DOCUMENT AND ENTITY INFORMATION
DOCUMENT AND ENTITY INFORMATION - shares | 3 Months Ended | |
Mar. 31, 2017 | Apr. 27, 2017 | |
Document and Entity Information Abstract | ||
Entity Registrant Name | StarTek, Inc. | |
Entity Central Index Key | 1,031,029 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 15,898,694 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenue | $ 77,652 | $ 78,035 |
Cost of services | 67,638 | 69,647 |
Gross profit | 10,014 | 8,388 |
Selling, general and administrative expenses | 7,882 | 7,781 |
Impairment losses and restructuring charges, net | 0 | 12 |
Operating income | 2,132 | 595 |
Interest and other income (expense), net | (367) | (439) |
Income before income taxes | 1,765 | 156 |
Income tax expense (benefit) | (28) | 125 |
Net income | 1,793 | 31 |
Other comprehensive income, net of tax: | ||
Foreign currency translation adjustments | (14) | 21 |
Change in fair value of derivative instruments | 446 | 258 |
Comprehensive income | $ 2,225 | $ 310 |
Net income per common share - basic | $ 0.11 | $ 0 |
Weighted average common shares outstanding - basic | 15,815 | 15,699 |
Net income per common share - diluted | $ 0.11 | $ 0 |
Weighted average common shares outstanding - diluted | 16,995 | 15,956 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 1,364 | $ 1,039 |
Trade accounts receivable, net | 54,639 | 60,179 |
Prepaid expenses | 2,546 | 2,140 |
Other current assets | 1,492 | 1,670 |
Total current assets | 60,041 | 65,028 |
Property, plant and equipment, net | 20,784 | 23,276 |
Deferred income tax assets | 338 | 333 |
Intangible assets, net | 6,412 | 6,697 |
Goodwill | 9,077 | 9,077 |
Other long-term assets | 2,408 | 2,397 |
Total assets | 99,060 | 106,808 |
Current liabilities: | ||
Accounts payable | 7,095 | 7,612 |
Accrued liabilities: | ||
Accrued employee compensation and benefits | 10,345 | 13,767 |
Other accrued liabilities | 2,696 | 2,083 |
Line of credit | 0 | 26,025 |
Derivative liability | 560 | 980 |
Other current debt | 2,446 | 2,740 |
Other current liabilities | 889 | 1,157 |
Total current liabilities | 24,031 | 54,364 |
Line of credit | 20,719 | 0 |
Deferred rent | 971 | 1,151 |
Deferred income tax liabilities | 564 | 499 |
Other debt | 4,889 | 5,500 |
Other liabilities | 589 | 550 |
Total liabilities | 51,763 | 62,064 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common stock, 32,000,000 non-convertible shares, $0.01 par value, authorized; 15,898,694 and 15,811,516 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively | 159 | 158 |
Additional paid-in capital | 80,887 | 80,560 |
Accumulated other comprehensive income (loss) | 383 | (49) |
Accumulated deficit | (34,132) | (35,925) |
Total stockholders’ equity | 47,297 | 44,744 |
Total liabilities and stockholders’ equity | $ 99,060 | $ 106,808 |
CONSOLIDATED BALANCE SHEETS _Pa
CONSOLIDATED BALANCE SHEETS [Parenthetical] (Unaudited) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, non-convertible shares authorized | 32,000,000 | 32,000,000 |
Common stock, shares issued | 15,898,694 | 15,811,516 |
Common stock, shares outstanding | 15,898,694 | 15,811,516 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating Activities | ||
Net income | $ 1,793 | $ 31 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 2,962 | 3,230 |
Share-based compensation expense | 229 | 489 |
Deferred income taxes | 65 | 51 |
Income tax benefit related to other comprehensive income | 0 | (166) |
Changes in operating assets and liabilities: | ||
Trade accounts receivable | 5,545 | 4,078 |
Prepaid expenses and other assets | (214) | 362 |
Accounts payable | 18 | (268) |
Accrued and other liabilities | (3,215) | (2,943) |
Net cash provided by operating activities | 7,183 | 4,864 |
Investing Activities | ||
Proceeds from sale of assets | 342 | 0 |
Purchases of property, plant and equipment | (1,113) | (411) |
Cash paid for acquisition of businesses | 0 | (217) |
Net cash used in investing activities | (771) | (628) |
Financing Activities | ||
Proceeds from the issuance of common stock | 98 | 39 |
Proceeds from line of credit | 79,675 | 76,400 |
Principal payments on line of credit | (84,980) | (81,759) |
Principal payments on other debt | (868) | (700) |
Net cash used in financing activities | (6,075) | (6,020) |
Effect of exchange rate changes on cash | (12) | (12) |
Net increase (decrease) in cash and cash equivalents | 325 | (1,796) |
Cash and cash equivalents at beginning of period | 1,039 | 2,626 |
Cash and cash equivalents at end of period | $ 1,364 | $ 830 |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. These financial statements reflect all adjustments (consisting only of normal recurring entries, except as noted) which, in the opinion of management, are necessary for fair presentation. Operating results for the three months ended March 31, 2017 are not necessarily indicative of operating results that may be expected during any other interim period of 2017 or the year ending December 31, 2017 . The consolidated balance sheet as of December 31, 2016 , included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 . Unless otherwise noted in this report, any description of "us," "we," or "our," refers to StarTek, Inc. and its subsidiaries. Financial information in this report is presented in U.S. dollars. Use of Estimates The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompanying notes. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they are determined to be necessary. Recent Accounting Pronouncements In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04, Intangibles - Goodwill and Other (Topic 350) ("ASU 2017-04"), Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of ASU 2017-04 will have a material impact on our consolidated financial statements. In October 2016, FASB issued ASU 2016-16, Income Taxes (Topic 740) ("ASU 2016-16"), Intra-Entity Transfers of Assets Other Than Inventory . The purpose of ASU 2016-16 is to simplify the income tax accounting of an intra-entity transfer of an asset other than inventory and to record its effect when the transfer occurs. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods and early adoption is permitted. We do not expect the adoption of ASU 2016-16 will have a material impact on our consolidated financial statements. In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13") , Measurement of Credit Losses on Financial Instruments. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The standard will replace today's "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. We do not expect the adoption of ASU 2016-13 will have a material impact on our consolidated financial statements. In March 2016, FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718) ("ASU 2016-09"), Improvements to Employee Share-Based Payment Accounting. The amendments in ASU 2016-09 address multiple aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liability, and classification on the statements of cash flows. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted in any interim or annual period. An entity that elects early adoption must adopt all the amendments in the same period, and any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. We adopted this ASU for the first quarter of 2017 and it did not have a material impact on our consolidated financial statements. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). These amendments require the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases under ASC 840 “Leases”. These amendments also require qualitative disclosures along with specific quantitative disclosures. These amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Entities are required to apply the amendments at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the impact that the adoption of ASU 2016-02 will have on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry-specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016; however, in July 2015, the FASB agreed to delay the effective date by one year. The proposed deferral may permit early adoption, but would not allow adoption any earlier than the original effective date of the standard. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We have assessed the impact of ASU 2014-09 and have determined that our current revenue recognition process is substantially in compliance with the ASU. Therefore, we do not anticipate a material impact to our consolidated financial statements. We are currently evaluating the additional disclosures that will be required upon adoption. |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Goodwill Total goodwill of $ 9,077 is assigned to our Domestic segment. We perform a goodwill impairment analysis at least annually (in the fourth quarter of each year) unless indicators of impairment exist in interim periods. We performed a quantitative assessment to determine whether it was more likely than not that the fair value of the Domestic reporting unit exceeded its carrying value. In making this assessment, we evaluated overall business and economic conditions as well as expectations of projected revenues and cash flows, assumptions impacting the weighted average cost of capital and overall global industry and market conditions. In 2016, we concluded that goodwill was not impaired. No indicators of impairment exist as of March 31, 2017 . Intangible Assets The following table presents our intangible assets as of March 31, 2017 : Gross Intangibles Accumulated Amortization Net Intangibles Weighted Average Amortization Period (years) Developed technology $ 390 $ 195 $ 195 3.75 Customer relationships 7,550 2,030 5,520 4.68 Trade names 1,050 353 697 2.86 $ 8,990 $ 2,578 $ 6,412 4.45 Expected future amortization of intangible assets as of March 31, 2017 is as follows: Year Ending December 31, Amount Remainder of 2017 $ 855 2018 1,140 2019 1,131 2020 1,128 2021 1,004 Thereafter 1,154 |
NET INCOME PER SHARE
NET INCOME PER SHARE | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
NET INCOME (LOSS) PER SHARE | NET INCOME PER SHARE Basic net income per common share is computed based on our weighted average number of common shares outstanding. Diluted earnings per share is computed based on our weighted average number of common shares outstanding plus the effect of dilutive stock options and non-vested restricted stock using the treasury stock method. Dilutive stock options for the three months ended March 31, 2017 and 2016 totaled 1,179,634 and 256,661 , respectively. |
PRINCIPAL CLIENTS
PRINCIPAL CLIENTS | 3 Months Ended |
Mar. 31, 2017 | |
Risks and Uncertainties [Abstract] | |
PRINCIPAL CLIENTS | PRINCIPAL CLIENTS The following table represents revenue concentration of our principal clients: Three Months Ended March 31, 2017 2016 Revenue Percentage Revenue Percentage T-Mobile $ 22,054 28.4 % $ 16,017 20.5 % Sprint $ 10,256 13.2 % $ 10,871 13.9 % AT&T $ 8,647 11.1 % $ 10,487 13.4 % We enter into master service agreements (MSAs) that cover all of our work for each client. These MSAs are typically multi-year contracts that include auto-renewal provisions. They typically do not include contractual minimum volumes and are generally terminable by the customer or us with prior written notice. To limit credit risk, management performs periodic credit analyses and maintains allowances for uncollectible accounts as deemed necessary. Under certain circumstances, management may require clients to pre-pay for services. As of March 31, 2017 , management believes reserves are appropriate and does not believe that any significant credit risk exists. We have entered into factoring agreements with financial institutions to sell certain of our accounts receivable under non-recourse agreements. These transactions are accounted for as a reduction in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyers. We do not service any factored accounts after the factoring has occurred. We utilize factoring arrangements as part of our financing for working capital. The aggregate gross amount factored under these agreements was $28,742 and $7,824 for the three months ended March 31, 2017 and March 31, 2016 , respectively. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 3 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS We use derivatives to partially offset our business exposure to foreign currency exchange risk. We enter into foreign currency forward and option contracts to hedge our anticipated operating commitments that are denominated in foreign currencies, including forward contracts and range forward contracts (a transaction where both a call option is purchased and a put option is sold). The contracts cover periods commensurate with expected exposure, generally three to twelve months, and are principally unsecured foreign exchange contracts. The market risk exposure is essentially limited to risk related to currency rate movements. We operate in Canada, Jamaica, and the Philippines, where the functional currencies are the Canadian dollar, the Jamaican dollar, and the Philippine peso, respectively, which are used to pay labor and other operating costs in those countries. We provide funds for these operating costs as our client contracts generate revenues, which are paid in U.S. dollars. In Honduras, our functional currency is the U.S. dollar and the majority of our costs are denominated in U.S. dollars. We have elected to designate our derivatives as cash flow hedges in order to associate the results of the hedges with forecasted expenses. Unrealized gains and losses are recorded in accumulated other comprehensive income (“AOCI”) and will be re-classified to operations as the forecasted expenses are incurred, typically within one year. During the three months ended March 31, 2017 and 2016, our cash flow hedges were highly effective and hedge ineffectiveness was not material. The following table shows the notional amount of our foreign exchange cash flow hedging instruments as of March 31, 2017 : Local Currency Notional Amount U.S. Dollar Notional Amount Canadian Dollar 13,880 $ 10,571 Philippine Peso 1,646,700 32,471 $ 43,042 Derivative assets and liabilities associated with our hedging activities are measured at gross fair value as described in Note 6, "Fair Value Measurements," and are reflected as separate line items in our consolidated balance sheets, as applicable. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The levels of the fair value hierarchy are described below: Level 1 - Quoted prices for identical instruments traded in active markets. Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 - Unobservable inputs that cannot be supported by market activity and that are significant to the fair value of the asset or liability, such as the use of certain pricing models, discounted cash flow models and similar techniques that use significant assumptions. These unobservable inputs reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Derivative Instruments The values of our derivative instruments are derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such the derivatives are classified as Level 2 in the fair value hierarchy. The following tables set forth our liabilities measured at fair value on a recurring basis by level within the fair value hierarchy. As of March 31, 2017 Level 1 Level 2 Level 3 Total Liabilities: Foreign exchange contracts $ — $ 560 $ — $ 560 Total fair value of liabilities measured on a recurring basis $ — $ 560 $ — $ 560 As of December 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Foreign exchange contracts $ — $ 980 $ — $ 980 Total fair value of liabilities measured on a recurring basis $ — $ 980 $ — $ 980 |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Secured Revolving Credit Facility On April 29, 2015, we entered into a secured revolving credit facility with BMO Harris Bank N.A. ("Administrative Agent" or "Lender"); subsequently we entered into amendments one through four (collectively, the "Credit Agreement"). The Credit Agreement is effective through March 2022 and we may borrow the lesser of the borrowing base calculation and $50,000 . As long as no default has occurred and with the Administrative Agent’s consent, we may increase the maximum availability to $70,000 in $5,000 increments. We may request letters of credit under the Credit Agreement in an aggregate amount equal to the lesser of the borrowing base calculation (minus outstanding advances) and $5,000 . The borrowing base is generally defined as 85% of our eligible accounts receivable less certain reserves as defined in the Credit Agreement. Our borrowings bear interest at one-month LIBOR plus 1.50% to 1.75% , depending on current availability. We will pay letter of credit fees equal to the applicable margin times the daily maximum amount available to be drawn under all letters of credit outstanding and a monthly unused fee at a rate per annum of 0.25% on the aggregate unused commitment. As of March 31, 2017 , outstanding letters of credit totaled $609 . The Credit Agreement contains standard affirmative and negative covenants that may limit or restrict our ability to sell assets, incur additional indebtedness and engage in mergers and acquisitions. We are required to maintain a minimum consolidated fixed charge coverage ratio of 1.00 :1.00, if a reporting trigger period commences. We were in compliance with all covenants as of March 31, 2017. The fourth amendment to the Credit Agreement was executed on March 28, 2017. Among other things, it removed the requirement that funds collected be automatically applied to our credit facility balance, unless a trigger event occurs. As a result, the balance sheet classification has been changed from short-term liabilities to long-term liabilities beginning in the first quarter of 2017. As of March 31, 2017 , we had $ 20,719 of outstanding borrowings and our remaining borrowing capacity was $28,173 . Other Debt From time to time and when management believes it to be advantageous, we may enter into other arrangements to finance the purchase or construction of capital assets. These obligations are included on our consolidated balance sheets in other current debt and other debt, as applicable. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION Our share-based compensation arrangements include grants of stock options, restricted stock units and deferred stock units under the StarTek, Inc. 2008 Equity Incentive Plan and our Employee Stock Purchase Plan. The compensation expense that has been charged against income for such awards for the three months ended March 31, 2017 and 2016 was $229 and $ 489 , respectively, and is included in selling, general and administrative expenses. As of March 31, 2017 , there was $1,085 of total unrecognized compensation expense related to nonvested awards, which is expected to be recognized over a weighted-average period of 2.12 years. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME | 3 Months Ended |
Mar. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME | ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI) Accumulated other comprehensive income consisted of the following items: Foreign Currency Translation Adjustment Derivatives Accounted for as Cash Flow Hedges Defined Benefit Plan Total Balance at December 31, 2016 $ 1,830 $ (2,132 ) $ 253 $ (49 ) Foreign currency translation (37 ) (37 ) Reclassification to operations 144 144 Unrealized gains 325 325 Balance at March 31, 2017 $ 1,793 $ (1,663 ) $ 253 $ 383 Reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2017 and 2016 were as follows: Details about AOCI components Amount reclassified from AOCI Affected line item in the Consolidated Statements of Comprehensive Income Three Months Ended March 31, 2017 2016 Losses on cash flow hedges Foreign exchange contracts $ 134 $ 295 Cost of services Foreign exchange contracts 10 10 Selling, general and administrative expenses Total reclassifications for the period $ 144 $ 305 |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION We operate our business within three reportable segments based on the geographic regions in which our services are rendered. As of March 31, 2017 , our Domestic segment included the operations of thirteen facilities in the U.S. and one facility in Canada. Our Offshore segment included the operations of four facilities in the Philippines and our Nearshore segment included two facilities in Honduras and one facility in Jamaica. We primarily evaluate segment operating performance in each reporting segment based on revenue and gross profit. Certain operating expenses are not allocated to each reporting segment; therefore, we do not present income statement information by reporting segment below the gross profit level. Information about our reportable segments for the three months ended March 31, 2017 and 2016 is as follows: For the Three Months Ended March 31, 2017 2016 Revenue: Domestic $ 44,363 $ 49,145 Offshore 21,123 17,581 Nearshore 12,166 11,309 Total $ 77,652 $ 78,035 Gross profit: Domestic $ 1,509 $ 4,824 Offshore 6,175 2,286 Nearshore 2,330 1,278 Total $ 10,014 $ 8,388 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | SUBSEQUENT EVENTS Canada Income Taxes In April 2017, we received a notice of reassessment related to our ongoing Canadian income tax audit. We do not believe it is more likely than not that we owe the taxes that have been reassessed, and therefore we are in the process of filing an appeal and have not accrued a liability related to this matter. |
BASIS OF PRESENTATION AND SUM17
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompanying notes. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they are determined to be necessary. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04, Intangibles - Goodwill and Other (Topic 350) ("ASU 2017-04"), Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of ASU 2017-04 will have a material impact on our consolidated financial statements. In October 2016, FASB issued ASU 2016-16, Income Taxes (Topic 740) ("ASU 2016-16"), Intra-Entity Transfers of Assets Other Than Inventory . The purpose of ASU 2016-16 is to simplify the income tax accounting of an intra-entity transfer of an asset other than inventory and to record its effect when the transfer occurs. The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods and early adoption is permitted. We do not expect the adoption of ASU 2016-16 will have a material impact on our consolidated financial statements. In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13") , Measurement of Credit Losses on Financial Instruments. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren't measured at fair value through net income. The standard will replace today's "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. We do not expect the adoption of ASU 2016-13 will have a material impact on our consolidated financial statements. In March 2016, FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718) ("ASU 2016-09"), Improvements to Employee Share-Based Payment Accounting. The amendments in ASU 2016-09 address multiple aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liability, and classification on the statements of cash flows. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted in any interim or annual period. An entity that elects early adoption must adopt all the amendments in the same period, and any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. We adopted this ASU for the first quarter of 2017 and it did not have a material impact on our consolidated financial statements. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). These amendments require the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases under ASC 840 “Leases”. These amendments also require qualitative disclosures along with specific quantitative disclosures. These amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Entities are required to apply the amendments at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the impact that the adoption of ASU 2016-02 will have on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry-specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016; however, in July 2015, the FASB agreed to delay the effective date by one year. The proposed deferral may permit early adoption, but would not allow adoption any earlier than the original effective date of the standard. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We have assessed the impact of ASU 2014-09 and have determined that our current revenue recognition process is substantially in compliance with the ASU. Therefore, we do not anticipate a material impact to our consolidated financial statements. We are currently evaluating the additional disclosures that will be required upon adoption. |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | The following table presents our intangible assets as of March 31, 2017 : Gross Intangibles Accumulated Amortization Net Intangibles Weighted Average Amortization Period (years) Developed technology $ 390 $ 195 $ 195 3.75 Customer relationships 7,550 2,030 5,520 4.68 Trade names 1,050 353 697 2.86 $ 8,990 $ 2,578 $ 6,412 4.45 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Expected future amortization of intangible assets as of March 31, 2017 is as follows: Year Ending December 31, Amount Remainder of 2017 $ 855 2018 1,140 2019 1,131 2020 1,128 2021 1,004 Thereafter 1,154 |
PRINCIPAL CLIENTS (Tables)
PRINCIPAL CLIENTS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Risks and Uncertainties [Abstract] | |
Schedule of Revenue by Major Customers | The following table represents revenue concentration of our principal clients: Three Months Ended March 31, 2017 2016 Revenue Percentage Revenue Percentage T-Mobile $ 22,054 28.4 % $ 16,017 20.5 % Sprint $ 10,256 13.2 % $ 10,871 13.9 % AT&T $ 8,647 11.1 % $ 10,487 13.4 % |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Notional Amounts of Outstanding Derivative Positions | The following table shows the notional amount of our foreign exchange cash flow hedging instruments as of March 31, 2017 : Local Currency Notional Amount U.S. Dollar Notional Amount Canadian Dollar 13,880 $ 10,571 Philippine Peso 1,646,700 32,471 $ 43,042 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements, Recurring and Nonrecurring | The following tables set forth our liabilities measured at fair value on a recurring basis by level within the fair value hierarchy. As of March 31, 2017 Level 1 Level 2 Level 3 Total Liabilities: Foreign exchange contracts $ — $ 560 $ — $ 560 Total fair value of liabilities measured on a recurring basis $ — $ 560 $ — $ 560 As of December 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Foreign exchange contracts $ — $ 980 $ — $ 980 Total fair value of liabilities measured on a recurring basis $ — $ 980 $ — $ 980 |
ACCUMULATED OTHER COMPREHENSI22
ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
Schedule of Comprehensive Income | Accumulated other comprehensive income consisted of the following items: Foreign Currency Translation Adjustment Derivatives Accounted for as Cash Flow Hedges Defined Benefit Plan Total Balance at December 31, 2016 $ 1,830 $ (2,132 ) $ 253 $ (49 ) Foreign currency translation (37 ) (37 ) Reclassification to operations 144 144 Unrealized gains 325 325 Balance at March 31, 2017 $ 1,793 $ (1,663 ) $ 253 $ 383 |
Reclassification out of Accumulated Other Comprehensive Income | Reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2017 and 2016 were as follows: Details about AOCI components Amount reclassified from AOCI Affected line item in the Consolidated Statements of Comprehensive Income Three Months Ended March 31, 2017 2016 Losses on cash flow hedges Foreign exchange contracts $ 134 $ 295 Cost of services Foreign exchange contracts 10 10 Selling, general and administrative expenses Total reclassifications for the period $ 144 $ 305 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | Information about our reportable segments for the three months ended March 31, 2017 and 2016 is as follows: For the Three Months Ended March 31, 2017 2016 Revenue: Domestic $ 44,363 $ 49,145 Offshore 21,123 17,581 Nearshore 12,166 11,309 Total $ 77,652 $ 78,035 Gross profit: Domestic $ 1,509 $ 4,824 Offshore 6,175 2,286 Nearshore 2,330 1,278 Total $ 10,014 $ 8,388 |
GOODWILL AND INTANGIBLE ASSET24
GOODWILL AND INTANGIBLE ASSETS Goodwill (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill | $ 9,077 | $ 9,077 |
GOODWILL AND INTANGIBLE ASSET25
GOODWILL AND INTANGIBLE ASSETS Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangibles | $ 8,990 | |
Accumulated Amortization | 2,578 | |
Net Intangibles | $ 6,412 | $ 6,697 |
Weighted Average Amortization Period (years) | 4 years 5 months 12 days | |
Developed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangibles | $ 390 | |
Accumulated Amortization | 195 | |
Net Intangibles | $ 195 | |
Weighted Average Amortization Period (years) | 3 years 9 months | |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangibles | $ 7,550 | |
Accumulated Amortization | 2,030 | |
Net Intangibles | $ 5,520 | |
Weighted Average Amortization Period (years) | 4 years 8 months 5 days | |
Trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangibles | $ 1,050 | |
Accumulated Amortization | 353 | |
Net Intangibles | $ 697 | |
Weighted Average Amortization Period (years) | 2 years 10 months 10 days |
GOODWILL AND INTANGIBLE ASSET26
GOODWILL AND INTANGIBLE ASSETS Future Amortization Expense (Details) $ in Thousands | Mar. 31, 2017USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Remainder of 2017 | $ 855 |
2,018 | 1,140 |
2,019 | 1,131 |
2,020 | 1,128 |
2,021 | 1,004 |
Thereafter | $ 1,154 |
NET INCOME PER SHARE (Details)
NET INCOME PER SHARE (Details) - shares | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Earnings Per Share [Abstract] | ||
Anti-dilutive securities (in shares) | 10,062 | 2,630,774 |
Dilutive securities (in shares) | 1,179,634 | 256,661 |
PRINCIPAL CLIENTS (Details)
PRINCIPAL CLIENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenue, Major Customers [Line Items] | ||
Receivables Sold Under Factoring Agreements | $ 28,742 | $ 7,824 |
T-Mobile | ||
Revenue, Major Customers [Line Items] | ||
Revenue | $ 22,054 | $ 16,017 |
Revenue concentration, percentage | 28.40% | 20.50% |
Sprint | ||
Revenue, Major Customers [Line Items] | ||
Revenue | $ 10,256 | $ 10,871 |
Revenue concentration, percentage | 13.20% | 13.90% |
AT&T | ||
Revenue, Major Customers [Line Items] | ||
Revenue | $ 8,647 | $ 10,487 |
Revenue concentration, percentage | 11.10% | 13.40% |
DERIVATIVE INSTRUMENTS Textual
DERIVATIVE INSTRUMENTS Textual (Details) - Foreign Exchange Contract [Member] | 3 Months Ended |
Mar. 31, 2017 | |
Minimum | |
Derivative [Line Items] | |
Foreign Currency Derivatives, Contract Period | 3 months |
Maximum | |
Derivative [Line Items] | |
Foreign Currency Derivatives, Contract Period | 12 months |
DERIVATIVE INSTRUMENTS Notional
DERIVATIVE INSTRUMENTS Notional (Details) - Mar. 31, 2017 - Designated as Hedging Instrument [Member] - Cash Flow Hedging [Member] - Forward Contracts [Member] PHP in Thousands, CAD in Thousands, $ in Thousands | USD ($) | PHP | CAD |
CAN | |||
Derivative [Line Items] | |||
Derivative, Notional Amount | $ 10,571 | CAD 13,880 | |
PHP | |||
Derivative [Line Items] | |||
Derivative, Notional Amount | 32,471 | PHP 1,646,700 | |
USD | |||
Derivative [Line Items] | |||
Derivative, Notional Amount | $ 43,042 |
FAIR VALUE MEASUREMENTS (Recurr
FAIR VALUE MEASUREMENTS (Recurring and Nonrecurring) (Details) - Recurring - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Assets and Liabilities at Fair Value Measured on Recurring Basis | ||
Liabilities, Fair Value Disclosure | $ 560 | $ 980 |
Level 2 | ||
Assets and Liabilities at Fair Value Measured on Recurring Basis | ||
Liabilities, Fair Value Disclosure | 560 | 980 |
Foreign exchange contracts | ||
Assets and Liabilities at Fair Value Measured on Recurring Basis | ||
Liabilities, Fair Value Disclosure | 560 | 980 |
Foreign exchange contracts | Level 2 | ||
Assets and Liabilities at Fair Value Measured on Recurring Basis | ||
Liabilities, Fair Value Disclosure | $ 560 | $ 980 |
DEBT (Details)
DEBT (Details) $ in Thousands | Mar. 28, 2017 | Apr. 30, 2015 | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Apr. 29, 2015USD ($) |
Line of Credit Facility [Line Items] | |||||
Line of credit | $ 0 | $ 26,025 | |||
BMO Harris Bank | Revolving Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Line of credit facility, current borrowing capacity | $ 50,000 | ||||
Line of credit facility, maximum borrowing capacity | 70,000 | ||||
Increments for additional borrowing | 5,000 | ||||
Letters of credit, maximum allowed | $ 5,000 | ||||
Borrowing base, as percentage of eligible accounts receivables less reserves | 85.00% | ||||
Letters of Credit Outstanding, Amount | 609 | ||||
Fixed charge coverage ratio | 1 | ||||
Line of credit | 20,719 | ||||
Line of Credit Facility, Remaining Borrowing Capacity | $ 28,173 | ||||
BMO Harris Bank | Revolving Credit Facility | London Interbank Offered Rate (LIBOR) [Member] | |||||
Line of Credit Facility [Line Items] | |||||
Description of variable rate basis | one-month LIBOR | ||||
Monthly unused fee, rate per annum | 0.25% | ||||
BMO Harris Bank | Revolving Credit Facility | London Interbank Offered Rate (LIBOR) [Member] | Minimum | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 1.50% | ||||
BMO Harris Bank | Revolving Credit Facility | London Interbank Offered Rate (LIBOR) [Member] | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on variable rate | 1.75% |
SHARE-BASED COMPENSATION (Textu
SHARE-BASED COMPENSATION (Textuals) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Stock Awards Activity [Line Items] | ||
Total compensation cost | $ 229 | $ 489 |
Stock Options | ||
Stock Awards Activity [Line Items] | ||
Total unrecognized compensation cost | $ 1,085 | |
Weighted-average period that cost is expected to be recognized | 2 years 1 month 13 days |
ACCUMULATED OTHER COMPREHENSI34
ACCUMULATED OTHER COMPREHENSIVE INCOME AOCI (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Accumulated Other Comprehensive Income [Roll Forward] | |
Total - Beginning balance | $ (49) |
Foreign currency translation | (37) |
Reclassification to operations | 144 |
Unrealized gains | 325 |
Total - Ending balance | 383 |
Foreign Currency Translation Adjustment | |
Accumulated Other Comprehensive Income [Roll Forward] | |
Total - Beginning balance | 1,830 |
Foreign currency translation | (37) |
Total - Ending balance | 1,793 |
Derivatives Accounted for as Cash Flow Hedges | |
Accumulated Other Comprehensive Income [Roll Forward] | |
Total - Beginning balance | (2,132) |
Reclassification to operations | 144 |
Unrealized gains | 325 |
Total - Ending balance | (1,663) |
Defined Benefit Plan | |
Accumulated Other Comprehensive Income [Roll Forward] | |
Total - Beginning balance | 253 |
Total - Ending balance | $ 253 |
ACCUMULATED OTHER COMPREHENSI35
ACCUMULATED OTHER COMPREHENSIVE INCOME Reclassification (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Cost of services | $ 67,638 | $ 69,647 |
Selling, general and administrative expenses | 7,882 | 7,781 |
Foreign exchange contracts | Amount Reclassified from Accumulated Other Comprehensive Income | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Reclassification to operations | 144 | 305 |
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | Foreign exchange contracts | Amount Reclassified from Accumulated Other Comprehensive Income | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Cost of services | 134 | 295 |
Selling, general and administrative expenses | $ 10 | $ 10 |
SEGMENT INFORMATION (Textual) (
SEGMENT INFORMATION (Textual) (Details) | 3 Months Ended |
Mar. 31, 2017facilitysegment | |
Segment Reporting Information [Line Items] | |
Number of Operating Segments | segment | 3 |
U.S. | |
Segment Reporting Information [Line Items] | |
Number of Operating Facilities | 13 |
Canada | |
Segment Reporting Information [Line Items] | |
Number of Operating Facilities | 1 |
Philippines | |
Segment Reporting Information [Line Items] | |
Number of Operating Facilities | 4 |
Honduras | |
Segment Reporting Information [Line Items] | |
Number of Operating Facilities | 2 |
Jamaica | |
Segment Reporting Information [Line Items] | |
Number of Operating Facilities | 1 |
SEGMENT INFORMATION (Segment Re
SEGMENT INFORMATION (Segment Reporting) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Segment Reporting Information [Line Items] | ||
Revenue | $ 77,652 | $ 78,035 |
Gross profit | 10,014 | 8,388 |
Domestic | ||
Segment Reporting Information [Line Items] | ||
Revenue | 44,363 | 49,145 |
Gross profit | 1,509 | 4,824 |
Offshore | ||
Segment Reporting Information [Line Items] | ||
Revenue | 21,123 | 17,581 |
Gross profit | 6,175 | 2,286 |
Nearshore | ||
Segment Reporting Information [Line Items] | ||
Revenue | 12,166 | 11,309 |
Gross profit | $ 2,330 | $ 1,278 |