10-K
TTEC HOLDINGS, INC. filed this Form 10-K on 03/06/2019
Entire Document
 

Included in the year ended December 31, 2017 was a net $2.6 million loss related to a business unit which was sold effective December 22, 2017,  a $5.3 million expense related to the Connextions acquisition and the finalization of the transition services agreement offset by a $3.2 million gain related to dissolution of a foreign entity and a release of its cumulative translation adjustment.

For further information on the above items, see Part II. Item 8. Financial Statements, Note 2 to the Consolidated Financial Statements. 

Income Taxes

The reported effective tax rate for 2018 was 29.3% as compared to 87.8% for 2017. The effective tax rate for 2018 was impacted by earnings in international jurisdictions currently under an income tax holiday, $1.6 million of expense related to changes in tax contingent liabilities,  a  $3.4 million benefit related to provision to return adjustments, a $4.2 million benefit related to the impairment of an equity investment, $0.5 million of expense related to the disposition of assets, $1.5 million of expense related to changes in valuation allowances, a $0.7 million benefit related to excess taxes on equity compensation, a  $2.1 million benefit related to restructuring charges, and $0.5 million of other benefits.  Without these items our effective tax rate for the year ended December 31, 2018 would have been 25.6%. 

For the year ended December 31, 2017, our effective tax rate was 87.8%.  The effective tax rate for 2017 was impacted by earnings in international jurisdictions currently under an income tax holiday, $62.4 million of expense related to the US 2017 Tax Act, $0.6 million of benefit related to provision to return adjustments, a $1.9 million benefit related to impairments, $0.4 million of expense related to the disposition of assets, $0.6 million of expense related to changes in valuation allowances, a $2.2 million benefit related to excess taxes on equity compensation,  a $5.8 million benefit related to restructuring charges, and a $2.1 million benefit related to the finalization of a transition service. Without these items our effective tax rate for the year ended December 31, 2017 would have been 24.4%.

Year Ended December 31, 2017 Compared to 2016

The tables included in the following sections are presented to facilitate an understanding of Management’s Discussion and Analysis of Financial Condition and Results of Operations and present certain information by segment for the years ended December 31, 2017 and 2016 (amounts in thousands). All inter-company transactions between the reported segments for the periods presented have been eliminated.

Customer Management Services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

 

 

 

 

 

    

2017

    

2016

    

$ Change

    

% Change

 

Revenue

 

$

1,141,760

 

$

924,325

 

$

217,435

 

23.5

%

Operating Income

 

 

78,206

 

 

50,541

 

 

27,665

 

54.7

%

Operating Margin

 

 

6.8

%  

 

5.5

%  

 

 

 

 

 

 

The increase in revenue for the Customer Management Services segment was attributable to a $246.0 million net increase in organic and inorganic client programs including the Atelka, Connextions and Motif acquisitions and a $2.3 million increase due to foreign currency fluctuations, offset by program completions of $30.9 million.

The operating income as a percentage of revenue increased to 6.8% in 2017 as compared to 5.5% in 2016. The operating margin increased due to higher revenue, a $12.1 million benefit due to improved foreign exchange trends, increased capacity utilization, and efficiencies realized from the expense rationalization activities completed during the second half of 2016. This increase was offset by $13.6 million of 2017 planned restructuring and integration charges for the Connextions acquisition related to severance, center closure costs, the hiring, training and licensing of employees in new delivery centers and the integration of the IT systems (see Part II. Item 8. Financial Statements and Supplementary Data, Note 2 to the Consolidated Financial Statements) and an increase of $9.3 million for variable incentive compensation. The increase was also due to the 2016 $11.1 million impairment for internally developed software and technology assets and a $1.4 million impairment of goodwill (see Part II. Item 8. Financial Statements and Supplementary Data, Note 6 to the Consolidated Financial Statements). Included in the operating income was amortization related to acquired intangibles of $4.6 million and $0.9 million for the years ended December 31, 2017 and 2016, respectively.

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