251
(69,458)
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the year ended December 31, 2016, 2017 and 2018
(In thousands of U.S. dollars, unless otherwise indicated)
Share
capital
Share
premium
Treasury
shares
Balance at January 1, 2016
48
639,435
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
-
-
-
-
-
-
-
-
-
-
-
-
48
639,435
-
-
-
-
-
-
-
-
Share
capital
Share
premium
Treasury
shares
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
48
639,435
-
-
-
-
-
-
-
-
-
-
-
-
-
-
48
639,435
-
-
-
-
-
-
-
-
-
Share
capital
Share
premium
Treasury
shares
Balance at January 1, 2018
48
639,435
Comprehensive income/
(loss) for the period
Profit for the period
Other comprehensive
income/(loss)
Compensation of retained
losses
Increase of share capital
Dividends
Stock-based compensation
Aquisition of treasury shares
Monetary correction caused
by hyperinflation
Balance at December 31,
2018
-
-
-
-
1
-
-
-
-
-
-
-
(24,147)
-
-
-
-
-
-
-
-
-
-
-
-
-
(8,178)
-
Reserve
for
acquisition
of non-
controlling
interest
-
-
-
-
(1,057)
-
-
Retained
earnings/
(losses)
Translation
differences
Hedge
accounting
effects
Stock-based
compensation
Total
owners
of the
parent
company
Non-
controlling
interest
Total equity
(53,663)
(209,224)
18,629
2,566
397,791
65
65
-
-
-
-
15,695
16,892
-
-
15,695
16,892
-
-
-
-
-
-
-
-
-
-
32,652
65
32,587
(1,057)
1,535
1,535
-
-
(1,057)
(53,598)
(193,529)
35,521
4,101
430,921
-
92
86
6
-
-
(810)
(718)
397,791
32,744
151
32,593
(1,057)
1,535
(810)
430,203
Reserve
for
acquisition
of non-
controlling
interest
Retained
earnings/
(losses)
Translation
differences
Hedge
accounting
effects
Stock-based
compensation
Total
owners
of the
parent
company
Non-
controlling
interest
Total equity
(1,057)
(53,598)
(193,529)
35,521
4,101
430,921
(718)
430,203
-
-
-
-
(22,474)
-
-
(16,790)
23,466
(25,927)
(16,790)
-
-
-
23,466
(25,927)
(24,147)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(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
2,690
3,222
(532)
(332)
-
-
7,836
9,476
(16,561)
(13,568)
(2,993)
(24,479)
(22,474)
3,314
7,836
377,839
Reserve to
acquisition
of non-
controlling
interest
Retained
earnings/
(losses)
Translation
differences
Cash
flow/net
investment
hedge
Stock-based
compensation
Total
owners
of the
parent
company
Non-
controlling
interest
Total equity
(23,531)
(94,535)
(170,063)
9,594
7,415
368,363
9,476
377,839
-
-
-
-
-
-
-
-
-
18,540
(87,059)
(1,190)
18,540
-
-
-
(87,059)
(1,190)
24,147
-
-
-
-
35,524
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(69,709)
251
(69,458)
18,540
1,946
20,486
(88,249)
(1,695)
(89,944)
-
1
-
-
-
(1,186)
5,551
5,551
-
-
(8,178)
35,524
-
-
-
-
1
(1,186)
5,551
(8,178)
35,524
49
615,288
(8,178)
(23,531)
(16,325)
(257,121)
8,404
12,966
331,551
8,541
340,092
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31, 2016, 2017 and 2018
(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
Share Based payment expense
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
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
Acquisition of treasury shares
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
Notes
2016
2017
2018
For the year ended December 31,
8,564
(1,035)
33,900
22e)
22b)
22g)
22g)
22g)
22g)
5
97,364
1,902
20,312
1,535
(673)
1,063
(7,188)
59,151
56,494
(675)
(49,540)
179,745
62,409
22,004
(17,799)
66,614
(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)
-
-
(62,695)
4,175
5,840
184,020
194,035
104,421
627
4,364
4,923
(860)
4,106
(7,858)
78,145
23,426
(230)
2,423
213,487
(31,486)
11,507
(12,872)
(32,851)
(76,496)
49,014
(20,587)
(17,080)
(65,149)
114,452
(28,439)
(48,423)
(14,512)
431
-
95,245
1,656
11,124
6,417
(1,000)
1,984
(18,843)
45,612
29,075
(179)
(180)
170,911
(6,936)
(2,588)
(36,094)
(45,618)
(49,477)
674
(20,446)
(8,757)
(78,006)
81,187
(24,813)
(16,355)
-
-
-
(90,943)
(41,168)
474,465
(534,460)
(24,353)
-
(84,348)
(60,839)
8,566
194,035
141,762
58,462
(81,675)
(2,318)
(8,178)
(33,709)
6,310
(14,546)
141,762
133,526
The accompanying notes are an integral part of the consolidated financial statements.
F - 8
Table of Contents
ATENTO S.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2016, 2017 and 2018
(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 GrandDuchy of Luxembourg, with its registered office in
Luxembourg at 4, Rue Lou Hemmer.
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, 2018. The consolidated financial statements have been
prepared on a historical costs basis, except for Argentina that is adjusted for inflation as required by IAS 29 Financial Reporting in
Hyperinflationary Economies in Argentina and derivative financial instruments and financial liability related to the option for acquisition of
non-controlling interest, which have been measured at fair value.
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 March 1, 2019. 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 3s
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.
F - 9
Table of Contents
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 year ended December 31, 2016.
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. 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 Flows.
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.
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
F - 10
Table of Contents
When the Atento Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This
includes the separation of embedded derivatives in host contracts by the acquire.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent
consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration
classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is measured at fair value
with the changes in fair value recognized in the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is
not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognized in profit or loss.
Goodwill is initially measured as any excess of the total consideration transferred over the net identifiable assets acquired and
liabilities assumed. If the fair value of the net assets acquired is greater than the total consideration transferred, the difference is recognized in
the statements of operations as a gain from a 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), except for the Statements of operations of the Argentina subsidiary, which are converted by the
exchange rates prevailing at the reporting date, since in that country the economy is considered hyperinflationary and therefore, for the
purposes of conversion, the rules of IAS 21 are applied.
• 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 proceeds
and payments are translated at the rate on the dates of the transactions). Proceeds and payments for subsidiary located in Argentina shown on
the statements of cash flows are translated at the exchange rates prevailing at the reporting date.
• 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 yearend exchange rates. Exchange differences arising are recognized in other
comprehensive income/(loss).
F - 11
Table of Contents
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 hedges 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 casebycase 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”.
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.
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 ten years. Maintenance cost of software is expensed as incurred.
F - 12
Table of Contents
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.
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.
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.
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Table of Contents
The useful lives generally used by the Atento Group are as follow:
Years of useful life
Buildings
Plant and machinery
Furniture, tools
Other tangible assets
h) Impairment of noncurrent assets
5 - 40
3 - 6
1 - 10
5 - 8
The Atento Group assesses as of each reporting date whether there is an indicator that a noncurrent 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 pretax 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 if 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.
i) Financial assets and liabilities
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), and fair value through profit or loss.
The Atento Group has classified all of its financial assets as amortized cost, 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.
2.
The rights to receive cash flow from the asset have expired.
The Atento Group has assumed an obligation to pay the cash flow received from the asset to a third party or
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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.
Amortized cost financial assets include fixedmaturity 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 noncurrent
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, 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 noncurrent 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.
Financial liabilities
Debt with third parties (Loans and Borrowings)
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 noncurrent 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 noncurrent
liabilities.
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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 and net investment 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.
l) Treasury shares
Own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is
recognized in profit or loss on the purchase, sale, issue or cancellation of the Atento Group’s own equity instruments. Any difference
between the carrying amount and the consideration, if reissued, is recognized in the share premium.
m) 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.
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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 pretax 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.
n) Employee benefit
Sharebased payments
Atento S.A. has a sharebased 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 six types
of restricted stock units (“RSUs”) have been granted to selected employees, being two on December 3, 2014, two on July 1, 2016 one on July
3, 2017 and one on July 2, 2018.
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 nonmarket 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 nonvesting 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.
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 cashsettled 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.
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o) 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.
p) Revenue and Expenses
Revenue and Expenses are recognized in the statements of operations an accrual basis, regardless of when actual payment or
collection occurs.
The Atento Group’s incorporation, startup 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.
q) 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.
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r) 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.
s) 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.
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:
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 cashgenerating 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 fiveyear
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
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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.
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 exchange
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.
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t) 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, 2018 are as follow:
Name
Registered address
Line of business
% interest
Holding company
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
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Buenos Aires
(Argentina)
Madrid (Spain)
Madrid (Spain)
Madrid (Spain)
Holding company
Holding company
Holding company
Holding company
Operation of call
centers
Holding company
Holding company
Holding company
Atento Spain Holdco 2. S.A.U
Madrid (Spain)
Holding company
Atento Teleservicios España. S.A.U
Madrid (Spain)
Atento Servicios Técnicos y Consultoría
S.A.U
Madrid (Spain)
Atento Impulsa. S.A.U
Barcelona (Spain)
Atento Servicios Auxiliares de Contact
Center. S.A.U
Madrid (Spain)
Atento B V
Teleatento del Perú. S.A.C
Amsterdam
(Netherlands)
Lima (Peru)
Operation of call
centers
Execution of
technological projects
and services, and
consultancy services
Management of
specialized
employment centers
for disabled workers
Execution of
technological projects
and services, and
consultancy services
100
100
100
100
90
10
100
100
100
100
100
100
100
100
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.
Atento Teleservicios España S.A.U.
Atento Teleservicios España S.A.U.
Atento Teleservicios España. S.A.U.
Holding company
100
Atento Spain Holdco 2. S.A.U.
Operation of call
centers
83.3333
(Class A)
16.6667
(Class B)
Atento B.V.
Atento Holding Chile. S.A.
Woknal. S.A.
Montevideo (Uruguay)
Operation of call
centers
100
Atento B.V.
Atento Colombia. S.A.
Bogotá DC (Colombia)
94.97871
0.00424
0.00854
5.00427
0.00424
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.
Operation of call
centers
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Atento Holding Chile. S.A.
Atento Chile. S.A.
Atento Educación Limitada
Santiago de Chile
(Chile)
Holding company
Santiago de Chile
(Chile)
Operation of call
centers
Santiago de Chile
(Chile)
Operation of call
centers
Atento Centro de Formación Técnica
Limitada
Santiago de Chile
(Chile)
Operation of call
centers
99.9999
0.0001
99.99
0.01
99
1
99
1
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 4. S.A.U
Madrid (Spain)
Holding company
100
Atento Spain Holdco. S.L.U.
Atento Brasil. S.A
São Paulo (Brazil)
Operation of call
centers
99.999
0.001
Atento Spain Holdco 4. S.A.U.
Atento Spain Holdco. S.L.U.
R Brasil Soluções S.A.
São Paulo (Brazil)
Operation of call
centers
Atento Spain Holdco 5. S.L.U
Madrid (Spain)
Holding company
100
Atento Spain Holdco. S.L.U.
Atento Mexico Holdco S. de R.L. de C.V.
Mexico
Holding company
99.966
0.004
Atento Spain Holdco 5. S.L.U.
Atento Spain Holdco. S.L.U.
Atento Puerto Rico. Inc.
Guaynabo (Puerto Rico)
Contact US Teleservices Inc.
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.
Mexico City (Mexico)
Operation of call
centers
Operation of call
centers
Operation of call
centers
Administrative,
professional and
consultancy services
Sale of goods and
services
Atento Centroamérica. S.A.
Guatemala (Guatemala)
Holding company
Atento de Guatemala. S.A.
Guatemala (Guatemala)
Operation of call
centers
Atento El Salvador. S.A. de C.V.
City of San Salvador (El
Salvador)
Operation of call
centers
Atento Nicaragua S.A.
Nicaragua
Atento Costa Rica S.A.
Costa Rica
Interservicer - Serviços de BPO Ltda
São Paulo (Brasil)
Interfile Serviços de BPO Ltda.
São Paulo (Brasil)
Nova Interfile Holding Ltda.
São Paulo (Brasil)
Operation of call
centers
Operation of call
centers
Operation of call
centers
Operation of call
centers
Holding company
100
100
100
99.998
0.002
99.998
0.002
99.9999
0.0001
99.99999
0.00001
7.4054
92.5946
4.35
95.65
99.999
0.0001
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.
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.
50.00002
Nova Interfile e Holding Ltda.
50.00002
Nova Interfile e Holding Ltda.
100
Atento Brasil. S.A.
At December 31, 2016, 2017 and 2018, 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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u) New and amended standards adopted by the Group
The Atento Group applied IFRS 15 and IFRS 9 for the first time in 2018. The nature and effect of the changes as a result of adoption
of these new accounting standards are described below. The adoption of these amendments did not have any material impact on the current
period or any prior period.
Several other amendments and interpretations apply for the first time in 2018, but did not have an impact on the consolidated financial
statements of the Atento Group. The Atento Group has not early adopted any standards, interpretations or amendments that have been issued
but are not yet effective.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies, with limited
exceptions, to all revenue arising from contracts with its customers. IFRS 15 establishes a five-step model to account for revenue arising
from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects
to be entitled in exchange for transferring goods or services to a customer.
IFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying
each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a
contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.
The Atento Group adopted IFRS 15 using the modified retrospective approach for initial adoption. The Company and its subsidiaries
did not have any initial impact through the adoption of IFRS 15.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on
or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement;
impairment; and hedge accounting.
The Atento Group has applied IFRS 9 prospectively, with the initial application date of January 1, 2018.
F - 23
Table of Contents
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.
The Company also had 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 (Fair Value Through Profit or Loss) as per IFRS 9.
Accordingly, the Atento Group did not have any impact on the classification and measurement of its financial assets.
Financial liabilities
There is 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
option for the acquisition of non-controlling interest and 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 have 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, loan
commitments and certain financial guarantee contracts. Management did not have any significant increase in the credit losses.
v) Standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s
financial statements are disclosed below. The Group intends to adopt these new and amended standards and interpretations, if applicable,
when they become effective.
Title of standard
IFRS 16 Leases
Nature of change
Impact
Mandatory application
date/ Date of adoption by
group
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.
The standard will affect primarily the accounting for the group’s operating leases.
As at the reporting date, lease commitments that the group expects to recognize as right-of-use assets
amount to approximately 184,099 thousand U.S. dollars on January 1, 2019, and lease liabilities in the
same amount.
The consolidated statement of operations will be impacted by a decrease of-operating expenses and an
increase of the amortization of the right-of-use assets and interest on the lease liability.
Atento activities as a lessor are not material and hence the group does not expect any significant impact on
the financial statements including no impacts in the loan’s covenants.
Atento will apply the standard from its mandatory adoption date of 1 January 2019. The group intends to
apply the simplified transition approach and will not restate comparative amounts for the year prior to first
adoption. Right-of-use assets for property leases will be measured on transition as if the new rules had
always been applied. All other right-of-use assets will be measured at the amount of the lease liability on
adoption
F - 24
Table of Contents
Title of standard
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment
Key requirements
Mandatory application
date/ Date of adoption by
group
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;
• How an entity considers changes in facts and circumstances.
Atento reviewed the tax treatment under the terms of IFRIC 23 in all subsidiaries and as at the reporting
date, the group did not identify any material impact on the financial statements.
Atento implemented a process for periodically review the income tax treatments consistent under IFRIC 23
requirements across the group.
Atento will apply the standard from its mandatory adoption date of 1 January 2019.
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.
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.
F - 25
Table of Contents
a) Market risk
Interest rate risk in respect of cash flow and fair value
Interest 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 noncurrent liabilities that
bear interest at fixed rates.
Atento Group’s finance costs are exposed to fluctuations in interest rates. At December 31, 2018, 7.4% of financial debt with third
parties bore interests at variable rates, while at December 31, 2017. this amount was 12.8%. In both 2017 and 2018, the exposure was to the
Brazilian CDI rate and the TJLP (Brazilian Long Term Interest Rate).
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 floatingrate 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
a derivative liability of $1.2 million, which was recorded as a financial liability. As of December 31, 2018, there were no outstanding interest
rate hedging instruments related to the Brazilian Debentures.
Foreign currency risk
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 Countries.
The main source of our foreign currency risk is related to the Senior Secured Notes due 2022 denominated in U.S. dollars. Upon
issuance of the Notes, we entered into cross-currency swaps pursuant to which we exchange an amount of U.S. dollars for a fixed amount of
Euro, Mexican Pesos, Peruvian Soles and Brazilian Reais. The total amount of interest (coupon) payments are covered (until maturity date)
and also a portion of the principal (until January 2020).
As of December 31, 2018, the estimated fair value of the cross-currency swaps totalled an net asset of $10.6 million (asset of $3.0
million as of December 31, 2017).
The table below shows the impact of a +/10 basis points variation in the exchange rate on the value of the cross-currency swaps.
Thousands of U.S. dollars
CROSS-CURRENCY
FAIR VALUE
0.10%
-0.10%
2018
10,630
(3,522)
862
F - 26
Table of Contents
2016
Financial assets(*)
Financial liabilities(*)
Sensitivity analysis
Functional currency -
financial asset/liability
currency
Functional
currency
(thousands)
Asset
currency
(thousands)
U.S. Dollar
(thousands)
Functional
currency
(thousands)
Liability
currency
(thousands)
U.S. Dollar
(thousands)
244
817,344
25 2
64
3,515
212
6
6
2,442
590,271
2,848
241
3,705
-
-
2
325
197
272
281
72
3,705
-
-
2
325
197
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,484
6,998
6,998
5,138
1,531
1,531
10%
11,068
10,500
11,068
79
292
1,627
-
79
-
-
-
-
-
-
-
-
-
-
10%
18.6
10%
0.0
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.
2017
Financial assets(*)
Financial liabilities(*)
Sensitivity analysis
Functional currency -
financial asset/liability
currency
Functional
currency
(thousands)
Asset
currency
(thousands)
U.S. Dollar
(thousands)
Functional
currency
(thousands)
Liability
currency
(thousands)
U.S. Dollar
(thousands)
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)
253
527
37
2,999
7,982
970
27
82
610,695
904,880
5,915
144
3,597
13
-
8
11
205
303
632
44
3,597
13
49
8
11
205
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,358
8,123
8,123
5,822
1,794
1,794
10%
8
10
132,016
6
202
179
8
10
215
-
-
-
-
-
-
-
-
-
10%
17.7
10%
0.0
146,423
281
586
41
3,332
8,875
-
30
91
678,550
29,287
9
11
34
70
5
400
1
(49)
1
1
23
903
1
1
20
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,469
(199)
-
-
-
-
-
-
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
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
Appreciation
of
asset/liability
currency vs
functional
currency
10% 2,846.7
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
9.6
3.2
0.9
0.0
0.0
0.3
0.1
0.0
0.3
0.9
3.5
1.1
0.0
0.0
0.3
0.1
0.0
0.3
0.8
Appreciation
of
asset/liability
currency vs
functional
currency
10% 3,220.8
10%
10.1
(*) 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 - 27
Table of Contents
2018
Financial assets(*)
Financial liabilities(*)
Sensitivity analysis
Functional currency -
financial asset/liability
currency
Functional
currency
(thousands)
Asset
currency
(thousands)
U.S. Dollar
(thousands)
Functional
currency
(thousands)
Liability
currency
(thousands)
U.S. Dollar
(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
Chilean Pesos –
Euro
-
668
-
1,417
36,744
27,719
16
2,094
546,644
-
7,031
-
1,622
53
1,411
4
271
168
-
764
-
1,622
53
1,411
4
271
168
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,221
3,321
3,321
3,536
1,046
1,046
10%
15
1
70
13
26
-
15
1
-
-
-
-
-
-
-
-
-
-
10%
18.0
10%
0.0
Appreciation
of
asset/liability
currency vs
functional
currency
10% 3,349.0
10%
10.0
10%
10%
10%
10%
10%
10%
10%
10%
3.0
1.0
0.0
0.0
0.0
0.0
0.0
0.0
1.0
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)
-
713
-
1,574
40,827
30,799
17
2,327
607,382
12,468
17
1
81
-
52
-
180
6
157
-
30
19
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
369
3,929
(116)
2
-
-
-
-
-
-
-
-
(*) 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 - 28
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 riskreward 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. The Atento
Group holds no guarantees as collection insurance.
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.
F - 29
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, 2017 and 2018 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
5) BUSINESS COMBINATIONS
a) RBrasil Soluções S.A.
Thousands of U.S. dollars
2017
398,346
21,055
56,392
10,498
(141,762)
344,529
2018
400,035
14,708
39,498
5,527
(133,526)
326,242
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).
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:
F - 30
Table of Contents
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
Thousands of U.S.
dollars
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.
From the acquisition date to December 31, 2016, 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.
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.
F - 31
Table of Contents
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 thousand Brazilian Reais (1,057 thousand US 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 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 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.
The fair value in U.S dollars of identifiable assets acquired and liabilities assumed of Interfile and Interservice on the date of
acquisition is as follows:
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
F - 32
Table of Contents
(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 to December 31, 2017, 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.
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.
F - 33
Table of Contents
On the basis of the above, the Company recognized a financial liability related to the potential acquisition of non-controlling interest
of 74,401 thousand Brazilian Reais (22,474 thousand US 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, 2017 and 2018 and respective changes in the year:
Thousands of U.S. dollars
Balance
at
December
31, 2016
Additions
Acquisitions
from
business
combination
(Note 5)
Disposals
Transfers
Translation
differences
Hyperinflation
Adjustments
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
3,907
264,157
138,050
44,839
2,823
1,513
2,552
12,463
18,960
-
-
14,931
1,468
57
-
(7)
(9)
(3,085)
(533)
(259)
453,776
35,488
16,456
(3,893)
(475)
(235)
(105,296)
(68,138)
(31,807)
(25,222)
(24,669)
(5,069)
(205,716)
(55,195)
(21,507)
-
-
-
-
-
-
-
7
-
147
373
527
-
226,553
(19,707)
16,456
(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
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance
at
December
31, 2017
4,696
291,898
158,035
65,253
462
520,344
(691)
(133,658)
(93,905)
(37,517)
(265,771)
(24,469)
230,104
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Table of Contents
Balance
at
December
31, 2017
4,696
291,898
158,035
65,253
462
520,344
(691)
(133,658)
Cost
Development
Customer base
Software
Other intangible assets
Work in progress
Total cost
Accumulated amortization
Development
Customer base
Software
(93,905)
(37,517)
Other intangible assets
Total accumulated amortization (265,771)
(24,469)
Impairment
Net intangible assets
230,104
Additions
2,081
-
53,035
6,091
927
62,134
(181)
(23,423)
(28,992)
(6,085)
(58,681)
(626)
2,827
Thousands of U.S. dollars
Acquisitions
from
business
combination
(Note 5)
Disposals
Transfers
Translation
differences
Hyperinflation
Adjustments
Balance
at
December
31, 2018
5,090
262,927
194,966
69,060
1,089
(1,341)
(38,285)
(22,973)
431
9,725
2,363
(733)
(300)
276
-
(63,632)
12,795
533,132
727
18,461
10,269
2,998
32,455
1,104
(516)
(4,820)
(1,265)
(708)
(7,309)
-
5,486
(647)
(143,290)
(113,845)
(40,159)
(297,941)
(23,991)
211,202
(777)
(411)
(676)
(1,007)
-
(2,871)
14
150
48
1,153
1,365
-
-
-
5,182
(820)
-
4,362
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,506)
4,362
(30,073)
“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 2018, the fair value assigned to commercial relationships with Telefónica at the acquisition date amounts
to 247,744 thousand U.S. dollars, while the remaining amount relates to other customers.
In terms of geographic distribution, the customer base corresponds to businesses in Brazil (112,632 thousand U.S. dollars), Spain
(49,910 thousand U.S. dollars) net of impairment, Mexico (48,202 thousand U.S. dollars), Peru (15,648 thousand U.S. dollars), Colombia
(3,106 thousand U.S. dollars), Chile (8,940 thousand U.S. dollars) and Argentina and Uruguay (4,033 thousand U.S. dollars).
In 2018, the additions are mainly related to acquisition by Atento of the rights to software’s use of $38,500 thousand US dollars and
development of software’s Visibility and Control, Digital Voice & Operations Systems in Atento Brasil in the amount of 4,600 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 2018, was recognized the impairment of 626 thousand US dollars relating to other intangible assets in Spain.
F - 35
Table of Contents
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.
The breakdown and changes in goodwill in 2017 and 2018 are as follow:
Peru
Chile
Colombia
Mexico
(*)
Brazil
Argentina
Total
12/31/2016 Acquisitions Hyperinflation
Translation
differences
12/31/2017 Acquisitions Hyperinflation
Translation
differences
12/31/2018
Thousands of U.S. dollars
29,268.0
17,314.0
6,249.0
1,758.0
72,439
18,988
146,015
-
-
-
-
8,400
-
8,400
-
-
-
-
-
-
-
1,001
1,466
35
84
(1,049)
(2,809)
30,269
18,780
6,284
1,842
79,790
16,179
(1,272)
153,144
-
-
-
-
-
-
-
-
-
-
-
-
25,577
25,577
(1,200)
(2,172)
(514)
2
(11,672)
(8,176)
29,069
16,608
5,770
1,844
68,118
33,580
(23,732)
154,989
(*) As of December 31, 2018 the total amount of goodwill is composed by 12.796 thousand U.S. dollars from the acquisition of RBrasil, 7.097 thousand U.S. dollars from the
acquisition of Interfile and 48.225 thousand allocated to Atento Brasil from the acquisition of CRM Business from Telefonica in 2012.
8) IMPAIRMENT OF ASSETS
As of December 31, 2018, 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 cashgenerating 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, 2017 and 2018, the tests conducted did not identify 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.
F - 36
Table of Contents
The pre-tax discount rates, which factor in country and business risks, and the projected growth rates were as follow:
Discount rate
December 2017
December 2018
December 2017
December 2018
Brazil
12.74%
14.10%
Mexico
Colombia
Peru
Chile
12.09%
14.07%
12.48%
12.46%
11.54%
9.75%
11.35%
10.49%
Argentina
30.25%
53.04%
Growth rate
Brazil
Mexico
Colombia
Peru
Chile
3.85%
3.70%
4.00%
3.00%
3.40%
3.30%
2.50%
1.40%
2.40%
2.50%
Argentina
19.30%
34.20%
The recoverable amounts per country were as follow:
Thousand U.S. dollars
Recoverable amounts
December 2017
December 2018
Brazil (*)
879,303
763,449
Mexico
25,400
47,732
Colombia
59,643
74,267
Peru
226,881
389,208
Chile
60,607
98,318
Argentina
90,143
78,276
(*) The total recoverable amount of 2017 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. For 2018 the total recoverable amount is composed
by 37,429 thousand U.S. dollars from the acquisition of RBrasil, 77,126 thousand U.S. dollars from the acquisition of Interfile and 648,894
thousand from Atento Brasil.
In the event of a 1% 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.
F - 37
Table of Contents
9) PROPERTY, PLANT AND EQUIPMENT (PP&E)
Details of property, plant and equipment at December 31, 2017 and 2018 are as follow:
Cost
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, 2017
11,443
8,659
-
55
329,058
15,154
19,008
368,168
12,542
27,751
(3,878)
(396)
(5,687)
(1,010)
(206,408)
(35,160)
(215,973)
(36,566)
152,195
(8,815)
Cost
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
Thousands of U.S. dollars
Balance at
December
31, 2016
Additions
Acquisitions
from
business
combination
Disposals
Transfers
Translation
differences
Balance at
December
31, 2017
9,792
6,843
317,228
9,264
343,127
272
211
27,800
21,893
50,176
(3,232)
(4,068)
(839)
(1,049)
(170,557)
(47,338)
(177,857)
(49,226)
-
575
2,053
-
2,628
-
-
-
-
-
-
(32,300)
(10,637)
(42,937)
653
13
17,827
18,493
165,270
950
2,628
(24,444)
Thousands of U.S. dollars
-
437
3,117
(3,554)
-
-
-
-
-
-
1,379
593
11,160
2,042
15,174
11,443
8,659
329,058
19,008
368,168
(460)
(583)
(3,878)
(5,687)
(6,340)
(206,408)
(7,383)
(215,973)
7,791
152,195
Acquisitions
from
business
Additions
combination Disposals
Transfers
Translation
differences
Hyperinflation
Adjustments
Balance
at
December
31, 2018
-
-
-
-
-
-
-
-
-
-
(1)
(59)
-
-
(514)
(468)
(18,204)
952
(32,412)
(963)
(19,227)
(5,314)
(4,362)
(2,853)
(36,247)
-
-
18,749
18,749
-
-
-
-
316
365
20,232
20,913
1,201
12,129
-
-
-
1,201
8,187
294,548
22,420
337,284
(467)
(4,425)
-
-
(6,332)
(202,587)
(467)
(213,344)
(478)
(4,362)
(15,334)
734
123,940
F - 38
Table of Contents
Additions for the year 2018 mainly represent the construction of a new site in Puerto Rico in the amount of $6.600 thousand of US
dollars, the construction of new sites in Mexico (Azafran and Centro Histórico), remodeling of existing sites and equipment’s in the amount
of $7,400 thousand of US dollars, and implementation of a new site, remodeling of existing ones and equipment’s in the amount in Atento
Brasil in the amount of $5,600 thousand of US dollars
No impairment was recognized on items of property, plant and equipment in 2017 and 2018.
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, 2017 and 2018.
10) LEASES AND SIMILAR ARRANGEMENTS
a) Finance leases
The Atento Group holds the following assets under finance leases:
Finance leases
Furniture, tools and other tangible assets
Plant and machinery
Total
Thousands of U.S. dollars
Net carrying amount of asset
2017
2018
6,619
1,847
8,466
4,815
983
5,798
On April 25, 2017, Atento Brasil S.A. entered in a sale leaseback agreement with HP Financial Services Arrendamento Mercantil S.A.
in an amount of 23,615 thousand Brazilian Reais, equivalent to 6,094 thousand U.S. dollars as of December 31, 2018, which will be repaid in
36 monthly installments.
On July 24, 2017, Atento Brasil S.A. entered in a new sale leaseback agreement with HP Financial Services Arrendamento Mercantil
S.A. in an amount of 4,220 thousand Brazilian Reais, equivalent to 1,089 thousand U.S. dollars as of December 31, 2018, which will be
repaid in 60 monthly installments.
On August 24, 2017, Atento Brasil S.A. entered in a new sale leaseback agreement with HP Financial Services Arrendamento
Mercantil S.A. in an amount of 4,570 thousand Brazilian Reais, equivalent to 1,179 thousand U.S. dollars as of December 31, 2018, 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
F - 39
Thousands of U.S. dollars
2017
2018
4,260
6,238
10,498
3,158
2,369
5,527
Table of Contents
11) FINANCIAL ASSETS
As of December 31, 2017 and 2018 all the financial assets of the Company are classified as amortized cost, 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, 2018, 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 259,258 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.
12) OTHER FINANCIAL ASSETS
Details of other financial assets at December 31, 2017 and 2018 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
2017
2018
11,125
49,097
60,222
805
1,005
1,810
62,032
13,232
51,838
65,070
272
619
891
65,961
(*) “Other non-current receivables” as of December 31, 2017 and 2018 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.
F - 40
Table of Contents
13) TRADE AND OTHER RECEIVABLES
The breakdown of “Trade and other receivables” at December 31, 2017 and 2018 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
2017
2018
6,923
14,754
21,677
358,311
13,225
7,849
9,180
388,565
410,242
6,430
12,718
19,148
279,926
8,439
18,332
8,957
315,654
334,802
(*) "Other non-financial assets" as of December 31, 2018 primarily comprise the litigation underwaytax credits 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
Thousands of U.S. dollars
2017
2018
371,333
(6,099)
365,234
288,531
(2,175)
286,356
As of December 31, 2018, trade receivables not yet due for which no provision has been made amounted to 263,605 thousand U.S.
dollars (338,350thousand U.S. dollars as of December 31, 2017).
As of December 31, 2018, trade receivables due for which no provision has been made amounted to 22,751 thousand U.S. dollars
(26,884 thousand U.S. dollars as of December 31, 2017). 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
12/31/2017
12/31/2018
20,268
14,704
1,476
1,026
1,734
2,691
3,406
4,330
Total
26,884
22,751
F - 41
Table of Contents
Changes in allowances of trade receivables in 2017 and 2018 were as follow:
Opening balance
Allowance of trade receivables
Reversal
Write off
Translation differences
Total
Thousands of U.S. dollars
2017
2018
(4,279)
(3,061)
553
-
688
(6,099)
(6,099)
(1,854)
824
3,031
1,923
(2,175)
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, 2017 and 2018 are as follow:
Interest rate swaps - cash flow hedges
Cross currency swaps - net investment hedges
Cross currency swaps - that do not meet the criteria for hedge
accounting
Total
Non-current portion
Current portion
Thousands of U.S. dollars
2017
2018
Assets
Liabilities
Assets
Liabilities
-
7,429
748
8,177
8,177
-
(1,212)
(5,140)
-
-
11,313
-
(6,352)
11,313
(5,140)
(1,212)
11,313
-
-
-
(682)
(682)
(682)
-
Derivatives held for trading are classified as current assets or current liabilities. The fair value of a hedging derivative is classified as a
noncurrent asset or a noncurrent 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 the statement of operations.
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.
F - 42
Table of Contents
On March 5, 2018, Atento Brasil S.A. entered into a cross-currency swap to hedge a USD loan of 10,092 thousand U.S. dollars at a
fixed rate of 3.40% exchanged to a 33,000 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 2.10% per annum.
At December 31, 2017 and 2018, details of interest rate swap, cross-currency swaps that do not qualify for hedge accounting and net
investment hedges were as follows:
2017
Interest Rate Swap
Bank
Maturity
Notional
currency
Index
Itau
Dec-18 BRL
BRL
CDI
Notional in
contract
currency
(thousands)
Fair
value
liability
D/(C)
Other
comprehensive
income, net of
taxes
D/(C)
Change
in
OCI,
net of
taxes
D/(C)
Statements
of
operations
- Finance
cost
D/(C)
Statements
of
operations
- Change
in fair
value
D/(C)
135,000
(1,212)
(1,212)
-
-
(781)
(781)
954
954
-
-
Cross Currency Swaps - that do not qualify for hedge accounting
Bank
Maturity
Purchase
currency
Selling
currency
Notional
(thousands)
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)
Statements
of
operations
- Change
in fair
value
D/(C)
ABC Brasil S.A.
Nov-17 USD
BRL
12,232
-
Goldman Sachs
Aug-22 BRL
USD
754,440
748
748
-
-
-
-
-
-
(1,863)
-
-
(1,863)
(748)
(748)
Net Investment Hedges
Bank
Maturity
Purchase
currency
Selling
currency
Notional
(thousands)
Fair
value
asset/
(liability)
D/(C)
Other
comprehensive
income
D/(C)
Nomura International
Goldman Sachs
Goldman Sachs
Santander
Santander
Goldman Sachs
Goldman Sachs
Nomura International
Nomura International
Goldman Sachs
BBVA
Goldman Sachs
BBVA
Total
22-Aug EUR
22-Aug MXN
22-Aug PEN
20-Jan USD
20-Jan USD
20-Jan USD
20-Jan USD
20-Jan USD
20-Jan USD
18-Jan USD
18-Jan USD
18-Jan USD
18-Jan 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
Derivative financial instrument-asset
Derivative financial instrument-liability
(382)
7,256
(4,758)
-
-
-
-
-
-
84
-
89
-
2,289
1,825
8,177
(6,352)
Change
in
OCI
D/(C)
(382)
7,256
(4,758)
(2,522)
(2,411)
(5,452)
(8,671)
(5,358)
(2,476)
(59)
(229)
(19)
(65)
(25,146)
Income
statement -
Finance
Cost
D/(C)
Income
statement -
Change in
fair value
D/(C)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
88
21
217
(47)
105
99
6
23
(1)
7
518
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)
(25,927)
(909)
(230)
F - 43
Table of Contents
2018
Interest Rate Swap
Bank
Maturity
Notional
currency
Index
Notional in
contract
currency
(thousands)
Itau
Dec-18 BRL
BRL
CDI
135,000
Fair
value
assets
D/(C)
Fair
value
liability
D/(C)
-
-
-
-
Other
comprehensive
income, net of
taxes
D/(C)
Change in
OCI, net of
taxes
D/(C)
Statements
of
operations
- Finance
cost
D/(C)
-
-
-
-
972
972
Cross Currency Swaps - that do not qualify for hedge accounting
Bank
Maturity
Purchase
currency
Selling
currency
Notional
(thousands)
Goldman Sachs
Aug-22
BRL
USD
754,440
Fair
value
assets
D/(C)
6,020
6,020
Fair
value
liability
D/(C)
-
-
Other
comprehensive
income
D/(C)
Change in
OCI, net of
taxes
D/(C)
Statements
of
operations
- Finance
cost
D/(C)
-
-
-
-
(4,302)
(4,302)
Cross-currency swap- Net Investment Hedges
Bank
Maturity
Purchase
currency
Selling
currency
Notional
(thousands)
Nomura International
Goldman Sachs
Goldman Sachs
Santander
Santander
22-Aug EUR
22-Aug MXN
22-Aug PEN
20-Jan USD
USD
USD
USD
EUR
20-Jan USD
MXN
Goldman Sachs
20-Jan USD
EUR
Goldman Sachs
20-Jan USD
MXN
Nomura International
20-Jan USD
MXN
Nomura International
Goldman Sachs
Goldman Sachs
20-Jan USD
18-Jan USD
18-Jan USD
EUR
PEN
COP
BBVA
BBVA
Total
18-Jan USD
PEN
18-Jan USD
COP
Derivative financial instrument-asset
Derivative financial instrument-liability
Fair
value
assets
D/(C)
189
6,025
-
Fair
value
liability
D/(C)
-
(922)
(682)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,214
12,234
-
(1,604)
(1,604)
Other
comprehensive
income
D/(C)
Change in
OCI
D/(C)
Income
statement -
Finance
Cost
D/(C)
(257)
(3,094)
2,413
1,742
(2,113)
3,587
(7,600)
(4,357)
1,620
22
(80)
71
(359)
(8,405)
(8,405)
640
(4,163)
2,333
-
-
-
-
-
-
-
-
-
-
(1,190)
(1,190)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,330)
34,109
1,065,060
194,460
20,000
11,111
48,000
40,000
23,889
22,000
13,800
7,200
55,200
28,800
11,313
(682)
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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
2017
2018
111,495
30,267
141,762
100,706
32,820
133,526
“Short-term financial investments” comprises short-term fixedincome securities in Brazil, which mature in less than 90 days and
accrue interest pegged to the CDI.
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Table of Contents
16) FINANCIAL LIABILITIES
As of December 31, 2017 and 2018 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, 2017 and 2018,
including estimated future interest payments, calculated based on interest rates and foreign exchange rates applicable as at December 31,
2017 and 2018 are as follow:
Thousands of U.S. dollars
Maturity (years)
2017
2018
2019
2020
2021
2022
More than
5 years
Total
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
24,500
5,276
1,907
4,373
-
36,056
24,500
4,901
887
558
-
424,500
4,458
442
438
-
-
2,026
-
-
-
30,846
429,838
2,026
522,500
28,170
12,625
60,588
216,626
840,509
Thousands of U.S. dollars
Maturity (years)
2018
2019
2020
2021
2022
2023
More than
5 years
Total
Senior Secured Notes
Brazilian bonds—Debentures
Finance leases
Bank borrowings
Trade and other payables
Total financial liabilities
24,500
4,698
3,785
36,176
184,886
254,045
24,500
4,378
1,691
3,726
14,391
48,686
24,500
4,091
794
474
-
424,500
3,759
384
372
-
-
1,721
-
-
-
29,859
429,015
1,721
-
-
-
-
-
-
498,000
18,647
6,654
40,748
199,277
763,326
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Table of Contents
17) FINANCIAL DEBT WITH THIRD PARTIES
Details of debt with third parties at December 31, 2017 and 2018 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
2017
2018
388,818
16,797
27,878
6,238
439,731
9,528
4,258
28,514
4,260
46,560
486,291
390,507
11,163
4,387
2,369
408,426
9,528
3,545
35,111
3,158
51,342
459,768
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, 2018, we were in compliance with these covenants. The outstanding amount on December 31, 2018 is 400,035 thousand U.S.
dollars.
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All interest payments are made on a half yearly basis.
The fair value of the Senior Secured Notes, calculated on the basis of their quoted price at December 31, 2018, is 379,233 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:
Maturity
Currency
Principal
2017
Accrued
interests
Thousands of U.S. dollars
Total debt
Principal
2018
Accrued
interests
Total debt
2022
U.S. dollar
388,818
9,528
398,346
390,507
9,528
400,035
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 extra-
group”—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 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, 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, 2018 is $14,708 thousand.
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Table of Contents
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, 2018, Atento Brasil S.A. was in compliance with this covenant.
Details of the corresponding debt at each reporting date are as follow:
Maturity
Currency
Principal
2017
Accrued
interests
Thousands of U.S. dollars
Total debt
Principal
2018
Accrued
interests
Total debt
2023
Brazilian Reais
16,797
4,258
21,055
11,163
3,545
14,708
The fair value as of December 31, 2018 calculated based on discounted cash flow is 15,643 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 77,413 thousand U.S. dollars as of December 31, 2018.
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:
F - 49
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
6,540 -
2,718 -
-
-
16,154 -
25,412
4,738 -
9,477 -
7,452 -
21,667
-
-
47,079
-
3,229 -
1,359 -
-
-
1,764 -
6,352
1,185 -
2,369 -
1,857 -
5,411
-
-
11,763
-
4,520 -
1,903 -
-
-
2,594 -
9,017
1,682 -
3,363 -
-
-
5,045
-
-
14,062
-
323 -
136 -
-
-
279 -
738
138 -
275 -
-
-
413
-
-
1,151
-
-
-
155
-
155
-
-
181
181
197
197
533
14,612
6,116
155
20,791
41,674
7,743
15,484
9,490
32,717
197
197
74,588
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, 2018, 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 preapproval 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 bylaws 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 5,703 thousand U.S. dollars as of December 31, 2018. 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 was 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.
As of December 31, 2018, the outstanding amount under BNDES Credit Facility was 23,974 thousand U.S. dollars.
The fair value as of December 31, 2018 calculated based on discounted cash flow is 24,254 thousand U.S. dollars.
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
$20.6 million as of December 31, 2018. 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 September
3, 2018 and the aggregate principal amount was modified to 75.0 million Brazilian Reais. On October 11, 2018, the maturity was extended
until April 11, 2019 and the aggregate principal amount was modified to 100.0 million Brazilian Reais, equivalent to approximately $25.8
million as of December 31, 2018. As of December 31, 2018, there was no outstanding balance under the 2017 Santander Bank Credit
Certificate.
As of December 31, 2018, there was no outstanding balance under the 2017 Santander Bank Credit Certificate.
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Table of Contents
On March 5, 2018, Atento Brasil S.A. entered into an agreement with Banco ABC Brasil for an amount of 10,092 thousand U.S.
dollars maturing on September 3, 2018 with an annual interest rate of 3.40%. 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 2.10% over 33,000 thousand Brazilian Reais. As of
December 31, 2018, the outstanding balance was zero.
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, 2018, we were in compliance with this covenant and no amounts
were released under the Super Senior Revolving Credit Facility.
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 $20.0 million of commitments are available for the drawing of cash loans in Euro and Mexican Pesos (MXN). The original
borrowers under this facility are 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, 2018, the outstanding amount under this facility was zero.
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Table of Contents
a) Financing activities
See below the changes in debt with third parties arising from financing activities:
Cash flows from/(used in
financing activities)
2016
December
31, 2015
New
borrowing Amortization
New
leases
Interest
accrued
Interest
paid (*)
Fair value
adjustment
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
Cash flows from/(used in
financing activities)
2017
December
31, 2016
New
borrowing Amortization
New
leases
Interest
accrued
Interest
paid (*)
Fair value
adjustment
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
Cash flows from/(used in
financing activities)
2018
December
31, 2017
New
borrowing Amortization
New
leases
Interest
accrued
Interest
paid (*)
Fair value
adjustment
Foreign
exchange
losses
Amortization
(addition)
fees
Translation
differences
Other
December
31, 2018
Thousands of U.S. dollars
Senior Secured Notes
Brazilian Debentures
Finance Lease Payables
Other borrowings
Total
398,346
21,055
10,498
-
-
-
56,392
58,462
486,291
58,462
-
(3,543)
(4,221)
(73,911)
(81,675)
-
-
-
-
-
24,500
(24,500)
1,809
(1,920)
856
(856)
3,491
(6,283)
30,656
(33,559)
-
-
-
-
-
-
-
-
-
-
2,245
(556)
(118)
(2,568)
-
-
(770)
1,339
2,127
(2,555)
-
-
-
-
-
400,035
14,715
5,507
39,490
459,747
(*) For the purposes of the statements of cash flows, it is classified as "interest paid" in operting activities.
F - 52
Table of Contents
18) TRADE AND OTHER NON-TRADE PAYABLES
Details of trade and other payables at December 31, 2017 and 2018 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
2017
2018
7,750
344
8,094
92,216
1,862
94,078
15,598
80,631
17,787
438
114,454
208,532
216,626
13,744
647
14,391
74,616
2,296
76,912
26,003
67,644
13,526
789
107,962
184,874
199,265
The carrying amount of trade and other non-trade payables is similar to the fair value.
19) EQUITY
Share capital
As of December 31, 2018, share capital stood at 49 thousand U.S. dollars - €33,827 (48 thousand U.S. dollars - €33,304 as December
31, 2017), divided into 75,070,926 shares (73,909,056 shares in December 31, 2017). PikCo owns 64% 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, 2018 and December 31, 2017.
Dividends
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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. In 2018, this amount was restored from the Share Premium.
On December 31, 2018, the subsidiary Atento Brasil S.A distributes dividends to its minority shareholders in the amount of 1.186
thousand U.S dollars.
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, 2017 and 2018, 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).
Treasury shares
Atento S.A. repurchased 1,106,158 shares during 2018 at a cost of 8,178 thousand of US dollars and an average price of $7.39
Retained earning/losses
In 2018, the subsidiary Atento Argentina recorded an amount of 35,524 thousand of US dollars, referring to monetary correction for
the country to have become hyperinflationary balance at December 31, 2017.
Stock-based compensation
a) Description of share based 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 performance based vesting 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:
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Table of Contents
• 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 based 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;
• 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.
As of October 1, 2015, a total of 125,509 TRSUs vested and were exercised. No grant was made in 2015. 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
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 3, 2016, a total of 157,925 TRSUs vested.
On May 31 and June 2, 2017, Atento granted a new share-based payment arrangement to Board directors (a total of 29,300 RSUs) in a
one-time award with a one-year vesting period.
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
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Table of Contents
• Amount: 886,187 RSUs
• Vesting period: 100% of the RSUs vest on January 2, 2020
• There are no other vesting conditions
On April 19, 2018, Atento granted a new share-based payment arrangement to Board directors (a total of 23,232 RSUs) in a one-time
award with a one-year vesting period.
On July 2, 2018, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company
and its subsidiaries. The share-based payment had the following arrangements:
Time Restricted Stock Units (“RSUs”) (equity settled)
• Grant date: July 2, 2018
• Amount: 1,065,220 RSUs
• Vesting period: 100% of the RSUs vests on January 4, 2021
• 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 BlackScholes 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
Performance RSU
Time
RSU
Time RSU
Adj.
EBITDA
TSR 1
TSR 2
Comments
11.06
11.06
11.06
11.06
11.06 Stock price of Atento S.A. in USD at grant date
0.01
0.01
0.01
19.97
27.74 Value close to nil will be paid
December 3, 2014
Variable
Stock price
(USD)
Strike price
(USD)
Time (years)
Risk free rate
Expected
volatility
1
18.00%
4.11%
2
0.57%
4.11%
3
3
1.04% 1.04%
4.11% 4.11%
Dividend yield
2.00%
2.00%
2.00% 2.00%
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
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
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.
F - 56
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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
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
Dividend yield
0.01% Assumption is made here that no dividends will be paid out as this is not in the line of
Value RSU in USD
9.06
expectations
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
Value RSU in USD
9.07
0.01
0.25
18.00%
36.29%
0.01%
9.06
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
9.06
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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.
The 2017 Plan:
Variable
Stock price (USD)
Strike price (USD)
Time (years)
Risk free rate
Expected volatility
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
Dividend yield
0.01% Assumption is made here that no dividends will be paid out as this is not in the line of
Value RSU in USD
10.99
expectations
The Time RSU reflects the fact that 100% of the Time RSUs will vest on January 2, 2020.
The 2018 Plan:
Variable
Stock price (USD)
Strike price (USD)
Time (years)
Risk free rate
Expected volatility
Dividend yield
Value RSU in USD
Time RSU
Comments
7 Stock price of Atento S.A. in USD at grant date July 2, 2018
0.01 For valuation purposes set to 0.01
2.5 Time to vest as per the contract
2.60% USD risk free rate obtained from Bloomberg
Assumption is made to base volatility on the average volatility of main competitors because
Atento S.A. itself is listed in October 2014
Assumption is made here that no dividends will be paid out as this is not in the line of
expectations
23.05%
0.01%
6,989
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Table of Contents
c) Outstanding RSUs
As of December 31, 2018, there are 1,109,338 Time RSUs outstanding related to 2016 Grant, 815,693 Time RSUs outstanding related
to 2017 Grant and 1,060,220 Time RSUs outstanding related to 2018 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, 2017 and 2018 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 (**)
Time RSU
Time RSU
119,634
(15,880)
(103,754)
871,649
(871,649)
-
(*) RSUs are forfeited during the year due to employees failing to satisfy the service or non-market performance conditions.
(**) 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
Forfeited (*)
Outstanding December 31, 2018
(*)
RSUs are forfeited during the year due to employees failing to satisfy the service conditions.
The 2016 Extraordinary Plan
Grantes July 1, 2016
Vested (**)
Outstanding December 31, 2016
Forfeited (**)
Time RSU
1,367,896
(219,271)
1,148,625
(39,287)
1,109,338
Time RSU
82,157
(54,171)
27,986
(27,986)
(*) 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.
(**) 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
Forfeited (*)
Outstanding December 31, 2018
(*) RSUs are forfeited during the year due to employees failing to satisfy the service conditions.
The 2018 Plan
Outstanding December 31, 2018
(*) RSUs are forfeited during the year due to employees failing to satisfy the service conditions.
F - 59
Time RSU
886,187
(24,324)
861,863
(46,170)
815,693
Time RSU
1,060,220
Table of Contents
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
Time RSU
Performance RSU
Forfeited
Balance
December
31, 2016
(18,229)
(306,743)
(48,345)
(94,371)
(3,845)
(1,911)
(102,938)
(2,742)
(8,096)
(284,429)
(871,649)
-
-
-
-
-
-
-
-
-
-
-
Balance as
of
December
31, 2015
6,095
49,564
4,925
15,183
2,060
1,024
22,933
1,468
2,602
13,780
119,634
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
Forfeited
Vested
Balance
December
31, 2016
(1,099)
(13,510)
(1)
49
(2,060)
(1)
(13,192)
-
1,097
12,837
(15,880)
Forfeited
(5,458)
(13,715)
(5,870)
-
(23,271)
(798)
(35,557)
(11,176)
(125,022)
(219,271)
(4,996)
(36,054)
(4,924)
(15,232)
-
(1,023)
(9,741)
(1,468)
(3,699)
(26,617)
(103,754)
Time RSU
Balance
December
31, 2017
16,523
201,049
61,525
10,940
101,490
798
107,495
5,286
643,519
1,148,625
F - 60
-
-
-
-
-
-
-
-
-
-
-
Forfeited
14,592
(23,348)
(3,392)
-
54,063
-
(70,732)
3,392
(13,862)
(39,287)
Balance as
of
December
31, 2015
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, 2018
31,115
177,701
58,133
10,940
155,553
798
36,763
8,678
629,657
1,109,338
Table of Contents
The 2016 Extraordinary Plan
Time RSU
Country
United States
Total
The 2017 Plan
Country
Brazil
Chile
Spain
United States
Total
The 2018 Plan
Country
Argentina
Brazil
Chile
Colombia
Spain
Mexico
Peru
United States
Total
Balance as
of
December
31, 2016
-
-
Granted
Vested
Forfeited
82,157
82,157
(54,171)
(54,171)
(27,986)
(27,986)
Balance as
of
December
31, 2017
117,667
66,028
69,398
608,770
861,863
Time RSU
Forfeited
(46,170)
-
-
-
(46,170)
Balance
December
31, 2018
71,497
66,028
69,398
608,770
815,693
Time RSU
Balance
December
31, 2018
27,244
282,743
70,009
21,049
105,168
60,736
20,306
472,965
1,060,220
d) Impacts in Profit or Loss
In 2018, 6,417 thousand U.S. dollars (4,923 thousand U.S. dollars as at December 31, 2017 and 1,535 thousand U.S. dollars as at
December 31, 2016) related to stock-based compensation were recorded as employee benefit expenses.
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Table of Contents
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:
Thousands of U.S. dollars
For the year ended December 31,
2017
2018
2016(*)
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
Total income tax expense
(*) Exclude discontinued operations - Marocco.
8,564
(2,484)
(13,655)
11,526
791
(1,385)
(5,207)
(1,035)
310
(12,635)
(445)
1,112
(875)
(12,533)
33,900
(12,899)
(5,052)
540
2,297
1,700
(13,414)
Permanent differences in 2018 are mainly related to non-deductible expenses in Brazil, Spain and Mexico.
The breakdown of the Atento Group’s income tax expense is as follow:
Thousands of U.S. dollars
For the year ended December 31,
2017
2018
2016(*)
Current tax expense
Deferred tax
Total income tax expense
Exclude discontinued operations - Marocco(*)
F - 62
(22,852)
17,645
(5,207)
(20,175)
7,642
(12,533)
(23,426)
11,012
(13,414)
Table of Contents
b) Deferred tax assets and liabilities
Details of deferred tax assets and liabilities at December 31, 2017 and 2018 are as follow:
Deferred tax assets
Tax loss carryforwards
Tax credits
Deferred tax assets from temporary differences
Litigations provisions
Financial costs
Fixed Assets
Others
Total deferred tax assets
Deferred tax liabilities
Intangible assets - PPA
Others
Total deferred tax liabilities
Thousands of U.S. dollars
2017
2018
29,663
5,381
27,286
47,973
6,229
14,710
23,414
3,935
23,709
41,504
6,312
26,288
131,243
125,163
(29,663)
(14,188)
(26,376)
(3,845)
(43,851)
(30,221)
The deferred tax not recognized as of December 31, 2018 is 39,869 thousand of U.S dollars.
The temporary differences associated with investments in the Atento’s subsidiaries, for which a deferred tax liability has not been
recognized, aggregate to 3,917 thousands of U.S. dollar. Atento has determined that the undistributed profits of its subsidiaries, joint venture
or associate will not be distributed in the foreseeable future.
The breakdown and balances of deferred tax assets and deferred tax liabilities at December 31, 2017 and 2018 are as follow:
Balance at
12/31/2016
Income Statement
Equity
Increases Decreases Increases Decreases
Acquisition of
Business
Combinations
Others
(**)
Translation
differences
Balance at
12/31/2017
Thousands of U.S. dollars
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
17,881
(26,840)
(45,597)
(1,888)
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
96,282
(1,194)
(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
Balance at
12/31/2017
Income Statement
Equity
Increases Decreases Increases
Decreases
Acquisition of
Business
Combinations
Others
(**)
Translation
differences
Balance at
12/31/2018
Thousands of U.S. dollars
DEFERRED TAX ASSETS
Unused tax losses (*)
Unused tax credits
Deferred tax assets (temporary
differences)
DEFERRED TAX LIABILITIES
Deferred tax liabilities (temporary
differences)
131,326
19,324
(14,537)
29,663
5,381
2,246
310
(1,557)
(72)
96,282
16,768
(12,908)
(43,942)
(569)
6,794
(43,942)
(569)
6,794
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,950)
125,163
(6,938)
(1,684)
(2,327)
7,496
23,414
3,935
97,815
(30,221)
7,496
(30,221)
(*) 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.
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 2018 or 2017 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:
2017
Tax losses
Deductible temporary differences
Tax credits for deductions
Total deferred tax assets
Total deferred tax liabilities
2018
Tax losses
Deductible temporary differences
Tax credits for deductions
Total deferred tax assets
Total deferred tax liabilities
2018
2,431
12,578
1,266
16,275
4,436
2019
12,804
14,390
1,220
28,414
(236)
2019
4,849
14,018
1,266
20,133
4,436
2020
9,365
15,801
842
26,008
2,684
2020
5,368
14,401
1,266
21,035
4,436
2021
1,245
18,152
581
19,978
4,696
F - 64
Thousands of U.S. dollars
2021
1,800
15,065
1,266
18,131
4,436
2022
749
15,066
317
16,133
4,436
2023
2,713
8,075
-
10,788
4,436
Subsequent years
11,753
17,079
-
28,831
17,326
Total
29,663
96,282
5,381
131,326
43,942
Thousands of U.S. dollars
2022
-
24,736
401
25,137
6,082
2023
-
24,736
276
25,012
7,038
2024
-
-
191
191
7,697
Subsequent years
-
-
426
426
2,260
Total
23,414
97,815
3,935
125,164
30,221
Table of Contents
c) Taxes receivables/payables
Details of taxes receivables and payables at December 31, 2017 and 2018 are as follow:
Receivables
Non-current
Indirect taxes
Current
Indirect taxes
Other taxes
Income tax
Total
Payables
Non-current
Social security
Current
Indirect taxes
Other taxes
Income tax
Total
Thousands of U.S. dollars
As of December 31,
2017
2018
7,282
4,764
7,308
12,072
21,969
41,323
Thousands of U.S. dollars
As of December 31,
2017
2018
1,025
28,024
58,142
86,166
8,058
95,249
6,061
11,956
8,019
19,975
26,421
52,457
3,145
28,188
50,323
78,511
10,615
92,271
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Table of Contents
21) PROVISIONS AND CONTINGENCIES
Movements in provisions in 2017 and 2018 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
12/31/2016
Additions
30,394
21,447
15,338
2,716
69,895
8,160
1,006
213
5,339
18,474
1,286
1,416
944
22,120
8,197
4,580
1
988
14,718
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)
(10,687)
-
(48)
(2,382)
(8,950)
(2,479)
-
6
(5,181)
(7,654)
(6,607)
(7,382)
(2,733)
(27,409)
(104)
-
(219)
(15)
(338)
(73)
2,108
-
(2,035)
-
-
-
-
-
-
(4,912)
(675)
(75)
4,784
(878)
30,810
19,833
9,249
1,294
61,186
(3,231)
10,543
55
(1)
1,754
(1,423)
5,641
-
2,884
19,068
Thousands of U.S. dollars
Additions
from
business
combination
(Note 5)
12/31/2017
Additions
Payments
Reversal
Transfers
Translation
differences
12/31/2018
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
30,810
19,833
9,249
1,294
61,186
10,543
5,641
-
2,884
19,068
22,074
6,185
994
371
29,624
4,015
-
19
6,925
10,959
-
-
-
-
-
-
-
-
-
-
(7,665)
(16,135)
(243)
(1)
(151)
(6,354)
(174)
(1,044)
(8,060)
(23,707)
(2,139)
-
-
(65)
(2,204)
(479)
(2,959)
(312)
(2,002)
(5,752)
(81)
82
(383)
(1)
(383)
-
-
383
-
383
(4,466)
(2,632)
(1,255)
867
(7,486)
(2,920)
(227)
(30)
(185)
24,537
16,871
8,430
1,336
51,174
9,020
2,455
60
7,515
(3,362)
19,050
“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 42,217 thousand U.S. dollars and 45,684 thousand U.S. dollars as of
December 31, 2017 and 2018, respectively.
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“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 4,407
thousand U.S. dollars and 3,320 thousand U.S. dollars as of December 31, 2017 and 2018, 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, 2018, lawsuits still before the courts as follow:
Brazil
At December 31, 2018, Atento Brasil was involved in approximately 11,486 labor-related disputes (14,750 labor disputes as of
December 31, 2017), 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 46,797 thousand U.S. dollars (162,701 thousand U.S.
dollars on December 31, 2017).
In addition, at December 31, 2018, there are labor-related disputes belonging to the company Atento Brasil 1 (formely Casa Bahia
Contact Center Ltda – “CBCC”) totaling 337 thousand U.S. dollars. According to the Company’s external attorneys, materialization of the
risk event is probable.
Moreover, as of December 31, 2018, Atento Brasil was party to 15 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 21,469 thousand Brazilian Reais (5,541 thousand
U.S. dollars), of which 775 thousand US Dollars 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.
As of December 31, 2018, Atento Brasil S.A. has 7 civil lawsuits ongoing for various reasons (8 on December 31, 2017) which,
according to the Company’s external attorneys, materialization of the risk event is possible. The total amount of the claims is approximately
5,558 thousand U.S. dollars (5,953 thousand U.S. dollars on December 31, 2017).
In addition, at December 31, 2018, Atento Brasil S.A. has 30 disputes ongoing with the tax authorities and social security authorities,
for various reasons relating to infraction proceedings filed (42 on December 31, 2017). The total amount of these claims is approximately
39,498 thousand U.S. dollars (59,445 thousand U.S. dollars on December 31, 2017). According to the Company’s external attorneys, risk of
material loss is possible.
In addition, as of December 31, 2018, there are tax authorities disputes belonging to the company CBCC totaling 1,470 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.
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Table of Contents
Thus, the Company considered 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 1,184 thousand U.S. dollars.
Additionally in March 2018, Atento Brasil 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 the 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 105.3 million of US 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 were recognized regarding these proceedings
On December 31, 2018, the subsidiary RBrasil Soluções S.A. holds contingent liabilities of labor nature classified as possible in the
approximate amount of 45 thousand U.S. dollars.
On December 31, 2018, the subsidiary Interfile holds contingent liabilities of labor nature and social charges classified as possible in
the approximate amount of 450 thousand U.S. dollars.
Additionally, there are other contingencies which are classified as possible by the Company amounting to 4,993 thousand U.S.
dollars.
Spain
At December 31, 2018, 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 regarding
employment conditions. According to the Company’s external lawyers, materialization of the risk event is possible for 665 thousand U.S.
dollars.
Mexico
At December 31, 2018, 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 10,144 thousand U.S. dollars (Atento Servicios, S.A. de C.V. 6,629 thousand U.S. dollars and
Atento Atencion y Servicios, S.A. de C.V. 3,515 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 1,326 thousand U.S. dollars at December 31, 2018 (2,454 thousand
U.S. dollars on December 31, 2017). A formal appeal has been filed at the National Supreme Court of Justice.
F - 68
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22) REVENUE AND EXPENSES
a) Revenue
The breakdown of revenue for the years ended December 31, 2016, 2017 and 2018 is as follow:
Revenue
Services rendered
Total
(*) Exclude discontinued operations - Morocco.
b) Other operating income
Thousands of U.S. dollars
2017
2018
2016(*)
1,757,498
1,757,498
1,921,311
1,921,311
1,818,180
1,818,180
Details of other operating income for the years ended December 31, 2016, 2017 and 2018 are as follow:
Other operating income
Other operating income (a)
Grants
Income from indemnities and other non-recurring income
Gain on disposal of data center
Gains on disposal of non-current assets
Total
(*) Exclude discontinued operations - Morocco.
Thousands of U.S. dollars
2016(*)
2017
2018
3,991
673
872
0
344
5,880
5,755
860
939
0
8,883
16,437
15,686
1,000
42
2,265
384
19,377
a)
Includes $ 8.7 milion of partial insurance indemnity in Puerto Rico as a result of impacts from the natural disasters in the country.
F - 69
Table of Contents
c) Supplies
Details of amounts recognized under “Supplies” during the years ended December 31, 2016, 2017 and 2018 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
Thousands of U.S. dollars
2016 (*)
2017
2018
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
10,630
13,856
2,919
19,460
1,051
22,900
70,816
Details of amounts recognized under “Employee benefit expenses” during the years ended December 31, 2016, 2017 and 2018 are as
follow:
Employee benefit expenses
Salaries and wages
Social security
Supplementary pension contributions
Termination benefits
Other welfare costs
Total
(*) Exclude discontinued operations - Morocco.
F - 70
Thousands of U.S. dollars
2016(*)
2017
2018
1,014,830
120,923
2,848
34,654
136,646
1,309,901
1,076,810
1,024,094
131,524
2,861
33,744
184,137
1,429,076
130,161
2,840
26,510
181,576
1,365,181
Table of Contents
e) Depreciation and amortization
The depreciation and amortization expenses for the years ended December 31, 2016, 2017 and 2018 are as follow:
Depreciation and amortization
Intangible assets (Note 6)
Property, plant and equipment (Note 9)
Total
(*) Exclude discontinued operations - Morocco.
f) Other operating expenses
Thousands of U.S. dollars
2016 (*)
2017
2018
50,916
46,448
97,364
55,195
49,226
104,421
58,679
36,566
95,245
The breakdown of “Other operating expenses” for the years ended December 31, 2016, 2017 and 2018 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.
F - 71
Thousands of U.S. dollars
2016 (*)
2017
2018
193,213
1,432
7,491
11,879
214,015
202,146
12,989
13,580
7,933
236,648
202,543
817
10,038
2,560
215,958
Table of Contents
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.
Thousands of U.S. dollars
2016 (*)
2017
2018
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
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
67,902
24,290
7,743
179
8,372
1,576
65
43,404
5,332
548
6,979
27,142
1,771
7,240
193,213
202,146
202,543
The amounts recognized under “Consultants” and “Other external professional services” for the years ended December 31, 2016,
2017 and 2018 mainly refers to consulting and other costs in connection with efficiencies and costs reduction projects implemented in Brazil
and EMEA.
g) Net finance expense
The breakdown of “Finance income” and “Finance costs” for the years ended December 31, 2016, 2017 and 2018 are as follow:
Finance income
Interest from third parties and hyperinflationary adjustment in Argentina (a)
Total finance income
Finance costs
Interest accrued to third parties (b)
Discounts to the present value of provisions and other liabilities(**)
Total finance costs
Thousands of U.S. dollars
2016 (*)
2017
2018
7,188
7,188
(75,090)
15,939
(59,151)
7,858
7,858
(71,404)
(6,741)
(78,145)
18,843
18,843
(43,351)
(2,261)
(45,612)
(*) Exclude discontinued operations - Morocco.
(**) 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".
F - 72
Table of Contents
a) Contain a positive impact of $ 10,700 thousand of U.S dollars due to the application of the IAS29 Financial Reporting in
Hyperinflationary Economies in Argentina. This impact is mainly explained by the effects of monetary correction on the goodwill generated
on December 01, 2012, from the acquisition of the customer relationship management (CRM) business from Telefônica S.A
b) The decrease in finance costs was driven by lower interest expenses from the debt refinancing program concluded in August 2017,
combined with a negative effect in the year ended December 31, 2017 of $19.0 million related to the debt refinancing.
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
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
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
2016
Losses
675
675
868
12,381
18,996
32,245
-
-
(12,200)
(45,784)
(30,755)
(88,739)
Gains
2017
Losses
230
230
38,220
16,407
8,969
63,596
-
(57,187)
(14,405)
(15,431)
(87,023)
Gains
2018
Losses
179
179
2,928
19,253
43,845
66,026
-
-
(433)
(29,786)
(64,822)
(95,041)
Net
675
675
(11,332)
(33,403)
(11,759)
(56,494)
Net
230
230
(18,967)
2,002
(6,462)
(23,427)
Net
179
179
2,495
(10,533)
(20,977)
(29,015)
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Table of Contents
23) SEGMENT INFORMATION
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 (which was discontinued in 2016).
• 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.
F - 74
Table of Contents
The following tables present financial information for the Atento Group’s operating segments for the years ended December 31, 2016,
2017 and 2018 (in thousand U.S. dollars):
For the year ended December 31, 2016
Thousands of U.S. dollars
EMEA (*)
Americas
Brazil
Other and
eliminations
Sales to other companies
Sales to Telefónica Group
Sales to other group companies
72,750
151,176
4
394,961
322,237
542,953
273,420
1
-
1,718
-
Other operating income and expense
(220,645)
(596,963)
(717,683)
EBITDA
Depreciation and amortization
Operating profit/(loss)
Net finance expense
Income tax
Profit/(loss) from continuing operations
3,285
(10,712)
(7,427)
(12,319)
4,933
(14,813)
121,953
(33,757)
88,196
(31,092)
(15,823)
41,281
98,690
(52,356)
46,334
(40,074)
(3,070)
3,190
(1,722)
(8,497)
(10,218)
(539)
(10,757)
(24,297)
8,753
(26,301)
Profit/(loss) from discontinued operations
(3,206)
-
-
-
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
(18,019)
3,285
10,390
18
2,709
16,402
2,124
48,342
396,298
272,082
41,281
121,953
10,562
168
(40,668)
92,015 -
23,042
189,036
558,657
259,352
3,190
98,690
10,994
9,137
2,131
(26,301)
(10,218)
1,700
-
1,011
120,952 -
(7,507) -
23,000
-
298,920
677,794
490,172
1,540
(255,131)
(74,191)
(*) Exclude discontinued operations - Morocco.
F - 75
Total Group
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
Table of Contents
For the year ended December 31, 2017
Thousands of U.S. dollars
EMEA
Americas
Brazil
Sales to other companies
Sales to Telefónica Group
Sales to other group companies
80,020
143,424
1
435,195
317,849
4,997
Other operating income and expense
(215,860)
(688,949)
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
Intangible, Goodwill and PP&E
Allocated assets
Allocated liabilities
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
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
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
Other and
eliminations
-
(1)
(4,980)
12,745
7,764
(533)
7,231
(30,406)
925
(22,250)
7,764
464
2,875
Total Group
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
(13,148)
-
(2,045)
259
1,185
(351,946)
45,646
220,966
67,535
535,443
1,330,305
952,466
For the year ended December 31, 2018
Thousands of U.S. dollars
Sales to other companies
Sales to Telefónica Group
Sales to other group companies
EMEA
Americas
Brazil
93,173
147,686
-
388,889
293,945
25,910
609,307
266,596
1,756
Other operating income and expense
(228,591)
(652,531)
(794,148)
EBITDA
Depreciation and amortization
Operating profit/(loss)
Net finance expense
Income tax
Profit/(loss) for the year
EBITDA
Adjusted EBITDA (unaudited)
Capital expenditure
Intangible, Goodwill and PP&E
Allocated assets
Allocated liabilities
56,213
(34,683)
21,530
(5,536)
(2,054)
13,940
56,213
56,213
41,466
195,369
557,695
254,150
12,268
(9,733)
2,535
(1,620)
(893)
22
12,268
12,268
6,192
42,766
394,325
122,784
F - 76
83,511
(50,376)
33,135
(30,309)
(1,422)
1,404
83,511
83,511
42,226
251,520
595,807
437,200
Other and
eliminations
Total Group
(1)
-
(9,082)
41,843
32,760
(453)
32,307
(18,140)
(9,046)
5,121
32,760
32,760
1
476
(334,475)
59,126
1,091,368
708,227
18,584
(1,633,427)
184,752
(95,245)
89,507
(55,605)
(13,415)
20,487
184,752
184,752
89,885
490,131
1,213,352
873,260
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:
For the year ended December 31,
2017
2018
2016
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
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
240,859
-
240,859
134,557
112,679
71,219
14,260
50,001
16,195
177,595
136,266
9,439
2,866
4,095
(20,428)
708,744
877,661
(9,084)
1,818,180
The Atento Group signed a framework contract with Telefónica that expires on December 31, 2021. In 2018, 39.0% of service
revenue were generated from business with Telefónica Group companies (39.2% in 2017 and 42.5% in 2016).
F - 77
Table of Contents
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 (in U.S.
dollars)
Basic loss per share from discontinued operations (in U.S. dollars)
2016 (*)
Thousands of U.S. dollars
2017
2018
3,357
(13,568)
20,486
(3,206)
73,816,933
-
73,909,056
-
73,841,447
0.05
(0.04)
(0.18)
-
0.28
-
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 (in U.S.
dollars)
Diluted loss per share from discontinued operations (in U.S. dollars)
Thousands of U.S. dollars
2016 (*)
2017
2018
3,357
(13,568)
20,486
(3,206)
-
-
272,791
74,089,724
-
73,909,056
936,616
74,778,063
0.05
(0.04)
(0.18)
-
0.28
-
(*) 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.
F - 78
Table of Contents
25) COMMITMENTS
a) Guarantees
As of December 31, 2017 and 2018, the Atento Group has guarantees to third parties of 322,233 thousand U.S. dollars, and 383,286
thousand U.S. dollars, respectively.
The transactions guaranteed and their respective amounts at December 31, 2017 and 2018 are as follow:
Guarantees
Financial, labor-related, tax and rental transactions
Contractual obligations
Other
Total
Thousands of U.S. dollars
2017
2018
156,579
165,624
30
322,233
125,422
257,844
20
383,286
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.
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
2017
2018
63,178
124,913
52,021
240,112
41,217
81,735
30,376
153,328
Total operating lease expenses recognized in the consolidated statements of operations for the year ended December 31, 2018 amount
to 13,856 thousand U.S. dollars (11,889 thousand U.S. dollars in 2017 and 3,376 thousand U.S. dollars in 2016) under “Infrastructure
leases” (see Note 22c) and 67,902 thousand U.S. dollars (66,923 thousand U.S. dollars in 2017 and 63,014 thousand U.S. dollars in 2016)
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, 2016, 2017 and 2018.
F - 79
Table of Contents
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, 2018, the payment commitment for the early cancellation of these leases is 114,215 thousand U.S. dollars
(137,684 thousand U.S. dollars in 2017 and 122,480 thousand U.S. dollars in 2016).
26) RELATED PARTIES
The following table shows the breakdown of the total remuneration paid to the Atento Group’s key management personnel in 2016,
2017 and 2018:
Salaries and variable remuneration
Salaries
Variable remuneration
Payment in kind
Medical insurance
Life insurance premiums
Other
Total
Thousands of U.S. dollars
2017
2016
2018
3,826
3,826
0
980
117
27
836
4,374
3,303
1,071
858
138
28
692
10,703
9,524
1,179
1,116
206
44
866
4,806
5,232
11,819
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Table of Contents
27. SUBSEQUENT EVENT
On January 18, 2019, the Board approved a share capital increase and issued 335,431 shares, increasing the number of outstanding shares
to 75,406,357.
On January 04, 2019, the Company vested the total of 1,161,870 TRSUs.
F - 81
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
CERTIFICATIONS
I, Carlos López-Abadía, certify that:
1. I have reviewed this annual report on Form 20-F of Atento S.A.;
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: March 19, 2019
/s/ Carlos López-Abadía
Carlos López-Abadía
Chief Executive Officer
Exhibit 12.2
CERTIFICATIONS
I, Mauricio Montilha, certify that:
1. I have reviewed this annual report on Form 20-F of Atento S.A.;
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: March 19, 2019
/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: March 19, 2019
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/ Carlos López-Abadía
Carlos López-Abadía
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: March 19, 2019
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