10-K 1 sitel1231201410k.htm FORM 10-K SITEL 12.31.2014 10K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 333-172952
SITEL WORLDWIDE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
16-1556476
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
3102 West End Avenue
Two American Center, Suite 900
Nashville, Tennessee
 
37203
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant's Telephone Number, Including Area Code: (615) 301-7100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES o NO þ
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES þ NO o
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES o NO þ
The Registrant is a voluntary filer of reports required of companies with public securities under Section 13 or 15(d) of the Securities Exchange Act of 1934 and has filed all reports which would have been required of the Registrant during the preceding 12 months had it been subject to such provisions.


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
YES þ NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer o
 
Accelerated filer o
 
 
 
Non-accelerated filer þ
(Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act.)
YES o NO þ
As of June 30, 2014, there was no established public trading market for any of the common stock of the Registrant.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
 
Outstanding
Class
January 31, 2015
Class A, $0.01 par value
38,256,844
Class B, $0.01 par value
88,281,647
Class C, $0.01 par value
23,990

Documents Incorporated by Reference: None




TABLE OF CONTENTS
Item
Page No.
PART I
 
1.
1A.
1B.
2.
3.
4.
 
 
 
PART II
 
5.
6.
7.
7A.
8.
9.
9A.
9B.
 
 
 
PART III
10.
11.
12.
13.
14.
 
 
PART IV
15.
 

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Forward-Looking Statements
This report contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, which are based on the beliefs and assumptions of our management regarding, among other things, our plans, strategies and prospects, both business and financial. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning our possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words "believes," "expects," "anticipates," "intends," "plans," "estimates" or similar expressions. These statements discuss potential risks and uncertainties; therefore, our actual future results may be materially different than those expressed in our forward-looking statements. These statements should be read in conjunction with the other cautionary factors identified under the heading "Risk Factors."
We caution you not to place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date they were made. We do not undertake any obligation to make any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by law, including the securities laws of the United States and rules and regulations of the United States Securities and Exchange Commission (the "SEC"). This Report on Form 10-K includes important information as to risk factors in "Item 1. Business," "Item 1A. Risk Factors," and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.



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PART I
ITEM 1. BUSINESS
Our Company
SITEL Worldwide Corporation ("we," "our," "Sitel," or "the Company") is one of the world’s largest and most diversified providers of customer care outsourcing services. We offer our clients a wide array of services, including customer service, technical support, customer acquisition, retention and revenue generation services, and back office support. The majority of our customer care services are inbound and delivered telephonically, but we are increasingly asked to provide services through other communication channels, including email, online chat, interactive voice response ("IVR"), and social media channels. We serve a broad range of industry end–markets, including financial services, technology, wireless, retail and consumer products, telecommunications, media and entertainment, energy and utilities, travel and transportation, Internet service providers, insurance, public sector, and healthcare. Sitel maintains global standards of excellence providing service through 108 customer experience centers and other facilities located in 21 countries and supporting client customers located in 62 countries across North America, South America, Europe, Africa and Asia Pacific in 40 languages. Home-based agents complement our global network of facilities and provide rapidly scalable services and access to unique skill sets, making Sitel a pioneer in customer experience innovation. We believe that our operating platform handles an estimated 2.1 million customer interactions per day. In 2014, our largest single client and our top 10 client relationships represented approximately 6.0% and 36.3% of our Revenues, respectively, and no single industry end-market represented more than 21.3% of Revenues, which we believe makes us one of the most diversified providers in our industry by client and end-market.
Due to the depth of our client relationships and expertise, we are well positioned to help clients holistically improve the experience of their customer with their brand, using the most appropriate channels and communication methods. We further strive to deliver value to our clients by reducing their operating costs, as well as increasing their revenue through improved customer satisfaction, increased retention, more effective sales interactions and turning cost centers, such as technical support, into profit centers.
Our geographic footprint and multi-lingual support capability aligns with growing demand from our clients that have global customer bases. Our offering of domestic, nearshore, and offshore contact centers and our Work@Home program allows us to provide customized client solutions, to service customers in a single country or across many different countries and at various price points. Our Global Operating System enables us to deliver consistent, high quality service throughout the world while our regionalized operating model allows us to quickly respond to customer needs.
We are organized geographically and have two reporting segments: (1) "Americas," which refers to North America, Latin America, and Asia Pacific; and (2) "EMEA," which refers to Europe, the Middle East, and Africa. Each reporting segment performs substantially the same services for clients. See Note 18 to the Consolidated Financial Statements included in Item 8 of this Report for additional information regarding our reporting segments.
For the year ended December 31, 2014, we reported $1,440.2 million of Revenues, $49.3 million of Operating income, and $117.7 million of Adjusted EBITDA. See Management's Discussion and Analysis within Item 7 of this Report for a reconciliation of Net income to Adjusted EBITDA.
Our Services
With almost three decades of industry experience, we are a leading global business process outsourcing provider of customer care and complementary back-office processes. Our services encompass the entire customer lifecycle, from the acquisition of customers for our clients, to the service, growth, and retention of those customers. Our services are delivered through multiple communication channels, including over telephone, social media, online chat, email, and IVR. These service offerings are complemented by a select range of back-office services.
Our Strategy
Our strategy revolves around the concept of "improving experiences" of our clients, of our customer’s clients and of our people. We want to be the vendor and employer of choice in the customer care outsourcing industry, offering our clients consistent, high-quality, cost-effective, and comprehensive customer care services across multiple regions and business lines. We want our clients and prospective clients to select us over our competitors or their in-house capabilities. We want our employees to select us over our competitors or even opportunities in other industries. Moreover, we want our stockholders and lenders to invest in us over other choices.We believe this strategy will allow us to grow revenues, improve margins, and enhance return on capital.
Our strategy focuses on the following four strategy principles:
Operational Excellence. We have a large and globally diverse base of approximately 225 clients, with exposure to a broad variety of end-markets and limited client concentration. We focus on enhancing our clients’ strategy and business by not

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only reducing their costs per call/contact, but by deploying comprehensive strategies to improve their return on customer investment, improve customer relationships, and enhance their revenue opportunities. We accomplish this through investment in account management, leveraging best practices established through our Global Operating System and investment in new sites, technologies and expanded product offerings. We believe this combination of client-focused initiatives and strong operational performance has resulted in the long-tenured relationships we hold with our clients. As we continue to demonstrate the value of our services, we are frequently able to expand the size and scope of our existing client relationships, specifically as many of our clients consolidate their vendor relationships.
Additionally, as more companies outsource their customer care service requirements, we believe our expertise and execution in customer support will enable us to grow and to add long-term client relationships in diverse industries. We further believe this trend will enhance the stability and growth-potential of our revenue base.
Maximize Return on Invested Capital. We actively manage our capacity, investments, human resources, clients, and infrastructure, allowing us to drive effective utilization of our assets. This allows us to maximize our return on capital and compete at different market price points. Over the past five years, we have aggressively pursued rationalization and optimization efforts reducing indirect costs and closing or consolidating approximately 28 underperforming or underutilized sites, creating a leaner and more focused and flexible operating platform. Additionally, we have reduced our annual selling, general, and administrative expenses by approximately $18.0 million over the last three years, and expect to continue to rationalize and leverage our fixed operating costs going forward. Further, our substantial tax operating loss carry forwards enhance our future cash flow by reducing potential cash tax obligations.
People First. Recognizing that talent is extremely important to our success, we continue to strive to attract, develop and retain a strong team of diverse and high-performing professionals. We believe our emphasis on continual development of in-house talent has positioned us well for growth and better enables us to expand in existing markets and new markets without having to recruit and train new managers. Furthermore, development of our talent allows us to quickly adapt to changing geographic demands of our clients, while still maintaining a consistent service offering. Significant investments in our SITEL Leadership Academy and SITEL University learning platforms help to give our managers the knowledge, ability, and skills needed to succeed at their jobs.
Knowledge Sharing. As a global industry leader with a recognized brand and extensive global footprint, we seek to grow our market share with existing and new clients by introducing new and innovative solutions to enhance the effectiveness and efficiency of our customer interactions. Our knowledge sharing culture utilizes processes, organizational structures, and technology applications that help people share and leverage their knowledge to deliver better experiences to our clients' customers and to our people, driving sustainable growth and value creation to our stockholders.
Our History
We were founded in April 1998 by Onex Corporation with the acquisition of a single contact center in Toronto, Canada. Through 2006, we undertook a number of organic growth initiatives and made several acquisitions that helped us build our infrastructure and develop our process capabilities under the trade name ClientLogic. Throughout our history, our goal has been to provide professional managed, cost efficient and consistent customer care of the highest quality to our clients.
On January 30, 2007, we acquired SITEL Corporation, a business tracing its industry origins back to 1985, to form SITEL Worldwide Corporation. We believe the SITEL Corporation acquisition provided us with expanded technology infrastructure and the increased scale to serve high-growth end-markets within the customer care outsourcing industry. Since the SITEL Corporation acquisition, we have achieved synergies and cost reductions through elimination of facility and corporate overhead redundancies, consolidation of operating units, changes in benefits programs and operational efficiencies.
Our Employees
At January 31, 2015, we had approximately 61,100 employees, with approximately 43,200 employees in Americas and approximately 17,900 in EMEA. We operate in a number of jurisdictions with established works councils and unions. Accordingly, we are subject to laws and regulations, and we are party to collective bargaining and other agreements which stipulate work rules and restrict our ability to hire and fire employees without recourse, severance or adherence to certain due process and grievance procedures. We consider our relations with our employees to be good.
Our employees are critical to the success of our business. Accordingly, we have developed an end-to-end approach that enables us to attract, train, develop, motivate, reward and retain talented employees at all levels throughout our organization. To build rewarding careers for our employees and enable effective planning for continued success and growth, we facilitate an environment that yields strong employee satisfaction and performance.
Information Technology
Strategy Overview. Our information technology ("IT") strategy is to capitalize on stable technology suppliers and Sitel technology offerings to create a balanced portfolio of technology and service offerings that maximizes our value

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proposition to our clients. We strive to develop global relationships with best-of-breed technology providers and use our combined global expertise to provide innovative, flexible and secure solutions for our clients. Our infrastructure allows us to implement our suppliers’ solutions in scalable, on-demand models to effectively manage both client expansion and capital expense.
A key aspect of our IT operational model is the ability to route voice, using Voice over IP ("VoIP") and data traffic, on a common global private network. This network allows us to route contact center work through a wide variety of channels to multiple locations to respond to changes in client requirements and provide business continuity. Additionally, this allows us to support other emerging service delivery models, such as our Work@Home, Premium Technical Support, and Technology Solutions programs, as a complement to our traditional brick-and-mortar customer contact centers.
We also endeavor to deliver continuous availability to our clients across our network and facilities. We do this by working with our suppliers to develop appropriate backup plans and by spreading our facilities across geographies to minimize any natural or regional threats.
In addition to owning or leasing systems hardware, we license the software programs that form the basis of our IT systems. Due to our scale, we are able to maintain favorable relationships with quality software providers of off-the-shelf software products. We also utilize software programs that are specific to our industry, including for workforce management, scripting and computer–telephone integration.
Security and Data Privacy. We have developed and implemented a global security program, supporting policies and related procedures to promote uniform management and deployment of security controls and solutions. Executive team members from our internal functions, including operations, IT, finance, human resources and legal, govern the policy process so that security and data risks, including regulatory requirements, are identified and mitigated.
Our strategy is to deploy and operate our baseline security policy to manage security and data privacy risk at a level suitable for our business. For many of our clients, our baseline security policy meets their needs and enables risks to be managed appropriately for their outsourced solution requirements. Where clients desire higher levels of security, due to the nature of their business risk profile or sector-specific legislation, we evaluate their requirements against our baseline policy and assist clients to identify and implement appropriate and heightened security controls for their outsource solution.
In addition, our agents generally deliver services to our clients’ customers while connected to our clients’ IT systems and enter customer data directly into those clients’ systems. Other than recordings of our agents’ calls with customers, we generally do not store any customer data on our systems. As we are generally liable for potential agent fraud, we work with our clients to mitigate fraud risks and/or the risk of misappropriation of customer data posed by the configuration of client systems. To date, incidents of agent fraud or misappropriation of data generally have been localized.
Operational Technologies. As a provider of customer care services, we promote flexibility in our solutions by blending commercially available components with our internal competencies into solutions meeting each client’s unique business requirements. Our system integration capabilities enable us to develop tailored solutions utilizing both our systems and our clients’ systems.
The core elements of our IT infrastructure that support our customer contact center operations include systems for automatic call distribution, IVR, computer telephony integration, database systems to support client knowledge bases and applications to support specific client requirements. In addition, to support our back office operations, we use technologies such as imaging and scanning systems, workflow management systems, order management systems and customer data warehouses. We utilize systems for digital call recording, workforce scheduling and adherence, employee training and standardized reporting to ensure our operations are working at optimal efficiency. Our systems are monitored through a global incident response team that coordinates the rapid resolution of any service incident and coordinates planned changes to maintain high system availability. The global change management team integrates our operational activities with those of our clients to maintain service levels.
Seasonality
Our business has been generally subject to seasonality, with revenues and profits strongest in the fall months due to the high level of sales activity between our clients and their customers during the holiday season, with slower business during the spring and summer months.
Competition
The customer care outsourcing industry is a highly fragmented and competitive industry. We face our principal competition from the following:
•
Existing and prospective clients with the resources to provide services in-house;

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•
Customer care outsourcing companies such as Arvato AG, Convergys Corporation, Expert Global Solutions, Inc., Sykes Enterprises, Inc., Alorica Incorporated, Teleperformance SA, TeleTech Holdings, Inc., ATENTO SA, and WNS (Holdings) Ltd.;
•
Large multinational information technology services providers, such as Xerox, Hewlett-Packard Company, and IBM Corporation; and
•
Smaller, niche service providers that provide services in a specific geographic market, industry segment or service area.
Competition for contracts for many of our services takes the form of bidding in response to requests for proposals.
We believe the most significant competitive factors in our business include service quality, price, geographic delivery footprint, range of service offering (including implementation of customized solutions to meet client needs), technological expertise, security, and industry experience.
Government Regulations
We are subject to regulation in many jurisdictions around the world as a result of the complexity of our operations and services, particularly in the countries where we have operations and deliver services. We are also subject to regulation by regional bodies such as the European Union.
In addition, the terms of our service contracts typically require us to comply with applicable laws, rules and regulations and industry standards, including payment card industry rules applicable to our clients for whom we transact credit card transactions and requirements applicable to telecommunications service providers. In some contracts, we are required to comply even if such laws and regulations apply to our clients, but not directly to us.
If we fail to comply with any applicable laws, rules, standards or regulations, we may be restricted in our ability to provide services and may also be the subject of civil or criminal actions involving penalties, any of which could have a material adverse effect on our operations.
Available Information
Our Website is www.sitel.com. Our periodic reports and all amendments to those reports required to be filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 are available free of charge on the SEC's Internet site at http://www.sec.gov. There is a link to all reports SITEL Worldwide Corporation has filed with the SEC on our website. Information is also available at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

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ITEM 1A. RISK FACTORS
The following factors, among others, could cause our future results to differ from those contained in forward-looking statements made in this report and presented elsewhere by management from time to time. Such factors, among others, may have a material adverse effect on our business, financial condition, results of operations and cash flows. The risks identified in this section are not exhaustive. We operate in a dynamic and competitive environment. New risk factors affecting us emerge from time to time and it is not possible for management to predict all such risk factors. Further, it is not possible to assess the impact of all risk factors on our business or the extent to which any single factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Given these inherent risks and uncertainties, investors are cautioned not to place undue reliance on forward-looking statements as a prediction of actual results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business or results of operations in the future. In addition, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following discussion of our risk factors speaks only as of the date on which they were made and should be read in conjunction with the Consolidated Financial Statements and related notes included herein. Because of these and other factors, past financial performance should not be considered an indication of future performance. Any of the following risks could materially adversely affect our business, financial condition, results of operations or cash flows.
RISKS RELATING TO OUR BUSINESS
Volatility in the global economy has an adverse effect on our clients’ business and our business and uncertainty in global economic conditions could have a material adverse effect on our business.
The global economy continues to experience economic uncertainty with wide-ranging effects, including volatility in overall economic activity in various parts of the world and in particular industries. Global economic conditions affect our clients’ businesses and the markets they serve. Our revenues and call volumes are often highly correlated with the revenues and sales volumes of our clients as well as with renewals by our clients’ customers. In addition, many of our clients are seeking to consolidate their current group of service providers to a smaller more manageable group that is able to provide integrated service offerings on a global basis. Moreover, when client call volumes decrease due to deteriorating economic conditions, some clients decide to take the services provided by us and our competitors in-house, further reducing our revenues.
Our ability to sustain growth and profitability in the current environment is dependent upon our ability to maintain or gain a greater share of business among our current clients and to attract new clients. There can be no assurance we will be able to do so in the future. Continued economic uncertainty could adversely affect our clients’ financial condition and the levels of business activity of our clients and the industries we serve. In particular, depressed consumer spending levels may cause clients to reduce demand for our services or depress pricing of those services and therefore could have a material adverse effect on our business, results of operations and financial condition, including our ability to refinance maturing debt instruments and to access the capital markets. In the event that some of our customer contact centers do not receive sufficient call volume in the future, we may be required to close them and relocate business to other centers. This would require substantial employee severance, lease termination costs and other reorganization costs.
The countries in which our EMEA reporting segment operates in particular continue to experience significant economic turmoil. Several countries within the EMEA reporting segment are our highest cost locations due to competitive employee pay and benefit rates. When services are moved from one country to another country or we lose client volume and business, there are certain exit costs including lease termination, employee severance and other restructuring costs. In several countries, works councils and unions have agreements in place which require calculated severances. These exit costs could be substantial.
Finally, we are exposed to additional risks related to our clients' ability to pay, which may result in uncollectable accounts receivables. Economic volatility and a prolonged recovery, coupled with tightened credit availability, could adversely affect our clients' liquidity and cause them to delay or reduce their payments to us. Such delays or reductions or the non-payment by our clients of amounts owed to us could require us to increase our allowance for doubtful accounts, negatively impact our cash flow and adversely affect our results of operations.

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Wage increases in the countries, regions, or locations in which we have operations may reduce our profit margin.
Salaries and related benefits of our employees are our most significant costs. A majority of our employees work in our off-shore facilities in which wage levels have historically been significantly lower than wage levels in our domestic facilities for comparably skilled professionals. However, wage levels for comparably skilled employees in most of our off-shore facilities have increased and further increases are expected at a faster rate than in our domestic facilities because of, among other reasons, faster economic growth, increased competition for skilled employees and increased demand for business process services. In addition, labor shortages in some of the regions in which we operate could impact our ability to hire workers, increase the wages necessary to attract such workers or prompt us to re-locate some of our customer contact centers to domestic areas having greater labor availability or higher wages. We may not be able to increase pricing to offset wage increases, which may impact our margins and profitability.
Our inability to attract, hire and retain qualified employees could adversely affect our growth and depress our profit margins.
We operate in a labor-intensive industry and our business depends in part on our ability to attract, hire and retain qualified employees. Some of our customer support services activities require highly trained employees. High rates of turnover are common in our industry, and, as a result, we are continuously required to recruit and train qualified personnel. If our attrition rate increases, our recruiting and training costs could rise and our operating efficiency and productivity may decrease. In addition, failure to hire or retain necessary personnel may adversely impact our ability to perform under our contracts or to implement our growth strategies.
We are exposed to exchange rate fluctuations in the international markets in which we operate. A movement in the value of any of these currencies relative to the U.S. dollar could reduce profits from certain client contracts.
We conduct operations in many areas of the world involving transactions denominated in a variety of functional currencies, which are other than our reporting currency. We are subject to currency exchange rate risk to the extent that our costs may be denominated in currencies other than those in which we earn and report revenues and vice versa. As a consequence, movements in exchange rates could cause our expenses to fluctuate, affecting our profitability and cash flows. In addition, since our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and our various functional currencies have had, and will continue to have, an impact on our earnings.
We also face risks arising from the imposition of exchange controls and currency devaluations. Exchange controls may limit our ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by our foreign subsidiaries or businesses located in or conducted within a country imposing controls. Currency devaluations result in a diminished value of funds denominated in the currency of the country instituting the devaluation. Actions of this nature, if they occur or continue for significant periods of time, could have an adverse effect on our results of operations and financial condition in any given period.
Our reporting currency is the U.S. dollar. Gains and losses from the re-measurement of assets and liabilities that are receivable or payable in a currency other than functional currency are included in the accompanying Consolidated Statements of Comprehensive Loss. The re-measurement has caused the U.S. dollar value of our international results of operations to vary with exchange rate fluctuations, and the U.S. dollar value of our international results of operations will continue to vary with exchange rate fluctuations.
A fluctuation in the value of any of these currencies relative to the U.S. dollar could reduce our profits from non-U.S. operations and the translated value of the net assets of our non-U.S. operations when reported in U.S. dollars in our financial statements. This could have a negative impact on our business, financial condition or results of operations as reported in U.S. dollars. In addition, fluctuations in currencies relative to currencies in which the earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations.
Although we have historically entered into hedging transactions to reduce our exposure to this type of currency exchange risk with respect to certain, but not all, currency pairings, such transactions typically cover only 12 to 18 months forward and as such cannot eliminate all of the risks or potential negative impact on earnings or net assets associated with currency fluctuations, and there is no assurance we will hedge, or be able to hedge, these risks in the future. Further, the markets in which we operate could restrict the removal or conversion of the local or foreign currency, resulting in our inability to hedge against these risks.
The presentation of our financial results may be impacted by the translation of foreign currencies.
We hold assets, incur liabilities, earn revenues and pay expenses in a variety of currencies other than the U.S. dollar, including primarily the Euro, British pound sterling, Canadian dollar, Indian rupee, Mexican peso and Philippine peso. Because our Consolidated Financial Statements are presented in U.S. dollars, we must translate our assets, liabilities, revenues and expenses into U.S. dollars at then-applicable exchange rates. Consequently, increases and decreases in the value of the U.S.

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dollar affect the value of these items in our Consolidated Financial Statements, even if their value has not changed in their original currency. These translations could significantly affect the comparability of our results between financial periods or result in significant changes to the carrying value of our assets, liabilities and stockholders’ equity.
We process, transmit and store personally identifiable information, and the unintended release of this information or a breach of our security measures could result in a claim for damage or loss of business and create unfavorable publicity.
We process, transmit and store personally identifiable information, both in our role as a service provider and as an employer. Additionally, databases used in our operations contain personally identifiable information concerning our clients and their customers. We and our clients each take measures to protect against unauthorized access to this information. Circumvention of these security measures, whether caused by a third party or by employee error or malfeasance, could lead to the misappropriation and dissemination of sensitive or proprietary information such as names, addresses, credit and debit card numbers and other personal information, or interrupt our operations or cause a system denial of service. As a result, we are subject to certain contractual terms, as well as federal, state, and foreign laws and regulations designed to protect personally identifiable information. Many of our contracts do not limit our potential liability for breaches of confidentiality or employee fraud or misconduct. Unauthorized access to information or failure to comply with data privacy laws and regulations may subject us to contractual liability and damages, loss of business, damages from individual claimants, fines, penalties, criminal prosecution, unfavorable publicity and harm to our brand, any of which could negatively affect our operating results and financial condition.
Increases in the cost of voice, data and other technology services or significant interruptions in these services could adversely affect our business, results of operations and financial condition.
We depend on voice and data services and other intellectual property rights provided by and licensed from various telecommunications providers. Because of this dependence, any change to the telecommunications market that would disrupt these services or limit our ability to obtain services at favorable rates could adversely affect our business, results of operations and financial condition. While we have entered into long-term contracts with many of our telecommunications providers, there is no obligation for these vendors to renew their contracts with us or to offer the same or lower rates in the future. In addition, these contracts are subject to termination or modification for various reasons outside of our control. Furthermore, the consolidation of voice and data services to a limited number of telecommunication providers could expose us to risks associated with being dependent upon a limited number of service providers. An adverse change in the pricing of voice, data or other technology services that we are unable to recover through a corresponding change in the price of our services, or any significant interruption in voice, data or other technology services, including a termination or modification of our contracts and licenses with these providers, could adversely affect our business, results of operations and financial condition.
Our business could be adversely affected by a systems or equipment failure or other emergency interruption.
Our operations are dependent upon our ability to protect our customer contact centers, computer and telecommunications equipment, software and other systems against damage and failures. Damage or failures could result from fire, power loss, equipment malfunctions, system failures, problems with Internet access or usage, natural disasters, intentional acts of others and other causes outside of our control. If our business is interrupted for any reason, we may be unable to provide the services we are required to deliver under our client contracts or may incur significant expense in reallocating resources and employees to provide coverage for a business interruption. As a result, we may experience a reduction in revenues or be required to pay contractual damages to some clients or allow some clients to terminate or renegotiate their contracts. In addition, our relationship with these clients may be damaged and our reputation and ability to compete for new clients may be impaired. Our business interruption and property insurance may not adequately cover or compensate us for any losses we may incur. As a result, these interruptions to our business could adversely affect our business, results of operations and financial condition.
Our business is dependent on our information technology and communications platforms.
We have invested in specialized information technology and communications capabilities to service our clients' needs. We expect we will be required to invest continually in new and enhanced technology to manage the increasingly specialized needs of our clients and to maintain our competitiveness. There can be no assurance that any of our information technology platforms will be adequate to maintain our competitiveness or that we will be able to develop or purchase new technology to enhance, develop or maintain our existing platforms.
We are often also dependent on the information technology and communication platforms of our clients. Our contracts typically require us to interface directly with our clients' systems and our agents perform the large majority of their work behind client system firewalls and are given access directly to client customer information. If these client systems do not employ appropriate anti-fraud and other preventative capabilities or are otherwise subject to exploitable weaknesses, we could be exposed to system risks or be held responsible for our agents' actions or omissions in the course of our service renderings.

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Our business could be adversely affected by a cyber incident.
Our operations are dependent upon our ability to rely on our computer networks and the networks of our clients. Our networks and the networks of our clients are subject to many types of cyber attacks, including but not limited to the gaining of unauthorized access to steal or corrupt sensitive data or to disrupt operations, sophisticated electronic circumvention of network security, and social engineering techniques such as "phishing" to extract passwords or other information that will enable the gaining of access. If our business or our clients' business is interrupted for any reason, we may be unable to provide the services we are required to deliver under our client contracts, or we may incur significant expense in reallocating resources and employees to make up for a business interruption related to the cyber attack. As a result, we may experience a reduction in revenues or be required to pay contractual damages to some clients or allow some clients to terminate or renegotiate their contracts. In addition, our relationship with these clients may be damaged and our reputation and ability to compete for new clients may be impaired. As a result, these interruptions to our business could adversely affect our business, results of operations and financial condition.
We enter into long-term and fixed rate contracts with our clients. Our failure to correctly price these contracts may negatively affect our profitability.
The pricing of our services is usually included in contracts entered into with our clients, most of which are for terms of one to three years. In many cases, we commit to fixed rate pricing over the contract term with only limited sharing of risk regarding inflation, currency exchange rates and costs of labor, office space and technology. If we fail to accurately estimate future inflation rates, currency exchange rates or other costs, or if we fail to accurately estimate the productivity benefits we can achieve under our contracts or fail to meet certain operating metrics, it could have a material adverse effect on our business, results of operations and financial condition.
Most of our clients have contracts with us that are non-exclusive, are terminable by the clients without cause, and do not provide for revenue commitments.
While we sign multi-year contracts with our clients, our contracts are terminable by our clients without cause, and, in many cases, do not provide for revenue commitments. In addition, most of our contracts are not exclusive, and many of our clients retain other service providers with whom we compete. We may lose business as a result of clients moving business in-house, using our competitors’ services, or otherwise choosing to terminate us for performance issues or lack of demand.
The loss of a key client could adversely affect our business, results of operations and financial condition.
We derive significant revenues in certain countries in which we operate from a few key clients. The loss of all or a significant portion of our business with these key clients could have a material adverse effect on our business, financial condition and results of operations. Many of our contracts are terminable by the client at their convenience often with only short-term notice. Our contracts further contain few minimum volume commitments and allow clients to reduce their use of our services under these contracts without penalty.
Mergers and acquisitions involving certain of our clients could result in a loss of clients or contract changes that could have a material adverse effect on our business and financial results.
We do business with clients in end-markets that have historically experienced significant merger and acquisition activity and consolidating market share. If any of our key clients is acquired, the client or its acquirer may seek to renegotiate or terminate our contract which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our business is dependent on increasing client demand for outsourcing and may not develop in ways that we currently anticipate due to negative public reaction.
Our business and growth depend in large part on the industry trend toward outsourced customer care management services. However, the trend to outsource business processes may not continue and could reverse. Outsourcing is a politically sensitive topic in the U.S. and abroad. For example, several organizations in the U.S. have publicly expressed concern about a perceived association between outsourcing providers and the loss of jobs in the U.S. In response to such expressions, federal legislative measures have been proposed in the past, such as limiting income tax credits for companies that off-shore American jobs.
In addition, there is ongoing publicity about some negative experiences that organizations have had with outsourcing, such as theft and misappropriation of sensitive client data. Current or prospective clients may elect to perform such services themselves or may be discouraged from transferring these services from onshore to off-shore providers to avoid negative perceptions that may be associated with using an off-shore provider. Any slowdown or reversal of existing industry trends toward off-shore outsourcing could harm our ability to compete effectively with competitors that operate solely out of facilities located in the United States or Canada.

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We typically face a long selling cycle to secure a new contract as well as long implementation periods requiring significant resource commitments, which may delay our realization of revenues from the establishment of new relationships.
We typically face a long selling cycle to secure a new client and incur significant business development expenses during this selling cycle. Typically, before committing to utilize our services, clients or potential clients require us to expend substantial time and resources demonstrating the value of our services and the feasibility of successfully integrating our processes and resources with their operations. Our selling cycle, which generally ranges from four to six months, is subject to many risks and delays over which we have no control, including a potential client’s decision to choose a competitor or retain the work in-house. In the event we are unsuccessful in winning a new client’s business, we receive no revenues and may receive no reimbursement for expenses incurred during the selling cycle.
If we are successful in obtaining an engagement, a long implementation period typically follows before we begin receiving revenues. Our clients may also experience delays in obtaining internal approvals or delays associated with technology or system implementations, thereby further lengthening the implementation period. We generally hire new employees to provide services to a new client once a contract is signed and we may face significant difficulties in hiring such employees and incur significant costs associated with these hires before we receive corresponding revenues.
If we are not successful in obtaining contractual commitments after the selling cycle, in maintaining contractual commitments after the implementation period or in maintaining or reducing the duration of unprofitable initial periods in our contracts, it may have a material adverse effect on our business, results of operations and financial condition.
We face competition from many sources that could adversely affect our business and create pricing pressures that could reduce our profit margins.
Our industry is highly fragmented and competitive. Our principal competition stems from existing and prospective clients with the resources and ability to provide the same or similar services in-house. We also face competition from customer care outsourcing companies, large multi-national information technology services providers and smaller, niche service providers that provide services in a specific geographic market, industry segment or service area. Many of these providers offer one or more of the same services we do. We expect the intensity of competition to continue to increase in the future as existing competitors enhance and expand their service offerings and as new participants enter the market.
Our success depends, in part, on our ability to respond adequately to pricing pressures from our competitors and clients, license or internally develop leading technologies to enhance our existing services and develop new services, and adapt to changing market conditions, client requirements and emerging industry standards. Some of our competitors have, or could acquire, greater financial, personnel, technological, capacity and other resources than we have. As a result, our competitors may be better able to create or withstand pricing pressures in our industry, and may be in a stronger position to respond quickly to potential acquisitions and other market opportunities, new or emerging technologies and changes in client requirements. Competitors with greater financial resources may be able to offer lower prices, additional services or other incentives we cannot match or do not offer. Our failure to maintain and enhance our competitive position would limit our ability to maintain or increase our market share, which could adversely affect our business, results of operations and financial condition. Increased competition also may result in price reductions, reduced gross margins and loss of market share. The prices we are able to charge for our services and our ability to retain current or secure new clients may be affected by our clients’ or potential clients’ perceptions of the financial strength of our company compared to that of our competitors.
Risks associated with our international operations may decrease our revenues and increase our costs.
We operate or rely upon customer contact centers located in 62 countries. A majority of our revenues are serviced outside the U.S. As part of our business strategy, we intend to further increase our global presence off-shore by following our clients’ expansion into new international markets. We also provide services to our domestic clients through customer contact centers located abroad. Our operations in foreign countries present additional risks, including risks associated with unexpected events, which may result in increased operational difficulties, lower revenues, higher costs and reduced profitability.
These risks include but are not limited to the following:
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compliance with numerous, and sometimes varied, legal or regulatory requirements (including data privacy regulation, employment laws and laws regulating corrupt activity such as the Foreign Corrupt Practices Act ("FCPA") and the U.K. Bribery Act of 2010 (the "U.K. Bribery Act") and other anti-bribery laws);
•
restrictions on the transfer of funds into or out of a particular country;
•
domestic and foreign customs, tariffs and trade barriers;
•
potential adverse tax consequences, including the expiration of tax holidays or the failure by foreign governments to renew tax holidays or unfavorable resolution of tax controversies;
•
nationalization of foreign assets and other forms of government protectionism;

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•
political and economic instability;
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labor or other disruptions;
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fluctuations in the exchange rate;
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delays in collecting accounts receivable;
•
restrictions on our ability to adjust the size of our workforce;
•
acts of war or terrorism or natural disasters, and limits on the ability of regional governments to respond to such acts; and
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restrictions on our ability to own or operate subsidiaries, make investments, or acquire new businesses in these jurisdictions.
As noted above, because we operate internationally we are required to comply with numerous legal and regulatory requirements, including the FCPA and the U.K. Bribery Act. The FCPA generally prohibits U.S. companies and their employees from offering, promising, authorizing or making payments to foreign officials for the purpose of obtaining or retaining business or otherwise obtaining favorable treatment. It also includes certain provisions relating to accounting matters. Our employees are subject to a code of conduct which prohibits, among other matters, violations of law, including the FCPA and the U.K. Bribery Act. We monitor compliance with our code of conduct by requiring executives to certify, on a quarterly basis, that such executive is not aware of any acts or omissions which would constitute a violation of our code of conduct. We have updated our corporate policies and implemented a comprehensive, stand-alone Anti-Bribery and Corruption policy. If for any reason our internal controls relating to bribery and corruption are found to be ineffective, such a determination in and of itself might be construed to be a violation of the FCPA.
The U.K. Bribery Act criminalizes (i) commercial bribery and bribery of domestic and foreign government officials; (ii) receipt of a bribe; and (iii) failure by a corporate entity to prevent bribery. Unlike the FCPA, it does not contain a "books and records" provision. The corporate offense of failure to prevent bribery applies not only to U.K. companies, but to any company that conducts part of its business in the U.K., even if no part of the conduct constituting the bribery took place in the U.K. The U.K. Bribery Act does, however, provide for a defense to liability for failure to prevent bribery if the corporate entity can show that it has "adequate procedures" in place to detect and deter such conduct.
Civil penalties under the anti-bribery provisions of the FCPA could range up to $10 thousand per violation, with a criminal fine up to the greater of $2 million per violation or twice the gross pecuniary gain to us or twice the gross pecuniary loss to others, if larger. A company that knowingly commits a violation of the accounting provisions can be fined up to $25 million per violation. Additionally, resolutions of anti-corruption matters may result in modifications to company compliance programs and the selection of a monitor to ensure anti-corruption compliance by the company. Authorities in relevant foreign jurisdictions may also seek to impose fines and other penalties relating to anti-corruption violations. Moreover, a potential investigation could have adverse effects upon our reputation and, among other things, the ability to attract and retain clients and employees.
Any of the above factors could impair our current or future international operations and, as a result, harm our overall business.
Pending and future litigation may divert management’s time and attention and result in substantial costs of defense, damages or settlement, which could adversely affect our business, results of operations and financial condition.
In the ordinary course of our business, we are subject to legal proceedings and claims regarding a variety of matters, including contract, intellectual property, regulatory, tax and employment claims. For detailed information, see Note 14 to the Consolidated Financial Statements included in Item 8 of this Report.
We may not successfully defend against or otherwise satisfactorily resolve current or future litigation to which we are or may become subject. Furthermore, regardless of the outcome of any current or future lawsuits, actions, claims or investigations, we may incur substantial defense costs and these actions may cause a diversion of management’s time and attention. Also, we may be required to alter our business practices or pay substantial damages or settlement costs as a result of these proceedings, which could adversely affect our business, results of operations and financial condition. Further, litigation with any one of our clients could harm our reputation and adversely affect our ability to obtain and retain other clients.
Certain countries (including some where we do business) have experienced political and economic instability and periodically experience civil unrest and terrorism, which could disrupt our operations and have a material adverse effect on our business, results of operations, and financial condition.
Certain countries (including some where we do business) have experienced inflationary markets and have fluctuating currencies. Certain countries where we do business also periodically experience civil unrest, terrorism, and political turmoil,

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and U.S. companies operating therein may experience greater risk. The political event risk in the Middle East and the policy response could undermine the economies in the Middle East, and have other collateral impacts on the world economy, including reduced economic activity due to movements in the price of oil. These conditions could disrupt our operations and have a material adverse effect on our business, results of operations, and financial condition.
Terrorist attacks, other acts of violence or war, and political instability may adversely affect worldwide financial markets and could potentially lead to economic recession or a weakened or lengthened recovery, which could adversely affect our business, results of operations, and financial condition. These events also pose significant risks to our employees and to our operations around the world.
Our financial results depend on our ability to forecast accurately client contact volumes and to make timely decisions regarding employee staffing, capital investments and ordinary course operating expenses.
Our forecasting accuracy directly impacts the costs of staffing and operating our customer contact centers. If we fail to forecast accurately and maintain too many or too few employees to efficiently handle received call volumes, our profitability decreases due to excess operational costs or in some cases penalties assessed by clients for failure to achieve certain performance metrics.
Moreover, efficient utilization of our facility capacity is impacted by the following:
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our ability to maintain, increase, and decrease employment during the course of a day, week or month as call volumes fluctuate; and
•
our ability to hire and train new employees and manage employee turnover.
Because we must make advance capital investments to support expected client demand, we have often experienced periods of inefficient capacity utilization in our customer contact centers particularly in new sites or in existing sites that support clients whose historical business with us has decreased or been terminated altogether. We rationalize or close sites when utilization rates remain inefficient for significant periods of time to improve our profitability and margins. In the event we consolidate or close sites, we may be required to record restructuring or impairment charges, which could adversely impact our results of operations. There can be no assurance that we will be able to achieve or maintain desired levels of efficiency in our sites.
We could cause disruptions to our clients’ business from inadequate service, and our insurance coverage may be inadequate to cover this risk.
If we fail to deliver the service required under a particular client contract or cause harm to a client’s business or operations, our client’s business could be disrupted significantly and we may be subject to damage claims for breach of contract or other causes of action. While we maintain general liability and errors and omissions insurance policies, this insurance coverage may be inadequate to cover one or more large claims, or our insurers may deny coverage. Further, most of our contracts with our clients contain key service level and performance requirements, including requirements relating to customer retention rates, sales rates and other similar performance metrics. Failure to meet service requirements subjects us to penalties under the terms of the contracts, which are reflected as a reduction in our revenues under that contract.
We are subject to extensive regulation that could limit or restrict our activities and impose financial requirements or other limitations on the conduct of our business.
Our business is subject to extensive regulation in each jurisdiction in which we have physical operations as well as in jurisdictions in which we make contact with customers of our clients. Many of these jurisdictions have promulgated and enacted various laws and regulations that govern the methods, timing and processes of making and completing certain types of calls and telephone sales (including sales of insurance) or require us to obtain or make various regulatory registrations, approvals or licenses.
Additionally, new federal, state, local or international legislation, or changes in regulatory implementation, could further limit our activities or those of our clients in the future or significantly increase the cost of regulatory compliance. Future consumer protection and privacy protection laws or regulations are likely to impose additional requirements on telephonic sales, internet communications and other portions of our business and our clients' business.
Our clients’ business operations are subject to certain rules and regulations and our clients generally contractually require that we perform our services in a manner that would enable them to comply with such rules and regulations. Failure to perform our services in compliance with these laws could result in breaches of contract with our clients and, in some limited circumstances, civil fines and criminal penalties for us.
While we believe we can continue to operate our business in substantial compliance with these requirements, there can be no assurance we will satisfy all laws in a timely manner or compliance with all such requirements would not be costly or time consuming. Any failure on our part to comply with laws and regulations applicable to our or our clients’ businesses could

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have an adverse impact on our business, may damage our reputation and may result in civil or criminal sanctions, penalties, court injunctions or administrative enforcement.
Our clients may adopt technologies that decrease the demand for our services, which could reduce our revenues and harm our business.
Our clients may adopt new or existing technologies that decrease the need for live client interactions, such as IVR, web-based or social media facilitated self-help and other technologies used to automate or reduce dedicated interactions with clients. The adoption of such technologies could reduce the demand for our services, put downward pressure on our pricing, cause a reduction in our revenues and harm our business.
If others claim we or our clients are infringing on their intellectual property, we could incur significant expenses or be prevented from providing our services.
Others may assert claims alleging we infringe, dilute, misappropriate or otherwise violate their intellectual property rights. If someone asserts a claim our systems, services, trademarks, software or other technologies or materials infringe on their intellectual property rights, any resulting litigation could be costly and time consuming and would divert the attention of management and key personnel from other business issues. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement also might require us to enter into costly royalty or license agreements. However, we may be unable to obtain royalty or license agreements on terms acceptable to us or at all. We also may be subject to significant damages or an injunction against use of our systems. A successful claim of patent or other intellectual property infringement against us could adversely affect our business, results of operations and financial condition. Further, we generally receive contractual indemnities from our vendors in the event our use of their systems, services, or software infringes, misappropriates or otherwise violates the intellectual property rights of others. In turn, we generally indemnify our customers against claims alleging their use of our systems, services or software infringes, misappropriates or otherwise violates the intellectual property rights of others. In the event any such claims are asserted against us or our customers, our vendors may challenge their obligation to indemnify us, and any contractual indemnities we do receive from our vendors may not be sufficient to cover the costs that could arise as a result of any such claims, either of which could adversely affect our business, results of operations and financial condition.
Existing and future legislation could significantly affect the ability of our clients to utilize our services and significantly increase our costs.
The issue of companies outsourcing services to organizations operating in other countries has been and continues to be a topic of political discussion in many countries. There has been publicity about negative experiences associated with off-shore outsourcing, such as theft and misappropriation of sensitive client data. Current or prospective clients may elect to perform such services themselves or may be discouraged from transferring these services from domestic to off-shore providers to avoid negative perceptions that may be associated with using an off-shore provider. In the United States, measures aimed at limiting or restricting off-shore outsourcing have been proposed and in some states, enacted. The measures that have been enacted to date generally have restricted the ability of governmental entities to outsource work to off-shore business process service providers and have not materially adversely affected our business. Certain recent legislative proposals have focused on banning companies that offshore U.S. jobs from receiving governmental grants and subsidies and requiring such companies to report offshoring activity to regulators. There can be no assurance that pending or future legislation, either in the United States or abroad, will not be proposed or enacted that would significantly and adversely affect our business, results of operations and financial condition.
Further, legislation enacted in certain European jurisdictions and any future legislation in Europe, Asia or any other region in which we have clients restricting the performance of business process services from an off-shore location could also have a material adverse effect on our business, results of operations and financial condition. For example, legislation enacted in the United Kingdom, based on the 1977 EC Acquired Rights Directive which has been adopted in some form by many European Union ("EU") countries, provides that if a company outsources all or part of its business to a service provider or changes its current service provider, the affected employees of the company or of the previous service provider are entitled to become employees of the new service provider, generally on the same terms and conditions as their original employment. In addition, dismissals of employees who were employed by the company or the previous service provider immediately prior to that transfer are automatically considered unfair dismissals that entitle such employees to compensation. As a result, to avoid unfair dismissal claims we may have to offer, and become liable for, voluntary redundancy payments to the employees of our clients in the United Kingdom and other EU countries who have adopted similar laws who outsource business to us. This legislation may materially affect our ability to obtain new business from companies in the EU and, after including the cost of the potential compensation paid for unfair dismissal claims or redundancies, to provide outsourced services to our current and future clients in the EU in a cost-effective manner.
We may incur non-cash impairment charges on our goodwill and other intangible assets with indefinite lives, which could negatively impact our business, financial condition and results of operations.

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We test goodwill and other intangible assets for impairment during the fourth quarter of each year and on an interim date should factors or indicators become apparent that would require an interim test.
As discussed in Note 16 to the Consolidated Financial Statements included in Item 8 of this Report, we performed our annual impairment test as of December 31, 2014, 2013, and 2012. We did not recognize any impairment charges relating to goodwill and other intangible assets with indefinite lives during the years ended December 31, 2014, 2013, and 2012. As of December 31, 2014, goodwill and other intangible assets with indefinite lives represented 23.7% of our total assets. If in the future we determine that there has been an impairment, our financial results for the relevant period would be reduced by the amount of the impairment, net of any income tax effects, which could have an adverse effect on our financial condition and results of operations.
Our ability to use existing net operating losses to offset future taxable income may be subject to certain limitations.
At December 31, 2014, we had U.S. federal net operating loss carryforwards ("NOLs") of $425.8 million, which may be used to offset future taxable income. Of this amount, $131.3 million may only be used to offset future taxable income of up to $13.6 million in any calendar year, including carryover of amounts not used in prior years as a result of a prior ownership change under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). U.S. federal NOLs began to expire in 2010 with the majority of federal NOLs set to begin expiring in 2020. In addition, at December 31, 2014, we had NOLs relating to foreign jurisdictions of $188.5 million, which may be used to offset future foreign taxable income that will begin to expire in 2015.
Under Section 382 of the Code, a corporation that undergoes an "ownership change" generally may utilize its pre-change NOLs only to the extent of an annual amount determined by multiplying the applicable long-term tax exempt rate by the equity value of such corporation. A corporation generally undergoes an ownership change if the percentage of stock of the corporation owned by one or more 5% stockholders has increased by more than 50 percentage points over a three-year period. It is impossible for us to ensure that an ownership change will not occur in the future as changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code. For example, the sale by one or more 5% stockholders of our common stock and changes in the beneficial ownership of such stock could result in an ownership change under Section 382 of the Code. Similarly, the exercise of outstanding stock options by our employees would count for purposes of determining whether we had an ownership change.
If we undergo an ownership change, our ability to utilize NOLs could be limited by Section 382 of the Code. The extent to which our use of our NOLs would be limited depends on a number of legal and factual determinations, some of which may be subject to varying interpretations, including the date on which an ownership change occurs, the long-term tax exempt rate, whether the equity value of the entire company or only one or more of its subsidiaries would be used in the application of the Section 382 limitation and the equity value of the company or such subsidiaries, as applicable. If the limitation were significant, our limited ability to use these NOLs to offset future taxable income could materially increase our future U.S. federal income tax liability.
Some of our employees are affiliated with organized labor groups, and we could face work disruptions due to strikes, slowdowns or other labor disputes.
Some of our employees are affiliated with organized labor groups, such as works councils and unions. Most of our employees affiliated with organized labor groups are located in EMEA or Latin American countries. Although our management believes that our relationship with our union employees is good, we cannot ensure that we will never experience a labor disruption. Such disruptions could occur in response to our actions but could also be due to the actions of other union employers. Significant labor disruptions could adversely affect our ability to provide acceptable levels of service to our customers, which could result in customer dissatisfaction and a loss of business.

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RISKS RELATING TO OUR INDEBTEDNESS
 Our substantial debt and lease obligations could adversely affect our financial condition and prevent us from fulfilling certain obligations.
As of December 31, 2014, our total outstanding long-term debt (including long-term capital leases) was $749.3 million, which will require significant interest and principal payments. In addition, we had $27.6 million of unused availability under the Revolvers as of December 31, 2014. Subject to the limits contained in the indentures governing the 11.0% Senior Secured Notes due 2017 ("Senior Secured Notes"), the 11.5% Senior Notes due 2018 ("Senior Notes"), and the senior secured credit facility ("Senior Secured Credit Facility"), we may be able to incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify. We also lease certain property and equipment under long-term leases. As of December 31, 2014, our minimum rental expense under non-cancelable operating leases for 2015 was $43.2 million. As of December 31, 2014, our total lease obligations totaled $127.7 million. See Note 13 to the Consolidated Financial Statements included in Item 8 of this Report for further lease commitment information.
Our high level of debt and lease obligations could have important consequences, including the following:
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making it more difficult for us to satisfy our obligations with respect to the Senior Secured Notes, Senior Notes, and our other debt;
•
requiring a substantial portion of our cash flows to be dedicated to debt service payments and lease obligations instead of other purposes;
•
increasing our vulnerability to general adverse economic and industry conditions;
•
limiting our flexibility in planning for and reacting to changes in the industry in which we compete;
•
exposing us to the risk of increased interest rates under certain of our borrowings, including borrowings under our Revolvers, which are at variable rates of interest;
•
limiting our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our growth strategy or other purposes, including incurring additional indebtedness;
•
limiting our ability to hedge foreign currency exposures;
•
placing us at a disadvantage compared to other, less leveraged competitors; and
•
increasing our cost of borrowing.
In addition, the agreement governing our Senior Secured Credit Facility contains financial and other covenants and the indentures governing the Senior Secured Notes and the Senior Notes contain other restrictive covenants that limit our ability to engage in activities that may be in our best interests. We believe that we will be able to comply with the restrictive covenants in our Senior Secured Credit Facility. In the event of unforeseen adverse circumstances, however, we could be forced to undertake additional restructuring activities, including further cost reductions, further management of working capital or capital expenditures, or additional financing, to remain compliant with these covenants. There is no assurance we would be able to implement such additional actions or obtain additional financing with acceptable terms and conditions. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt, including the Senior Secured Notes and Senior Notes.
To service our indebtedness, we will require a significant amount of cash flow. Our ability to generate cash depends on many factors beyond our control, and any failure to meet our debt service obligations could harm our business, financial condition and results of operations.
Our cash interest expense for the year ended December 31, 2014 was $80.0 million. Our ability to make payments on and to refinance our indebtedness, and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control.
Our Revolvers mature in January 2016. As of December 31, 2014, we had outstanding borrowings of $31,700 under our Revolvers which provide for aggregate borrowings of up to $61,250 less $1,982 of letters of credit outstanding for a total availability of $27,568 as of December 31, 2014. We intend to restructure or refinance the Revolvers prior to their maturity. The refinancing of the Revolvers is outside of our control and there can be no assurance that such transaction will occur, or if it does occur, on what terms. In addition, if our business does not generate sufficient cash flow from operations or if future borrowings are not available to us in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness, on or before the maturity thereof, sell assets, reduce or delay capital investments or seek to raise additional capital, any of which could have a material adverse effect on our

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operations. In addition, we may not be able to affect any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments, including the indentures governing the Senior Secured Notes, Senior Notes, and Senior Secured Credit Facility, may limit or prevent us from taking any of these actions. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness on commercially reasonable terms or at all. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an adverse effect, which could be material, on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations in respect of the Senior Secured Notes, Senior Notes, and Senior Secured Credit Facility.
In addition, if the issuers are unable to meet their debt service obligations under the Senior Secured Notes, Senior Notes, and Senior Secured Credit Facility, the holders of the notes would have the right to cause the entire principal amount of the Senior Secured Notes, Senior Notes, and Senior Secured Credit Facility to become immediately due and payable. If the amounts outstanding under these instruments are accelerated, our assets may not be sufficient to repay in full the money owed to our debt holders, including holders of the Senior Secured Notes, Senior Notes, and Senior Secured Credit Facility.
The indentures governing the Senior Secured Notes and Senior Notes and the agreement governing the Senior Secured Credit Facility impose significant operating and financial restrictions on our company and our subsidiaries, which may prevent us from capitalizing on business opportunities.
The indentures governing the Senior Secured Notes and the Senior Notes and the agreement governing our Senior Secured Credit Facility impose significant operating and financial restrictions on us and our restricted subsidiaries. For example, these restrictions limit our ability, among other things, to:
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incur additional indebtedness;
•
pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments;
•
enter into agreements that restrict distributions from restricted subsidiaries;
•
sell or otherwise dispose of assets, including capital stock of restricted subsidiaries;
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enter into transactions with affiliates;
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create or incur liens; and
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merge, consolidate or sell substantially all of our assets.
As a result of these covenants and restrictions, we are limited in how we conduct our business, and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We may not be able to maintain compliance with these covenants in the future and, if we fail to do so, we may not be able to obtain waivers from the lenders or amend the covenants.
Our failure to comply with the restrictive covenants described above as well as the terms of any future indebtedness we may incur from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings or amend our Senior Secured Credit Facility on less favorable terms, our results of operations and financial condition could be adversely affected.
In addition, the Senior Secured Notes and our Senior Secured Credit Facility are secured, among other things, by interests granted on a substantial portion of our worldwide assets. If we are unable to repay our indebtedness under the Senior Secured Notes or our Senior Secured Credit Facility when due, the lenders could seek to foreclose on these assets. Any of these outcomes could have a material adverse effect on our business, financial condition and results of operations.
Our failure to comply with the agreements relating to our outstanding indebtedness, including as a result of events beyond our control, could result in an event of default that could materially and adversely affect our results of operations and our financial condition.
If there were an event of default under any of the agreements relating to our outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. Upon acceleration of our other indebtedness in excess of $25 million, holders of the Senior Secured Notes and Senior Notes could declare all amounts outstanding under the Senior Notes immediately due and payable. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of

18

default. Further, if we are unable to repay, refinance or restructure any of our secured indebtedness, the holders of such debt could proceed against the collateral securing that indebtedness. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments.
The issuers of the Senior Secured Notes and Senior Notes may be unable to repurchase the Senior Secured Notes and Senior Notes upon a change of control.
Upon the occurrence of specified kinds of change of control events, the issuers of the Senior Secured Notes and Senior Notes will be required to offer to repurchase all outstanding notes at a price equal to 101% of the principal amount of the notes, together with accrued and unpaid interest to the date of repurchase.
However, it is possible that the issuers will not have sufficient funds at the time of the change of control to make the required repurchase of the Senior Secured Notes and Senior Notes. If the issuers are required to repurchase the notes, the issuers would probably require third party financing. We cannot be sure that the issuers would be able to obtain third party financing on acceptable terms, or at all.
One of the circumstances under which a change of control may occur is upon the sale or disposition of all or substantially all of our assets. However, the phrase "all or substantially all" will likely be interpreted under applicable state law and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or disposition of "all or substantially all" of our capital stock or assets has occurred, in which case, the ability of a holder of the Senior Secured Notes and Senior Notes to obtain the benefit of an offer to repurchase all of a portion of the notes held by such holder may be impaired.
It is also possible that the events that constitute a change of control may also be events of default under the Senior Secured Credit Facility. These events may permit the lenders under such facility to accelerate the indebtedness outstanding thereunder. If the issuers are required to repurchase the Senior Secured Notes and/or Senior Notes pursuant to a change of control offer and the issuers are required to repay certain amounts outstanding under the Senior Secured Credit Facility if such indebtedness is accelerated, the issuers would probably require third-party financing. We cannot be sure that the issuers would be able to obtain third-party financing on acceptable terms, or at all. If the indebtedness under our Revolvers is not paid, the lenders thereunder may seek to enforce security interests in the collateral securing such indebtedness, thereby limiting our ability to raise cash to purchase the Senior Secured Notes and Senior Notes, and reducing the practical benefit of the offer to purchase provisions to the holders of the notes.
Our principal equityholder's interests may conflict with the interest of the holders of the Senior Secured Notes and Senior Notes.
Onex has voting ownership of approximately 89% of the fully-diluted equity of SITEL Worldwide. As a result of its equity ownership, Onex is effectively able to control the outcome of votes on all matters submitted to a vote of SITEL Worldwide's equityholders, including the adoption of amendments to its certificate of incorporation and by-laws and approval of significant corporate transactions. Onex can also appoint up to five members of our Board of Directors ("Board"). As a result of their equity ownership, Onex may also be able to substantially influence our operations and business strategy.
Onex and its affiliates may invest in entities that directly or indirectly compete with us or companies in which they currently invest may begin competing with us. The interests of Onex could conflict with the interests of the holders of the Senior Secured Notes and Senior Notes. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of Onex might conflict with the interests of a holder of the notes. Onex may also have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their respective judgment, could enhance their equity investment, even though such transactions might involve risks to the holders of the Senior Secured Notes and Senior Notes. See "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" and "Certain Relationships and Related Transactions, and Director Independence."

19

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal executive offices are located in Nashville, Tennessee. This facility currently serves as the headquarters for several of our senior executives and our global and North America finance, legal, human resources, information technology and general administrative functions. The following table sets forth information concerning all of our facilities. We believe our existing facilities are adequate to meet current requirements, and suitable additional or substitute space will be available as needed to accommodate any physical expansion. In addition, we operate from time to time in temporary facilities to accommodate growth before new customer contact centers are available. Approximately 12.0% of our customer contact centers are currently owned by us. We have locations with approximately 2.5 million square feet in the Americas reporting segment and approximately 1.1 million square feet in the EMEA reporting segment.
The table below summarizes our customer contact centers and related facilities (excluding sites that are owned or leased by customers but operated by us) as of December 31, 2014:
Country
Locations
 
Owned/
Leased
Americas:
 
 
 
Brazil
3
 
0/3
Canada
2
 
0/2
Columbia
2
 
0/2
India
4
 
0/4
Mexico
1
 
0/1
New Zealand
2
 
0/2
Nicaragua
2
 
0/2
Panama
3
 
1/2
Philippines
12
 
1/11
United States
26
 
7/19
Total Americas
57
 
9/48
EMEA:
 
 
 
Bulgaria
2
 
0/2
Denmark
1
 
0/1
France
3
 
0/3
Germany
8
 
0/8
Serbia
1
 
0/1
Morocco
4
 
0/4
Netherlands
2
 
0/2
Poland
1
 
0/1
Portugal
2
 
0/2
Spain
5
 
0/5
United Kingdom
6
 
1/5
Total EMEA
35
 
1/34
Total
92
 
10/82

20

From time to time, we evaluate our portfolio of sites against client demand, the macro-economic environment, profitability and various other factors and restructure our sites as appropriate, either through lease renegotiations, termination, acquisition at term, disposition, sublease or inactivating a facility.
ITEM 3. LEGAL PROCEEDINGS
Information regarding legal proceedings involving us is set forth in Note 14 to the Consolidated Financial Statements included in Item 8 of this Report.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.

21

PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market and other information
We are a privately-owned company with no established public trading market for our common stock.
Holders
As of January 31, 2015, there were 332 holders of our Class A Common Stock, 2 holders of our Class B Common Stock and 7 holders of our Class C Common Stock. See "Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" for additional information about the ownership of our common stock.
Dividends
We are currently restricted in our ability to pay dividends under various covenants of our debt agreements, including our Senior Secured Credit Facility and the indenture governing our Senior Secured Notes and Senior Notes. We do not expect for the foreseeable future to pay dividends on our common stock. Any future determination to pay dividends will depend upon, among other factors, our results of operations, financial condition, cash flows, capital requirements, any contractual restrictions and any other considerations our Board of Directors deems relevant.
Recent Sales of Unregistered Securities
None.

22

ITEM 6. SELECTED FINANCIAL DATA
(in thousands of U.S. dollars, except where otherwise noted)
The following table sets forth our selected historical consolidated financial data which are derived from our Consolidated Financial Statements for 2014, 2013, 2012, 2011, and 2010. The financial data set forth below should be read in conjunction with, and are qualified by reference to, "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations," our Consolidated Financial Statements, and the related notes to those Consolidated Financial Statements, included elsewhere in this report.
 
Year Ended December 31,
 
2014
 
2013
 
2012
 
2011
 
2010
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
Revenues
$
1,440,245

 
$
1,438,338

 
$
1,429,133

 
$
1,415,969

  
$
1,340,545

Operating expenses:
 
 
 
 
 
 
 
 
 
Costs of services*
972,545

 
946,293

 
934,547

 
921,137

  
856,463

Selling, general, and administrative expenses*
354,404

 
367,617

 
372,528

 
370,611

  
363,177

Depreciation and amortization of property and equipment
36,222

 
34,578

 
35,997

 
38,902

  
37,346

Amortization of intangible assets
589

 
6,383

 
7,035

 
13,272

  
15,523

Restructuring and exit charges
20,407

 
14,241

 
15,693

 
20,048

  
38,065

Loss (gain) on foreign currency transactions
5,148

 
(984
)
 
2,596

 
2,112

 
4,628

Loss on sale of subsidiary
—

 
4,558

 
—

 
—

 
—

Impairment and loss on disposal of assets, net
1,598

 
71

 
1,484

 
634

  
179

Other expense (income), net
75

 
(743
)
 
97

 
1,169

  
(285
)
Operating income
49,257

 
66,324

 
59,156

 
48,084

 
25,449

Interest and other financing costs, net
83,934

 
80,554

 
84,307

 
70,690

  
65,775

Loss before income taxes
(34,677
)
 
(14,230
)
 
(25,151
)
 
(22,606
)
 
(43,345
)
Income tax provision (benefit)
13,683

 
(15,216
)
 
(1,283
)
 
9,179

  
(4,488
)
Net (loss) income
$
(48,360
)
 
$
986

 
$
(23,868
)
 
$
(31,785
)
 
$
(38,857
)
Other Financial Data:
 
 
 
 
 
 
 
 
 
Capital expenditures(1)
$
35,304

 
$
31,001

 
$
31,503

 
$
40,258

  
$
29,187

Ratio of earnings to fixed charges(2)
—

 
—

 
—

 
—

 
—

Balance Sheet Data (at end of period):
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
8,857

 
$
7,366

 
$
12,245

 
$
19,337

 
$
29,894

Adjusted working capital(3)
145,176

 
105,965

 
131,965

 
107,482

  
91,155

Total assets
649,669

 
620,221

 
642,349

 
649,204

  
682,417

Property and equipment, net
87,354

 
89,662

 
91,592

 
100,468

  
106,359

Total debt
752,240

 
739,744

 
737,121

 
700,784

  
656,274

Preferred stock(4)
226,245

 
126,038

 
109,919

 
108,933

  
94,560

Stockholders’ deficit(5)
566,960

 
490,143

 
454,699

 
433,615

  
369,022

*Exclusive of Depreciation and amortization of property and equipment
(1)
Capital expenditures are presented on a cash basis consistent with the Consolidated Statements of Cash Flows.        
(2)
Earnings for the years ended December 31, 2014, 2013, 2012, 2011, and 2010 were inadequate to cover fixed charges. The coverage deficiency for these years was $59,542, $29,854, $38,849, $43,614, and $55,328, respectively. For purposes of calculating the ratio of earnings to fixed charges, earnings consist of earnings before provision for income taxes, non-controlling interest, plus fixed charges. Fixed charges consist of interest expense, amortized discounts and capitalized expenses related to indebtedness, an estimate of interest within rental expense and preference security dividend requirements.
(3)
Adjusted working capital is a non-GAAP measure that we define as current assets (excluding cash and cash equivalents and restricted cash) less current liabilities (excluding current portion of long-term debt and book overdrafts). See Part II Item 7 of this Report for a reconciliation on this non-GAAP measure.
(4)
At December 31, 2014, there were 39,947, 28,881, and 75,000 shares of our redeemable series B, C, and D preferred stock outstanding with an aggregate liquidation value of $75,103, $69,273, and 81,869, respectively. Our redeemable series B, C, and D preferred stock accrue cumulative dividends at a rate of 12.0%, 16.0%, and 16.0%, respectively, of the liquidation preference per share per annum. Our redeemable series B, C, and D preferred stock can be redeemed for cash at our option any time prior to maturity, but are mandatorily redeemable for cash 91 days following the maturity of the notes. However, we may only make redemption payments to the extent we have the funds legally available and if permitted by the terms of our Senior Secured Credit Facility as amended, supplemented or refinanced. Our Senior Secured Credit Facility does not currently permit any such redemption payments.

23

(5)
As of December 31, 2014, there were 1,713,321 of exchangeable preferred shares of a subsidiary of SITEL Worldwide Corporation issued to the three stockholders of 1293220 Ontario Inc. under the terms of a support agreement between Customerone Holding Corporation (now SITEL Worldwide Corporation) and 1293220 Ontario Inc., dated December 17, 1998. The exchangeable preferred shares have no voting rights or other rights of redemption but are exchangeable for SITEL Worldwide class A voting shares, plus any dividends declared thereon at any time. We have agreed to repurchase the exchangeable preferred shares at the underlying fair market value of the common stock for which they are exchangeable in the event that we are unable to issue the class A common stock upon conversion of the exchangeable preferred shares.

24

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands of U.S. dollars, except share and per share data)


The following discussion and analysis of our financial condition and results of operations contains forward-looking statements, which are subject to numerous risks and uncertainties, including, but not limited to, those described in "Risk Factors" and "Forward-Looking Statements" of this annual report. Actual results may differ materially from those contained in any forward-looking statements.
Overview
We are one of the world’s largest and most diversified providers of customer care outsourcing services. We offer our clients a wide array of services, including customer service, technical support, customer acquisition, retention and revenue generation services, and back office support. The majority of our customer care services are inbound and delivered telephonically, but we are increasingly asked to provide services through other communication channels, including email, online chat, interactive voice response ("IVR"), and social media channels. We serve a broad range of industry end–markets, including financial services, technology, wireless, retail and consumer products, telecommunications, media and entertainment, energy and utilities, travel and transportation, Internet service providers, insurance, public sector, and healthcare.
Sitel maintains global standards of excellence providing service through 108 customer experience centers and other facilities located in 21 countries and supporting client customers located in 62 countries across North America, South America, Europe, Africa and Asia Pacific in 40 languages. We have approximately 61,100 employees, with approximately 43,200 employees in Americas and approximately 17,900 in EMEA. Home-based agents complement our global network of facilities and provide rapidly scalable services and access to unique skill sets, making Sitel a world leader in customer experience innovation. We believe that our operating platform handles an estimated 2.1 million customer interactions per day.
Due to the depth of our client relationships and expertise, we are well positioned to help clients improve the experience of their customer with their brand, using the most appropriate channels and communication methods. We further strive to deliver value to our clients by reducing their operating costs, as well as increasing their revenue through improved customer satisfaction, increased retention, more effective sales interactions and turning cost centers, such as technical support, into profit centers.
Our geographic footprint and multi-lingual support capability aligns with growing demand from our clients that have global customer bases. Our offering of domestic, nearshore, and offshore contact centers and our Work@Home program allows us to provide customized client solutions, to service customers in a single country or across many different countries and at various price points. Our Global Operating System enables us to deliver consistent, high quality service throughout the world while our regionalized operating model allows us to quickly respond to customer needs.
We are organized geographically and have two reporting segments: (1) "Americas," which refers to North America, Latin America, and Asia Pacific; and (2) "EMEA," which refers to Europe, the Middle East, and Africa. Each reporting segment performs substantially the same services for clients.
Components of Revenues and Expenses
Revenues
We generate revenues from our clients through the provision of a wide array of services. Our services include the provision of customer service and technical support services to our clients’ customers as well as services that assist our clients in acquiring or retaining customers and generating revenue from customers. The majority of our services result from inbound telephonic contacts, but we are increasingly asked to provide services through other communication channels, including email, online chat, web, and IVR.
Revenues are recognized only when there is persuasive evidence that an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable, and collection is reasonably assured. We recognize revenues at the time services are performed based on the rate detailed in the client contract, such as per: minute, hour, month, employee, subscriber or user, or item basis for each transaction processed. A small percentage of our total Revenues may be subject to performance standards, such as sales per hour, average handle time, occupancy rate, abandonment rate, call quality, and customer satisfaction. Our performance against such standards may result in bonuses or penalties, which are recognized as earned or incurred. Reward and penalty provisions rarely result in material changes to contract revenues.
We determine the price for our services based on a variety of factors including the complexity of the service, the contractual service levels and the cost of the labor to provide the service. The nature of our business is such that we generally compete with other outsourced service providers as well as the retained in-house operations of our clients. This can create pricing pressures and impact the rates we can charge in our contracts. We generally price our bids with a long-term view of

25

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


profitability and, accordingly, we consider all of our fixed and variable costs in developing our bids, including inflation and foreign exchange assumptions.
During the years ended December 31, 2014, 2013 and 2012, our largest 10 clients represented approximately 36.3%, 36.7%, and 36.2% of Revenues, respectively. No client represented more than 10% of our total 2014, 2013, or 2012 Revenues.
Operating Expenses
Our operating expenses primarily consist of:
•
costs of services;
•
SG&A expenses;
•
depreciation and amortization of property and equipment;
•
amortization of intangible assets;
•
restructuring and exit charges; and
•
gains or losses on foreign currency transactions.
Of the foregoing, Costs of services and SG&A expenses are our primary operating expenses, accounting collectively for over 90% of our Revenues during 2014, 2013, and 2012. Each component of our operating expenses is described in further detail below.
Costs of Services.    Costs of services represent operating costs specifically associated with client programs. These costs, which include direct labor wages and benefits, telecommunication charges, and sales commissions, are primarily variable in nature. Costs of services represent 67.5%, 65.8%, and 65.4% of our Revenues for the years ended December 31, 2014, 2013 and 2012, respectively.
Direct labor costs (including payroll taxes and benefits) are the primary driver of our Costs of services, representing approximately 94.8%, 95.0%, and 94.6% of our costs of services for the years ended December 31, 2014, 2013 and 2012, respectively. As such, customer service representative wages have been a key component of operating expenses.
SG&A Expenses.    SG&A expenses represent overhead costs associated with support functions, such as finance, human resources, legal, IT, sales and marketing, and senior management. Typically, costs of these support functions are wages and benefits, systems costs, trade costs, insurance, certain telecommunications costs, professional services, and facilities costs. SG&A expenses are fixed in nature but a significant portion of these costs typically shift with revenues over time. The percentage of SG&A expenses to Revenues was 24.6%, 25.6%, and 26.1% for the years ended December 31, 2014, 2013 and 2012, respectively.
Depreciation and Amortization of Property and Equipment.    Our Depreciation and amortization of property and equipment relates to capital expenditures, including leasehold improvements for customer contact centers, and computers and related software that we own or license. We depreciate property and equipment on a straight-line basis over their estimated useful life.
Depreciation and amortization of Property and equipment represent 2.5%, 2.4%, and 2.5% of our Revenues for the years ended December 31, 2014, 2013, and 2012, respectively.
Amortization of Intangible Assets.    Our intangible assets are primarily comprised of non-amortizable goodwill, trademarks, and trade names. During 2014, our amortizable customer relationships related to our January 30, 2007 acquisition of Legacy SITEL became fully amortized, and the Company acquired additional customer relationships of $957. Amortization of intangible assets represents 0.0%, 0.4%, and 0.5% of our Revenues for the years ended December 31, 2014, 2013 and 2012, respectively.
Restructuring and Exit Charges.    Restructuring and exit charges consist of costs incurred in conjunction with reductions in our work force or decisions to exit facilities, including employee severance benefits and lease liabilities net of expected sublease rentals. Restructuring and exit charges represent 1.4%, 1.0%, and 1.1% of our Revenues for the years ended December 31, 2014, 2013, and 2012, respectively.
Loss (Gain) on Foreign Currency Transactions.    We are exposed to market risk from fluctuations in foreign currencies. Foreign currency transaction gains and losses primarily result from exchange rate fluctuations on intercompany transactions denominated in different currencies and the resulting revaluation of cash and other assets and liabilities. Although

26

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


these settlements occur in multiple currencies, our most common fluctuations result from the translation of Philippine pesos, Euros, Indian rupees, Brazilian Real, or Canadian dollars into U.S. dollars, as well as intra-European settlements translated to U.S. dollars.
Impairment of Goodwill and Trade Name.    At least annually or more frequently, as changes in circumstances indicate, we evaluate the estimated fair value of our goodwill and indefinite-lived intangibles. To the extent that the carrying value of the net assets of any of our reporting units with goodwill is greater than their estimated fair value, we may be required to take goodwill impairment charges. In addition, an impairment charge is recorded if the carrying value of the intangible asset exceeds its estimated fair value. We did not record goodwill and trade name impairment charges for the years ended December 31, 2014, 2013, and 2012. Our combined goodwill and other intangible assets as of December 31, 2014 and 2013 totaled $154,623 and $154,256, respectively. We will continue to monitor the economic situations that could impact fair value of goodwill and/or other indefinite-lived intangibles and finite-lived intangibles.
Interest and Other Financing Costs, net
Interest and other financing costs, net consist primarily of interest charges under our Senior Notes, Senior Secured Notes, and Senior Secured Credit Facility, as well as costs incurred in connection with the execution of and amendments to these items. We recognized interest and other financing costs of 5.8%, 5.6%, and 5.9% of our Revenues for the years ended December 31, 2014, 2013, and 2012, respectively.
Provision for Income Taxes
Our income tax provision includes U.S. federal, state, local, and foreign income taxes that are currently payable or recoverable, as well as income taxes that are deferred. We record deferred tax assets and liabilities using enacted tax rates in the jurisdictions in which we operate for the effect of temporary differences between the book and tax basis of assets and liabilities. If enacted tax rates change, we would adjust the deferred tax assets and liabilities, through the provision for income taxes in the period of change, to reflect the enacted tax rate expected to be in effect when the deferred tax items reverse. To the extent that we believe that recovery is not likely, we establish a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. The valuation allowance is based on our estimates of future taxable income by jurisdiction in which we operate and the period over which the deferred tax assets can be recovered. A review of all available positive and negative evidence is considered, including our current and past performance, the market environment in which we operate, the utilization of past tax credits, length of carryback and carryforward periods, and existing or prospective contracts that will result in future profits.
Forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence, such as cumulative losses in recent years in certain tax jurisdictions. We weigh cumulative losses heavily in the overall assessment. We have established valuation allowances for future tax benefits related to net operating losses incurred in certain federal, state, and foreign tax jurisdictions. We expect to continue to record a valuation allowance on future tax benefits in certain tax jurisdictions until an appropriate level of profitability is sustained.
U.S. GAAP defines the threshold for recognizing the tax benefits of a tax return filing position in the financial statements as "more-likely-than-not" to be sustained by the taxing authority. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized. A tax position that does not meet the recognition threshold is an uncertain tax position. We record interest and penalties related to uncertain tax positions as components of income tax expense. Determining the existence and amount of an uncertain tax position involves judgment as to the interpretation of tax laws and the application of those tax laws to the particular facts. We regularly evaluate current information available to us to determine whether such accruals for uncertain tax positions should be adjusted. Given the judgment involved and inherent uncertainty in the resolution of uncertain tax positions, our actual income tax liability for such positions may be different than the accruals established.
Results of Operations
In our Overview above, and in our analysis of the results of operations below, we have referred to the impact of changes in foreign currency exchange rates, which references the differences between the foreign currency exchange rates we use to convert our international operating results from local currencies into U.S. dollars for reporting purposes. We have also referred to non-GAAP financial measures for Revenues, Costs of services, and SG&A, which represent U.S. GAAP measures that have been adjusted to exclude the impact of foreign exchange translation. We believe these non-GAAP financial measures provide a better framework for management and investors to understand and analyze our performance by providing meaningful information relevant to amounts that impact the comparability of underlying business results from period to period. These

27

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


supplemental measures should be considered in addition to, and not as a substitute for, measures that are determined in accordance with U.S. GAAP. See Non-GAAP Measures for reconciliations of the non-GAAP measures to their corresponding U.S. GAAP measures.
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
The table below presents statement of operations data, including the amount and percentage changes for the periods indicated, as well as the impact from foreign exchange translation:
 
Year Ended December 31,
 
 
 
 
 
 
 
 
 
2014
 
2013
 
Dollar
Change
 
Percentage
Change
 
Percentage Change Excluding Foreign Exchange
 
Foreign Exchange Impact
Statement of Operations Data:
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Americas
$
878,715

 
$
895,253

 
$
(16,538
)
 
(1.8
)%
 
(0.4
)%
 
$
(12,825
)
EMEA
561,422

 
543,093

 
18,329

 
3.4
 %
 
2.9
 %
 
2,454

Other
108

 
(8
)
 
116

 
n/m

 
n/m

 
(57
)
Total revenues
1,440,245

 
1,438,338

 
1,907

 
0.1
 %
 
0.9
 %
 
(10,428
)
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Costs of services:
 
 
 
 
 
 
 
 
 
 
 
Americas
563,553

 
559,042

 
4,511

 
0.8
 %
 
3.0
 %
 
(12,289
)
EMEA
409,620

 
386,612

 
23,008

 
6.0
 %
 
5.4
 %
 
2,324

Other
(628
)
 
639

 
(1,267
)
 
(198.3
)%
 
1.1
 %
 
(1,274
)
Total costs of services
972,545

 
946,293

 
26,252

 
2.8
 %
 
4.0
 %
 
(11,239
)
Selling, general, and administrative expenses:
 
 
 
 
 
 
 
 
 
 
 
Americas
190,479

 
200,321

 
(9,842
)
 
(4.9
)%
 
(3.1
)%
 
(3,714
)
EMEA
119,137

 
117,364

 
1,773

 
1.5
 %
 
0.4
 %
 
1,284

Other
44,788

 
49,932

 
(5,144
)
 
(10.3
)%
 
(8.8
)%
 
(752
)
Total selling, general, and administrative expenses
354,404

 
367,617

 
(13,213
)
 
(3.6
)%
 
(2.7
)%
 
(3,182
)
Depreciation and amortization of property and equipment
36,222

 
34,578

 
1,644

 
4.8
 %
 
na

 
na

Amortization of intangible assets
589

 
6,383

 
(5,794
)
 
(90.8
)%
 
na

 
na

Restructuring and exit charges
20,407

 
14,241

 
6,166

 
43.3
 %
 
na

 
na

Loss (gain) on foreign currency transactions
5,148

 
(984
)
 
6,132

 
623.2
 %
 
na

 
na

Loss on sale of subsidiary
—

 
4,558

 
(4,558
)
 
n/m

 
na

 
na

Impairment and loss on disposal of assets, net
1,598

 
71

 
1,527

 
2,150.7
 %
 
na

 
na

Other expense (income), net
75

 
(743
)
 
818

 
110.1
 %
 
na

 
na

Operating income
49,257

 
66,324

 
(17,067
)
 
(25.7
)%
 
na

 
na

Interest and other financing costs, net
83,934

 
80,554

 
3,380

 
4.2
 %
 
na

 
na

Loss before income taxes
(34,677
)
 
(14,230
)
 
(20,447
)
 
(143.7
)%
 
na

 
na

Income tax provision (benefit)
13,683

 
(15,216
)
 
28,899

 
189.9
 %
 
na

 
na

Net (loss) income
$
(48,360
)
 
$
986

 
$
(49,346
)
 
(5,004.7
)%
 
na

 
na


28

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


Revenues
We reported Revenues of $1,440,245 for the year ended December 31, 2014, an increase of $1,907, compared to $1,438,338 for the year ended December 31, 2013. Excluding the $10,428 impact of foreign exchange translation, Revenues increased by $12,335, from 2013 to 2014. Revenue increases in 2014 (excluding the impact of foreign exchange translation) were primarily attributable to growth of existing client campaigns of approximately $67,800, which was primarily driven by increases of $39,400 in EMEA and $28,400 in the Americas. The increase in Revenues was also due to new business of approximately $64,700, with $44,600 attributable to the Americas and $20,100 attributable to EMEA. These increases in Revenues were partially offset by approximately $120,400 of attrition, of which $76,700 related to the Americas and $43,700 related to EMEA.
Operating Expenses
Costs of Services
Costs of services were $972,545 for the year ended December 31, 2014, an increase of $26,252, compared to $946,293 for the year ended December 31, 2013. Excluding the impact of foreign exchange translation of $11,239, of which $12,289 related to the Americas offset by $2,324 related to EMEA, Costs of services increased by $37,491, during 2014 as compared to 2013. Excluding the impact of foreign exchange translation of $811, gross margin decreased $25,156 during 2014 as compared to the same period during 2013. The decrease in gross margin is due to commercial and execution issues with certain customers.
SG&A
SG&A expenses were $354,404 for the year ended December 31, 2014, a decrease of $13,213, compared to $367,617 for the year ended December 31, 2013. Excluding the impact of foreign currency translation of $3,182, primarily due to $3,714 related to Americas offset by $1,284 related to EMEA, SG&A expenses decreased $10,031, during 2014 as compared to 2013. The decrease in SG&A was primarily due to cost savings initiatives including personnel reductions, telecommunication, and travel expenses.
Depreciation and Amortization of Property and Equipment
Depreciation and amortization of property and equipment was $36,222 for the year ended December 31, 2014, a increase of $1,644, as compared to $34,578 for the year ended December 31, 2013. The increase was primarily due to computer software being place into service during the fourth quarter of 2014 in addition to an increase in capital expenditures throughout 2014.
Amortization of Intangible Assets
Amortization of intangible assets was $589 for the year ended December 31, 2014, a decrease of $5,794, compared to $6,383 for the year ended December 31, 2013. The decrease was primarily due to customer relationship intangible assets becoming fully amortized during 2014.
Restructuring and Exit Charges
Restructuring and exit charges were $20,407 for the year ended December 31, 2014, an increase of $6,166 compared to $14,241 for the year ended December 31, 2013. Restructuring expense for 2014 included $17,674 of severance costs and $2,733 of facility exit and other costs, while restructuring expense for 2013 included severance costs of $11,232 and facility exit and other costs of $3,009. Refer to Note 7 in the accompanying Consolidated Financial Statements for a discussion of our restructuring plans.
Facility exit and other costs primarily relate to ongoing lease and other contractual obligations. We estimate that approximately $1,280 of cash payments related to these obligations will be made from 2015 through 2018 as the related leases expire.

29

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


The restructuring activities implemented during 2014 and the restructuring and exit charges for the year ended December 31, 2014 are summarized below.
Headcount reduction
3,068

Sites eliminated
3

Estimated annualized cash savings
$
5,630

 
 
Restructuring and exit charges related to restructuring activities initiated in 2014
$
17,660

Restructuring and exit charges related to restructuring plans from earlier years
$
2,747

Total restructuring and exit charges for the year ended December 31, 2014
$
20,407

(Gain) Loss on Foreign Currency Transactions
We recognized a loss on foreign currency transactions of $5,148 for the year ended December 31, 2014, compared to a gain of $984 for the year ended December 31, 2013. The 2014 loss was primarily attributable to the revaluation between the Euro and the British Pound Sterling. The 2013 gain was primarily attributable to the revaluation between the U.S. Dollar and the British Pound Sterling.
Impairment and Loss on Disposal of Assets, Net
Impairment and loss on disposal of assets was $1,598 for the year ended December 31, 2014, an increase of $1,527, compared to $71 for the year ended December 31, 2013. The increase was primarily related to impairment charges of $1,171 recognized during 2014 on certain of the Company's property and equipment, of which $478 related to software in the Americas and $693 related to fixed assets in EMEA.
Interest and Other Financing Costs, net
Interest and other financing costs were $83,934 for the year ended December 31, 2014, an increase of $3,380, compared to $80,554 for the year ended December 31, 2013. The increase was primarily attributable to non-cash interest related to mark-to-market fluctuations associated with the interest rate swap, financing costs related to our Sixth Amendment, and increases in interest related to capital leases.
Income Tax Provision (Benefit)
We recognized income tax expense of $13,683 for the year ended December 31, 2014, compared to a benefit of $15,216 for the year ended December 31, 2013. The effective tax rate for the year ended December 31, 2014 was (39.5)% and 106.9% for the year ended December 31, 2013. The effective tax rate for the year ended December 31, 2014 differed from the statutory rate due to current year losses of subsidiaries with full valuation allowances, nondeductible expenditures, and foreign dividends and interest offset by tax rate differences of foreign subsidiaries.
We have significant deferred tax assets in many of the jurisdictions in which we operate. We will continue to assess our ability to realize the deferred tax benefits in jurisdictions which currently have valuation allowances.
During the second quarter of 2013, we released valuation allowance on U.S. state deferred tax assets totaling $744. During the third quarter of 2013, we released valuation allowance on the deferred tax assets of our French subsidiary in the amount of $10,419 after we concluded that the indefinite lived nature of its net operating losses coupled with its recent operating results and forecasted income substantiated the release. During the fourth quarter of 2013, we released valuation allowance on our German subsidiary in the amount of $7,639 and two of our United Kingdom subsidiaries in the amounts of $8,735 and $1,115 given their recent cumulative profit positions coupled with profitable outlooks. These releases were offset by valuation allowance established on our Italian subsidiary totaling $170 given the expected future operating results could no longer sustain recognition of the deferred tax assets.
We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations (the "Income Tax Allocation"). During the fourth quarter of 2014, as a result of the Income Tax Allocation, we recorded a non-cash deferred income tax expense of $33 against other comprehensive income as a result of year-to-date gains from mark-to-market fluctuations on the 2015 portfolio of foreign currency hedges which are designated as accounting hedges and an offsetting non-cash income tax benefit of $33 in continuing operations compared to $598 and $3,237 related to the 2013 portfolio recorded in 2013 and 2012, respectively. The 2014 hedge portfolio was fully settled during the fourth quarter, resulting in the reversal of previously recorded tax benefits in non-cash income tax expense of $1,676. During

30

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


the first quarter of 2014, the 2013 hedge portfolio was fully settled resulting in the reversal of previously recorded tax benefits in non-cash income tax expense of $3,799.
We have not recorded deferred U.S. income tax liabilities of $12,455 and $12,162 applicable to undistributed earnings of $36,779 and $34,977 at December 31, 2014 and 2013, respectively, related to certain foreign subsidiaries as these undistributed earnings are indefinitely reinvested in foreign operations. During the fourth quarter of 2014, we changed our assertion with respect to a certain foreign subsidiary however did not record a deferred tax liability applicable to the undistributed earnings due to an excess tax basis. During the fourth quarter of 2013, we changed our assertions with respect to certain of our foreign subsidiaries. We recorded a deferred tax liability applicable to the undistributed earnings of our Nicaraguan subsidiary for $584 as a result of its strong performance combined with repatriation opportunities and our Indian subsidiary for $1,683 given that future distributions could exceed current earnings. We reduced the deferred tax liabilities as a result of reversing our assertions related to our Polish subsidiary for $1,055 as future distributions are not expected to exceed current earnings. We continuously review the assertion for indefinitely reinvested earnings in line with our global cash strategy.
The provision for income taxes increased to expense of $13,683 for the year ended December 31, 2014 from an income tax benefit of $15,216 for the year ended December 31, 2013 primarily due to the additional tax expense of $28,432 resulting from the release of valuation allowances on the deferred tax assets of certain of our foreign subsidiaries in 2013 when compared to 2014.
For the year ended December 31, 2013, we recognized a $15,216 benefit for income taxes. The effective tax rate for the year ended December 31, 2013 was 106.9%. The income tax provision differed from the statutory rate due to releases in valuation allowances primarily related to operating losses, foreign dividends and interest, and nondeductible expenditures.

31

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
The table below presents statement of operations data, including the amount and percentage changes for the periods indicated, as well as the impact from foreign exchange translation:
 
Year Ended December 31,
 
 
 
 
 
 
 
 
 
2013
 
2012
 
Dollar
Change
 
Percentage
Change
 
Percentage Change Excluding Foreign Exchange
 
Foreign Exchange Impact
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Americas
$
895,253

 
$
870,079

 
$
25,174

 
2.9
 %
 
3.8
 %
 
$
(7,946
)
EMEA
543,093

 
559,554

 
(16,461
)
 
(2.9
)%
 
(5.3
)%
 
13,368

Other
(8
)
 
(500
)
 
492

 
98.4
 %
 
132.0
 %
 
(168
)
Total revenues
1,438,338

 
1,429,133

 
9,205

 
0.6
 %
 
0.3
 %
 
5,254

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Costs of services:
 
 
 
 
 
 
 
 
 
 
 
Americas
559,042

 
540,418

 
18,624

 
3.4
 %
 
5.1
 %
 
(8,745
)
EMEA
386,612

 
394,509

 
(7,897
)
 
(2.0
)%
 
(4.5
)%
 
9,879

Other
639

 
(380
)
 
1,019

 
268.2
 %
 
109.2
 %
 
604

Total costs of services
946,293

 
934,547

 
11,746

 
1.3
 %
 
1.1
 %
 
1,738

Selling, general, and administrative expenses:
 
 
 
 
 
 
 
 
 
 
 
Americas
200,321

 
201,208

 
(887
)
 
(0.4
)%
 
1.4
 %
 
(3,614
)
EMEA
117,364

 
129,554

 
(12,190
)
 
(9.4
)%
 
(11.1
)%
 
2,249

Other
49,932

 
41,766

 
8,166

 
19.6
 %
 
20.0
 %
 
(198
)
Total selling, general, and administrative expenses
367,617

 
372,528

 
(4,911
)
 
(1.3
)%
 
(0.9
)%
 
(1,563
)
Depreciation and amortization of property and equipment
34,578

 
35,997

 
(1,419
)
 
(3.9
)%
 
na

 
na

Amortization of intangible assets
6,383

 
7,035

 
(652
)
 
(9.3
)%
 
na

 
na

Restructuring and exit charges
14,241

 
15,693

 
(1,452
)
 
(9.3
)%
 
na

 
na

(Gain) loss on foreign currency transactions
(984
)
 
2,596

 
(3,580
)
 
(137.9
)%
 
na

 
na

Loss on sale of subsidiary
4,558

 
—

 
4,558

 
n/m

 
na

 
na

Impairment and loss on disposal of assets, net
71

 
1,484

 
(1,413
)
 
(95.2
)%
 
na

 
na

Other (income) expense, net
(743
)
 
97

 
(840
)
 
(866.0
)%
 
na

 
na

Operating income
66,324

 
59,156

 
11,726

 
19.8
 %
 
na

 
na

Interest and other financing costs, net
80,554

 
84,307

 
(3,753
)
 
(4.5
)%
 
na

 
na

Loss before income taxes
(14,230
)
 
(25,151
)
 
15,479

 
61.5
 %
 
na

 
na

Income tax benefit
(15,216
)
 
(1,283
)
 
(13,933
)
 
(1,086.0
)%
 
na

 
na

Net income (loss)
$
986

 
$
(23,868
)
 
$
29,412

 
123.2
 %
 
na

 
na


32

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


Revenues
We reported Revenues of $1,438,338 for the year ended December 31, 2013, an increase of $9,205, compared to $1,429,133 for the year ended December 31, 2012. Excluding the $5,254 impact of foreign exchange translation (primarily consists of $13,368 related to EMEA, partially offset by $7,946 related to the Americas), Revenues increased by $3,951, from 2012 to 2013. Revenue increases in 2013 (excluding the impact of foreign exchange translation) were primarily attributable to new business, which increased approximately $101,900, with $78,600 attributable to the Americas and $23,300 attributable to EMEA. The increase in Revenues was also due to growth of existing client campaigns of approximately $6,800, which was primarily driven by increases in the Americas of $22,200, partially offset by a decrease of $15,400 in EMEA. These increases in Revenues were partially offset by approximately $104,700 of attrition, of which $67,100 related to the Americas and $37,600 related to EMEA.
Operating Expenses
Costs of Services
Costs of services were $946,293 for the year ended December 31, 2013, an increase of $11,746, compared to $934,547 for the year ended December 31, 2012. Excluding the impact of foreign exchange translation of $1,738, of which $9,879 related to EMEA offset by $8,745 related to the Americas, Costs of services increased by $10,008, during 2013 as compared to 2012. Costs of services increases were primarily due to the aforementioned increase in Revenues, but slightly lower margins due to a shift in customer mix.
SG&A
SG&A expenses were $367,617 for the year ended December 31, 2013, a decrease of $4,911, compared to $372,528 for the year ended December 31, 2012. Excluding the impact of foreign currency translation of $1,563, primarily due to $3,614 related to Americas offset by $2,249 related to EMEA, SG&A expenses decreased $3,348, during 2013 as compared to 2012. The decrease in SG&A was primarily due to cost savings initiatives during 2013.
Depreciation and Amortization of Property and Equipment
Depreciation and amortization of property and equipment was $34,578 for the year ended December 31, 2013, a decrease of $1,419, as compared to $35,997 for the year ended December 31, 2012. The decrease was primarily due to asset retirements during 2013, partially offset by an increase in assets capital expenditures during the same period.
Amortization of Intangible Assets
Amortization of intangible assets was $6,383 for the year ended December 31, 2013, a decrease of $652, compared to $7,035 for the year ended December 31, 2012. The decrease was primarily due to certain customer relationship intangible assets in the Americas that became fully amortized during 2012.
Restructuring and Exit Charges
Management initiated a restructuring plan for the year ended December 31, 2012 (the "2012 Plan") in response to reduced volumes stemming from the global economic downturn and the likelihood of a prolonged and sluggish recovery period, primarily in EMEA. A restructuring plan for the year ended December 31, 2013 (the "2013 Plan") was also initiated in response to reduced volumes caused by the continued economic instability. Both plans consisted of workforce reductions and site closures.
Restructuring and exit charges were $14,241 for the year ended December 31, 2013, a decrease of $1,452, compared to $15,693 for the year ended December 31, 2012. Restructuring expense included severance costs of $11,232 and $12,217 for the years ended December 31, 2013 and 2012, respectively. Facility exit and other costs, which primarily related to ongoing lease and other contractual obligations, were $3,009 and $3,476 for the years ended December 31, 2013 and 2012, respectively.

33

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


Information regarding the 2013 Plan and the restructuring and exit charges for the year ended December 31, 2013 is summarized below:
Headcount reduction
2,325

Sites eliminated
—

Estimated annualized cash savings
$
3,469

 
 
Restructuring and exit charges related to the 2013 Plan
$
12,462

Restructuring and exit charges related to restructuring plans from earlier years
$
1,779

Total restructuring and exit charges for the year ended December 31, 2013
$
14,241

Information regarding the 2012 Plan and the restructuring and exit charges for the year ended December 31, 2012 is summarized below:
Headcount reduction
1,392

Sites eliminated
2

Estimated annualized cash savings
$
9,772

 
 
Restructuring and exit charges related to the 2012 Plan
$
12,716

Restructuring and exit charges related to restructuring plans from earlier years
$
2,977

Total restructuring and exit charges for the year ended December 31, 2012
$
15,693

(Gain) Loss on Foreign Currency Transactions
We recognized a gain on foreign currency transactions of $984 for the year ended December 31, 2013, compared to a loss of $2,596 for the year ended December 31, 2012. The 2013 gain was primarily attributable to the revaluation between the U.S. Dollar and the British Pound Sterling. The 2012 loss was primarily attributable to revaluation between the Euro and the British Pound Sterling.
Loss on Sale of Subsidiary
We incurred a loss of $4,558 during the year ended December 31, 2013 relating to the sale of our Belgium subsidiary. See Note 12 in the accompanying Consolidated Financial Statements for additional details regarding the subsidiary sale.
Impairment and (Gain) Loss on Disposal of Assets, Net
Impairment and loss on disposal of assets was $71 for the year ended December 31, 2013, a decrease of $1,413, compared to $1,484 for the year ended December 31, 2012. The decrease was primarily related to impairment charges of $1,633 recognized during 2012 on certain of the Company's annuity contracts located in the Americas. During 2013, we recorded impairment charges of $753 related to property and equipment, partially offset by $182 in gains on disposal of property and equipment. Additionally, $500 in liquidation payments received during 2013 related to the aforementioned annuity contracts, was recorded as a gain to Impairment and loss on disposal of assets.
Interest and Other Financing Costs, net
Interest and other financing costs were $80,554 for the year ended December 31, 2013, a decrease of $3,753, compared to $84,307 for the year ended December 31, 2012. The decrease was primarily attributable to non-cash interest related to a mark-to-market gain during 2013, compared to a loss in 2012 associated with the interest rate swap. The decrease was partially offset by higher interest expense related to the Senior Secured Notes as compared to the Term Loans that were repaid during 2012.
Income Tax Benefit
We recognized an income tax benefit of $15,216 for the year ended December 31, 2013, compared to a benefit of $1,283 for the year ended December 31, 2012. The effective tax rate for the year ended December 31, 2013 was 106.9%. The

34

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


effective tax rate for the year ended December 31, 2013 differed from the statutory rate due to releases of valuation allowances and tax rate differences of foreign subsidiaries offset by foreign dividends and interest and nondeductible expenditures.
We have significant deferred tax assets in many of the jurisdictions in which we operate. Management will continue to assess our ability to realize the deferred tax benefits in jurisdictions which currently have valuation allowances. During the second quarter of 2013, we released valuation allowance on U.S. state deferred tax assets totaling $744. During the third quarter of 2013, we released valuation allowance on the deferred tax assets of our French subsidiary in the amount of $10,419 after management concluded that the indefinite lived nature of its net operating losses coupled with its recent operating results and forecasted income substantiated the release. During the fourth quarter of 2013, we released valuation allowance on our German subsidiary in the amount of $7,639 and two of our United Kingdom subsidiaries in the amounts of $8,735 and $1,115 given their recent cumulative profit positions coupled with profitable outlooks. These releases were offset by valuation allowance established on our Italian subsidiary totaling $170 given the expected future operating results could no longer sustain recognition of the deferred tax assets. During the fourth quarter of 2012, we released the valuation allowance on operating losses and other tax attributes with unlimited carryforward periods in certain jurisdictions to the extent that the deferred tax liabilities related to indefinite lived intangibles created a source of income to support the release. This release resulted in a tax benefit of $5,139.
We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations (the "Income Tax Allocation"). During the first quarter of 2013, as a result of the Income Tax Allocation, we recorded a non-cash deferred income tax expense of $598 related to the 2013 hedge portfolio against other comprehensive income as a result of year-to-date gains from mark-to-market fluctuations on foreign currency hedges which are designated as accounting hedges and an offsetting non-cash income tax benefit of $598 in continuing operations as compared to a non-cash deferred income tax expense against other comprehensive income and offsetting non-cash income tax benefit of $3,237 related to the 2013 hedge portfolio in continuing operations during the third quarter of 2012. During the fourth quarter of 2012, we recorded a non-cash deferred income tax expense of $948 against Foreign currency translation adjustment as a result of year to date gains from foreign currency fluctuations primarily related to our establishment of a deferred tax liability on unrepatriated foreign earnings of our Philippines subsidiary and an offsetting non-cash income tax benefit of $948 in continuing operations.
We have not recorded deferred U.S. income tax liabilities of $12,162 and $19,085 applicable to undistributed earnings of $34,977 and $54,724 at December 31, 2013 and 2012, respectively, related to certain foreign subsidiaries as these undistributed earnings are indefinitely reinvested in foreign operations. During the fourth quarter of 2013, we changed our assertions with respect to certain of our foreign subsidiaries. We recorded a deferred tax liability applicable to the undistributed earnings of our Nicaraguan subsidiary for $584 as a result of its strong performance combined with repatriation opportunities and our Indian subsidiary for $1,683 given that future distributions could exceed current earnings. We reduced the deferred tax liabilities as a result of reversing our assertions related to our Polish subsidiary for $1,055 as future distributions are not expected to exceed current earnings. During the fourth quarter of 2012, we changed our assertions with respect to certain of our foreign subsidiaries. We recorded a deferred tax liability of $9,271, recognizing $425 of income tax expense, applicable to the undistributable earnings of our Philippines subsidiary and reduced the deferred tax liability for $534 related to the reversal of our assertion with respect to our Portuguese subsidiary, recognizing $28 of income tax benefit. We continuously review the assertion for indefinitely reinvested earnings in line with our global cash strategy.
The provision for income taxes decreased to a benefit of $15,216 for the year ended December 31, 2013 from an income tax benefit of $1,283 for the year ended December 31, 2012 primarily due to the additional tax benefit of $23,414 related to the release of valuation allowances on the deferred tax assets of certain of our foreign subsidiaries in 2013 when compared to 2012. The tax benefit was offset by additional tax expense of $3,587 in 2013 when compared to 2012 resulting from the Income Tax Allocation along with an increase in tax reserves of $2,817 over the same period.
For the year ended December 31, 2012, we recognized a $1,283 benefit for income taxes. The effective tax rate for the year ended December 31, 2012 was 5.1%. The income tax provision differed from the statutory rate due to releases in valuation allowances primarily related to operating losses, foreign dividends and interest, and nondeductible expenditures.
Liquidity and Capital Resources
Our principal sources of liquidity are cash provided by operating activities, borrowings under our Senior Secured Credit Facility, and proceeds from the issuances of our Senior Secured Notes, Senior Notes, and equity. We expect that these will continue to be our principal sources of cash in the future. Our principal uses of cash have included debt service, capital

35

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


expenditures, restructuring activities, and the financing of working capital. We expect that these will continue to be our principal uses of cash in the future.
We manage a centralized global treasury function in the United States with a particular focus on concentrating and safeguarding our global cash and cash equivalent reserves. While we generally prefer to hold U.S. dollars, we maintain adequate cash in the functional currency of our foreign subsidiaries to support local operating costs. We protect our cash reserves by maintaining sound cash management practices, relationships with reputable banking partners, and highly liquid investments. We continuously review our assertion for indefinitely reinvested earnings in line with our global cash strategy.
We believe that cash generated from operations, existing cash balances, and borrowings under our Senior Secured Credit Facility or other financing arrangements will be sufficient to meet our working capital requirements, anticipated capital expenditures, and scheduled debt payments. Our Revolvers mature in January 2016. As of December 31, 2014, we had outstanding borrowings of $31,700 under our Revolvers which provide for aggregate borrowings of up to $61,250 less $1,982 of letters of credit outstanding for a total availability of $27,568 as of December 31, 2014. We intend to restructure or refinance the Revolvers prior to their maturity. The refinancing of the Revolvers is outside of our control and there can be no assurance that such transaction will occur, or if it does occur, on what terms.
The amount of capital required over the next 12 months will also depend on our levels of investment in infrastructure necessary to maintain, upgrade, or replace existing assets or to develop new customer contact centers. Our working capital and capital expenditure requirements could also increase materially in the event cash is required to fund new strategic initiatives, the resolution of certain litigation or administrative disputes, or other unexpected business expenses. These factors could require that we raise additional capital through future debt or equity financing or reduce certain capital and other expenditures.
We expect our operations to continue to require capital expenditures at or above prior years to support expected growth of our business and various cost savings initiatives. We expect to continue to finance equipment purchases through proceeds from our operations, our Senior Secured Credit Facility, and our ability to acquire equipment through operating and capital lease obligations with various equipment vendors and lending institutions.
During the year ended December 31, 2014, cash paid for fixed asset capital expenditures and other related investments totaled $35,304. The capital expenditure line item includes the following categories: facilities and information technology repair and maintenance, growth, retention, and incremental new sites.
The maximum capital expenditures covenant in our Senior Secured Credit Facility limits our annual capital spending, cash restructuring in excess of $10,000 and our acquisition expenses in excess of $10,000, to a pre-established limit for each year and allows for carryover of unused spend.
As of December 31, 2014, our total Cash and cash equivalents were $8,857, and our indebtedness was $752,240. This compares with $7,366 in total Cash and cash equivalents and $739,744 of indebtedness as of December 31, 2013. Adjusted working capital was $145,176 at December 31, 2014, compared to $105,965 at December 31, 2013, a increase of $39,211. Adjusted working capital is a non-GAAP measure that we define as current assets (excluding cash and cash equivalents and restricted cash) less current liabilities (excluding current portion of long-term debt and book overdrafts). See Part II Item 7 of this Report for a reconciliation of this non-GAAP measure.
These fluctuations are explained in the Cash Flows comparisons below.

36

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


Cash Flows
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
The following summarizes our primary sources and uses of cash in the periods presented (in thousands):
 
Year Ended
December 31,
 
Increase
(Decrease) to
Net Cash Flow
 
2014
 
2013
 
Amount
Cash provided by (used in):
 
 
 
 
 
Operating activities
$
(44,851
)
 
$
33,866

 
$
(78,717
)
Investing activities
(34,535
)
 
(30,723
)
 
(3,812
)
Financing activities
81,465

 
(7,572
)
 
89,037

Operating Activities.    Cash flow from operations was a use of cash of $44,851 in 2014, compared to a source of cash of $33,866 in 2013. Cash flow from operations decreased primarily due to the $49,346 decrease in Net income from 2013 to 2014, as well as unfavorable changes in our Accounts receivable of $60,111. The decrease in Accounts receivable was primarily driven by the timing of our Accounts receivable collections during 2014 compared to 2013.
Investing Activities.    Cash used in investing activities was $34,535 in 2014, compared to $30,723 in 2013. The increase was primarily driven by an increase in capital expenditures during 2014, partially offset by the proceeds from the disposition of our Port Aurthur location during the first quarter of 2014.
Financing Activities.    Cash provided by financing activities was $81,465 in 2014, compared to a use of cash of $7,572 in 2013. The increase in cash provided by financing activities was primarily due to the issuance of Preferred D stock during the second quarter of 2014. In addition, we had borrowings on the Revolvers during 2014 compared to paydowns during 2013.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
The following summarizes our primary sources and uses of cash in the periods presented (in thousands):
 
Year Ended
December 31,
 
Increase
(Decrease) to
Net Cash Flow
 
2013
 
2012
 
Amount
Cash provided by (used in):
 
 
 
 
 
Operating activities
$
33,866

 
$
6,600

 
$
27,266

Investing activities
(30,723
)
 
(31,184
)
 
461

Financing activities
(7,572
)
 
18,771

 
(26,343
)
Operating Activities.    Cash flow from operations was a source of cash of $33,866 in 2013, compared to $6,600 in 2012. Cash flow from operations increased primarily due to the $24,854 increase in Net income from 2012 to 2013, as well as favorable changes in our operating working capital accounts of approximately $14,071, which was due to decreases in Accounts receivable partially offset by decreases in Accrued liabilities and other. The decrease in Accounts receivable was primarily driven by initiatives to reduce the average time our receivables are outstanding, such as initiatives around improving the billing cycle. The decrease in Accrued liabilities and other was primarily related to payments on foreign currency hedge liabilities.
Investing Activities.    Cash used in investing activities was $30,723 in 2013, compared to $31,184 in 2012. The decrease was primarily driven from certain software licensing purchases during 2012 that the Company did not incur during 2013, partially offset by an increase in other capital expenditures.

37

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


Financing Activities.    Cash used by financing activities was $7,572 in 2013, compared to source of cash of $18,771 in 2012. The decrease in cash provided by financing activities was primarily due to higher pay downs and less borrowings against the Revolvers over the course of 2013 as compared to 2012, partially offset by a reduction in debt issuance costs incurred during 2013.
Contractual Obligations and Commercial Commitments
The following table represents our contractual commitments associated with our debt and other contractual obligations as of December 31, 2014:
 
Payments Due By Period
Commitments
Less than 1
Year
 
1-3 Years
 
3-5 Years
 
More than
5 Years
 
Totals
 
(dollars in thousands)
Long-term debt obligations(1)
$
—

 
$
454,540

 
$
300,000

 
$
—

 
$
754,540

Interest obligation(2)
79,763

 
118,705

 
8,625

 
—

 
207,093

Capital lease obligations(3)
3,821

 
3,784

 
384

 
—

 
7,989

Operating lease obligations(4)
43,172

 
51,858

 
21,361

 
3,357

 
119,748

Purchase commitments(5)
27,477

 
14,787

 
10,075

 
—

 
52,339

Total(6)
$
154,233

 
$
643,674

 
$
340,445

 
$
3,357

 
$
1,141,709

 
(1)
Represents principal on our Senior Notes, the Senior Secured Notes, and Senior Secured Credit Facility. For further information on our long-term debt obligations, see Note 8 to our Consolidated Financial Statements for the year ended December 31, 2014. As of December 31, 2014, we had outstanding borrowings of $31,700 under our Revolvers which provide for aggregate borrowings of up to $61,250 less $1,982 of letters of credit outstanding for a total availability of $27,568 as of December 31, 2014. The actual amounts of interest and payments under our Revolvers will ultimately depend on the amount of debt and letters of credit outstanding and the interest rates in effect during each period.
(2)
Represents interest payments on our Senior Secured Credit Facility, Senior Secured Notes, and Senior Notes. Because we have hedged $175,000 of our outstanding term loan borrowings through an interest rate swap agreement expiring December 2016, the interest payments reflected above for that $175,000 are based on the swap rate of 2.315% through the expiration date of that agreement, rather than the interest rate of the Term Loans. Variable interest rates under our Senior Secured Credit Facility have been assumed to remain constant through the end of the term. For further information, see Notes 8 and 15 to our Consolidated Financial Statements for the year ended December 31, 2014, included in Item 8 of this report.
(3)
Consists of payments under our capital leases for certain equipment. For further information, see Note 13 to our Consolidated Financial Statements for the year ended December 31, 2014, included in Item 8 of this report.
(4)
Represents payments under our non-cancelable operating leases for various property and equipment. For further information, see Note 13 to our Consolidated Financial Statements for the year ended December 31, 2014.
(5)
Consists primarily of contractual obligations to purchase goods or services, primarily telecommunications services, which are enforceable and legally binding on us.
(6)
Because we are uncertain as to when and if cash settlement may occur, this table does not reflect our net long-term liability of $21,461 related to uncertain tax positions. See Note 10 of the Consolidated Financial Statements for the year ended December 31, 2014, included in Item 8 of this report.
Debt
Senior Notes
On March 18, 2010, SITEL, LLC and SITEL Finance Corp. (together with SITEL, LLC, the "Issuers") issued the 11.5% Senior Notes due April 1, 2018 having an aggregate principal amount of $300,000 with an original issuance discount of $7,638. The Senior Notes are general unsecured obligations of SITEL Worldwide Corporation and are senior in right of payment to all existing and future indebtedness, if any, that is by its terms expressly subordinated to the Senior Notes. The Senior Notes are guaranteed by our domestic subsidiaries and will mature on April 1, 2018. Interest accrues on the Senior Notes at a rate of 11.5% annually, and is payable semi-annually in arrears on April 1 and October 1. Proceeds from the Senior Notes offering were used to pay down approximately $231,600 of the Term Loans and 100% of the outstanding balance on the Revolvers, both of which are discussed further below.
We are not required to make mandatory redemptions or sinking fund payments with respect to the Senior Notes; however at any time prior to April 1, 2014, the Senior Notes may be redeemed in part or in full at a redemption price equal to 100% of the principal amount of the Senior Notes, plus a make-whole premium calculated in accordance with the indenture governing the Senior Notes and accrued and unpaid interest. On or after April 1, 2014, the Senior Notes may be redeemed in

38

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


part or in full at the following percentages of the outstanding principal amount prepaid: 105.750% prior to April 1, 2015; 102.875% on or after April 1, 2015, but prior to April 1, 2016; and 100% on or after April 1, 2016.
Senior Secured Notes
On April 20, 2012, the Issuers issued the 11.0% Senior Secured Notes due August 1, 2017, having an aggregate principal amount of $200,000 with an original issuance discount of $8,000. The Senior Secured Notes are guaranteed by our domestic subsidiaries and will mature on August 1, 2017. The Senior Secured Notes and the guarantees are the senior obligations of the Issuers and the guarantors and are secured on a first-priority basis by a lien on substantially all of the assets of the Issuers and the guarantors, subject to certain exceptions. The obligations of the Issuers and the guarantors under the Senior Secured Notes and the guarantees are secured on an equal and ratable basis with all obligations of the Issuers and the guarantors under the Senior Secured Credit Facility. The Senior Secured Notes and guarantees thereof rank effectively senior in right of payment to all of the Issuers' and guarantors' existing and future senior unsecured debt, including the Senior Notes to the extent of the collateral securing the Senior Secured Notes, and rank senior to all of the Issuers' and guarantors' existing and future subordinated debt. Interest accrues on the Senior Secured Notes at a rate of 11.0% annually, and is payable semi-annually in arrears on February 1 and August 1. Proceeds from the Senior Secured Notes offering were used to pay down approximately $128,900 of the Term Loans and 100% of the outstanding balance on the Revolvers, both of which are discussed further below.
We are not required to make mandatory redemptions or sinking fund payments with respect to the Senior Secured Notes. On or after August 1, 2014, the Senior Secured Notes may be redeemed in part or in full at the following percentages of the outstanding principal amount prepaid: 105.5% prior to August 1, 2015; 102.75% on or after August 1, 2015, but prior to August 1, 2016; and 100% on or after August 1, 2016.
The indentures governing the Senior Notes and the Senior Secured Notes contains customary covenants and restrictions on the activities of SITEL, LLC, Sitel Finance and SITEL, LLC's restricted subsidiaries, including, but not limited to, the incurrence of additional indebtedness; dividends or distributions in respect of capital stock or certain other restricted payments or investments; entering into agreements that restrict distributions from restricted subsidiaries; the sale or disposal of assets, including capital stock of restricted subsidiaries; transactions with affiliates; the incurrence of liens; and mergers, consolidations or the sale of substantially all of SITEL, LLC's assets. Certain of these covenants will be suspended if the Senior Notes or Senior Secured Notes are assigned an investment grade rating by both Standard & Poor's Rating Services and Moody's Investor Service, Inc. and no default has occurred or is continuing. If either rating on the Senior Notes or Senior Secured Notes should subsequently decline to below investment grade, the suspended covenants will be reinstated.
Senior Secured Credit Facility
Overview
On January 30, 2007, we entered into a Senior Secured Credit Facility among a syndicate of banks with Goldman Sachs Credit Partners L.P. as joint lead arranger, joint bookrunner, administrative agent and collateral agent and GE Capital Markets, Inc. as joint lead arranger and joint bookrunner. The Senior Secured Credit Facility originally provided for total available borrowings in an aggregate principal amount of approximately $760,000, which included $85,000 of Revolvers maturing on January 30, 2013, consisting of a $50,000 U.S. revolver, a $7,000 Canadian revolver (made available in Canadian dollars) and a $28,000 U.K. revolver (made available in Euro and British pound sterling), and $675,000 of Term Loans maturing on January 30, 2014, consisting of a $550,000 U.S. term loan, a €51,447 Euro term loan, and a £30,000 British pound sterling term loan. SITEL, LLC was the borrower under the U.S. term loan and the U.S. revolver, ClientLogic Holding Limited was the borrower under the Euro term loan, the British pound sterling term loan and the U.K. revolver, and SITEL Canada Corporation (formerly known as ClientLogic Canada Corporation) was the borrower under the Canadian revolver.
As of December 31, 2014, we had an aggregate of $254,540 of outstanding indebtedness under our Senior Secured Credit Facility, which consisted of $222,840 of term loan borrowings. Our Term Loans consisted of approximately $177,973 outstanding on the U.S. term loan, $26,657 outstanding on the Euro term loan, and $18,210 outstanding on the British pound sterling term loan. As of December 31, 2014, we had $31,700 of borrowings outstanding and $27,568 available for additional borrowings under our Revolvers.
First Amendment
On December 9, 2008, we entered into the first amendment to our Senior Secured Credit Facility (the "First Amendment") which, among other matters, modified applicable interest rates, certain negative covenants and financial covenant thresholds. In addition, the First Amendment permitted us to offer to purchase the outstanding Term Loans at a

39

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


discount to par using a portion of the net proceeds we received from the sales of our series C preferred stock we completed in 2008. We received approximately $29,600 through the issuance of series C preferred stock which was a condition to entering into the First Amendment. As required under the First Amendment, we offered to purchase Term Loans under the Senior Secured Credit Facility, and in December 2008, we purchased $27,047 of outstanding principal under the Term Loans for $15,000, which Term Loans were subsequently cancelled and retired.
Second Amendment
In April 2009, we entered into the second amendment to our Senior Secured Credit Facility which effected a technical amendment clarifying certain terms governing minimum borrowing amounts under certain interest rates including London Interbank Offer Rate ("LIBOR").
Third Amendment
In February 2010, we entered into a third amendment to the Senior Secured Credit Facility (the "Third Amendment") to, among other things, permit the issuance of the Senior Notes, improve the terms of mandatory prepayment requirements, and modify our Senior Secured Leverage Ratio and Minimum Interest Coverage Ratio.
Fourth Amendment
During the second quarter of 2011, we entered into the fourth amendment to the Senior Secured Credit Facility (the "Fourth Amendment") to, among other things, allow flexibility to refinance or prepay the non-extended portions of the Term Loans prior to the extended portions, and to refinance, extend or replace the Revolvers and Term Loans; increase the Senior Secured Leverage Ratio covenant levels; and decrease the Minimum Interest Coverage Ratio covenant levels.
Fifth Amendment
In April 2012, we entered into the fifth amendment to the Senior Secured Credit Facility (the "Fifth Amendment") which allowed for the issuance and sale of the Senior Secured Notes, modified our Senior Secured Leverage Ratio and Minimum Interest Coverage Ratio, and changed the currency mix of our lenders' revolver commitments to consist only of U.S. dollar and Canadian dollar amounts and terminated the British pound sterling revolver commitment. During the second quarter of 2012, a portion of the proceeds received from the issuance of the Senior Secured Notes were used to prepay the outstanding balances on the non-extended Term Loans, which were due in January 2014.
Sixth Amendment
In February 2014, we entered into the sixth amendment to the Senior Secured Credit Facility (the "Sixth Amendment") which increased our Senior Secured Leverage Ratio and decreased our Minimum Interest Coverage Ratio covenant levels.
Interest
The Term Loans mature in January 2017. All Term Loans amortize in equal quarterly installments in an aggregate annual amount equal to 0.25% of the original principal amount with the balance payable at maturity. Payments on the principal amount have exceeded the cumulative amortization schedule, thus no amount is due until maturity. Interest on the U.S. term loan is based, at our option, on LIBOR plus the applicable margin of 7.25% or the higher of the federal funds rate plus 0.50% or the banks’ prime rate plus the applicable margin of 6.25%. Interest on the Euro term loan is based on EURIBOR plus the applicable margin of 7.25%. Interest on the British pound sterling term loan is based on LIBOR plus the applicable margin of 7.25%. We have an interest rate swap agreement for the notional amount of $175,000 against our Term Loans that is based on a rate of 2.315% versus three month LIBOR. In November 2011, we amended our interest rate swap agreement to reduce the notional amount to $175,000 from $350,000 as of March 31, 2012.
The Revolvers mature in January 2016. In January 2013, the non-extended portion of our U.S. Revolver expired, reducing the borrowing capacity under the Revolvers to $61,250 from $85,000. A commitment fee is payable quarterly at 1.00% per annum of the undrawn portion of the Revolvers. Interest on the U.S. revolver is based, at our option, on LIBOR plus the applicable margin of 7.25%, or the higher of the federal funds rate plus 0.50% or the prime rate plus the applicable margin of 6.25%. Interest on the Canadian revolver is based, at our option, on the Canadian banker's acceptance rate plus the applicable margin of 7.25% or the higher of the one month BA Rate 0.75% or the Canadian prime rate plus the applicable margin of 6.25%.
For the years ended December 31, 2014, 2013, and 2012, including the impact of our interest rate swap, the weighted average interest rate on the Term Loans was 8.81%, 8.61%, and 8.57%, respectively. For the years ended

40

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


December 31, 2014, 2013, and 2012, the weighted average rate on the Revolvers was 8.55%, 8.43%, and 8.06%, respectively. Specified interest rates for the Euro term loan and Canadian term loan are as described in the Senior Secured Credit Facility.
Prepayments
Beginning on April 2, 2007, our Term Loans began amortizing in equal quarterly installments of $1,700 with the balance payable at maturity. We may be required to prepay certain amounts under the Senior Secured Credit Facility should we initiate specified transactions, including certain issuances of equity, sale of certain assets or receipt of certain insurance proceeds, or additional debt issuances if not otherwise extended as well as from certain percentages of any excess cash flow. We may voluntarily prepay all or part of the term loan under certain conditions. Amounts borrowed under the Term Loans that are repaid or prepaid may not be re-borrowed. Amounts repaid under our Revolvers may be re-borrowed, as long as the total commitment under the Revolvers is not permanently reduced.
Covenants
We are required under the terms of the Senior Secured Credit Facility to maintain certain financial covenants on a quarterly and annual basis, specifically:
Senior Secured Leverage Ratio.    The senior secured leverage ratio is the ratio of our total funded debt that is secured by a lien on any of our assets or equity interests or any of our subsidiaries to our Adjusted EBITDA (as defined in the amended Senior Secured Credit Facility) for each period of four consecutive quarters ending during the term of the Senior Secured Credit Facility.
Minimum Interest Coverage Ratio.    The minimum interest coverage ratio is the ratio of Adjusted EBITDA to cash interest expense (net of interest income) for each period of four consecutive quarters ending during the term of the Senior Secured Credit Facility.
Maximum Capital Expenditures.    The maximum capital expenditures covenant in our Senior Secured Credit Facility limits our annual capital spending, cash restructuring in excess of $10,000 and our acquisition expenses in excess of $10,000 to a pre-established limit each year and allows for carryover of unused spend.
The Senior Secured Credit Facility also contains customary affirmative and negative covenants such as restricting certain corporate actions, including asset dispositions, acquisitions, the payment of dividends, changes of control, the incurrence of indebtedness, providing financing and investments and transactions with affiliates.
We were in compliance with all debt covenants under the Senior Secured Credit Facility as of December 31, 2014. We believe that we will continue to be able to comply with the restrictive covenants in our Senior Secured Credit Facility throughout 2015.
Off Balance Sheet Arrangements
Our off balance sheet arrangements primarily consist of our operating leases and standby letters of credit. We lease property and equipment under non-cancelable operating lease arrangements with initial or remaining lease terms in excess of one year. At December 31, 2014, the future lease commitments relating to our operating leases were $119,748. Refer to Note 13 in the accompanying Consolidated Financial Statements for a discussion of our operating leases. We utilize standby letters of credit to support primarily workers’ compensation policy requirements, performance obligations, tax obligations, and certain operating leases. These obligations will expire at various dates through June 2015, and are renewed as required. The outstanding commitment on these obligations at December 31, 2014 was $1,982.
Inflation
We believe inflation has not had a material effect on our financial condition or results of operations in recent years. We are generally aware of increasing inflationary pressure in emerging markets in which we operate but have not yet identified any specific trends that will have a material effect on our financial condition or results of operations. However, there can be no assurance that we will not be affected by inflation in the future.
Seasonality
Our business has been generally subject to seasonality, with revenues and profits strongest in the fall months due to the high level of sales activity between our clients and their customers during the fall holiday season, with slower business during the spring and summer months.

41

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


Non-GAAP Measures
Our primary financial measure not calculated in accordance with U.S. GAAP is Adjusted EBITDA. We also use Adjusted working capital and Revenues, Costs of services, and SG&A that have been adjusted to exclude the impact of foreign exchange translation as additional non-GAAP measures.
The computation of Adjusted EBITDA is as follows:
(in thousands of U.S. dollars)
December 31, 2014
December 31, 2013
December 31, 2012
Net (loss) income
$
(48,360
)
$
986

$
(23,868
)
Adjustments:
 
 
 
Income tax provision (benefit)
13,683

(15,216
)
(1,283
)
Interest and other financing costs, net
83,934

80,554

84,307

Impairment and loss on disposal of assets, net
1,598

4,629

1,484

Amortization of intangible assets
589

6,383

7,035

Depreciation and amortization of property and equipment
36,222

34,578

35,997

Restructuring and exit charges
20,407

14,241

15,693

Non-cash loss on FX
9,039

1,739

4,558

Non-cash (gain) loss on FX hedges
(1,452
)
708

(917
)
Stock compensation
152

256

518

Other
1,910

1,215

1,654

Total Adjustments
166,082

129,087

149,046

Adjusted EBITDA
$
117,722

$
130,073

$
125,178

The computation of Adjusted working capital is as follows:
(in thousands of U.S. dollars)
December 31, 2014
December 31, 2013
December 31, 2012
Working capital (a)
$
152,272

$
112,113

$
143,359

Adjustments:
 


Cash and cash equivalents
(8,857
)
(7,366
)
(12,245
)
Restricted cash
(4,159
)
(4,312
)
(3,758
)
Current portion of capital lease obligations
2,952

2,005

3,023

Book overdrafts
2,968

3,525

1,586

Total Adjustments
(7,096
)
(6,148
)
(11,394
)
Adjusted working capital
$
145,176

$
105,965

$
131,965

(a) Defined as current assets less current liabilities from the Consolidated Balance Sheets.
We believe that Adjusted working capital provides a meaningful measure of our operational results and underlying performance because it reflects working capital related to core operations, which we find helpful in evaluating performance.

42

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


The computation of Revenues, Costs of services, and SG&A that have been adjusted to exclude the impact of foreign exchange translation is as follows:
(in thousands of U.S. dollars)
Year Ended December 31,
 
 
 
 
 
 
 
 
 
 
 
2014
 
2013
 
Dollar
Change
 
Percentage
Change
 
Percentage Change Excluding Foreign Exchange
 
Foreign Exchange Impact
 
$ Change without Foreign exchange impact
Total revenues
$
1,440,245

 
$
1,438,338

 
$
1,907

 
0.1
 %
 
0.9
 %
 
$
(10,428
)
 
$
12,335

Total costs of services
972,545

 
946,293

 
26,252

 
2.8
 %
 
4.0
 %
 
(11,239
)
 
37,491

Total selling, general, and administrative expenses
354,404

 
367,617

 
(13,213
)
 
(3.6
)%
 
(2.7
)%
 
(3,182
)
 
(10,031
)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
 
 
 
 
 
 
 
 
 
 
2013
 
2012
 
Dollar
Change
 
Percentage
Change
 
Percentage Change Excluding Foreign Exchange
 
Foreign Exchange Impact
 
$ Change without Foreign exchange impact
Total revenues
$
1,438,338

 
$
1,429,133

 
$
9,205

 
0.6
 %
 
0.3
 %
 
$
5,254

 
$
3,951

Total costs of services
946,293

 
934,547

 
11,746

 
1.3
 %
 
1.1
 %
 
1,738

 
10,008

Total selling, general, and administrative expenses
367,617

 
372,528

 
(4,911
)
 
(1.3
)%
 
(0.9
)%
 
(1,563
)
 
(3,348
)
The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP and may not be comparable to other companies' non-GAAP measures with similar titles.
Adjusted EBITDA is our primary non-GAAP financial measure. We use Adjusted EBITDA to enhance our understanding of our operating performance in the ordinary, ongoing, and customary course of our operations. We historically have found it helpful, and believe that investors have found it helpful.
We also provide information relating to Adjusted EBITDA so that analysts, investors and other interested persons have the same data that we use to assess our core operating performance. We believe that Adjusted EBITDA should be viewed only as a supplement to the U.S. GAAP financial information. We also believe, however, that providing this information in addition to, and together with, U.S. GAAP financial information permits analysts, investors and other interested persons to obtain a better understanding of our core operating performance and to evaluate the efficiency of the methodology and information used by our management to evaluate and measure such performance on a standalone and a comparative basis.
The use of Adjusted EBITDA has certain limitations. Restructuring, depreciation and amortization expense for various long-term assets, income tax expense or benefit, interest expense, interest income, non-cash gain or loss on foreign exchange, and non-cash gain or loss on foreign exchange hedges have been and will be incurred and are not reflected in the presentation of Adjusted EBITDA. Each of these items should also be considered in the overall evaluation of the results. We compensate for these limitations by providing the relevant disclosure of the depreciation and amortization, interest expense, income tax expense and other relevant items both in the reconciliations to the U.S. GAAP financial measures and in the Consolidated Financial Statements, all of which should be considered when evaluating performance.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the amounts reported in those Consolidated Financial Statements. On an ongoing basis, we evaluate estimates. We base our estimates on historical experiences and assumptions believed to be reasonable under the circumstances. Those estimates form the basis for our judgments that affect the amounts reported in the Consolidated Financial Statements. Actual results could differ from our estimates under different assumptions or conditions.

43

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


These policies are those that we consider to be the most critical. This should be read in conjunction with Note 1 of the Notes to Consolidated Financial Statements in Item 8 of this report.
Revenue Recognition
We generate revenues from our clients through the provision of a wide array of services. Our services include the provision of customer service and technical support services to our clients’ customers as well as services that assist our clients in acquiring or retaining customers and generating revenue from customers. The majority of our customer care services are inbound and delivered telephonically, but we are increasingly asked to provide services through other communication channels, including email, online chat, IVR, and social media channels. Revenues are recognized only when there is persuasive evidence that an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable, and collection is reasonably assured. We recognize revenues at the time service is performed based on the rate detailed in the client contract, such as per: minute, hour, month, employee, subscriber or user, or item basis for each transaction processed. A portion of revenues may be subject to performance standards, such as sales per hour, average handle time, occupancy rate, abandonment rate, call quality, and customer satisfaction. Our performance against such standards may result in bonuses or penalties, which are recognized as earned or incurred. In certain circumstances, we receive payment in advance of providing service.
We may incur certain upfront project start-up costs specific to each customer contract. In certain instances, our contracts allow us to bill the customer for these costs; however, because these upfront start-up services (mostly employee training services) do not have stand-alone value to the customer, revenues from upfront start-up services are deferred (and included in accrued liabilities and other for the current portion and in other noncurrent liabilities) and are recognized in revenues as services are provided over the estimated customer relationship life.
We are reimbursed by clients for certain pass-through out-of-pocket expenses, consisting principally of telecommunication, employee performance incentive, and postage and shipping costs. The reimbursement and related costs are reflected in the accompanying Consolidated Statements of Comprehensive Loss as revenues and costs of services, respectively. Revenue-related taxes collected from customers and remitted to governmental authorities are netted and not included in revenues.
Accounts Receivable and Allowance for Doubtful Accounts
Trade receivables are comprised primarily of amounts owed to us by clients and are presented net of an allowance for doubtful accounts, which represents management's estimate of the amount of its receivables that may not be collectible. This estimate is based on a detailed aging analysis of accounts receivable, historical bad debts, client credit-worthiness, and changes in client payment patterns. The financial condition of our clients may deteriorate, which may require us to increase its allowance for doubtful accounts. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Financial Instruments
We have cash and cash equivalents, short-term investments, short-term trade receivables and payables, and long-term debt instruments, including capital leases.
Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. We allow for the use of derivative financial instruments to prudently manage foreign currency exchange rate and interest rate exposure, but do not allow derivatives to be used for speculative purposes. Derivatives used are primarily foreign currency forward contracts and interest rate swaps. Derivative activities are subject to the management, direction, and control of our senior financial officers. Risk management practices, including the use of financial derivative instruments, are presented to the Board of Directors at least annually. All derivatives are recognized on the Consolidated Balance Sheets at their fair value. On the date the derivative contract is entered, the derivative is either (1) designated as a hedge of a forecasted transaction or (2) undesignated. Changes in the fair value of a derivative that is qualified, designated, and highly effective as a hedge are recorded in other comprehensive income (loss) until earnings are affected by the forecasted transaction and are then reported in current earnings (in the same line items as the gain or loss on the item hedged). Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current earnings (in the same line item as the gain or loss on the item hedged). We formally document all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes linking cash flow hedges to specific forecasted transactions. For derivatives designated as a hedge for accounting purposes, we also formally assess, both at the hedge's inception and on an ongoing basis, whether the derivatives

44

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)


that are used in hedging transactions are highly effective in offsetting changes in the exposure of the hedged items. If it is determined that a derivative is not highly effective as a hedge, or that it has ceased to be a highly effective hedge, we discontinue hedge accounting prospectively. For financial instruments that no longer qualify for hedge accounting, changes in fair value are recognized in loss (gain) on foreign currency transactions in the accompanying Consolidated Statements of Comprehensive Loss.
Impairment of Goodwill and Other Indefinite-Lived Intangibles
At least annually or more frequently, as changes in circumstances indicate, we evaluate the estimated fair value of our goodwill and indefinite-lived intangibles. Regarding goodwill, to the extent that the carrying value of the net assets of any of our reporting units having goodwill is greater than their estimated fair value, we may be required to take goodwill impairment charges. Regarding indefinite-lived intangibles, an impairment charge is recorded if the carrying value of the intangible exceeds its estimated fair value. We are required to make certain assumptions and estimates regarding the fair value of goodwill and indefinite-lived intangibles when assessing for impairment. Changes in the fact patterns underlying such assumptions and estimates could ultimately result in the recognition of additional impairment losses.
Income Taxes
Our income tax provision includes U.S. federal, state, local and foreign income taxes that are currently payable or recoverable, as well as income taxes that are deferred.
We record deferred tax assets and liabilities using enacted tax rates in the jurisdictions in which we operate for the effect of temporary differences between the book and tax basis of assets and liabilities. If enacted tax rates change, we would adjust the deferred tax assets and liabilities, through the provision for income taxes in the period of change, to reflect the enacted tax rate expected to be in effect when the deferred tax items reverse. To the extent that we believe that recovery is not likely, we establish a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. The valuation allowance is based on our estimates of future taxable income by jurisdiction in which we operate and the period over which the deferred tax assets can be recovered. A review of all available positive and negative evidence is considered, including our current and past performance, the market environment in which we operate, the utilization of past tax credits, length of carryback and carryforward periods, and existing or prospective contracts that will result in future profits.
Forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence, such as cumulative losses in recent years in certain tax jurisdictions. We consider cumulative losses which weigh heavily in the overall assessment. We have established valuation allowances for future tax benefits related to net operating losses incurred in certain federal, state, and foreign tax jurisdictions. We expect to continue to record a valuation allowance on future tax benefits in certain tax jurisdictions until an appropriate level of profitability is sustained.
U.S. GAAP defines the threshold for recognizing the tax benefits of a tax return filing position in the financial statements as "more-likely-than-not" to be sustained by the taxing authority. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized. A tax position that does not meet the recognition threshold is an uncertain tax position. We record interest and penalties related to uncertain tax positions as components of income tax expense. Determining the existence and amount of an uncertain tax position involves judgment as to the interpretation of tax laws and the application of those tax laws to the particular facts. We regularly evaluate current information available to us to determine whether such accruals for uncertain tax positions should be adjusted. Given the judgment involved and inherent uncertainty in the resolution of uncertain tax positions, our actual income tax liability for such positions may be different than the accruals established.
See Note 10 of the Consolidated Financial Statements for the year ended December 31, 2014 included in Item 8 of this Report for additional discussion regarding income taxes.
Recent Accounting Pronouncements
See Note 1 of the Consolidated Financial Statements for the year ended December 31, 2014 included in Item 8 of this Report for discussion of the potential impact of recent accounting pronouncements.


45

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(in thousands of U.S. dollars)
Our operations are exposed to market risks primarily as a result of changes in interest and foreign currency exchange rates. We primarily use foreign currency forward contracts and interest rate swaps to minimize the impact of these market risks. Our derivative activities are subject to the management, direction, and control of our senior financial officers. Risk management practices, including the use of financial derivative instruments, are reviewed by the Audit Committee of our Board of Directors at least annually.
We perform a sensitivity analysis to determine the effects that market risk exposures may have on our debt and other financial instruments. Information provided by the sensitivity analysis does not necessarily represent the actual changes in fair value that would be incurred under normal market conditions because, due to practical limitations, all variables other than the specific market risk factor are held constant.
Interest Rate Risk
We are exposed to market risk from fluctuations in interest rates. At December 31, 2014, we had $254,540 of variable rate debt. Holding other variables constant (such as foreign exchange rates and debt levels), a one percentage point change in interest rates would be expected to increase interest expense by approximately $2,545, for the year ended December 31, 2014 before giving effect to the interest rate swap agreement described below. Approximately 78.5% of our term loan debt at December 31, 2014 was covered by an interest rate swap derivative instrument. The interest rate swap agreement described below reduces our exposure to interest rate risk associated with our variable rate debt for the periods in which the agreement is in effect.
In March 2007, we entered into an interest rate swap derivative instrument, which we refer to as the interest rate swap, to minimize the risk associated with fluctuations in interest rates on our variable rate debt. The objective of the swap is to more effectively balance our borrowing costs and interest rate risk. The interest rate swap was originally set to expire in March 2012. Under the original terms of the interest rate swap, we made payments to a counterparty at a fixed rate of 4.91% on a $400,000 notional amount of the interest rate swap, and we received a variable rate of three-month LIBOR. The notional amount was reduced to $350,000 in March 2009 for the remainder of the term. On November 28, 2011, we amended the interest rate swap to extend the term through December 31, 2016. The fixed rate decreased to 2.315% as of September 30, 2011. The notional amount decreased to $175,000 on March 31, 2012, and will remain constant through the remainder of the revised term.
Foreign Currency Risk
We are exposed to market risk from fluctuations in foreign currencies. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in Europe, Asia, and other foreign markets in which we have operations.
Foreign Currency Translation.    We experience foreign currency translation exposure upon translation of foreign denominated revenues and profit into U.S. dollars. Material portions of our revenues and expenses have been generated by our European operations, and we expect that our European operations will account for a material portion of our revenues and expenses in the future. Substantially all of our expenses and revenues in our European operations are denominated in foreign currencies, principally the British pound sterling and the Euro. We do not hedge the Euro and British pound sterling as our costs are generally in the same currency as our revenues and therefore our exposure is only in translation and does not impact cash.
Cash Flow Hedges.    We conduct a significant portion of our business in currencies other than the U.S. dollar, the currency in which the Consolidated Financial Statements are reported. Our subsidiaries generally use the local currency as their functional currency for paying labor and other operating costs. Significant costs are incurred in our foreign locations where we service a number of our U.S. and European based clients using non-U.S. and non-European based customer care centers, such as customer care centers in the Philippines, India, Mexico, New Zealand and others. Conversely, related revenues from the client contracts are invoiced and collected in a different currency, principally in U.S. dollars as well as other currencies such as the Euro, British pound sterling ("GBP"), and Australian and New Zealand dollars. To hedge against the risk of fluctuations in the invoiced currency, we have contracted with financial institutions to set (utilizing forward contracts) the functional currency of the foreign subsidiary at a fixed counterparty exchange rate at specific dates in the future. As of December 31, 2014, we had forward contracts maturing within the next 12 months. The principal currency exposures hedged are in relation to the Philippine peso ("PHP") the Indian rupee ("INR"), the New Zealand dollar ("NZD"), and the Mexican peso ("MXN").

46

To help minimize variability and exposure to changes in these currencies on a year over year basis, we have a hedging program in place that enters into hedges throughout the preceding year of the exposure. Under this program we have entered into forward contracts with two financial institutions to acquire these foreign currencies set forth in the table below:  
Currency to be Acquired
 
USD
Equivalent
Amount of
Foreign
Currency to be
Acquired, in
thousands
 
Exchange
Rate
 
Contract
Term
PHP
 
$
132,230

 
44.32

 
2015
INR
 
$
21,798

 
63.60

 
2015
NZD
 
$
9,767

 
1.35

 
2015
MXN
 
$
8,168

 
13.22

 
2015
We do not use derivative foreign exchange instruments for trading or other speculative purposes.
Holding other variables constant (such as interest rates and debt levels), if the U.S. dollar had a 10% depreciation against our non-U.S. dollar denominated business in 2014, revenues would have been increased by approximately $79,000 and operating income would have been decreased by approximately $14,000, respectively, before giving effect to the forward contracts described above.
While we have implemented certain strategies to mitigate risks related to the impact of fluctuations in currency exchange rates, we cannot ensure that we will not recognize gains or losses from international transactions, as this is part of transacting business in an international environment. Not every exposure is or can be hedged and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts which may vary or which may later prove to be inaccurate. Failure to successfully hedge or anticipate currency risks properly could adversely affect our consolidated operating results. Further, there is no assurance that we will hedge, or be able to hedge, against these types of risks in the future.

47

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Beginning on the next page are the Consolidated Financial Statements with applicable notes and the related Report of Independent Registered Public Accounting Firm, and the supplementary financial information specified by Item 302 of Regulation S-K.

48


Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of SITEL Worldwide Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
comprehensive loss, changes in stockholders' deficit, and cash flows present fairly, in all material respects,
the financial position of SITEL Worldwide Corporation and its subsidiaries (the "Company") at December
31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the
period ended December 31, 2014 in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our audits.We
conducted our audits of these statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.




/s/PricewaterhouseCoopers LLP

Nashville, Tennessee
February 18, 2015




49
SITEL Worldwide Corporation
Consolidated Balance Sheets
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share data)


 
2014
 
2013
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
8,857

 
$
7,366

Accounts receivable (net of allowance for doubtful accounts of $2,562 and $2,081, respectively)
279,227

 
242,472

Prepaids and other current assets
56,711

 
53,832

Total current assets
344,795

 
303,670

Property and equipment, net
87,354

 
89,662

Goodwill
117,708

 
117,709

Other intangible assets, net
36,915

 
36,547

Deferred income taxes
28,951

 
35,975

Other noncurrent assets
33,946

 
36,658

Total assets
$
649,669

 
$
620,221

Liabilities and Stockholders’ Deficit
 
 
 
Current liabilities
 
 
 
Accounts payable
$
22,300

 
$
20,161

Accrued payroll and benefits
75,037

 
76,646

Accrued liabilities and other
85,713

 
85,235

Income taxes payable
6,521

 
7,510

Current portion of capital lease obligations
2,952

 
2,005

Total current liabilities
192,523

 
191,557

Long-term debt
746,016

 
734,614

Capital lease obligations
3,272

 
3,125

Deferred income taxes
5,919

 
3,828

Other noncurrent liabilities
42,654

 
51,202

Total liabilities
990,384

 
984,326

Commitments and contingencies (see Note 14)

 


50
SITEL Worldwide Corporation
Consolidated Balance Sheets (Continued)
December 31, 2013 and 2012
(in thousands of U.S. dollars, except share and per share data)


 
2014
 
2013
Redeemable preferred stock, 20,000,000 convertible shares authorized, issuable in series:
 
 
 
Series B, $0.01 par value; 39,947 shares issued and outstanding at December 31, 2014 and 2013
75,103

 
66,982

Series C, $0.01 par value; 28,881 shares issued and outstanding at December 31, 2014 and 2013
69,273

 
59,056

Series D, $0.01 par value; 75,000 shares issued and outstanding at December 31, 2014 and none issued at December 31, 2013
81,869

 
—

Stockholders’ deficit
 
 
 
Subsidiary exchangeable preferred stock, no par value; 1,713,321 shares authorized, issued, and outstanding at December 31, 2014 and December 31, 2013
2,665

 
2,665

Common stock, 361,000,000 shares authorized; 225,000,000 Class A shares, 128,500,000 Class B convertible shares, and 7,500,000 Class C shares
 
 
 
Class A, $0.01 par value; 41,766,222 (including 9,060,858 restricted) and 40,699,602 (including 8,268,358 restricted) shares issued at December 31, 2014 and 2013, respectively; 38,223,599 and 38,234,495 shares outstanding at December 31, 2014 and 2013, respectively
327

 
325

Class B, $0.01 par value; convertible into Class A common stock on 1:1 basis; 88,281,647 shares issued and outstanding at December 31, 2014 and 2013
882

 
882

Class C, $0.01 par value; 6,751,263 shares issued and 23,990 shares outstanding at December 31, 2014 and 2013, respectively
68

 
68

Additional paid-in capital
334,657

 
357,518

Accumulated deficit
(836,750
)
 
(788,390
)
Accumulated other comprehensive loss
(57,186
)
 
(53,964
)
Treasury shares, at cost
(11,623
)
 
(9,247
)
Total stockholders’ deficit
(566,960
)
 
(490,143
)
Total liabilities and stockholders’ deficit
$
649,669

 
$
620,221

See accompanying Notes to Consolidated Financial Statements.

51
SITEL Worldwide Corporation
Consolidated Statements of Comprehensive Loss
Years Ended December 31, 2014, 2013 and 2012
(in thousands of U.S. dollars)



2014

2013

2012
Revenues
$
1,440,245


$
1,438,338


$
1,429,133

Operating expenses





Costs of services*
972,545


946,293


934,547

Selling, general, and administrative expenses*
354,404


367,617


372,528

Depreciation and amortization of property and equipment
36,222


34,578


35,997

Amortization of intangible assets
589


6,383


7,035

Restructuring and exit charges
20,407


14,241


15,693

Loss (gain) on foreign currency transactions
5,148


(984
)

2,596

Loss on sale of subsidiary
—

 
4,558

 
—

Impairment and loss on disposal of assets, net
1,598


71


1,484

Other expense (income), net
75


(743
)

97

Operating income
49,257


66,324


59,156

Interest and other financing costs, net
83,934


80,554


84,307

Loss before income taxes
(34,677
)

(14,230
)

(25,151
)
Income tax provision (benefit)
13,683


(15,216
)

(1,283
)
Net (loss) income
(48,360
)

986


(23,868
)
Other comprehensive (loss) income





Foreign currency translation adjustments, net of tax (benefit) expense of $(46), $(3), and $948, respectively
(8,451
)

(12,119
)

1,203

Unrealized gain (loss) on derivative valuation, net of tax (benefit) expense of $(3,400), $659, and $3,106, respectively
6,209


(6,897
)

5,325

Change related to pension liability, net of tax (benefit) expense of $(239), $43, and $0, respectively
(980
)

(1,548
)

(1,602
)
Total other comprehensive (loss) income
(3,222
)
 
(20,564
)
 
4,926

Comprehensive loss
$
(51,582
)
 
$
(19,578
)
 
$
(18,942
)
*Exclusive of Depreciation and amortization of property and equipment
See accompanying Notes to Consolidated Financial Statements.



52
SITEL Worldwide Corporation
Consolidated Statements of Changes in Stockholders’ Deficit - Schedule 1
Years Ended December 31, 2014, 2013 and 2012
 (in thousands of U.S. dollars, except per share amounts)


 
Shares Issued
 
Par Value
 
 
 
 
 
 
 
Class A
Common
Stock
 
Class B
Common
Stock
 
Class C
Common
Stock
 
Class A
Common
Stock
 
Class B
Common
Stock
 
Class C
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Subtotal
Balances at January 1, 2012
31,965,438

 
88,281,647

 
6,751,263

 
$
302

 
$
882

 
$
68

 
$
374,777

 
$
(765,508
)
 
$
(389,479
)
Restricted shares forfeited
(36,500
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Stock issued for cash and notes
1,296,359

 
—

 
—

 
13

 
—

 
—

 
480

 
—

 
493

Stock granted
322,034

 
—

 
—

 
3

 
—

 
—

 
247

 
—

 
250

Preferred B and C stock accretion and BCF
—

 
—

 
—

 
—

 
—

 
—

 
(2,113
)
 
—

 
(2,113
)
Net loss
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(23,868
)
 
(23,868
)
Balances at December 31, 2012
33,547,331

 
88,281,647


6,751,263


$
318


$
882


$
68


$
373,391


$
(789,376
)
 
$
(414,717
)
Restricted shares granted
7,318,000

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Restricted shares forfeited
(823,617
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Stock granted
657,888

 
—

 
—

 
7

 
—

 
—

 
246

 
—

 
253

Preferred B and C stock accretion and BCF
—

 
—

 
—

 
—

 
—

 
—

 
(16,119
)
 
—

 
(16,119
)
Net income
—

 
—

 
—

 
—

 
—

 
—

 
—

 
986

 
986

Balances at December 31, 2013
40,699,602

 
88,281,647

 
6,751,263

 
$
325

 
$
882

 
$
68

 
$
357,518

 
$
(788,390
)
 
$
(429,597
)
Restricted shares granted
900,000

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Restricted shares forfeited
(107,500
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Treasury stock acquired
—

 
—

 
—

 
—

 
—

 
—

 
2,376

 
—

 
2,376

Stock granted
274,120

 
—

 
—

 
2

 
—

 
—

 
150

 
—

 
152

Preferred B, C, and D stock accretion and BCF
—

 
—

 
—

 
—

 
—

 
—

 
(25,387
)
 
—

 
(25,387
)
Net loss
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(48,360
)
 
(48,360
)
Balances at December 31, 2014
41,766,222

 
88,281,647

 
6,751,263

 
$
327

 
$
882

 
$
68

 
$
334,657

 
$
(836,750
)
 
$
(500,816
)
See accompanying Notes to Consolidated Financial Statements.

53
SITEL Worldwide Corporation
Consolidated Statements of Changes in Stockholders’ Deficit - Schedule 2
Years Ended December 31, 2014, 2013 and 2012
 (in thousands of U.S. dollars, except per share amounts)


 
 
 
Accumulated Other Comprehensive (Loss) Income
 
 
 
 
 
 
 
 
 
Totals from Schedule 1
 
Foreign Currency Translation
 
Defined Benefit Pension/Other
 
Unrealized (Loss) Gain on Derivatives Valuation
 
Subsidiary Exchangeable Stock
 
Treasury Stock Shares
 
Treasury Stock Capital
 
Total
Balances at January 1, 2012
$
(389,479
)
 
$
(29,091
)
 
$
1,518

 
$
(10,753
)
 
$
2,665

 
2,465,107

 
$
(8,475
)
 
$
(433,615
)
Stock issued for cash and notes
493

 
—

 
—

 
—

 
—

 
—

 
—

 
493

Purchase of treasury stock
—

 
—

 
—

 
—

 
—

 
6,727,273

 
(772
)
 
(772
)
Stock granted
250

 
—

 
—

 
—

 
—

 
—

 
—

 
250

Preferred B and C stock accretion and BCF
(2,113
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(2,113
)
Change related to pension liability, net of tax of $0
—

 
—

 
(1,602
)
 
—

 
—

 
—

 
—

 
(1,602
)
Unrealized gain on derivative, net of tax expense of $3,106
—

 
—

 
—

 
5,325

 
—

 
—

 
—

 
5,325

Net loss
(23,868
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(23,868
)
Foreign currency translation adjustment, net of tax expense of $948
—

 
1,203

 
—

 
—

 
—

 
—

 
—

 
1,203

Balances at December 31, 2012
$
(414,717
)
 
$
(27,888
)
 
$
(84
)
 
$
(5,428
)
 
$
2,665

 
9,192,380

 
$
(9,247
)
 
$
(454,699
)
Stock granted
253

 
—

 
—

 
—

 
—

 
—

 
—

 
253

Preferred B and C stock accretion and BCF
(16,119
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(16,119
)
Change related to pension liability, net of tax expense of $43
—

 
—

 
(1,548
)
 
—

 
—

 
—

 
—

 
(1,548
)
Unrealized loss on derivative, net of tax expense of $659
—

 
—

 
—

 
(6,897
)
 
—

 
—

 
—

 
(6,897
)
Net income
986

 
—

 
—

 
—

 
—

 
—

 
—

 
986

Foreign currency translation adjustment, net of tax (benefit) of $(3)
—

 
(12,119
)
 
—

 
—

 
—

 
—

 
—

 
(12,119
)
Balances at December 31, 2013
$
(429,597
)
 
$
(40,007
)
 
$
(1,632
)
 
$
(12,325
)
 
$
2,665

 
9,192,380

 
$
(9,247
)
 
$
(490,143
)

54
SITEL Worldwide Corporation
Consolidated Statements of Changes in Stockholders’ Deficit - Schedule 2 (Continued)
Years Ended December 31, 2013, 2012 and 2011
 (in thousands of U.S. dollars, except per share amounts)


 
 
 
Accumulated Other Comprehensive (Loss) Income
 
 
 
 
 
 
 
 
 
Totals from Schedule 1
 
Foreign Currency Translation
 
Defined Benefit Pension/Other
 
Unrealized (Loss) Gain on Derivatives Valuation
 
Subsidiary Exchangeable Stock
 
Treasury Stock Shares
 
Treasury Stock Capital
 
Total
Balances at December 31, 2013
(429,597
)
 
(40,007
)
 
(1,632
)
 
(12,325
)
 
2,665

 
9,192,380

 
(9,247
)
 
(490,143
)
Treasury stock acquired
2,376

 
—

 
—

 
—

 
—

 
1,077,516

 
(2,376
)
 
—

Stock granted
152

 
—

 
—

 
—

 
—

 
—

 
—

 
152

Preferred B, C, and D stock accretion and BCF
(25,387
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(25,387
)
Change related to pension liability, net of tax (benefit) of $(239)
—

 
—

 
(980
)
 
—

 
—

 
—

 
—

 
(980
)
Unrealized gain on derivative, net of tax (benefit) of $(3,400)
—

 
—

 
—

 
6,209

 
—

 
—

 
—

 
6,209

Net loss
(48,360
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(48,360
)
Foreign currency translation adjustment, net of tax (benefit) of $(46)
—

 
(8,451
)
 
—

 
—

 
—

 
—

 
—

 
(8,451
)
Balances at December 31, 2014
$
(500,816
)
 
$
(48,458
)

$
(2,612
)

$
(6,116
)

$
2,665


10,269,896


$
(11,623
)
 
$
(566,960
)
See accompanying Notes to Consolidated Financial Statements.



55
SITEL Worldwide Corporation
Consolidated Statements of Cash Flows
Years Ended December 31, 2014, 2013 and 2012
(in thousands of U.S. dollars)


 
2014
 
2013
 
2012
Cash flows from operating activities
 
 
 
 
 
Net (loss) income
$
(48,360
)
 
$
986

 
$
(23,868
)
Adjustments to reconcile Net (loss) income to net cash flows relating to operating activities:
 
 
 
 
 
Depreciation and amortization (including intangible assets)
36,811

 
40,961

 
43,032

Deferred income taxes
8,134

 
(25,849
)
 
(1,744
)
Non-cash derivative activity
6,345

 
9,653

 
2,596

Non-cash stock compensation expense
155

 
256

 
518

Amortization of debt issue costs and original issue discount
5,288

 
4,867

 
3,786

Amortization of deferred training revenue, net of costs
(2,436
)
 
(3,845
)
 
(3,247
)
Loss (gain) on disposal of capital assets
427

 
(182
)
 
(149
)
Impairment of property and equipment and other long-term assets
1,171

 
753

 
1,633

Loss on sale of subsidiary
—

 
4,558

 
—

Other non-cash items, net
390

 
(1,772
)
 
(1,495
)
Change in book overdrafts
(557
)
 
1,939

 
(1,932
)
Changes in operating assets and liabilities
 
 
 
 
 
Accounts receivable
(51,969
)
 
8,142

 
(9,837
)
Prepaids and other current assets
(10,398
)
 
(1,563
)
 
(1,588
)
Other noncurrent assets
(4,585
)
 
(3,454
)
 
(9,725
)
Accounts payable and accrued liabilities and taxes
14,538

 
(3,057
)
 
8,526

Other noncurrent liabilities
195

 
1,473

 
94

Net cash provided by (used in) operating activities
(44,851
)
 
33,866

 
6,600

Cash flows from investing activities
 
 
 
 
 
Purchases of property and equipment
(35,304
)
 
(31,001
)
 
(31,503
)
Proceeds from disposition of property and equipment
1,752

 
278

 
319

Purchases of intangible assets
(983
)
 
—

 
—

Net cash used in investing activities
(34,535
)
 
(30,723
)
 
(31,184
)

56
SITEL Worldwide Corporation
Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 2012, 2011 and 2010
(in thousands of U.S. dollars)


 
2014
 
2013
 
2012
Cash flows from financing activities
 
 
 
 
 
Proceeds from issuance of Series D Preferred Stock, net
74,820

 
—

 
—

Proceeds related to stock transactions
—

 
—

 
227

Purchases of preferred and treasury shares
—

 
—

 
(1,900
)
Payments on long-term debt and capital lease obligations
(405,949
)
 
(733,345
)
 
(699,239
)
Proceeds from issuance of Senior Secured Notes
—

 
—

 
192,000

Proceeds from other long-term debt
417,001

 
729,402

 
538,640

Payment of interest rate swap
(3,688
)
 
(3,612
)
 
(4,065
)
Payments of debt issue costs
(719
)
 
(17
)
 
(6,892
)
Net cash provided by (used in) financing activities
81,465

 
(7,572
)
 
18,771

Effect of exchange rate on cash and cash equivalents
(588
)
 
(450
)
 
(1,279
)
Net change in cash and cash equivalents
1,491

 
(4,879
)

(7,092
)
Cash and cash equivalents:
 
 
 
 
 
Beginning of year
7,366

 
12,245

 
19,337

End of year
$
8,857

 
$
7,366

 
$
12,245

Cash paid for interest
$
80,016

 
$
79,254

 
$
68,702

Cash paid for income taxes
$
9,003

 
$
5,942

 
$
(208
)
Non-cash activities:
 
 
 
 
 
Purchases of assets under capital leases
$
3,709

 
$
4,566

 
$
473

Property and equipment additions unpaid
$
426

 
$
895

 
$
156

See accompanying Notes to Consolidated Financial Statements.

57
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


1. Nature of Business and Summary of Significant Accounting Policies
References in the Notes to Consolidated Financial Statements to "we", "our", "Sitel", or "the Company" are to SITEL Worldwide Corporation and its subsidiaries, collectively.
The Company is a majority-owned subsidiary of Onex Corporation ("Onex") and is one of the world’s largest and most diversified providers of customer care outsourcing services. We offer our clients a wide array of services, including customer service, technical support, customer acquisition, retention and revenue generation services, and back office support. The majority of our customer care services are inbound and delivered telephonically, but we are increasingly asked to provide services through other communication channels, including email, online chat, IVR, and social media channels. We provide services to a broad range of industry end-markets, including technology, financial services, wireless, retail and consumer products, telecommunications, media and entertainment, energy and utilities, internet service providers, travel and transportation, insurance, healthcare, and government.
Our worldwide operations are organized geographically and are grouped into two reporting segments: (1) North America, Latin America, and Asia Pacific ("Americas") and (2) Europe, the Middle East, and Africa ("EMEA"). Each reporting segment performs substantially the same services for clients.
Basis of Presentation and Preparation
The accompanying Consolidated Financial Statements of the Company are presented in accordance with U.S. GAAP and include the accounts of the Company and its majority owned subsidiaries after elimination of intercompany transactions.
Use of Estimates
Management makes estimates and assumptions when preparing financial statements under U.S. GAAP that affect our reported amounts of assets and liabilities at the dates of the Consolidated Financial Statements, our disclosure of contingent assets and liabilities at the dates of the Consolidated Financial Statements, and our reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include revenue recognition, income taxes, allowance for doubtful accounts, impairment of long-lived assets, impairment of goodwill and other indefinite-lived intangibles, projected compliance with debt covenants, contingencies, restructuring charges, asset retirement obligations, stock-based compensation, derivatives, and employee benefit plans. These estimates involve judgments with respect to, among other things, future economic factors that are difficult to predict and are beyond management’s control. As a result, actual amounts could differ from these estimates.
Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments, such as disbursement accounts, term deposits, money market instruments, and commercial paper carried with original maturities of three months or less. Legally restricted cash of $4,159 and $4,312 as of December 31, 2014 and 2013, respectively, are included in Prepaids and other current assets in the Consolidated Balance Sheets.
Accounts Receivable and Allowance for Doubtful Accounts
Trade receivables are comprised primarily of amounts owed to the Company by clients and are presented net of an allowance for doubtful accounts, which represents management’s estimate of the amount of its receivables that may not be collectible. This estimate is based on a detailed aging analysis of accounts receivable, historical bad debts, client credit-worthiness, and changes in client payment patterns. The financial condition of our clients may deteriorate, which may require the Company to increase its allowance for doubtful accounts. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

58
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


The transactions in the allowance for doubtful accounts for the years ended December 31, 2014, 2013, and 2012 are as follows:
 
2014
 
2013
 
2012
Balance, beginning of year
$
2,081

 
$
2,990

 
$
3,129

Charges to costs and expenses
—

 
159

 
14

Write-offs, net of recoveries
(357
)
 
(1,855
)
 
(138
)
Currency translation and other
838

 
787

 
(15
)
Balance, end of year
$
2,562

 
$
2,081

 
$
2,990

Financial Instruments
We have Cash and cash equivalents, short-term investments, short-term trade receivables and payables, and long-term debt instruments, including capital leases.
Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. We allow for the use of derivative financial instruments to prudently manage foreign currency exchange rate and interest rate exposure, but do not allow derivatives to be used for speculative purposes. Derivatives used are primarily foreign currency forward contracts and interest rate swaps. Derivative activities are subject to the management, direction, and control of our senior financial officers. Risk management practices, including the use of financial derivative instruments, are presented to the Board of Directors at least annually. All derivatives are recognized on the Consolidated Balance Sheets at their fair value. On the date the derivative contract is entered, the derivative is either (1) designated as a hedge of a forecasted transaction or (2) undesignated. Changes in the fair value of a derivative that is qualified, designated, and highly effective as a hedge are recorded in Other comprehensive loss until earnings are affected by the forecasted transaction, and are then reported in current earnings (in the same line items as the gain or loss on the item hedged). Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current earnings (in the same line item as the gain or loss on the item hedged). We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions. This process includes linking cash flow hedges to specific forecasted transactions. For derivatives designated as a hedge for accounting purposes, we also formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the exposure of the hedged items. If it is determined that a derivative is not highly effective as a hedge, or that it has ceased to be a highly effective hedge, we discontinue hedge accounting prospectively. For financial instruments that no longer qualify for hedge accounting, changes in fair value are recognized in (gain) loss on foreign currency transactions in the Consolidated Statements of Comprehensive Loss.
Significant Customers and Concentrated Credit Risk
The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable and derivative instruments. Historically, the losses related to credit risk have been minimal. The Company regularly monitors its credit risk to mitigate the possibility of current and future exposures resulting in a loss. The Company evaluates the creditworthiness of its clients prior to entering into an agreement to provide services and on an on-going basis as part of the processes for revenue recognition and accounts receivable. The Company does not believe it is exposed to more than a nominal amount of credit risk in its derivative hedging activities, as the counter parties are established, well-capitalized financial institutions.
No customer represented greater than 10% of 2014, 2013, or 2012 Revenues or 10% of Accounts receivable, net, at December 31, 2014 or 2013.

59
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Property and Equipment
Property and equipment are carried at cost and depreciated over their estimated useful lives on a straight-line basis. Estimated useful lives for the principal asset categories are as follows:
Buildings — structure
40 years
Buildings — interior / mechanical
15 years
Buildings — roof
20 years
Leasehold improvements
Shorter of useful life or term of lease
Computer software
3 to 7 years
Equipment
3 to 7 years
Furniture and fixtures
5 years
Cost and related accumulated depreciation on assets retired or disposed of are removed from the accounts and any gains or losses resulting thereon are credited or charged to operating income. Maintenance and repairs are charged to operations as incurred; major overhauls that extend the useful lives of existing assets are capitalized.
Fixed asset costs, including leasehold improvements, include actual costs plus capitalized interest accruing during the construction process.
Internal-use software costs incurred during the application development stage are capitalized as incurred. The application development stage does not begin until both (a) technological feasibility has been established for the software and (b) all research and development activities for the other components of the product or process have been completed. Those costs related to the development of internal-use software, other than those incurred during the application development stage, are expensed as incurred. Capitalized internal-use software costs are amortized using the straight-line method over the remaining estimated economic life of the software.
Intangible Assets
The Company’s intangible assets are primarily comprised of non-amortizable goodwill, trademark/trade name, and amortizable customer relationships, primarily related to the January 30, 2007 acquisition of SITEL Corporation ("Legacy SITEL"). All customer relationships related to the Legacy SITEL acquisition became fully amortized during 2014. The remaining customer relationship has a useful life of 42 months.
Impairment or Disposal of Long-lived Assets
We evaluate long-lived assets (Property and equipment and definite-lived intangible assets) for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Triggering events include a significant change in the extent or manner in which long-lived assets are being used or in their physical condition, in legal factors, or in the business climate that could affect the value of the long-lived assets. The interpretation of such events requires judgment from management as to whether such an event has occurred.
Upon the occurrence of a triggering event, the carrying amount of a long-lived asset is reviewed to assess whether the recoverable amount has declined below its carrying amount. The recoverable amount is the estimated net future cash flows that we expect to recover from the future use of the asset, undiscounted and without interest, plus the asset’s residual value on disposal. Where the recoverable amount of the long-lived asset is less than the carrying value, an impairment loss would be recognized to write down the asset to its fair value, which is based on discounted estimated cash flows from the future use of the asset.
Due to the business climate in some of our countries, the Company reviewed certain long-lived assets for possible impairment during the years ended December 31, 2014, 2013, and 2012. Based on the results of our review, during 2012 the Company recorded impairment charges of $1,633 to write down the carrying value of certain annuity contracts included within Other noncurrent assets. During 2013, we received approximately $500 in liquidation payments related to these annuity contracts, which was recorded as a gain during the year ended December 31, 2013. During 2014 and 2013, the Company recorded impairment charges of $1,171 and $212, respectively, to write off the remaining carrying value of certain fixed assets. No such impairment charges were recorded during 2012. These charges are included in Impairment and loss on disposal of assets, net on our Consolidated Statements of Comprehensive Loss.

60
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


The estimated cash flows that are used in the impairment analysis requires judgment. Any changes in the estimates of cash flows based on changes in the market conditions, changes in the use of the assets, management’s plans, and the determination of the useful life of the assets could significantly change the recoverable amount of the asset or the calculation of the fair value and the resulting impairment loss, which could significantly affect the results of operations.
Long-lived assets are classified as held for sale and presented within other current assets if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. Assets are classified as held for sale only when the sale is highly probable and the asset is available for immediate sale in its present condition subject to terms that are usual and customary. Long-lived assets held for sale are measured at the lower of carrying amount or fair value, and any differences between carrying amount and fair value are recognized in the Consolidated Statements of Comprehensive Loss during the period in which a long-lived asset is classified as held for sale. During the year ended December 31, 2010, the Company closed its Port Arthur, Texas site (included within the Americas segment) and reclassified the fair value, which approximated the carrying value, of the office building of $1,200 from Property and equipment to Other current assets. This property was sold, and the Company recorded a charge of $541 within Impairment and loss on disposal of assets during the year ended December 31, 2013 to reflect the net sales price. No amounts related to assets held for sale were recognized in the Consolidated Statements of Comprehensive Loss during the years ended December 31, 2014 or 2012.
Impairment of Goodwill and Other Indefinite-Lived Intangibles
At least annually or more frequently, as changes in circumstances indicate, we evaluate the estimated fair value of our goodwill and indefinite-lived intangibles. Regarding goodwill, to the extent that the carrying value of the net assets of any of our reporting units having goodwill is greater than their estimated fair value, we may be required to take goodwill impairment charges. Regarding indefinite-lived intangibles, an impairment charge is recorded if the carrying value of the intangible exceeds its estimated fair value. We are required to make certain assumptions and estimates regarding the fair value of goodwill and indefinite-lived intangibles when assessing for impairment. Changes in the fact patterns underlying such assumptions and estimates could ultimately result in the recognition of additional impairment losses.
The goodwill impairment test consists of two steps. The first step, which compares a reporting unit's fair value to its carrying amount, is used as a screening process to identify potential goodwill impairment. If the carrying amount of a reporting unit exceeds the reporting unit's fair value, the second step of the impairment test must be completed to measure the amount of the reporting unit's goodwill impairment loss, if any. To perform step one of the goodwill impairment test, we had to perform the following steps:
1.
Identify our reporting units;
2.
Assign assets and liabilities to our reporting units;
3.
Assign all recorded goodwill to one or more of our reporting units; and,
4.
Determine the fair value of those reporting units to which goodwill has been assigned.

If a reporting unit fails step one, step two requires an assignment of the reporting unit's fair value to the reporting unit's assets and liabilities, using the initial acquisition accounting guidance, to determine the implied fair value of the reporting unit's goodwill. The implied fair value of the reporting unit's goodwill is then compared with the carrying amount of the reporting unit's goodwill to determine the goodwill impairment loss to be recognized, if any.
For purposes of testing goodwill, we estimated the fair value utilizing multiple measurement techniques. The estimation was primarily determined based on an estimate of future cash flows (income approach) discounted at a market derived weighted average cost of capital. The income approach has been determined to be the most representative because we do not have an active trading market for our equity or debt. A guideline public companies model, which uses peer group metrics to value a company, was then utilized to confirm the measurement.
No impairment charges were recorded to goodwill or our other indefinite-lived intangible assets during the years ended December 31, 2014, 2013, or 2012.
Contingencies
An estimated loss contingency is accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine the appropriate amount to be recorded for such accruals. See Note 14 for additional discussion regarding our contingencies.

61
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Revenue Recognition
The Company generates revenues from its clients through the provision of a wide array of services. Our services include the provision of customer service and technical support services to our clients’ customers as well as services that assist our clients in acquiring or retaining customers and generating revenue from customers. The majority of our customer care services are inbound and delivered telephonically, but we are increasingly asked to provide services through other communication channels, including email, online chat, IVR, and social media channels. Revenues are recognized only when there is persuasive evidence that an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable, and collection is reasonably assured. The Company recognizes revenues at the time services are performed based on the rate detailed in the client contract, such as per: minute, hour, month, employee, subscriber or user, or item basis for each transaction processed. A portion of revenues may be subject to performance standards, such as sales per hour, average handle time, occupancy rate, abandonment rate, call quality, and customer satisfaction. The Company’s performance against such standards may result in bonuses or penalties, which are recognized as earned or incurred. In certain circumstances, the Company receives payment in advance of providing service. Amounts billed but not earned under these contracts are excluded from revenues and included in Accounts payable in the Consolidated Balance Sheets. The Company had $646 and $2,419 of unearned revenues recorded on the Consolidated Balance Sheets at December 31, 2014 and 2013, respectively.
The Company may incur certain upfront project start-up costs specific to each customer contract. In certain instances, our contracts allow us to bill the customer for these costs; however, because these upfront start-up services (mostly employee training services) do not have stand-alone value to the customer, revenues from upfront start-up services are deferred (and included in accrued liabilities and other for the current portion and in other noncurrent liabilities) and are recognized in revenues as services are provided over the term of the expected client relationship. The Company recognized $11,025, $10,604, and $11,281 of cost and $10,549, $11,389, and $12,267 of revenues for the years ended December 31, 2014, 2013, and 2012, respectively, relating to these deferrals.
The Company is reimbursed by clients for pass-through out-of-pocket expenses, consisting principally of telecommunication, employee performance incentive, and postage and shipping costs. The reimbursement and related costs are reflected in the accompanying Consolidated Statements of Comprehensive Loss as revenues and costs of services, respectively. Telecommunication, postage and shipping, and other costs were $24,817, $24,069, and $25,783 for 2014, 2013, and 2012, respectively.
Revenue-related taxes collected from customers and remitted to governmental authorities are netted and not included in revenues.
Deferred Costs and Deferred Revenues
As more fully described under the heading "Revenue Recognition," the Company capitalizes direct and incremental training costs to the extent recovery of these costs is probable. Both the training revenues and related costs are amortized straight-line over the term of the expected client relationship as a component of revenues and costs of services, respectively. The deferred costs are recorded as a component of Prepaids and other current assets or Other noncurrent assets, while the deferred revenues are recorded as a component of Accrued liabilities and other or Other noncurrent liabilities in the accompanying Consolidated Balance Sheets based upon the remaining term of the underlying client contracts.
Deferred amounts are periodically evaluated for impairment or when circumstances indicate a possible inability to recover their carrying amounts. In the event these costs are not deemed recoverable, the costs are immediately expensed. The Company evaluates probability of recovery by considering remaining profits to be earned during the term of the related contract, including any related deferred revenues, the creditworthiness of the client, and, if applicable, contract termination penalties payable by the client in the event that the client terminates the contract early. We recorded impairment charges related to deferred training costs of $427 during 2013, respectively. No such impairment charges were recorded during 2014 and 2012.
The balance of short and long-term deferred training revenues was $10,769 and $9,719 at December 31, 2014 and 2013, respectively. The balance of deferred training costs was $8,569 and $9,641 at December 31, 2014 and 2013, respectively.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs were $1,507, $1,322, and $1,411 for the years ended December 31, 2014, 2013, and 2012, respectively.

62
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Costs of Restructuring and Exit Activities
The Company has incurred various costs in an effort to reposition its business in order to lower its cost structure and improve its long-term competitive position. The costs are mainly comprised of employee severance and facility exit costs. Refer to Note 7 for a discussion of our Restructuring activities.
Debt Issue Costs
Capitalized costs related to the acquisition of long-term debt are amortized using the effective interest method over the expected life of the related debt instrument. Amortization of debt issue costs amounted to $5,288, $4,867, and $3,786 during the years ended December 31, 2014, 2013, and 2012, respectively, and is included in Interest and other financing costs, net, in the Consolidated Statements of Comprehensive Loss. The unamortized balance of $7,723 and $9,966 at December 31, 2014 and 2013, respectively, is included in Other noncurrent assets on the Consolidated Balance Sheets. Refer to Note 8 for a discussion of our long-term debt transactions associated with the debt issue costs.
Employee Benefit Plans
The Company has defined benefit pension plans covering certain employees outside of the U.S. We estimate the projected benefit obligations using an assumed discount rate, expected return on plan assets, and a rate of compensation increase. As of December 31, 2014 and 2013, our projected benefit obligations were $11,924 and $10,455, respectively.
Income Taxes
Our income tax provision includes U.S. federal, state, local, and foreign income taxes that are currently payable or recoverable, as well as income taxes that are deferred.
We record deferred tax assets and liabilities using enacted tax rates in the jurisdictions in which we operate for the effect of temporary differences between the book and tax basis of assets and liabilities. If enacted tax rates change, we would adjust the deferred tax assets and liabilities, through the provision for income taxes in the period of change, to reflect the enacted tax rate expected to be in effect when the deferred tax items reverse. To the extent that we believe that recovery is not likely, we establish a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. The valuation allowance is based on our estimates of future taxable income by jurisdiction in which we operate and the period over which the deferred tax assets can be recovered. A review of all available positive and negative evidence is considered, including our current and past performance, the market environment in which we operate, the utilization of past tax credits, length of carryback and carryforward periods, and existing or prospective contracts that will result in future profits.
Forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence, such as cumulative losses in recent years in certain tax jurisdictions. The Company considers cumulative losses which weigh heavily in the overall assessment. We have established valuation allowances for future tax benefits related to net operating losses incurred in certain federal, state, and foreign tax jurisdictions. We expect to continue to record a valuation allowance on future tax benefits in certain tax jurisdictions until an appropriate level of profitability is sustained.
U.S. GAAP defines the threshold for recognizing the tax benefits of a tax return filing position in the financial statements as "more-likely-than-not" to be sustained by the taxing authority. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized. A tax position that does not meet the recognition threshold is an uncertain tax position. We record interest and penalties related to uncertain tax positions as components of income tax expense. Determining the existence and amount of an uncertain tax position involves judgment as to the interpretation of tax laws and the application of those tax laws to the particular facts. We regularly evaluate current information available to us to determine whether such accruals for uncertain tax positions should be adjusted. Given the judgment involved and inherent uncertainty in the resolution of uncertain tax positions, our actual income tax liability for such positions may be different than the accruals established.
See Note 10 for additional discussion regarding income taxes.
Stock Awards
All equity-based payments to employees (stock awards) are recognized in the Consolidated Statements of Comprehensive Loss based on the grant date fair value of the award. See Note 9 for additional discussion regarding stock-based compensation.
Treasury Stock
The Company accounts for treasury stock under the cost method, which requires the Company to record the value of the shares at the purchased amount.

63
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Incentive Grants
The Company has received grants from various local government entities as incentives for the creation of jobs and training credits. These grants generally take the form of forgivable loan or lease obligations or cash subsidies of current wages paid. In the instance of forgivable loans or leases, the Company’s obligations under the arrangements are forgiven as certain employment or payroll dollar criteria are achieved, and in some cases, maintained. With respect to cash grants, the amount of grant monies that may be received by the Company over the term of the grant agreement is a function of eligible payroll dollars paid or employment levels achieved.
Forgiveness of loan or lease obligations is recognized as other income in the Consolidated Statements of Comprehensive Loss when the terms of the forgiveness are met and when continued compliance with the grant terms is reasonably assured. Cash grant subsidies relating to operating expenditures are recorded as a reduction of the related expense in the period in which the expenditure is recorded.
Unforgiven loan balances, lease obligations, and deferred grant income of $485 and $812 at December 31, 2014 and 2013, respectively are reflected in the accompanying Consolidated Balance Sheets as a component of Other current and Other noncurrent liabilities. In the case of forgivable loan and lease obligations, interest expense is not recognized on the obligations to the extent management believes there is reasonable assurance that the grant criteria will be met over the term of the agreement. Training grants receivable of $439 and $934 at December 31, 2014 and 2013, respectively, are recorded in Prepaids and other current assets in the Consolidated Balance Sheets.
The Company recognized income of $106 and expense of $11 in Other expense (income), net for the years ended December 31, 2014 and 2013. No such costs were recognized during 2012. Reductions to operating expense of $732, $1,249, and $960 were recognized for the years ended December 31, 2014, 2013, and 2012, respectively, relating to the various incentive grants.
Foreign Currency
The reporting currency of the Company is the U.S. dollar. Subsidiaries utilize their various local currencies as their functional currency and convert to U.S. dollars for reporting purposes.
 The accounts of the Company’s foreign operations are translated into U.S. dollars using the current rate method. Assets and liabilities are translated at the year-end exchange rate and revenues and expenses are translated at average exchange rates. Gains and losses arising from the translation of the financial statements of foreign operations are deferred and recognized as a separate component of stockholders’ deficit. Transactional currency gains or losses are recorded in the Consolidated Statements of Comprehensive Loss as gain or loss on foreign currency transactions.
Asset Retirement Obligations
We have contractual obligations with respect to the retirement of certain leasehold improvements at maturity of facility leases and the restoration of facilities back to their original state at the end of the lease term. Accruals are made based on management’s estimates of current market restoration costs, inflation rates, and discount rates. At the inception of a lease, the present value of the expected cash payment is recognized as an asset retirement obligation with a corresponding amount recognized in property assets. The property asset amount is depreciated, and the liability is accreted, over the period from lease inception to the time we expect to vacate the premises resulting in both depreciation and interest charges in the Consolidated Statements of Comprehensive Loss. Discount rates used are based on incremental borrowing rates. During 2014, liabilities incurred and settled were $855 and $36 respectively. Liabilities incurred and settled during 2013 were $107 and $454, respectively. Accretion expense totaled $112, $259, and $104 for the years ended December 31, 2014, 2013, and 2012, respectively. As of December 31, 2014 and 2013, the Company’s asset retirement obligations totaled $4,150 and $3,584, respectively.
Newly Issued Accounting Pronouncements
In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740)", which provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable

64
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments in ASU 2013-11 do not require new recurring disclosures. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. Adoption of ASU No. 2013-11 during 2014 resulted in a decrease in both Deferred tax assets and Other noncurrent liabilities of $2,834.
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", which applies to customer contracts for the transfer of goods or services or nonfinancial assets, unless those contracts are within the scope of other standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual and interim reporting periods beginning after December 15, 2016. Early application is not permitted. The amendments should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this Update recognized at the date of initial application. If an entity elects the transition method, it should provide additional disclosures in the reporting periods that include the date of initial application of the amount by which each financial statement line item is affected in the current reporting period compared to the guidance that was in effect before the change. In addition, an explanation of the reasons for significant changes are required in the disclosure. The Company is currently evaluating the effect of ASU 2014-09 on our financial statements.
No other new accounting pronouncement issued or effective during the fiscal year has had or is expected to have a material impact on the Consolidated Financial Statements, included in Item 8 of this report.
Out of Period Adjustments
During the year ended December 31, 2014, we identified prior period accounting errors related to the understatement of an accrued liability, the overstatement of certain deposits, and the overstatement of foreign currency transaction losses. Adjustments to correct these items in 2014 decreased Net loss by approximately $775, net of tax of $336. Because these errors were not material to the prior year's financial statements and the impact of correcting these errors in the current year is not material to the 2014 financial statements or results, we recorded the correction of the errors in the year ended December 31, 2014 Consolidated Financial Statements.
During the quarter and year ended December 31, 2013, an adjustment to correct items identified during the year that related to prior years increased Net income by approximately $361, net of tax of $155. This error related to an over-recognition of depreciation expense on certain property and equipment. Because this error was not material to the prior year's financial statements and the impact of correcting this error in the current year is not material to the 2013 financial statements or results, we recorded the correction of the error in the year ended December 31, 2013 Consolidated Financial Statements.
During the year ended December 31, 2012, adjustments to correct items identified during the year that related to prior years, in the aggregate, increased Net loss by approximately $2,096, net of tax of $475. These errors related to an under-recognition of depreciation expense on certain property and equipment of $971, net of tax of $155, the ineffective portion of certain foreign currency hedging instruments of $336, net of tax of $181, an under-accrual of vacation expense of $365, net of tax of $139, and an over-recognition of foreign currency gains of $424. Because these errors, both individually and in the aggregate, were not material to any of the prior years' financial statements and the impact of correcting these errors in 2012 was not material to the 2012 financial statements or results, we recorded the correction of these errors in the year ended December 31, 2012 Consolidated Financial Statements.

65
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


2. Prepaids and Other Current Assets
The composition of Prepaids and other current assets is as follows:
 
2014
 
2013
Value-added tax receivables
$
10,724

 
$
8,975

Prepaid expenses
9,192

 
9,927

Income tax receivable
6,487

 
4,390

Deferred training costs
5,833

 
6,495

Other tax receivable
5,117

 
5,608

Restricted cash
4,159

 
4,312

Taxes recoverable
2,002

 
1,711

Deferred income taxes — current
1,925

 
1,797

Refundable deposits
1,695

 
1,814

Derivatives
1,576

 
403

Assets held for sale
—

 
1,200

Other receivables
2,232

 
2,137

Other current assets
5,769

 
5,063

 
$
56,711

 
$
53,832

At December 31, 2014, Other current assets and Other receivables consisted primarily of grants receivable, vendor receivables, employee advances, deposits, and other deferred costs. At December 31, 2013, Other current assets and Other receivables consisted primarily of grants receivable, payroll withholding taxes receivables, vendor receivables, employee advances, and other deferred costs.
3. Property and Equipment
The composition of Property and equipment is as follows:
 
2014
 
2013
Land
$
3,554

 
$
3,554

Buildings and improvements
26,353

 
26,219

Leasehold improvements
71,087

 
64,506

Computer software
50,376

 
46,850

Equipment
183,897

 
171,259

Furniture and fixtures
30,951

 
29,834

Total original cost
366,218

 
342,222

Less: Accumulated depreciation and amortization
(282,635
)
 
(261,635
)
Net, excluding construction in progress
83,583

 
80,587

Construction in progress
3,771

 
9,075

Property and equipment, net
$
87,354

 
$
89,662

Depreciation and amortization of property and equipment was $36,222, $34,578, and $35,997 for the years ended December 31, 2014, 2013, and 2012, respectively.
We recorded net losses of $427, gains of $182, and gains of $149 related to disposals of Property and equipment for the years ended December 31, 2014, 2013, and 2012, respectively. During the years ended December 31, 2014 and 2013, the Company also recorded impairment charges of $1,171 and $212, respectively, related to certain property and equipment. No

66
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


such charges were recorded during the year ended December 31, 2012. These amounts are included in Impairment and loss on disposal of assets on our Consolidated Statements of Comprehensive Loss.
Capitalized computer software costs are comprised of internal-use software acquired direct from vendors. Amortization of computer software amounted to $5,792, $5,957, and $6,092 for the years ended December 31, 2014, 2013, and 2012, respectively. Unamortized computer software costs were $14,839, $16,671, and $19,822 at December 31, 2014, 2013, and 2012, respectively.
Included in Property and equipment are the following assets under capital leases:
 
2014
 
2013
Buildings and improvements
$
1,009

 
$
5,388

Leasehold improvements
2,044

 
2,263

Computer software
4,426

 
2,468

Equipment
19,766

 
15,149

 
27,245

 
25,268

Less: Accumulated amortization
(20,671
)
 
(20,046
)
 
$
6,574

 
$
5,222

4. Goodwill and Other Intangible Assets
The total consolidated Goodwill balance is recorded in the Americas reporting segment. The Goodwill balance related to the EMEA reporting segment was fully impaired in 2009. The change in the carrying amount of Goodwill during 2014, 2013, and 2012 is as follows: 
 
2014
 
2013
 
2012
Balances at January 1
 
 
 
 
 
Goodwill
$
261,750

 
$
261,761

 
$
261,751

Accumulated impairment losses
(144,041
)
 
(144,041
)
 
(144,041
)
 
117,709

 
117,720

 
117,710

 
 
 
 
 
 
Currency translation adjustments
(1
)
 
(11
)
 
10

 
 
 
 
 
 
Balances at December 31
 
 
 
 
 
Goodwill
261,749

 
261,750

 
261,761

Accumulated impairment losses
(144,041
)
 
(144,041
)
 
(144,041
)
 
$
117,708

 
$
117,709

 
$
117,720


67
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


The following tables present our Other intangible assets as of December 31, 2014 and 2013:
 
2014
 
Gross
Intangibles
 
Accumulated
Amortization
and Impairment
Charges
 
Currency
Translation
Adjustment
 
Net
Intangibles
Customer relationships
$
90,643

 
$
(89,751
)
 
$
(1
)
 
$
891

Trademark and trade name (indefinite-lived)
40,200

 
(4,176
)
 
—

 
36,024

 
$
130,843

 
$
(93,927
)
 
$
(1
)
 
$
36,915

 
2013
 
Gross
Intangibles
 
Accumulated
Amortization
and Impairment
Charges
 
Currency
Translation
Adjustment
 
Net
Intangibles
Customer relationships
$
89,686

 
$
(89,163
)
 
$
—

 
$
523

Trademark and trade name (indefinite-lived)
40,200

 
(4,176
)
 
—

 
36,024

 
$
129,886

 
$
(93,339
)
 
$
—

 
$
36,547

We amortize intangible assets with definite lives over their estimated useful lives, using the straight-line method. Amortization of intangible assets for the years ended December 31, 2014, 2013, and 2012 was $589, $6,383, and $7,035, respectively. Our estimated future amortization expense is as follows:
Years Ending
 
2015
$
274

2016
274

2017
274

2018
69

2019
—

No impairment charges were recorded related to Goodwill or Other intangible assets for the years ended December 31, 2014, 2013, or 2012. See Note 16 for a discussion of the valuation techniques and inputs used to determine the fair value of these assets.
We cannot predict the occurrence of certain events that might adversely affect the carrying value of Goodwill and Other intangible assets. Deterioration in global economic conditions and/or changes in assumptions or circumstances could result in impairment charges in Goodwill or other indefinite-lived intangibles in future periods in which the change occurs.

68
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


5. Accrued Liabilities and Other
The composition of Accrued liabilities and other is as follows:
 
2014
 
2013
Accrued expenses
$
24,608

 
$
23,236

Accrued interest
21,455

 
21,323

Deferred revenues
12,577

 
7,420

Derivatives
8,685

 
11,787

Accrued value-added tax
7,077

 
6,981

Book overdrafts
2,968

 
3,525

Restructuring — current
2,946

 
2,804

Sales and use tax liability
1,856

 
1,924

Deferred income taxes
997

 
2,340

Software license liabilities
553

 
616

Other
1,991

 
3,279

 
$
85,713

 
$
85,235

At December 31, 2014, Other consisted primarily of deferred rent and certain foreign government tax-related liabilities. At December 31, 2013, Other consisted primarily of deferred rent, certain foreign government tax-related liabilities, and other deferred items.
6. Other Noncurrent Liabilities
The composition of Other noncurrent liabilities is as follows:
 
2014
 
2013
Unrecognized tax benefits
$
21,423

 
$
27,435

Pension liability
6,728

 
5,988

Asset retirement obligation
4,150

 
3,584

Deferred revenues
3,509

 
3,253

Deferred rent — noncurrent
2,696

 
2,085

Derivatives
1,680

 
4,061

Restructuring — noncurrent
534

 
1,724

Deferred grant income
331

 
485

Deferred lease premiums
168

 
306

Software license liabilities
41

 
594

Other
1,394

 
1,687

 
$
42,654

 
$
51,202

At December 31, 2014 and 2013, Other consisted primarily of unclaimed property and client retainers.

69
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


7. Restructuring and Exit Activities
We evaluate and assess our worldwide operations in an effort to rationalize facility and labor costs, further streamline our operations in order to align resources to support growth, and appropriately shift the geographic mix of Company resources. Total costs relating to restructuring activities initiated in 2014 were $17,660. For activities initiated in 2014, the remaining accrual as of December 31, 2014 of $593 related to severance is expected to be paid during 2015, and the remaining accrual for facility exit costs of $497 is expected to be paid in 2015 as the related leases expire. Total costs relating to restructuring activities initiated in 2013 and prior years were $2,747. For restructuring activities initiated in 2013 and prior years, the remaining accrual for severance-related activities of $673 is expected to be paid during 2015, and the remaining accrual for facility exit costs of $1,717 is expected to be paid in 2015 through 2018 as the related leases expire.
Restructuring expense recorded in the years ended December 31, 2014, 2013, and 2012 were $20,407, $14,241, and $15,693, respectively.
The liability for Restructuring and exit activity initiated in 2014 consisted of the following:
 
Severance
 
Facility Exit and Other
 
Total
December 31, 2013
$
—

 
$
—

 
$
—

Costs accrued (offset was to expense)
15,664

 
1,834

 
17,498

Cash payments
(14,561
)
 
(1,213
)
 
(15,774
)
Foreign exchange and other
(510
)
 
(124
)
 
(634
)
December 31, 2014
$
593

 
$
497

 
$
1,090

 
 
 
 
 
 
Current portion of restructuring included in Accrued liabilities and other
$
593

 
$
497

 
$
1,090

Long-term portion of restructuring included in Other noncurrent liabilities
$
—

 
$
—

 
$
—

 
 
 
 
 
 
Activity not reflected within the restructuring liability:
 
 
 
 
 
Costs expensed
$
142

 
$
20

 
$
162

Foreign exchange and other
$
3

 
$
1

 
$
4

Cash payments
$
(145
)
 
$
(21
)
 
$
(166
)
Restructuring expense during the year ended December 31, 2014 for activities initiated in 2014 was $14,213 for EMEA and $3,447 for the Americas.

70
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


The liability for Restructuring and exit activity initiated in 2013 and prior years consisted of the following:
 
Severance
 
Facility Exit and Other
 
Total
December 31, 2013
$
1,293

 
$
3,235

 
$
4,528

Costs accrued (offset was to expense)
1,482

 
879

 
2,361

Cash payments
(1,987
)
 
(2,255
)
 
(4,242
)
Foreign exchange and other
(115
)
 
(142
)
 
(257
)
December 31, 2014
$
673

 
$
1,717

 
$
2,390

 
 
 
 
 
 
Current portion of restructuring included in Accrued liabilities and other
$
673

 
$
1,183

 
$
1,856

Long-term portion of restructuring included in Other noncurrent liabilities
$
—

 
$
534

 
$
534

 
 
 
 
 
 
Activity not reflected within the restructuring liability:
 
 
 
 
 
Costs expensed
$
386

 
$
—

 
$
386

Cash payments
$
(30
)
 
$
—

 
$
(30
)
Restructuring expense during the year ended December 31, 2014 for activities initiated in 2013 and prior years was $1,501 for EMEA and $1,246 for the Americas. Cumulative restructuring costs related to such activities are $15,209 as of December 31, 2014, of which $8,121 relates to EMEA and $7,088 relates to the Americas. No significant additional costs are expected to be incurred.
8. Long-Term Debt
The composition of Long-term debt is as follows:
 
2014
 
2013
Senior Notes
$
296,018

 
$
295,073

Senior Secured Notes
195,458

 
194,045

Senior Secured Credit Facility:
 
 
 
Revolvers:
 
 
 
U.S. revolver
31,700

 
18,000

Canadian revolver
—

 
—

Term Loans:
 
 
 
U.S. dollar term loan
177,973

 
177,973

Euro term loan
26,657

 
30,191

British pound sterling term loan
18,210

 
19,332

Total debt
746,016

 
734,614

Less: Debt maturing within one year
—

 
—

Total Long-term debt
$
746,016

 
$
734,614

Senior Notes
On March 18, 2010, SITEL, LLC and SITEL Finance Corp. (together with SITEL, LLC, the "Issuers") issued in a private placement, 11.5% Senior Notes due 2018 having an aggregate principal amount of $300,000. There is an original issue discount associated with the Senior Notes of $7,638, and the Company deferred debt issuance costs relating to the Senior Notes of $8,203, both of which are amortized over the term of the Senior Notes. The Senior Notes are general unsecured obligations

71
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


of the Company and are senior in right of payment to all existing and future indebtedness, if any, that is by its terms expressly subordinated to the Senior Notes. The Senior Notes are guaranteed by the Company’s domestic subsidiaries and will mature on April 1, 2018. Interest accrues on the Senior Notes at a rate of 11.5% annually, and is payable semi-annually in arrears on April 1 and October 1.
Senior Secured Notes
On April 20, 2012, the Issuers issued in a private placement, 11.0% Senior Secured Notes due 2017 having an aggregate principal amount of $200,000 with an original issue discount of $8,000. The Company deferred debt issuance costs relating to the Senior Secured Notes of $4,675. The original issue discount and deferred debt issuance costs are being amortized over the term of the Senior Secured Notes. The Senior Secured Notes are guaranteed by the Company and its domestic subsidiaries, are secured on an equal and ratable basis with all obligations of the Issuers and the guarantors under the existing Senior Secured Credit Facility, and will mature on April 1, 2017. Interest accrues on the Senior Secured Notes at a rate of 11.0% annually and is payable semi-annually in arrears on February 1 and August 1. Proceeds from the Senior Secured Notes were used to pay down approximately $128,900 of the Term Loans and 100% of the outstanding balance on the Revolvers at that time.
Both the Senior Notes and the Senior Secured Notes contain customary covenants and restrictions on the activities of SITEL, LLC, Sitel Finance Corp. and SITEL, LLC's restricted subsidiaries, including, but not limited to, the incurrence of additional indebtedness; dividends or distributions in respect of capital stock or certain other restricted payments or investments; entering into agreements that restrict distributions from restricted subsidiaries; the sale or disposal of assets, including capital stock of restricted subsidiaries; transactions with affiliates; the incurrence of liens; and mergers, consolidations or the sale of substantially all of SITEL, LLC's assets.
Senior Secured Credit Facility
The Company's Senior Secured Credit Facility initially provided for available borrowings in an aggregate amount of $760,000. Components of the Senior Secured Credit Facility were (1) the $675,000 aggregate principal amount term loans, including a $550,000 U.S. dollar loan, a €51,447 Euro loan, and a £30,000 British pound sterling loan (collectively, the "Term Loans"), and (2) the $85,000 aggregate principal amount revolvers, consisting of a $75,000 U.S. revolver and a $10,000 Canadian revolver (made available in Canadian dollars) (collectively, the "Revolvers"). In January 2013, the non-extended portion of our U.S. revolver expired, reducing the borrowing capacity under the Revolvers to $61,250.
All Term Loans mature on January 30, 2017 and amortize in equal quarterly installments in an aggregate annual amount equal to 0.25% of the original principal amount with the balance payable at maturity. Payments on the principal amount have exceeded the cumulative amortization schedule, thus no amount is due until maturity. Interest on the U.S. term loan is based, at our option, on LIBOR plus the applicable margin of 7.25%, or the higher of the federal funds rate plus 0.50% or the prime rate plus the applicable margin of 6.25%. Interest on the Euro term loan is based on EURIBOR plus the applicable margin of 7.25%. Interest on the British pound sterling term loan is based on LIBOR plus the applicable margin of 7.25%. We have an interest rate swap agreement for the notional amount of $175,000 against our Term Loans that is based on a rate of 2.315% versus three month LIBOR. In November 2011, we amended our interest rate swap agreement to, among other things, reduce the notional amount from $350,000 to $175,000 as of March 31, 2012. For the years ended December 31, 2014, 2013, and 2012, including the impact of our interest rate swap, the weighted average interest rate on the Term Loans was 8.81%, 8.61%, and 8.57%, respectively.
The Revolvers mature on January 30, 2016. A commitment fee is payable quarterly at 1.00% per annum of the undrawn portion of the Revolvers. Interest on the U.S. revolver is based, at our option, on LIBOR plus the applicable margin of 7.25%, or the higher of the federal funds rate plus 0.50% or the prime rate plus the applicable margin of 6.25%. Interest on the Canadian revolver is based, at our option, on the Canadian banker's acceptance rate (the "BA Rate") plus the applicable margin of 7.25%, or the higher of the one month BA Rate plus 0.75% or the Canadian prime rate plus the applicable margin of 6.25%. For the years ended December 31, 2014, 2013, and 2012, the weighted average rate on the Revolvers was 8.55%, 8.43%, and 8.06%, respectively. At December 31, 2014, and December 31, 2013, we had $27,568 and $42,242 available under the Revolvers after utilizing $1,982 and $1,008, respectively, for letters of credit outstanding. In January 2013, a portion of our U.S. revolver expired, reducing the borrowing capacity under the Revolvers to $61,250 from $85,000.

72
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


We paid total debt issuance costs of $719, $17, and $6,892 during 2014, 2013, and 2012, respectively, relating to the Senior Secured Credit Facility, Senior Secured Notes, and Senior Notes. The unamortized balance of debt issuance costs is reflected in Other noncurrent assets and was $7,723, $9,966 and $12,736 at December 31, 2014, 2013 and 2012, respectively.
We are required to prepay certain amounts under the Senior Secured Credit Facility should we initiate specified transactions, including the issuance of equity, sale of certain assets, or additional debt issuance. As a result of voluntary repayments on the Term Loans made during 2008, we will not incur any quarterly principal installments before maturity in January 2017. During 2012, a portion of the proceeds received from the issuance of the Senior Secured Notes were used to prepay the outstanding balances on the non-extended Term Loans, which were due in January 2014. Borrowings under the Senior Secured Credit Facility are collateralized by interests granted on a substantial portion of our worldwide assets and are guaranteed by certain subsidiary guarantors.
The Senior Secured Credit Facility also contains customary affirmative and negative covenants such as restricting certain corporate actions, including asset dispositions, acquisitions, the payment of dividends, changes of control, the incurrence of indebtedness, providing financing and investments and transactions with affiliates. Under the Senior Secured Credit Facility, we are required to comply with the following financial covenants on a quarterly and annual basis:
Senior Secured Leverage Ratio.  The senior secured leverage ratio is a maximum ratio of our total funded debt that is secured by a lien on any assets or equity interests of the Company or any of our subsidiaries to our Adjusted EBITDA (as defined in our Senior Secured Credit Facility) for each period of four consecutive quarters during the term of the Senior Secured Credit Facility.
Minimum Interest Coverage Ratio.  The minimum interest coverage ratio is the ratio of Adjusted EBITDA to cash interest expense (net of interest income) for each period of four consecutive quarters during the term of the Senior Secured Credit Facility.
Maximum Capital Expenditures.  The maximum capital expenditures covenant in our Senior Secured Credit Facility limits our annual capital spending, cash restructuring in excess of $10,000, and our acquisition expenses in excess of $10,000 to a pre-established limit each year and allows for carryover of unused spend.
Future maturities of the Company’s outstanding Long-term debt as of December 31, 2014 are summarized as follows:
2015
$
—

2016
31,700

2017
422,840

2018
300,000

2019
—

2020 and thereafter 
—

Total debt payments
754,540

Less amount representing unamortized debt discount
(8,524
)
Total debt balance at December 31, 2014
$
746,016


73
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


9. Capital Stock
Redeemable Preferred Stock
20.00 million redeemable preferred shares, par value $0.01 per share issuable in series. To date, we have authorized the issuance of three series of preferred shares—Series B, Series C, and Series D. Our Board of Directors determines the voting rights, dividend policy, and conversion rights of each series of these preferred shares. The majority of each series of these preferred shares are held by Onex and other related parties. Each series has a mandatory redemption date of July 2, 2018 for cash and the right to be converted, at any time through the redemption date at the option of the holder, into the Company's Class A Voting Common Stock (initially at $4.85 per share for Series B, $1.50 per share for Series C, and $0.77 per share for Series D), in settlement of these obligations (including all accumulated and unpaid dividends through the redemption date). The net value of the preferred shares is recorded as Redeemable preferred stock (outside of permanent equity).
The Series B, C, and D Preferred Stock contain an optional cash redemption call option that is only exercisable by the Company. Since Onex controls the majority of the Board of Directors, accounting guidance requires that we account for this as an in-substance put option, since it assumes that Onex could force the execution of the call option. The in-substance put option meets the qualifications of a derivative, requiring it to be separated from the host instrument and recorded as a liability at fair value, with subsequent changes in the fair value recorded to the income statement.We have determined that the value is immaterial as of December 31, 2014, 2013, and 2012, thus no adjustment to the carrying value of the stock has been recorded in relation to the in-substance put option.
Series D Preferred Stock
On May 8, 2014, we authorized the issuance of 125,000 shares of 16.0% Cumulative Participating Preferred Stock, Series D (the "Series D Preferred Stock"). On May 8, 2014, we executed a subscription agreement with Onex Clientlogic Holdings LLC to issue up to 75,000 shares of the Series D Preferred Stock at a rate of $1,000 per share. Pursuant to this offer, we received net proceeds of $74,820 from Onex Clientlogic Holdings LLC and other existing shareholders during the year ended December 31, 2014, which the Company used to fund sales growth, invest in our clients, and execute ongoing cost initiatives. The Series D Preferred Stock ranks senior to each other class of the Company's stock in liquidation rights. Holders of the Series D Preferred Stock are entitled to receive cumulative dividends at the rate of 16.0% of the liquidation preference per share per annum, which accrue from inception and are payable at the mandatory redemption date or upon declaration by our Board of Directors. Accrued dividends are recorded to Additional paid-in capital.
At December 31, 2014, the number of shares of Series D Preferred Stock issued and outstanding was 75,000. During the year ended December 31, 2014, we incurred fees associated with the issuance of the Series D Preferred Stock totaling $180 related to a fairness opinion issued by a third party. These fees were deferred and recorded outside of permanent equity as a reduction of the related proceeds, to be accreted to Additional paid-in capital from the date of issuance to the stated redemption date. The liquidation value of the Series D Preferred Stock, including accrued dividends payable, at December 31, 2014 of $81,869 is net of deferred financing costs of $154. Dividends accrued in 2014 amounted to $7,024 and are recorded to Additional paid-in capital.
Series C Preferred Stock
On December 10, 2008, we authorized the issuance of 125,000 shares of Series C Preferred Stock. At December 31, 2014 and 2013, the number of Series C Preferred shares issued and outstanding was 28,881. The liquidation value, including accrued dividends payable, at December 31, 2014, 2013, and 2012 of $69,273, $59,056, and $50,191, respectively, is net of deferred financing costs of $135, $174, and $212, respectively, and the Beneficial Conversion Feature ("BCF") of $1,395, $1,793, and $2,192, respectively. The Series C Preferred Stock ranks senior to the Series B Preferred Stock and to each class of common stock in liquidation rights. Holders of the Series C Preferred Stock are entitled to receive cumulative dividends at the rate of 16.0% of the liquidation preference per share per annum, which accrue from inception and are payable at the mandatory redemption date or upon declaration by the Board of Directors. Dividends accrued in 2014, 2013 and 2012 amounted to $9,779, $8,429, and $7,264, respectively, and are recorded to Additional paid-in capital.
When the conversion option of the Series C Preferred Stock into Class A Voting Common Stock at $1.50 per share is less than the fair value of the common stock on the issuance dates, there is a BCF associated with this preferred stock. The value of the BCF has been recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value to additional paid-in capital. For the Series C Preferred Stock owned by certain other related parties, this discount is then being accreted from the date of issuance to the stated redemption date of July 2, 2018. For the Series C Preferred Stock owned by

74
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Onex, the BCF was immediately amortized to temporary equity at the date of issuance due to the existence of an in-substance put on the stock (see below). The BCF discount at December 31, 2014, 2013, and 2012 is $1,395, $1,793, and $2,192, respectively. The Company recognized $398, $398, and $1,528 of accretion within equity related to the BCF during 2014, 2013 and 2012, respectively.
Series B Preferred Stock
On April 3, 2008, the Company authorized the issuance of 125,000 shares of Series B Preferred Stock. At December 31, 2014 and 2013, the number of shares of Series B Preferred Stock issued and outstanding was 39,947. The liquidation value, including accrued dividends payable, at December 31, 2014, 2013, and 2012 of $75,103, $66,982, and $59,728, respectively, is net of deferred financing costs of $206, $265, and $324, respectively. The Series B Preferred Stock ranks senior to each class of common stock in liquidation rights. Holders of the Series B Preferred Stock are entitled to receive cumulative dividends at the rate of 12.0% of the liquidation preference per share per annum, which accrue from inception and are payable at the mandatory redemption date or upon declaration by the Board of Directors. Dividends accrued in 2014, 2013, and 2012 amounted to $8,062, $7,196, and $6,434, respectively, and are recorded to Additional paid-in capital.
Common Stock
205.00 million Class A voting common shares, par value $0.01 per share, entitled to one vote per share and to receive dividends as declared. At December 31, 2014, 2013, and 2012, the number of Class A voting common shares issued was 41,766,222, 40,699,602, and 33,547,331. At December 31, 2014, 2013, and 2012, there were 38,223,599, 38,234,495, and 31,082,224 Class A voting common shares outstanding, respectively, net of Class A treasury shares of 3,542,623, 2,465,107, and 2,465,107, respectively. Also, the Company is required to at all times reserve and keep available out of its authorized but unissued shares of Class A voting common stock, solely for the purpose of issuance upon the conversion of the Series B, C, and D Preferred Stock, such number of shares of Class A voting common stock as are issuable upon the conversion of all outstanding shares of Series B, C, and D Preferred Stock.
During 2014 and 2013, 274,120 and 657,888 Class A voting common shares were issued related to director compensation. During 2012, 1,606,295 Class A voting common shares were issued, primarily related to purchases by certain of the Company's executives.
20.00 million Class A nonvoting common shares, par value $0.01 per share. No Class A nonvoting common shares have been issued.
120.00 million Class B voting common shares, par value $0.01 per share, entitled to 25 votes per share and to receive dividends as declared, and convertible into the same number of shares of Class A voting common stock at any time. At December 31, 2014, 2013, and 2012, the number of Class B voting common shares issued and outstanding was 88,281,647.
8.50 million Class B nonvoting common shares, par value $0.01 per share. No Class B nonvoting common shares have been issued.
7.50 million Class C voting common shares authorized, par value $0.01 per share, entitled to one vote per share and to receive dividends as declared. At December 31, 2014 and 2013, 6,751,263 Class C voting common shares were issued and 23,990 were outstanding.
Stock Repurchase
On October 5, 2012, the Company entered into a stock repurchase agreement ("Repurchase Agreement") with JANA Piranha Master Fund, Ltd., JANA Nirvana Fund, L.P. and JANA Nirvana Master Fund, L.P. (collectively, "JANA"), whereby the Company acquired all of the outstanding Company common and preferred shares owned by JANA for a total cost of $1,900. The purchase included 6,727,273 shares of Class C common stock, 12,123 shares of Series B Preferred Stock, and 3,696 of Series C Preferred Stock.
The common shares were acquired for $722 and were recorded as Treasury shares at cost. The preferred shares were acquired for $1,128. The difference between the $13,417 carrying value of the preferred shares and the $1,128 acquisition price was recorded to Additional paid-in-capital. In addition, $87 of deferred financing fees related to the preferred shares was written off during the year ended December 31, 2012.

75
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Exchangeable Preferred Stock
Pursuant to a charter and related support agreement, as of December 31, 2014, 2013, and 2012, 1,713,321 shares of exchangeable preferred stock held in a subsidiary of the Company have the right to exchange their shares for Class A voting common shares, plus any dividends declared on the Class A voting common shares. These exchangeable preferred shares have no voting rights or other rights of redemption. If exchanged, the preferred shares will be exchanged for Class A voting common shares on a 1 to 1 basis. We have agreed to repurchase the exchangeable preferred shares at the underlying fair market value of the common stock for which they are exchangeable in the event that we are unable to issue the class A common stock upon conversion of the exchangeable preferred shares. None of these exchangeable preferred shares were converted into shares of Class A voting common shares during 2014, 2013, or 2012. The exchangeable preferred shares are recorded at $2,665 at December 31, 2014, 2013, and 2012 in the accompanying Consolidated Balance Sheets.
Treasury Shares
During 2014, the Company re-acquired 1,077,516 Class A common shares from a former executive, and, in connection therewith, recognized $2,376 of treasury stock. No Class A common shares were purchased during 2013 or 2012. From March 2001 through December 31, 2014, the Company purchased a total of 10,269,896 treasury shares for $11,623, which includes the aforementioned repurchase of Class C common shares from JANA. Currently, the Company does not have an authorized stock repurchase plan.
Stockholders’ Agreement
Pursuant to the Company’s Stockholders’ Agreement, as amended and restated, the Company has a contingent call option on all common shares of the Company held by any management stockholder (as defined). Upon termination of employment for any reason (other than retirement, death, or disability), the Company has the option to purchase the common shares held by the management stockholder at the then fair market value of such common shares. The Company has not elected to exercise this contingent call option since inception of the Stockholders’ Agreement.
Stock-Based Compensation
The Company maintains several equity compensation plans, which are described below.
Stock Option Plan
The Company’s 1998 Stock Option Plan (the "1998 Option Plan"), which is stockholder approved, permits the grant of stock options to directors, officers, and key employees. Option awards are generally granted with an exercise price not less than 100% of the fair value of the Company’s stock at the date of the grant, generally vest over a four-year period, and are generally exercisable for 10 years from the date of the grant. Upon the termination of the option holder’s employment with the Company, or upon a change in control, the Company has the option (but not the obligation) to purchase the original stock options from the option holder, or if the option had been exercised, the stock resulting from such exercise. The option purchase price to be paid by the Company, if such contingent call option is exercised, is the current fair market value of the Company’s Class A voting common shares less the applicable per share option price. For option shares, the purchase price is the current fair market value of the Company's Class A voting common shares.
Since January 2005, following the decision of the Company to issue restricted stock and restricted stock units pursuant to individual employee restricted stock and restricted stock unit grant plans and agreements (the "Restricted Plans") described more fully below, the Company has not granted any stock options. All options granted under the 1998 Option Plan were vested as of December 31, 2008; thus, no compensation cost was recognized related to these previously granted stock options during 2014, 2013, or 2012. There were no related income tax benefits recognized in the Consolidated Statements of Comprehensive Loss, and no realization of the benefit of tax deductions in excess of recognized tax benefits from the exercise of stock options for 2014, 2013, and 2012.

76
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


A summary of nonqualified and incentive stock option activity under the 1998 Option Plan is presented below:
 
Shares
 
Weighted
Average
Exercise
Price Per
Share
Options outstanding at January 1, 2012
21,200

 
$
3.44

Forfeited
(6,200
)
 
3.45

Options outstanding at December 31, 2012
15,000

 
3.43

Forfeited
(10,000
)
 
4.00

Options outstanding at December 31, 2013
5,000

 
2.30

Forfeited
(5,000
)
 
2.30

Options outstanding at December 31, 2014
—

 
$
—

Exercisable at December 31, 2014
—

 
$
—

No options were granted, exercised, or vested during 2014, 2013, or 2012.
Restricted Stock and Restricted Stock Unit Plans
The restricted shares vest over a two-year period commencing upon a change in control, initial public offering, or liquidation (a liquidity event). A portion of the restricted shares vest if a liquidity event occurs within six months of the date an employee is involuntarily terminated due to death, disability or reduction in force within six months of the liquidity event. These grants fully vest upon the employee's termination or constructive termination in connection with a change in control. The Company has a right of first refusal to acquire the restricted shares held by an employee at the current fair value, even after the restriction period lapses.
During the years ended December 31, 2014 and 2013, we issued 900,000 and 7,318,000 restricted shares of Class A Common Stock, respectively, pursuant to agreements with each of the Company's executives under terms of a (“Restricted Stock Grant Plan and Agreements”). The restricted shares will generally be earned based on the attainment of specified goals achieved over a performance period. See Item 11 of this Report for additional information regarding the Restricted Stock Grant Plan and Agreements. No shares were issued under the Restricted Stock Grant Plan and Agreements during 2012.
The summary of restricted stock activity is set forth below:
 
Shares
 
Weighted
Average
Grant Date Fair Value    
Unvested at January 1, 2012
1,810,475

 
$
5,161

Forfeited
(36,500
)
 
(123
)
Unvested at December 31, 2012
1,773,975

 
5,038

Granted
7,318,000

 
2,908

Forfeited
(823,617
)
 
(335
)
Unvested at December 31, 2013
8,268,358

 
7,611

Granted
900,000

 
513

Forfeited
(107,500
)
 
(148
)
Unvested at December 31, 2014
9,060,858

 
$
7,976


77
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Additionally, there are unvested restricted stock units, covered under the Restricted Plans, which are similar to restricted shares except that actual shares of Class A voting common stock are only issued to individuals upon vesting and exercise. These restricted stock units vest over a three-year period upon the stock becoming freely tradable and fully vest upon a change in control. In addition, a portion of the stock units vest following an employee's termination for specified reasons if a change in control or an initial public offering occurs within six months of the employee's termination. The summary of activity related to restricted stock units is set forth below:
 
Stock
Units
 
Weighted
Average
Grant Date Fair Value    
Unvested at January 1, 2012
1,871,500

 
$
4,881

Granted
40,000

 
49

Forfeited
(187,500
)
 
(477
)
Unvested at December 31, 2012
1,724,000

 
4,453

Granted
150,000

 
76

Forfeited
(257,500
)
 
(575
)
Unvested at December 31, 2013
1,616,500

 
3,954

Granted
20,000

 
11

Forfeited
(174,500
)
 
(527
)
Unvested at December 31, 2014
1,462,000

 
$
3,438

As of December 31, 2014, 2013, and 2012, there was approximately $8,919, $9,050, and $7,795, respectively, of total unrecognized compensation cost (including the effect of expected forfeitures) related to unvested restricted stock and restricted stock units that the Company had not recorded. We will recognize that cost over a period of two and three years for restricted shares and restricted stock units, respectively, following the occurrence of a change in control, initial public offering, or liquidity event, as defined in the Restricted Plans.
Deferred Compensation Plan
The Company has a deferred compensation plan pursuant to which certain employees and directors have been given the option to defer compensation. Compensation deferred is in the form of phantom stock units, which are held in the plan for the benefit of the individual until such compensation is distributed in accordance with the terms of the agreement. A total of 22,500, 22,500, and 35,357 phantom stock units were outstanding at December 31, 2014, 2013, and 2012 respectively.
With respect to the remaining 22,500 phantom stock units, the Company has the option of settling the obligation in either cash or Class A voting common shares. These phantom stock units are classified as a liability, as the Company may settle these awards in cash. Accordingly, $11 and $12 is recorded in Other noncurrent liabilities at December 31, 2014 and 2013, respectively. Compensation income of $2, expense of $4, and expense of $2 was recorded in 2014, 2013, and 2012, respectively, based on the stock price at the end of the applicable period.
10. Income Taxes
(Loss) income before income taxes consists of the following:
 
2014
 
2013
 
2012
Domestic
$
(47,771
)
 
$
(38,104
)
 
$
(49,363
)
Foreign
13,094

 
23,874

 
24,212

Total
$
(34,677
)
 
$
(14,230
)
 
$
(25,151
)

78
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


The (benefit) provision for income taxes attributable to continuing operations consists of the following:
 
2014
 
2013
 
2012
Current tax provision
 
 
 
 
 
U.S. federal
$
(148
)
 
$
2,129

 
$
—

State and local
(91
)
 
885

 
1,209

Foreign
5,788

 
7,619

 
2,346

Total current tax provision
5,549

 
10,633

 
3,555

Deferred tax provision
 
 
 
 
 
U.S. federal
5,117

 
(2,585
)
 
(6,882
)
State and local
1,140

 
(569
)
 
(53
)
Foreign
1,877

 
(22,695
)
 
2,097

Total deferred tax provision
8,134

 
(25,849
)
 
(4,838
)
Total (benefit) provision for income taxes
$
13,683

 
$
(15,216
)
 
$
(1,283
)
The (benefit) provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income (loss) from continuing operations, before noncontrolling interests, as a result of the following:
 
2014
 
2013
 
2012
Tax benefit at statutory U.S. tax rate (35%)
$
(12,137
)
 
$
(4,981
)
 
$
(8,803
)
State and local taxes, net of federal benefit
823

 
193

 
740

Valuation allowance
7,967

 
(28,316
)
 
(8,997
)
Impact of foreign operations
4,702

 
1,736

 
7,067

Change in tax reserves
(325
)
 
368

 
(2,449
)
Nondeductible expenditures
9,046

 
7,864

 
8,214

Foreign dividends and interest
12,107

 
17,544

 
11,539

Tax rate differences of foreign subsidiaries
(8,503
)
 
(9,606
)
 
(8,652
)
Jobs tax credits
—

 
—

 
398

AMT credits
—

 
(187
)
 
—

Other
3

 
169

 
(340
)
 
$
13,683

 
$
(15,216
)
 
$
(1,283
)

79
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Deferred Taxes
Deferred tax assets (liabilities) included in the accompanying Consolidated Balance Sheets consists of the following:
 
2014
 
2013
Operating loss carryforwards
$
170,875

 
$
177,291

Accrued liabilities
3,353

 
8,815

Property, equipment, and amortization
28,729

 
26,690

Federal, state, and foreign tax credits
12,566

 
13,712

Accrued and unearned compensation
3,272

 
3,946

Customer and grant assets
2,278

 
—

Restructuring liabilities
610

 
632

Unrealized foreign exchange gain
6,346

 
193

Other
1,481

 
2,523

Total deferred tax assets
229,510

 
233,802

Definite and indefinite lived intangibles
(12,727
)
 
(12,748
)
Unrepatriated foreign earnings
(4,821
)
 
(3,686
)
Customer and grant assets
—

 
(229
)
Total deferred tax liabilities
(17,548
)
 
(16,663
)
Net deferred tax assets
211,962

 
217,139

Valuation allowance
(188,002
)
 
(185,535
)
Net deferred tax assets
$
23,960

 
$
31,604

The balance sheet classification of the net deferred tax assets (liabilities) is as follows:
 
2014
 
2013
Net current deferred tax assets
$
1,925

 
$
1,797

Net noncurrent deferred tax assets
28,951

 
35,975

Net current deferred tax liabilities
(997
)
 
(2,340
)
Net noncurrent deferred tax liabilities
(5,919
)
 
(3,828
)
Total net deferred tax assets
$
23,960

 
$
31,604

The Company has not recorded deferred U.S. income tax liabilities of $12,455 and $12,162 applicable to undistributed earnings of $36,779 and $34,977 at December 31, 2014 and 2013, respectively, related to certain foreign subsidiaries as these undistributed earnings are indefinitely reinvested in foreign operations. If earnings of such subsidiaries were not reinvested, the resulting U.S. tax liability would be substantially offset by the utilization of U.S. net operating loss carryforwards. Furthermore, foreign withholding taxes may be imposed on actual distributions. During the fourth quarter of 2014, we changed our assertion with respect to a certain foreign subsidiary however did not record a deferred tax liability applicable to the undistributed earnings due to an excess tax basis. During the fourth quarter of 2013, we changed our assertions with respect to certain of our foreign subsidiaries. We recorded a deferred tax liability applicable to the undistributed earnings of our Nicaraguan subsidiary for $584 as a result of its strong performance combined with repatriation opportunities and our Indian subsidiary for $1,683 given that future distributions could exceed current earnings. We reduced the deferred tax liabilities as a result of reversing our assertions related to our Polish subsidiary for $1,055 as future distributions are not expected to exceed current earnings. The Company has deferred tax liabilities in the amount of $4,821 and $3,686 for anticipated repatriations of earnings from foreign subsidiaries in Nicaragua, India, and New Zealand for the years ending December 31, 2014 and December 31, 2013, respectively.

80
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Valuation Allowances
U.S. GAAP requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s current and past performance, the market environment in which the company operates, the utilization of past tax credits, length of carryback and carryforward periods, existing contracts that will result in future profits, etc.
As a result of historical operating losses, the Company has established a valuation allowance of $188,002, $185,535, and $206,415 at December 31, 2014, 2013, and 2012, respectively. The valuation allowance increased $2,467 during 2014, decreased $20,880 during 2013, and decreased $9,305 during 2012.
In the second quarter of 2013, we released valuation allowance on U.S. state deferred tax assets totaling $744. We released the deferred tax assets of our French subsidiary in the amount of $10,419 in the third quarter of 2013 after management concluded that the indefinite lived nature of its net operating losses coupled with its recent operating results and forecasted income substantiated the release. During the fourth quarter of 2013, we also released valuation allowance for our German subsidiary in the amount of $7,639 and two of our United Kingdom subsidiaries in the amounts of $8,735 and $1,115, given recent cumulative profit positions coupled with profitable outlooks. These releases were offset by valuation allowance established on our Italian subsidiary totaling $170 given the expected future operating results could no longer sustain recognition of the deferred tax assets.
In the fourth quarter of 2012, we released valuation allowances on the deferred tax assets of one of our Canadian subsidiaries and our Colombian subsidiary, resulting in a tax benefit of $3,522. Management concluded that releases were warranted in the fourth quarter of 2012 given recent cumulative profit positions coupled with profitable outlooks. We also established a valuation allowance on the deferred tax assets of our Brazilian subsidiary in the fourth quarter of 2012 as management concluded that cumulative losses and lack of future expected sustained profitability could no longer support recognition of the deferred tax assets, resulting in tax expense of $3,593. We also released the valuation allowance on operating losses and other tax attributes with unlimited carryforward periods in certain jurisdictions to the extent that deferred tax liabilities related to indefinite lived intangibles created a source of income to support the release. This release resulted in a tax benefit of $5,139 during the fourth quarter of 2012.
We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations (the "Income Tax Allocation"). During the fourth quarter of 2014, as a result of the Income Tax Allocation, we recorded a non-cash deferred income tax expense of $33 against other comprehensive income as a result of year-to-date gains from mark-to-market fluctuations on the 2015 portfolio of foreign currency hedges which are designated as accounting hedges and an offsetting non-cash income tax benefit of $33 in continuing operations compared to $598 and $3,237 related to the 2013 hedge portfolio recorded in 2013 and 2012, respectively. The 2014 hedge portfolio was fully settled during the fourth quarter, resulting in the reversal of previously recorded tax benefits in non-cash income tax expense of $1,676. During the first quarter of 2014, the 2013 hedge portfolio was fully settled resulting in the reversal of previously recorded tax benefits in non-cash income tax expense of $3,799.
During the fourth quarter of 2012, we recorded a non-cash deferred income tax expense of $948 against Foreign currency translation adjustment as a result of year-to-date gains from foreign currency fluctuations primarily related to our establishment of a deferred tax liability on unrepatriated foreign earnings of our Philippines subsidiary and an offsetting non-cash income tax benefit of $948 in continuing operations.
A summary of transactions impacting the valuation allowance for the years ended December 31, 2014, 2013, and 2012 are as follows:
 
2014
 
2013
 
2012
Balance, beginning of year
$
(185,535
)
 
$
(206,415
)
 
$
(215,720
)
(Additions) deductions charged to tax expense
(9,063
)
 
28,316

 
8,997

(Additions) deductions charged to other accounts (1)
6,596

 
(7,436
)
 
308

Balance, end of year
$
(188,002
)
 
$
(185,535
)
 
$
(206,415
)
(1)
Adjustments to other comprehensive loss and adjustments to valuation allowance where we continue to maintain a full valuation allowance.

81
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Tax Attributes (Net Operating Losses, Tax Credits, and Tax Holidays)
At December 31, 2014, the Company had $425,803 of U.S. federal net operating loss carryforwards and $1,126,834 of state net operating loss carryforwards, which began to expire in 2010 and will continue through 2034. At December 31, 2014, the Company had $131,305 of U.S. federal net operating loss carryforwards, which are limited to $13,600 in any calendar year, and $3,445 of U.S. federal tax credits, both of which are subject to limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended.
The Company has foreign net operating loss carryforwards in the following jurisdictions, which expire at the dates indicated:
 
Amount
 
Expiration period
United Kingdom
$
61,406

 
Indefinite carryforward
Netherlands
36,111

 
2015 - 2023
Spain
29,402

 
Indefinite carryforward
France
21,011

 
Indefinite carryforward
Germany
15,540

 
Indefinite carryforward
Brazil
8,532

 
Indefinite carryforward
Italy
5,938

 
Indefinite carryforward
Singapore
3,948

 
Indefinite carryforward
Australia
2,868

 
Indefinite carryforward
Chile
2,773

 
Indefinite carryforward
Other foreign net operating losses with indefinite carryforward
929

 
Indefinite carryforward
At December 31, 2014, the Company has $7,230 of U.S. federal tax credit carryforwards, which begin to expire in 2020, and $1,578 of state tax credit carryforwards, which will begin to expire in 2016. A portion of the state tax credits are being used yearly and are expected to be fully utilized by 2027. In addition, the Company has tax credits in foreign jurisdictions of $3,711, which will begin to expire in 2017.
In 2014, 2013, and 2012 for U.S. federal income tax purposes, the Company recognized certain unrepatriated dividends and other interest income due to financing terms under third party and intercompany financing arrangements totaling approximately $31,432, $48,570, and $33,016, respectively.
The Company has been granted tax holidays in certain countries or takes advantage of tax benefits in certain tax-favored zones. The tax benefit is generated from the Company's operations in the Philippines, India and Nicaragua. The majority of the Philippines tax holidays have expired and the Company has applied to extend the tax holidays at an income tax rate of 0% for multiple sites up to July 31, 2014. The Company currently has tax holidays at an income tax rate of 0% for other sites set to expire on dates up to February 28, 2016, with possible extensions thereafter. After the 0% income tax rate expires, a reduced income tax rate of 5% will apply. The tax benefit received by the Company related to the tax holidays in the Philippines is approximately $1,171, $939, and $893 for 2014, 2013, and 2012, respectively.
The Software Technology Parks of India (STPI) tax holidays expired on March 31, 2011 and we were taxed at the regular income tax rates of 33.99% commencing April 1, 2011, except at our Chennai location where we have an income tax rate of 0%, which will continue until 2021 under the Special Economic Zone. The tax benefit related to the tax holidays in India is approximately $301, $361, and $505, respectively, for 2014, 2013, and 2012.
The Company operates in a Free Trade Zone in Nicaragua and enjoys a 0% income tax rate until 2022. The tax benefits related to Nicaragua were $922, $691, and $636, respectively, for 2014, 2013, and 2012.
Unrecognized Tax Benefits
U.S. GAAP defines the threshold for recognizing the tax benefits of a tax return filing position in the financial statements as more likely than not to be sustained by the taxing authority. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized. U.S. GAAP provides guidance on how to determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits.

82
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


The following table summarizes the activity related to our gross unrecognized tax benefits:
 
2014
 
2013
 
2012
Beginning balance
$
30,717

 
$
36,658

 
$
37,921

(Decreases) increases related to prior year tax positions
613

 
2,547

 
(193
)
(Decreases) increases related to current year tax positions
(377
)
 
3,917

 
886

(Decreases) related to settlements with taxing authorities
(350
)
 
(9,715
)
 
(270
)
(Decreases) related to lapsing of statute of limitations
(713
)
 
(1,994
)
 
(2,868
)
Currency translation adjustment
(1,683
)
 
(696
)
 
1,182

Ending balance
$
28,207

 
$
30,717

 
$
36,658

We record interest and penalties related to uncertain tax positions as components of income tax expense. We recorded interest expense (income) on uncertain tax positions of $(147), $220, and $290 and penalties of $(824), $(607), and ($569) for 2014, 2013, and 2012, respectively.
As of December 31, 2014 and 2013, in addition to the balance above, we had accrued $5,413 and $5,686 for payment of interest and $5,412 and $6,378 for payment of penalties respectively. At this time, we are unable to determine when ultimate payment will be made for any of these items. If cash settlement for all of these items occurred in the same year, there would be a material impact to cash flow. Upon future recognition of the unrecognized tax benefits as of December 31, 2014, including interest and penalties, $28,748 will have a favorable impact on the effective tax rate.
We are no longer subject to U.S. federal, state, or non U.S. income tax examinations or assessment of taxes by tax authorities with respect to years ending on, or prior to, December 31, 2004, except that our net operating loss carryforwards in several jurisdictions are subject to adjustment generally until the expiration of applicable statutes of limitation for the years in which such loss carryforwards are utilized. We are currently under audit in the United Kingdom, Canada, Germany, Philippines, India, and Colombia. We do not expect these tax audits to have a material impact to our Consolidated Financial Statements.
It is reasonably possible that within the next 12-month period, the amount of unrecognized tax benefits for certain foreign tax positions might be reduced by $174 as a result of statute expirations or a final determination.

83
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


11. Employee Benefits and Compensation
The Company has defined benefit pension plans covering certain employees outside of the U.S. The following sets forth the obligations, assets, and funded status of the plans.
 
2014
 
2013
 
2012
Change in projected benefit obligation
 
 
 
 
 
Projected benefit obligation at beginning of year
$
10,455

 
$
8,676

 
$
6,719

Service cost
792

 
770

 
608

Interest cost
423

 
339

 
337

Actuarial loss (gain)
1,620

 
1,256

 
851

Benefits paid
(753
)
 
(569
)
 
(142
)
Foreign exchange
(807
)
 
69

 
350

Other
194

 
(86
)
 
(47
)
Projected benefit obligation at end of year
11,924

 
10,455

 
8,676

Change in plan assets
 
 
 
 
 
Fair value of plan assets at beginning of year
4,467

 
3,897

 
3,362

Actual return on plan assets
455

 
219

 
35

Employer and employee contributions
562

 
388

 
395

Foreign exchange
(325
)
 
102

 
169

Benefits paid
(143
)
 
(139
)
 
(64
)
Other
180

 
—

 
—

Fair value of plan assets at end of year
5,196

 
4,467

 
3,897

Unfunded status/net pension liability
$
(6,728
)
 
$
(5,988
)
 
$
(4,779
)
Net periodic pension cost consisted of the following:
 
2014
 
2013
 
2012
Service cost
$
792

 
$
770

 
$
608

Interest cost
423

 
339

 
337

Actual return on plan assets
(455
)
 
(219
)
 
(35
)
Difference between expected return and actual return on plan assets for period
91

 
(80
)
 
(260
)
Past service cost
152

 
159

 
159

Actuarial loss (gain), recognized
34

 
(300
)
 
(621
)
Other
(9
)
 
(85
)
 
(46
)
Net periodic pension cost
$
1,028

 
$
584

 
$
142

Amounts recognized in the accompanying Consolidated Balance Sheets are as follows:
 
2014
 
2013
Other noncurrent liabilities (pension liability)
$
(6,728
)
 
$
(5,988
)
The total accumulated benefit obligation for all pension plans approximated the projected benefit obligation as of December 31, 2014 and 2013.


84
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Amounts recognized in Accumulated other comprehensive loss are as follows:
 
2014
 
2013
Actuarial (loss) gain
$
(723
)
 
$
469

Prior service cost
(496
)
 
(360
)
Difference between actual and expected return on assets, loss
(1,615
)
 
(1,724
)
Other / CTA, gain (loss)
222

 
(17
)
 
$
(2,612
)
 
$
(1,632
)
The amounts of accumulated other comprehensive loss that are expected to be amortized as expense during 2015 for actuarial gain and prior service cost are $91 and $181 respectively.

The assumptions used in determining pension costs for the predominate plan include the following:
 
2014
 
2013
 
2012
Discount rate
3.8%
 
4.5%
 
4.5%
Expected return on plan assets
6.0%
 
8.2%
 
8.1%
Rate of compensation increase
4.3%
 
5.1%
 
4.2%
The assumptions used in determining pension obligations for the predominate plan include the following:
 
2014
 
2013
 
2012
Discount rate
3.8%
 
4.5%
 
4.5%
Rate of compensation increase
4.3%
 
5.1%
 
4.2%
For the predominate plan, the discount rate used is based on the yield on the iBoxx Sterling Corporate Bond Index for bonds with AA rating and duration greater than 15 years. The expected long-term rate of return on assets was determined using a weighted average calculation for the various investments of the plans. Based on current short-term investment rates, the yield on cash investments was 3.3% and 2.7% for 2014 and 2013, respectively. For other investments, which included cash, growth, private equity, and infrastructure pooled funds, based upon short-term investment rates, the rate was set at 8.2% and 8.1% for 2014 and 2013, respectively.
Estimated contributions and benefits are as follows:
 
Estimated
 
Benefits
 
Contributions
December 31
 
 
 
2015
$
577

 
$
836

2016
680

 
680

2017
731

 
730

2018
759

 
754

2019
662

 
654

2020 and thereafter
3,306

 
2,765


85
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


The Company’s investment strategy in managing pension assets is to maintain an overweight position in investment funds in order to achieve desired returns with appropriate levels of risk. The use of derivative instruments is not permitted. The Company’s pension plan weighted-average actual asset allocations are as follows:
 
2014
 
2013
Equity securities
43.7%
 
29.0%
Debt securities
25.4%
 
47.0%
Real estate
5.0%
 
5.0%
Other, including cash and cash equivalents
25.9%
 
19.0%
Fair Value of Plan Assets
U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are classified into a hierarchy by the inputs used to perform the fair value calculation as follows:
Level 1 – Fair value based on unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 – Modeled fair value with model inputs that are all observable market values.
Level 3 – Modeled fair value with at least one model input that is not an observable market value.
The fair value measurements of major categories of plan assets are as follows:
 
Fair Value Measurements at December 31, 2014
Asset category
Total
 
Level 1
 
Level 2
 
Level 3
Multiple pooled separate accounts(1)
$
3,635

 
$
169

 
$
—

 
$
3,466

European bond pooled separate account(2)
1,561

 
144

 
1,417

 
—

Total
$
5,196

 
$
313

 
$
1,417

 
$
3,466

 
 
 
 
 
 
 
 
 
Fair Value Measurements at December 31, 2013
Asset category
Total
 
Level 1
 
Level 2
 
Level 3
Multiple pooled separate accounts(1)
$
3,154

 
$
—

 
$
—

 
$
3,154

European bond pooled separate account(2)
1,313

 
—

 
1,313

 
—

Total
$
4,467

 
$
—

 
$
1,313

 
$
3,154

(1) Consists of private equity, European infrastructure, real estate, hedge funds of funds, global equities, and bonds
(2) Consists of government and non-government fixed interest securities with observable market pricing information
The transactions in Level 3 assets for the years ended December 31, 2014 and 2013 are as follows:
 
2014
 
2013
Balance, beginning of year
$
3,154

 
$
3,381

Actual return on plan assets
232

 
202

Sales and settlements
294

 
(518
)
Foreign exchange
(214
)
 
89

Balance, end of year
$
3,466

 
$
3,154

Due to the lack of observable market quotations on certain pooled separate accounts, we evaluate their structure and current market estimates of fair value. These inputs include those that are based on expected cash flow streams, including assessments of overall market liquidity. The valuations are subject to uncertainties that are difficult to predict.

86
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


The Company also sponsors various employee retirement plans. In the United States, the Company sponsors a 401(k) savings plan that covers substantially all U.S. employees. In both Canada and Europe, the Company sponsors similar defined contribution plans. Expenses related to the defined contribution plans amounted to $1,530, $713, and $492 in 2014, 2013 and 2012, respectively.
12. Related Party Transactions
David Garner Director Agreement
On October 28, 2013, David Garner resigned as the Company’s Non-Executive Chairman of the Board. Mr. Garner will continue to serve as a member of the Board of Directors of the Company. In connection with Mr. Garner’s resignation, on October 28, 2013, the Company entered into a new director agreement with Mr. Garner, providing that for service as a director on the Board, Mr. Garner will receive annual director compensation of $125, payable $63 in cash and the remainder in shares of Class A common stock issued at the then fair market value.
Sale of Subsidiary
On March 29, 2013, the Company sold all of its common stock, totaling 1,287,000 shares, in its Sitel Belgium NV (“Belgium”) subsidiary to HV Management Consulting BVBA (“HVMC”), a company of which the controlling shareholder and chief executive officer is the former Belgium country manager and director, for a nominal price. During the year ended December 31, 2013, the Company recorded a Loss on sale of subsidiary of $4,558 related to the Belgium sale in the accompanying Consolidated Statements of Comprehensive Loss.
In addition to the sale of stock, the Company also agreed to provide support services and certain sub-contract services to HVMC and Belgium following the date of closing in order to assist in the transition. Certain information technology assets and employees were transitioned to another Company affiliate concurrently with the sale.
Discounted Sale of Class A Common Stock
On December 31, 2012, we entered into stock purchase agreements (the "Stock Purchase Agreements") with Dagoberto Quintana, our Chairman, President, and Chief Executive Officer, and Patrick Tolbert, our Chief Operating and Financial Officer. Pursuant to the Stock Purchase Agreements, Messrs. Quintana and Tolbert purchased 1,000,000 and 296,359 shares of our Class A Common Stock, respectively, for a purchase price of $0.175 per share, a discount to the then fair market value of $0.38 per share, resulting in $480 in Additional paid-in capital in the accompanying Consolidated Statements of Changes in Stockholders' Deficit, and a charge to compensation cost of $266 in the accompanying Consolidated Statements of Comprehensive Loss.
NAFS Sale
On August 31, 2011, our wholly owned subsidiary, NAFS, now known as NA Liquidating Company, Inc., executed a Membership Interest Purchase Agreement with David Garner, our former Chief Executive Officer and Non-Executive Chairman of the Company’s Board of Directors, and current Board member. Pursuant to the agreement, Mr. Garner agreed to purchase directly or indirectly through an affiliate, Emory Enterprises, LLC ("Emory"), certain assets and obligations comprising NAFS's third party collections business based in Buffalo, New York (the "NAFS Business"). To facilitate this transaction, NAFS agreed to transfer the assets and obligations of the NAFS Business to a newly formed limited liability company ("NAFS Buffalo").
A portion of the purchase price for the NAFS Business was paid at closing on August 31, 2011, with the remainder to be paid in equal monthly installments over a thirty-six month period commencing March 2012. The NAFS Business was deconsolidated effective August 1, 2011. In addition, commencing August 31, 2011 and ending January 30, 2014, we provided certain outsourced information technology services to NAFS Buffalo and Emory. These services were provided to NAFS Buffalo and Emory to support continuing information technology requirements, and amounted to $0, $176, and $161, respectively, during the years ended December 31, 2014, 2013, and 2012. The parties also entered an additional service agreement in August 2011 pursuant to which NAFS Buffalo and/or its affiliates agreed to continue to service one of the Company’s clients.
On February 13, 2013, we entered into an agreement with Mr. Garner and Emory pursuant to which we deferred payment of certain information technology service fees charged from February 1, 2012 through January 31, 2013 and amended such service agreements to reduce certain 2013 fees and provide for their ultimate termination. On January 30, 2014, we entered into a new agreement to defer payment of additional past due amounts of $46 and the remaining purchase price receivable of $398 owed to the Company by Emory and Mr. Garner related to the 2011 purchase of the NAFS

87
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Business. The Company also agreed to defer payment of the information technology service fees of $176 charged during 2013. These deferred payment amounts were added to the principal and accrued interest owed under the original note, which amounted to $193 as of December 31, 2013. The original note was amended and restated in the principal amount of $813 and is recorded in Other noncurrent assets at December 31, 2014 and 2013. The note is guaranteed by Mr. Garner on a recourse basis, and is due December 15, 2017. Mr. Garner’s guarantee is secured by a security interest in all of Mr. Garner’s preferred and common stock in the Company granted pursuant to a stock pledge agreement.
13. Lease Commitments
Capital Leases
The Company is obligated under various capital leases for certain property, software, and equipment. We record assets under capital leases at the present value of the minimum lease payments. We amortize assets under capital leases on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset. The Company had capital lease assets of $6,574 and $5,222 at December 31, 2014 and 2013, respectively. At December 31, 2014, the future minimum payments under capital leases were as follows:
 
Minimum
Lease
Payments
Years Ending
 
2015
$
3,821

2016
3,064

2017
720

2018
384

2019
—

2020 and thereafter
—


7,989

Amount representing interest
(1,765
)
     Net
$
6,224

Operating Leases
The Company also leases property and equipment under non-cancelable operating lease arrangements with initial or remaining lease terms in excess of one year. We recognize rent holidays and rent escalations on a straight-line basis over the lease term; and landlord/tenant incentives are recorded as deferred rent and amortized over the life of the related lease. At December 31, 2014, the future minimum payments due under operating leases were as follows:
 
Minimum   
Lease
Payments
Years Ending
 
2015
$
43,172

2016
30,135

2017
21,723

2018
15,059

2019
6,302

2020 and thereafter
3,357

 
$
119,748

For the years ended December 31, 2014, 2013, and 2012, the Company recognized rent expense under operating leases of $55,809, $56,920, and $59,257, respectively.

88
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


14. Commitments and Contingencies
The Company and its subsidiaries from time to time are subject to legal claims arising in the ordinary course of business. While the Company is unable to predict the outcome of these matters, it believes, based upon currently available facts, that adequate provision for such claims has been made. However, adverse developments could negatively impact earnings in particular future fiscal periods.
In October 2013, India’s Provident Fund ("PF") issued a summons to Sitel India pursuant to the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (“PF Act”) stating that Sitel India had improperly remitted PF payments for a period of 2006 to present. The PF Act provides that both the employer and employee make a 12.0% contribution on basic wage, excluding certain allowances, capped at a basic wage of INR 6,500. Sitel India responded to the summons. In August 2014, the PF Commissioner issued an order assessing Sitel India approximately $2,420 plus penalties and interest based on its conclusion that Sitel’s salary structure resulted in an under-contribution to the PF Fund as a result of excluding certain special allowances from “basic wages” for the period 2006 forward. The PF audited Sitel’s contributions in 2008, under the same salary structure, and found no violations. If the excluded allowances are reclassified as basic wages then the basic wage would exceed INR 6,500/month cap on PF contributions and there would be a PF contribution shortfall (the difference between Sitel’s basic wage and INR 6,500/month cap for PF contribution). In September 2014, Sitel India filed an appeal and the appeals tribunal stayed enforcement of the PF Order and directed Sitel India to deposit 25.0% of the amount of the PF Order as an appeal deposit within thirty days. Sitel made that deposit as required by the order. The next hearing is set for March 23, 2015. We are currently unable to predict the probable outcome of this matter and are not able to reasonably estimate the amount of the loss, if any. No liability has been recorded as of December 31, 2014 and 2013.
   During 2011, the French tax authorities assessed SITEL France approximately €7,900 (equivalent to approximately $9,600 as of December 31, 2014) for the periods from 2007 to July 2010 for input value added taxes related to its performance of intermediary insurance services for the sale of insurance products on behalf of its insurance clients. During December 2013, the French tax authorities reduced the assessment to approximately €1,247 (equivalent to approximately $1,520 as of December 31, 2014). On January 6, 2014, the Company paid the assessment to perfect its rights in the event litigation is necessary to resolve the matter. As of December 31, 2014, we have accrued a portion of the assessment within Selling, general, and administrative expenses ("SG&A") equal to our estimated obligation under this matter. No liability related to this matter was recorded as of December 31, 2013. 
In April 2008, the local Sao Paulo, Brazil tax authorities assessed our Brazilian subsidiary ("SITEL Brazil") for the alleged non-payment of local sales taxes in the original amount of approximately R$3,500 (equivalent to approximately $1,300 as of December 31, 2014) for a period extending from 2004 to October 2008. The assessment relates to billings made to a domestic Brazilian client for which SITEL Brazil provided on site agent support at the client’s site located in Barueri City, Brazil. Local sales taxes on services provided in Brazil are assessed based on the actual location where services are rendered. SITEL Brazil paid local sales taxes to Barueri City, however the Sao Paulo tax authorities contend erroneously that the services were performed in Sao Paolo where SITEL Brazil maintains an office. SITEL Brazil appealed the original assessment and in March 2010, the tax authorities ruled against SITEL Brazil. In October 2010, SITEL Brazil received a formal demand to pay the assessment, which at the time totaled R$7,700 due to increases in interest and penalties. SITEL Brazil deposited R$7,700 with the tax authorities in December 2010 and filed its defense with the courts in January 2011. We are currently unable to predict the probable outcome of this matter and are not able to reasonably estimate the amount of loss, if any. No liability has been recorded as of December 31, 2014 and 2013.
15. Derivative Financial Instruments
Our earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. We allow for the use of derivative financial instruments to prudently manage foreign currency exchange rate and interest rate exposure, but do not allow derivatives to be used for speculative purposes. Derivatives that we use are primarily foreign currency forward contracts and interest rate swaps. Our derivative activities are subject to the management, direction, and control of our senior financial officers. Risk management practices, including the use of financial derivative instruments, are presented to the Board of Directors at least annually.

89
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Foreign Currency Exchange Rate Risk
We conduct a significant portion of our business in currencies other than the U.S. dollar, the currency in which the Consolidated Financial Statements are reported. Our subsidiaries generally use the local currency as their functional currency for paying labor and other operating costs. Conversely, revenues for some of these foreign subsidiaries are derived from client contracts that are invoiced and collected in a different currency, principally in U.S. dollars, as well as other currencies such as Euro, British pound sterling, or Australian dollars. To hedge against the risk of fluctuations in the invoiced currency, we have contracted with financial institutions to acquire (utilizing forward contracts) the functional currency of the foreign subsidiary at a fixed counterparty exchange rate at specific dates in the future. As of December 31, 2014, we had forward contracts maturing within the next 12 months.
While we have implemented certain strategies to mitigate risks related to the impact of fluctuations in currency exchange rates, we cannot ensure that we will not recognize gains or losses from international transactions, as this is part of transacting business in an international environment. Not every exposure is or can be hedged and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts which may vary or which may later prove to be inaccurate. Failure to successfully hedge or anticipate currency risks properly could adversely affect our consolidated operating results.
Interest Rate Risk
Interest rate movements create a degree of risk by affecting the amount of our interest payments, so our practice is to use interest rate swap agreements to manage our exposure to interest rate changes.
In connection with the Senior Secured Credit Facility dated January 30, 2007, we entered into an interest rate swap to convert $400,000 (reduced to $350,000 on March 31, 2009) of our floating rate debt into fixed rate debt. We elected not to designate this swap for hedge accounting treatment. On November 28, 2011, we amended the interest rate swap agreement to extend the term through December 31, 2016 and decreased the notional amount to $175,000 as of March 31, 2012. The fair value of this interest rate swap is classified as part of Accrued liabilities and other of $3,292 and $3,526 and as Other noncurrent liabilities of $1,680 and $4,061 as of December 31, 2014 and 2013, respectively, in the accompanying Consolidated Balance Sheets.
For 2014, 2013, and 2012, we recorded losses of $3,688, $3,612, and $4,065, respectively, for settled interest payments. Additionally, there was a non-cash mark-to-market valuation increase in the liability of $1,073 for 2014, a reduction in the liability of $486 for 2013, and an increase in the liability of $5,944 for 2012. These amounts are reflected in Interest and other financing costs, net in the accompanying Consolidated Statements of Comprehensive Loss.
Derivatives not designated as hedging instruments
We choose not to designate a portion of our hedging portfolio. We are hedging forecasted transactions, but in order to qualify for hedge accounting treatment the forecasted transactions must be highly probable of occurring. Due to the inherent risk in a forecast, we consider a lesser amount to be highly probable, and only designate this portion for hedge accounting treatment.

90
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Fair Values in the Consolidated Balance Sheets
 
 
Derivative Assets
 
Derivative Liabilities
 
 
 
 
12/31/2014
 
12/31/2013
 
 
 
12/31/2014
 
12/31/2013
 
 
Balance
Sheet
Classification
 
Fair
Value
 
Fair
Value
 
Balance
Sheet
Classification
 
Fair
Value
 
Fair
Value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
Prepaids and other current assets
 
$
1,108

 
$
62

 
Accrued liabilities and other
 
$
3,539

 
$
4,996

Foreign exchange contracts
 
Other noncurrent assets
 
—

 
—

 
Other noncurrent liabilities
 
—

 
—

Total
 

 
$
1,108

 
$
62

 

 
$
3,539

 
$
4,996

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contract - ST
 
Prepaids and other current assets
 
$
—

 
$
—

 
Accrued liabilities and other
 
$
3,292

 
$
3,526

Interest rate contract - LT
 
Other noncurrent assets
 
—

 
—

 
Other noncurrent liabilities
 
1,680

 
4,061

Foreign exchange contracts
 
Prepaids and other current assets
 
469

 
341

 
Accrued liabilities and other
 
1,851

 
3,264

Foreign exchange contracts
 
Other noncurrent assets
 
—

 
—

 
Other noncurrent liabilities
 
—

 
—

Total
 
 
 
$
469

 
$
341

 
 
 
$
6,823

 
$
10,851

Total derivatives
 
 
 
$
1,577

 
$
403

 
 
 
$
10,362

 
$
15,847

The Effect of Derivative Instruments on the Consolidated Statements of Comprehensive Loss
Derivatives in
Cash Flow
Hedging
Relationships
 
Amount of Gain or (Loss) Recognized in OCI on Derivative
(Effective Portion)
 
Location of Gain or
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
 
Amount of Gain or (Loss)
Reclassified from
Accumulated OCI
into Income
 
2014
 
2013
 
2012
 
 
2014
 
2013
 
2012
Foreign exchange contracts
 
$
(1,684
)
 
$
(7,452
)
 
$
6,428

 
COS and SG&A
 
$
(4,493
)
 
$
(1,214
)
 
$
(1,987
)
Total
 
$
(1,684
)
 
$
(7,452
)
 
$
6,428

 
Total
 
$
(4,493
)
 
$
(1,214
)
 
$
(1,987
)
For 2014, 2013, and 2012, we recorded losses of $2,697, $709, and $1,280, respectively, to Costs of services and losses of $1,796, $505, and $707, respectively, to SG&A expenses in the accompanying Consolidated Statements of Comprehensive Loss for the effective portion of settled hedge contracts. We expect unrealized losses will be reclassified from Accumulated other comprehensive loss ("AOCL") to Costs of services and SG&A expenses during the next 12 months of $2,431. However, this amount and other future reclassifications from AOCL will fluctuate with movements in the underlying market price of the forward contracts. The estimates of fair value are based on applicable and commonly used pricing models and prevailing financial market information as of December 31, 2014.

91
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


During 2014, 2013, and 2012, we recognized gains of $3, losses of $177, and gains of $296, respectively, on foreign currency transactions related to the ineffective portion of the derivative instruments.
Derivatives Not
Designated as Hedging Instruments        
 
Location of Gain or (Loss)
Recognized in Income on Derivative
 
Amount of Gain or
(Loss) Recognized in
Income on Derivative
 
2014
 
2013
 
2012
Foreign exchange contracts
 
COS and SG&A
 
$
182

 
$
(708
)
 
$
917

Foreign exchange contracts
 
Foreign currency transactions
 
(1,907
)
 
6,305

 
251

Total
 
 
 
$
(1,725
)
 
$
5,597

 
$
1,168

For 2014, 2013, and 2012, we recorded gains of $109, losses of $425, and gains of $550, respectively, to Costs of services and gains of $73, losses of $283, and gains of $367, respectively, to SG&A expenses in the accompanying Consolidated Statements of Comprehensive Loss for foreign currency derivatives not designated as hedging contracts.
Current Contracts
At December 31, 2014, the Company had the following outstanding financial contracts that were entered to hedge foreign exchange and interest rate risk:
Derivatives in Cash Flow Relationship
Notional Amount 
Interest rate contract
$
175,000

Foreign exchange contracts
171,963

16. Fair Value Measurements
The fair values of Cash and cash equivalents, short-term investments, trade receivables, and trade payables are valued as Level 1 items. The carrying value of these assets and liabilities approximates their fair value due to the short-term maturities.
The terms of the Senior Secured Credit Facility, Senior Secured Notes, and Senior Notes include debt with variable and fixed interest rates, totaling $746,016 and $734,614 at December 31, 2014 and 2013, respectively. The estimated fair value of such debt was approximately $676,000 and $754,000 at December 31, 2014 and 2013, respectively. The fair value of debt with fixed interest rates was determined using the quoted market prices of debt instruments with similar terms and maturities which are considered Level 2 inputs. The fair value of debt with variable interest rates was also measured using Level 2 inputs. These inputs included good faith estimates of the market value for the particular debt instrument, which represent the amount an independent market participant would provide, based upon market observations and other factors relevant under the circumstances.
See Note 11 for fair value measurements of major categories of the Company’s defined benefit pension plans.

92
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


The following tables summarize the value of financial instruments by the pricing levels defined in Note 15 as of December 31, 2014 and 2013. There were no transfers between pricing levels during the years ended December 31, 2014 and 2013.
 
Fair Value Measurements at December 31, 2014
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Foreign currency forward contracts
$
1,577

 
$
—

 
$
1,577

 
$
—

Total
$
1,577

 
$
—

 
$
1,577

 
$
—

Liabilities
 
 
 
 
 
 
 
Foreign currency forward contracts
$
5,390

 
$
—

 
$
5,390

 
$
—

Interest rate derivative instrument
4,972

 
—

 
4,972

 
—

Total
$
10,362

 
$
—

 
$
10,362

 
$
—

 
Fair Value Measurements at December 31, 2013
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Foreign currency forward contracts
$
403

 
$
—

 
$
403

 
$
—

Total
$
403

 
$
—

 
$
403

 
$
—

Liabilities
 
 
 
 
 
 
 
Foreign currency forward contracts
$
8,260

 
$
—

 
$
8,260

 
$
—

Interest rate derivative instrument
7,587

 
—

 
7,587

 
—

Total
$
15,847

 
$
—

 
$
15,847

 
$
—

We value derivatives based on current market prices of comparable instruments or, if none are available, on pricing models or formulas using current market and model assumptions. Our interest rate derivative instrument is a pay-fixed, receive-variable, interest rate swap based on LIBOR swap rate. The LIBOR swap rate is observable at commonly quoted intervals for the full term of the swap and therefore is considered a Level 2 item. Our foreign currency forward contracts are contracts to buy foreign currency at a fixed rate for delivery on a specified future date or period. The foreign exchange rate is observable for the full term of the swap and is therefore also considered a Level 2 item. The fair value measurement of a liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the Company's and counterparty's creditworthiness have also been factored into the fair value measurement of these derivative instruments.
We measure our intangible assets at fair value on a nonrecurring basis. These assets are classified in Level 3 of the fair value hierarchy. We test all existing Goodwill and other indefinite-lived intangibles (trademark and trade name) for impairment at least annually and more frequently if circumstances indicate that the carrying amount exceeds fair value. We conduct annual impairment tests as of December 31.
We estimate the fair values of Goodwill and other indefinite-lived intangibles utilizing multiple measurement techniques performed. The estimation is primarily determined based on an estimate of future cash flows (income approach) discounted at a market derived weighted average cost of capital. The income approach has been determined to be the most representative because our equity does not have an active trading market. Other unobservable inputs used in these valuations include managements' cash flow projections and estimated terminal growth rates. The valuation of Indefinite-lived intangible assets also includes an unobservable input for royalty rate, which is based on rates used by comparable industries. We then use a public company model (which uses peer group valuation metrics) to confirm the measurement. 
We evaluate the remaining useful lives of definite-lived intangible assets (customer relationships) whenever events or circumstances warrant a revision to the remaining amortization period. The fair value of definite-lived intangible assets is based on estimated cash flows from the future use of the asset, discounted at a market derived weighted average cost of capital.

93
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


No impairment charges were recorded related to Goodwill or Other intangible assets for the years ended December 31, 2014, 2013, or 2012.
Long-lived assets are measured at fair value on a non-recurring basis and are classified in Level 3 of the fair value hierarchy. The fair value is estimated utilizing unobservable inputs, including appraisals on real estate as well as evaluations of the marketability and potential relocation of other assets in similar condition and similar market areas. We analyze our long-lived assets on a quarterly basis for any triggering events that would cause us to perform an impairment test. During the years ended December 31, 2014 and 2013, we determined that certain fixed assets in EMEA should be fully impaired and recorded charges of $693 and $212, respectively, based on our assessment as noted above. We recorded $478 of impairment primarily related to software in the Americas during the year ended December 31, 2014. No such impairment charges were recorded in 2012.
During the year ended December 31, 2013, the Company recorded a charge in the Americas of $541 within Impairment and loss on disposal of assets to reflect the net sales price of certain property that was sold. This property is classified as held for sale and included within Other current assets at December 31, 2013. No impairment charges related to assets held for sale were recorded during the years ended December 31, 2014 and 2012.
We recorded an impairment charge of $1,633 in 2012 related to the impairment of the full value of certain annuity contracts in the Americas. These annuity contracts were included within Other noncurrent assets on the accompanying Consolidated Balance Sheets. They were measured at fair value on a non-recurring basis and were classified in Level 3 of the fair value hierarchy. Third-party recoverability information was used to assess the fair value of these annuity contracts. During 2013, we received approximately $500 in liquidation payments related to these annuity contracts, which was recorded as a gain to Impairment and loss on disposal of assets.

94
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


17. Accumulated Other Comprehensive Loss
Changes in Accumulated Other Comprehensive Loss by Component (a) 
 
 
For the Year Ended December 31, 2014
 
 
Gains and Losses on Cash Flow Hedges
 
Defined Benefit Pension Items
 
Foreign Currency Items
 
Total
Beginning balance
 
$
(12,325
)
 
$
(1,632
)
 
$
(40,007
)
 
$
(53,964
)
Other comprehensive loss before reclassifications, net of tax expense (benefit) of $399, $0, $(46), and $353, respectively
 
(2,083
)
 
(1,405
)
 
(8,451
)
 
(11,939
)
Amounts reclassified from accumulated other comprehensive loss, net of tax (benefit) of $(3,799), $(239), $0, and $(4,038), respectively
 
8,292

 
425

 
—

 
8,717

Net current-period other comprehensive income (loss)
 
6,209

 
(980
)
 
(8,451
)
 
(3,222
)
Ending balance
 
$
(6,116
)
 
$
(2,612
)
 
$
(48,458
)
 
$
(57,186
)
(a) Amounts are net-of-tax. Amounts in parentheses indicate debits.
 
 
For the Year Ended December 31, 2013
 
 
Gains and Losses on Cash Flow Hedges
 
Defined Benefit Pension Items
 
Foreign Currency Items
 
Total
Beginning balance
 
$
(5,428
)
 
$
(84
)
 
$
(27,888
)
 
$
(33,400
)
Other comprehensive loss before reclassifications, net of tax expense (benefit) of $659, $43, $(3), and $699, respectively
 
(8,111
)
 
(1,407
)
 
(12,119
)
 
(21,637
)
Amounts reclassified from accumulated other comprehensive loss, net of tax of $0
 
1,214

 
(141
)
 
—

 
1,073

Net current-period other comprehensive loss
 
(6,897
)
 
(1,548
)
 
(12,119
)
 
(20,564
)
Ending balance
 
$
(12,325
)
 
$
(1,632
)
 
$
(40,007
)
 
$
(53,964
)
(a) Amounts are net-of-tax. Amounts in parentheses indicate debits.
Reclassifications out of Accumulated Other Comprehensive Loss (a) 

95
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


For the Year Ended December 31, 2014
Details about Accumulated Other Comprehensive Loss Components
 
Amount Reclassified from Accumulated Other Comprehensive Loss
 
Affected Line Item in the Statement Where Net Income is Presented
Gains and losses on cash flow hedges
 
 
 
 
Foreign exchange contracts
 
$
(2,697
)
 
COS
 
 
(1,796
)
 
SG&A
 
 
(4,493
)
 
Total before tax
 
 
(3,799
)
 
Tax (expense) or benefit
 
 
$
(8,292
)
 
Net of Tax
 
 
 
 
 
Amortization of defined benefit pension items
 
 
 
 
Prior service costs
 
$
(152
)
 
SG&A
Actuarial gains
 
(34
)
 
SG&A
 
 
(186
)
 
Total before tax
 
 
(239
)
 
Tax (expense) or benefit
 
 
$
(425
)
 
Net of Tax
 
 
 
 
 
Total reclassifications for the period
 
$
(8,717
)
 
Net of Tax
(a) Amounts in parentheses indicate debits to profit/loss.
For the Year Ended December 31, 2013
Details about Accumulated Other Comprehensive Loss Components
 
Amount Reclassified from Accumulated Other Comprehensive Loss
 
Affected Line Item in the Statement Where Net Income is Presented
Gains and losses on cash flow hedges
 
 
 
 
Foreign exchange contracts
 
$
(709
)
 
COS
 
 
(505
)
 
SG&A
 
 
(1,214
)
 
Total before tax
 
 
—

 
Tax (expense) or benefit
 
 
$
(1,214
)
 
Net of Tax
 
 
 
 
 
Amortization of defined benefit pension items
 
 
 
 
Prior service costs
 
$
(159
)
 
SG&A
Actuarial gains
 
300

 
SG&A
 
 
141

 
Total before tax
 
 
—

 
Tax (expense) or benefit
 
 
$
141

 
Net of Tax
 
 
 
 
 
Total reclassifications for the period
 
$
(1,073
)
 
Net of Tax
(a) Amounts in parentheses indicate debits to profit/loss.

96
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


18. Operating Segment and Geographic Information
Our two reportable segments, Americas and EMEA, are organized by geographic operating units that portray similar economic characteristics. The segment information presented below reflects the internal management reporting that the chief operating decision maker ("CODM") uses to evaluate segment performance and allocate resources, which is solely based on segment revenues, gross margin (segment revenues less segment cost of sales), segment SG&A expense, and the segment operating results as calculated below.
Certain Revenues, Costs of services, and SG&A amounts are excluded from the CODM evaluation of our segments, as the CODM believes they are not representative of segment performance. In addition, the CODM does not review assets or the associated depreciation and amortization at the reportable segment level. Therefore, we do not allocate these items to our reportable segments or present these items at the segment level in our internal management reporting. These unallocated amounts, as well as other income and expenses that are managed at the corporate level, are presented below in the Reconciliation of Segment operating results to our consolidated Loss before income taxes table.
We have modified previously reported SG&A to exclude certain foreign exchange transactions that are no longer presented at the segment level in our internal management reporting that is provided to and used by the CODM.
Information about the Company’s reportable segments for the years ended December 31, 2014, 2013 and 2012 is as follows:
 
 
2014
 
2013
 
2012
Americas
 
 
 
 
 
 
Revenues
 
$
878,715

 
$
895,253

 
$
870,079

Gross margin
 
315,162

 
336,211

 
329,661

SG&A
 
190,479

 
200,321

 
201,208

Segment operating results
 
$
124,683

 
$
135,890

 
$
128,453

GM%
 
35.9
%
 
37.6
%
 
37.9
%
SG&A%
 
21.7
%
 
22.4
%
 
23.1
%
Op Results%
 
14.2
%
 
15.2
%
 
14.8
%
 
 
 
 
 
 
 
EMEA
 
 
 
 
 
 
Revenues
 
$
561,422

 
$
543,093

 
$
559,554

Gross margin
 
151,802

 
156,481

 
165,045

SG&A
 
119,137

 
117,364

 
129,554

Segment operating results
 
$
32,665

 
$
39,117

 
$
35,491

GM%
 
27.0
%
 
28.8
%
 
29.5
%
SG&A%
 
21.2
%
 
21.6
%
 
23.2
%
Op Results%
 
5.8
%
 
7.2
%
 
6.3
%


97
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


Reconciliation of Segment operating results to consolidated Loss before income taxes:
 
 
 
 
 
 
 
 
 
2014
 
2013
 
2012
Segment operating results:
 
 
 
 
 
 
Americas
 
$
124,683

 
$
135,890

 
$
128,453

EMEA
 
32,665

 
39,117

 
35,491

Total
 
157,348

 
175,007

 
163,944

 
 
 
 
 
 
 
Corporate and other(1)
 
44,052

 
50,579

 
41,886

Depreciation and amortization
 
36,811

 
40,961

 
43,032

Restructuring and exit charges
 
20,407

 
14,241

 
15,693

Loss on sale of subsidiary
 
—

 
4,558

 
—

Other operating (income) expense(2)
 
6,821

 
(1,656
)
 
4,177

Operating income
 
49,257

 
66,324

 
59,156

Interest and other financing costs, net
 
83,934

 
80,554

 
84,307

Loss before income taxes
 
$
(34,677
)
 
$
(14,230
)
 
$
(25,151
)
(1) Represents other operating income and expenses not allocated to segments for internal management reporting purposes, including certain corporate employee compensation, corporate overhead, stock-based compensation, certain foreign exchange transactions, and the net operating results of disposed subsidiaries, which are not material to segment operating results.
(2) Includes amounts from the Consolidated Statements of Comprehensive Loss for Loss (gain) on foreign currency transactions, Impairment and loss on disposal of assets, net, and Other expense (income), net.
During 2014, the Company determined that it included revenues directly attributable to Canada within the United States geographic location within its 2013 financial statements. There was no impact to consolidated revenue or to revenue reported under the Company’s reportable segments. The corrections to the previously issued disclosure are as follows:
 
December 31,
 
2013
 
2012
Total Revenues:
 
 
 
US
$
(27,669
)
 
$
(41,334
)
Philippines
—

 
—

Germany
—

 
—

Other countries
27,669

 
41,334

Total
$
—

 
$
—

In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), the Company assessed the materiality of the error and concluded that the error was not material to any of the Company's previously issued financial statements. As permitted by the accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the Company has presented revised financial information for the year ended December 31, 2013 and December 31, 2012.
Information about the Company’s revenues and long-lived assets by geographic location are in the following tables. Long-lived assets held and used at various corporate and executive offices are included within their respective geographical locations.

98
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


 
December 31,
 
2014
 
2013
 
2012
Total Revenues:
 
 
 
 
 
US
$
385,098

 
$
370,531

 
$
325,200

Philippines
194,194

 
199,261

 
207,315

Germany
151,494

 
137,464

 
125,911

Other countries(a)
709,459

 
731,082

 
770,707

Total
$
1,440,245

 
$
1,438,338

 
$
1,429,133

(a) No other country comprises more than 10% of total revenues.
 
December 31,
 
2014
 
2013
Long-lived assets:
 
 
 
US
$
74,080

 
$
70,839

Latin America
47,090

 
48,803

Europe
36,236

 
38,852

India
40,364

 
41,076

Philippines
40,370

 
39,683

Other countries
3,837

 
4,665

Total
$
241,977

 
$
243,918


99

19. Quarterly Financial Data (unaudited)
The following tables present certain quarterly financial data for the years ended December 31, 2014 and 2013:
 
March 31
 
June 30
 
Sep 30
 
Dec 31
 
Total
 
For the quarter ended 2014
Revenues
$
350,479

 
$
348,747

 
$
359,089

 
$
381,930

 
$
1,440,245

Costs of services*
236,930

 
237,180

 
240,388

 
258,047

 
972,545

Gross profit
113,549

 
111,567

 
118,701

 
123,883

 
467,700

Operating expenses
 
 
 
 
 
 
 
 
 
Selling, general, and administrative expenses*
91,930

 
87,424

 
86,189

 
88,861

 
354,404

Depreciation and amortization
8,935

 
8,548

 
9,510

 
9,818

 
36,811

Restructuring and exit charges
3,272

 
12,532

 
2,853

 
1,750

 
20,407

Other, net (1)
(276
)
 
455

 
4,200

 
2,442

 
6,821

Operating income
$
9,688

 
$
2,608

 
$
15,949

 
$
21,012

 
$
49,257

Net (loss) income
$
(18,816
)
 
$
(21,632
)
 
$
(4,114
)
 
$
(3,798
)
 
$
(48,360
)
 
 
 
 
 
 
 
 
 
 
 
March 31
 
June 30
 
Sep 30
 
Dec 31
 
Total
 
For the quarter ended 2013
Revenues
$
365,062

 
$
348,934

 
$
353,368

 
$
370,974

 
$
1,438,338

Costs of services*
238,946

 
231,709

 
231,089

 
244,549

 
946,293

Gross profit
126,116

 
117,225

 
122,279

 
126,425

 
492,045

Operating expenses
 
 
 
 
 
 
 
 
 
Selling, general, and administrative expenses*
93,116

 
90,325

 
91,072

 
93,104

 
367,617

Depreciation and amortization
10,665

 
10,244

 
10,266

 
9,786

 
40,961

Restructuring and exit charges
3,316

 
1,986

 
1,430

 
7,509

 
14,241

Loss on sale of subsidiary
4,558

 
—

 
—

 
—

 
4,558

Other, net (1)
1,600

 
(1,159
)
 
(1,476
)
 
(621
)
 
(1,656
)
Operating income
$
12,861

 
$
15,829

 
$
20,987

 
$
16,647

 
$
66,324

Net (loss) income
$
(9,075
)
 
$
(4,871
)
 
$
9,225

 
$
5,707

 
$
986

*Exclusive of Depreciation and amortization of property and equipment
(1) Includes amounts from the Consolidated Statements of Comprehensive Loss for Loss (gain) on foreign currency transactions, Impairment and loss on disposal of assets, net, and Other expense (income), net.
20. Supplemental Condensed Consolidating Financial Information
The following guarantor financial information is presented to comply with U.S. SEC disclosure requirements, specifically Rule 3-10 of Regulation S-X.
The Senior Secured Notes and Senior Notes are guaranteed jointly and severally, and in the case of the Senior Secured Notes, on a senior secured basis, by the Issuers' parent company, SITEL Worldwide, and by each of SITEL Worldwide's existing and future direct and indirect domestic subsidiaries that are 100% owned by SITEL Worldwide and guarantors under the Senior Secured Credit Facility (the "Subsidiary Guarantors"). The guarantees are not full and unconditional because Subsidiary Guarantors can be released and relieved of their obligations under certain customary circumstances contained in the indenture governing the Senior Notes and Senior Secured Notes. These circumstances include the following, so long as other applicable provisions of the indentures are adhered to: any sale or other disposition of all or substantially all of the assets of any Subsidiary Guarantors, any sale or other disposition of capital stock of any Subsidiary Guarantors, or designation of any restricted subsidiary that is a Subsidiary Guarantor as an unrestricted subsidiary.
The Condensed Consolidating Statements of Comprehensive (Loss) Income are presented net of intercompany activity. The following supplemental financial information sets forth, on a consolidating basis based on the equity method of accounting, balance sheets, statements of comprehensive (loss) income, and statements of cash flows for the Company, the Subsidiary Guarantors, and the Company's non-guarantor subsidiaries.

100
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


SITEL Worldwide Corporation
Condensed Consolidating Balance Sheets
December 31, 2014
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
—

 
$
287

 
$
8,570

 
$
—

 
$
8,857

Accounts receivable (net of allowance for doubtful accounts)
—

 
—

 
136,215

 
143,012

 
—

 
279,227

Prepaids and other current assets
288,834

 
414

 
233,109

 
356,209

 
(821,855
)
 
56,711

Total current assets
288,834

 
414

 
369,611

 
507,791

 
(821,855
)
 
344,795

Property and equipment, net
39

 
—

 
41,247

 
46,068

 
—

 
87,354

Goodwill
—

 
—

 
16,690

 
101,018

 
—

 
117,708

Other intangible assets, net
—

 
—

 
16,104

 
20,811

 
—

 
36,915

Deferred income taxes
—

 
—

 
750

 
28,201

 
—

 
28,951

Investments in affiliates
(497,564
)
 
537,316

 
189,430

 
—

 
(229,182
)
 
—

Other noncurrent assets
1,655

 
92,835

 
42,626

 
24,452

 
(127,622
)
 
33,946

Total assets
$
(207,036
)
 
$
630,565

 
$
676,458

 
$
728,341

 
$
(1,178,659
)
 
$
649,669

Liabilities and Stockholders' Deficit
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
282

 
$
—

 
$
10,533

 
$
11,485

 
$
—

 
$
22,300

Accrued payroll and benefits
—

 
—

 
15,472

 
59,565

 
—

 
75,037

Accrued liabilities and other
133,234

 
441,962

 
97,256

 
235,116

 
(821,855
)
 
85,713

Income taxes payable
163

 
—

 
—

 
6,358

 
—

 
6,521

Current portion of capital lease obligations
—

 
—

 
2,666

 
286

 
—

 
2,952

Total current liabilities
133,679

 
441,962

 
125,927

 
312,810

 
(821,855
)
 
192,523

Long-term debt
—

 
701,149

 
—

 
44,867

 
—

 
746,016

Capital lease obligations
—

 
—

 
3,104

 
168

 
—

 
3,272

Deferred income taxes
—

 
—

 
—

 
5,919

 
—

 
5,919

Other noncurrent liabilities
—

 
1,680

 
10,111

 
158,485

 
(127,622
)
 
42,654

Total liabilities
133,679

 
1,144,791

 
139,142

 
522,249

 
(949,477
)
 
990,384

Series B PIK preferred stock
75,103

 
—

 
—

 
—

 
—

 
75,103

Series C PIK preferred stock, net of beneficial conversion feature
69,273

 
—

 
—

 
—

 
—

 
69,273

Series D PIK preferred stock
81,869

 
—

 
—

 
—

 
—

 
81,869

Stockholders' (deficit) equity
 
 
 
 
 
 
 
 
 
 
 
Subsidiary exchangeable preferred stock
2,665

 
—

 
—

 
—

 
—

 
2,665

Common stock
1,277

 
—

 
536

 
168,965

 
(169,501
)
 
1,277

Additional paid-in capital
334,657

 
105,786

 
668,880

 
309,794

 
(1,084,460
)
 
334,657

Accumulated deficit
(836,750
)
 
(563,223
)
 
(76,572
)
 
(273,885
)
 
913,680

 
(836,750
)
Accumulated other comprehensive (loss) income, net of tax
(57,186
)
 
(56,789
)
 
(55,528
)
 
1,218

 
111,099

 
(57,186
)
Treasury shares, at cost
(11,623
)
 
—

 
—

 
—

 
—

 
(11,623
)
Total stockholders' (deficit) equity
(566,960
)
 
(514,226
)
 
537,316

 
206,092

 
(229,182
)
 
(566,960
)
Total liabilities and stockholders' (deficit) equity
$
(207,036
)
 
$
630,565

 
$
676,458

 
$
728,341

 
$
(1,178,659
)
 
$
649,669


101
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


SITEL Worldwide Corporation
Condensed Consolidating Balance Sheets
December 31, 2013
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
—

 
$
136

 
$
7,230

 
$
—

 
$
7,366

Accounts receivable (net of allowance for doubtful accounts)
—

 
—

 
112,222

 
130,250

 
—

 
242,472

Prepaids and other current assets
245,718

 
322

 
166,728

 
302,244

 
(661,180
)
 
53,832

Total current assets
245,718

 
322

 
279,086

 
439,724

 
(661,180
)
 
303,670

Property and equipment, net
206

 
—

 
37,840

 
51,616

 
—

 
89,662

Goodwill
—

 
—

 
16,690

 
101,019

 
—

 
117,709

Other intangible assets, net
—

 
—

 
16,104

 
20,443

 
—

 
36,547

Deferred income taxes
1,980

 
—

 
4,558

 
29,437

 
—

 
35,975

Investments in affiliates
(470,679
)
 
482,165

 
186,528

 
—

 
(198,014
)
 
—

Other noncurrent assets
2,972

 
87,280

 
47,460

 
24,023

 
(125,077
)
 
36,658

Total assets
$
(219,803
)
 
$
569,767

 
$
588,266

 
$
666,262

 
$
(984,271
)
 
$
620,221

Liabilities and Stockholders' Deficit
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
502

 
$
—

 
$
5,842

 
$
13,817

 
$
—

 
$
20,161

Accrued payroll and benefits
3,342

 
—

 
12,230

 
61,074

 
—

 
76,646

Accrued liabilities and other
138,053

 
367,032

 
69,461

 
171,869

 
(661,180
)
 
85,235

Income taxes payable
426

 
82

 
187

 
6,815

 
—

 
7,510

Current portion of capital lease obligations
—

 
—

 
1,583

 
422

 
—

 
2,005

Total current liabilities
142,323

 
367,114

 
89,303

 
253,997

 
(661,180
)
 
191,557

Long-term debt
—

 
685,090

 
—

 
49,524

 
—

 
734,614

Capital lease obligations
—

 
—

 
2,993

 
132

 
—

 
3,125

Deferred income taxes
—

 
—

 
3,828

 
—

 
—

 
3,828

Other noncurrent liabilities
1,979

 
4,062

 
9,977

 
160,260

 
(125,076
)
 
51,202

Total liabilities
144,302

 
1,056,266

 
106,101

 
463,913

 
(786,256
)
 
984,326

Series B PIK preferred stock
66,982

 
—

 
—

 
—

 
—

 
66,982

Series C PIK preferred stock, net of beneficial conversion feature
59,056

 
—

 
—

 
—

 
—

 
59,056

Stockholders' (deficit) equity
 
 
 
 
 
 
 
 
 
 
 
Subsidiary exchangeable preferred stock
2,665

 
—

 
—

 
—

 
—

 
2,665

Common stock
1,275

 
—

 
536

 
168,965

 
(169,501
)
 
1,275

Additional paid-in capital
357,518

 
105,786

 
668,881

 
309,793

 
(1,084,460
)
 
357,518

Accumulated deficit
(788,390
)
 
(536,750
)
 
(131,717
)
 
(279,318
)
 
947,785

 
(788,390
)
Accumulated other comprehensive (loss) income, net of tax
(53,964
)
 
(55,535
)
 
(55,535
)
 
2,909

 
108,161

 
(53,964
)
Treasury shares, at cost
(9,247
)
 
—

 
—

 
—

 
—

 
(9,247
)
Total stockholders' (deficit) equity
(490,143
)
 
(486,499
)
 
482,165

 
202,349

 
(198,015
)
 
(490,143
)
Total liabilities and stockholders' (deficit) equity
$
(219,803
)
 
$
569,767

 
$
588,266

 
$
666,262

 
$
(984,271
)
 
$
620,221


102
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


SITEL Worldwide Corporation
Condensed Consolidating Statements of Comprehensive (Loss) Income
Year Ended December 31, 2014
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Revenues
$
—

 
$
—

 
$
450,484

 
$
989,761

 
$
—

 
$
1,440,245

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Costs of services*
—

 
—

 
292,780

 
679,765

 
—

 
972,545

Selling, general, and administrative expenses*
23,274

 
156

 
88,009

 
242,965

 
—

 
354,404

Depreciation and amortization of property and equipment
166

 
—

 
13,986

 
22,070

 
—

 
36,222

Amortization of intangible assets
—

 
—

 
—

 
589

 
—

 
589

Restructuring and exit charges
—

 
—

 
1,050

 
19,357

 
—

 
20,407

(Gain) loss on foreign currency transactions
(829
)
 
3,991

 
(8,743
)
 
10,729

 
—

 
5,148

Other, net
(6
)
 
(18
)
 
830

 
867

 
—

 
1,673

Operating (loss) income
(22,605
)
 
(4,129
)
 
62,572

 
13,419

 
—

 
49,257

Interest and other financing costs, net
—

 
77,488

 
6,125

 
321

 
—

 
83,934

Equity in earnings of subsidiaries
23,760

 
(55,145
)
 
(2,721
)
 
—

 
34,106

 
—

(Loss) income before income taxes
(46,365
)
 
(26,472
)
 
59,168

 
13,098

 
(34,106
)
 
(34,677
)
Income tax provision
1,995

 
—

 
4,023

 
7,665

 
—

 
13,683

Net (loss) income
(48,360
)
 
(26,472
)
 
55,145

 
5,433

 
(34,106
)
 
(48,360
)
Other comprehensive (loss) income
(3,222
)
 
(1,254
)
 
7

 
(1,691
)
 
2,938

 
(3,222
)
Comprehensive (loss) income
$
(51,582
)
 
$
(27,726
)
 
$
55,152

 
$
3,742

 
$
(31,168
)
 
$
(51,582
)
 *Exclusive of Depreciation and amortization of property and equipment

103
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


SITEL Worldwide Corporation
Condensed Consolidating Statements of Comprehensive (Loss) Income
Year Ended December 31, 2013
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Revenues
$
—

 
$
—

 
$
427,908

 
$
1,010,430

 
$
—

 
$
1,438,338

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Costs of services*
—

 
—

 
260,844

 
685,449

 
—

 
946,293

Selling, general, and administrative expenses*
29,863

 
141

 
84,756

 
252,857

 
—

 
367,617

Depreciation and amortization of property and equipment
407

 
—

 
11,169

 
23,002

 
—

 
34,578

Amortization of intangible assets
—

 
—

 
—

 
6,383

 
—

 
6,383

Restructuring and exit charges
—

 
—

 
881

 
13,360

 
—

 
14,241

Loss (gain) on foreign currency transactions
334

 
(216
)
 
(1,209
)
 
107

 
—

 
(984
)
Loss on sale of subsidiary
—

 
—

 
—

 
4,558

 
—

 
4,558

Other, net
201

 
—

 
294

 
(1,167
)
 
—

 
(672
)
Operating (loss) income
(30,805
)
 
75

 
71,173

 
25,881

 
—

 
66,324

Interest and other financing costs, net
8

 
75,023

 
3,466

 
2,057

 
—

 
80,554

Equity in earnings of subsidiaries
(32,324
)
 
(104,786
)
 
(36,359
)
 
—

 
173,469

 
—

Income (loss) before income taxes
1,511

 
29,838

 
104,066

 
23,824

 
(173,469
)
 
(14,230
)
Income tax provision (benefit)
525

 
—

 
(719
)
 
(15,022
)
 
—

 
(15,216
)
Net income
986

 
29,838

 
104,785

 
38,846

 
(173,469
)
 
986

Other comprehensive (loss) income
(20,564
)
 
(19,244
)
 
(19,244
)
 
(15,363
)
 
53,851

 
(20,564
)
Comprehensive (loss) income
$
(19,578
)
 
$
10,594

 
$
85,541

 
$
23,483

 
$
(119,618
)
 
$
(19,578
)
 *Exclusive of Depreciation and amortization of property and equipment

104
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


SITEL Worldwide Corporation
Condensed Consolidating Statements of Comprehensive (Loss) Income
Year Ended December 31, 2012
 
Parent
 
Issuers
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Total Consolidated
Revenues
$
—

 
$
—

 
$
376,521

 
$
1,052,612

 
$
—

 
$
1,429,133

Operating expenses

 

 

 

 

 
 
Costs of services*
—

 
—

 
226,540

 
708,007

 
—

 
934,547

Selling, general, and administrative expenses*
25,923

 
182

 
82,181

 
264,242

 
—

 
372,528

Depreciation and amortization of property and equipment
355

 
—

 
10,258

 
25,384

 
—

 
35,997

Amortization of intangible assets
—

 
—

 
222

 
6,813

 
—

 
7,035

Restructuring and exit charges
2

 
—

 
1,477

 
14,214

 
—

 
15,693

Loss (gain) on foreign currency transactions
178

 
(920
)
 
744

 
2,594

 
—

 
2,596

Other, net
(389
)
 
39

 
(160
)
 
2,091

 
—

 
1,581

Operating (loss) income
(26,069
)
 
699

 
55,259

 
29,267

 
—

 
59,156

Interest and other financing costs, net
1,664

 
75,166

 
2,460

 
5,017

 
—

 
84,307

Equity in earnings of subsidiaries
(4,252
)
 
(76,447
)
 
(17,864
)
 
—

 
98,563

 
—

(Loss) income before income taxes
(23,481
)
 
1,980

 
70,663

 
24,250

 
(98,563
)
 
(25,151
)
Income tax provision (benefit)
387

 
—

 
(5,784
)
 
4,114

 
—

 
(1,283
)
Net (loss) income
(23,868
)
 
1,980

 
76,447

 
20,136

 
(98,563
)
 
(23,868
)
Other comprehensive income (loss)
4,926

 
4,368

 
4,368

 
(130
)
 
(8,606
)
 
4,926

Comprehensive (loss) income
$
(18,942
)
 
$
6,348

 
$
80,815

 
$
20,006

 
$
(107,169
)
 
$
(18,942
)
 *Exclusive of Depreciation and amortization of property and equipment

105
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


SITEL Worldwide Corporation
Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2014
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(48,360
)
 
$
(26,472
)
 
$
55,145

 
$
5,433

 
$
(34,106
)
 
$
(48,360
)
Undistributed equity in earnings of subsidiaries
23,760

 
(55,145
)
 
(2,721
)
 
—

 
34,106

 
—

Adjustments to reconcile Net (loss) income to net cash flows relating to operating activities:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization (including intangible assets)
166

 
—

 
13,986

 
22,659

 
—

 
36,811

Deferred income taxes
1,980

 
—

 
4,277

 
1,877

 
—

 
8,134

Non-cash derivative activity
—

 
1,518

 
4,014

 
813

 
—

 
6,345

Amortization of debt issue costs and OID
—

 
5,164

 
—

 
124

 
—

 
5,288

Amortization of deferred training revenue, net of costs
—

 
—

 
(1,083
)
 
(1,353
)
 
—

 
(2,436
)
Impairment of property and equipment and other long-term assets
—

 
—

 
446

 
725

 
—

 
1,171

Other non-cash items, net
149

 
—

 
1,076

 
(253
)
 
—

 
972

Change in book overdrafts
—

 
—

 
(1,054
)
 
497

 
—

 
(557
)
Changes in operating assets and liabilities, net
(52,515
)
 
65,693

 
(58,084
)
 
(7,313
)
 
—

 
(52,219
)
Net cash (used in) provided by operating activities
(74,820
)
 
(9,242
)
 
16,002

 
23,209

 
—

 
(44,851
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
—

 
—

 
(15,003
)
 
(20,301
)
 
—

 
(35,304
)
Proceeds from disposition of property and equipment
—

 
—

 
1,237

 
515

 
—

 
1,752

Purchase of intangible assets
—

 
—

 
—

 
(983
)
 
—

 
(983
)
Net cash used in investing activities
—

 
—

 
(13,766
)
 
(20,769
)
 
—

 
(34,535
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from issuance of Series D Preferred Stock, net
74,820

 
—

 
—

 
—

 
—

 
74,820

Payments on long-term debt and capital lease obligations
—

 
(381,052
)
 
(2,085
)
 
(22,812
)
 
—

 
(405,949
)
Proceeds from long-term debt
—

 
394,701

 
—

 
22,300

 
—

 
417,001

Payment of interest rate swap, net
—

 
(3,688
)
 
—

 
—

 
—

 
(3,688
)
Payments of debt issue costs
—

 
(719
)
 
—

 
—

 
—

 
(719
)
Net cash provided by (used in) financing activities
74,820

 
9,242

 
(2,085
)
 
(512
)
 
—

 
81,465

Effect of exchange rate on cash and cash equivalents
—

 
—

 
—

 
(588
)
 
—

 
(588
)
Net change in cash and cash equivalents
—

 
—

 
151

 
1,340

 
—

 
1,491

Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
Beginning of year
—

 
—

 
136

 
7,230

 
—

 
7,366

End of year
$
—

 
$
—

 
$
287

 
$
8,570

 
$
—

 
$
8,857


106
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


SITEL Worldwide Corporation
Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2013
 
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
986

 
$
29,838

 
$
104,785

 
$
38,846

 
$
(173,469
)
 
$
986

Undistributed equity in earnings of subsidiaries
 
(32,324
)
 
(104,786
)
 
(36,359
)
 
—

 
173,469

 
—

Adjustments to reconcile Net income to net cash flows relating to operating activities:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization (including intangible assets)
 
407

 
—

 
11,170

 
29,384

 
—

 
40,961

Deferred income taxes
 
(1,980
)
 
—

 
(1,215
)
 
(22,654
)
 
—

 
(25,849
)
Non-cash derivative activity
 
—

 
454

 
4,135

 
5,064

 
—

 
9,653

Amortization of debt issue costs and OID
 
—

 
4,748

 
—

 
119

 
—

 
4,867

Amortization of deferred training revenue, net of costs
 
—

 
—

 
(1,027
)
 
(2,818
)
 
—

 
(3,845
)
Impairment of property and equipment and other long-term assets
 
—

 
—

 
542

 
211

 
—

 
753

Loss on sale of subsidiary
 
—

 
—

 
—

 
4,558

 
—

 
4,558

Other non-cash items, net
 
422

 
63

 
(272
)
 
(1,911
)
 
—

 
(1,698
)
Change in book overdrafts
 
—

 
(1,586
)
 
2,501

 
1,024

 
—

 
1,939

Changes in operating assets and liabilities, net
 
32,425

 
76,282

 
(71,309
)
 
(35,857
)
 
—

 
1,541

Net cash (used in) provided by operating activities
 
(64
)
 
5,013

 
12,951

 
15,966

 
—

 
33,866

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
 
(16
)
 
—

 
(12,101
)
 
(18,884
)
 
—

 
(31,001
)
Proceeds from disposition of property and equipment
 
—

 
—

 
—

 
278

 
—

 
278

Net cash used in investing activities
 
(16
)
 
—

 
(12,101
)
 
(18,606
)
 
—

 
(30,723
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
 
Payments on long-term debt and capital lease obligations
 
—

 
(730,642
)
 
(1,649
)
 
(1,054
)
 
—

 
(733,345
)
Proceeds from long-term debt
 
—

 
729,402

 
—

 
—

 
—

 
729,402

Payment of interest rate swap, net
 
—

 
(3,612
)
 
—

 
—

 
—

 
(3,612
)
Payments of debt issue costs
 
—

 
(19
)
 
—

 
2

 
—

 
(17
)
Net cash (used in) provided by financing activities
 
—

 
(4,871
)
 
(1,649
)
 
(1,052
)
 
—

 
(7,572
)
Effect of exchange rate on cash and cash equivalents
 
80

 
(142
)
 
935

 
(1,323
)
 
—

 
(450
)
Net change in cash and cash equivalents
 
—

 
—

 
136

 
(5,015
)
 
—

 
(4,879
)
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of year
 
—

 
—

 
—

 
12,245

 
—

 
12,245

End of year
 
$
—

 
$
—

 
$
136

 
$
7,230

 
$
—

 
$
7,366


107
SITEL Worldwide Corporation
Notes to Consolidated Financial Statements (Continued)
December 31, 2014 and 2013
(in thousands of U.S. dollars, except share and per share amounts)


SITEL Worldwide Corporation
Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2012
 
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(23,868
)
 
$
1,980

 
$
76,447

 
$
20,136

 
$
(98,563
)
 
$
(23,868
)
Undistributed equity in earnings of subsidiaries
 
(4,252
)
 
(76,447
)
 
(17,864
)
 
—

 
98,563

 
—

Adjustments to reconcile Net (loss) income to net cash flows relating to operating activities:
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization (including intangible assets)
 
355

 
—

 
10,480

 
32,197

 
—

 
43,032

Deferred income taxes
 
—

 
—

 
(6,795
)
 
5,051

 
—

 
(1,744
)
Non-cash derivative activity
 
—

 
2,673

 
(1,001
)
 
924

 
—

 
2,596

Amortization of debt issue costs and OID
 
—

 
3,566

 
—

 
220

 
—

 
3,786

Amortization of deferred training revenue, net of costs
 
—

 
—

 
(2,016
)
 
(1,231
)
 
—

 
(3,247
)
Impairment of property and equipment and other long-term assets
 
—

 
—

 
—

 
1,633

 
—

 
1,633

Other non-cash items, net
 
518

 
—

 
(296
)
 
(1,348
)
 
—

 
(1,126
)
Change in book overdrafts
 
—

 
1,586

 
(2,252
)
 
(1,266
)
 
—

 
(1,932
)
Changes in operating assets and liabilities, net
 
28,920

 
(6,105
)
 
(41,509
)
 
6,164

 
—

 
(12,530
)
Net cash provided by (used in) operating activities
 
1,673

 
(72,747
)
 
15,194

 
62,480

 
—

 
6,600

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
 
—

 
—

 
(13,713
)
 
(17,790
)
 
—

 
(31,503
)
Proceeds from disposition of property and equipment
 
—

 
—

 
—

 
319

 
—

 
319

Net cash used in investing activities
 
—

 
—

 
(13,713
)
 
(17,471
)
 
—

 
(31,184
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds related to stock transactions
 
227

 
—

 
—

 
—

 
—

 
227

Purchases of preferred and treasury shares
 
(1,900
)
 
—

 
—

 
—

 
—

 
(1,900
)
Payments on long-term debt and capital lease obligations
 
—

 
(647,425
)
 
(1,481
)
 
(50,333
)
 
—

 
(699,239
)
Proceeds from long-term debt
 
—

 
538,640

 
—

 
—

 
—

 
538,640

Proceeds from issuance of Senior Secured Notes
 
—

 
192,000

 
—

 
—

 
—

 
192,000

Payment of interest rate swap, net
 
—

 
(4,065
)
 
—

 
—

 
—

 
(4,065
)
Payments of debt issue costs
 
—

 
(6,403
)
 
—

 
(489
)
 
—

 
(6,892
)
Net cash (used in) provided by financing activities
 
(1,673
)
 
72,747

 
(1,481
)
 
(50,822
)
 
—

 
18,771

Effect of exchange rate on cash and cash equivalents
 
—

 
—

 
—

 
(1,279
)
 
—

 
(1,279
)
Net change in cash and cash equivalents
 
—

 
—

 
—

 
(7,092
)
 
—

 
(7,092
)
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
Beginning of year
 
—

 
—

 
—

 
19,337

 
—

 
19,337

End of year
 
$
—

 
$
—

 
$
—

 
$
12,245

 
$
—

 
$
12,245


108

ITEM 9. CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Operating and Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2014. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2014, our Chief Executive Officer and Chief Operating and Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that our degree of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of the end of the period covered by this report based on the 2013 Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting during the fiscal quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.

109

PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
(in whole U.S. dollars)
Directors and Executive Officers
Set forth below are the name, age, position and a description of the business experience of certain of the executive officers and the members of the Board of Directors of SITEL Worldwide as of February 18, 2015.
Name
 
Age
 
Position
Dagoberto Quintana
 
54
 
Chairman, President, Chief Executive Officer and Director
Patrick Tolbert
 
69
 
Chief Operating and Financial Officer and Director
Donald Berryman
 
56
 
Executive Vice President and Chief Commercial Officer
Sean Erickson
 
53
 
Executive Vice President and Chief Global Markets and Infrastructure Officer
David Beckman
 
51
 
Chief Legal Officer and Secretary
Elsa Zambrano
 
50
 
Chief Human Resources Officer
Steve Barker
 
47
 
Executive Vice President, Global Operations Support
Pedro Lozano
 
51
 
General Manager - EMEA Region
Raul Navarro
 
56
 
General Manager - LATAM Region
Michael Lee
 
46
 
General Manager - Philippines
John Bowden
 
60
 
General Manager - North America
Seth Mersky
 
55
 
Director
David Garner
 
57
 
Director
Tate Abols
 
34
 
Director
Robert Mahoney
 
66
 
Director
Keith Powell
 
69
 
Director
Peter Shea
 
63
 
Director
Dagoberto Quintana has served as our President and Chief Executive Officer since October 2011 and as a member of our Board of Directors and Chairman of the Board since February 18, 2014. Mr. Quintana served as our President and Chief Operating Officer from February, 2010 until his appointment as Chief Executive Officer and as our Chief Operating Officer from August 2009 to October 2011. Mr. Quintana is responsible for directing our strategic growth and expansion. He also is responsible for business development to enhance SITEL's customer management solutions. Mr. Quintana most recently led the International Services division for Dell, Inc. and was responsible for site start-ups and deployment of Dell's contact center strategy in India, the Philippines and El Salvador. Prior to joining Dell, he held various executive management positions at Florida Power and Light, TYCO/ADT Security Services, Inc. and MCI Telecommunications, Inc. Mr. Quintana holds a bachelor's degree in electrical engineering from the University of Miami.
Patrick Tolbert has served as our Chief Operating Officer since February 15, 2012, and as our Chief Financial Officer since November 2010. Mr. Tolbert also has served as a member of our Board of Directors since 2007 and served as a member and Chairman of our Audit Committee from 2007 through October 2010. Mr. Tolbert is charged with leading our operations and financial and compliance functions on a global basis. From 2001 to 2004, Mr. Tolbert held the positions of Executive Vice President and Chief Financial and Administrative Officer for LSG Lufthansa Service Holding, AG. As a member of the Executive Management Board and LSG's Supervisory Board, he was responsible for the integration of U.S.-based Onex Food Services, Inc. with LSG. From 1992 to 2001, Mr. Tolbert was the Executive Vice President and Chief Financial and Administrative Officer for Onex Food Services, Inc. Mr. Tolbert received a bachelor's degree in Economics and his Masters of Business Administration from Auburn University. Mr. Tolbert brings to the Board expertise in accounting, finance and tax.
Donald Berryman has served as our Executive Vice President and Chief Commercial Officer since February 13, 2013. Mr. Berryman served as our President - Americas from January 2012 until his appointment as Executive Vice President and Chief Commercial Officer and as our General Manager - Americas region from February 2010 to January 2012, leading our North and Latin American operations. Mr. Berryman also served as our Global Chief Sales and Marketing Officer from February 2009 to February 2010 leading our efforts to grow revenues through new client acquisition and existing client program expansion. Mr. Berryman joined SITEL Worldwide after serving as Senior Industry Executive at Electronic Data

110

Systems from March 2008 to February 2009 working with Electronic Data Systems' Global Customer Relationship Management practice. Before that, Mr. Berryman spent almost six years with EarthLink Inc. as President and as an Executive Vice President. In addition, Mr. Berryman has served in management positions for IdentityNow, Inc., APAC Customer Care, Inc., Ryder Systems, Inc. and Gannett Co.'s USA Today. Mr. Berryman holds a bachelor's degree in Economics and Political Science from Michigan State University.
Sean Erickson has served as our Executive Vice President and Chief Global Marketing & Infrastructure Officer since September 1, 2013, leading our marketing, product innovation, IT, facilities and real estate functions. Mr. Erickson served as our Executive Vice President Corporate Development from January 25, 2013 until assuming his current role and as our General Manager Strategic Markets from February 2011 until November 2012 and Chief Commercial Officer/General Manager - Strategic Markets from November 2012 to January 2013. Prior to joining SITEL Worldwide, Mr. Erickson spent 25 years in the leadership of public companies such as MCI, Dell, and TeleTech and private corporations such as Vercuity and Cloud 10, all in the telecommunications, high tech, and BPO industries. Mr. Erickson holds a bachelor’s degree in Business Administration with an emphasis in Finance from Wichita State University.
David Beckman has served as our Chief Legal Officer and Secretary since April 2007. Mr. Beckman is responsible for leading our global legal, corporate governance, risk management and legal compliance. Prior to joining SITEL Worldwide, Mr. Beckman spent 19 years at Frost Brown Todd LLC (and its predecessor firm), first as an associate and then as a partner concentrating his practice on mergers and acquisitions, commercial transactions, franchise and general corporate law. Mr. Beckman received his undergraduate degree in Economics from Harvard College, and his law degree from Northwestern University.
Elsa Zambrano has served as our Chief Human Resources Officer since October 2013, leading our centralized global human resources function, including talent management, compensation, benefits and employee relations. Prior to joining Sitel, Ms. Zambrano held a variety of human resource executive roles with Dell, Inc., including leading Dell’s HR strategy for Canada, United States and Latin America within its Global Public and Large Enterprise segments as well as serving as the Executive Director for Dell's Latin American region. Ms. Zambrano received her undergraduate degree in Business Administration with an emphasis in Human Resources Management and an Economics minor from San Jose State University as well as a master’s degree in Organizational Science from the University of San Francisco.
Steve Barker has served as our Executive Vice President, Global Operations Support since October 2013. Mr. Barker served as our General Manager - APAC region from January 2010 through October 2013, leading our Asia Pacific operations. Mr. Barker served as the Chief Operating Officer - APAC region from April 2009 through January 2010, and Chief Operating Officer of SITEL New Zealand and SITEL Australia from April 2007 to March 2009. Prior to that, Mr. Barker served in a variety of roles within our Asia Pacific operations. Prior to joining SITEL Worldwide in 1998, Mr. Barker worked in customer contact operations with Telcom New Zealand.
Pedro Lozano has served as our General Manager - EMEA region since October 13, 2011, leading our European, Middle Eastern and African operations. Mr. Lozano served as our General Manager of Southern EMEA from February 18, 2009 to October 13, 2011 leading our operations in Spain, Portugal and Italy, General Manager of Spain, Portugal and Italy from February 1, 2008 to February 18, 2009 and our Chief Financial Officer of Spain, Portugal and Italy from May 3, 2001 to February 1, 2008. Prior to that, Mr. Lozano served in various finance positions with The Continuity Company, S.A., Warner Brothers Consumer Products, S.A. and Wagonlit Travel. Mr. Lozano holds a degree in business administration from Universidad Pontificia Comillas.
Raul Navarro has served as our General Manager of Latin America since June 1, 2012 with responsibility for Sitel’s operations in Mexico, Panama, Nicaragua, Colombia and Brazil.  Prior to joining Sitel Mr. Navarro served as General Manager, USA and Puerto Rico for ATENTO.  Mr. Navarro also served as a Senior Vice President at Teleperformance with responsibility for all aspects of the near shore operations for U.S.-based customers as well as a senior vice president at ICT Group.  Mr. Navarro obtained his undergraduate degree in political science from the University of Kentucky and MBA degree in International Business from the University of Miami.
Michael Lee has served as our Chief Operating Officer for the Philippines since June 1, 2013. Prior to that Mr. Lee  served as the Senior Vice President of Operations for our Mid-West Region of North America and as a Site Director in our Las Vegas site.   Prior to joining Sitel in 2006 Mr. Lee served as the Executive Vice President and General Manager of Call Center Operations for Voice Vision TeleServices and Director of Implementation Management for TPG TeleManagement Inc.  Over the course of 23 year in the industry Mr. Lee also held positions with Sitel Corporation (a predecessor of Sitel Worldwide Corporation) and APAC Customer Services.  Mr. Lee holds a bachelor’s degree in Business Administration from Wartburg College.


111

John Bowden has served as our Chief Operating Officer for the North American region since September 2013.  Prior to joining Sitel, Mr. Bowden served as Senior Vice President of Customer Care at Time Warner Cable with responsibility for all customer call center operations as well as self-service and shared service activity.   Mr. Bowden also served as Senior Vice President  of Customer Care at both Earthlink and Ameritech.   Mr. Bowden also held a number of roles as a senior vice president at MCI.    Mr. Bowden holds a Bachelor of Arts in Accounting from The Ohio State University and an MBA Finance from Golden Gate University.
Seth Mersky served as our Chairman of the Board from May 2007 until February 2010 and again from October 28, 2013 through February 18, 2014, and has served as a member of our Board of Directors since 1998 and the Chairman of our Compensation Committee since 1997. Mr. Mersky is a Managing Director of Onex Corporation where he has worked since 1997. Prior to joining Onex, Mr. Mersky was Senior Vice President of The Bank of Nova Scotia where he worked for 13 years. Mr. Mersky previously served as a director of Allison Transmission Inc. from 2007 through 2014. Mr. Mersky currently serves as a director of Hawker Beechcraft, Inc. Mr. Mersky holds a bachelor's degree in Accounting and Philosophy from the University of Delaware. Mr. Mersky brings to the Board significant expertise in banking and finance.
David Garner served as our Chairman of the Board from February 2010 to October 2013, and is currently a member of our Board of Directors. Mr. Garner served as our Chief Executive Officer from September 2003 through October 2011. Prior to joining SITEL Worldwide, Mr. Garner was President and Chief Executive Officer of SHPS, Inc., a provider of outsourced employee benefit administrative services, from 1998 to 2003. Prior to joining SHPS, Mr. Garner accumulated 14 years of key leadership experience at Sykes Enterprises, Inc. Mr. Garner has a B.A. in Technical Communications from Louisiana Tech University. We believe Mr. Garner's qualifications to sit on our Board of Directors include his strong business background and extensive executive leadership and management experience in the customer care outsourcing services industry.
Tate Abols has served as a member of our Board of Directors and as a member of our Audit and Compensation Committees since February 2011. Mr. Abols is a Principal at Onex Corporation where he has worked since 2006. Prior to joining Onex, Mr. Abols was an associate at RBC Capital Markets. Mr. Abols holds a bachelor's degree in philosophy from Huron University College, University of Western Ontario and an Honours Business Administration Degree from Ivey School of Business, University of Western Ontario. Mr. Abols brings to the Board significant expertise in banking and finance.
Robert Mahoney has served as a member of our Board of Directors since 2007, our Audit Committee since 2008 and as Chairman of our Audit Committee since November 2010. In 2010, Mr. Mahoney was appointed President and Chief Executive Officer of Belmont Savings Bank in Belmont, Massachusetts and its holding company, BSB Bancorp, Inc. Mr. Mahoney previously retired as Executive Vice Chairman of Citizens Financial Group, Inc. ("CFG"). Mr. Mahoney joined CFG in 1993 as President and Chief Executive Officer of Citizens Bank of Massachusetts after serving 22 years in a variety of domestic and international management positions at Bank of Boston. Mr. Mahoney earned his undergraduate degree in Chemistry from the University of Massachusetts and received his Masters of Business Administration from Columbia University School of Business. Mr. Mahoney brings to the Board extensive financial and management experience.
Keith Powell has served as a member of our Board of Directors since 2000 and as a member of our Audit Committee since November 2010. Mr. Powell is a twenty-year veteran of Nortel Networks Corporation, having retired from Nortel in 2000 as Senior Vice President, Information Systems and Chief Information Officer. Prior to Nortel, Mr. Powell was with Pratt and Whitney Aircraft of Canada, LTD. Mr. Powell is a member of the Board of Cortex Business Solutions, Inc. and Sumitomo Mitsui Banking Corporation of Canada. Mr. Powell has a bachelor's degree in Mathematics from Concordia University, and a Masters of Business Administration from McGill University. Mr. Powell brings to the Board significant expertise in information technology strategy formulation and improving customer service through information technology.
Peter Shea has served as a member of our Board of Directors since October 2011. Mr. Shea serves as a private consultant and as an Operating Advisor to OMERS Private Equity, the manager of the private equity investments of OMERS Administration Corporation, and other private equity firms. Mr. Shea has previously served as a member of senior management of several public and private multi-national companies, including as President of Icahn Enterprises, Managing Director for H.J. Heinz Company in Central and Eastern Europe, President and Chief Executive Officer of Specialty Foods Company and in various positions with United Brands Company. Mr. Shea serves as a director of Viskase Companies. Mr. Shea brings to the Board significant financial and management experience.
Composition of Board and Board Committees
Our stockholders agreement, dated August 15, 2000, as amended from time to time, provides that (a) our Board of Directors consists of (i) one individual as may be designated from time to time by OMERS and its affiliates and (ii) up to five individuals as may be designated from time to time by Onex, at least one of which must be a member of our management; (b) our Audit Committee consists of (i) one individual as may be designated from time to time by OMERS and its affiliates and (ii) two individuals as may be designated from time to time by Onex, one of which shall be an independent director; and (c) our Compensation Committee consists of (i) one individual as may be designated from time to time by OMERS and its affiliates and (ii) one or two individuals as may be designated from time to time by Onex. OMERS appointed Mr. Shea as its Board

112

designate, but has waived its right to name designees to our Audit and Compensation Committees and its designees no longer serve on those Committees.
Board Committees
Our Board of Directors has established an Audit Committee and a Compensation Committee. The duties and responsibilities of these committees are set forth below.
Audit Committee.    Our Audit Committee consists of Robert Mahoney, who serves as chairman of the Audit Committee, Tate Abols and Keith Powell. The Audit Committee assists our Board of Directors in its oversight of (1) the preparation of our financial statements (including, without limitation, reviewing the integrity of our financial statements), (2) the performance of our internal audit functions and controls, (3) our audit and financial reporting system and process, (4) our compliance with legal and regulatory requirements, (5) the performance of our independent auditors and (6) our independent auditor's qualifications and independence. In light of our status as a privately held company and the absence of a public listing or trading market for our common stock, our Board has not designated any member of the Audit Committee as an "Audit Committee financial expert."
Compensation Committee.    Our Compensation Committee consists of Seth Mersky, who serves as chairman of the Compensation Committee, and Tate Abols. The Compensation Committee is responsible for (1) reviewing and evaluating our overall compensation philosophy and overseeing our equity, incentive and other compensation and benefits plans that are subject to Board approval, (2) reviewing and approving corporate goals and objectives relevant to the compensation of the Chief Executive Officer, evaluating performance in reference to those goals and objectives and determining and approving their compensation based on performance evaluations, (3) reviewing and approving the compensation of other senior management; (4) reviewing and approving employment contracts and other similar arrangements with executive officers; (5) preparing the Compensation Committee report on executive officer compensation that will be required by the SEC for inclusion in our Annual Report on Form 10-K, (6) making recommendations to the Board related to the compensation of our directors, and (7) evaluating succession plans for executives and monitoring the succession planning process for other members of management.
Other Committees.    Our Board of Directors may establish other committees as it deems necessary or appropriate from time to time.
Code of Conduct and Ethics
We have a global code of conduct and ethics currently applicable to all executive level management employees, all management employees and all United States based employees. The code of conduct is implemented in our other locations and among our associate population in accordance with local law. This code is posted on our website, located at www.sitel.com. Information contained on our website, whether currently posted or posted in the future, is not part of this document or the documents incorporated by reference in this document.
Compensation Committee Interlocks and Insider Participation
None of our directors or executive officers serves as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee of our Board of Directors.
Family Relationships
There are no family relationships between any of our executive officers or directors.
The Board's Role in Risk Oversight
The Board's role in the risk oversight process includes receiving regular updates and reports from members of senior management on areas of material risk to our company, including operational, financial, legal, regulatory, strategic and reputational risks. The full Board or, if appropriate, one of its committees receives these updates and reports from the senior managers responsible for the oversight of particular risks within our company. These updates and reports enable the Board to understand and implement our risk identification, risk management and risk mitigation strategies.

113

ITEM 11. EXECUTIVE COMPENSATION
(in whole U.S. dollars)
Introduction
This Compensation Discussion and Analysis describes the compensation arrangements we have with our named executive officers ("NEOs") as required under the rules of the SEC. The SEC rules require disclosure for the principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Operating and Financial Officer), regardless of compensation level; they and the three other most highly compensated executives of our company are referred to in this Compensation Discussion and Analysis as our "NEOs."
Our NEOs are:
Name
  
Title
Dagoberto Quintana
  
Chairman, President and Chief Executive Officer
Patrick Tolbert
  
Chief Operating and Financial Officer
Elsa Zambrano
  
Chief Human Resources Officer
Michael Lee
 
General Manager - Philippines
Raul Navarro
 
General Manager - LATAM Region
Establishing and Evaluating Executive Compensation
Executive Compensation Objectives and Philosophy
The Compensation Committee believes that our executive compensation programs should reward actions and behaviors that drive long-term, profitable revenue growth at above-market rates while also rewarding the achievement of short-term performance goals. We seek to apply a consistent philosophy to compensation for all executive officers. We also have increasingly sought to align the short-term incentive compensation goals of our NEOs and other executives in ways that encourage the management of certain critical risks to our long term business success such as meeting certain debt covenants, making cash available for future expenditures and growth and enhancing the health of our client relationships. In 2014, we granted restricted shares of Class A common stock tied to long term business success. These restricted share grants are further discussed below.
Role of Compensation Consultant
The Compensation Committee has the authority to retain an independent compensation consultant. The committee did not engage a compensation consultant to assist the committee with respect to 2014 compensation decisions. In 2012, management purchased Towers Watson survey data for executive officer positions at both the general industry level and for our specific industry. Our Chief Executive Officer used this data as part of his annual review of executive compensation, as discussed below.
Role of Executive Officers
The Compensation Committee is responsible for all compensation decisions for our NEOs. Our Chairman, President, and Chief Executive Officer, Dagoberto Quintana, annually reviews the performance of his direct reports and other executive officers and makes recommendations based on these reviews to the Compensation Committee. There were no recommended increases to base salaries of any of the NEOs in 2014 other than in connection with a change in roles or responsibilities.
Elements of Compensation
The following is a list of each potential element of our NEOs' compensation:
•base salary;
•bonus awards;
•incentive compensation;
•class A restricted stock and restricted stock unit grants;
•perquisites;
•retirement and welfare benefits; and
•severance benefits.

114

Base Salary
Base salary is used to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our NEOs. When establishing base salaries, the Compensation Committee considers a number of factors, including the seniority of the individual, the functional role of the position, the level of the individual's responsibility, the ability to replace the individual, the base salary of the individual at their prior employment and the number of well qualified candidates to assume the individual's role. Base salaries are reviewed at a minimum annually by our Compensation Committee, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. There were no base salary increases in 2014.
The annual base salaries in effect for each of our NEOs as of December 31, 2014, are as follows:
Name                                                          
 
Annual Salary
 
Dagoberto Quintana
 
$
600,000

 
Patrick Tolbert
 
$
500,000

 
Elsa Zambrano
 
$
325,000

 
Michael Lee
 
$
300,000

 
Raul Navarro
 
$
310,000

 
Bonus Awards
We may also pay specific bonuses to align the compensation of certain NEOs with market rates for total cash compensation and/or to provide discretionary rewards for performance in situations where incentive compensation goals have not been met but the executive's performance has nonetheless advanced our strategic goals. We did not award any bonuses during 2014.
Incentive Compensation
We pay incentive compensation awards in order to align the compensation of our NEOs with our short-term operational, performance and risk management goals and to provide near-term rewards to our NEOs for meeting those goals. Our short-term, performance-based cash incentive compensation program provides for incentive payments to specified NEOs. These incentive payments are primarily based on the attainment of pre-established, objective financial and operational goals and are intended to motivate executives to work effectively to achieve financial and operational performance objectives and reward them when objectives are met and results are certified by the Compensation Committee. Using short-term incentives tied to certain corporate financial goals, including Annual Global Adjusted EBITDA (as defined in our Senior Secured Credit Facility) and Annual Global Cash Flow, allows us to establish appropriately aggressive performance expectations that align business performance expectations to the prevailing market and economic conditions.
The 2014 target annual incentive opportunities and awards for eligible NEOs were as follows:
Name
Target Annual Incentive Opportunity (% of Base Salary)
Awards (USD)
 
Dagoberto Quintana
130%
$
—

 
Patrick Tolbert
100%
$
—

 
Elsa Zambrano (1)
75%
$
97,500

 
Michael Lee
50%
$
81,140

 
Raul Navarro
50%
$
108,500

 
(1) Ms. Zambrano received a guaranteed $97,500 2014 Management Incentive Plan award as a part of her employment agreement.
2014 Incentive Programs
For 2014, the NEO cash incentive programs included corporate performance factors similar to those used in the prior years. Specifically, incentive programs for Mr. Quintana, Mr. Tolbert, and Ms. Zambrano, were based on corporate performance factors for Annual Global Adjusted EBITDA and Annual Global Cash Flow. Payout under the plan was subject to achieving 90% of the goal for Annual Global Adjusted EBITDA and exceeding 2013 results. Global Cash Flow is defined as net cash provided by operating activities less net cash from investment activities as determined on a consolidated basis for SITEL Worldwide Corporation and its direct and indirect subsidiaries in accordance with United States Generally Accepted Accounting Principles.

115

The Compensation Committee approved the performance range and corresponding payout for each of the corporate performance factors set out below resulting in no payout. The performance ranges were based on our operating plan for 2014 and were meant to be achievable but challenging in order to drive performance. The actual payouts for each NEO are reflected in the Summary Compensation Table in the "Non-Equity Incentive Plan Compensation" column.
Factor
  
Performance Range
 
  
Threshold
  
Goal
  
Maximum
% Payout
Annual Global Adjusted EBITDA (1)
  
$126.0M
  
$140.0M
  
$168.0M
0%
Annual Global Cash Flow (2)
 
$(1.5)M
 
$0
 
$5M
0%
(1) Annual Global Adjusted EBITDA is determined in accordance with the terms of our Senior Secured Credit Facility.
(2) Annual Global Cash Flow where used in NEO incentive plans is defined as net cash provided by operating activities less net cash from investment activities as determined on a consolidated basis for SITEL Worldwide Corporation and its direct and indirect subsidiaries in accordance with United States Generally Accepted Accounting Principles.
NEO 2014 incentive programs for Mr. Quintana, Mr. Tolbert and Ms. Zambrano were based on corporate performance factors weighted as follows:
Annual Global Adjusted EBITDA
Annual Global Cash Flow
70%
30%
The incentive programs for Mr. Lee and Mr. Navarro were based on corporate and regional performance factors for Semi-Annual Regional Adjusted EBITDAR, Semi-Annual Regional Actual to Optimal Gross Margin Ratio ("A/O") and Annual Global Adjusted EBITDA. Payout under the program was subject to 90% achievement of the Global Adjusted EBITDA component for the measurement period. Annual Global Adjusted EBITDA is defined as set out above. Semi-Annual Adjusted EBITDAR is defined as Adjusted Regional EBITDA less restructuring in excess of stipulated regional goals for each six month period of the fiscal year. Adjusted Regional EBITDA is defined as Adjusted EBITDA as defined in our Senior Secured Credit Facility and calculated for the relevant region. Semi-Annual Regional A/O is defined as the ratio measuring the degree of gross margin optimization by dividing actual gross margin into optimal gross margin as set by our Chief Financial Officer.
Mr. Navarro and Mr. Lee's 2014 incentive programs were based on corporate and regional performance factors weighted as follows:
Semi-Annual Regional Adjusted EBITDAR
Annual Global Adjusted EBITDA
Semi-Annual Regional Actual to Optimal Gross Margin Ratio
60%
20%
20%
Since the components of Regional EBITDAR and A/O targets embody highly sensitive data as well as highly confidential goals targeted by divisions of our operations, we do not disclose Regional EBITDAR or A/O because we believe that such disclosure would result in serious competitive harm and be detrimental to our operating performance. These factors are measured and awarded on a semi-annual basis. Global Adjusted EBITDA is defined as set out above. No award was made for the first half of plan year 2014 due to failure to achieve the 90% of the Global Adjusted EBITDA goal. Mr. Lee and Mr. Navarro's 2014 awards were based on financial performance in the second half 2014 and achievement of the Global Adjusted EBITDA threshold.
2015 Incentive Program
For 2015, the NEO cash incentive program includes corporate performance factors for Annual Global Adjusted EBITDA and Annual Global Cash Flow, defined as in the 2015 Plan.
2015 NEO incentive programs for Mr. Quintanta, Mr. Tolbert, and Ms. Zambrano are based on corporate performance factors weighted as follows:
Annual Global Adjusted EBITDA
Annual Global Cash Flow
70%
30%
Annual Global Adjusted EBITDA as used in the 2015 Incentive Program is defined the same as in the 2014 Incentive Program. The 90% Annual Global EBITDA threshold was eliminated from the 2015 Incentive Program. Annual

116

Global Cash Flow as used in the 2015 Incentive Program is defined as net cash, before interest, provided by operating activities less net cash used from investing activities as determined on a consolidated basis for SITEL Worldwide Corporation and its direct and indirect subsidiaries in accordance with United States generally accepted accounting principles.
Mr. Lee and Mr. Navarro's 2015 incentive program are based on the same performance factors, weighting and definitions as in the 2014 plans. As noted above, the 90% Annual Global EBITDA threshold for payout was eliminated from the 2015 Incentive Program.
The Compensation Committee set performance ranges for the 2015 NEO incentive programs based on our operating plan for 2015 that are meant to be achievable but challenging in order to drive performance.
Since the components of the global and regional targets for 2015 contain highly sensitive data such as targeted Adjusted EBITDA growth, we do not disclose specific future measures and targets because we believe that such disclosure would result in serious competitive harm and be detrimental to our operating performance.
Global Adjusted EBITDA is a non-GAAP measure specific to this plan and may not be comparable to other similarly titled measures reported by other companies. We use Adjusted EBITDA as a financial target because it provides a recognized measure of performance over the periods on which executives can have a significant impact. We use Global Cash Flow as a factor in incentive compensation in light of the importance of meeting certain debt covenants and making cash available for future expenditures and growth which serve also to manage several of the key risks to our business. The Compensation Committee set the performance goals at the beginning the fiscal year based on an analysis of (1) historical performance; (2) income, expense and margin expectations; (3) financial results of other comparable businesses; (4) economic conditions and (5) progress toward achieving other strategic initiatives, including the management of risk.
The targets under our annual cash incentive program are intended to require substantial efforts by executive officers and their teams toward achieving our strategic and operational goals. In addition, achievement of performance above established targets constitute "stretch goals" that are substantially more challenging and therefore less likely to be achieved.
Class A Restricted Stock /Restricted Stock Unit Grants
Reflecting our executive compensation principle of rewarding long-term performance, equity awards in the form of restricted class A common stock and restricted stock unit grants are designed to further our desire to align our executive compensation with the interests of our stockholders. We also believe that our restricted stock and restricted stock unit plans give executives incentive to balance the risks of achieving short term goals against the long term best interests of our company and stockholders.
With respect to restricted class A common stock grants prior to 2013, generally the forfeiture period applicable to the award lapses over a two-year period commencing upon a change in control, initial public offering, or liquidation (a "liquidity event"). In addition, the forfeiture period lapses for one third of the grant if a liquidity event occurs within six months of the date an employee is involuntarily terminated due to death, disability or reduction in force. The grant fully vests upon the employee's termination or constructive termination in connection with a change in control. We also have a right of first refusal to acquire shares held by an employee at the current fair value upon termination.
Additionally, we have issued restricted stock units, which are similar to our grants of restricted class A common stock except that actual shares of class A common stock are only issued to individuals upon vesting and exercise. Grants of restricted stock units have been issued in the past for new hires and promotions. Grants of restricted stock units vest over a three year period commencing upon our stock becoming freely tradable (as defined in the restricted stock unit plan and agreement). Grants of restricted stock units vest immediately upon a change in control (as defined in the restricted stock unit plan and agreement) if the individual is employed as of that date or if the employee is constructively discharged prior to the date of the change in control. While grants of restricted stock units are generally forfeited upon termination, the forfeiture period lapses for one fourth of the grant if a liquidity event occurs within six months of the date an employee is involuntarily terminated due to death, disability or position elimination. A liquidity event is defined as the stock becoming freely tradable or a change in control.  
Finally, in connection with Amended Employment Agreements executed with certain of our NEOs in 2013, we also awarded Class A Common Stock to each of Dagoberto Quintana and Patrick Tolbert pursuant to the terms of a Restricted Stock Grant Plan and Agreement (the "Grant Agreement") with each executive. These awards will generally begin to vest upon the first to occur of (i) the Company's stock becoming freely tradeable as a result of being listed on a national stock exchange ("Freely Tradeable"), or (ii) a change in control of the Company (either, a "Liquidity Event"), in either case, occurring within six years of the date of the applicable Grant Agreement and only if the "Adjusted EBITDA Threshold" (as defined in the Grant Agreement") has been met; provided that the executive is still employed at such time (except as set forth below). Upon our shares becoming Freely Tradeable, the awards will vest in four increments of 25% each, beginning upon our shares becoming Freely Tradeable and thereafter on each of the next three anniversaries thereof as long as the executive remains an employee; provided, however, that in the event Onex sells more than 25% of their ownership of SITEL Worldwide, then the vested amount

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of the awards shall at all times at least be equal to the ownership percentage that Onex has sold. If the Liquidity Event is a change of control, 100% of the awards will vest upon the change of control. If an executive is terminated without cause, resigns with good reason or is terminated due to death or disability within six months of a Liquidity Event, such executive's shares will still be eligible to vest upon the Liquidity Event. To the extent that the awards do not vest upon a Liquidity Event because the applicable Adjusted EBITDA Threshold has not been satisfied, such shares will vest if and when the Adjusted EBITDA Threshold is eventually satisfied. All unvested Shares will be forfeited upon an executive's termination for cause or resignation without good reason. We also awarded Class A Common Stock to Ms. Zambrano on similar terms.
Perquisites
We provide certain perquisites to NEOs which the Compensation Committee believes are reasonable and appropriate based on the results of market surveys reviewed from time to time. The perquisites assist in the attraction and retention of NEOs and, in the case of certain perquisites, promote the health, safety and efficiency of the NEOs. For further information on the perquisites provided to our NEOs during 2014, refer to "Summary Compensation Table" below.
Retirement and Welfare Benefits
Retirement and Non-Qualified Defined Contribution and Deferred Compensation Plans.    We sponsor a tax-qualified defined contribution 401(k) retirement plan. Participation is available to all employees who meet certain age and service requirements. Our NEOs are eligible to participate in this plan based on these requirements. The qualified plan allows employees to elect to make contributions up to the maximum limits allowable under the Internal Revenue Code subject to discrimination tests for highly compensated employees. Effective January 28, 2011, we implemented a three percent (3%) cap on employee contributions. Employees' contributions vest immediately.
We do not sponsor or maintain any pension plans or non-qualified deferred compensation plans in which our NEOs participate.
With the exception of those benefits described under "Perquisites" above, we provide NEOs the same health and welfare benefits provided generally to all of our other employees, at the same general premium rates as charged to such employees.
Severance Benefits
Our NEOs and certain other executives with employment agreements are covered by arrangements which specify payments in the event the executive's employment is terminated. The type and amount of payments vary by executive and the nature of the termination. These severance benefits are payable if and only if the executive's employment terminates as specified in the applicable employment agreement. Our primary reason for including severance benefits in compensation packages is to attract and retain the best possible executive talent. We believe our severance benefits are competitive with general industry packages. For a further description of these severance benefits, see "Employment Agreements" below.
Accounting and Tax Considerations
Policy with Respect to Deductibility of Compensation over $1 Million. Section 162(m) of the Code generally limits to $1 million the tax deductibility of annual compensation paid to certain executives named in the Summary Compensation Table. However, performance-based compensation can be excluded from this limit if it meets certain requirements. Because we do not have publicly-held equity, the restrictions of Section 162(m) do not apply to us. However, since achieving increased enterprise value creation remains our goal, the Compensation Committee has emphasized performance-based compensation as an important part of the NEOs' total compensation package.
Accounting for Stock-Based Compensation. We adopted ASC 718, "Compensation-Stock Compensation" ("ASC 718") using the modified prospective transition method for all stock-based compensation awards. Upon adoption of ASC 718, we continued to use the Black-Scholes valuation model. Compensation for non-vested grants is measured at fair value on the grant date based on the number of shares expected to vest and the fair market value of such shares as determined by the Board and our Audit Committee. Compensation cost for awards with service conditions are recognized in earnings, net of estimated forfeitures, on a straight-line basis over the requisite service period.

118

Compensation and Risk
We believe that our compensation programs have been designed and administered in a manner that discourages undue risk-taking by employees. Relevant features of these programs include:
•Compensation Committee discretion to adjust base bonus and incentive compensation to reflect the core operating performance of the business;
•the application of metrics in determining incentive compensation that aligns employees with balanced objectives of increasing revenues and reducing costs; and
•use of class A restricted stock and restricted stock units-that vest after certain triggering events over a number of years, thereby promoting sustained operational and financial performance.
In light of these features of our compensation program, we conclude that the risks arising from our employee compensation policies and practices are not reasonably likely to have a material adverse effect on us.
Report of Compensation Committee
The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.
Compensation Committee
Seth Mersky
Tate Abols
Compensation Tables
The purpose of the following tables is to provide information regarding the compensation earned during our most recently completed year by our NEOs Summary Compensation Table.
The following table shows the compensation earned by our NEOs during the years ended December 31, 2014, 2013 and 2012, referred to as years 2014, 2013 and 2012, respectively.
Name and Principal
Position
Year
 
Salary
($)
 
Bonus
($)(1)
 
Stock
Award
($)(2)
 
Option
Awards
($)
 
Non-Equity
Incentive
Plan
Compensation
($)
 
Nonqualified
Deferred
Compensation
Earnings
($)
 
All Other
Compensation
($)(3)
 
Total ($)
Dagoberto Quintana
2014
 
$
600,000

 
$
—

  
$
—

  
$
—

 
$
—

 
$
—

 
$
19,698

 
$
619,698

Chairman, President, and Chief Executive Officer

2013
 
$
600,000

 
$
—

 
$
646,000

 
$
—

 
$
694,200

 
$
—

 
$
—

 
$
1,940,200

2012
 
$
585,205

 
$
—

  
$
—

  
$
—

 
$
—

 
$
—

 
$
221,090

 
$
806,295

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Patrick Tolbert
2014
 
$
500,000

 
$
—

  
$
—

 
$
—

 
$
—

 
$
—

 
$
78,936

 
$
578,936

Chief Financial Officer and Chief Operating Officer
2013
 
$
500,000

 
$
—

  
$
447,640

 
$
—

 
$
445,000

 
$
—

 
$
89,364

 
$
1,482,004

2012
 
$
478,904

 
$
—

  
$
—

 
$
—

 
$
—

 
$
—

 
$
154,052

 
$
632,956

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Elsa Zambrano (4)
2014
 
$
325,000

  
$
97,500

  
$
228,000

  
$
—

 
$
—

 
$
—

 
$
56,347

 
$
706,847

Chief Human Resources Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Michael Lee (4)
2014
 
$
300,000

  
$
—

  
$
—

  
$
—

 
$
81,140

 
$
—

 
$
223,813

 
$
604,953

General Manager - Philippines
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Raul Navarro (4)
2014
 
$
310,000

  
$
—

  
$
—

  
$
—

 
$
108,500

 
$
—

 
$
382,104

 
$
800,604

General Manager - LATAM Region
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Reflects the bonuses paid to NEOs during 2014, 2013, and 2012.

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(2) Reflects the grant-date fair value of stock awards (in U.S. Dollars) calculated in accordance with FASB Accounting Standards Codification ("ASC") 718 for each NEO. Awards to both U.S. and international NEOs are calculated in terms of U.S. Dollars. Refer to Note 16 to our Consolidated Financial Statements for the year ended December 31, 2014, included elsewhere in this filing, for a discussion of the relevant assumptions used in calculating the fair value.
(3) The following table details All Other Compensation paid to each NEO during year 2014.
(4) 2014 was first year as an NEO.
Name
 
Executive
Health
Benefits
($) (1)
 
Executive
Life
and
Disability
Insurance
($)
 
Commuting & Housing
Expenses
($) (2)
 
Auto Expense
Home Office($) (3)
 
401(k) Company Match ($)
 
Annual Company Contribution ($)
Expatriate Expenses(4)
 
All Other Compensation Total ($)
Dagoberto Quintana
 
$
7,492

 
$
1,704

 
$
—

 
$
—

$
10,502

 
$
—

 
$
—

$
—

 
$
19,698

Patrick Tolbert
 
7,492

 
1,116

 
62,016

 
—

8,313

 
—

 
—

—

 
78,937

Elsa Zambrano
 
7,449

 
1,565

 
37,745

 
—

9,588

 
—

 
—

—

 
56,347

Michael Lee
 
3,631

 
1,704

 
31,743

 
9,710

9,291

 
1,377

 
5,510

160,847

 
223,813

Raul Navarro
 
36,557

 
1,116

 
51,924

 
44,974

37,643

 
—

 
—

209,890

 
382,104

(1) Executive Health Benefit calculation reflects reimbursement for private health insurance premiums.
(2) Reflects cost of commuting between home and work location and housing (Tolbert $36,000 and Zambrano $21,911), home office, and gross up amount to account for related taxes (Tolbert $33,169 and Zambrano $15,834).
(3) Reflects telecom, office supplies and other miscellaneous expenses.
(4) Reflects expatriate expenses including individual local income tax paid (Mr. Lee $149, 466, Mr. Navarro $163,770), travel allowance (Mr. Lee $3,861, Mr. Navarro $15,920), cost of living allowance (Mr. Navarro $20,000), visa costs (Mr. Lee $2,834, Mr. Navarro $10,200), association dues (Mr. Lee $2,686), tax preparation (Mr. Lee $2,000).
Grants of Plan-Based Awards
The following table sets forth information regarding performance-based incentive compensation under the 2014 Incentive Program.
  
 
  
 
Estimated Future Payments
Under Non-Equity Incentive
Plan Awards (1)
 
Estimated Future Payouts
Under Equity Incentive
Plan Awards
 
  
 
  
 
  
 
  
 
  
Name
 
Grant
Date
 
Threshold
($)
 
Target($)
 
Maximum
($)
 
Threshold
($)
 
Target($)
 
Maximum
($)
 
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
 
All Option
Awards:
Number of
Securities
Underlying
Options (#)
 
Exercise
Price of
Option
Awards
($/Sh)
 
Closing
Market
Price on
Grant
Date ($/
Sh)
 
Full Grant
Date Fair
Value ($)
Dagoberto Quintana
 
2/7/2014
 
$
390,000

 
$
780,000

 
$
1,384,500

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Patrick Tolbert
 
2/7/2014
 
250,000

 
500,000

 
887,750

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Elsa Zambrano
 
2/7/2014
 
121,825

 
243,750

 
450,937

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Michael Lee
 
2/7/2014
 
75,000

 
150,000

 
270,000

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Raul Navarro
 
2/7/2014
 
77,500

 
155,000

 
279,000

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

(1) Amounts reported in this column represent the threshold, target and maximum amounts payable under the 2014 incentive program as described above. The 2014 Incentive Program is an annual cash incentive opportunity and, therefore, these awards are earned in the year of grant. See the column captioned "Non-Equity Incentive Plan Compensation" in the Summary Compensation Table for the actual payout amounts related to the 2014 incentive program. See also "Compensation Discussion and Analysis - Elements of Compensation - Incentive Compensation" for additional information about the 2014 Incentive Program.

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Outstanding Equity Awards at Year-End
The table below sets forth certain information regarding the outstanding equity awards held by our NEOs as of December 31, 2014.
 
 
Stock Awards
Name
 
Type of Award
 
Number
Of
Shares
Or
Units
Of
Stock
That
Have
Not
Vested
(#)(1)
 
Market
Value Of
Shares
Or
Units Of
Stock
That
Have
Not
Vested
($)(1)
 
Equity
Incentive
Plan
Awards:
Number
Of
Unearned
Shares,
Units Or
Other
Rights
That
Have Not
Vested
(#)
 
Equity
Incentive
Plan
Awards:
Market
Or
Payout
Value Of
Unearned
Shares,
Units Or
Other
Rights
That
Have Not
Vested
(#)
Dagoberto Quintana(2)
 
Restricted Stock Unit
 
600,000

 
$
282,000

 
—

 
—

Dagoberto Quintana(3)
 
Restricted Stock Grant
 
1,700,000

 
$
799,000

 
—

 
—

Patrick Tolbert(3)
 
Restricted Stock Grant
 
1,178,000

 
$
553,660

 
—

 
—

Elsa Zambrano(3)
 
Restricted Stock Grant
 
400,000

 
$
188,000

 
—

 
—

Michael Lee (4) 
 
Restricted Stock Grant
 
3,500

 
$
1,645

 
—

 
—

Michael Lee (2)
 
Restricted Stock Unit
 
6,500

 
$
3,055

 
—

 
—

Michael Lee (3)
 
Restricted Stock Grant
 
95,000

 
$
44,650

 
—

 
—

Raul Navarro (2)
 
Restricted Stock Unit
 
20,000

 
$
9,400

 
—

 
—

Raul Navarro (3)
 
Restricted Stock Grant
 
55,000

 
$
25,850

 
—

 
—

(1)  Reflects Class A restricted stock and restricted stock units that have not vested. The price used for valuation as of December 31, 2014 is $0.47. The following provides information with respect to the vesting schedule as of December 31, 2014.
(2)  Pursuant to the applicable Restricted Stock Unit Plan and Agreement, units begin to vest upon the shares of SITEL Worldwide Corporation's class A common stock becoming freely tradable. Upon such stock becoming freely tradable, the units vest over three years in equal portions on the date the underlying stock becomes freely tradable and the first, second and third anniversary thereof. If the employee dies, becomes disabled or is terminated due to a position elimination during the "Restriction Period" and a liquidity event (either a change in control or the stock becoming freely tradable) occurs within six months of such event, one fourth (1/4) of the employee's units will vest. The stock vests upon a change in control or if the employee is constructively discharged prior to a change in control.
(3) Pursuant to the terms of the applicable Restricted Stock Grant Plan and Agreement, shares vest upon the first to occur of (i) the Company's stock becoming freely tradeable as a result of being listed on a national stock exchange ("Freely Tradeable"), or (ii) a change in control of the Company (either, a "Liquidity Event"), in either case, occurring within six years of the date of the applicable Grant Agreement and only if the "Adjusted EBITDA Threshold" (as defined in the Grant Agreement") has been met; provided that the executive is still employed at such time (except as set forth below). Upon our shares becoming Freely Tradeable, the awards will vest in four increments of 25% each, beginning upon our shares becoming Freely Tradeable and thereafter on each of the next three anniversaries thereof as long as the executive remains an employee; provided, however, that in the event Onex ClientLogic Holdings, LLC ("Onex") sells more than 25% of their ownership of SITEL Worldwide, then the vested amount of the awards shall at all times at least be equal to the ownership percentage that Onex has sold. If the Liquidity Event is a change of control, 100% of the awards will vest upon the change of control. If an executive is terminated without cause, resigns with good reason or is terminated due to death or disability within six months of a Liquidity Event, such executive's shares will still be eligible to vest upon the Liquidity Event. To the extent that the awards do not vest upon a Liquidity Event because the applicable Adjusted EBITDA Threshold has not been satisfied, such shares will vest if and when the Adjusted EBITDA Threshold is eventually satisfied. All unvested Shares will be forfeited upon an executive's termination for cause or resignation without good reason.
(4) Pursuant to the applicable Restricted Stock Grant Plan and Agreement, shares vest when the "Restriction Period" lapses upon either (a) a Liquidity Event (as defined in the respective agreements); (b) the employee's death or disability or (c) the date the employee is terminated in a reduction in force. A Liquidity Event is defined as an instance under which (a) there is a change in control, (b) the stock becomes freely tradeable or (c) there is a liquidation or winding up of SITEL Worldwide Corporation. The awards will vest in three increments of 33 1/3% each beginning upon a Liquidity Event and thereafter on each of the next two anniversaries thereof as long as the executive remains employed. If the Liquidity Event is a change of control, 100% of the awards vest upon the change in control If an executive is terminated in a reduction in force or due to death or disability within six months of a Liquidity Event, one third (1/3) of such executive's shares will still be eligible to vest.
Option Exercises and Stock Vested
There were no Stock Awards or Option awards that vested during the year 2014.
Pension Benefits
None of our NEOs participate in or have account balances in qualified or non-qualified defined benefit plans sponsored by us.

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Non-Qualified Deferred Compensation
None of our NEOs participate in or have account balances in non-qualified defined contribution plans or other deferred compensation plans sponsored by us.
Employment and Other Agreements
Dagoberto Quintana
We entered into an employment agreement with Dagoberto Quintana dated July 20, 2009, commencing on August 3, 2009, which was amended on February 16, 2012. The amended employment agreement increased his base salary to $600,000 and his annual target incentive to $780,000. We amended and restated Mr. Quintana's employment agreement on February 11, 2013. Mr. Quintana's amended and restated employment agreement provides for an annual base salary of $600,000 and an annual target incentive plan payment of $780,000 as further described above in the Bonus and Incentive Compensation section. Participation in the incentive plan remains at the discretion of the Board of Directors. The employment agreement is terminable by us or Mr. Quintana at any time upon notice. In the event Mr. Quintana's employment is terminated by us without cause (as defined in the employment agreement) or by Mr. Quintana for good reason (as defined in the employment agreement), upon execution of a release, Mr. Quintana is entitled to severance pay, to be paid pro rata on a monthly basis in accordance with our regular payment practices over the course of a one year period, in an amount equal to one year of base salary and a prorated portion of Mr. Quintana's annual incentive bonus based on the days employed during the incentive plan year at the date of termination. Mr. Quintana would also be eligible to receive health insurance continuation coverage at the same rates paid for active employees for a full year following the date of termination, provided no similar benefit is received from a subsequent employer. In the event Mr. Quintana's employment is terminated for any other reason, including by reason of death or disability, Mr. Quintana is not entitled to any severance payments. Mr. Quintana is subject to non-competition and non-competition provisions for a period of one year after termination
Patrick Tolbert
We entered into an employment agreement with Patrick Tolbert dated November 23, 2010 which was amended on February 16, 2012. The amended employment agreement increased his base salary to $500,000 and his annual target incentive to $500,000. We amended and restated Mr. Tolbert's employment agreement on February 11, 2013. Mr. Tolbert's amended and restated employment agreement provides for an annual base salary to $500,000 and an annual target incentive target of $500,000 as further described above in the Bonus and Incentive Compensation section. Participation in the incentive plan remains at the discretion of both the Board of Directors and our Chief Executive Officer. The employment agreement is terminable by us or Mr. Tolbert at any time. In the event Mr. Tolbert's employment is terminated by us without cause (as defined in the employment agreement) or by Mr. Tolbert for good reason (as defined in the employment agreement), upon execution of a release, Mr. Tolbert is entitled to severance pay, to be paid pro rata on a monthly basis in accordance with our regular payment practices over the course of a one year period, in an amount equal to one year of base salary and a prorated portion of Mr. Tolbert's annual incentive bonus based on the days employed during the incentive plan year at the date of termination. Mr. Tolbert would also be eligible to receive health insurance continuation coverage at the same rates paid for active employees for a full year following the date of termination, provided no similar benefit is received from a subsequent employer. In the event Mr. Tolbert 's employment is terminated for any other reason, including by reason of death or disability, Mr. Tolbert is not entitled to any severance payments. Mr. Tolbert is subject to client and employee non-competition and non-solicitation provisions for a period of one year after termination of the employment agreement for any reason.
Elsa Zambrano
We entered into an Employment Agreement with Ms. Zambrano on September 19, 2013 which included an annual salary of $325,000 and an annual target incentive plan payment of 75% of annual base salary and a guaranteed minimum payment of $97,500 for the 2014 Incentive Plan year. In addition, Ms. Zambrano received a signing bonus of $100,000 (payable in two installments of $50,000 each). Participation in the incentive plan, subject to the guaranteed minimum for the 2014 plan year, is at the discretion of both the Board of Directors and our Chief Executive Officer. The agreement is terminable by us or Ms. Zambrano at any time. In the event that Ms. Zambrano's employment is terminated by us without cause (as defined in the employment agreement) or by Ms. Zambrano for good reason (as defined in the employment agreement), subject to execution of a release, Ms. Zambrano is entitled to severance pay, to be paid pro rata on a monthly basis in accordance with our regular payroll practices over the course of a one year period, in an amount equal to one year of base salary and a prorated portion of Ms. Zambrano's annual incentive bonus based on the days employed during the incentive plan year at the date of termination. Ms. Zambrano would also be eligible to receive health insurance continuation coverage at the same rates paid for active employees for a full year following the date of termination, provided no similar benefit is received from a subsequent employer. In the event Ms. Zambrano's employment is terminated for any other reason, including by reason of death or disability, Ms. Zambrano is not entitled to any severance payments. Ms. Zambrano is subject to non-competition and non-solicitation provisions for a period of one year after termination for any reason.

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Michael Lee
We entered an expatriate agreement with Mr. Lee effective June 1, 2013, which included an annual base salary of $300,000, and an annual target incentive plan payment of 50% of annual base salary. In addition, Mr. Lee receives certain expatriate related expenses including housing, transportation and a monthly home visit to the United States. Mr. Lee's employment is terminable by us at any time or Mr. Lee upon 60 days' notice. If Mr. Lee's employment is terminated for any reason other than "good cause" as defined in the agreement or voluntary termination, Mr. Lee is entitled to severance pay equal to 12 weeks' base pay to be paid in accordance with our regular payroll practices. Mr. Lee is subject to non-competition and non-solicitation provisions for a period of one year after termination for any reason.
Raul Navarro
We entered an expatriate agreement with Mr, Navarro effective May 1, 2012, which included an annual base salary of $310,000, a quarterly cost of living allowance of $5000 and an annual target incentive plan payment of 50% of annual base salary. In addition, Mr. Navarro receives certain expatriate related expenses including housing, transportation, four (4) personal visits to the United States per year for himself and his dependents. Mr. Navarro's employment is terminable by us at any time or Mr. Navarro upon 60 days' notice. If Mr. Navarro's employment does not continue after his assignment period ending May 31, 2015, or if Mr. Navarro is terminated for any reason other than voluntary termination, performance related reasons, failure to execute/comply with our policies or failure to execute his duties, Mr. Navarro is entitled to severance pay, equal to nine (9) months' base pay to be paid in accordance with our regular payroll practices. Mr. Navarro is subject to non-competition and non-solicitation provisions for a period of one year after termination for any reason.
Potential Payments Upon Termination and Change in Control
The information below describes and quantifies certain compensation that would become payable under employment agreements with the following NEOs if, as of December 31, 2014, the NEO's employment with us had been terminated. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event.
Dagoberto Quintana
Component
 
Voluntary
Resignation
 
Involuntary without 
Cause or Voluntary 
with Good Reason
 
 
 
Involuntary
w/out Cause
following
Change in
Control
 
 
 
Death/
Disability
 
 
 
Retirement
Without
Signed Release  
 
 
 
With
Signed
Release
 
 
 
Base Salary
 
$
—

 
$
—

 
  
 
$
600,000

 
  
 
$
600,000

 
  
 
$
—

 
  
 
$
—

Bonus
 
—

 
—

 
  
 
—

 
(1) 
 
—

 
  
 
—

 
  
 
—

Value of Accelerated Equity
 
—

 
270,250

 
(2) 
 
270,250

 
(2) 
 
1,081,000

 
(3) 
 
270,250

 
(2) 
 
—

Benefits and Perquisites
 
—

 
—

 
  
 
4,260

 
(4) 
 
4,260

 
  
 
—

 
  
 
—

Total Severance
 
$
—

 
$
270,250

 
  
 
$
874,510

 
  
 
$
1,685,260

 
  
 
$
270,250

 
  
 
$
—

(1) The 2014 Incentive Plan payout was zero based on the plan metrics and 2014 performance.
(2) 575,000 restricted stock units vest if a Liquidity Event occurs within six months after an involuntary termination due to position elimination, death or disability.
(3) 2,300,000 restricted stock units and restricted shares vest if Mr. Quintana remains employed until the date of a change in control or upon constructive termination prior to the change in control.
(4) Amount equal to the monthly premium paid for active employee if insurance continued through COBRA for up to a 12 month period.


123

Patrick Tolbert
Component
 
Voluntary
Resignation
 
Involuntary without 
Cause or Voluntary 
with Good Reason
 
 
 
Involuntary
w/out Cause
following
Change in
Control
 
 
 
Death/
Disability
 
 
 
Retirement
Without
Signed Release  
 
 
 
With
Signed
Release
 
 
 
Base Salary
 
$
—

 
$
—

 
  
 
$
500,000

 
  
 
$
500,000

 
  
 
$
—

 
  
 
$
—

Bonus
 
—

 
—

 
  
 
—

 
(1) 
 
—

 
  
 
—

 
  
 
—

Value of Accelerated Equity
 
—

 
138,415

 
(2) 
 
138,415

 
(2) 
 
553,660

 
(3) 
 
138,415

 
(2) 
 
—

Benefits and Perquisites
 
—

 
—

 
  
 
4,260

 
(4) 
 
4,260

 
  
 
—

 
  
 
—

Total Severance
 
$
—

 
$
138,415

 
  
 
$
642,675

 
  
 
$
1,057,920

 
  
 
$
138,415

 
  
 
$
—

(1) The 2014 Incentive Plan payout was zero based on the plan metrics and 2014 performance.
(2) 294,500 restricted stock units vest if a Liquidity Event occurs within six months after an involuntary termination due to position elimination, death or disability.
(3) 1,178,000 restricted stock units and restricted shares vest if Mr. Tolbert remains employed until the date of a change in control or upon constructive termination prior to the change in control.
(4) Amount equal to the monthly premium paid for active employee if insurance continued through COBRA for up to a 12 month period.
Elsa Zambrano
Component
 
Voluntary
Resignation
 
Involuntary without
Cause or Voluntary
with Good Reason
 
Involuntary
w/out Cause
following
Change in
Control
 
 
 
Death/
Disability
 
 
 
Retirement
Without
Signed
Release
 
With
Signed
Release
 
Base Salary
 
$
—

 
$
—

  
$
325,000

  
$
325,000

 
  
 
$
—

 
  
 
$
—

Bonus
 
—

 
—

  
97,500

(1) 
97,500

 
(1) 
 
—

 
  
 
—

Value of Accelerated Equity
 
—

 
47,000

(2) 
47,000

(2) 
188,000

 
(3) 
 
47,000

 
(2) 
 
—

Benefits and Perquisites
 
—

 
—

  
4,260

 
4,260

 
 
 
—

 
  
 
—

Total Severance
 
$
—

 
$
47,000

  
$
473,760

  
$
614,760

 
  
 
$
47,000

 
  
 
$
—

(1) Ms. Zambrano's employment agreement provides a guaranteed minimum incentive payment of $97,500 for 2014.
(2) 100,000 restricted shares vest if a Liquidity Event occurs within six months after an involuntary termination due to position elimination, death or disability.
(3) 400,000 restricted shares vest if Ms. Zambrano remains employed until the date of a change in control or upon constructive termination prior to the change in control.

124

Michael Lee
Component
 
Voluntary
Resignation
 
Involuntary without
Cause or Voluntary
with Good Reason
 
Involuntary
w/out Cause
following
Change in
Control
 
 
 
Death/
Disability
 
 
 
Retirement
Without
Signed Release
 
With
Signed
Release
 
Base Salary
 
$
—

 
$
—

 
$
69,230

 
$
69,230

 
  
 
$
—

 
  
 
$
—

Bonus
 
—

 
—

 
—

 
—

 
  
 
—

 
  
 
—

Value of Accelerated Equity
 
—

 
11,926

(2) 
11,926

(2) 
49,350

 
(4) 
 
12,474

 
(3) 
 
—

Benefits and Perquisites
 
—

 
—

 
—

 
—

 
 
 
—

 
  
 
—

Total Severance
 
$
—

 
$
11,926

 
$
81,156

 
$
118,580

 
  
 
$
12,474

 
  
 
$
—

(1) The 2014 Incentive Plan payout will occur in 2015 and the plan requires that the award will not be paid unless the employee is employed on the date of payout.
(2) 25,375 restricted shares vest if a Liquidity Event occurs within sic months after an involuntary termination without cause or good reason.
(3) 26,540 restricted shares vest if a Liquidity Event occurs within six months after an involuntary termination due to position elimination, death or disability.
(4) 105,000 restricted shares vest if Mr. Lee remains employed until the date of a change in control or upon constructive termination in connection with the change in control.
Raul Navarro
Component
 
Voluntary
Resignation
 
Involuntary without
Cause or Voluntary
with Good Reason
 
Involuntary
w/out Cause
following
Change in
Control
 
 
 
Death/
Disability
 
 
 
Retirement
Without
Signed Release
 
With
Signed
Release
 
Base Salary
 
$
—

 
$
—

  
$
232,500

  
$
232,500

 
  
 
$
—

 
  
 
$
—

Bonus
 
—

 
—

  
—

(1) 
—

 
  
 
—

 
  
 
—

Value of Accelerated Equity
 
—

 
8,812

(2) 
8,812

(2) 
35,250

 
(3) 
 
8,812

 
(2) 
 
—

Benefits and Perquisites
 
—

 
—

  
—

 
—

 
 
 
—

 
  
 
—

Total Severance
 
$
—

 
$
8,812

  
$
81,156

  
$
267,750

 
  
 
$
8,812

 
  
 
$
—

(1) The 2014 Incentive Plan payout will occur in 2015 and the plan requires that the award will not be paid unless the employee is employed on the date of payout.
(2) 18,750 restricted stock units and restricted shares vest if a Liquidity Event occurs within six months after an involuntary termination due to position elimination, death or disability.
(3) 75,000 restricted stock units and restricted shares vest if Mr. Navarro remains employed until the date of a change in control or upon constructive termination in connection with the change in control.
Director Compensation
Certain of our non-employee and employee directors were eligible to receive compensation based on their service. During 2014, only Messrs. Mahoney, Garner, Powell, and Shea received compensation in respect of their service as directors. Effective August 5, 2014, those directors who receive compensation have the opportunity to elect to receive service and meetings fees in all cash, all stock or any proportion thereof subject to owning, on August 1, 2014, Sitel equity equal to twice the total annual meeting and service fees in value using the issue date share price. Directors can make this election for each fiscal year if done by December 31, 2014. Messrs. Mahoney, Garner and Powell elected to receive their meeting and service fees in cash for the remainder of 2014.
For fiscal year 2014, Messrs. Garner and Powell each received $93,750 in cash and 54,824 shares of class A common stock, with a fair market value of $31,250. For the fiscal year 2014, Mr. Mahoney received $108,750 (which includes an additional $3,750 per quarter for service as Chair of the Audit Committee) and 54,824 shares of class A common stock, with a fair market value of $31,250. For fiscal year 2014, Mr. Shea received $62,500 in cash and 109,648 shares of class A common stock with a fair market value of $62,500. For the year ended December 31, 2014, Messrs. Mersky and Abols did not receive compensation in respect of their service on our Board of Directors during 2014. Directors are reimbursed for their

125

business expenses related to their attendance at SITEL Worldwide meetings, including room, meals and transportation to and from Board and committee meetings.
Non-Executive Directors' Compensation Table
The following table shows information regarding the compensation of our non-executive directors for the 2014 year.
Name
 
Fees
Earned
or Paid
in Cash
($)
 
Stock
Awards
($)
 
Option
Awards
($)
 
Non-Equity
Incentive Plan
Compensation
($)
 
Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings ($)
 
All Other
Compensation
($)
 
Total ($)
Seth Mersky
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Robert Mahoney
 
108,750

(2) 
31,250

 
—

 
—

 
—

 
—

 
140,000

Tate Abols
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Keith Powell
 
93,750

 
31,250

 
—

 
—

 
—

 
—

 
125,000

Peter Shea
 
62,500

 
62,500

(1) 
—

 
—

 
—

 
—

 
125,000

David Garner
 
93,750

 
31,250

 
—

 
—

 
—

 
—

 
125,000

(1) Reflects the $.57 grant-date fair value of stock awards associated with Board service during 2014 calculated in accordance with FASB 718 for each non-employee director. Refer to Note 16 to our Consolidated Financial Statements for the year ended December 31, 2014, included in Item 8 of this Report, for a discussion of the relevant assumptions used in calculating the fair value.
(2) Includes $3,750 per quarter for service as chair of the Audit Committee.
Director and Officer Indemnification and Limitation of Liability
Section 102 of the Delaware General Corporation Law ("DGCL"), as amended, allows a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware law or obtained an improper personal benefit.
Section 145 of the DGCL provides, among other things, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, agent or employee of the corporation or is or was serving at the corporation's request as a director, officer, agent, or employee of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgment, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding. The power to indemnify applies (a) if such person is successful on the merits or otherwise in defense of any action, suit or proceeding or (b) if such person acted in good faith and in a manner he reasonably believed to be in the best interest, or not opposed to the best interest, of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The power to indemnify applies to actions brought by or in the right of the corporation as well, but only to the extent of defense expenses (including attorneys' fees but excluding amounts paid in settlement) actually and reasonably incurred and not to any satisfaction of judgment or settlement of the claim itself, and with the further limitation that in such actions no indemnification shall be made in the event of any adjudication of negligence or misconduct in the performance of duties to the corporation, unless the court believes that in light of all the circumstances indemnification should apply.
Section 174 of the DGCL provides, among other things, that a director, who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption, may be held liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time, may avoid liability by causing his or her dissent to such actions to be entered in the books containing the minutes of the meetings of the Board of Directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.
SITEL Worldwide's certificate of incorporation provides that, pursuant to Delaware law, our directors shall not be liable for monetary damages for breach of the directors' fiduciary duty of care to us and our stockholders. This provision in the certificate of incorporation does not eliminate the duty of care, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. In addition, each director will continue to be subject to liability for breach of the director's duty of loyalty to us or our stockholders, for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, for actions leading to improper personal benefit to the director and for payment of dividends or approval of stock repurchases or redemptions that are unlawful under Delaware

126

law. The provision also does not affect a director's responsibilities under any other law, such as the federal securities laws or state or federal environmental laws.
SITEL Worldwide's bylaws provide that we must indemnify our directors and officers to the fullest extent permitted by Delaware law and require us to advance litigation expenses upon our receipt of an undertaking by a director or officer to repay such advances if it is ultimately determined that such director or officer is not entitled to indemnification. The indemnification provisions contained in our bylaws are not exclusive of any other rights to which a person may be entitled by law, agreement, vote of stockholders or disinterested directors or otherwise.
In addition, we have entered into agreements to indemnify our directors and certain of our officers in addition to the indemnification provided for in the certificate of incorporation and bylaws. These agreements, among other things, indemnify our directors and some of our officers for certain expenses (including attorneys' fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including any action by or in our right, on account of services by that person as a director or officer of SITEL Worldwide or as a director or officer of any of our subsidiaries, or as a director or officer of any other company or enterprise that the person provides services to at our request.

127

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEED STOCKHOLDER MATTERS
(in thousands of U.S. dollars, except share and per share amounts)
Unless otherwise noted, the following table sets forth, as of January 31, 2015, information with respect to the beneficial ownership of the common equity of SITEL Worldwide by:
•
each person that is a beneficial owner of 5% or more of any class of its outstanding common equity;
•
each of our NEOs;
•
each member of our Board of Directors; and
•
all of the executive officers and directors as a group.
Beneficial ownership is determined under SEC rules and generally includes voting or investment power over securities. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each equity holder identified in the table possesses sole voting and investment power over all common equity shown as beneficially owned by the equityholder. As of January 31, 2015, SITEL Worldwide had outstanding 38,256,844 of class A common stock, 88,281,647 of class B common stock and 23,990 of class C common stock. All of the common stock votes together as a single class. The class A common stock and class C common stock is entitled to one vote per share; the class B common stock is entitled to 25 votes per share. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Unless otherwise indicated in the footnotes below, the address for each beneficial owner is c/o SITEL Worldwide Corporation, 3102 West End Avenue, Suite 900, Nashville, Tennessee 37203.

128


 
 
Class A Common
 
Class B Common
 
Class C Common
 
Aggregate
Name
 
Number of
Shares of
Common
Stock
Beneficially
Owned
 
Percent of
Class A
Common
Stock
Bene-
ficially
Owned
 
Number of
Shares of
Common
Stock
Beneficially
Owned(1)
 
Percent of
Class B
Common
Stock
Bene-
ficially
Owned
 
Number of
Shares of
Common
Stock
Beneficially
Owned(1)
 
Percent of
Class C
Common
Stock
Bene-
ficially
Owned
 
Number of
Shares of
Common
Stock
Beneficially
Owned(1)
 
Percent of
Common
Stock
Bene-
ficially
Owned
 
Percent
of
Voting
Power
Equityholders 
owning 5% or more:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Onex Corporation (1)
 
174,941,413

 
87.7
%
 
78,281,647

 
88.7
%
 
—

 
—

 
253,223,060

 
88.0
%
 
88.6
%
Ontario Municipal Employees Retirement Systems ("OMERS") (2)
 
8,009,743

 
17.4
%
 
10,000,000

 
11.3
%
 
—

 
—

 
18,009,743

 
13.4
%
 
11.5
%
Edward Schwartz (3)
 
4,152,710

 
10.3
%
 
—

 
—

 
—

 
—

 
4,152,710

 
3.2
%
 
*

Citi Commerce Solutions (4)
 
2,500,000

 
6.5
%
 
—

 
—

 
—

 
—

 
2,500,000

 
2.0
%
 
*

Kathleen Banashak
 
22,756

 
*

 
—

 
—

 
2,320

 
9.7
%
 
25,076

 
*

 
*

Julie Casteel
 
777,985

 
2.0
%
 
—

 
—

 
10,481

 
43.7
%
 
788,466

 
*

 
*

Pete Martino
 
10,311

 
*

 
—

 
—

 
7,000

 
29.2
%
 
17,311

 
*

 
*

Named executive officer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dagoberto Quintana (5)
 
3,371,681

 
8.7
%
 
—

 
—

 
—

 
—

 
3,371,681

 
2.6
%
 
*

Michael Lee (6)
 
105,000

 
*

 
—

 
—

 
—

 
—

 
105,000

 
*

 
*

Patrick Tolbert (7)
 
1,657,913

 
4.3
%
 
—

 
—

 
—

 
—

 
1,657,913

 
1.3
%
 
*

Raul Navarro (8)
 
75,000

 
*

 
—

 
—

 
—

 
—

 
75,000

 
*

 
*

Elsa Zambrano (9)
 
400,000

 
—

 
—

 
—

 
—

 
—

 
400,000

 
*

 
*

Non-employee directors:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
David Garner (10)
 
2,199,143

 
5.7
%
 
—

 
—

 
—

 
—

 
2,199,143

 
1.7
%
 
*

Tate Abols
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Robert Mahoney
 
395,942

 
1.0
%
 
—

 
—

 
—

 
—

 
395,942

 
*

 
*

Seth Mersky (11)
 
61,958

 
*

 
—

 
—

 
—

 
—

 
61,958

 
*

 
*

Keith Powell (12)
 
712,861

 
1.9
%
 
—

 
—

 
—

 
—

 
712,861

 
*

 
*

Peter Shea
 
393,627

 
1.0
%
 
—

 
—

 
—

 
—

 
393,627

 
*

 
*

All directors and executive officers as a group (16 persons)
 
13,088,012

 
32.9
%
 
—

 
—

 
—

 
—

 
13,088,012

 
10.2
%
 
*

 *    Less than 1%

(1)
Includes 401,561 shares of class A common stock, 147 shares of series B preferred stock convertible within 60 days to 57,580 shares of class A common stock and 608 shares of series C preferred stock convertible within 60 days to 1,001,958 shares of class A common stock, owned by Onex Advisor III LLC ("Onex Advisor"). Also includes 34,023 shares of class A common stock, 34,616 shares of series B preferred stock convertible within 60 days to 13,015,009 shares of class A common stock, 24,845 shares of series C preferred stock convertible within 60 days to 41,150,863 shares of class A common stock, and 73,682 of series D preferred stock convertible within 60 days to 106,016,550 shares of class A common stock, owned by Onex ClientLogic Holdings LLC. Also includes 13,263,869 shares of class A common stock held by Onex ClientLogic LLC. All of the 78,281,647 shares of class B common stock are held by Onex ClientLogic Holdings LLC. The sole member of Onex Advisor III LLC is 1597257 Ontario Inc. Onex ClientLogic Holdings LLC is controlled by Onex ClientLogic LLC. Onex Corporation is the sole member of Onex ClientLogic LLC. Gerald W. Schwartz, president and chief executive officer of Onex Corporation, controls 18.5% of the subordinated voting shares and 100% of the multiple voting shares of Onex Corporation and 100% of the common equity of 1597257 Ontario Inc., and controls all voting and investment decisions of both Onex Corporation and 1597257 Ontario Inc. Mr. Abols is a Principal, and Mr. Mersky is a Managing Director, of Onex Corporation, and as a result, may be deemed to have beneficial ownership of the shares held by Onex Corporation and its affiliates. Mr. Mersky also own units of Onex ClientLogic Holdings LLC. Messrs. Mersky and Schwartz disclaim beneficial ownership of the shares held by Onex Corporation and its affiliates except to the extent of their pecuniary interest therein. The address of Onex Corporation is 161 Bay Street, PO Box 700, Toronto, ON M5J 2S1. Each stockholder, other than OMERS, has granted Onex a proxy to vote all shares of common stock, with respect to the election of directors, pursuant to provisions of the August 15, 2000 stockholders agreement, as amended. See "Certain Relationships and Related Party Transactions—Stockholders’ Agreement."
(2)
Includes 1,329,795 shares of class A common stock, 4,136 shares of series B preferred stock convertible within 60 days to 1,623,581 shares of class A common stock, 3,053 shares of series C preferred stock convertible within 60 days to 5,056,367 shares of class A common stock and 10,000,000 shares of class B common stock owned by OCP SC Investment Holdings Inc. OCP SC Investment Holdings Inc. is wholly owned by

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OMERS Administration Corporation, a non-share capital corporation continued under the Ontario Municipal Employees Retirement System Act, 2006. The address of OMERS is One University Avenue, Suite 1100, Toronto, Ontario, M5J 2P1.
(3)
Includes 498,355 exchangeable preferred shares convertible within 60 days to 498,355 shares of class A common stock and 2,171,185 shares of class A common stock owned by 1422621 Ontario Inc. Mr. Schwartz controls all voting and investment decisions of 1422621 Ontario Inc. The address of 1422621 Ontario Inc. is 9 Old Forest Hill Road, Toronto, Ontario M5P 7P6. Mr. Schwartz also holds 50,000 shares of class A common stock.
(4)
Citi Commerce Solutions (formerly known as Associates Commerce Solutions), is a division of Citibank, N.A., a wholly owned subsidiary of Citigroup, Inc. The address of Citigroup, Inc. is 399 Park Ave., New York, NY 10043.
(5)
Includes 50 shares of series D preferred stock convertible within 60 days to 71,681 shares of class A common stock and 1,000,000 shares of class A common stock as well as 1,700,000 shares of restricted class A common stock and 600,000 restricted stock units, each of which are subject to vesting as described in "Executive Compensation-Establishing and Evaluating Executive Compensation-Class A Restricted /Restricted Stock Unit Grants."
(6)
Includes 98,500 shares of restricted class A common stock, and 6,500 restricted stock units, each of which are subject to vesting as described in "Executive Compensation-Establishing and Evaluating Executive Compensation-Class A Restricted /Restricted Stock Unit Grants."
(7)
Includes 368,728 shares of class A common stock, 1,178,000 shares of restricted class A common stock, which are subject to vesting as described in "Executive Compensation-Establishing and Evaluating Executive Compensation-Class A Restricted /Restricted Stock Unit Grants", 25 shares of series C preferred stock convertible within 60 days to 39,504 shares of class A common stock, and 50 shares of series D preferred stock convertible within 60 days to 71,681 shares of class A common stock.
(8)
Includes 55,000 shares of restricted class A common stock, and 20,000 restricted stock units, each of which are subject to vesting as described in "Executive Compensation-Establishing and Evaluating Executive Compensation-Class A Restricted /Restricted Stock Unit Grants."
(9)
Includes 400,000 shares of restricted class A common stock, which are subject to vesting as described in "Executive Compensation-Establishing and Evaluating Executive Compensation-Class A Restricted /Restricted Stock Unit Grants."
(10)
Includes 1,274,872 shares of class A common stock, 793,407 shares of restricted class A common stock which are subject to vesting as described in "Executive Compensation-Establishing and Evaluating Executive Compensation-Class A Restricted /Restricted Stock Unit Grants",
and 333 shares of series B preferred stock convertible within 60 days to 130,864 shares of class A common stock.
(11)
Includes 31,648 shares of class A common stock owned by Kyzalea Company. Also includes 37 shares of series B preferred stock convertible within 60 days to 14,395 shares of class A common stock and 10 shares of series C preferred stock convertible within 60 days to 15,915 shares of class A common stock, each owned by Kyzalea Company. Mr. Mersky owns all of the capital stock of Kyzalea Company. The address of Kyzalea Company is 161 Bay Street, PO Box 700, Toronto, ON M5J 2S1.
(12)
Includes 494,724 shares of class A common stock, 56 shares of series B preferred stock convertible within 60 days to 21,811 shares of class A common stock, 32 shares of series C preferred stock convertible within 60 days to 52,964 shares of class A common stock, and 100 shares of series D preferred stock convertible within 60 days to 143,362 shares of class A common stock.
Preferred Stock Ownership
As of January 31, 2015, SITEL Worldwide had outstanding an aggregate of 39,947 shares of series B preferred stock, an aggregate of 28,881 shares of series C preferred stock, and an aggregate of 75,000 shares of D preferred stock.
We issued 31,149 shares of series B preferred stock to Onex in June 2008 in exchange for its convertible subordinated note in an aggregate principal amount of $30,500 plus $700 of accrued interest. This transaction triggered certain preemptive rights for other stockholders, including certain members of Onex and our management, resulting in the issuance of additional shares to Onex Advisor, OMERS, JANA and other stockholders including certain senior executives at a price of $1,000 per share. In the fourth quarter of 2012, we repurchased all of the series B preferred stock that had been issued to JANA.
The series B preferred stock has an initial liquidation preference of $1,000 per share and has the right to be converted into class A common stock (initially at $4.85 per share). Our series B preferred stock accrue cumulative dividends at a rate of 12% of the liquidation preference per share per annum, which dividends, commencing after June 2009, compound and cumulate annually on the first business day of June of each subsequent year. Total cumulative dividends as of January 31, 2015 were $36,066. No NEO owns series B preferred stock. Mr. Garner owns 333 shares of series B preferred stock, Mr. Powell owns 56 shares of series B preferred stock, and Mr. Mersky is the beneficial owner of 37 shares of series B preferred stock. No other non-employee director owns series B preferred stock.
Shares of series C preferred stock were issued in December 2008 and February 2009 to an Onex affiliate, OMERS, JANA and certain of our directors and executive officers for an aggregate of $31,000 in cash. In the fourth quarter of 2012, we repurchased the series C preferred stock that had been issued to JANA .
The series C preferred stock has an initial liquidation preference of $1,000 per share and has the right to be converted into class A common stock (initially at $1.50 per share). Our series C preferred stock accrue cumulative dividends at a rate of 16% of the liquidation preference per share per annum, which dividends accrue and cumulate from the date of original issuance and compound on the first business day of January of each subsequent year. Total cumulative dividends as of January 31, 2015 were $42,878. Mr. Tolbert owns 25 shares of series C preferred stock. No other NEO owns series C preferred stock. Mr. Powell owns 32 shares of series C preferred stock and Mr. Mersky is the beneficial owner of 10 shares of series C preferred stock. No other non-employee director owns series C preferred stock.
The series D preferred stock has an initial liquidation preference of $1,000 per share and has the right to be converted into class A common stock (initially at $.77 per share). Our series D preferred stock accrue cumulative dividends at a rate of 16% of the liquidation preference per share per annum, which dividends accrue and cumulate from the date of original

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issuance and compound on the first business day of May of each subsequent year. Total cumulative dividends as of January 31, 2015 were $8,024. Mr. Quintana and Mr. Tolbert each own 50 shares of series D preferred stock. No other NEO owns series D preferred stock. Mr. Powell owns 100 shares of series D preferred stock. No other non-employee director owns series D preferred stock.


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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
(in thousands of U.S. dollars, except share and per share amounts)
NAFS Third Party Collections Business
On August 31, 2011, our wholly owned subsidiary, NAFS, now known as NA Liquidating Company, Inc., executed a Membership Interest Purchase Agreement with David Garner, our former Chief Executive Officer and Non-Executive Chairman of the Company’s Board of Directors, and current Board member. Pursuant to the agreement, Mr. Garner agreed to purchase directly or indirectly through an affiliate certain assets and obligations comprising NAFS Business. To facilitate this transaction, NAFS agreed to transfer the assets and obligations of the NAFS Business to a newly formed limited liability company, NAFS Buffalo. The effective date of the transaction was August 1, 2011, although the transfer of the NAFS Buffalo membership interest to Mr. Garner and the transfer of certain client obligations to Emory, an affiliate of Mr. Garner, were not formally completed until November 30, 2011.
The purchase price for the NAFS Business was $1,246, of which $623 was paid at closing on August 31, 2011, with the remainder of $623 to be paid in equal monthly installments over a thirty-six month period commencing March 2012. The purchase price was subject to adjustment should Mr. Garner sell NAFS Buffalo during the two-year period subsequent to August 1, 2011.
Subsequent to the effective date, Mr. Garner retained all profits, interests and obligations relating to the operations of the NAFS Business. To that end, Mr. Garner agreed to indemnify the Company for certain losses incurred by the NAFS Business determined on a pro forma basis during the transition period commencing August 1, 2011 and ending on November 30, 2011. On January 31, 2012, Mr. Garner paid the Company $363 toward settlement of certain transition period losses, which is an adjustment to the purchase price reflected in the Consolidated Financial Statements.
In addition, commencing August 31, 2011 and ending January 30, 2014, we provided certain outsourced information technology services to NAFS Buffalo and Emory. These services were provided to NAFS Buffalo and Emory to support continuing information technology requirements, and amounted to $0 for 2014, $176 for 2013, and $161 for 2012. The parties also entered an additional agreement pursuant to which NAFS Buffalo and/or its affiliates would continue to service one of our clients. On February 13, 2013, we entered into an agreement with Mr. Garner and Emory pursuant to which we deferred payment of certain information technology service fees charged to Emory from February 1, 2012 through January 31, 2013 and amended such service agreements to reduce certain 2013 fees and provide for their ultimate termination. The deferred payment obligation was embodied in a Promissory Note (the "Original Emory Note") in the amount of $188 bearing interest at the prime rate and was guaranteed on a nonrecourse basis by Mr. Garner through a stock pledge agreement which provides that the guaranty may only be collected out of the proceeds of a sale of Mr. Garner's shares of Company stock.
On January 30, 2014, we entered into a new agreement with Mr. Garner and Emory pursuant to which we agreed to defer payment of additional past due and all future purchase price payments owed to the Company by Emory and Mr. Garner related to the 2011 purchase of the NAFS Business. The Company also agreed to defer payment on certain information technology service charges owed by Emory to the Company for services provided to Emory. These deferred payment amounts were added to the principal and accrued interest owed under the Original Emory Note, and the Original Emory Note was amended and restated in the principal amount of $813 (the “Amended and Restated Emory Note”). The Amended and Restated Emory Note bears interest at the prime rate and is guaranteed by Mr. Garner on a recourse basis. Mr. Garner’s guarantee is secured by a security interest in all of Mr. Garner’s preferred and common stock in the Company granted pursuant to a stock pledge agreement.
The NAFS Business was considered a VIE of which we were not determined to be the primary beneficiary during the transition period but ceased to be a VIE as of November 30, 2011. The NAFS Business was deconsolidated effective August 1, 2011.
David Garner Employment Agreements
On October 28, 2013, Mr. Garner resigned as the Company’s Non-Executive Chairman of the Board. Mr. Garner will continue to serve as a member of the Board of Directors of the Company. In connection with Mr. Garner’s resignation, on October 28, 2013, the Company entered into a new director agreement with Mr. Garner, providing that for service as a director on the Board, Mr. Garner will receive annual director compensation of $125, payable $63 in cash and the remainder in shares of Class A common stock issued at the then fair market value. In addition, Mr. Garner will also be reimbursed for his business expenses related to his attendance at Company meetings, including room, meals and transportation to and from Board meetings.

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Stockholders’ Agreement
On August 15, 2000, we entered into a stockholders’ agreement with certain of our stockholders. The stockholders’ agreement includes certain Board representation rights, rights of first refusal, "tag along" rights and "drag along" rights. The agreement also includes preemptive rights in the event we issue or sell any equity rights, which do not apply to issuances to certain of our employees pursuant to employee benefit and incentive plans, issuances in connection with a qualified initial public offering and issuances in connection with payment of indebtedness. The agreement also provides for the following rights:
Board Composition.    Under the terms of the stockholders’ agreement, our Board of Directors consists of (i) one individual as may be designated from time to time by the OMERS and its affiliates and (ii) up to five individuals as may be designated from time to time by Onex. Our Audit Committee consists of (i) one individual as may be designated from time to time by OMERS and its affiliates and (ii) two individuals as may be designated from time to time by Onex, one of which shall be an independent director. Our Compensation Committee consists of (i) one individual as may be designated from time to time by OMERS and its affiliates and (ii) one or two individuals as may be designated from time to time by Onex. Each stockholder, other than OMERS, has granted Onex a proxy to vote all shares of capital stock in accordance with this Board composition provision.
Secondary Offering Rights.    Under the terms of the stockholders’ agreement, we are required to use our reasonable best efforts to register our class A common stock (including the shares of class C common stock that automatically convert into our class A common stock as described below) in a secondary offering in connection with a qualified initial public offering, but only if, in the written opinion of the underwriter (in consultation with us and our stockholders), it will not adversely affect such offering. The number of shares included in the secondary offering is subject to a pro rata cut back based on each stockholder’s proportionate interest on a fully diluted basis.
Demand Registration Rights.    Under the terms of the stockholders’ agreement, certain stockholders may make a demand request within 180 days of the completion of a qualified initial public offering requesting that we register their shares on Form S-1 or, if applicable, Form S-3. Demands to register our class A common stock may only be made by holders of more than 50% of the 10 million shares originally issued to OMERS. Any demand registrations on Form S-3 must have a fair market value (as determined in good faith by our Board) of at least $5,000. We are only required to effect one demand registration once every 180 days, with a maximum of two S-1 demand registrations and an unlimited number of S-3 demand registrations. No shares (including our shares) other than those of the demanding stockholder’s can be included in a demand registration, unless the managing underwriter advises us and the demanding stockholders in writing that the inclusion would not materially and adversely affect the price or success of such offering. If the managing underwriter further determines that including any secondary shares would materially and adversely affect such offering, we may reduce the number of shares in the demand registration. In that event, holders of our class A common stock may have the right to make an additional demand.
Piggyback Registration Rights.    In connection with a qualified initial public offering of our class A common stock, we are required to give the holders of our class A common stock written notice of their opportunity to include their shares in the registration statement. If the managing underwriter advises us that including the piggyback shares would have a material adverse effect on such offering, we can reduce the number of shares to be included on a pro rata basis. In a demand registration, OMERS has priority to have its shares included ahead of other stockholders.
Other Provisions.    Pursuant to the stockholders’ agreement, we and our stockholders have agreed not to sell, offer or distribute stock for 10 business days prior to an underwritten registration statement’s effectiveness and during the 180 days thereafter. We have agreed to pay the stockholders’ expenses associated with demand and piggyback offerings (other than underwriting discounts, commissions and other related expenses). Such expense reimbursement includes the expenses of one legal counsel selected by the holders of a majority of the shares included in the registration statement.
Conversion of Class C Common Stock to Class A Common Stock.    The stockholders’ agreement also provides that immediately prior to the closing of a qualified initial public offering all shares of class C common stock will be automatically converted into shares of our class A common stock on a one-for-one basis or into the shares of the class of securities into which the class A common stock has been or is being converted into, as the case may be.
Class B Stockholders’ Agreement
On August 15, 2000, we entered into a class B stockholders’ agreement with Onex and OMERS. Pursuant to the class B stockholders’ agreement, OMERS has certain information rights and approval rights, in addition to the following:
Information Rights.    The class B stockholders’ agreement gives OMERS the right to receive a budget for each year, audited annual financial statements, unaudited quarterly financial statements, unaudited monthly financial statements and such other information as OMERS may reasonably request.

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Approval Rights.    Under the terms of the class B stockholders’ agreement, OMERS must approve, among other things, (i) material changes to our business, (ii) transactions with affiliates, (iii) amendments to our certificate of incorporation or bylaws, (iv) any merger, consolidation, recapitalization or share exchange resulting in a change in control, (v) the filing of bankruptcy or similar act of insolvency, (vi) material changes to our accounting practices, (vii) changes to our auditors, (viii) issuances of shares of any subsidiary or (ix) changes in the size of our Board of Directors.
Participation Rights.    The class B stockholders’ agreement gives OMERS the right to participate in certain offerings in order not to have its ownership diluted. Under the terms of the participation rights, we are required to use our commercially reasonable efforts to cause the managing underwriter of a qualified initial public offering to offer OMERS the right to purchase in such offering, at the price being offered thereby, shares of our class A common stock in order for OMERS to maintain up to 10.6% of our fully diluted shares immediately following such offering, or if less, the right to purchase a number of shares so as to provide it with the same percentage of our shares owned by OMERS prior to such offering. The managing underwriter may limit or modify OMERS’ participation right. If the price being offered thereby is less than the "Antidilution Price" (as defined in a certain share purchase agreement between OMERS and us), we will be required to issue additional shares to OMERS. In that event, the number of shares that OMERS has the right to purchase will be reduced by the number of shares it is issued pursuant to the antidilution adjustment. In certain situations, OMERS’ right to purchase shall be substituted with a right to buy shares in a private placement transaction prior to the completion of an initial public offering or an alternative transaction if more appropriate.
Class C Stockholders’ Agreement
On April 30, 2007, we entered into a class C stockholders’ agreement with JANA Piranha Master Fund, Ltd. ("JANA"). On October 5, 2012, we entered into an agreement to repurchase all 6,727,273 shares of Class C Common Stock, 12,123 shares of Class B Preferred Stock and 3,696 shares of Class C Preferred Stock owned by JANA and its affiliates for aggregate consideration of $1,900. In connection with the repurchase, on October 5, 2012 we and JANA also entered into an amendment to the Class C Stockholders Agreement, pursuant to which we may consent to the amendment or waiver of any provision of the Class C Stockholders Agreement and such amendment or waiver will be binding on all of the holders of our Class C Common Stock.
The agreement currently provides for the following rights that would apply to the remaining holders of our Class C Common Stock:
Piggyback Registration Rights.    In connection with a registered public offering of our class C common stock, we are required to give the holders of our class C common stock written notice of their opportunity to include their shares in the registration statement. If the managing underwriter advises us that including the piggyback shares would have a material adverse effect on such offering, we can reduce the number of shares to be included on a pro rata basis.
Other Provisions.    Pursuant to the class C stockholders’ agreement, we and the class C stockholders have agreed not to sell, offer or distribute stock for 10 business days prior to a registration statement’s effectiveness and during the 180 days thereafter. We have agreed to pay the stockholders’ expenses associated with demand and piggyback offerings (other than underwriting discounts, commissions and other related expenses). Such expense reimbursement includes the expenses of one legal counsel selected by the holders of a majority of the shares included in the registration statement.
Series D Preferred Stock Purchase Agreement
On May 8, 2014, we authorized the issuance of 125,000 shares of series D preferred stock. On May 8, 2014, we executed a subscription agreement with Onex Clientlogic Holdings LLC to issue up to 75,000 shares of the Series D preferred stock at a rate of $1,000 per share. Pursuant to this offer, we received net proceeds of $74,820 from Onex Clientlogic Holdings LLC and other existing shareholders during the year ended December 31, 2014. The series D preferred stock has an initial liquidation preference of $1,000 per share. Our series D preferred stock accrues cumulative dividends at a rate of 16% of the liquidation preference per share per annum, which dividends compound and cumulate annually on the anniversary date of issuance.
We are required, after the maturity date of the notes, to the extent of our legally available assets, to redeem the series D preferred stock at the Redemption Price, equal to the greater of (i) the sum of (x) 100% of the liquidation price per share and (y) all accumulated and unpaid dividends thereon and (ii) the amount payable to the holder of such preferred shares upon our liquidation under the terms of our certificate of incorporation, determined as if we were liquidated, dissolved and wound up as of such mandatory redemption date.
At any time prior to redemption, the holders of the series D preferred stock may convert their shares into class A voting common stock at a price equal to the liquidation preference plus all accumulated and unpaid dividends divided by an initial conversion price of $0.77, which may be adjusted from time to time.

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Series C Preferred Stock Purchase Agreement
In December 2008, Onex, JANA, and OMERS provided us cash proceeds of $30,000 in exchange for 30,000 shares of our series C preferred stock. This transaction triggered certain preemptive rights for other stockholders, resulting in the issuance of additional shares at $1,000 per share. The series C preferred stock has an initial liquidation preference of $1,000 per share. Our series C preferred stock accrues cumulative dividends at a rate of 16% of the liquidation preference per share per annum, which dividends compound and cumulate annually on and after on the anniversary date of issuance.
We are required, after the maturity date of the notes, to the extent of our legally available assets, to redeem the series C preferred stock at the Redemption Price, equal to the greater of (i) the sum of (x) 100% of the liquidation price per share and (y) all accumulated and unpaid dividends thereon and (ii) the amount payable to the holder of such preferred shares upon our liquidation under the terms of our certificate of incorporation, determined as if we were liquidated, dissolved and wound up as of such mandatory redemption date.
At any time prior to redemption, the holders of the series C preferred stock may convert their shares into class A voting common stock at a price equal to the liquidation preference plus all accumulated and unpaid dividends divided by an initial conversion price of $1.50, which may be adjusted from time to time.
Subordinated Note / Series B Preferred Stock Purchase Agreement
In April 2008, we issued a $32,000 convertible subordinated note to Onex, using the proceeds to make a voluntary prepayment on our Term Loans. In June 2008, Onex converted all $30,500 principal plus $700 in interest outstanding on the note into 31,149 shares of our series B preferred stock. This transaction triggered certain preemptive rights for other stockholders, including certain members of Onex and our management, resulting in the issuance of additional shares at $1,000 per share. The series B preferred stock has an initial liquidation preference of $1,000 per share. Our series B preferred stock accrues cumulative dividends at a rate of 12% of the liquidation preference per share per annum, which dividends, commencing after June 2009, compound and cumulate annually on the anniversary date of issuance.
We are required, after the maturity date of the notes, to the extent of our legally available assets, to redeem the series B preferred stock at the Redemption Price, equal to the greater of (i) the sum of (x) 100% of the liquidation price per share and (y) all accumulated and unpaid dividends thereon and (ii) the amount payable to the holder of such preferred shares upon our liquidation under the terms of our certificate of incorporation, determined as if we were liquidated, dissolved and wound up as of such mandatory redemption date.
At any time prior to redemption, the holders of the series B preferred stock may convert their shares into class A voting common stock at a price equal to the liquidation preference plus all accumulated and unpaid dividends divided by an initial conversion price of $4.85, which may be adjusted from time to time.
Debt Conversion Agreement
In 2004, 2003 and 2001, we entered into promissory notes with Onex in aggregate principal amounts of $13,000, $22,000 and $3,000, respectively. Interest was payable on outstanding amounts at the rate of 10% and accrued to $3,900 at March 2005. In March 2005, we completed a debt conversion agreement with Onex pursuant to which we converted $38,000 of debt, which carried a 10% interest rate, and $9,400 of accrued liabilities due Onex into an aggregate 47,419 shares our series A preferred stock. The series A preferred stock had an initial liquidation preference of $1,000 per share. Onex subsequently sold 3,252 shares to other related parties, including Onex management.
Subsidiary exchangeable preferred shares
As of December 31, 2014, there were 1.71 million exchangeable preferred shares of one of our subsidiaries issued to the three stockholders of 1293220 Ontario Inc. under the terms of an agreement between Customerone Holding Corporation (now SITEL Worldwide) and 1293220 Ontario Inc., dated December 17, 1998. The exchangeable preferred shares have no voting rights or other rights of redemption but are exchangeable for SITEL Worldwide class A voting shares, plus any dividends declared thereon at any time. We have agreed to repurchase the exchangeable preferred shares at the underlying fair market value of the common stock for which they are exchangeable in the event that we are unable to issue the class A common stock upon conversion of the exchangeable preferred shares.
Employment Agreements
We have entered into employment agreements with David Garner, our former Chairman and Chief Executive Officer, and other executives. See "Executive Compensation—Employment and Other Agreements."

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Review and Approval of Transactions with Related Persons
We have not formally adopted a written policy and procedure for approval of transactions involving "related persons" (directors and executive officers or their immediate family members, or stockholders owning five percent or greater of our outstanding stock). However, we believe that any such transactions have in the past been, and will continue to be, appropriately reviewed, approved, and monitored.
Director Independence
We are a privately held corporation. Our Board presently considers none of our directors to be independent (as independence is defined by Rule 4200(a)(15) of the NASDAQ Stock Market LLC marketplace rules).

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
(in thousands of U.S. dollars)
Fees for professional services provided by our independent accountants in each of the last two fiscal years, in each of the following categories are:
 
For the Year Ended December 31, 2014
 
For the Year Ended December 31, 2013
Audit fees
$
3,411

 
$
3,754

Tax fees
94

 
239

Other fees
—

 
45

Total
$
3,505

 
$
4,038

Fees for audit services above include those from PricewaterhouseCoopers LLP (audit and consulting related). Fees for audit services include fees associated with the annual audit of consolidated financial statements, the reviews of our quarterly reports on Form 10-Q and SEC registration statements, audit-related accounting consultations, and statutory audits required internationally. Tax fees included tax compliance, tax advice, and tax planning. All other fees included services related to our bond offering.
The Audit Committee has adopted policies and procedures for approving in advance all audit and permitted non-audit services to be performed for us by our independent accountants, subject to certain de minimis exceptions approved by the Audit Committee. Prior to the engagement of the independent accountants for the next year's audit, management, with the participation of the independent accountants, submits to the Audit Committee for approval an aggregate request for services expected to be rendered during that year for various categories of services.

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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE
(a) The following financial statements and financial statement schedules are included in Item 8 herein.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SITEL Worldwide Corporation
Date:
February 18, 2015
By:  
/s/ Patrick Tolbert
 
 
 
Name:  
Patrick Tolbert 
 
 
 
Title:  
Chief Operating and Financial Officer and Director
(Duly authorized officer and principal financial officer) 























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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SITEL Worldwide Corporation
Date:
February 18, 2015
By:  
/s/ Dagoberto Quintana
 
 
 
Name:  
Dagoberto Quintana
 
 
 
Title:  
Chairman, President, Chief Executive Officer and Director
 
 
 
 
 
Date:
February 18, 2015
By:  
/s/ Patrick Tolbert
 
 
 
Name:  
Patrick Tolbert 
 
 
 
Title:  
Chief Operating and Financial Officer and Director
 
 
 
 
 
Date:
February 18, 2015
By:  
/s/ Ryan Wagers
 
 
 
Name:  
Ryan Wagers
 
 
 
Title:  
Chief Accounting Officer
 
 
 
 
 
Date:
February 18, 2015
By:  
/s/ Seth Mersky
 
 
 
Name:  
Seth Mersky
 
 
 
Title:  
Director
 
 
 
 
 
Date:
February 18, 2015
By:  
/s/ David Garner
 
 
 
Name:  
David Garner
 
 
 
Title:  
Director
 
 
 
 
 
Date:
February 18, 2015
By:  
/s/ Tate Abols
 
 
 
Name:  
Tate Abols
 
 
 
Title:  
Director
 
 
 
 
 
Date:
February 18, 2015
By:  
/s/ Robert Mahoney
 
 
 
Name:  
Robert Mahoney
 
 
 
Title:  
Director
 
 
 
 
 
Date:
February 18, 2015
By:  
/s/ Keith Powell
 
 
 
Name:  
Keith Powell
 
 
 
Title:  
Director
 
 
 
 
 
Date:
February 18, 2015
By:  
/s/ Peter Shea
 
 
 
Name:  
Peter Shea
 
 
 
Title:  
Director


140

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
No annual report to security holders covering the registrant's last fiscal year has been sent to security holders. No proxy statement, form of proxy or other proxy soliciting material has been sent to more than 10 of the registrant's security holders with respect to any annual or other meeting of security holders.
 
 
 
 
 
 
Incorporated by Reference
No.
  
Exhibit Description
 
Filed with this 10-K
 
Form
 
Original Exhibit No.
 
File No.
 
Date Filed
3.1
 
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF SITEL WORLDWIDE CORPORATION, DATED AS OF APRIL 27, 2007, AS FILED WITH THE STATE OF DELAWARE ON APRIL 27, 2007
 
 
 
S-4
 
3.1
 
333-172952
 
3/18/2011
3.2
 
THIRD AMENDED AND RESTATED CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF OF SITEL WORLDWIDE CORPORATION -12% CUMULATIVE PARTICIPATING PREFERRED STOCK, SERIES B, DATED AS OF MARCH 11, 2010, AS FILED WITH THE STATE OF DELAWARE ON MARCH 11, 2010
 
 
 
S-4
 
3.2
 
333-172952
 
3/18/2011
3.3
 
SECOND AMENDED AND RESTATED CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF OF SITEL WORLDWIDE CORPORATION -16% CUMULATIVE PARTICIPATING PREFERRED STOCK, SERIES C, DATED AS OF MARCH 11, 2010, AS FILED WITH THE STATE OF DELAWARE ON MARCH 11, 2010
 
 
 
S-4
 
3.3
 
333-172952
 
3/18/2011
3.4
 
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF OF SITEL WORLDWIDE CORPORATION 16% CUMULATIVE PARTICIPATING PREFERRED STOCK, SERIES D
 
 
 
10-Q
 
3.1
 
333-172952
 
5/8/2014
3.5
 
SECOND AMENDED AND RESTATED BYLAWS OF SITEL WORLDWIDE CORPORATION
 
 
 
S-4
 
3.4
 
333-172952
 
3/18/2011
3.6
 
CERTIFICATE OF FORMATION OF SITEL, LLC
 
 
 
S-4
 
3.5
 
333-172952
 
3/18/2011
3.7
 
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF SITEL, LLC
 
 
 
10-Q
 
3.1
 
333-172952
 
11/6/2012
3.7.A
 
LIMITED LIABILITY COMPANY AGREEMENT OF SITEL, LLC
 
 
 
S-4
 
3.6
 
333-172952
 
3/18/2011
3.8
 
CERTIFICATE OF INCORPORATION OF SITEL FINANCE CORP
 
 
 
S-4
 
3.7
 
333-172952
 
3/18/2011
3.9
 
BYLAWS OF SITEL FINANCE CORP
 
 
 
S-4
 
3.8
 
333-172952
 
3/18/2011
3.10
 
CERTIFICATE OF INCORPORATION OF SITEL OPERATING CORPORATION
 
 
 
S-4
 
3.9
 
333-172952
 
3/18/2011
3.11
 
BYLAWS OF SITEL OPERATING CORPORATION
 
 
 
S-4
 
3.10
 
333-172952
 
3/18/2011
3.12
 
CERTIFICATE OF INCORPORATION OF CATALOG RESOURCES, INC
 
 
 
S-4
 
3.11
 
333-172952
 
3/18/2011

141

3.13
 
BYLAWS OF CATALOG RESOURCES, INC
 
 
 
S-4
 
3.12
 
333-172952
 
3/18/2011
3.14
 
CERTIFICATE OF INCORPORATION OF SITEL INTERNATIONAL HOLDINGS, INC
 
 
 
S-4
 
3.13
 
333-172952
 
3/18/2011
3.15
 
BYLAWS OF SITEL INTERNATIONAL HOLDINGS, INC
 
 
 
S-4
 
3.14
 
333-172952
 
3/18/2011
3.16
 
CERTIFICATE OF FORMATION OF SITEL INTERNATIONAL LLC
 
 
 
S-4
 
3.15
 
333-172952
 
3/18/2011
3.17
 
LIMITED LIABILITY COMPANY AGREEMENT OF SITEL INTERNATIONAL LLC
 
 
 
S-4
 
3.16
 
333-172952
 
3/18/2011
3.18
 
CERTIFICATE OF FORMATION OF SERVICE ZONE HOLDINGS, INC
 
 
 
S-4
 
3.17
 
333-172952
 
3/18/2011
3.19
 
LIMITED LIABILITY COMPANY AGREEMENT OF SERVICE ZONE HOLDINGS, LLC
 
 
 
S-4
 
3.18
 
333-172952
 
3/18/2011
3.20
 
CERTIFICATE OF INCORPORATION OF NATIONAL ACTION FINANCIAL SERVICES, INC
 
 
 
S-4
 
3.19
 
333-172952
 
3/18/2011
3.21
 
BYLAWS OF NATIONAL ACTION FINANCIAL SERVICES, INC
 
 
 
S-4
 
3.20
 
333-172952
 
3/18/2011
4.1
 
INDENTURE, DATED AS OF MARCH 18, 2010, BY AND AMONG SITEL, LLC, SITEL FINANCE CORP., THE GUARANTORS LISTED THEREIN, AND U.S. BANK NATIONAL ASSOCIATION.
 
 
 
S-4
 
4.1
 
333-172952
 
3/18/2011
4.2
 
INDENTURE, DATED AS OF APRIL 20, 2012, BETWEEN SITEL, LLC, SITEL FINANCE CORP., THE GUARANTORS NAMED THEREIN AND U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE AND COLLATERAL AGENT
 
 
 
8-K
 
4.1
 
333-172952
 
4/24/2012
10.1.1
 
SITEL WORLDWIDE CORPORATION SUBSCRIPTION AGREEMENT
 
 
 
10-Q
 
10.1
 
333-172952
 
5/8/2014
10.2.7
 
SIXTH AMENDMENT, DATED FEBRUARY 18, 2014, TO THE CREDIT AGREEMENT, DATED AS OF JANUARY 30, 2007, BY AND AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, SITEL CANADA CORPORATION, THE OTHER CREDIT PARTIES SIGNATORY THERETO, THE LENDERS SIGNATORY THERETO, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT
 
 
 
10-K
 
10.1.7
 
333-172952
 
2/19/2014
10.2.6
 
FIFTH AMENDMENT, DATED APRIL 5, 2012, TO THE CREDIT AGREEMENT, DATED AS OF JANUARY 30, 2007, BY AND AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, SITEL CANADA CORPORATION, THE OTHER CREDIT PARTIES SIGNATORY THERETO, THE LENDERS SIGNATORY THERETO, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT
 
 
 
8-K
 
10.1
 
333-172952
 
4/9/2012
10.2.5
 
FOURTH AMENDMENT, DATED MAY 12, 2011, TO THE CREDIT AGREEMENT, DATED AS OF JANUARY 30, 2007, BY AND AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, SITEL CANADA CORPORATION (F/K/A CLIENTLOGIC CANADA CORPORATION), THE OTHER CREDIT PARTIES SIGNATORY THERETO, THE LENDERS SIGNATORY THERETO, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT
 
 
 
8-K
 
10.1
 
333-172952
 
5/18/2011

142

10.2.4
 
THIRD AMENDMENT, DATED FEBRUARY 18, 2010, CREDIT AGREEMENT, DATED AS OF JANUARY 30, 2007, BY AND AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, CLIENTLOGIC CANADA CORPORATION, THE OTHER CREDIT PARTIES SIGNATORY THERETO, THE LENDERS SIGNATORY THERETO, GOLDMAN SACHS CREDIT PARTNERS L.P., AND GENERAL ELECTRIC CAPITAL CORPORATION
 
 
 
S-4
 
10.1.4
 
333-172952
 
3/18/2011
10.2.3
 
SECOND AMENDMENT, DATED APRIL 21, 2009, CREDIT AGREEMENT, DATED AS OF JANUARY 30, 2007, BY AND AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, CLIENTLOGIC CANADA CORPORATION, THE OTHER CREDIT PARTIES SIGNATORY THERETO, THE LENDERS SIGNATORY THERETO, GOLDMAN SACHS CREDIT PARTNERS L.P., AND GENERAL ELECTRIC CAPITAL CORPORATION
 
 
 
S-4
 
10.1.3
 
333-172952
 
3/18/2011
10.2.2
 
FIRST AMENDMENT, DATED DECEMBER 9, 2008, CREDIT AGREEMENT, DATED AS OF JANUARY 30, 2007, BY AND AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, CLIENTLOGIC CANADA CORPORATION, THE OTHER CREDIT PARTIES SIGNATORY THERETO, THE LENDERS SIGNATORY THERETO, GOLDMAN SACHS CREDIT PARTNERS L.P., AND GENERAL ELECTRIC CAPITAL CORPORATION
 
 
 
S-4
 
10.1.2
 
333-172952
 
3/18/2011
10.2.1
 
CREDIT AGREEMENT, DATED AS OF JANUARY 30, 2007, BY AND AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, CLIENTLOGIC CANADA CORPORATION, THE OTHER CREDIT PARTIES SIGNATORY THERETO, THE LENDERS SIGNATORY THERETO, GOLDMAN SACHS CREDIT PARTNERS L.P., AND GENERAL ELECTRIC CAPITAL CORPORATION
 
 
 
S-4
 
10.1.1
 
333-172952
 
3/18/2011
10.3.8
 
SEVENTH AMENDMENT, DATED AS OF SEPTEMBER 18, 2010, TO THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 15, 2000, BY AND AMONG SITEL WORLDWIDE CORPORATION (F/K/A CLIENTLOGIC CORPORATION) AND THE SECURITYHOLDERS LISTED ON SCHEDULE A THERETO
 
 
 
S-4
 
10.2.8
 
333-172952
 
3/18/2011
10.3.7
 
SIXTH AMENDMENT, DATED AS OF SEPTEMBER 14, 2007, TO THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 15, 2000, BY AND AMONG SITEL WORLDWIDE CORPORATION (F/K/A CLIENTLOGIC CORPORATION) AND THE SECURITYHOLDERS LISTED ON SCHEDULE A THERETO
 
 
 
S-4
 
10.2.7
 
333-172952
 
3/18/2011
10.3.6
 
FIFTH AMENDMENT, DATED AS OF JANUARY 29, 2007, TO THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 15, 2000, BY AND AMONG SITEL WORLDWIDE CORPORATION (F/K/A CLIENTLOGIC CORPORATION) AND THE SECURITYHOLDERS LISTED ON SCHEDULE A THERETO
 
 
 
S-4
 
10.2.6
 
333-172952
 
3/18/2011

143

10.3.5
 
FOURTH AMENDMENT, DATED AS OF JULY 9, 2004, TO THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 15, 2000, BY AND AMONG SITEL WORLDWIDE CORPORATION (F/K/A CLIENTLOGIC CORPORATION) AND THE SECURITYHOLDERS LISTED ON SCHEDULE A THERETO
 
 
 
S-4
 
10.2.5
 
333-172952
 
3/18/2011
10.3.4
 
THIRD AMENDMENT, DATED AS OF OCTOBER 23, 2003, TO THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 15, 2000, BY AND AMONG SITEL WORLDWIDE CORPORATION (F/K/A CLIENTLOGIC CORPORATION) AND THE SECURITYHOLDERS LISTED ON SCHEDULE A THERETO
 
 
 
S-4
 
10.2.4
 
333-172952
 
3/18/2011
10.3.3
 
SECOND AMENDMENT, DATED AS OF DECEMBER 12, 2001, TO THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 15, 2000, BY AND AMONG SITEL WORLDWIDE CORPORATION (F/K/A CLIENTLOGIC CORPORATION) AND THE SECURITYHOLDERS LISTED ON SCHEDULE A THERETO
 
 
 
S-4
 
10.2.3
 
333-172952
 
3/18/2011
10.3.2
 
FIRST AMENDMENT, DATED AS OF FEBRUARY 28, 2002, TO THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 15, 2000, BY AND AMONG SITEL WORLDWIDE CORPORATION (F/K/A CLIENTLOGIC CORPORATION) AND THE SECURITYHOLDERS LISTED ON SCHEDULE A THERETO
 
 
 
S-4
 
10.2.2
 
333-172952
 
3/18/2011
10.3.1
 
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 15, 2000, BY AND AMONG SITEL WORLDWIDE CORPORATION (F/K/A CLIENTLOGIC CORPORATION) AND THE SECURITYHOLDERS LISTED ON SCHEDULE A THERETO
 
 
 
S-4
 
10.2.1
 
333-172952
 
3/18/2011
10.4.3
 
EXTENSION AGREEMENT, DATED AS OF JUNE 13, 2012, AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, SITEL CANADA CORPORATION (F/K/A CLIENTLOGIC CANADA CORPORATION), THE GUARANTORS PARTY THERETO, GOLDMAN SACHS LENDING PARTNERS LLC, AS AN EXTENDED U.S. REVOLVING LENDER, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT
 
 
 
8-K
 
10.1
 
333-172952
 
6/14/2012
10.4.2
 
EXTENSION AGREEMENT, DATED AS OF APRIL 26, 2012, AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, SITEL CANADA CORPORATION (F/K/A CLIENTLOGIC CANADA CORPORATION), THE GUARANTORS PARTY THERETO, THE U.S. REVOLVER LENDERS PARTY THERETO, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT
 
 
 
8-K
 
10.1
 
333-172952
 
4/30/2012
10.4.1
 
EXTENSION AGREEMENT, DATED AS OF JUNE 7, 2011, AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, SITEL CANADA CORPORATION (F/K/A CLIENTLOGIC CANADA CORPORATION), THE GUARANTORS PARTY THERETO, THE U.S. REVOLVER LENDERS PARTY THERETO, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT
 
 
 
8-K
 
10.1
 
333-172952
 
6/10/2011

144

10.5.1
 
EXTENSION AGREEMENT, DATED AS OF JUNE 8, 2011, AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, SITEL CANADA CORPORATION (F/K/A CLIENTLOGIC CANADA CORPORATION), THE GUARANTORS PARTY THERETO, THE U.S. TERM LOAN LENDERS PARTY THERETO, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT
 
 
 
8-K
 
10.3
 
333-172952
 
6/10/2011
10.6.1
 
EXTENSION AGREEMENT, DATED AS OF APRIL 26, 2012, AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, SITEL CANADA CORPORATION (F/K/A CLIENTLOGIC CANADA CORPORATION), THE GUARANTORS PARTY THERETO, THE CANADIAN REVOLVER LENDERS PARTY THERETO, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT
 
 
 
8-K
 
10.2
 
333-172952
 
4/30/2012
10.7.1
 
EXTENSION AGREEMENT, DATED AS OF JUNE 7, 2011, AMONG SITEL, LLC, CLIENTLOGIC HOLDING LIMITED, SITEL CANADA CORPORATION (F/K/A CLIENTLOGIC CANADA CORPORATION), THE GUARANTORS PARTY THERETO, THE U.K. REVOLVER LENDERS PARTY THERETO, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS ADMINISTRATIVE AGENT
 
 
 
8-K
 
10.2
 
333-172952
 
6/10/2011
10.8.1
 
FIRST AMENDMENT TO THE CLASS C STOCKHOLDERS AGREEMENT OF SITEL WORLDWIDE CORPORATION, DATED AS OF OCTOBER 5, 2012, BY AND AMONG SITEL WORLDWIDE CORPORATION AND JANA PIRANHA MASTER FUND, LTD
 
 
 
8-K
 
10.1
 
333-172952
 
10/10/2012
10.9.1
 
CLASS B STOCKHOLDERS AGREEMENT, DATED AS OF AUGUST 15, 2000, BY AND AMONG SITEL WORLDWIDE CORPORATION (F/K/A CLIENTLOGIC CORPORATION), ONEX HOLDING PROPERTY MANAGEMENT LTD., ONEX CORPORATION AND ONTARIO MUNICIPAL EMPLOYEES RETIREMENT BOARD
 
 
 
S-4
 
10.3
 
333-172952
 
3/18/2011
10.10.1
 
CLASS C STOCKHOLDERS AGREEMENT, DATED AS OF APRIL 30, 2007, BY AND BETWEEN SITEL WORLDWIDE CORPORATION AND JANA PIRANHA MASTER FUND, LTD
 
 
 
S-4
 
10.4
 
333-172952
 
3/18/2011
10.11.1
 
FORM OF RESTRICTED STOCK UNIT PLAN AND AGREEMENT OF SITEL WORLDWIDE CORPORATION
 
 
 
S-4
 
10.14
 
333-172952
 
3/18/2011
10.12.1
 
FORM OF RESTRICTED STOCK GRANT PLAN AND AGREEMENT OF SITEL WORLDWIDE CORPORATION
 
 
 
S-4
 
10.15
 
333-172952
 
3/18/2011
10.13.1
 
FORM OF RESTRICTED STOCK GRANT PLAN AND AGREEMENT MODIFIED AND USED FOR DAVID GARNER AND DAVID BECKMAN
 
 
 
S-4
 
10.16
 
333-172952
 
3/18/2011
10.14.1
 
AGREEMENT, DATED AS OF JANUARY 30, 2014, BY AND AMONG SITEL OPERATING CORPORATION, EMORY ENTERPRISES, LLC AND DAVID GARNER
 
 
 
8-K
 
10.1
 
333-172952
 
2/4/2014
10.14.2
 
AMENDED AND RESTATED PROMISSORY NOTE DATED JANUARY 30, 2014, MADE BY EMORY ENTERPRISES, LLC AND GUARANTEED BY DAVID GARNER
 
 
 
8-K
 
10.2
 
333-172952
 
2/4/2014

145

10.14.3
 
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT DATED AS OF JANUARY 30, 2014, BY AND BETWEEN SITEL OPERATING CORPORATION, NA LIQUIDATING COMPANY, INC. AND DAVID GARNER
 
 
 
8-K
 
10.3
 
333-172952
 
2/4/2014
10.15.1
 
DIRECTOR AGREEMENT, DATED AS OF OCTOBER 28, 2013, BETWEEN SITEL WORLDWIDE CORPORATION
AND DAVID GARNER
 
 
 
8-K
 
10.1
 
333-172952
 
11/1/2013
10.16.2
 
AMENDED MANAGEMENT EMPLOYMENT AGREEMENT, EFFECTIVE FEBRUARY 14, 2013, BY AND BETWEEN DAGOBERTO QUINTANA AND SITEL OPERATING CORPORATION
 
 
 
10-K
 
10.17
 
333-172952
 
2/20/2013
10.16.1
 
AMENDED MANAGEMENT EMPLOYMENT AGREEMENT, DATED FEBRUARY 16, 2012, BY AND BETWEEN DAGOBERTO QUINTANA AND SITEL OPERATING CORPORATION
 
 
 
10-K
 
10.48
 
333-172952
 
2/22/2012
10.17.2
 
AMENDED MANAGEMENT EMPLOYMENT AGREEMENT, EFFECTIVE FEBRUARY 14, 2013, BY AND BETWEEN PATRICK TOLBERT AND SITEL OPERATING CORPORATION
 
 
 
10-K
 
10.18
 
333-172952
 
2/20/2013
10.17.1
 
AMENDMENT TO MANAGEMENT EMPLOYMENT AGREEMENT, EFFECTIVE FEBRUARY 16, 2012, BY AND BETWEEN PATRICK TOLBERT AND SITEL OPERATING CORPORATION
 
 
 
10-K
 
10.49
 
333-172952
 
2/22/2012
10.18.2
 
AMENDED MANAGEMENT EMPLOYMENT AGREEMENT, EFFECTIVE FEBRUARY 14, 2013, BY AND BETWEEN DONALD BERRYMAN AND SITEL OPERATING CORPORATION
 
 
 
10-K
 
10.19
 
333-172952
 
2/20/2013
10.18.1
 
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, EFFECTIVE JANUARY 1, 2012, BETWEEN DONALD BERRYMAN AND SITEL OPERATING CORPORATION
 
 
 
10-K
 
10.35
 
333-172952
 
2/22/2012
10.19.2
 
AMENDED MANAGEMENT EMPLOYMENT AGREEMENT, DATED AS OF NOVEMBER 1, 2013, BETWEEN SITEL OPERATING CORPORATION AND DAVID L. BECKMAN, JR.
 
 
 
8-K
 
10.2
 
333-172952
 
11/1/2013
10.19.1
 
EMPLOYMENT AGREEMENT, DATED AS OF APRIL 23, 2007, AS AMENDED DECEMBER 15, 2008, BY AND BETWEEN DAVID BECKMAN AND SITEL WORLDWIDE CORPORATION
 
 
 
S-4
 
10.9
 
333-172952
 
3/18/2011
10.20.1
 
ORDINARY LABOUR PERMANENT TERM CONTRACT FOR PEDRO LOZANO, DATED MAY 3, 2001
 
 
 
10-K
 
10.21
 
333-172952
 
2/20/2013
10.20.2
 
LOZANO AGREEMENT ANNEX I - BETWEEN PEDRO LOZANO AND SITEL IBERICA TELESERVICIOS, S.A.
 
 
 
10-K
 
10.21.1
 
333-172952
 
2/20/2013
10.20.3
 
LOZANO AGREEMENT ANNEX II - BETWEEN PEDRO LOZANO AND SITEL IBERICA TELESERVICIOS, S.A.
 
 
 
10-K
 
10.21.2
 
333-172952
 
2/20/2013
10.21.1
 
MANAGEMENT EMPLOYMENT AGREEMENT, DATED AS OF SEPTEMBER 19, 2013, BETWEEN SITEL OPERATING CORPORATION AND ELSA ZAMBRANO
 
 
 
10-K
 
10.20.1
 
333-172952
 
2/19/2014
10.22.2
 
AMENDMENT NUMBER 1 TO AMENDED MANAGEMENT EMPLOYMENT AGREEMENT, EFFECTIVE SEPTEMBER 1, 2013 BY AND BETWEEN SEAN ERICKSON AND SITEL OPERATING CORPORATION
 
 
 
10-K
 
10.21.2
 
333-172952
 
2/19/2014

146

10.22.1
 
AMENDED MANAGEMENT EMPLOYMENT AGREEMENT, EFFECTIVE JANUARY 25, 2013, BY AND BETWEEN SEAN ERICKSON AND SITEL OPERATING CORPORATION
 
 
 
10-K
 
10.21.1
 
333-172952
 
2/19/2014
10.23.1
 
EMPLOYMENT AGREEMENT BY AND BETWEEN SITEL NEW ZEALAND LIMITED AND STEVE BARKER DATED FEBRUARY 20, 2012
 
 
 
10-K
 
10.42
 
333-172952
 
2/22/2012
10.24.1
 
EXPATRIATE ASSIGNMENT, DATED FEBRUARY 10, 2012, BY SITEL SERVICES TO SITEL DE BRAZIL LIMITADA - RAUL NAVARRO
 
X
 
 
 
 
 
 
 
 
10.25.1
 
EXPATRIATE ASSIGNMENT, DATED MAY 7, 2013, BY SITEL TO SITEL PHILIPPINES CORP - MICHAEL LEE
 
X
 
 
 
 
 
 
 
 
10.26.1
 
BOARD AGREEMENT BETWEEN DAVID GARNER AND SITEL WORLDWIDE CORPORATION, DATED AUGUST 5, 2014
 
 
 
10-Q
 
10.1
 
333-172952
 
2/19/2014
10.27.1
 
BOARD AGREEMENT BETWEEN BOB MAHONEY AND SITEL WORLDWIDE CORPORATION, DATED AUGUST 5, 2014
 
 
 
10-Q
 
10.2
 
333-172952
 
2/19/2014
10.28.1
 
BOARD AGREEMENT BETWEEN KEITH POWELL AND SITEL WORLDWIDE CORPORATION, DATED AUGUST 5, 2014
 
 
 
10-Q
 
10.3
 
333-172952
 
2/19/2014
10.29.1
 
BOARD AGREEMENT BETWEEN PETER SHEA AND SITEL WORLDWIDE CORPORATION, DATED AUGUST 5, 2014
 
 
 
10-Q
 
10.4
 
333-172952
 
2/19/2014
10.30.1
 
BOARD OF DIRECTORS AGREEMENT, DATED AS OF JUNE 5, 2007, AS AMENDED OCTOBER 25, 2010, AS AMENDED MARCH 7, 2011, BY AND BETWEEN PATRICK TOLBERT AND THE BOARD OF DIRECTORS OF SITEL WORLDWIDE CORPORATION
 
 
 
S-4
 
10.10
 
333-172952
 
3/18/2011
10.31.1
 
BOARD OF DIRECTORS AGREEMENT, DATED AS OF OCTOBER 24, 2007, AS AMENDED NOVEMBER 3, 2010, BY AND BETWEEN ROBERT MAHONEY AND THE BOARD OF DIRECTORS OF SITEL WORLDWIDE CORPORATION
 
 
 
S-4
 
10.12
 
333-172952
 
3/18/2011
10.32.1
 
BOARD OF DIRECTORS AGREEMENT, DATED AS OF JUNE 5, 2007, BY AND BETWEEN KEITH POWELL AND THE BOARD OF DIRECTORS OF SITEL WORLDWIDE CORPORATION
 
 
 
S-4
 
10.13
 
333-172952
 
3/18/2011
10.33.1
 
DIRECTOR AGREEMENT DATED OCTOBER 31, 2011 - MR. PETER SHEA
 
 
 
8-K
 
10.1
 
333-172952
 
11/4/2011
10.34.1
 
2013 GLOBAL MANAGMENT INCENTIVE PLAN — QUINTANA
 
 
 
10-K
 
10.27
 
333-172952
 
2/20/2013
10.35.1
 
2013 GLOBAL MANAGMENT INCENTIVE PLAN — BECKMAN
 
 
 
10-K
 
10.28
 
333-172952
 
2/20/2013
10.36.1
 
2013 GLOBAL MANAGMENT INCENTIVE PLAN — BERRYMAN
 
 
 
10-K
 
10.29
 
333-172952
 
2/20/2013
10.37.1
 
2013 GLOBAL MANAGMENT INCENTIVE PLAN — TOLBERT
 
 
 
10-K
 
10.30
 
333-172952
 
2/20/2013
10.38.1
 
2013 GLOBAL MANAGMENT INCENTIVE PLAN — LOZANO
 
 
 
10-K
 
10.31
 
333-172952
 
2/20/2013
10.39.1
 
2013 GLOBAL MANAGMENT INCENTIVE PLAN — ERICKSON
 
 
 
10-K
 
10.33.1
 
333-172952
 
2/19/2014
10.40.1
 
FORM 2014 MANAGMENT INCENTIVE PLAN FOR EXECUTIVE OFFICERS
 
 
 
10-K
 
10.34.1
 
333-172952
 
2/19/2014
10.41.1
 
2013 GLOBAL MANAGMENT INCENTIVE PLAN — BARKER
 
 
 
10-K
 
10.35.1
 
333-172952
 
2/19/2014

147

10.42.1
 
2014 REGIONAL MANAGEMENT INCENTIVE PLAN — NAVARRO
 
X
 
 
 
 
 
 
 
 
10.43.1
 
FORM 2015 GLOBAL MANAGEMENT INCENTIVE PLAN - ELT LEADER
 
X
 
 
 
 
 
 
 
 
10.44.1
 
FORM 2015 GLOBAL MANAGEMENT INCENTIVE PLAN - REGIONAL
 
X
 
 
 
 
 
 
 
 
10.45.1
 
FORM OF RESTRICTED STOCK GRANT PLAN AND AGREEMENT, DATED AS OF FEBRUARY 14, 2013, BETWEEN SITEL WORLDWIDE CORPORATION AND DAGOBERTO QUINTANA
 
 
 
10-K
 
10.32
 
333-172952
 
2/20/2013
10.46.1
 
FORM OF RESTRICTED STOCK GRANT PLAN AND AGREEMENT, DATED AS OF FEBRUARY 14, 2013, BETWEEN SITEL WORLDWIDE CORPORATION AND PATRICK TOLBERT
 
 
 
10-K
 
10.33
 
333-172952
 
2/20/2013
10.47.1
 
FORM OF RESTRICTED STOCK GRANT PLAN AND AGREEMENT, DATED AS OF FEBRUARY 14, 2013, BETWEEN SITEL WORLDWIDE CORPORATION AND DONALD BERRYMAN
 
 
 
10-K
 
10.34
 
333-172952
 
2/20/2013
10.48.1
 
FORM OF RESTRICTED STOCK GRANT PLAN AND AGREEMENT, DATED AS OF FEBRUARY 14, 2013, BETWEEN SITEL WORLDWIDE CORPORATION AND PEDRO LOZANO
 
 
 
10-K
 
10.35
 
333-172952
 
2/20/2013
10.49.1
 
FORM OF RESTRICTED STOCK GRANT PLAN AND AGREEMENT, DATED AS OF NOVEMBER 1, 2013, BETWEEN SITEL WORLDWIDE CORPORATION AND DAVID L. BECKMAN, JR.
 
 
 
8-K
 
10.3
 
333-172952
 
11/1/2013
10.50.1
 
FORM OF RESTRICTED STOCK GRANT PLAN AND AGREEMENT, DATED AS OF FEBRUARY 14, 2013, BETWEEN SITEL WORLDWIDE CORPORATION AND STEVE BARKER
 
 
 
10-K
 
10.41.1
 
333-172952
 
2/19/2014
10.51.1
 
FORM OF RESTRICTED STOCK GRANT PLAN AND AGREEMENT, DATED AS OF FEBRUARY 14, 2013, BETWEEN SITEL WORLDWIDE CORPORATION AND SEAN ERICKSON
 
 
 
10-K
 
10.42.1
 
333-172952
 
2/19/2014
12.1
 
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
 
X
 
 
 
 
 
 
 
 
21.1
 
SUBSIDIARIES OF SITEL WORLDWIDE CORPORATION
 
X
 
 
 
 
 
 
 
 
31.1
 
Certification of Chief Executive Officer Pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934
 
X
 
 
 
 
 
 
 
 
31.2
 
Certification of Chief Financial Officer Pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934
 
X
 
 
 
 
 
 
 
 
32.1
 
Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350
 
X
 
 
 
 
 
 
 
 
32.2
 
Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350
 
X
 
 
 
 
 
 
 
 
101.INS
 
XBRL Instance Document
 
X
 
 
 
 
 
 
 
 
101.SCH
 
XBRL Schema Document
 
X
 
 
 
 
 
 
 
 
101.CAL
 
XBRL Calculation Linkbase Document
 
X
 
 
 
 
 
 
 
 
101.DEF
 
XBRL Definition Linkbase Document
 
X
 
 
 
 
 
 
 
 
101.LAB
 
XBRL Label Linkbase Document
 
X
 
 
 
 
 
 
 
 
101.PRE
 
XBRL Presentation Linkbase Document
 
X
 
 
 
 
 
 
 
 

148