x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 84-1370538 | |
(State or other jurisdiction of | (I.R.S. employer | |
incorporation or organization) | Identification No.) | |
8200 E. Maplewood Ave., Suite 100 | ||
Greenwood Village, Colorado | 80111 | |
(Address of principal executive offices) | (Zip code) |
Large accelerated filer o | Accelerated filer x | |
Non-accelerated filer o | Smaller reporting company o | |
(Do not check if a smaller reporting company) |
PART I - FINANCIAL INFORMATION | ||||
ITEM 1. | FINANCIAL STATEMENTS | Page | ||
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2016 and 2015 (Unaudited) | ||||
Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015 | ||||
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015 (Unaudited) | ||||
Notes to Consolidated Financial Statements (Unaudited) | ||||
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | |||
ITEM 4. | Controls and Procedures | |||
PART II - OTHER INFORMATION | ||||
ITEM 1A. | Risk Factors | |||
ITEM 6. | Exhibits | |||
SIGNATURES | ||||
• | certain statements, including possible or assumed future results of operations, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; |
• | any statements regarding the prospects for our business or any of our services; |
• | any statements preceded by, followed by or that include the words “may,” “will,” “should,” “seeks,” “believes,” “expects,” “anticipates,” “intends,” “continue,” “estimate,” “plans,” “future,” “targets,” “predicts,” “budgeted,” “projections,” “outlooks,” “attempts,” “is scheduled,” or similar expressions; and |
• | other statements regarding matters that are not historical facts. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue | $ | 78,305 | $ | 72,756 | $ | 230,073 | $ | 199,874 | |||||||
Cost of services | 67,958 | 69,597 | 204,327 | 185,284 | |||||||||||
Gross profit | 10,347 | 3,159 | 25,746 | 14,590 | |||||||||||
Selling, general and administrative expenses | 8,767 | 9,335 | 24,668 | 25,981 | |||||||||||
Impairment losses and restructuring charges, net | 187 | 889 | 356 | 3,231 | |||||||||||
Operating profit (loss) | 1,393 | (7,065 | ) | 722 | (14,622 | ) | |||||||||
Interest and other (expense), net | (374 | ) | (421 | ) | (1,185 | ) | (758 | ) | |||||||
Income (loss) before income taxes | 1,019 | (7,486 | ) | (463 | ) | (15,380 | ) | ||||||||
Income tax expense | 163 | 219 | 334 | 569 | |||||||||||
Net income (loss) | $ | 856 | $ | (7,705 | ) | $ | (797 | ) | $ | (15,949 | ) | ||||
Other comprehensive income (loss), net of tax: | 1 | 156 | |||||||||||||
Foreign currency translation adjustments | 45 | 47 | 152 | 58 | |||||||||||
Change in fair value of derivative instruments | (46 | ) | (682 | ) | 240 | 78 | |||||||||
Comprehensive income (loss) | $ | 855 | $ | (8,340 | ) | $ | (405 | ) | $ | (15,813 | ) | ||||
Net income (loss) per common share - basic | $ | 0.05 | $ | (0.49 | ) | $ | (0.05 | ) | $ | (1.03 | ) | ||||
Weighted average common shares outstanding - basic | 15,735 | 15,569 | 15,718 | 15,504 | |||||||||||
Net income (loss) per common share - diluted | 0.05 | (0.49 | ) | (0.05 | ) | (1.03 | ) | ||||||||
Weighted average common shares outstanding - diluted | 16,250 | 15,569 | 15,718 | 15,504 |
September 30, | December 31, | ||||||
2016 | 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 791 | $ | 2,626 | |||
Trade accounts receivable, net | 54,918 | 57,940 | |||||
Prepaid expenses | 1,730 | 2,019 | |||||
Other current assets | 885 | 1,433 | |||||
Total current assets | $ | 58,324 | $ | 64,018 | |||
Property, plant and equipment, net | 22,187 | 30,364 | |||||
Deferred income tax assets | 415 | 479 | |||||
Intangible assets, net | 6,982 | 7,847 | |||||
Goodwill | 9,077 | 9,148 | |||||
Other long-term assets | 2,320 | 2,948 | |||||
Total assets | $ | 99,305 | $ | 114,804 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 7,204 | $ | 9,232 | |||
Accrued liabilities: | |||||||
Accrued employee compensation and benefits | 12,527 | 12,956 | |||||
Other accrued liabilities | 1,733 | 2,451 | |||||
Line of credit | 22,184 | 32,214 | |||||
Derivative liability | 159 | 524 | |||||
Other current debt | 3,321 | 3,497 | |||||
Other current liabilities | 1,314 | 1,560 | |||||
Total current liabilities | $ | 48,442 | $ | 62,434 | |||
Deferred rent | 1,303 | 1,629 | |||||
Deferred income tax liabilities | 408 | 393 | |||||
Other debt | 6,195 | 8,189 | |||||
Other liabilities | — | 234 | |||||
Total liabilities | $ | 56,348 | $ | 72,879 | |||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Common stock, 32,000,000 non-convertible shares, $0.01 par value, authorized; 15,746,782 and 15,699,398 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | $ | 157 | $ | 157 | |||
Additional paid-in capital | 79,876 | 78,439 | |||||
Accumulated other comprehensive income (loss) | 41 | (351 | ) | ||||
Accumulated deficit | (37,117 | ) | (36,320 | ) | |||
Total stockholders’ equity | $ | 42,957 | $ | 41,925 | |||
Total liabilities and stockholders’ equity | $ | 99,305 | $ | 114,804 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Operating Activities | |||||||
Net loss | $ | (797 | ) | $ | (15,949 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 9,382 | 9,803 | |||||
Impairment losses | 174 | — | |||||
Provision for doubtful accounts | 555 | — | |||||
Gain on sale of assets | (19 | ) | (509 | ) | |||
Share-based compensation expense | 1,279 | 1,376 | |||||
Amortization of deferred gain on sale leaseback transaction | — | (168 | ) | ||||
Deferred income taxes | 103 | 132 | |||||
Income tax benefit related to other comprehensive income | (233 | ) | — | ||||
Changes in operating assets and liabilities: | |||||||
Trade accounts receivable | 2,482 | 3,778 | |||||
Prepaid expenses and other assets | 2,105 | (1,245 | ) | ||||
Accounts payable | (1,663 | ) | (5,076 | ) | |||
Accrued and other liabilities | (1,872 | ) | 4,488 | ||||
Net cash provided by (used in) operating activities | 11,496 | (3,370 | ) | ||||
Investing Activities | |||||||
Proceeds from sale of assets | 24 | 982 | |||||
Purchases of property, plant and equipment | (938 | ) | (6,500 | ) | |||
Cash paid for acquisition of businesses | (617 | ) | (18,909 | ) | |||
Net cash used in investing activities | (1,531 | ) | (24,427 | ) | |||
Financing Activities | |||||||
Proceeds from the issuance of common stock | 159 | 698 | |||||
Proceeds from line of credit | 224,650 | 237,840 | |||||
Principal payments on line of credit | (234,680 | ) | (214,096 | ) | |||
Principal payments on other debt | (2,150 | ) | (1,479 | ) | |||
Net cash (used in) provided by financing activities | (12,021 | ) | 22,963 | ||||
Effect of exchange rate changes on cash | 221 | 342 | |||||
Net decrease in cash and cash equivalents | (1,835 | ) | (4,492 | ) | |||
Cash and cash equivalents at beginning of period | $ | 2,626 | $ | 5,306 | |||
Cash and cash equivalents at end of period | $ | 791 | $ | 814 | |||
Gross Intangibles | Accumulated Amortization | Net Intangibles | Weighted Average Amortization Period (years) | |||||||||||
Developed technology | $ | 390 | $ | 170 | $ | 220 | 3.42 | |||||||
Customer relationships | 7,550 | 1,571 | 5,979 | 4.58 | ||||||||||
Trade names | 1,050 | 267 | 783 | 3.57 | ||||||||||
$ | 8,990 | $ | 2,008 | $ | 6,982 | 4.43 |
Year Ending December 31, | Amount | |||
Remainder of 2016 | $ | 285 | ||
2017 | 1,140 | |||
2018 | 1,140 | |||
2019 | 1,131 | |||
2020 | 1,128 | |||
Thereafter | 2,158 |
Facility-Related and Employee-Related Costs | ||||||||||||
Domestic | Nearshore | Total | ||||||||||
Balance as of December 31, 2015 | $ | 802 | $ | 112 | $ | 914 | ||||||
Reversal | (103 | ) | — | (103 | ) | |||||||
Payments | (655 | ) | (69 | ) | (724 | ) | ||||||
Balance as of September 30, 2016 | $ | 44 | $ | 43 | $ | 87 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||
Revenue | Percentage | Revenue | Percentage | Revenue | Percentage | Revenue | Percentage | |||||||||||||||||||||
T-Mobile USA, Inc. | $ | 20,298 | 25.9 | % | $ | 16,330 | 22.4 | % | $ | 53,359 | 23.2 | % | $ | 51,453 | 25.7 | % | ||||||||||||
Sprint / United Management Co. | $ | 11,656 | 14.9 | % | $ | 10,528 | 14.5 | % | $ | 33,785 | 14.7 | % | $ | 13,690 | 6.8 | % | ||||||||||||
AT&T Services, Inc. and AT&T Mobility, LLC | $ | 9,194 | 11.7 | % | $ | 7,422 | 10.2 | % | $ | 29,416 | 12.8 | % | $ | 26,232 | 13.1 | % | ||||||||||||
Comcast Cable Communications Management, LLC | $ | 6,549 | 8.4 | % | $ | 7,590 | 10.4 | % | $ | 20,790 | 9.0 | % | $ | 24,399 | 12.2 | % |
Local Currency Notional Amount | U.S. Dollar Notional Amount | |||||
Canadian Dollar | 2,945 | $ | 2,356 | |||
Philippine Peso | 340,000 | 7,473 | ||||
$ | 9,829 |
As of September 30, 2016 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Liabilities: | |||||||||||||||
Foreign exchange contracts | $ | — | $ | 159 | $ | — | $ | 159 | |||||||
Total fair value of liabilities measured on a recurring basis | $ | — | $ | 159 | $ | — | $ | 159 |
As of December 31, 2015 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Liabilities: | |||||||||||||||
Foreign exchange contracts | $ | — | $ | 524 | $ | — | $ | 524 | |||||||
Total fair value of liabilities measured on a recurring basis | $ | — | $ | 524 | $ | — | $ | 524 |
• | During fiscal year 2016, maintaining certain EBITDA thresholds if a reporting trigger period commences, |
• | Beginning in 2017, maintaining a minimum consolidated fixed charge coverage ratio of 1.10 to 1.00 if a reporting trigger period commences, and |
• | Limiting non-financed capital expenditures to $5,000 for fiscal years 2016 and thereafter. |
Foreign Currency Translation Adjustment | Derivatives Accounted for as Cash Flow Hedges | Total | |||||||||
Balance at December 31, 2015 | $ | 1,533 | $ | (1,884 | ) | $ | (351 | ) | |||
Foreign currency translation | 242 | 242 | |||||||||
Reclassification to operations | 431 | 431 | |||||||||
Unrealized losses | (48 | ) | (48 | ) | |||||||
Tax benefit | (90 | ) | (143 | ) | (233 | ) | |||||
Balance at September 30, 2016 | $ | 1,685 | $ | (1,644 | ) | $ | 41 |
Details about Accumulated Other Comprehensive Loss Components | Amount Reclassified from Accumulated Other Comprehensive Loss | Affected Line Item in the Consolidated Statements of Operations and Comprehensive Loss | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Losses on cash flow hedges | ||||||||||||||||||
Foreign exchange contracts | $ | — | $ | 682 | $ | 416 | $1,682 | Cost of services | ||||||||||
Foreign exchange contracts | — | 62 | 15 | 143 | Selling, general and administrative expenses | |||||||||||||
Total reclassifications for the period | $ | — | $ | 744 | $ | 431 | $ | 1,825 |
For the Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Revenue: | |||||||
Domestic | $ | 46,050 | $ | 44,552 | |||
Offshore | 20,830 | 17,141 | |||||
Nearshore | 11,425 | 11,063 | |||||
Total | $ | 78,305 | $ | 72,756 | |||
Gross profit: | |||||||
Domestic | $ | 2,790 | $ | 316 | |||
Offshore | 5,101 | 1,236 | |||||
Nearshore | 2,456 | 1,607 | |||||
Total | $ | 10,347 | $ | 3,159 |
For the Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Revenue: | |||||||
Domestic | $ | 141,537 | $ | 117,281 | |||
Offshore | 55,475 | 55,599 | |||||
Nearshore | 33,061 | 26,994 | |||||
Total | $ | 230,073 | $ | 199,874 | |||
Gross profit: | |||||||
Domestic | $ | 10,858 | $ | 4,940 | |||
Offshore | 9,935 | 5,569 | |||||
Nearshore | 4,953 | 4,081 | |||||
Total | $ | 25,746 | $ | 14,590 |
For the Three Months Ended September 30, | |||||||||||||
2016 | 2015 | ||||||||||||
(in 000s) | (% of Total) | (in 000s) | (% of Total) | ||||||||||
Domestic: | |||||||||||||
Revenue | $ | 46,050 | 58.8 | % | $ | 44,552 | 61.2 | % | |||||
Gross profit | $ | 2,790 | 27.0 | % | $ | 316 | 10.0 | % | |||||
Gross profit % | 6.1 | % | 0.7 | % | |||||||||
Offshore: | |||||||||||||
Revenue | $ | 20,830 | 26.6 | % | $ | 17,141 | 23.6 | % | |||||
Gross profit | $ | 5,101 | 49.3 | % | $ | 1,236 | 39.1 | % | |||||
Gross profit % | 24.5 | % | 7.2 | % | |||||||||
Nearshore: | |||||||||||||
Revenue | $ | 11,425 | 14.6 | % | $ | 11,063 | 15.2 | % | |||||
Gross profit | $ | 2,456 | 23.7 | % | $ | 1,607 | 50.9 | % | |||||
Gross profit % | 21.5 | % | 14.5 | % | |||||||||
Company Total: | |||||||||||||
Revenue | $ | 78,305 | 100.0 | % | $ | 72,756 | 100.0 | % | |||||
Gross profit | $ | 10,347 | 100.0 | % | $ | 3,159 | 100.0 | % | |||||
Gross profit % | 13.2 | % | 4.3 | % |
For the Nine Months Ended September 30, | |||||||||||||
2016 | 2015 | ||||||||||||
(in 000s) | (% of Total) | (in 000s) | (% of Total) | ||||||||||
Domestic: | |||||||||||||
Revenue | $ | 141,537 | 61.5 | % | $ | 117,281 | 58.7 | % | |||||
Gross profit | $ | 10,858 | 42.2 | % | $ | 4,940 | 33.8 | % | |||||
Gross profit % | 7.7 | % | 4.2 | % | |||||||||
Offshore: | |||||||||||||
Revenue | $ | 55,475 | 24.1 | % | $ | 55,599 | 27.8 | % | |||||
Gross profit | $ | 9,935 | 38.6 | % | $ | 5,569 | 38.2 | % | |||||
Gross profit % | 17.9 | % | 10.0 | % | |||||||||
Nearshore: | |||||||||||||
Revenue | $ | 33,061 | 14.4 | % | $ | 26,994 | 13.5 | % | |||||
Gross profit | $ | 4,953 | 19.2 | % | $ | 4,081 | 28.0 | % | |||||
Gross profit % | 15.0 | % | 15.1 | % | |||||||||
Company Total: | |||||||||||||
Revenue | $ | 230,073 | 100.0 | % | $ | 199,874 | 100.0 | % | |||||
Gross profit | $ | 25,746 | 100.0 | % | $ | 14,590 | 100.0 | % | |||||
Gross profit % | 11.2 | % | 7.3 | % |
Exhibit | Incorporated Herein by Reference | ||||||||
No. | Exhibit Description | Form | Exhibit | Filing Date | |||||
2.1 | Membership Interest Purchase Agreement, dated as of May 11, 2015, by and among StarTek, Inc. MDC Corporate (US) Inc. and MDC Acquisition Inc. (excluding schedules and exhibits, which StarTek, Inc. agrees to furnish supplementally to the Securities and Exchange Commission upon request). | 8-K | 2.1 | 5/12/2015 | |||||
3.1 | Restated Certificate of Incorporation of StarTek, Inc. | S-1 | 3.1 | 1/29/1997 | |||||
3.2 | Amended and Restated Bylaws of StarTek, Inc. | 8-K | 3.2 | 11/1/2011 | |||||
3.3 | Certificate of Amendment to the Certificate of Incorporation of StarTek, Inc. filed with the Delaware Secretary of State on May 21, 1999 | 10-K | 3.3 | 3/8/2000 | |||||
3.4 | Certificate of Amendment to the Certificate of Incorporation of StarTek, Inc. filed with the Delaware Secretary of State on May 23, 2000 | 10-Q | 3.4 | 8/14/2000 | |||||
4.1 | Specimen Common Stock certificate | 10-Q | 4.2 | 11/6/2007 | |||||
10.1*& | Contract Center Master Services Agreement between Startek, Inc and AT&T Services, Inc. effective 8/8/2016 | ||||||||
31.1* | Certification of Chad A. Carlson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||
31.2* | Certification of Don Norsworthy pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||
32.1* | Written Statement of the Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||||||
101* | The following materials are formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2016 and 2015 (Unaudited), (ii) Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015, (iii) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015 (Unaudited) and (iv) Notes to Consolidated Financial Statements (Unaudited) |
* | Filed with this Form 10-Q. | |
& | Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission. |
STARTEK, INC. | ||
By: | /s/ CHAD A. CARLSON | Date: November 8, 2016 |
Chad A. Carlson | ||
President and Chief Executive Officer | ||
(principal executive officer) | ||
By: | /s/ DON NORSWORTHY | Date: November 8, 2016 |
Don Norsworthy | ||
Senior Vice President, Chief Financial Officer and Treasurer | ||
(principal financial and accounting officer) |
1. | Scope of Agreement |
1.1. | Services. |
1.2. | Orders |
a. | A description of the Services; |
b. | Performance metrics, including applicable payment adjustments; |
c. | The requested Delivery Date; and/or performance schedule of the Services; |
d. | Pricing or rates; |
e. | The location where Services is to be performed; |
f. | The location to which invoices are to be rendered for payment; |
g. | AT&T’s Order number; |
h. | The maximum total expenditure authorized, if applicable; |
i. | AT&T Vendor Manager(s); and |
j. | Any Special Terms and Conditions. |
1.3. | Pricing |
1.4. | Non-Commitment; Non-Exclusivity. |
1.5. | Affiliates. |
1.6. | Term of Agreement. |
2. | Delivery, Performance, Acceptance and Availability |
2.1. | Delivery of Services. |
2.2. | Notice of Acceptance. |
2.3. | Anticipated Delays. |
3. | Invoicing and Payment |
3.1. | Invoicing |
3.2. | Reimbursable Expenses. |
3.3. | Most Favored Customer. |
3.4. | Taxes |
a. | Supplier shall invoice AT&T the amount of any federal excise, state, and local transaction taxes imposed upon the sale of Material and provision of Services under this Agreement. All such taxes must be stated as separate items on a timely invoice listing the taxing jurisdiction imposing the tax. Installation, labor and other non-taxable charges must be separately stated. AT&T shall pay such applicable taxes to Supplier that are stated on and at the time the Material or Services invoice is submitted by Supplier. Supplier shall remit taxes to the appropriate taxing authorities. Supplier shall honor tax exemption certificates, and other appropriate documents, which AT&T may submit, pursuant to relevant tax provisions of the taxing jurisdiction providing the exemption. |
b. | Supplier shall pay any penalty, interest, additional tax, or other charge that may be levied or assessed as a result of the delay or failure of Supplier, for any reason, to pay any tax or file any return or information required by law, rule or regulation or by this Agreement to be paid or filed by Supplier. |
c. | Upon AT&T’s request, the Parties shall consult with respect to the basis and rates upon which Supplier shall pay any taxes or fees for which AT&T is obligated to reimburse Supplier under this Agreement. If AT&T determines that in its opinion any such taxes or fees are not payable, or should be paid on a basis less than the full price or at rates less than the full tax rate, AT&T shall notify Supplier in writing of such determinations, Supplier shall make payment in accordance with such determinations, and AT&T shall be responsible for such determinations. If collection is sought by the taxing authority for a greater amount of taxes than that so determined by AT&T, Supplier shall promptly notify AT&T. If AT&T desires to contest such collection, AT&T shall promptly notify Supplier. Supplier shall cooperate with AT&T in contesting such determination, but AT&T shall be responsible and shall reimburse Supplier for any tax, interest, or penalty in excess of AT&T’s determination. |
d. | If AT&T determines that in its opinion it has paid Supplier for any taxes in excess of the amount that AT&T is obligated to pay Supplier under this Agreement, AT&T and Supplier shall consult in good faith to determine the appropriate method(s) of recovery of such excess payments, which method(s) may include, but is not limited to, (i) Supplier immediately refunding to AT&T such excess payments, (ii) Supplier crediting any excess payments against tax amounts or other payments due from AT&T if and to the extent Supplier can make corresponding adjustments to its payments to the relevant tax authority, and (iii) Supplier timely filing claims for refund and any other documents required to recover any excess payments and Supplier promptly remitting to AT&T all such refunds and interest received. |
e. | If any taxing authority advises Supplier that it intends to audit Supplier with respect to any taxes for which AT&T is obligated to reimburse Supplier under this Agreement, Supplier shall (i) promptly so notify AT&T, (ii) afford AT&T an opportunity to participate on an equal basis with Supplier in such audit with respect to such taxes and (iii) keep AT&T fully informed as to the progress of such audit. Each Party shall bear its own expenses with respect to any such audit, and the responsibility for any additional tax, interest or penalty resulting from such audit is to be determined in accordance with the applicable provisions of this Taxes Section. Supplier’s failure to comply with the notification requirements of this Taxes Section will relieve AT&T of its responsibility to reimburse Supplier for taxes only if Supplier’s failure materially prejudiced AT&T’s ability to contest imposition or assessment of those taxes. |
f. | In addition to its rights under Subsections c., d., and e. above with respect to any tax or tax controversy covered by this Taxes Section, AT&T is entitled to contest, pursuant to applicable law and tariffs, and at its own expense, any tax previously invoiced that it is ultimately obligated to pay. AT&T is entitled to the benefit of any refund or recovery of amounts that it has previously paid resulting from such a contest. Supplier shall cooperate in any such contest, but AT&T shall pay all costs and expenses incurred in obtaining a refund or credit for AT&T. |
g. | If either Party is audited by a taxing authority or other governmental entity in connection with taxes under this Taxes Section, the other Party shall reasonably cooperate with the Party being audited in order to respond to any audit inquiries in an appropriate and timely manner, so that the audit and any resulting controversy may be resolved expeditiously. |
h. | AT&T and Supplier shall reasonably cooperate with each other with respect to any tax planning to minimize taxes. The degree of cooperation contemplated by this Section is to enable any resulting tax planning to be implemented and includes, but is not limited to: (i) Supplier’s installing and loading all of the Software licensed by AT&T, and retaining possession and ownership of all tangible personal property, (ii) Supplier’s installing, loading and/or transferring the Software at a location selected by AT&T, and (iii) Supplier’s Delivery of all of the Software in electronic form. |
i. | Supplier and any of its affiliates, as appropriate, receiving payments hereunder shall provide AT&T with a valid United States Internal Revenue Service (“IRS”) Form W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, W-8IMY, or W-9 (or any successor form prescribed by the IRS). AT&T may reduce any payment otherwise due Supplier in connection with the sale of Material and provision of Services under this Agreement by the amount of any tax imposed on Supplier that AT&T is required to pay directly to a taxing or other governmental authority (“Withholding Tax”). Alternatively, if applicable law permits, AT&T agrees that it will honor a valid exemption certificate or other mandated document evidencing Supplier’s exemption from payment of, or liability for, any Withholding Tax as authorized or required by statute, regulation, administrative pronouncement, or other law of the jurisdiction providing said exemption. AT&T shall provide Supplier with documentation evidencing withholding within a reasonable period of time. |
4. | Supplier Personnel and Provision of Services |
4.1. | Employment and Management Matters. |
4.2. | Reporting Non Compliance and Data Breaches. |
4.3. | Replacement of Personnel. |
4.4. | Access to AT&T Premises. |
4.5. | Entry on AT&T Property - Short Form. |
4.6. | Background Checks. |
a. | make all reasonable efforts, including checking the background, and verifying the personal information to determine all information necessary to verify whether any Supplier employee, contractor or subcontractor and any employee or agent of any Supplier contractor or subcontractor (each a “Supplier Person”) whom Supplier proposes to have perform any Service that permits Physical Entry or virtual or other access to AT&T’s or its customers’ systems, networks, or Information ( “Access”) at any time during the term: |
i. | has been convicted of any felony, or has been convicted of any misdemeanor involving violence, sexual misconduct, theft or computer crimes, fraud or financial crimes, drug distribution, or crimes involving unlawful possession or use of a dangerous weapon (“Conviction”) or |
ii. | is identified on any government registry as a sex offender (“Sex Offender Status”); and |
b. | in addition to the requirements of Subsection (i) above, perform a Drug Screen on any Supplier Person whom Supplier proposes to have access to Customer Information, Systems, or Physical Entry onto AT&T’s or its customers’ premises and not permit any such Supplier Person presenting a positive Drug Screen to have access to Customer Information, Systems, or Physical Entry onto AT&T’s or AT&T’s customers’ premises. |
4.7. | Affordable Care Act. |
a. | health care coverage, or |
b. | affordable healthcare coverage, |
4.8. | Use of Subcontractors. |
4.9. | Offshore Services Permitted Under Specified Conditions. |
a. | Supplier shall not perform any Services under this Agreement, nor allow such performance by any Supplier affiliate or Subcontractor (hereinafter Supplier, its affiliates and Subcontractors are collectively referred to as “Supplier Entity” or “Supplier Entities”), at a location outside the United States (“Offshore Location”) for the purpose of providing Services under this Agreement in the United States unless AT&T consents to such Services to be performed by a Supplier Entity at such Offshore Location. In the event of such consent, the physical location where the Services are to be performed; the Services to be performed at such location; and the identity of the Supplier Entity performing such Services, shall be specifically set forth in Appendix K - Offshore Work. Prior to making any additions or deletions to the physical locations, the Services to be performed at such location, or the Supplier Entities performing Services at an Offshore Location, AT&T must consent to the proposed change and the Parties shall amend Appendix K accordingly. A change in the location where a Service is performed from one Offshore Location to another AT&T approved Offshore Location shall not require an amendment to Appendix K. The requirements of this Section shall be in addition to the Sections entitled, Assignment and Delegation, and Work Done by Others. |
b. | AT&T shall have the right to withdraw its consent to the performance of Services at an Offshore Location by a Supplier Entity at any time in AT&T’s sole discretion if (i) there has been a breach of the terms of this Agreement with respect to an Offshore Location, (ii) a violation of any laws or regulations with respect to the Services performed at such Offshore Location, or (iii) the continued performance of Services at said Offshore Location constitutes a risk to AT&T’s financial or security interests or could reasonably damage AT&T’s reputation, in which event Supplier shall continue to perform such Services at a location within the United States, or at another approved Offshore Location, and the Parties shall amend Appendix K accordingly. |
c. | Supplier’s compliance with this Section, and all Services performed in Offshore Locations with AT&T’s consent, shall be subject to the Section entitled Records and Audit. Supplier shall provide, and shall ensure all Supplier Entities provide, physical access to, AT&T, at no cost, to inspect all Offshore Locations. |
d. | Prior to interconnecting with, or otherwise accessing the AT&T internal company network, or doing any other Services at an Offshore Location, Supplier must be in compliance with all AT&T requirements for such interconnection, access or other Services. |
e. | Any Services under this Agreement performed by a Supplier Entity in an Offshore Location without AT&T’s prior consent in accordance with this Section shall be a breach of this Agreement and, in addition to any other legal rights or remedies available to AT&T in law or in equity, AT&T may immediately Cancel this Agreement without cost, liability or penalty to AT&T other than for payment for Services rendered. |
f. | When AT&T has granted consent for Services to be performed in an Offshore Location, Supplier shall remain fully responsible for compliance with any applicable foreign, federal, state or local law for such Services regardless of whether the Service is being performed by a Supplier Entity. Nothing contained within this Agreement is intended to extend, nor does it extend, any rights or benefits to Subcontractor, and no third party beneficiary right is intended or granted to any third party hereby |
g. | Supplier shall advise AT&T as early as possible prior to any change of Control of any of the Supplier Entities. AT&T may, but shall not be obligated to, Cancel all or part of the Agreement or applicable Order, at AT&T’s option, if, without prior consent of AT&T, through merger or acquisition or other means, there is a change in the Control of any of the Supplier Entities performing the Services at the Offshore Location(s). “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies by one person or entity or a group of persons or entities acting in concert; provided, however, that the legal or beneficial ownership, directly or indirectly, by persons or entities, including governmental entities, acting alone or in concert, of more than thirty percent (30%) of the voting stock for the election of directors of a party shall always be deemed Control. |
5. | Intellectual Property Matters |
5.1. | Ownership of Paid-For Development, Use and Reservation of Rights. |
5.2. | Publicity. |
6. | Compliance |
6.1. | Compliance with Laws. |
6.2. | AT&T Supplier Information Security Requirements (SISR). |
6.3. | Notice of Investigations. |
6.4. | Supplier Citizenship and Sustainability. |
6.5. | Utilization of Minority, Women, and Disabled Veteran Owned Business Enterprises. |
6.6. | Quality Assurance |
a. | Supplier shall use and document quality assurance and quality control processes sufficient to meet its obligations under this Agreement and Orders. Supplier shall provide copies of its processes upon AT&T request. |
b. | Supplier shall monitor Customer Service Representatives for compliance with the standards set forth in this Agreement and an Order. |
c. | Supplier shall provide adequate and timely monitoring, coaching, and feedback to each Customer Service Representative to ensure that Supplier Services meets the performance criteria contained in this Agreement and any Order. The adequacy and timing of Supplier’s monitoring, coaching and feedback shall be at Supplier’s discretion. |
d. | If Supplier or any of its Supplier Facilities is not meeting the performance standards contained in this Agreement or any Order, Supplier shall immediately investigate the situation, take any internal management action that is necessary to meet the applicable standards, and contact the AT&T Vendor Manager to discuss the issue. Supplier shall provide AT&T with a copy of any documentation that is reasonably related to the missed performance standards upon request. Supplier shall collect and submit data to AT&T related to Supplier’s performance in the format and according to the timeline contained in each Order. All such reports or data shall be accurate, complete, and timely. |
e. | Supplier shall record Customer calls and capture screenshots, which may include chat and e-mails, if and as outlined in an Order. Call recordings and screen captures are and shall remain AT&T confidential Information. Supplier shall not use, excerpt, summarize, or disseminate such calls in any manner without the prior written consent of AT&T. |
f. | Supplier shall provide AT&T or its designated third party, pursuant to applicable law, with access to Supplier’s recorded calls, which may include chat and e-mails, handled at Supplier Facilities in support of this Agreement without the intervention of Supplier’s personnel. |
g. | Supplier shall provide a list to AT&T within [*] ([*]) minutes or less when requested by AT&T of IDs and locations of Customer Service Representatives who are currently logged into Supplier's systems. Supplier shall provide such list via secured web access or via access to Supplier’s workforce management system. |
h. | Supplier shall ensure that Customer Service Representatives are aware that from time to time their work may be observed or recorded without their knowledge by Supplier or a designated third party, however, Supplier shall not provide specific advance notice to Customer Service Representative when such observations and/or recordings are to occur. Supplier shall make the necessary system and process changes at no cost to AT&T or its designated third party, to comply with the requirements set forth in this Section. |
i. | Notwithstanding any other provision of the Agreement, AT&T may use a third party to exercise any right or perform any obligation AT&T may have under this Section. |
7. | Warranties |
7.1. | Warranties Subject to Warranty Period. |
7.2. | Warranties Not Subject to Warranty Period. |
a. | Supplier warrants that there are no actions, suits, or proceedings, pending or threatened, which will have a material adverse effect on Supplier’s ability to fulfill its obligations under this Agreement.; and Supplier shall immediately notify AT&T if, during the term of this Agreement when Supplier becomes aware of any action, suit, or proceeding, pending or threatened, which may have a material adverse effect on Supplier’s ability to fulfill the obligations under this Agreement or any Order. |
b. | Supplier warrants that no consent, approval or withholding of objection is required from any entity, including any governmental authority, with respect to the entering into or the performance of this Agreement or any Order. |
c. | Supplier warrants that the Services shall not infringe any patent, copyright, trademark, trade secret or other intellectual property right. Moreover, as of the Effective Date, no third party claim has been alleged against Supplier that any of the Services provided hereunder infringes upon such third party’s intellectual property rights. |
d. | Supplier warrants that Supplier has all necessary skills, rights, financial resources, and authority to enter into this Agreement and related Orders, including the authority to provide or license the Services if Supplier does not solely own all intellectual property rights in such Services. |
e. | Notwithstanding anything to the contrary contained in the termination clause, in the event the AT&T has reason to believe that a breach has occurred or may occur, in addition to its rights and remedies under the law and this Agreement, AT&T may withhold payments, until such time as it has received confirmation to its satisfaction that no breach has occurred or will occur. AT&T shall not be liable to the Supplier for any claim, losses or damages whatsoever related to its decision to withhold payments under this provision. |
7.3. | Other Warranties; Warranty Survival. |
8. | Confidentiality |
8.1. | Information. |
a. | In connection with this Agreement or an Order, including Supplier’s performance of its obligations hereunder and AT&T’s receipt of Services, either Party may find it beneficial to disclose to the other Party (which disclosure may include permitting or enabling the other Party’s access to) certain of its Information. For the purpose of this Section, (i) AT&T’s disclosure of Information to Supplier includes any Information that Supplier creates, obtains, generates, observes, collects, harvests, handles, stores, or accesses, in any way, in connection with this Agreement or an Order and (ii) AT&T Derived Information shall be treated as if it have been disclosed by AT&T to Supplier hereunder. Information (in the case of AT&T, other than Customer Information and AT&T Derived Information) of a disclosing Party shall be deemed to be confidential or proprietary only if it is clearly marked or otherwise identified by the disclosing Party as being confidential or proprietary, provided that if it is orally or visually disclosed (including Information conveyed via email, text, voice message or similar medium), then the disclosing Party shall designate it as confidential or proprietary at the time of such disclosure. Notwithstanding the foregoing, a disclosing Party shall not have any such obligation to so mark or identify, or to so designate, Information that the disclosing Party discloses to or is otherwise obtained by the other Party’s employees, contractors, or representatives (1) who are located on the disclosing Party’s premises, (2) who access the disclosing Party’s systems, customers, operations, infrastructure, network or facilities, or (3) who otherwise obtain AT&T Information in connection with this Agreement; any such Information so disclosed shall automatically be deemed to be confidential and proprietary. Additionally, the failure to mark or designate information as being confidential or proprietary shall not waive the confidentiality where it is reasonably obvious, under the circumstances surrounding disclosure, that the Information is confidential or proprietary; any such Information so disclosed or obtained shall automatically be deemed to be confidential and proprietary. For greater certainty, Information provided by either Party to the other Party (or in the case of AT&T, Customer Information or AT&T Derived Information possessed by Supplier) prior to the Effective Date of this Agreement in connection with the subject matter hereof, including any such Information provided under or protected by a separate non-disclosure agreement (howsoever denominated) is also subject to the terms of this Agreement. Other than Customer Information and AT&T Derived Information, Supplier shall |
b. | With respect to the Information of the disclosing Party, the receiving Party shall: (i) hold all such Information in confidence with the same degree of care with which it protects its own confidential or proprietary Information, but with no less than reasonably prudent care, (ii) restrict disclosure of such Information solely to its employees, contractors, and agents (and, in the case of AT&T, also to its Affiliates’ employees, contractors, and agents) with a need to know such Information, advise such persons of their confidentiality obligations with respect thereto, and ensure that such persons are bound by obligations of confidentiality reasonably comparable to those imposed in this Agreement, (iii) use such Information only as needed to perform its obligations (and, if AT&T is the receiving Party, to receive the benefits of the Services provided) under this Agreement, (iv) except as necessary under the immediately preceding Subpart (iii), not sell, assign, lease, license, copy, distribute, or otherwise use or commercially exploit any such Information or allow anyone else to sell, assign, lease, license, copy, distribute, or otherwise use or commercially exploit such Information, and ensure that any and all copies bear the same notices or legends, if any, as the originals, (v) promptly deliver Customer Information and AT&T Derived Information to AT&T at no cost to AT&T, and in the format, on the media and in the timing prescribed by AT&T (1) at any time at AT&T’s request, and (2) unless otherwise instructed by AT&T, at the expiration or sooner termination of this Agreement and the completion of any requested termination assistance services, and (vi) upon the disclosing Party’s request, promptly return, or destroy all or any requested portion of the Information to the extent still retained by or on behalf of the receiving Party, and provide written certification within [*] ([*]) business days to the disclosing Party that such Information has been returned or destroyed, provided that with respect to archival or back-up copies of Information that reside on the receiving Party’s systems, the receiving Party shall be deemed to have complied with its obligations under this Subpart (vi) if it makes reasonable efforts to expunge from such systems, or to permanently render irretrievable, such copies. |
c. | Neither Party shall have any obligation to the other Party with respect to Information which: (i) at the time of disclosure was already known to the receiving Party free of any obligation to keep it confidential (as evidenced by the receiving Party’s written records prepared prior to such disclosure), (ii) is or becomes publicly known through no wrongful act of the receiving Party (such obligations ceasing at the time such Information becomes publicly known), (iii) is lawfully received from a third party, free of any obligation to keep it confidential, (iv) is independently developed by the receiving Party or a third party, as evidenced by the receiving Party’s written records, and where such development occurred without any direct or indirect use of or access to the Information received from the disclosing Party, or (v) the disclosing Party consents in writing to be free of restriction. |
d. | If a receiving Party is required to provide Information of a disclosing Party to any court or government agency pursuant to a written court order, subpoena, regulatory demand, request under the National Labor Relations Act (an “NLRA Request”), or process of law, then the receiving Party must, unless prohibited by applicable law, first provide the disclosing Party with prompt notice of such requirement and reasonable cooperation to the disclosing Party should it seek protective arrangements for the production of such Information. The receiving Party shall |
e. | A receiving Party’s obligations with respect to any particular Information of a disclosing Party shall remain in effect, including after the expiration or termination of this Agreement, until such time as it qualifies under one of the exceptions set forth in Subsection (c) above. Notwithstanding anything to the contrary herein, Customer Information and AT&T Derived Information shall remain confidential indefinitely and shall never be disclosed or used without the prior written approval of an authorized representative of AT&T. |
f. | Notwithstanding anything to the contrary in this Agreement (including in this Section), Supplier information related to installation, operation, repair, or maintenance shall not be considered confidential or proprietary, and AT&T may disclose any such information for purposes of installing, operating, repairing, replacing, removing, and maintaining the Material. |
g. | AT&T may use Information relating to Supplier performance to create resources for evaluating Supplier’s performance relative to other suppliers supporting a particular business unit or program and that, in such event: |
1. | AT&T may share this Information with other firms supporting the business unit or program; |
2. | Disclosure of such Information by AT&T to other suppliers supporting the business unit or program is not a breach of AT&T’s duty to protect Supplier Information; |
3. | In addition to use by AT&T and as provided above, such evaluative resources are intended to provide Supplier with benchmarking information regarding its performance relative to other firms supporting the business unit or program and relative to AT&T’s expectations so that Supplier can assess any need for improvement. Supplier shall not use any such evaluative resources for any other purpose. In particular and without limitation, Supplier shall not use any evaluative resources in any marketing, sales, or other efforts and all Information related to the existence, rankings, performance, ranking, contents, and criteria of all evaluative resources shall be disclosed only to individuals within Supplier and, even then, shall only be disclosed to individuals who have a bona fide need to know such Information. |
h. | Supplier shall: |
1. | Train its Customer Service Representatives regarding their obligations under the law, the Agreement, and all Orders issued pursuant hereto; |
2. | Monitor Customer Service Representatives actions, including their use of websites, for compliance; |
3. | Immediately notify AT&T Vendor Manager(s) in the event of any suspected or actual activities of Customer Service Representatives that would or could reasonably constitute a violation of the Law, the Agreement or an Order; |
4. | Identify areas where Supplier’s processes, systems, and monitoring may be vulnerable and take action to reduce the risk of unauthorized access, use, or disclosure of any AT&T Information. |
i. | If Supplier discovers or is notified that AT&T Information has been posted on an unsecure website, Supplier shall remove or cause the removal such AT&T Information within [*] ([*]) hours of such discovery or notification. Time is of the essence for such removal. Supplier shall |
j. | Supplier acknowledges that AT&T has a duty to protect AT&T Information. If AT&T determines in its sole and absolute discretion that Supplier or the Supplier facility is inadequately protecting AT&T Information, AT&T shall have the right to stop or reduce calls routed to Supplier or to the Facility. If such determination results in AT&T not delivering the forecasted volume of Services to Supplier or the Supplier facility, Supplier shall not be entitled to any payment under the forecast guarantee provisions in the Order. |
8.2. | Customer Information. |
a. | not use any CPNI to market or otherwise sell products to AT&T’s customers, except to the extent necessary for the performance of Services for AT&T or as otherwise approved or authorized by AT&T in this Agreement or in writing; |
b. | Make no disclosure of Customer Information to any party other than AT&T, except to the extent necessary for the performance of Services for AT&T or except such disclosure required under force of law; provided that Supplier shall provide AT&T with notice immediately upon receipt of any legal request or demand by a judicial, regulatory or other authority or third party to disclose or produce Customer Information; Supplier shall furnish only that portion of the Customer Information that is legally required to furnish and shall provide reasonable cooperation to AT&T should AT&T exercise efforts to obtain a protective order or other confidential treatment with respect to such Customer Information; |
c. | not incorporate any Customer Information into any database other than in a database maintained exclusively for the storage of AT&T’s Customer Information; |
d. | not incorporate any data from any of Supplier’s other customers, including Affiliates of AT&T, into AT&T’s customer database; |
e. | make no use whatsoever of any Customer Information for any purpose except to comply with the terms of this Agreement; |
f. | make no sale, license or lease of Customer Information to any other party; |
g. | restrict access to Customer Information to only those employees of Supplier that require access to perform Services under this Agreement; |
h. | prohibit and restrict access or use of Customer Information by any of Supplier’s other customers, Supplier’s Affiliates, or third parties except as may be agreed otherwise by AT&T; |
i. | promptly return all Customer Information to AT&T upon expiration or termination of this Agreement or applicable schedule or Order, unless expressly agreed or instructed otherwise by AT&T; and |
j. | immediately notify AT&T upon Supplier’s awareness of (1) any breach of the above-referenced provisions, (2) any disclosure (inadvertent or otherwise) of Customer Information to any third party not expressly permitted herein to receive or have access to such Customer Information, or (3) a breach of, or other security incident involving, Supplier’s systems or network that could cause or permit access to Customer Information inconsistent with the above-referenced provisions, and such notice shall include the details of the breach, disclosure or security incident. |
9. | Limitation of Damages, Indemnities and Insurance |
9.1. | Limitation of Damages. |
9.2. | Indemnity. |
a. | Except for Covered Losses which are provided for in the Section entitled “Infringement,” Supplier shall indemnify, hold harmless, and defend AT&T and its Affiliates, as well as their respective agents, distributors and customers, individually or collectively, as the case may be, in accordance with this Section, against any Loss arising from, or in connection with, or resulting from, the Material or Services furnished by Supplier or Supplier acts or omissions with respect to this Agreement or Employment Claims. Supplier duty to indemnify, hold harmless, and defend against Loss extends to Loss that may be caused or alleged to be caused in part by the negligence of AT&T and other persons indemnified under this Agreement, to the fullest extent that such indemnification is permitted by applicable Law. |
b. | AT&T shall notify Supplier promptly of any Loss but such notice shall not be a precondition of Supplier’s obligations under this Section, and any delay in such notice shall not relieve Supplier of its obligations under this Section, except if and only to the extent that Supplier can show that such delay actually and materially prejudices Supplier. |
c. | At the request of AT&T, Supplier shall conduct AT&T’s defense (employing counsel reasonably acceptable to AT&T), at Supplier expense, against any Loss within the scope of this Section. At its own option, AT&T may employ separate counsel, including in-house counsel, to conduct AT&T’s defense against such a Loss. AT&T and Supplier shall cooperate in the defense against any such Loss. Supplier may control the defense and settlement of such a Loss, but if the settlement of a Loss may have an adverse effect on AT&T, then Supplier shall not settle such Loss without the consent of AT&T, and AT&T shall not unreasonably withhold or delay its consent. |
d. | AT&T has no duty to indemnify, hold harmless or defend Supplier against Loss arising from or in connection with, resulting from, or relating to this Agreement or the performance of any Party to this Agreement. Supplier shall have no right of, nor shall Supplier bring, any claim or action for contribution, or [*] against AT&T, its Affiliates, or their agents or employees, nor shall Supplier implead any of them in any action brought by another and based on injury to the person or death arising out or relating to Supplier performance under this Agreement. |
e. | Supplier waives any immunity from indemnification that Supplier may hold, by virtue of Supplier compliance with its Workers’ compensation obligations in any jurisdiction, even if such immunity arises under the constitution or statutes of such jurisdiction (such as, for example, Section 35, Article II, of the Ohio Constitution and Sections 4123.74 and 4123.741 of the Ohio Revised Code). |
9.3. | Infringement. |
9.4. | Insurance. |
10. | Records and Audits |
10.1. | Records |
a. | the accuracy and integrity of Supplier’s invoices and AT&T’s payment obligations hereunder; |
b. | that the Services have been and are being provided by Supplier and its Subcontractors in accordance with this Agreement; and |
c. | that Supplier and its Subcontractors are complying with Laws. |
d. | that the Services charged were actually performed; |
e. | the integrity of Supplier’s systems that process, store, support, maintain, and transmit AT&T data; and |
f. | the performance of Supplier’s Subcontractors with respect to any portion of the Services; |
10.2. | Access at Reasonable Times. |
a. | any facility at which the Services or any portion thereof are being performed; |
b. | systems and assets used to provide the Services or any portion thereof; |
c. | Supplier employees and Subcontractor employees providing the Services or any portion thereof; and |
d. | all Supplier and Subcontractor records, including financial records relating to the invoices and payment obligations and supporting documentation, pertaining to the Services. |
10.3. | Scope of AT&T Audits. |
a. | practices and procedures used in performing the Services; |
b. | systems, communications and information technology used in performing the Services; |
c. | general controls and security practices and procedures; |
d. | supporting information and calculations regarding invoices and compliance with service requirements; |
e. | quality initiatives and quality assurance; |
f. | compliance with the terms of this Agreement; and |
g. | AT&T’s access to the records and other supporting documentation shall include the right to inspect and photocopy Supplier’s documentation and the documentation of its Subcontractors, and the right to retain copies thereof outside of their physical location with appropriate safeguards, if such retention is deemed reasonably necessary by AT&T. |
h. | In the event AT&T has reason to believe that a breach has occurred or may occur, AT&T shall have the right to audit; or have a third party acceptable to AT&T conduct the audit at Supplier’s expense, in order to ensure that no breach has occurred. Supplier shall, and shall cause Customer Service Representatives to, fully cooperate in any audit. Audits under this subsection may be conducted as often as deemed necessary by AT&T to assure compliance. |
10.4. | Cooperation with Audits. |
a. | if requested by governmental authorities; |
b. | if required by applicable Law; |
c. | if an audit uncovers any problems or deficiencies; |
d. | d a security violation occurs or has possibly occurred; |
e. | or a Clean Desk Audit. |
10.5. | Clean Desk Audits |
10.6. | Overcharges. |
10.7. | Preservation of Records. |
10.8. | Audit Expenses. |
10.9. | Audit of Subcontractors. |
11. | Termination |
11.1. | Termination for Convenience. |
11.2. | Termination for Cause. |
11.3. | Partial Termination. |
11.4. | Termination of Related Orders. |
11.5. | Termination Charges. |
11.6. | Obligations upon Expiration or Termination. |
11.7. | Orderly Transition |
a. | Full cooperation in the orderly transition of Services to AT&T or a third party service provider; |
b. | Supplier shall provide to AT&T and any designated third party service provider, to the extent available, applicable requirements, standards, policies, operating procedures and other documentation, reports, call recordings, chat transcripts, screen captures, files and other information associated with the Services, at no additional cost; |
c. | Continuation of Services during the transition period and at reduced levels if Services is transferred in part; |
d. | Supplier shall assist AT&T in developing a plan which shall specify the tasks to be performed by the Parties in connection with the transition and the schedule for the performance of such tasks, at AT&T’s request; |
e. | For a period not to exceed [*] ([*]) months following the full transition, Supplier shall answer all reasonable verbal or written questions from AT&T regarding the Services on an “as needed” basis. |
12. | Miscellaneous |
12.1. | Electronic Data Interchange. |
a. | AT&T Guidelines. Supplier shall transfer Data in accordance with the guidelines located at http://www.attpurchasing.com. |
b. | Statute of Frauds. All Data transmitted pursuant to this clause shall be deemed to be a “writing” or “in writing” for purposes of the Uniform Commercial Code. Any such Data containing or having affixed to it a Signature shall be deemed for all purposes to: (i) to have been “signed” and “executed,” and (ii) to constitute an “original” when printed from electronic files or records established and maintained in the normal course of business. |
c. | Method of Exchange. Data shall be exchanged by direct electronic or computer systems communication between AT&T and Supplier or by indirect communications using a third party service provider to translate, forward and/or store such Data. Each Party shall be responsible for the cost(s) and associated cost(s) of any such third party service provider with which it contracts. |
12.2. | Independent Contractor. |
a. | Supplier is engaged in an independent business and, except as specifically provided herein, shall perform all obligations under this Agreement as an independent contractor and not as the agent or an employee of AT&T; |
b. | Supplier personnel performing Services shall be considered solely the employees of Supplier and not employees of AT&T; |
c. | Supplier has and retains the right to exercise full control of and supervision over the performance of the Services and full control over the employment, direction, assignment, compensation, and discharge of all personnel performing the Services; |
d. | Supplier is solely responsible for all matters relating to compensation and benefits for all of Supplier personnel who perform Services. This responsibility includes (i) timely payment of compensation and benefits, including, but not limited to, overtime pay, medical, dental, and any other benefit, and (ii) all matters relating to compliance with all employer obligations to withhold employee taxes, pay employee and employer taxes, and file payroll tax returns and information returns under local, state and federal income tax laws, unemployment compensation insurance and state disability insurance tax laws, social security and Medicare tax laws, and all other payroll tax laws or similar laws with respect to all Supplier personnel providing Services; |
12.3. | Cumulative Remedies. |
12.4. | No Liens. |
12.5. | Assignment and Delegation. |
a. | the assignor fails to give the non-assigning Party at least thirty (30) days prior notice, |
b. | the assignment purports to impose upon the non-assigning Party additional costs or obligations in addition to the payment of such money, or |
c. | the assignment purports to preclude AT&T from dealing solely and directly with Supplier in all matters pertaining to this Agreement. Any assignment, delegation or transfer for which consent is required hereby and which is made without such consent given in writing is void. |
12.6. | Third Party Administrative Services. |
a. | collecting and verifying certificates of insurance, |
b. | providing financial analysis, |
c. | verifying certifications under the Section entitled “Utilization of Minority, Women, and Disabled Veteran Owned Business Enterprises,” and |
d. | collecting and verifying Supplier profile information. |
12.7. | Supplier`s Audited Financial Statements. |
12.8. | Entire Agreement. |
12.9. | Force Majeure. |
a. | such Party’s performance is prevented or delayed by an act or event (other than economic hardship, changes in market conditions, insufficiency of funds, or unavailability of equipment and supplies) that is beyond its reasonable control and could not have been prevented or avoided by its exercise of due diligence; |
b. | such Party gives notice to the other Party, as soon as practicable under the circumstances, of the act or event that so prevents such Party from performing its obligations; and |
c. | such Party continues to use commercially reasonable efforts to recommence performance or observance whenever and to whatever extent possible without delay. |
a. | terminate this Agreement and/or affected Order, in whole or in part, without any liability to Supplier; or |
b. | suspend this Agreement and/or the affected Order or any part thereof for the duration of the delay; and (at AT&T’s option) obtain Services elsewhere and deduct from any commitment under this Agreement or such Order the quantity of the Services obtained elsewhere or for which |
12.10. | Time is of the Essence. |
12.11. | Governing Law. |
12.12. | Forum for Judicial Actions. |
12.13. | Mediation of Disputes Relating to Indemnification. |
12.14. | Amendments and Waivers. |
12.15. | Severability. |
12.16. | Construction and Interpretation. |
12.17. | Third Party Beneficiaries. |
12.18. | Survival of Obligations. |
12.19. | Payment Card Industry-Data Security Standards Compliance |
12.20. | Anticorruption Laws |
12.21. | Business Continuity |
a. | Identification of key contacts together with their telephone numbers, cell phone numbers, email addresses, and pagers; |
b. | Identification of alternate contacts together with their telephone numbers, cell phone numbers, email addresses, and pagers; |
c. | Detailed discussion of Supplier’s plan for serving AT&T Customers in the event of an Occurrence. |
d. | Plan for communicating with AT&T regarding an Occurrence; |
e. | Redundancy of facilities and network connectivity; |
f. | Description of Supplier’s ability to support the Order in the event of an Occurrence; |
g. | Description of security precautions taken to protect AT&T Information in the event of an Occurrence; |
h. | Supplier’s plan for testing its BCP; and |
i. | Such other information as AT&T may request be included. |
12.22. | Codes of Conduct |
a. | Supplier shall not say anything misleading, deceptive or untrue. |
b. | Supplier shall not enter into any agreement fraudulently, i.e., order services and then cancel before the service is installed or completed. |
c. | Supplier shall always give its name to the AT&T Competitor, if requested. |
d. | Supplier shall provide its name and client if asked or, as an alternative, terminate the discussion. |
e. | Supplier shall not provide the AT&T Competitor with prices, pricing policies, or any sensitive or confidential or proprietary Information of AT&T in exchange for competitive information. |
f. | Supplier shall obtain AT&T’s prior written authorization, including authorization for funding, for any project requiring services by a third party consultant, payment of any fees in addition to those contemplated by this Agreement, or execution of any other agreement that would require the payment of any additional fees by AT&T to Supplier. |
12.23. | Conflict of Interest |
12.24. | Government Contract Provisions |
12.25. | No Dependence |
12.26. | Work Location |
12.27. | AT&T Data and AT&T Derived Data |
a. | “AT&T Data” means any data or information (i) of AT&T or its customers, that is disclosed or provided to Supplier by, or otherwise obtained by Supplier from, AT&T or any of its customers, including Customer Information and customer proprietary network information (as that term is defined in Section 222 of the Communications Act of 1934, as amended, 47 U.S.C. §222), as well as data and information with respect to the businesses, customers, operations, networks, systems, facilities, products, rates, regulatory compliance, competitors, consumer markets, assets, expenditures, mergers, acquisitions, divestitures, billings, collections, revenues and finances of AT&T; and (ii) not supplied by AT&T or any of its customers but created, generated, collected or harvested by Supplier either (a) in furtherance of this Agreement or an Order hereunder or (b) as a result of Supplier’s having access to AT&T infrastructure, systems, data, hardware, software or processes (for example, through data processing input and output, service level measurements, or ascertainment of network and system information). |
b. | “AT&T Derived Data” means any data or information that is a result of any modification, adaption, revision, translation, abridgement, condensation, compilation, evaluation, expansion or other recasting or processing of the AT&T Data, for example, as a result of Supplier’s observation, analysis, or visualization of AT&T Data arising out of the performance of Supplier’s obligations hereunder. |
a. | AT&T Data is the property of AT&T. To the extent needed to perfect AT&T’s ownership in AT&T Data, Supplier hereby assigns all right, title and interest in AT&T Data to AT&T. No transfer of title in AT&T Data to Supplier is implied or shall occur under this Agreement. AT&T Data shall not be (a) utilized by Supplier for any purpose other than as required to fulfill its obligations under this Agreement, (b) sold, assigned, leased, commercially exploited or |
b. | AT&T shall own all right, title and interest in and to the AT&T Derived Data. To the extent needed to perfect AT&T’s ownership in AT&T Derived Data, Supplier hereby assigns all right, title and interest in AT&T Derived Data to AT&T. AT&T grants to Supplier a license to access, use, and copy the AT&T Derived Data, with no right to grant sublicenses, solely for the performance of Supplier’s obligations during the Term of this Agreement and solely in compliance with AT&T’s privacy policies, including obligations relating to Customer Information. For the avoidance of doubt, Supplier shall not create or develop AT&T Derived Data after the expiration or termination of this Agreement. |
c. | Supplier shall promptly deliver AT&T Data and AT&T Derived Data to AT&T at no cost to AT&T, and in the format, on the media and in the timing prescribed by AT&T (i) at any time at AT&T’s request, (ii) at the expiration or termination of this Agreement and the completion of any requested termination assistance services or (iii) with respect to particular AT&T Data or AT&T Derived Data, at such earlier date that such data is no longer required by Supplier to perform the Services. Thereafter, Supplier shall return or destroy, as directed by AT&T, all copies of the AT&T Data and AT&T Derived Data in Supplier’s possession or under Supplier’s control within [*] ([*]) business days and deliver to AT&T written certification of such return or destruction signed by an officer of Supplier. |
d. | The provisions of this Section shall apply to all AT&T Data and AT&T Derived Data, regardless of whether such data was first disclosed or otherwise provided to, or created, developed, modified, recast or processed by, Supplier before, on or after the Effective Date of this Agreement, and shall survive the expiration or termination of this Agreement. Supplier shall secure AT&T Data and AT&T Derived Data pursuant to the provisions applicable to AT&T Information under the Section titled “AT&T Supplier Information Security Requirements (SISR).” Supplier’s obligation to return AT&T Data and AT&T Derived Data upon AT&T’s request shall not apply to such data which, at the time of AT&T’s request for return, is no longer retained by or on behalf of Supplier. |
12.28. | Customer Contact |
12.29. | Inspection of Work |
12.30. | Previous Services for AT&T |
12.31. | Requirements for Access to AT&T’s System(s) and/or Databases |
a. | When appropriate, Supplier shall have reasonable access to AT&T’s premises during normal business hours, and at such other times as may be agreed upon by the Parties, to enable Supplier to perform its obligations under this Agreement. Supplier shall coordinate such access with AT&T’s designated representative prior to visiting such premises. Supplier will ensure that only persons employed by Supplier or subcontracted by Supplier (each a “Supplier Worker”) will be allowed to enter AT&T’s premises. If AT&T requests Supplier or its Subcontractor to discontinue furnishing any Supplier Worker from performing Work on AT&T’s premises, Supplier shall immediately comply with such request. Such Supplier Worker shall leave AT&T’s premises immediately and Supplier shall not furnish such Supplier Worker again to perform Work on AT&T’s premises without AT&T’s written consent. The Parties agree that, where required by governmental regulations, Supplier will submit satisfactory clearance from the U.S. Department of Defense and/or other federal, state or local authorities. |
b. | AT&T may require Supplier or its Supplier Workers to exhibit identification credentials, which AT&T may issue, to gain unescorted access to AT&T’s premises for the performance of Services. In addition, if any Supplier Worker requires access to AT&T’s Nonpublic Information Resources (as defined in the AT&T Supplier Information Security Requirements), Supplier must obtain from AT&T an ATT UID for each such Supplier Worker. ATT UIDs are provisioned upon successful opening of a worker record within the vendor management system (VMS). |
c. | AT&T currently uses Fieldglass as its VMS vendor but reserves the right to change the VMS vendor at any time and from time to time. Supplier shall enter into an agreement with AT&T’s VMS vendor (Fieldglass or any substitute VMS vendor), at no cost to AT&T, and supply any information about its Supplier Workers reasonably required by the VMS vendor to create a worker record and enable provisioning of identification credentials and ATT UIDs. If Supplier fails to enter into an agreement with AT&T’s VMS vendor to use the VMS, Supplier’s Supplier Workers will not be allowed access to AT&T’s premises (other than on an escorted basis) or to AT&T’s Nonpublic Information Resources. |
d. | Supplier shall ensure that information provided to AT&T or the VMS vendor for its Supplier Workers is 1) input accurately into the VMS (including the SSN/Security ID for the Supplier Worker, the Agreement number in the “Contract or PO #” field as it may be changed, the start and end dates (end date must not be after the expiration date of the Agreement), and the worker classification obtained from the AT&T Sponsoring Manager), 2) maintained properly throughout the term of the engagement, and 3) closed on a timely basis upon the termination or expiration of the engagement or the need for the Supplier Worker to have access to AT&T’s premises or |
e. | If, for any reason, any Supplier Worker is no longer performing such Services or no longer has a need to have access to AT&T’s Nonpublic Information Resources, Supplier shall immediately close the Supplier Worker’s record in the VMS and promptly deliver to AT&T all identification credentials issued to such Supplier Worker. In cases where a Supplier Worker is being removed due to misconduct, Supplier will immediately inform the Sponsoring Manager of the nature of the misconduct. |
f. | Supplier shall comply with AT&T’s corporate policy requiring Supplier and its Supplier Workers to exhibit their company photo identification in addition to the AT&T-issued photo identification when on AT&T’s premises. |
g. | Supplier shall ensure that its Supplier Workers, including employees and Subcontractors, while on or off AT&T’s premises, will (i) perform Work which conforms to the Specifications, (ii) protect AT&T’s material, buildings and structures, (iii) perform Work which does not interfere with AT&T’s business operations, and (iv) perform such Work with care and due regard for the safety, convenience and protection of AT&T, its employees, and its property. |
h. | Supplier shall ensure that all persons furnished by Supplier work harmoniously with all others when on AT&T’s premises. |
i. | AT&T reserves the right to restrict Supplier’s or Supplier Workers’ access to AT&T’s facilities and/or Nonpublic Information Resources, without liability to AT&T, until AT&T is satisfied that Supplier is compliant with its obligations under this Section. In addition, notwithstanding anything to the contrary in the Termination section of this Agreement, if Supplier breaches any of its obligations under this Section, then AT&T may, by giving notice to Supplier, terminate this Agreement, in whole or in part, as of the termination date specified in such notice without regard to any cure period and without liability to Supplier except for payment for Services rendered up to the date of termination. |
12.32. | Customer Protection Policy |
12.33. | Worker Exit from AT&T Programs |
12.34. | Notices. |
AT&T: AT&T Services, Inc. 4119 Broadway Room 650A16 San Antonio, TX 78209 Attn: [*] Email Address: [*] | Supplier: STARTEK, Inc. 8200 E. Maplewood Avenue Suite 100 Greenwood Village, CO 80111 Attn: [*] Email Address: [*] BusinessNumber: [*] Notices Telephone Number: [*] |
a. | If a notice is furnished by hand, on the date of delivery if delivered during business hours on a business day (otherwise on the next business day); |
b. | ii. If a notice is sent by certified mail, U.S. Postal Service overnight or priority mail, or internationally recognized overnight courier, upon the date of delivery as indicated by the receipt or other tracking record; |
c. | iii. If a notice is sent by e-mail, upon successful transmission to the recipient’s email account, if such notice is sent in time to allow it to be accessible by the Addressee before the time allowed for giving such notice expires, and a confirmation copy is sent by one of the other methods. |
12.35. | Transmission of Original Signatures and Executing Multiple Counterparts. |
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the Effective Date. | |
Startek, Inc. | AT&T Services, Inc. |
By: ___________________________________ | By: _______________________________ |
Printed Name: Supplier Signature | Printed Name: Kathleen Holzer-Muniz |
Title: Supplier Title______________________ | Title: Sr. Sourcing Manager |
Date:__________________________________ | Date: ______________________________ |
a. | Average number of Contacts per hour |
b. | Average number of Sales per hour |
c. | Number of total contacted |
d. | Percentage of total campaign list contacted |
e. | Total Sales |
f. | Products Sold |
a. | Number of “no sales” and the reason for no sale (including wrong number, disconnects and refusals) |
g. | Conversion rate |
a. | Number of inbound calls |
b. | Number of calls handled |
c. | Number of calls transferred |
d. | Number of calls abandoned |
e. | Average time per call in queue |
f. | Average speed of answer |
g. | Number of sales completed and products sold |
h. | Number of refusals (no sale) and the reason for the no sale |
a. | Supplier's Responsibilities: |
i. | Supplier shall comply with all state, federal, and local laws and regulations, as well as standards promulgated by the Direct Marketing Association, with regard to DNC lists and procedures except where AT&T expressly assumes responsibility for compliance. |
ii. | Supplier shall establish and implement written procedures for complying with applicable Telemarketing Rules. |
iii. | Supplier shall train its employees engaged in telemarketing on the Telemarketing Rules and Supplier’s written procedures concerning the Telemarketing Rules. |
iv. | Supplier shall monitor, within its regular course of business, the compliance of its employees with federal and state DNC laws and regulations, the requirements of the Agreement and this Order, and Supplier’s written procedures. |
b. | Supplier shall be responsible for submitting on a daily basis a list of all persons, including their names and telephone numbers, who have indicated to Supplier a desire to be excluded from future AT&T telephone or written solicitations, or who have indicated that they have signed up for a federal or state DNC list, so that AT&T may update its internal do not call and do not write lists. The submission of the daily DNC requests shall be done via the daily response file as well as entering the DNC information on the AT&T DNC Web site. |
c. | Supplier shall establish that an employee’s willful violation of the applicable Telemarketing Rules or Supplier’s written policy concerning such rules constitute grounds for immediate termination from the program. |
d. | Supplier shall maintain records of its compliance with its responsibilities as described in this Section for a period of five (5) years. |
e. | Supplier represents and warrants that it shall comply with the foregoing procedures and with applicable DNC laws and regulations and that it shall reimburse AT&T for the cost of AT&T's defense and for any and all remedies, fines or penalties of any kind that may be imposed on AT&T arising from or related to Supplier's breach of its responsibilities as described in this Agreement. Failure of Supplier to comply with the foregoing provisions shall be considered a breach of the Agreement, and AT&T may, in addition to all other available legal and equitable remedies, immediately terminate this Agreement and/or Order for default, without incurring any liability whatsoever to Supplier for such termination. |
a. | Supplier shall not create print-outs or other hardcopy of SPI (defined in AT&T’s Supplier Information Security Requirements) and/or Customer Information data unless required by the job function and necessary to perform the Services. |
b. | When a hardcopy of SPI and/or Customer Information must be created, Supplier shall label the hardcopy as AT&T Proprietary (Sensitive Personal Information), but only under express authority granted by AT&T for the particular job activity. |
c. | If there is any identified compromise or suspected compromise under investigation, loss or theft of any print-outs or hardcopy containing SPI and/or Customer Information data, Supplier shall notify AT&T on or before close of business on the day following the identification. |
d. | If there is any identified compromise, loss or theft of any print-outs or hardcopy containing SPI and/or Customer Information data, Supplier shall notify AT&T on or before close of business on the day following the identification. |
e. | Supplier shall maintain SPI and/or Customer Information only if mandated by law or if the data element is a necessary attribute for the business process. |
f. | Supplier shall limit replication of SPI and/or Customer Information to the minimum copies (both hardcopy and softcopy) required to achieve the business purposes under this Agreement. |
g. | If SPI and/or Customer Information will reside on any Supplier systems, Supplier shall store such data in a format that is fully compliant with all AT&T standards that have been communicated to Supplier as well as the then-current standards of SISR and PCI industry, as applicable. |
h. | Supplier shall not take print-outs or other hardcopy of SPI and/or Customer Information data outside AT&T or Supplier premises without the prior written consent of AT&T’s Vendor Manager. |
i. | Supplier shall not transmit SPI and/or Customer Information data via regular (insecure) FAX without the express permission of AT&T. |
j. | Supplier shall not transmit SPI and/or Customer Information data via e-mail without encryption, which is explicitly approved by AT&T. |
a. | Using vulgar, offensive, abusive, or sexually oriented language in communications with Customers. |
b. | Making derogatory references to race, color, religion, national origin, sex, age, sexual orientation, marital status, veteran’s status or disability in communications with Customers. |
c. | Yelling or screaming, making rude, argumentative, abrasive, or sarcastic comments in communications with Customers. |
d. | Flirting or making social engagements with Customers or AT&T representatives, including the exchange of personal email addresses. |
e. | Intentional acts of call avoidance, including but not limited to: |
i. | Intentional disconnect of a Customer during a call. |
ii. | Intentional transfer of a call back into the queue that the CSR is trained to handle. |
iii. | Intentional dissemination of inaccurate information or troubleshooting steps in order to release a call without assisting the Customer. |
iv. | Intentionally ignoring a Customer that has been presented to the CSR from a call queue. |
f. | Intentionally abandoning a Customer on hold for an excessive period of time without providing a status update to the Customer. |
g. | Refusing to escalate to a supervisor at the Customer’s request. |
h. | Refusing to assist Customers with requests that the CSR is trained to handle. |
i. | Any unauthorized access, release or use of confidential information, such as Customer account information. This shall include, but not be limited to, accessing a Customer’s email account without permission and/or creating a password for a Customer without authorization. |
j. | Retaining, collecting, accessing, and/or using Customer information for reasons outside the scope of support of an Order. |
k. | Any attempt to falsify AT&T’s records or any record related to a Customer. |
l. | Any statements that intentionally misrepresent, or provide misleading information about, AT&T or its products, pricing or promotions. |
m. | Any intentional or reckless acts that create a risk of compromising the privacy of customer information, including failure to strictly comply with the “Clean Desk Policy,” as Appendix H which requires that AT&T Information be secured any time a CSR goes on a break or is away from the CSR’s work area. |
a. | Suspected improper or fraudulent use of customer or employee information. |
b. | Theft or loss of sensitive customer or employee information, including: |
i. | Accidental or intentional disclosure of sensitive customer information to a third party |
ii. | Customer call records, billing information, or other CPNI |
iii. | Customer financial account, banking or credit information |
iv. | Consumer Social Security Number, date of birth |
v. | Accidental or intentional disclosure of sensitive employee information to a third party |
vi. | Employee Social Security Number, date of birth, financial account information, |
vii. | Employee medical information or health-related records |
viii. | Employee human resources records |
ix. | Improper storage, disposal, or retention of confidential AT&T customer or employee files or records |
a. | Supplier shall ensure that all Agents are prevented access to any writing instruments or paper of any kind, within reason. |
b. | Electronic devices that may be used to record video, take photographs or otherwise communicate information (examples include but are not limited to, mobile phones, blue tooth devices, e-Readers, gaming devices, wearable electronics, personal tablets or laptops) are prohibited. |
c. | Notes displaying sensitive information such as user ID’s, passwords, customer account numbers, or other sensitive personal information of AT&T customers is strictly prohibited. AT&T customer information must NEVER be written down, typed, recorded (voice or image) or transmitted. These prohibitions notwithstanding, Agents may type customer information into authorized AT&T systems only where it is required; and Supplier shall record and retain customer calls and screen shots as required in accordance with the MSA and its Orders. |
d. | Supplier shall disable all external storage ports (CDROM, DVD, or USB drives) from all Agents’ desktop or laptop computers that are used to access AT&T systems or data. |
e. | For all desktop, laptop or tablet computers that are used by Agents to access AT&T systems or data, Supplier shall block access to all internet sites except those approved for use by AT&T. Additionally, access to any websites that allow for webmail, file sharing, data storage, or online notepad capabilities (examples: gmail, yahoo mail, dropbox, one drive, etc.) is prohibited on any desktop or laptop computer that is used by Agents to access AT&T systems or data. |
a. | Clear fax machines, printers and copiers of any AT&T data, records or customer information immediately |
b. | Agents shall lock desktop and /laptop computers when leaving their station for any period of time |
c. | Laptops and tablets that allow for access to AT&T data, records, or customer information must be physically secured in place and may not be removed from the Supplier location |
d. | Supplier shall physically secure any area where AT&T data, records or customer information is accessible to prevent access by unauthorized persons. |
Country(ies) where services are authorized by AT&T to be performed (physical location address is also required if the Services involve Information Technology-related work or if a “virtual” or “work-from-home” address is authorized) | City(ies) where services will be performed for AT&T | Services to be performed at approved Physical Location | Name of Supplier / Supplier Affiliate, and/or Subcontractor performing the services |
[*] | [*] | [*] [*] | Startek, Inc. |
I. | Status |
II. | Work Policies and Rules |
1. | I understand that it is my responsibility to ensure that my personal conduct and comments in the workplace support a professional environment free of inappropriate behavior, language, joke or actions which could be perceived as sexual harassment or as biased, demeaning, offensive, derogatory to others based upon race, color, religion, national origin, sex, age, sexual orientation, marital status, veteran’s status or disability. I further agree to refrain from words or conduct that is threatening and/or disrespectful of others. |
2. | If AT&T Company provides me access to its computer systems, I agree (a) to use such systems in a professional manner, (b) to use such systems only for business purposes, (c) to use such systems in compliance with AT&T Company’s applicable standards and guidelines for computer systems use and applicable laws, and (d) to use password devices, if applicable and if requested by AT&T Company. Without limiting the foregoing, AT&T Company property, including but not limited to Intranet and Internet services, shall not be used for personal purposes or for any purpose which is not directly related to the performance of work in fulfillment of Supplier’s agreement(s) with any AT&T Company. I acknowledge and agree that I must have a valid AT&T Company business reason to access the Intranet and/ or the Internet from within AT&T Company’s private corporate network. |
III. | Administrative Terms |
1. | This Agreement shall be effective as of the date executed below, and shall remain in effect shall remain in effect through my termination of employment or engagement with Supplier or my reassignment by the Supplier to another job unrelated to the Supplier’s provisioning of services to any AT&T Company unless and until I notify AT&T in writing that the statements set forth in this Agreement are no longer accurate. |
2. | In the event that any provision of this Agreement is held to be invalid or unenforceable, then such invalid or enforceable provisions shall be severed, and the remaining provisions shall remain in full force and effect to the fullest extent permitted by law. |
Date: November 8, 2016 | /s/ CHAD A. CARLSON |
Chad A. Carlson | |
President and Chief Executive Officer |
Date: November 8, 2016 | /s/ DON NORSWORTHY |
Don Norsworthy | |
Senior Vice President, Chief Financial Officer and Treasurer |
Date: November 8, 2016 | /s/ CHAD A. CARLSON |
Chad A. Carlson | |
President and Chief Executive Officer | |
Date: November 8, 2016 | /s/ DON NORSWORTHY |
Don Norsworthy | |
Senior Vice President, Chief Financial Officer and Treasurer |
DOCUMENT AND ENTITY INFORMATION - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Oct. 27, 2016 |
|
Document and Entity Information Abstract | ||
Entity Registrant Name | StarTek, Inc. | |
Entity Central Index Key | 0001031029 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
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 | 15,746,782 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Revenue | $ 78,305 | $ 72,756 | $ 230,073 | $ 199,874 |
Cost of services | 67,958 | 69,597 | 204,327 | 185,284 |
Gross profit | 10,347 | 3,159 | 25,746 | 14,590 |
Selling, general and administrative expenses | 8,767 | 9,335 | 24,668 | 25,981 |
Impairment losses and restructuring charges, net | 187 | 889 | 356 | 3,231 |
Operating profit (loss) | 1,393 | (7,065) | 722 | (14,622) |
Interest and other (expense), net | (374) | (421) | (1,185) | (758) |
Income (loss) before income taxes | 1,019 | (7,486) | (463) | (15,380) |
Income tax expense | 163 | 219 | 334 | 569 |
Net income (loss) | 856 | (7,705) | (797) | (15,949) |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments | 45 | 47 | 152 | 58 |
Change in fair value of derivative instruments | (46) | (682) | 240 | 78 |
Comprehensive income (loss) | $ 855 | $ (8,340) | $ (405) | $ (15,813) |
Net income (loss) per common share - basic | $ 0.05 | $ (0.49) | $ (0.05) | $ (1.03) |
Weighted average common shares outstanding - basic | 15,735 | 15,569 | 15,718 | 15,504 |
Net income (loss) per common share - diluted | $ 0.05 | $ (0.49) | $ (0.05) | $ (1.03) |
Weighted average common shares outstanding - diluted | 16,250 | 15,569 | 15,718 | 15,504 |
CONSOLIDATED BALANCE SHEETS [Parenthetical] (Unaudited) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
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 | 15,746,782 | 15,699,398 |
Common stock, shares outstanding | 15,746,782 | 15,699,398 |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
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 and nine months ended September 30, 2016 are not necessarily indicative of operating results that may be expected during any other interim period of 2016 or the year ending December 31, 2016. The consolidated balance sheet as of December 31, 2015, 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, 2015. 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. Reclassification Certain amounts for 2015 have been reclassified in the consolidated balance sheets to conform to the 2016 presentation. 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 October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 are is currently assessing the potential impact of the adoption of ASU 2016-16 on our consolidated financial statements. In June 2016, FASB issued Accounting Standards Update ("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 are currently evaluating the impact that the adoption of ASU 2016-13 will have on our financial condition, results of operations and cash flows. 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 of 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 are currently evaluating the impact that the adoption of ASU 2016-09 will have on our financial condition, results of operations and cash flows. 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 financial condition, results of operations and cash flows. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes - Balance Sheet Classification of Deferred Taxes (Topic 740) ("ASU No. 2015-17"). ASU No. 2015-17 requires deferred tax liabilities and assets to be classified as noncurrent in the consolidated balance sheets and is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted. It may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We early adopted this ASU for the first quarter of 2016, and we applied it retrospectively to 2015 for comparability. 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 are currently assessing the impact the adoption of ASU 2014-09, including possible transition alternatives, will have on our consolidated financial statements. |
ACQUISITION |
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Sep. 30, 2016 | |
Business Combinations [Abstract] | |
ACQUISITIONS | ACQUISITION On June 1, 2015, we acquired 100% of the membership interests of Accent Marketing Services, L.L.C. ("ACCENT") for $17,492. During the first quarter of 2016, we finalized the valuation of the identifiable assets acquired and liabilities assumed as of the acquisition date, resulting in an immaterial adjustment to accounts payable and goodwill. |
GOODWILL AND INTANGIBLE ASSETS |
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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. In 2015, we concluded that goodwill was not impaired. No indicators of impairment exist as of September 30, 2016. Intangible Assets The following table presents our intangible assets as of September 30, 2016:
Expected future amortization of intangible assets as of September 30, 2016 is as follows:
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IMPAIRMENT LOSSES AND RESTRUCTURING CHARGES |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
IMPAIRMENT LOSSES AND RESTRUCTURING CHARGES | RESTRUCTURING CHARGES Impairment Losses During 2015, we pursued opening additional capacity in our Nearshore segment. In the fourth quarter of 2015 we determined that this additional capacity was not necessary and we recognized an impairment loss of $323 related to certain assets. In September 2016, we impaired the remaining value of the assets when we determined that we would not be able to sell them, resulting in an additional loss of $174. Restructuring Charges The table below summarizes the balance of accrued restructuring costs, which is included in other accrued liabilities in our consolidated balance sheets, and the changes during the nine months ended September 30, 2016:
Domestic Segment In 2015, we made the decision to close the Kansas City, Missouri site and ACCENT's former headquarters office in Jeffersonville, Indiana. In conjunction with the ACCENT acquisition, we also eliminated a number of positions that were considered redundant. We established restructuring reserves for employee related costs of $1,289 at the time the decisions were made, and facility related costs of $272 at the time the facilities were vacated. We expect to pay the remaining costs by the end of 2016. Nearshore Segment During 2015, we pursued opening additional capacity in our nearshore segment. When it became evident that this additional capacity was not necessary, we decided to abandon the plan and establish a restructuring reserve of $112 for the remaining facility costs. We expect the remaining costs to be paid by the end of 2016. |
NET LOSS PER SHARE |
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Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
NET LOSS PER SHARE | NET INCOME (LOSS) PER SHARE Basic net income (loss) per common share is computed on the basis of our weighted average number of common shares outstanding. Diluted earnings per share is computed on the basis of 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 September 30, 2016 totaled 515,649. Securities totaling 2,686,068 for the nine months ended September 30, 2016 and 2,533,403 for the three and nine months ended September 30, 2015, respectively, have been excluded from our calculation because their effect would have been anti-dilutive. |
PRINCIPAL CLIENTS |
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PRINCIPAL CLIENTS | PRINCIPAL CLIENTS The following table represents revenue concentration of our principal clients:
We enter into contracts and perform services with our major clients that fall under the scope of master service agreements (MSAs) with statements of work (SOWs) specific to each line of business. These MSAs and SOWs may automatically renew or be extended by mutual agreement and are generally terminable by the customer or us with prior written notice. Effective July 1, 2011, we entered into a MSA with T-Mobile. It had an initial term of five years and automatically renews for additional one-year periods thereafter. It may be terminated by T-Mobile upon 90 days written notice. Effective July 1, 2011, ACCENT, a business we acquired in 2015, entered into a MSA with Sprint. It had an initial term of three years and automatically renews for additional one-month periods thereafter. It may be terminated by Sprint upon 30 days written notice. On August 8, 2016, we entered into a MSA with AT&T Services, Inc. The agreement has a term of three years from the effective date. There are a number of SOWs for several different lines of AT&T business. These SOWs expire prior to 2018. Effective June 22, 2013, we entered into a MSA with Comcast. The agreement had an initial term of one year and automatically renews for additional one-year periods unless either party gives 90 days written notice of cancellation. The contract was renewed for the year ending June 22, 2017. 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 September 30, 2016, 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 $14,584 and $6,055 for the three months ended September 30, 2016 and September 30, 2015, respectively. |
DERIVATIVE INSTRUMENTS |
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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. The contracts cover periods commensurate with expected exposure, generally three to twelve months. 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 and nine months ended September 30, 2016 and 2015, 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 September 30, 2016:
Derivative assets and liabilities associated with our hedging activities are measured at gross fair value as described in Note 8, "Fair Value Measurements," and are reflected as separate line items in our consolidated balance sheets. |
FAIR VALUE MEASUREMENTS |
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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 assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy.
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DEBT |
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Debt Disclosure [Abstract] | |||||||||||||
DEBT | DEBT Secured Revolving Credit Facility On April 29, 2015, we entered into a secured revolving credit facility ("Credit Agreement") with BMO Harris Bank N.A. ("Administrative Agent" or "Lender"). The Credit Agreement is effective through April 2020 and we may borrow the lesser of the borrowing base calculation or $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 1.75% to 2.50%, depending on current availability. In addition, we will pay a monthly unused fee at a rate per annum of 0.25% on the aggregate unused commitment. Letter of credit fees are charged at the applicable margin times the daily maximum amount available to be drawn under all letters of credit outstanding. As of September 30, 2016, 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, and includes the following financial covenants:
We were in compliance with all such covenants as of September 30, 2016. As of September 30, 2016, we had $22,184 of outstanding borrowings and our remaining borrowing capacity was $26,062. 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 |
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Sep. 30, 2016 | |
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 and nine months ended September 30, 2016 was $454 and $1,279, and for the three and nine months ended September 30, 2015 was $463 and $1,376, and is included in selling, general and administrative expenses. As of September 30, 2016, there was $951 of total unrecognized compensation expense related to nonvested awards, which is expected to be recognized over a weighted-average period of 1.90 years. |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
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ACCUMULATED OTHER COMPREHENSIVE LOSS | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) consisted of the following items:
Reclassifications out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015 were as follows:
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SEGMENT INFORMATION |
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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 September 30, 2016, 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 and nine months ended September 30, 2016 and 2015 is as follows:
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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Sep. 30, 2016 | |
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 October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 are is currently assessing the potential impact of the adoption of ASU 2016-16 on our consolidated financial statements. In June 2016, FASB issued Accounting Standards Update ("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 are currently evaluating the impact that the adoption of ASU 2016-13 will have on our financial condition, results of operations and cash flows. 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 of 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 are currently evaluating the impact that the adoption of ASU 2016-09 will have on our financial condition, results of operations and cash flows. 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 financial condition, results of operations and cash flows. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes - Balance Sheet Classification of Deferred Taxes (Topic 740) ("ASU No. 2015-17"). ASU No. 2015-17 requires deferred tax liabilities and assets to be classified as noncurrent in the consolidated balance sheets and is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted. It may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. We early adopted this ASU for the first quarter of 2016, and we applied it retrospectively to 2015 for comparability. 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 are currently assessing the impact the adoption of ASU 2014-09, including possible transition alternatives, will have on our consolidated financial statements. |
GOODWILL AND INTANGIBLE ASSETS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets | The following table presents our intangible assets as of September 30, 2016:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Expected future amortization of intangible assets as of September 30, 2016 is as follows:
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IMPAIRMENT LOSSES AND RESTRUCTURING CHARGES (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring and Related Costs | The table below summarizes the balance of accrued restructuring costs, which is included in other accrued liabilities in our consolidated balance sheets, and the changes during the nine months ended September 30, 2016:
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PRINCIPAL CLIENTS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue by Major Customers | The following table represents revenue concentration of our principal clients:
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DERIVATIVE INSTRUMENTS (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||
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 September 30, 2016:
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FAIR VALUE MEASUREMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements, Recurring and Nonrecurring | The following tables set forth our assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy.
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Comprehensive Income (Loss) | Accumulated other comprehensive income (loss) consisted of the following items:
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Reclassification out of Accumulated Other Comprehensive Loss | Reclassifications out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015 were as follows:
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SEGMENT INFORMATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | Information about our reportable segments for the three and nine months ended September 30, 2016 and 2015 is as follows:
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ACQUISITION (Details) - Accent Marketing Services, L.L.C. [Member] $ in Thousands |
Jun. 01, 2015
USD ($)
|
---|---|
Business Acquisition [Line Items] | |
Membership interest acquired (percent) | 100.00% |
Total preliminary purchase price allocation | $ 17,492 |
GOODWILL AND INTANGIBLE ASSETS Goodwill (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill | $ 9,077 | $ 9,148 |
GOODWILL AND INTANGIBLE ASSETS Intangible Assets (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangibles | $ 8,990 | |
Accumulated Amortization | 2,008 | |
Net Intangibles | $ 6,982 | $ 7,847 |
Weighted Average Amortization Period (years) | 4 years 5 months 5 days | |
Developed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangibles | $ 390 | |
Accumulated Amortization | 170 | |
Net Intangibles | $ 220 | |
Weighted Average Amortization Period (years) | 3 years 5 months 1 day | |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangibles | $ 7,550 | |
Accumulated Amortization | 1,571 | |
Net Intangibles | $ 5,979 | |
Weighted Average Amortization Period (years) | 4 years 6 months 29 days | |
Trade names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangibles | $ 1,050 | |
Accumulated Amortization | 267 | |
Net Intangibles | $ 783 | |
Weighted Average Amortization Period (years) | 3 years 6 months 25 days |
GOODWILL AND INTANGIBLE ASSETS Future Amortization Expense (Details) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
Remainder of 2016 | $ 285 |
2017 | 1,140 |
2018 | 1,140 |
2019 | 1,131 |
2020 | 1,128 |
Thereafter | $ 2,158 |
IMPAIRMENT LOSSES AND RESTRUCTURING CHARGES (Textuals) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Restructuring Cost and Reserve [Line Items] | ||||
Impairment losses | $ 174 | $ 0 | ||
Restructuring Charges | 103 | |||
Domestic | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring Charges | $ 103 | |||
Nearshore | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Impairment losses | $ 323 | |||
Employee Severance [Member] | Domestic | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring Charges | $ 1,289 | |||
Facility Closing Costs | Domestic | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring Charges | 272 | |||
Facility Closing Costs | Nearshore | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring Charges | $ 112 |
IMPAIRMENT LOSSES AND RESTRUCTURING CHARGES (Summary of Activity, Restructuring Plans) (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2015 | $ 914 |
Reversal | (103) |
Payments | (724) |
Balance as of September 30, 2016 | 87 |
Domestic | |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2015 | 802 |
Reversal | (103) |
Payments | (655) |
Balance as of September 30, 2016 | 44 |
Nearshore | |
Restructuring Reserve [Roll Forward] | |
Balance as of December 31, 2015 | 112 |
Reversal | 0 |
Payments | (69) |
Balance as of September 30, 2016 | $ 43 |
NET LOSS PER SHARE (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Earnings Per Share [Abstract] | ||||
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements | 515,649 | |||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 2,533,403 | 2,686,068 | 2,533,403 |
DERIVATIVE INSTRUMENTS Textual (Details) - Foreign Exchange Contract [Member] |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
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 (Details) - Sep. 30, 2016 - 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 | $ 2,356 | CAD 2,945 | |
PHP | |||
Derivative [Line Items] | |||
Derivative, Notional Amount | 7,473 | PHP 340,000 | |
USD | |||
Derivative [Line Items] | |||
Derivative, Notional Amount | $ 9,829 |
FAIR VALUE MEASUREMENTS (Recurring and Nonrecurring) (Details) - Recurring - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Assets and Liabilities at Fair Value Measured on Recurring Basis | ||
Liabilities, Fair Value Disclosure | $ 159 | $ 524 |
Level 2 | ||
Assets and Liabilities at Fair Value Measured on Recurring Basis | ||
Liabilities, Fair Value Disclosure | 159 | 524 |
Foreign exchange contracts | ||
Assets and Liabilities at Fair Value Measured on Recurring Basis | ||
Liabilities, Fair Value Disclosure | 159 | 524 |
Foreign exchange contracts | Level 2 | ||
Assets and Liabilities at Fair Value Measured on Recurring Basis | ||
Liabilities, Fair Value Disclosure | $ 159 | $ 524 |
SHARE-BASED COMPENSATION (Textuals) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Stock Awards Activity [Line Items] | ||||
Total compensation cost | $ 454 | $ 463 | $ 1,279 | $ 1,376 |
Stock Options | ||||
Stock Awards Activity [Line Items] | ||||
Total unrecognized compensation cost | $ 951 | $ 951 | ||
Weighted-average period that cost is expected to be recognized | 1 year 10 months 25 days |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) AOCI (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Accumulated Other Comprehensive Loss [Roll Forward] | |
Total - Beginning balance | $ (351) |
Foreign currency translation | 242 |
Reclassification to operations | 431 |
Unrealized losses | (48) |
Tax benefit | (233) |
Total - Ending balance | 41 |
Foreign Currency Translation Adjustment | |
Accumulated Other Comprehensive Loss [Roll Forward] | |
Total - Beginning balance | 1,533 |
Foreign currency translation | 242 |
Tax benefit | (90) |
Total - Ending balance | 1,685 |
Derivatives Accounted for as Cash Flow Hedges | |
Accumulated Other Comprehensive Loss [Roll Forward] | |
Total - Beginning balance | (1,884) |
Reclassification to operations | 431 |
Unrealized losses | (48) |
Tax benefit | (143) |
Total - Ending balance | $ (1,644) |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Reclassification (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Cost of services | $ 67,958 | $ 69,597 | $ 204,327 | $ 185,284 |
Selling, general and administrative expenses | 8,767 | 9,335 | 24,668 | 25,981 |
Foreign exchange contracts | Amount Reclassified from Accumulated Other Comprehensive Income | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Reclassification to operations | 0 | 744 | 431 | 1,825 |
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 | 0 | 682 | 416 | 1,682 |
Selling, general and administrative expenses | $ 0 | $ 62 | $ 15 | $ 143 |
SEGMENT INFORMATION (Segment Reporting) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Segment Reporting Information [Line Items] | ||||
Revenue | $ 78,305 | $ 72,756 | $ 230,073 | $ 199,874 |
Gross profit | 10,347 | 3,159 | 25,746 | 14,590 |
Domestic | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 46,050 | 44,552 | 141,537 | 117,281 |
Gross profit | 2,790 | 316 | 10,858 | 4,940 |
Offshore | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 20,830 | 17,141 | 55,475 | 55,599 |
Gross profit | 5,101 | 1,236 | 9,935 | 5,569 |
Nearshore | ||||
Segment Reporting Information [Line Items] | ||||
Revenue | 11,425 | 11,063 | 33,061 | 26,994 |
Gross profit | $ 2,456 | $ 1,607 | $ 4,953 | $ 4,081 |
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