UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the

Securities Exchange Act of 1934

 

For the month of June, 2020

Commission File Number 001-36671


Atento S.A.

(Translation of Registrant's name into English)

 

1 rue Hildegard Von Bingen

L-1282, Luxembourg
Grand Duchy of Luxembourg
(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F: x Form 40-F: o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes: o No: x

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes: o No: x

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 


 
 

ATENTO S.A.

INDEX

Financial Information

For the Six Months Ended June 30, 2020

 

 

PART I - OTHER INFORMATION 35
LEGAL PROCEEDINGS 35
RISK FACTORS 35
 
 

Atento s.a. AND SUBSIDIARIES

 

 

 

 

UNAUDITED INTERIM CONSOLIDATED FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 2020

 

 

 

 

3 
 

 

ATENTO S.A. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2019 and June 30, 2020
(In thousands of U.S. dollars, unless otherwise indicated)
ASSETS   Notes        
    December 31,   June 30,
    2019   2020
        (audited)   (unaudited)
NON-CURRENT ASSETS       765,839   602,715
             
Intangible assets       160,041   115,629
Goodwill       119,902   98,229
Right-of-use assets       181,564   124,363
Property, plant and equipment       116,893   89,043
Non-current financial assets       82,158   73,919
Trade and other receivables   10   22,124   16,635
Other non-current financial assets   10   54,652   41,093
Derivative financial instruments   11   5,382   16,191
Other taxes receivable       5,650   4,638
Deferred tax assets       99,631   96,894
             
CURRENT ASSETS       538,772   559,160
             
Trade and other receivables       388,308   310,157
Trade and other receivables   10   359,599   282,832
Current income tax receivable       28,709   27,325
Derivative financial instruments   11   -   1,405
Other taxes receivable       24,664   39,221
Other current financial assets   10   1,094   1,183
Cash and cash equivalents   10   124,706   207,194
             
TOTAL ASSETS       1,304,611   1,161,875
 
The accompanying notes are an integral part of the interim condensed consolidated financial information.

 

 

 

 

4 
 

 

ATENTO S.A. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2019 and June 30, 2020
(In thousands of U.S. dollars, unless otherwise indicated)
             
EQUITY AND LIABILITIES     Notes      

December 31,

2020

     

June 30,

2020

 
              (audited)       (unaudited)  
TOTAL EQUITY             207,020       89,254  
EQUITY ATTRIBUTABLE TO:                        
OWNERS OF THE PARENT COMPANY             207,020       89,254  
                         
Share capital     9       49       49  
Share premium             619,461       613,647  
Treasury shares     9       (19,319 )     (11,593 )
Retained losses             (127,070 )     (156,011 )
Translation differences             (271,273 )     (317,998 )
Cash flow/net investment hedge             (8,872 )     (51,471 )
Stock-based compensation             14,044       12,631  
                       
NON-CURRENT LIABILITIES             718,989       655,491  
                         
Deferred tax liabilities             20,378       14,282  
Debt with third parties     11       633,498       586,092  
Derivative financial instruments     11       2,289       4,812  
Provisions and contingencies     12       48,326       39,715  
Non-trade payables             11,744       8,699  
Other taxes payable             2,754       1,891  
                         
CURRENT LIABILITIES             378,602       417,130  
                         
Debt with third parties     11       87,117       147,034  
Derivative financial instruments     12       167       -     
Trade and other payables             272,547       247,501  
Trade payables             71,676       68,215  
Income tax payables             12,671       15,005  
Other taxes payables             93,765       91,762  
Other non-trade payables             94,435       72,519  
Provisions and contingencies     12       18,771       22,595  
TOTAL EQUITY AND LIABILITIES             1,304,611       1,161,875  
                         

The accompanying notes are an integral part of the interim condensed consolidated financial information.

  

 

5 
 

 

ATENTO S.A. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30, 2019 and 2020
(In thousands of U.S. dollars, unless otherwise indicated)
                
      For the three months ended June 30,  For the six months ended June 30,
   Notes  2019  2020  2019  2020
       (unaudited)  (unaudited)
Revenue        441,123    314,543    877,827    689,950 
Other operating income        730    1,096    1,369    1,962 
Other gains and own work capitalized        91    -      95    5 
Operating expenses:                         
Supplies        (15,059)   (15,981)   (31,882)   (32,701)
Employee benefit expenses        (334,747)   (244,995)   (674,040)   (533,979)
Depreciation        (19,878)   (17,826)   (41,678)   (37,591)
Amortization        (13,344)   (10,890)   (26,868)   (22,579)
Changes in trade provisions        (1,471)   (1,403)   (1,474)   (1,940)
Other operating expenses        (48,113)   (31,055)   (87,299)   (60,322)
OPERATING PROFIT        9,332    (6,511)   16,050    2,805 
                          
Finance income        2,056    8,563    4,446    11,003 
Finance costs        (19,720)   (16,963)   (37,858)   (32,823)
Net foreign exchange loss        (1,392)   (5,788)   (2,987)   (9,276)
NET FINANCE EXPENSE        (19,056)   (14,188)   (36,399)   (31,096)
LOSS BEFORE INCOME TAX        (9,724)   (20,699)   (20,349)   (28,291)
Income tax benefit/(expense)   13    3,101    2,362    (31,885)   2,527 
LOSS FOR THE PERIOD        (6,623)   (18,337)   (52,234)   (25,764)
(LOSS)/PROFIT ATTRIBUTABLE TO:                         
OWNERS OF THE PARENT        (6,872)   (18,337)   (52,847)   (25,764)
NON-CONTROLLING INTEREST        249    -      613    -   
LOSS FOR THE PERIOD        (6,623)   (18,337)   (52,234)   (25,764)
LOSS PER SHARE:                         
Basic loss per share (in U.S. dollars)   14    (0.47)   (1.30)   (3.58)   (1.82)
Diluted loss per share (in U.S. dollars)   14    (0.47)   (1.30)   (3.58)   (1.82)
                          
The accompanying notes are an integral part of the interim condensed consolidated financial information.

 

6 
 

 

ATENTO S.A. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the six months ended June 30, 2019 and 2020
(In thousands of U.S. dollars, unless otherwise indicated)
             
   For the three months ended June 30,  For the six months ended June 30,
   2019  2020  2019  2020
   (unaudited)  (unaudited)
Loss for the period   (6,623)   (18,337)   (52,234)   (25,764)
Other comprehensive income/(loss)                    
Other comprehensive income/(loss) to be reclassified to profit and loss in subsequent periods                    
Cash flow/net investment hedge   (4,164)   738    (8,003)   17,462 
Exchange differences on translation of foreign operations   1,673    (13,021)   1,673    (60,061)
Translation differences   (20,486)   22,422    (6,981)   (46,725)
Other comprehensive income/(loss)   (22,977)   10,139    (13,311)   (89,324)
Total comprehensive income/(loss)   (29,600)   (8,198)   (65,545)   (115,088)
Total comprehensive income/(loss) attributable to:                    
Owners of the parent   (29,047)   (8,198)   (65,356)   (115,088)
Non-controlling interest   (553)   -      (189)   -   
Total comprehensive income/(loss)   (29,600)   (8,198)   (65,545)   (115,088)
                     
The accompanying notes are an integral part of the interim condensed consolidated financial information.

 

7 
 

 

ATENTO S.A. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the six months ended June 30, 2019 and 2020
(In thousands of U.S. dollars, unless otherwise indicated)
   Share capital  Share premium  Treasury Shares  Reserve for acquisition of non-controlling interest  Others Reserve  Retained losses  Translation differences  Cash flow/net investment hedge  Stock-based compensation  Total owners of the parent company  Non-controlling interest  Total equity
Balance at January 1, 2019   49    615,288    (8,178)   (23,531)   -      (16,325)   (257,121)   8,404    12,966    331,551    8,541    340,091 
Comprehensive income/(loss) for the period   -      -      -      -      -      (52,847)   (6,179)   (6,330)   -      (65,356)   (189)   (65,545)
Loss for the period   -      -      -      -      -      (52,847)   -      -      -      (52,847)   613    (52,234)
Other comprehensive income/(loss), net of taxes   -      -      -      -      -      -      (6,179)   (6,330)   -      (12,509)   (802)   (13,311)
Dividends   -      -      -      -      -      -      -      -      -      -      (797)   (797)
Acquicition of non-nontrolling interest   -      -      -      23,531    (6,083)   -      -      -      -      17,448    -      17,448 
Stock-based compensation   -      4,173    -      -      -      -      -      -      (2,865)   1,308    -      1,308 
Acquisition of treasury shares   -      -      (516)   -      -      -      -      -      -      (516)   -      (516)
Non-controlling interest   -      -      -      -      -      -      -      -      -      -      (7,555)   (7,555)
Balance at June 30, 2019 (*)   49    619,461    (8,694)   -      (6,083)   (69,172)   (263,301)   2,074    10,101    284,434    -      284,434 

 

  

   Share capital  Share premium  Treasury Shares    Retained losses  Translation differences  Cash flow/net investment hedge  Stock-based compensation  Total owners of the parent company  Total equity
Balance at January 1, 2020   49    619,461    (19,319)     (127,070)   (271,273)   (8,872)   14,044    207,020    207,020 
Comprehensive income/(loss) for the period   -      -      -        (25,764)   (46,725)   (42,599)   -      (115,088)   (115,088)
Loss for the period   -      -      -        (25,764)   -      -      -      (25,764)   (25,764)
Other comprehensive income/(loss), net of taxes   -      -      -        -      (46,725)   (42,599)   -      (89,324)   (89,324)
Stock-based compensation   -      -      -        -      -      -      1,080    1,080    1,080 
Shares delivered   -      (5,781)   8,274      -      -      -      (2,493)   -      -   
Acquisition of treasury shares   -      (33)   (548)     -      -      -      -      (581)   (581)
Monetary correction caused by hyperinflation   -      -      -        (3,177)   -      -      -      (3,177)   (3,177)
Balance at June 30, 2020 (*)   49    613,647    (11,593)     (156,011)   (317,998)   (51,471)   12,631    89,254    89,254 
                                                
(*) unaudited
The accompanying notes are an integral part of the interim condensed consolidated financial information.

 

 

8 
 

 

ATENTO S.A. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2019 and 2020
(In thousands of U.S. dollars, unless otherwise indicated)
       
   For the six months ended June 30,
   2019  2020
   (unaudited)
Operating activities          
Loss before income tax   (20,349)   (28,291)
Adjustments to reconcile loss before income tax to net cash flows:          
Amortization and depreciation   68,546    60,170 
Changes in trade provisions   1,474    1,940 
Share-based payment expense   2,088    1,080 
Change in provisions   21,550    16,432 
Grants released to income   (420)   (338)
Losses on disposal of property, plant and equipment   131    209 
Losses on disposal of financial assets   (2)   -   
Finance income   (4,446)   (11,003)
Finance costs   37,858    32,823 
Net foreign exchange differences   2,987    9,276 
Changes in other (gains)/losses and own work capitalized   2,108    (412)
    131,874    110,177 
Changes in working capital:          
Changes in trade and other receivables   (105,175)   (9,829)
Changes in trade and other payables   33,365    32,579 
Other assets/(payables)   3,544    (21,775)
    (68,266)   975 
           
Interest paid   (23,222)   (21,954)
Interest received   260    10,067 
Income tax paid   (14,415)   (7,512)
Other payments   (19,150)   (5,738)
    (56,527)   (25,137)
Net cash flows (used in)/from operating activities   (13,268)   57,724 
Investing activities          
Payments for acquisition of intangible assets   (15,681)   (3,602)
Payments for acquisition of property, plant and equipment   (6,486)   (14,764)
Acquisition of subsidiaries, net of cash acquired   (14,884)   -   
Payments for financial instruments   (1,055)   (259)
Disposals of property, plant and equipment   48    -   
Net cash flows used in investing activities   (38,058)   (18,625)
Financing activities          
Proceeds from borrowing from third parties   150,342    100,479 
Repayment of borrowing from third parties   (86,283)   (23,272)
Payments of lease liabilities   (29,706)   (19,411)
Acquisition of treasury shares   (516)   (548)
Net cash flows provided by financing activities   33,837    57,248 
Net (decrease)/increase in cash and cash equivalents   (17,489)   96,347 
Foreign exchange differences   588    (13,859)
Cash and cash equivalents at beginning of period   133,526    124,706 
Cash and cash equivalents at end of period   116,625    207,194 
           
The accompanying notes are an integral part of the interim condensed consolidated financial information.          

 

9 
 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2020

1. ACTIVITY OF ATENTO S.A. AND CORPORATE INFORMATION

(a) Description of business

Atento S.A. (the “Company”) and its subsidiaries (“Atento Group”) offer customer relationship management services to their clients through contact centers or multichannel platforms.

The Company was incorporated on March 5, 2014 under the laws of the Grand Duchy of Luxembourg, with its registered office in Luxembourg at 4, Rue Lou Hemmer.

In 2019, the registered office of the Company has been moved to 1, Rue Hildegard Von Bingen, L-1282, Luxembourg, Grand Duchy of Luxembourg.

The majority direct shareholders of the Company are Mezzanine Partners II Offshore Lux Sarl II, Mezzanine Partners II Onshore Lux Sarl II, Mezzanine Partners II Institutional Lux Sarl II, Mezzanine Partners II AP LUX SARL II, Chesham Investment Pte Ltd. and Taheebo Holdings LLC

The Company may also act as the guarantor of loans and securities, as well as assisting companies in which it holds direct or indirect interests or that form part of its group. The Company may secure funds, with the exception of public offerings, through any kind of lending, or through the issuance of bonds, securities or debt instruments in general.

The Company may also carry on any commercial, industrial, financial, real estate business or intellectual property related activity that it deems necessary to meet the aforementioned corporate purposes.

The corporate purpose of its subsidiaries, with the exception of the intermediate holding companies, is to establish, manage and operate CRM centers through multichannel platforms; provide telemarketing, marketing and “call center” services through service agencies or in any other format currently existing or which may be developed in the future by the Atento Group; provide telecommunications, logistics, telecommunications system management, data transmission, processing and internet services and to promote new technologies in these areas; offer consultancy and advisory services to clients in all areas in connection with telecommunications, processing, integration systems and new technologies, and other services related to the above. The Company’s ordinary shares are traded on NYSE under the symbol “ATTO”.

The interim condensed consolidated financial information was approved by the Board of Directors on July 29, 2020.

(b) Seasonality

Our performance is subject to seasonal fluctuations, which is primarily due to (i) our clients generally spending less in the first quarter of the year after the year -end holiday season, (ii) the initial costs to train and hire new employees at new service delivery centers to provide additional services to our clients which are usually incurred in the first quarter of the year, and (iii) statutorily mandated minimum wage and salary increases of operators, supervisors and coordinators in many of the countries in which we operate which are generally implemented at the beginning of the first quarter of each year, whereas revenue increases related to inflationary adjustments and contracts negotiations generally take effect after the first quarter. We have also found that growth in our revenue increases in the last quarter of the year, especially in November and December, as the year-end holiday season begins and we have an increase in business activity resulting from the handling of holiday season promotions offered by our clients. These seasonal effects also cause differences in revenue and expenses among the various quarters of any year, which means that the individual quarters of a year should not be directly compared with each other or used to predict annual operating results.

 

10 
 

2. BASIS OF PRESENTATION OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The interim condensed consolidated financial information has been prepared in accordance with IAS 34 - Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”).

The information does not have all disclosure requirements for the presentation of full annual financial statements and thus should be read in conjunction with the consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) for the year ended December 31, 2019. The interim condensed consolidated financial information have been prepared on a historical costs basis, with the exception of derivative financial instruments and financial liability related to the option for acquisition of non-controlling interest, which have been measured at fair value. The interim condensed consolidated financial information is for the Atento Group.

The figures in this interim condensed consolidated financial information is expressed in thousands of dollars, unless indicated otherwise. U.S. Dollar is the Atento Group’s presentation currency.

 

3. ACCOUNTING POLICIES

There were no significant changes in accounting policies and calculation methods used for the interim condensed consolidated financial information as of June 30, 2020 in relation to those presented in the annual financial statements for the year ended December 31, 2019.

a)Critical accounting estimates and assumptions

The preparation of the interim condensed consolidated financial information under IAS 34 requires the use of certain assumptions and estimates that affect the recognized amount of assets, liabilities, income and expenses, as well as the related disclosures.

Some of the accounting policies applied in preparing the accompanying interim condensed consolidated financial information required Management to apply significant judgments in order to select the most appropriate assumptions for determining these estimates. These assumptions and estimates are based on Management experience, the advice of consultants and experts, forecasts and other circumstances and expectations prevailing at year end. Management’s evaluation takes into account the global economic situation in the sector in which the Atento Group operates, as well as the future outlook for the business. By virtue of their nature, these judgments are inherently subject to uncertainty. Consequently, actual results could differ substantially from the estimates and assumptions used. Should this occur, the values of the related assets and liabilities would be adjusted accordingly.

Although these estimates were made on the basis of the best information available at each reporting date on the events analyzed, events that take place in the future might make it necessary to change these estimates in coming years. Changes in accounting estimates would be applied prospectively in accordance with the requirements of IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors”, recognizing the effects of the changes in estimates in the related interim condensed consolidated statements of operations.

An explanation of the estimates and judgments that entail a significant risk of leading to a material adjustment in the carrying amounts of assets and liabilities in the coming financial period is as follow:

Impairment of goodwill

The Atento Group tests goodwill for impairment annually, in accordance with the accounting principle disclosed in the consolidated financial statements for the year ended December 31, 2019. Goodwill is subject to impairment testing as part of the cash-generating unit to which it has been allocated. The recoverable amounts of cash-generating units defined in order to identify potential impairment in goodwill are determined on the basis of value in use, applying five-year financial forecasts based on the Atento Group’s strategic plans, approved and reviewed by Management. These calculations entail the use of assumptions and estimates and require a significant degree of judgment. The main variables considered in the sensitivity analyses are growth rates, discount rates using the Weighted Average Cost of Capital (“WACC”) and the key business variables.

 

11 
 

Deferred taxes

The Atento Group assesses the recoverability of deferred tax assets based on estimates of future earnings. The ability to recover these deferred amounts depends ultimately on the Atento Group’s ability to generate taxable earnings over the period in which the deferred tax assets remain deductible. This analysis is based on the estimated timing of the reversal of deferred tax liabilities, as well as estimates of taxable earnings, which are sourced from internal projections and are continuously updated to reflect the latest trends.

The appropriate classification of tax assets and liabilities depends on a series of factors, including estimates as to the timing and realization of deferred tax assets and the projected tax payment schedule. Actual income tax receipts and payments could differ from the estimates made by the Atento Group as a result of changes in tax legislation or unforeseen transactions that could affect the tax balances.

The Atento Group has recognized deferred tax assets corresponding to losses carried forward since, based on internal projections, it is probable that it will generate future taxable profits against which they may be utilized.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of that deferred tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Provisions and contingencies

Provisions are recognized when the Atento Group has a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. This obligation may be legal or constructive, deriving from, inter alia, regulations, contracts, customary practice or public commitments that would lead third parties to reasonably expect that the Atento Group will assume certain responsibilities. The amount of the provision is determined based on the best estimate of the outflow of resources embodying economic benefit that will be required to settle the obligation, taking into account all available information as of the reporting date, including the opinions of independent experts such as legal counsel or consultants.

No provision is recognized if the amount of liability cannot be estimated reliably. In such cases, the relevant information is disclosed in the notes to the interim condensed consolidated financial information.

Given the uncertainties inherent in the estimates used to determine the amount of provisions, actual outflows of resources may differ from the amounts recognized originally on the basis of these estimates.

Fair value of derivatives

The Atento Group uses derivative financial instruments to mitigate risks, primarily derived from possible fluctuations in interest and exchange rates. Derivatives are recognized at the inception of the contract at fair value.

The fair values of derivative financial instruments are calculated on the basis of observable market data available, either in terms of market prices or through the application of valuation techniques. The valuation techniques used to calculate the fair value of derivative financial instruments include the discounting of future cash flow associated with the instruments, applying assumptions based on market conditions at the valuation date or using prices established for similar instruments, among others. These estimates are based on available market information and appropriate valuation techniques. The fair values calculated could differ significantly if other market assumptions and/or estimation techniques were applied.

Update On COVID-19

The estimates and assumptions included in the financial statements include our assessment of potential impacts arising from the COVID-19 pandemic that may affect the amounts reported and the accompanying notes. To-date,  no significant impacts on our collection experience and expected credit losses have been noted and we do not currently anticipate any material impairments of our long-lived assets or of our indefinite-lived intangible assets as a result of the COVID-19 pandemic. We will continue to monitor the impacts and will prospectively revise our estimates as appropriate.

 

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b)Standards issued but not yet effective

There are no other standards that are not yet effective and that would be expected to have a material impact on the Atento Group in the current or future reporting periods and on foreseeable future transactions.

 

4. MANAGEMENT OF FINANCIAL RISK

4.1 Financial risk factors

The Atento Group's activities are exposed to various types of financial risks: market risk (including currency risk, interest rate risk and country risk), credit risk and liquidity risk. The Atento Group's global risk management policy aims to minimize the potential adverse effects of these risks on the Atento Group's results of operations. The Atento Group also uses derivative financial instruments to hedge certain risk exposures.

This unaudited interim condensed consolidated financial information does not include all financial risk management information and disclosures required in the annual financial statements and therefore they should be read in conjunction with the Atento Group’s consolidated financial statements as of and for the year ended December 31, 2019. For the six months ended June 30, 2020 there have not been changes in any risk management policies.

Country Risk

To manage or mitigate country risk, we repatriate the funds generated in the Americas and Brazil that are not required for the pursuit of new profitable business opportunities in the region and subject to the restrictions of our financing agreements.

Interest Rate Risk

Interest rate risk arises mainly as a result of changes in interest rates which affect: finance costs of debt bearing interest at variable rates (or short-term maturity debt expected to be renewed), as a result of fluctuations in interest rates, and the value of non-current liabilities that bear interest at fixed rates.

Atento Group’s finance costs are exposed to fluctuation in interest rates. On June 30, 2020, 0.1% of Atento Group’s finance costs are exposed to fluctuations in interest rates (excluding the effect of financial derivative instruments), while on December 31, 2019 this amount was 0.2%. In both 2019 and 2020, the exposure was to the Brazilian CDI rate and the TJLP (Brazilian Long-Term Interest Rate).

The Atento Group’s policy is to monitor the exposure to interest at risk. As of June 30, 2020, there were no outstanding interest rate hedging instruments.

Foreign Currency Risk

Our foreign currency risk arises from our local currency revenues, receivables and payables while the U.S. dollar is our presentation currency. We benefit to a certain degree from the fact that the revenue we collect in each country, in which we have operations, is generally denominated in the same currency as the majority of the expenses we incur.

In accordance with our risk management policy, whenever we deem it appropriate, we manage foreign currency risk by using derivatives to hedge any exposure incurred in currencies other than those of the functional currency of the countries.

The main source of our foreign currency risk is related to the Senior Secured Notes due 2022 denominated in U.S. dollars. Upon issuance of the Notes, we entered into cross-currency swaps pursuant to which we exchange an amount of U.S. dollars for a fixed amount of Euro, Mexican Pesos, Peruvian Soles and Brazilian Reais. The total amount of interest (coupon) payments are covered (until maturity date). The principal portion that was originally covered until August 2020 was unwound in March 2020.

As of June 30,2020, the estimated fair value of the cross-currency swaps designated as hedging instruments totaled a net asset of 11,379 thousand U.S. dollars (net asset of 3,093 thousand U.S. dollars, as of December 31, 2019).

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Credit Risk

The Atento Group seeks to conduct all of its business with reputable national and international companies and institutions established in their countries of origin, to minimize credit risk. As a result of this policy, the Atento Group has no material adjustments to make to its credit accounts.

Accordingly, the Atento Group’s commercial credit risk management approach is based on continuous monitoring of the risks assumed and the financial resources necessary to manage the Group’s various units, in order to optimize the risk-reward relationship in the development and implementation of business plans in the course of their regular business.

Credit risk arising from cash and cash equivalents is managed by placing cash surpluses in high quality and highly liquid money-market assets. These placements are regulated by a master agreement revised annually on the basis of the conditions prevailing in the markets and the countries where Atento operate. The master agreement establishes: (i) the maximum amounts to be invested per counterparty, based on their ratings (long- and short-term debt rating); (ii) the maximum period of the investment; and (iii) the instruments in which the surpluses may be invested.

The Atento Group’s maximum exposure to credit risk is primarily limited to the carrying amounts of its financial assets. The Atento Group holds no guarantees as collection insurance.

The Atento Group seeks to conduct all of its business with reputable national and international companies and institutions established in their countries of origin, to minimize credit risk. As a result of this policy, the Atento Group has no material adjustments to make to its credit accounts.

Liquidity Risk

The Atento Group seeks to match its debt maturity schedule to its capacity to generate cash flow to meet the payments falling due, factoring in a degree of cushion. In practice, this has meant that the Atento Group’s average debt maturity must be longer than the length of time we required paying its debt (assuming that internal projections are met).

Capital Management

The Atento Group’s Finance Department, which is in charge of the capital management, takes various factors into consideration when determining the Group’s capital structure.

The Atento Group’s capital management goal is to determine the financial resources necessary both to continue its recurring activities and to maintain a capital structure that optimizes own and borrowed funds.

The Atento Group sets an optimal debt level in order to maintain a flexible and comfortable medium-term borrowing structure in order to be able to carry out its routine activities under normal conditions and to address new opportunities for growth. Debt levels are kept in line with forecast future cash flows and with quantitative restrictions imposed under financing contracts.

In addition to these general guidelines, we take into account other considerations and specifics when determining our financial structure, such as country risk, tax efficiency and volatility in cash flow generation.

The Super Senior Revolving Credit Facility carries no financial covenant obligations regarding debt levels. However, the notes do impose limitations of the distributions on dividends, payments or distributions to shareholders, the incurring of additional debt, and on investments and disposal of assets.

As of the date of these interim condensed consolidated financial information, the Atento Group was in compliance with all restrictions established in the aforementioned financing contracts and does not foresee any future non-compliance. To that end, the Atento Group regularly monitors figures for net financial debt with third parties and EBITDA.

 

4.2 Fair value estimation

a)        Level 1: The fair value of financial instruments traded on active markets is based on the quoted market price at the reporting date.
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b)       Level 2: The fair value of financial instruments not traded in active market (i.e. OTC derivatives) is determined using valuation techniques. Valuation techniques maximize the use of available observable market data, and place as little reliance as possible on specific company estimates. If all of the significant inputs required to calculate the fair value of financial instrument are observable, the instrument is classified in Level 2. The Atento Group’s Level 2 financial instruments comprise interest rate swaps used to hedge floating rate loans and cross currency swaps.
c)        Level 3: If one or more significant inputs are not based on observable market data, the instrument is classified in Level 3.

The Atento Group’s assets and liabilities measured at fair value as of December 31, 2019 and June 30, 2020 are classified as Level 2. No transfers were carried out between the different levels during the period.

 

 

5. SEGMENT INFORMATION

The following tables present financial information for the Atento Group’s operating segments for the six months ended June 30, 2019 and 2020 (in thousand U.S. dollars):

For the six months ended June 30, 2019
    Thousands of U.S. dollars
    EMEA   Americas   Brazil   Other and eliminations   Total Group
    (unaudited)
Sales to other companies     48,164       196,686       303,395       -         548,245  
Sales to Telefónica Group     75,138       127,900       124,177       -         327,215  
Sales to other group companies     7       8,923       1,108       (7,671 )     2,367  
Other operating income and expense     (114,124 )     (304,901 )     (382,407 )     8,201       (793,231 )
EBITDA     9,185       28,608       46,273       530       84,596  
Depreciation and amortization     (6,561 )     (24,549 )     (37,295 )     (141 )     (68,546 )
Operating profit/(loss)     2,624       4,059       8,978       389       16,050  
Financial results     (822 )     (9,540 )     (20,835 )     (5,202 )     (36,399 )
Income tax     (1,597 )     (1,756 )     2,997       (31,530 )     (31,885 )
Profit/(loss) for the period     204       (7,237 )     (8,860 )     (36,342 )     (52,234 )
EBITDA     9,184       28,608       46,273       530       84,596  
Shared services expenses     2,628       4,091       8,030       (14,749 )     -    
Adjusted EBITDA (unaudited)     11,812       32,699       54,303       (14,218 )     84,596  
Capital expenditure     1,926       5,915       13,323       -         21,164  
Intangible, Goodwill and PP&E (as of December 31, 2019)     48,712       186,111       342,954       623       578,400  
Allocated assets (as of December 31, 2019)     388,416       557,822       711,563       (353,190 )     1,304,611  
Allocated liabilities (as of December 31, 2019)     139,834       294,227       577,009       86,521       1,097,591  

 

 

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For the six months ended June 30, 2020
    Thousands of U.S. dollars
    EMEA   Americas   Brazil   Other and eliminations   Total Group
    (unaudited)
Sales to other companies     51,368       178,487       240,214       (1 )     470,068  
Sales to Telefónica Group     56,606       95,583       66,394       -         218,583  
Sales to other group companies     5       3,236       657       (2,599 )     1,299  
Other operating income and expense     (106,268 )     (254,518 )     (277,486 )     11,297       (626,975 )
EBITDA     1,711       22,788       29,779       8,697       62,975  
Depreciation and amortization     (5,869 )     (22,297 )     (31,865 )     (139 )     (60,170 )
Operating profit/(loss)     (4,158 )     491       (2,086 )     8,558       2,805  
Financial results     (483 )     (4,845 )     (21,586 )     (4,182 )     (31,096 )
Income tax     716       (2,788 )     7,451       (2,852 )     2,527  
Profit/(loss) for the period     (3,925 )     (7,142 )     (16,221 )     1,524       (25,764 )
EBITDA     1,711       22,788       29,779       8,697       62,975  
Shared services expenses     1,760       5,407       5,208       (12,375 )     -    
Adjusted EBITDA (unaudited)     3,471       28,195       34,987       (3,678 )     62,975  
Capital expenditure     1,271       4,148       7,252       1       12,672  
Intangible, Goodwill and PP&E (as of June 30, 2020)     43,794       150,046       232,930       494       427,264  
Allocated assets (as of June 30, 2020)     377,634       521,300       560,476       (297,535 )     1,161,875  
Allocated liabilities (as of June 30, 2020)     132,791       280,691       476,192       182,947       1,072,621  

 

"Other and eliminations" includes activities of the intermediate holding in Spain (Atento Spain Holdco, S.L.U.), Luxembourg holdings, as well as inter-group transactions between segments.

 

6. INTANGIBLE ASSETS

The main changes in intangible assets between the six-month period ended June 30, 2020 and the year ended December 31, 2019 are related to amortization of period and the negative impact of exchange variance.

 

7. GOODWILL

The variations of amounts related to the period ended December 31, 2019 and June 30, 2020 are related to exchange variance, mainly due to Brazilian Real and Argentine Peso against the U.S. dollar.

 

8. PROPERTY, PLANT AND EQUIPMENT (PP&E)

The variations of amounts related to the period ended December 31, 2019 and June 30, 2020 are related mainly to negative impact of exchange variance, due to Brazilian Real and Argentine Peso devaluation against the U.S dollar.

 

 

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9. Equity

Share capital

As of June 30, 2020, share capital stood at 49 thousand U.S dollars, equivalent to €33,979 (49 thousand U.S. dollars - €33,979 as December 31, 2019), divided into 75,406,357 shares (75,406,357 shares in December 31, 2019). Mezzanine Partners II; Onshore Lux Sarl II owns 8,412%; Mezzanine Partners II Offshore Lux Sarl II owns 14,462%; Chesham Investment Pte Ltd owns 21,854%, Taheebo Holdings LLC owns 14,869% of ordinary shares of Atento S.A.

Share premium

The share premium refers to the difference between the subscription price that the shareholders paid for the shares and their nominal value. Since this is a capital reserve, it can only be used to increase capital, offset losses, redeem, reimburse or repurchase shares.

On January 2, 2020, the Company vested the total of 1,305,065 TRSUs, issued by treasury shares, with an impact in share premium of 5,814 thousand of U.S. dollars.

Treasury shares

In 2019, Atento S.A. repurchased 4,425,499 shares at a cost of 11,141 thousand of U.S. dollars and an average price of $2.52, totalizing 5,531,657 shares in treasury.

As a result of the vesting of 1,305,065 TRSUs, Atento S.A. had 4,226,592 shares in treasury.

During the second quarter of 2020, Atento S.A. repurchased 450,418 shares at a cost of 548 thousand of U.S. dollars and an average price of $1.22, totalizing 4,677,010 shares in treasury at the end of June 2020.

Legal reserve

According to commercial legislation in Luxembourg, Atento S.A. must transfer 5% of its year profits to legal reserve until the amount reaches 10% of share capital. The legal reserve cannot be distributed.

At December 31, 2019 and June 30, 2020, no legal reserve had been established, mainly due to the losses incurred by Atento S.A. On February 26, 2020, the Board of Directors has proposed the allocation to legal reserve of the amount of sixty-seven with forty-seven cents Euros (EUR 67.47).

Hedge accounting effects

As discussed on Note 11, on January 1, 2019 Atento formalized at a meeting of the “Board of Directors”, which took place on December 20, 2018, its intention to renew the loan agreement between Atento Luxco 1 and Atento Brasil on its maturities per indefinite time and designate it as permanent in equity, as the repayment is neither planned nor likely to occur in the foreseeable future. Therefore, changes in fair value related to the USD-BRL exchange rate are recorded in equity as part of other comprehensive income.

At the same time the, on January 1, 2019, the Cross-Currency Swap USD BRL was designated as a net investment hedge. Prior to the date of designation of the Cross-Currency Swap, this hedging instrument was electively not designated as a hedge accounting because the change in fair value was intended to partially offset changes in the USD-BRL foreign currency component of the BRL denominated intercompany debt, which were recorded in earnings. Therefore, changes in fair value related to the USD-BRL Cross-Currency Swap are recorded in equity as part of other comprehensive income.

Also, on January 1, 2020 the Company decided to assign the loan agreement between Atento Luxco 1 and Atento Mexico Holdco as permanent in equity, with its maturities to be renewed per indefinite time, since the repayment is neither planned nor likely to occur in the foreseeable future. Therefore, changes in fair value related to the USD-MXN exchange rate are now recorded in equity as part of other comprehensive income.

Translation differences

Translation differences reflect the differences arising on account of exchange rate fluctuations when converting the net assets of fully consolidated foreign companies from local currency into Atento Group’s presentation currency (U.S. dollars).

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Stock-based compensation

a) Description of share-based payment arrangements

The 2017 Plan

On July 3, 2017, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries:

1.Time Restricted Stock Units (“RSU”) (equity settled)

       Grant date: July 3, 2017

       Amount: 886,187 RSUs

        Vesting period: 100% of the RSUs vest on January 2, 2020

        There are no other vesting conditions

The 2018 Plan

On July 2, 2018, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries. The share-based payment had the following arrangements:

1.Time Restricted Stock Units (“RSUs”) (equity settled)

•      Grant date: July 2, 2018

•      Amount: 1,065,220 RSUs

•      Vesting period: 100% of the RSUs vests on January 4, 2021

•      There are no other vesting conditions

The 2019 Plan – Board and Extraordinary

On March 1, 2019, Atento granted a new share-based payment arrangement to Board directors and an Extraordinary Grant for a total in a one-time award with a one-year vesting period.

1.Time Restricted Stock Units (“RSU”) (equity settled)

•      Grant date: March 1, 2019

•       Amount: 109,785 and 704,057 RSUs

•       Vesting period: 100% of the RSUs vests on January 2, 2020

•      There are no other vesting conditions

The 5 Years Plan

On March 1, 2019, Atento granted a new share-based payment arrangement to Board directors (a total of 238,663 RSUs) in a one-time award with a five-year vesting period of 20% each year.

1.Time Restricted Stock Units (“RSU”) (equity settled)

•      Grant date: March 1, 2019

•      Amount: 238,663 RSUs

•      Vesting period: 20% of the RSUs each year beginning on January 2, 2020 and last vested on January 4, 2024.

•        There are no other vesting conditions

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The 2019 Plan

On June 3, 2019, Atento granted a new share-based payment arrangement to directors, officers and other employees, for the Company and its subsidiaries. The share-based payment had the following arrangements:

1.Time Restricted Stock Units (“RSU”) (equity settled)

•      Grant date: June 3, 2019

•      Amount: 2,560,666 RSUs

•      Vesting period: 100% of the RSUs vests on January 3, 2022

•      There are no other vesting conditions

As of January 2, 2020, a total of 1,305,065 TRSUs vested, which is composed of 443,490 RSUs of the 2017 Plan granted on July 3, 2017, 109,785 RSUs of the Board of directors Plan granted on March 1, 2019, 704,057 RSUs of the Board and Extraordinary Plan granted on March 1, 2019 and 47,733 RSUs of the 20% of the 5 Years Plan granted on March 1, 2019.

The 2020 Plan – Board and Extraordinary

On March 2, 2020, Atento granted a new share-based payment arrangement to Board directors and an Extraordinary Grant for a total in a one-time award with a one-year vesting period.

1.Time Restricted Stock Units (“RSU”) (equity settled)

•      Grant date: March 2, 2020

•      Amount: 153,846 and 16,722 RSUs

•      Vesting period: 100% of the RSUs vests on January 4, 2021

•      There are no other vesting conditions

b) Measurement of fair value

The fair value of the RSUs, for all arrangements, has been measured using the Black-Scholes model. For all arrangements are equity settled and the fair value of RSUs is measured at grant date and not remeasured subsequently.

The inputs used in the measurement of the fair values at the grant date of the 2020 Plan – Board and Extraordinary are presented below:

The 2020 Plan – Board and Extraordinary

  Time RSU   Comments
       
Variable      
Stock price (USD) 2.99   Stock price of Atento S.A. in USD at grant date March 2, 2020
Strike price (USD) 0.01   For valuation purposes set to 0.01
Time (years) 1   Time to vest as per the contract

 

The Time RSU reflects the fact that 100% of the Time RSUs will vest on January 4, 2021.

 

 

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c) Outstanding RSUs

As of June 30, 2020, there are 556,190 Time RSUs outstanding related to 2018 Grant, 190,930 Time RSUs outstanding related to 2019 – Plan 5Y Grant, 2,170,957 Time RSUs outstanding related to 2019 Grant and 170,568 Time RSUs outstanding related to 2020 Board and Extraordinary Grant. Holders of RSUs will receive the equivalent in shares of Atento S.A. without cash settlement of stock values when the RSUs vest.

 

The 2017 Plan Time RSU
Outstanding December 31, 2019 443,490
Vested (443,490)
Outstanding June 30, 2020 -
   
   
The 2018 Plan Time RSU
Outstanding December 31, 2019 647,215
Forfeited (*) (91,025)
Outstanding June 30, 2020 556,190
   
   
The 2019 Plan – Board and Extraordinary Time RSU
Outstanding December 31, 2019 813,842
Vested (813,842)
Outstanding June 30, 2020 -
   
   
The 2019 Plan – 5 Years Time RSU
Outstanding December 31, 2019 238,663
Vested (47,733)
Outstanding June 30, 2020 190,930
   
   
The 2019 Plan Time RSU
Outstanding December 31, 2019 2,622,843
Forfeited (*) (451,886)
Outstanding June 30, 2020 2,170,957
   
   
The 2020 Plan – Board and Extraordinary Time RSU
Granted March 2, 2020 170,568
Forfeited (*) -
Outstanding June 30, 2020 170,568
   
(*) RSUs are forfeited during the year due to employees failing to satisfy the service conditions.

 

 

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d) Impacts in Profit or Loss

In the six months ended June 30, 2020, 1,489 thousand U.S. dollars related to stock-based compensation and the related social charges were recorded as employee benefit expenses.

 

10. FINANCIAL ASSETS

As of December 31, 2019 and June 30, 2020 all the financial assets of the Company are classified as amortized cost. As of December 31, 2019 and June 30, 2020, the BRL/USD Cross Currency Swap was also designated as Net Investment Hedge.

Credit risk arises from the possibility that the Atento Group might not recover its financial assets at the amounts recognized and in the established terms. Atento Group Management considers that the carrying amount of financial assets is similar to the fair value.

As of June 30, 2020, Atento Teleservicios España S.A., Atento Chile S.A., Teleatento del Perú S.A.C, Atento Brasil S.A. and Atento Mexico have entered into factoring agreements without recourse, anticipating an amount of 70,428 thousand U.S. dollars, receiving cash net of discount, the related trade receivables were realized and interest expenses were recognized in the statement of operations.

Details of other financial assets as of December 31, 2019 and June 30, 2020 are as follow:

  Thousands of U.S. dollars
  12/31/2019   06/30/2020
  (audited)   (unaudited)
       
Other non-current receivables (*) 9,457   8,721
Non-current guarantees and deposits 45,195   32,372
Total non-current 54,652   41,093
Other current receivables 76   6
Current guarantees and deposits 1,018   1,177
Total current 1,094   1,183
Total 55,746   42,276

 

(*) “Other non-current receivables” as of December 31, 2019 and June 30, 2020 primarily comprise a loan granted by the subsidiary RBrasil to third parties. The effective annual interest rate is CDI + 3.75% p.a., maturity in five years beginning on May 4, 2017, when the value of the loan will be amortized in a single installment.

The breakdown of “Trade and other receivables” as of December 31, 2019 and June 30, 2020 is as follow:

  Thousands of U.S. dollars
  12/31/2019   06/30/2020
  (audited)   (unaudited)
Non-current trade receivables 6,321   4,965
Other non-financial assets (*) 15,803   11,670
Total non-current 22,124   16,635
Current trade receivables 334,949   258,812
Other receivables 5,953   4,823
Prepayments 12,675   13,510
Personnel 6,022   5,687
Total current 359,599   282,832
Total 381,723   299,467

 

(*) “Other non-financial assets” as of June 30, 2020 primarily comprise tax credits with the Brazilian social security authority (Instituto Nacional do Seguro Social), recorded in Atento Brasil S.A.

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For the purpose of the interim condensed consolidated financial statements of cash flows, cash and cash equivalents are comprised of the following:

  Thousands of U.S. dollars
  12/31/2019   06/30/2020
(audited)   (unaudited)
Deposits held at call 96,978   119,381
Short-term financial investments 27,728   87,813
Total 124,706   207,194

 

“Short-term financial investments” comprises short-term fixed-income securities in Brazil, which mature in less than 90 days and accrue interest pegged to the CDI.

 

11. FINANCIAL LIABILITIES

Details of debt with third parties as of December 31, 2019 and June 30, 2020 are as follow:

   Thousands of U.S. dollars
    12/31/2019    6/30/2020 
    (audited)    (unaudited)  
Senior Secured Notes   490,012    491,883 
Bank Borrowing   748    3,227 
Lease Liabilities   142,738    90,982 
Total non-current   633,498    586,092 
Senior Secured Notes   11,910    11,910 
Super Senior Credit Facility   -      50,704 
Bank Borrowing   23,180    40,725 
Lease Liabilities   52,027    43,695 
Total current   87,117    147,034 
TOTAL DEBT WITH THIRD PARTIES   720,615    733,126 

 

Senior Secured Notes

On August 10, 2017, Atento Luxco 1 S.A., closed an offering of 400,000 thousand U.S. dollars aggregate principal amount of 6.125% Senior Secured Notes due 2022 in a private placement transaction. The notes are due in August 2022. The 2022 Senior Secured Notes are guaranteed on a senior secured basis by certain of Atento’s wholly owned subsidiaries. The issuance costs of 11,979 thousand U.S. dollars related to this new issuance are recorded at amortized cost using the effective interest method.

On April 4, 2019, Atento Luxco 1 S.A., closed an offering of an additional $100.0 million in aggregate principal amount of its 6.125% Senior Secured Notes due 2022 (the "Additional Notes"). The Additional Notes were offered as additional notes under the indenture, dated as of August 10, 2017, pursuant to which the Issuer previously issued $400.0 million aggregate principal amount of its 6.125% Senior Secured Notes due 2022 (the "Existing Notes"). The Additional Notes and the Existing Notes are treated as the same series for all purposes under the indenture and collateral agreements, each as amended and supplemented, that govern the Existing Notes and the Additional Notes.

The terms of the Indenture governing the 2022 Senior Secured Notes, among other things, limit, in certain circumstances, the ability of Atento Luxco 1 and its restricted subsidiaries to: incur certain additional indebtedness; make certain dividends, distributions, investments and other restricted payments; sell the property or assets to another person; incur additional liens; guarantee additional debt; and enter into transaction with affiliates. As of June 30, 2020, we were in compliance with these covenants. The outstanding amount at June 30, 2020 is 503,793 thousand U.S. dollars.

 

22 
 

All interest payments are made on a half yearly basis.

The fair value of /the Senior Secured Notes, calculated on the basis of their quoted price on June 30, 2020, is 412,706 thousand U.S. dollars.

The fair value hierarchy of the Senior Secured Notes is Level 1 as the fair value is based on the quoted market price at the reporting date.

Details of the corresponding debt at each reporting date are as follows:

      Thousands of U.S. dollars
      2019   2020
Maturity Currency   Principal   Accrued interests   Total debt   Principal   Accrued interests   Total debt
2022 U.S. dollar   490,012   11,910   501,922   491,883   11,910   503,793

 

Bank borrowings

On February 3, 2014, Atento Brasil S.A. entered into a credit agreement with Banco Nacional de Desenvolvimento Econômico e Social - BNDES (“BNDES”) in an aggregate principal amount of 300,000 thousand Brazilian Reais (the “BNDES Credit Facility”), equivalent to 109,700 thousand U.S. dollars as of each disbursement date.

The total amount of the BNDES Credit Facility is divided into five tranches subject to the following interest rates:

Tranche   Interest Rate
 
Tranche A   Long-Term Interest Rate (Taxa de Juros de Longo Prazo -TJLP) plus 2.5% per annum
Tranche B   SELIC Rate plus 2.5% per annum
Tranche C   4.0% per year
Tranche D   6.0% per year
Tranche E   Long-Term Interest Rate (Taxa de Juros de Longo Prazo -TJLP)

Each tranche intends to finance different purposes, as described below:

•  Tranche A and B: investments in workstations, infrastructure, technology, services and software development, marketing and commercialization, within the scope of BNDES program – BNDES Prosoft.

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•  Tranche C: IT equipment acquisition, covered by law 8.248/91, with national technology, necessary to execute the project described on tranches “A” and “B”.

•  Tranche D: acquisitions of domestic machinery and equipment, within the criteria of FINAME, necessary to execute the project described on tranches “A” and “B”.

•  Tranche E: investments in social projects to be executed by Atento Brasil S.A.

 

Date   Tranche A   Tranche B   Tranche C   Tranche D   Tranche E   Total
March 27, 2014   11,100   5,480   7,672   548   -   24,800
April 16, 2014   4,714   2,357   3,300   236   -   10,607

July 16, 2014

  -   -   -   -   270   270
August 13, 2014   27,584   3,013   4,430   477   -   35,504
Subtotal 2014   43,398   10,850   15,402   1,261   270   71,181
March 26, 2015   5,753   1,438   2,042   167   -   9,400
April 17, 2015   12,022   3,006   4,266   349   -   19,643
December 21, 2015   7,250   1,807   -   -   177   9,234
Subtotal 2015   25,025   6,251   6,308   516   177   38,277
October 27, 2016   -   -   -   -   242   242
Subtotal 2016   -   -   -   -   242   242
TOTAL   68,423   17,101   21,710   1,777   689   109,700

 

BNDES releases amounts under the credit facility once the debtor met certain requirements in the contract including delivering the guarantee (stand-by letter) and demonstrating the expenditure related to the project. Since the beginning of the credit facility, the following amounts were released:

This facility should be repaid in 48 monthly installments. The first payment was made on March 15, 2016 and the last payment will be due on February 15, 2020.

The BNDES Credit Facility contains covenants that restrict Atento Brasil S.A.’s ability to transfer, assign, change or sell the intellectual property rights related to technology and products developed by Atento Brasil S.A. with the proceeds from the BNDES Credit Facility. As of December 31, 2019, Atento Brasil S.A. was in compliance with these covenants. The BNDES Credit Facility does not contain any other financial maintenance covenant.

The BNDES Credit Facility contains customary events of default including the following: (i) reduction of the number of employees without providing program support for outplacement, as training, job seeking assistance and obtaining pre-approval of BNDES; (ii) existence of unfavorable court decision against the Company for the use of children as workforce, slavery or any environmental crimes and (iii) inclusion in the by-laws of Atento Brasil S.A. of any provision that restricts Atento Brasil S.A’s ability to comply with its financial obligations under the BNDES Credit Facility.

On September 26, 2016, Atento Brasil S.A. entered into a new credit agreement with BNDES in an aggregate principal amount of 22,000 thousand Brazilian Reais, equivalent to 4,232 thousand U.S. dollars as of March 31, 2020. The interest rate of this facility is Long-Term Interest Rate (Taxa de Juros de Longo Prazo - TJLP) plus 2.0% per annum. The facility should be repaid in 48 monthly installments. The first payment was due on November 15, 2018 and the last payment will be due on October 15, 2022. This facility is intended to finance an energy efficiency project to reduce power consumption by implementing new lightening, air conditioning and automation technology. On November 24, 2017, 6,500 thousand Brazilian Reais (equivalent to 1,993 thousand U.S. dollars) were released under this facility.

As of June 30, 2020, the outstanding amount under BNDES Credit Facility was 702 thousand U.S. dollars.

The fair value as of June 30, 2020 calculated based on discounted cash flow is 673 thousand U.S. dollars.

On April 25, 2017, Atento Brasil S.A. entered into a bank credit certificate (cédula de crédito bancário) with Banco Santander (Brasil) S.A. in an aggregate principal amount of up to 80,000 thousand Brazilian Reais (the “2017 Santander Bank Credit Certificate”), equivalent to approximately 14,609 thousand U.S. dollars as of June 30, 2020. The interest rate of the 2017 Santander Bank Credit Certificate equals to the average daily rate of the one day “over extra-group” – DI – Interbank Deposits (as such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 2.70% per annum. The 2017 Santander Bank Credit Certificate matures every 180 days and has been renewed on a regular basis. On April 07, 2020, we paid the full outstanding amount of 45,063 thousand Brazilian Reais, equivalent to 8,229 thousand U.S. dollars as of June 30, 2020, and the “2017 Santander Bank Credit Certificate” was terminated by mutual agreement between the parties.

 

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On August 10, 2017, Atento Luxco 1 S.A. entered into a new Super Senior Revolving Credit Facility (the “Super Senior Revolving Credit Facility”) which provides borrowings capacity of up to 50,000 thousand U.S. dollars and will mature on February 10, 2022. Banco Bilbao Vizcaya Argentaria, S.A., as the agent, the Collateral Agent and BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, Morgan Stanley Bank N.A. and Goldman Sachs Bank USA are acting as arrangers and lenders under the Super Senior Revolving Credit Facility.

The Super Senior Revolving Credit Facility may be utilized in the form of multi-currency advances for terms of one, two, three or six months. The Super Senior Revolving Credit Facility bears interest at a rate per annum equal to LIBOR or, for borrowings in euro, EURIBOR or, for borrowings in Mexican Pesos, TIIE plus an opening margin of 4.25% per annum. The margin may be reduced under a margin ratchet to 3.75% per annum by reference to the consolidated senior secured net leverage ratio and the satisfaction of certain other conditions.

The terms of the Super Senior Revolving Credit Facility Agreement limit, among other things, the ability of the Issuer and its restricted subsidiaries to (i) incur additional indebtedness or guarantee indebtedness; (ii) create liens or use assets as security in other transactions; (iii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iv) make investments; (v) merge, amalgamate or consolidate, or sell, transfer, lease or dispose of substantially all of the assets of the Issuer and its restricted subsidiaries; (vi) enter into transactions with affiliates; (vii) sell or transfer certain assets; and (viii) agree to certain restrictions on the ability of restricted subsidiaries to make payments to the Issuer and its restricted subsidiaries. These covenants are subject to a number of important conditions, qualifications, exceptions and limitations that are described in the Super Senior Revolving Credit Facility Agreement.

The Super Senior Revolving Credit Facility Agreement includes a financial covenant requiring the drawn super senior leverage ratio not to exceed 0.35:1.00 (the “SSRCF Financial Covenant”). The SSRCF Financial Covenant is calculated as the ratio of consolidated drawn super senior facilities debt to consolidated pro forma EBITDA for the twelvemonth period preceding the relevant quarterly testing date and is tested quarterly on a rolling basis, subject to the Super Senior Revolving Credit Facility being at least 35% drawn (excluding letters of credit (or bank guarantees), ancillary facilities and any related fees or expenses) on the relevant test date. The SSRCF Financial Covenant only acts as a draw stop to new drawings under the Revolving Credit Facility and, if breached, will not trigger a default or an event of default under the Super Senior Revolving Credit Facility Agreement. The Issuer has four equity cure rights in respect of the SSRCF Financial Covenant prior to the termination date of the Super Senior Revolving Credit Facility Agreement, and no more than two cure rights may be exercised in any four consecutive financial quarters.

On March 25, 2020, Atento Luxco 1 S.A. withdrew the full amount of 50,000 thousand U.S. dollars maturing on September 21, 2020 with an annual interest rate of Libor + 4.25%.

As of June 30, 2020, we were in compliance with this covenant and the outstanding amount under this facility was 50,704 thousand U.S. dollars.

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On March 13, 2019, Atento Brasil S.A. entered into a financing agreement with Banco Santander Brasil S.A. (“Risco Sacado”) for the annual Microsoft software licenses, for an amount of 23,254 thousand Brazilian Reais, maturing on March 9, 2020, with an annual interest rate of 8.9% per annum. The total outstanding balance was paid on the due date.

On August 13, 2019, Atento Brasil S.A. entered into an overdraft credit line agreement with Banco do Brasil for an amount of 30,000 thousand Brazilian Reais, with maturity every six months, with an annual interest rate of CDI plus 2.127% per annum. On February 27, 2020, the amount of the agreement was increased up to 40,000 thousand Brazilian Reais, with an annual interest rate of CDI plus 5.50% per annum, with next maturity date on July 27, 2020. As of June 30, 2020, the outstanding balance was 7,306 thousand U.S. dollars.

On August 20, 2019, Atento Brasil S.A. entered into a loan agreement with Banco ABC Brasil for an amount of 7,766 thousand Euros maturing on February 18, 2020 with an annual interest rate of 1.25%. In connection with the loan, Atento Brasil S.A. entered into a swap agreement through which it receives fixed interest rates in EURO, in the same amount of the loan agreement, and pays variable interest rate at a rate per annum equal to the average daily rate of the one day “over extragroup” – DI – Interbank Deposits (as such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 1.80% over 35,000 thousand Brazilian Reais. The total outstanding balance was paid on the due date.

On February 14, 2020, Atento Brasil S.A. entered into a loan agreement with Banco ABC Brasil for an amount of 7,402 thousand Euros maturing on August 13, 2020 with an annual interest rate of 1.49%. In connection with the loan, Atento Brasil S.A. entered into a swap agreement through which it receives fixed interest rates in EURO, in the same amount of the loan agreement, and pays variable interest rate at a rate per annum equal to the average daily rate of the one day “over extragroup” – DI – Interbank Deposits (as such rate is disclosed by CETIP in the daily release available on its web page), plus a spread of 1.95% over 35,000 thousand Brazilian Reais. As of June 30, 2020, the outstanding balance was 6,923 thousand U.S. dollars considering the swap adjustment.

On February 20, 2020, Atento Brasil S.A. entered into a bank credit certificate (cédula de crédito bancário) with Banco Itaú for an amount of 35,217 thousand Brazilian Reais, maturing on May 20, 2020 with an annual interest rate of CDI plus 1.95% per annum. The total outstanding balance was paid on the due date.

On March 13, 2020, Atento Brasil S.A. entered into a financing agreement with Banco Itaú (“Risco Sacado”) for the annual Microsoft software licenses, for an amount of 24,499 thousand Brazilian Reais, maturing on April 1, 2021, with an annual interest rate of 7.2%. As of June 30, 2020, the outstanding balance was 4,474 thousand U.S. dollars.

On April 06, 2020, Atento Brasil S.A. entered into a loan agreement with Banco Santander for an amount of 110,000 thousand Brazilian Reais, maturing on April 06, 2021 with an annual interest rate of CDI plus 4.96% per annum. As of June 30, 2020, the outstanding balance was 20,314 thousand U.S. dollars.

On May 12, 2020, Atento Peru entered a loan agreement with Scotiabank Peru, under the government financing program related to Covid-19 (Reactiva Peru), for an aggregate principal amount of 10,000 thousand Peruvian Soles, with an annual interest rate of 1.0% per annum. This facility should be repaid in 36 months. The first payment will be due on May 12, 2021 and the last payment will be due on May 12, 2023. As of June 2020, the outstanding balance was 2,828 thousand U.S. dollars.

 

26 
 

Derivatives

Details of derivative financial instruments as of December 31, 2019 and June 30, 2020 are as follows:

   Thousands of U.S. dollars
   12/31/2019  06/30/2020
    Assets     Liabilities     Assets     Liabilities  
                     
Cross currency swaps - net investment hedges   5,382    (2,289)   16,191    (4,812)
Cross currency swaps - that do not meet the criteria for hedge accounting   -      (167)   1,405    -   
Total   5,382    (2,456)   17,596    (4,812)
                     
Non-current portion   5,382    (2,289)   16,191    (4,812)
Current portion   -      (167)   1,405    -   

 

Derivatives held for trading are classified as current assets or current liabilities. The fair value of a hedging derivative is classified as a non-current asset or a non-current liability, as applicable, if the remaining maturity of the hedged item exceeds twelve months. Otherwise, it is classified as a current asset or liability.

In connection with the Refinancing process and the repayment of the first Brazilian Debentures, the hedge accounting for the interest rate swap was discontinued and the OCI balance was transferred to finance cost. Thereafter, any changes in fair value was directly recognized in the statements of operations.

On April 1, 2015, the Company started a hedge accounting for net investment hedge related to exchange risk between the U.S. dollar and foreign operations in Euro (EUR), Mexican Peso (MXN), Colombian Peso (COP) and Peruvian Nuevo Sol (PEN). In connection with the Refinancing process, 8 of the 10 derivatives contracts designated as Net Investment Hedges were terminated between August 1, 2017 and August 4, 2017, generating positive cash of 46,080 thousand U.S. dollars, net of charges. During August 2017, Atento Luxco 1 also entered into new Cross-Currency Swaps related to exchange risk between U.S. dollars and Euro (EUR), Mexican Peso (MXN), Brazilian Reais (BRL) and Peruvian Nuevo Sol (PEN). Except for the Cross-Currency Swap between U.S. dollars and Brazilian Reais (BRL), all Cross-Currency Swaps were designated for hedge accounting as net investment hedge. On January 01, 2019, the Company started to also designate the Cross-Currency Swap between U.S. dollars and Brazilian Reais (BRL) for hedge accounting as net investment hedge.

On January 1, 2019, the Company designated the Cross-Currency Swap between U.S. dollars and Brazilian Reais for hedge accounting as net investment hedge. Prior to the date of designation of the Cross-Currency Swap, this hedging instrument was electively not designated as a hedge accounting because the change in fair value was intended to partially offset changes in the USD-BRL foreign currency component of the BRL denominated intercompany debt, which were recorded in earnings. Effective January 1, 2019, the intercompany debt was reclassified as “permanent in equity” (which assumes that the related payable is neither planned nor likely to occur in the foreseeable future, since it is in substance, a part of the entity’s net investment in that foreign operation) and, as a consequence, the changes arising from the exchange rate are recorded in other comprehensive income.

On January 1, 2020 Atento decided to assign the loan agreement between Atento Luxco 1 and Atento Mexico Holdco as permanent in equity, with its maturities to be renewed per indefinite time, since the repayment is neither planned nor likely to occur in the foreseeable future. Therefore, changes related to the USD-MXN exchange rate are now recorded in equity as part of other comprehensive income.

On February 14, 2020, Atento Brasil S.A. entered into a cross-currency swap to hedge a EURO loan of 7,402 thousand Euros at a fixed rate of 1.49% exchanged to a 35,000 thousand Brazilian Reais with interest rate of the average daily rate of the one day “over extra-group” – DI – Interbank Deposits - plus a spread of 1.95% per annum.

On June 30, 2020, details of cross-currency swaps that do not qualify for hedge accounting and net investment hedges were as follows:

 

27 
 

 

Cross-Currency Swaps - that do not quality for hedge accounting
Bank  Maturity  Purchase currency  Selling currency  Notional (thousands)  Fair value asset  Fair value liability  Other comprehensive income  Change in OCI, net of taxes  Statements of operations - Finance cost
               (unaudited)
               D/(C)  D/(C)  D/(C)  D/(C)  D/(C)
ABC Brasil S.A.   Aug-20   EUR  BRL   7,402    8,330    (6,924)   -      -      -   
                    8,330    (6,924)   -      -      -   
                                          
Derivative financial instrument - asset   1,405                     

 

 

Net Investment Hedges
Bank  Maturity  Purchase currency  Selling currency  Notional (thousands)  Fair value asset  Fair value liability  Other comprehensive income 

Change in

OCI

  Statements of operations - Finance cost
               (unaudited)
               D/(C)  D/(C)  D/(C)  D/(C)  D/(C)
                            
Nomura International   Aug-22   EUR  USD   34,109    486    -      (879)   164    -   
Goldman Sachs   Aug-22   MXN  USD   1,065,060    -      (2,150)   (1,560)   5,574    -   
Goldman Sachs   Aug-22   PEN  USD   194,460    -      (2,662)   (228)   5,352    -   
Goldman Sachs   Aug-22   BRL  USD   754,440    12,495    -      (7,430)   8,243    (284)
Santander   Jan-20   USD  EUR   20,000    -      -      1,742    -      -   
Santander   Jan-20   USD  MXN   11,111    -      -      (2,113)   -      -   
Goldman Sachs   Jan-20   USD  EUR   48,000    -      -      3,587    -      -   
Goldman Sachs   Jan-20   USD  MXN   40,000    -      -      (7,600)   -      -   
Nomura International   Jan-20   USD  MXN   23,889    -      -      (4,357)   -      -   
Nomura International   Jan-20   USD  EUR   22,000    -      -      1,620    -      -   
Goldman Sachs   Jan-18   USD  PEN   13,800    -      -      22    -      -   
Goldman Sachs   Jan-18   USD  COP   7,200    -      -      (80)   -      -   
BBVA   Jan-18   USD  PEN   55,200    -      -      71    -      -   
BBVA   Jan-18   USD  COP   28,800    -      -      (359)   -      -   
Morgan Stanley   Aug-22   USD  BRL   308,584    3,102    -      (3,064)   3,162    -   
Morgan Stanley   Aug-22   USD  PEN   66,000    108    -      (86)   161    -   
Goldman Sachs   Aug-22   USD  MXN   1,065,060    -      -      2,229    (2,229)   -   
Goldman Sachs   Aug-22   USD  PEN   194,460    -      -      2,965    (2,965)   -   
                    16,191    (4,812)   (15,520)   17,462    (284)
                                          
Derivative financial instrument - asset   16,191                     
Derivative financial instrument - liability   (4,812)                    

 

 

 

28 
 

Lease liabilities

Leases are shown as follows in the balance sheet as at June 30, 2020 and in the income statement for second quarter of the year:

   

December

31, 2019

 

Additions/

(Disposals)

  Translation difference  

June

30, 2020

Assets                                
Right-of-use assets     253,424       8,087       (67,321 )     194,140  
(-) Accumulated depreciation     (71,860 )     (20,647 )     22,730       (69,777 )
Total     181,564       (10,560 )     (44,641 )     124,363  

 

   

December

31, 2019

  Additions/ (Disposals)   Payments   Interest accrued   Interest payed   Translation difference  

June

30, 2020

Liabilities                                                        
Current liabilities     52,027       1,716       (19,411 )     7,605       (779 )     2,537       43,695  
Non-current liabilities     142,738       6,029       -         -         -         (57,785)       90,982  
Total     194,765       7,745       (19,411 )     7,605       (779 )     (55,248)       134,677  

  

12. PROVISIONS AND CONTINGENCIES

Atento has contingent liabilities arising from lawsuits in the normal course of its business. Contingent liabilities with a probable likelihood of loss are recorded as liabilities and the breakdown is as follows:

  Thousands of U.S. dollars
  12/31/2019   06/30/2020
  (audited)   (unaudited)
Non-current      
Provisions for liabilities 24,295   17,410
Provisions for taxes 9,394   13,996
Provisions for dismantling 9,599   7,007
Other provisions 5,038   1,302
Total non-current 48,326   39,715
       
Current      
Provisions for liabilities 11,533   13,255
Provisions for taxes 2,002   1,381
Provisions for dismantling 314   512
Other provisions 4,922   7,447
Total current 18,771   22,595

 

“Provisions for liabilities” primarily relate to provisions for legal claims underway in Brazil. Atento Brasil S.A. has made payments in escrow related to legal claims from ex-employees, amounting to 38,823 thousand U.S. dollars and 26,902 thousand U.S. dollars as of December 31, 2019 and June 30, 2020, respectively. Also, the variation of the period was impacted by the Brazilian Reais and Argentinian Peso depreciations against the U.S. dollar.

“Provisions for taxes” mainly relate to probable contingencies in Brazil with respect to social security payments and other taxes, which are subject to interpretations by tax authorities. Atento Brasil S.A. has made payments in escrow related to taxes claims 3,468 thousand U.S. dollars and 2,467 thousand U.S. dollars as of December 31, 2019 and June 30, 2020, respectively.

29 
 

The amount recognized under “Provision for dismantling” corresponds to the necessary cost of dismantling of the installations held under operating leases to bring them to its original condition.

As of June 30, 2020, lawsuits outstanding in the courts were as follows:

Brazil

At June 30, 2020, Atento Brasil was involved in 9,527 labor-related disputes (9,408 labor as of December 31, 2019), being 9,405 of labor massive and 34 of outliers and others, filed by Atento’s employees or ex-employees for various reasons, such as dismissals or claims over employment conditions in general. The total amount of the main claims classified as possible was 34.150 thousand U.S. dollars (62,514 thousand U.S. dollars on December 31, 2019), of which 20,946 thousand U.S. dollars Labor Massive-related, 1,018 thousand U.S. dollars Labor Outliers-related and 12,186 thousand U.S. dollars Special Labor cases related.

On June 30, 2020, the subsidiary RBrasil Soluções S.A. holds contingent liabilities of labor nature classified as possible in the amount of 33 thousand U.S. dollars.

On June 30, 2020, the subsidiary Interfile holds contingent liabilities of labor nature and social charges classified as possible in the amount of 372 thousand U.S. dollars.

As of June 30, 2020, Atento Brasil S.A. is party to 25 civil lawsuits ongoing for various reasons (5 on December 31, 2019) which, according to the Company’s external attorneys, materialization of the risk event is possible. The total amount of the claims is 4,518 thousand U.S. dollars (2,365 thousand U.S. dollars on December 31, 2019).

As of June 30, 2020, the subsidiary RBrasil Soluções S.A. holds 100 civil lawsuits ongoing for various reasons classified as possible in the amount of 446 thousand U.S. dollars.

On June 30, 2020, the subsidiary Interfile holds 12 civil lawsuits ongoing for various reasons classified as possible in the amount of 206 thousand U.S. dollars.

As of June 30, 2020, Atento Brasil is party to 31 disputes ongoing with the tax authorities and social security authorities for various reasons relating to infraction proceedings filed (29 on December 31, 2019) which, according to the Company’s external attorneys, materialization of the risk event is possible. The total amount of these claims is 156,427 thousand U.S. dollars (36,508 thousand U.S. dollars on December 31, 2019).

In March 2018, Atento Brasil S.A. an indirect subsidiary of Atento S.A. received a tax notice from the Brazilian Federal Revenue Service, related to Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) for the period from 2012 to 2015, due to the disallowance of the expenses on tax amortization of goodwill and deductibility of certain financing costs originated of the acquisition of Atento Brasil S.A. by Bain Capital in 2012, and the withholding taxes on payments made to certain of our former shareholders.

The amount of the tax assessment from the Brazilian Federal Revenue Service, not including interest and penalties, was approximately 105,268 thousand U.S. dollars, and was assessed by the Company’s outside legal counsel as possible loss. We disagree with the proposed tax assessment and are defending our position, which we believe is meritorious, through applicable administrative and, if necessary, judicial remedies. On September 26, 2018 the Federal Tax Office issued a decision accepting the application of the statute of limitation on the withholding tax discussion. We and the Public Attorney appealed to the Administrative Tribunal (CARF). On February 11, 2020 CARF issued a partially favorable decision, ruling in favor of Atento, recognizing the application of the statute of limitation on the withholding tax discussion and reducing the penalty imposed. Based on our interpretation of the relevant law and based on the advice of our legal and tax advisors, we believe the position we have taken is sustainable. Consequently, no provisions are recognized regarding these proceedings.

On June 30, 2020, the subsidiaries Interfile and Interservicer hold 24 disputes with the tax authorities and social security authorities ongoing for various reasons classified as possible in the amount of 442 thousand U.S. dollars.

Spain

At June 30, 2020, Atento Teleservicios España S.A.U. including its branches and our other Spanish companies were party to labor-related disputes filed by Atento employees or former employees for different reasons, such as dismissals and disagreements regarding employment conditions. According to the Company’s external lawyers, materialization of the risk event is possible for 1,264 thousand U.S dollars.

30 
 

Mexico

At June 30, 2020, Atento Mexico through its two entities (Atento Servicios, S.A. de C.V. and Atento Atencion y Servicios, S.A. de C.V.) is a party of labor related disputes filed by Atento employees that abandoned their employment or former employees that base their claim on justified termination reasons, totaling 22,588 thousand U.S. dollars (Atento Servicios, S.A. de C.V. 14,480 thousand U.S. dollars and Atento Atencion y Servicios, S.A. de C.V. 8,107 thousand U.S. dollars), according to the external labor law firm for possible risk labor disputes.

Argentina

In Argentina, as a consequence of an unfavorable sentence on the case “ATUSA S.A.” issued by Argentinian Internal Revenue Services (“Administración Federal de Ingresos Públicos”), notified on February 2017, the contingency qualified as “possible”. In July 2019, Atento Argentina and OSECAC signed an agreement and closed this proceeding.

 

13. INCOME TAX

The breakdown of the Atento Group’s income tax expense is as follows:

   Thousands of U.S. dollars
   For the three months ended June 30,  For the six months ended June 30,
  2019  2020  2019  2020
   (unaudited)  (unaudited)
Current tax expense   (7,031)   (3,878)   (10,676)   (8,829)
Deferred tax   5,578    6,957    12,042    12,235 
DTA write-off (a)   4,554    -      (33,251)   -   
Tax adjustments over previous years   -      (717)   -      (879)
Total income tax expense   3,101    2,362    (31,885)   2,527 

 

For the three months ended June 30, 2020, Atento Group’s interim condensed consolidated financial information presented a loss before income tax in the amount of loss of (20,699) thousand U.S. dollars and an income tax benefit of 2,362 thousand U.S. dollars compared to a loss before income tax in the amount of (9,724) thousand U.S. dollars and an income tax benefit of 3,101 thousand U.S. dollars for the three months ended June 30, 2019.

For the six months ended June 30, 2020, Atento Group’s interim condensed consolidated financial information presented a loss before income tax in the amount of (28,291) thousand U.S. dollars and an income tax benefit of 2,527 thousand U.S. dollars compared to a loss before income tax in the amount of 20,349 thousand U.S. dollars and an income tax expense of 31,885 thousand U.S. dollars for the six months ended June 30, 2019. Income tax expense for the six months ended June 30, 2019 contains a negative one-off tax impact of $37.8 million due to Spain tax audit assessment, signed in May 2019.

(a)In the first quarter of 2019, in the context of a global Tax Audit of the periods 2013-2016, Atento Spain, as the representative company of the tax group comprised of the Spanish direct subsidiaries of Atento S.A., signed a tax agreement with the Spanish tax authorities. The criteria adopted by the Tax Administration was in connection with certain aspects, among others, of the deductibility of certain specific intercompany financing and operating expenses originated during the acquisition of Atento Spain, which was different from the tax treatment applied by the Company. As a result of this discrepancy, the amount of the tax credits of the Spanish tax group, together with the corresponding effects in subsequent tax periods, has being reduced in an amount of $37.8 million.

Accordingly, the tax credits for losses carryforward in our financial statements for the first quarter of 2019, was negatively affected by $37.8 million. Also, the agreement negatively impacted our EBITDA in the first quarter of 2019 by $0.5 million and financial expenses of $0.1 million, due to the other adjustments made by the tax authorities. The agreement’s cash impact of $1.1 million affected our cash flow for the period ended June 30, 2019.

 

31 
 

 

IFRIC 23 Uncertainty over Income Tax Treatment

Atento reviewed the tax treatment under the terms of IFRIC 23 in all subsidiaries and as at the reporting date, the Group did not identify any material impact on the financial statements.

Atento implemented a process for periodically review the income tax treatments consistent under IFRIC 23 requirements across the Group.

 

14. LOSS PER SHARE

Basic loss per share is calculated by dividing the loss attributable to equity owners of the Company by the weighted average number of ordinary shares outstanding during the periods as demonstrated below:

    For the three months ended June 30,   For the six months ended June 30,
    2019   2020   2019   2020
    (unaudited)   (unaudited)
Result attributable to equity owners of the Company                
Atento’s loss attributable to equity owners of the parent (in thousands of U.S. dollars)     (6,872 )     (18,337 )     (52,847 )     (25,764 )
Weigthed average number of ordinary shares(*)     14,751,632       14,127,527       14,765,796       14,143,382  
Basic loss per share (in U.S. dollars)     (0.47 )     (1.30 )     (3.58 )     (1.82 )

 

(*) As a consequence of the reverse share split occurred in July 28, 2020 as described in Note 17c, weighted average number of ordinary shares was calculated by applying the ratio of conversion of 5.027090466672970 into the previous weighted average number of ordinary shares outstanding.

Diluted results per share are calculated by adjusting the weighted average number of ordinary shares outstanding to reflect the conversion of all dilutive ordinary shares. The weighted average number of ordinary shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The losses in the periods presented are anti-dilutive.

    For the three months ended June 30,   For the six months ended June 30,
    2019   2020   2019   2020
    (unaudited)   (unaudited)
Result attributable to equity owners of the Company                
Atento’s loss attributable to equity owners of the parent (in thousands of U.S. dollars)     (6,872 )     (18,337 )     (52,847 )     (25,764 )
Adjusted weighted average number of ordinary shares (*)     14,751,632       14,127,527       14,765,796       14,143,382  
Diluted loss per share (in U.S. dollars) (1)     (0.47 )     (1.30 )     (3.58 )     (1.82 )

 

(*) As a consequence of the reverse share split occurred in July 28, 2020 as described in Note 17c, adjusted weighted average number of ordinary shares was calculated by applying the ratio of conversion of 5.027090466672970 into the previous weighted average number of ordinary shares outstanding.

(1) For the three and six months ended June 30, 2019 and 2020, potential ordinary shares of 434,596 and 334,731, respectively, relating to the stock option plan were excluded from the calculation of diluted loss per share as the losses in the period are anti-dilutive.

 

32 
 

15. RELATED PARTIES

Directors

The directors of the Company as of the date on which the interim condensed consolidated financial information were prepared are John Madden, Roberto Rittes, Thomas Iannotti, David Garner, Antenor Camargo, Oliver Feix, Antonio Viana-Baptista and Carlos López-Abadía.

At June 30, 2020, some members of Board of Directors have the right to the stock-based compensation as described in Note 9.

Key management personnel

Key management personnel include those persons empowered and responsible for planning, directing and controlling the Atento Group’s activities, either directly or indirectly.

The following table shows the total remuneration paid to the Atento Group’s key management personnel in the three months ended June 30, 2019 and 2020:

  For the six months ended June 30,
2019   2020
  (unaudited)
Total remuneration paid to key management personnel 2,901   2,583

 

16. OTHER INFORMATION

a.       Guarantees

As of June 30, 2020, the Atento Group has guarantees to third parties amounting to 323,105 thousand U.S. dollars (350,062 thousand U.S. dollars at December 31, 2019).

 

17. SUBSEQUENT EVENTS

a) Tax assessment imposed on July 2020 related to Goodwill tax amortization and financial expenses deducted in Atento Brazil

In March 2018, Atento Brasil S.A. an indirect subsidiary of Atento S.A. received a tax notice from the Brazilian Federal Revenue Service, related to Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) for the period from 2012 to 2015, due to the disallowance of the expenses on tax amortization of goodwill and deductibility of certain financing costs originated of the acquisition of Atento Brasil S.A. by Bain Capital in 2012, and the withholding taxes on payments made to certain of our former shareholders.

Immediately after, the Brazilian tax administration started a procedure to audit the Corporate Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) of Atento Brasil S.A. for the period from 2016 to 2017. This tax audit concluded on July 10, 2020 with the notification of a tax assessment that rejects the deductibility of the above-mentioned financing expenses and the deductibility of the tax amortization of goodwill.

The tax assessment notified by the Brazilian Federal Revenue Service was approximately 59,955 thousand U.S. dollars, including penalties and interest. Company´s external legal advisors considered 45,704 thousand U.S. dollars as possible loss while the remaining 14,244 thousand U.S. dollars was assessment as remote loss. We disagree with the proposed tax assessment and are defending our position, which we believe is meritorious, through applicable administrative and, if necessary, judicial remedies.

 

33 
 

b) Bank borrowings

On July 13, 2020, Atento Brasil S.A. made a partial principal amortization in the amount of 60,000 thousand Brazilian Reais to the loan with Banco Santander maturing on April 6, 2021. All terms and conditions of the original loan remain unchanged.

c) Reverse share split

On July 28, 2020, the Company’s shareholders approved the conversion of 75,406,357 ordinary shares without nominal value, representing the current entire share capital of the Company, into 15,000,000 ordinary shares without nominal value using a ratio of conversion of 5.027090466672970. The reverse share split is expected to be effective after trading hours on July 29, 2020. The Company’s ordinary shares will begin trading on a split-adjusted basis on the New York Stock Exchange (the “NYSE”) at the open of trading on July 30, 2020.

34 
 

PART I - OTHER INFORMATION

 

LEGAL PROCEEDINGS

See Note 12 to the unaudited interim condensed consolidated financial information.

RISK FACTORS

There were no material changes to the risk factors described in section “Risk Factors” in our Annual Report on Form 20-F, for the year ended December 31, 2019.

35 
 

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.

  ATENTO S.A.
Date: August 5, 2020.  
 

By: /s/ Carlos López-Abadía

 

Name: Carlos López-Abadía

Title: Chief Executive Officer

 

By: /s/ José Antonio de Sousa Azevedo

 

Name: José Antonio de Sousa Azevedo

Title: Chief Financial Officer

 

36

 

Atento Reports Fiscal 2020 Second Quarter Results

Progressive improvement intra-quarter drove solid EBITDA recovery in June

Three Horizon Plan delivers higher Multisector sales and further penetrates high-growth verticals

Continued working capital improvements strengthen cash position and financial liquidity

 

NEW YORK, August 5, 2020 -- Atento S.A. (NYSE: ATTO) (“Atento” or the “Company”), the largest provider of customer-relationship management and business-process outsourcing services in Latin America, and among the top five providers globally, today announced its second quarter operating and financial results for the period ending June 30, 2020. All comparisons in this announcement are year-over-year (YoY) and in constant-currency (CCY), unless noted otherwise, and may differ from the corresponding 6-K filing due to certain intra-group eliminations.

Q2 2020 highlights

Rapid Covid-19 response continues protecting stakeholders and improves delivery capacity to 97.5%

·    60% of agents working from home, with call centers operating safely at full operating capacity

·    Approximately 80% of agents are now recruited, onboarded and initially trained online

·    Company continues helping assure continuity of essential services, through remote and secure customer services

Strong Recovery Intra-Quarter with Three Horizon Plan delivering growth via targeted fast-growing verticals

·    Higher sales to Born-Digital, Tech and Media & Entertainment companies; 20 new clients, including US companies

·    Multisector sales up 5.2% YoY and 7.7% YTD, twice the rate of the market, with mix increasing 540 bps to 68.2% of total revenue in 6M 2020

·    Run-rate EBITDA increases 31.9% YoY and 35.8% YTD, with corresponding margin expanding 330 bps to 14.7% in Q2 and 360 bps to 14.3% YTD

Cash position rises to $207.2 million, strengthening financial liquidity

·    Cash position increases 9.0% (ex revolvers) vs June 30, 2019 on working capital improvements

·    Free Cash Flow of $44.1 million, with $51.0 million in Operating Cash Flow

·    Leverage under control, even under adverse operating and FX scenarios, with Net Debt-to-EBITDA at 4.0x

Operational improvements accelerated under New Cost Savings program

·    New program targets $80 million in annual savings, with $47 million already implemented

·    Further reduction of cost structure through right-sizing of operations, as well as implementation of shared services, ZBB and WAHA model

New shareholders fully incorporated into Atento team

·    Significant support of Three Horizon Plan

·    Near-term priorities are reducing cost structure, refinancing debt and improving capital structure to unlock value for equity holders

 

 

Summarized Financials

($ in millions except EPS) Q2 2020 Q2 2019 CCY
Growth
(1)
YTD 2020 YTD 2019 CCY
Growth
(1)
Income Statement            
Revenue 314.5 441.1 -12.1% 689.9 877.8 -7.3%
EBITDA (2) 22.2 42.6 -33.0% 63.0 84.5 -10.2%
      EBITDA Margin 7.1% 9.6% -2.6 p.p. 9.1% 9.6% -0.5 p.p.
Net Income (3) (18.3) (6.8) N.M (25.8) (52.2) 48.5%
Recurring Net Income (2) (10.2) (7.0) N.M (13.4) (12.5) 40.6%
Earnings Per Share (EPS) ((2) (3) ($0.26) ($0.09) N.M ($0.36) ($0.71) 47.7%
Recurring Earnings Per Share  (2) ($0.14) ($0.09) N.M ($0.19) ($0.16) 45.6%
Earnings Per Share in the reverse split basis ((2) (3) (5)) ($1.30) ($0.47) N.M ($1.82) ($3.58) 47.7%
Recurring EPS in the reverse split basis (2) (5) ($0.72) ($0.47) N.M ($0.95) ($0.81) 45.6%
Cash flow, Debt and Leverage            
Net Cash Used In Operating Activities 53.4 26.5   57.7 (13.3)  
Cash and Cash Equivalents 207.2 116.6        
Net Debt (4) 525.9 571.5        
Net Leverage (4) 4.0x 3.3x        
(1)Unless otherwise noted, all results are for Q2 2020; all revenue growth rates are on a constant currency basis, year-over-year.
(2)EBITDA, Recurring Net Income/Recurring Earnings per Share (EPS) are Non-GAAP measures.
(3)Reported Net Income and Earnings per Share (EPS) include the impact of non-cash foreign exchange gains/losses on intercompany balances.
(4)Includes IFRS 16 impact in Net Debt and Leverage
(5)Earnings per share and Recurring Earnings per share in the reverse split basis is calculated by applying the ratio of conversion of 5.027090466672970 used in the reverse split into the previous weighted average number of ordinary shares outstanding
 1 
  
 

Message from the CEO and CFO

Carlos López-Abadía, Atento’s Chief Executive Officer, commented, “Results in this quarter showed significant and progressive improvement. We exited the quarter with run-rate EBITDA and volume levels consistent with those in June 2019, with the severe impact of the Covid-19 pandemic now behind us. Despite substantially weak operational and economic conditions earlier in the quarter, we continued winning new clients, including leading US brands, in the high-growth Born-Digital and Tech verticals and, more recently, in the Media & Entertainment industry. Clients in these and other higher margin sectors drove Atento’s Multisector revenues 5.2% higher, helping extend our run-rate EBITDA growth with a 29% year-on-year increase, with the corresponding margin expanding 360 basis points to 14.3% on a six-month basis. These clients have been beneficiaries of shifts in spending patterns during the pandemic, many of which are likely to be permanent changes.

 

At the same time, we continued improving working capital - doubling operating cash flow and generating $44.1 million in free cash flow during the quarter - and launched a new expense reduction program to substantially reduce Atento’s cost structure. This includes rightsizing more of our operations, by shifting more of them to the WAHA model.

 

Economic conditions will undoubtedly remain challenging for the rest of the year, as the scope, duration and impact of the pandemic remains largely unknown. Nevertheless, we are confident in our ability to effectively address new challenges, as well as seize opportunities, with over half of the committed and collaborative employees who make up One Atento either working from home or at safe, reconfigured call centers. Given Atento’s recovering volumes, renewed sales growth, improving run-rate profitability, sound financial liquidity, as well as our Company’s stronger shareholder and board structures, we expect to continue advancing our Three Horizon transformation plan to achieve consistently higher levels of profitable growth.”

 

José Azevedo, Atento’s Chief Financial Officer said, “Stronger management of our working capital combined with drawing down Atento’s remaining credit lines substantially reinforced financial liquidity while we drove operating and free cash flow markedly higher during the second quarter.

 

At the same time, we have been implementing a new cost savings program to augment and accelerate operational improvements under the Three Horizon Plan. We are successfully reducing fixed and variable costs, including administrative expenses, to reduce Atento’s cost structure and drive operating leverage as economic and business environments improve in our markets. Our current efforts to become more cost efficient, combined with a zero based budgeting system that will be fully effective by year-end, are expected to result in $80 million of annualized cost savings beginning next year, of which $47 million has already been achieved on a run-rate basis.

 

Under our two-pronged financial strategy, we are now turning more of our attention toward capital efficiency. We have begun the process to refinance the $500 million 2022 bond, with the aim of improving Atento’s capital structure in a way that will better align it with our ambitious growth strategy and help unlock more shareholder value.”

 

Second Quarter Consolidated Financial Results

Atento’s financial liquidity strengthened further during the second quarter, with cash and cash equivalents increasing 27.2% sequentially to $207.2 million, while the Three Horizon Plan drove underlying performance levels higher. Continued improvements in working capital led to strong Free Cash Flow of $44.1 million in the quarter. Due to the Company’s rapid response to disruptions caused by the Covid-19 pandemic, delivery capacity has increased to 97.5%, with most call centers operational and 60% of agents working under the WAHA[1] model.

 

Multisector sales increased 5.2% to $218.0 million, despite an adverse economic and business environment during April and May, evidencing the effectiveness of Atento’s Three Horizon Plan. The increase in consolidated Multisector revenue during the quarter was driven by an 11.2% increase in Brazil, Atento’s flagship operation, while a 54% increase in US Multisector sales helped offset a decline in this category in Argentina and Peru, resulting in a 1.6% decrease for the Americas. Like Brazil, EMEA multisector revenues also continued to expand, rising 3.2% in the quarter.

 

Consolidated total revenue declined 12.1% to $314.5 million, mainly reflecting lower revenues from Telefónica (TEF). TEF revenues decreased 38.0% due to a combination of (i) the discontinuation of unprofitable programs in Brazil since the fourth quarter of 2019; and (ii) lower volumes due to Covid-19’s impact in all regions during April and part of May. Based on recent demand, the Company expects volumes to recover to pre-pandemic levels during the second half of 2020.

 

Atento’s total EBITDA in Q2 2020 decreased 33% year-on-year to $22.2 million, with the corresponding margin contracting 260 basis points to 7.1%. Of this amount, $14.8 million, or 70%, was generated in June, when volumes reached near normal levels. On a run-rate basis, excluding the impact of Covid-19, total EBITDA increased 31.9% compared to normalized EBITDA in second quarter 2019. On a six-month basis, the run rate EBITDA margin expanded 360 basis points to 14.3%. The underlying improvement in the Company’s EBITDA was due to continued improvements in the client and service mix as well as to additional operational improvements under a new cost reduction program, which targets $80 million in annualized savings, with $47 million of these savings measures already in effect as of June 30.

 


1 Work-at-Home Agent

 2 
  
 

Recurring Net Income decreased from a $7.0 million loss in Q2 2019 to $10.2 loss in Q2 2020, with recurring EPS of -$0.14 in the latter quarter. Excluding the impact of Covid-19 and costs related to drawing down credit lines, Recurring EPS was +$0.15 in Q2 2020.

 

Segment Reporting

Brazil

($ in millions) Q2 2020 Q2 2019 CCY growth YTD 2020 YTD 2019 CCY growth
Brazil Region            
Revenue 135.2 210.4 -11.9% 307.3 428.7 -9.2%
Adjusted EBITDA 10.6 26.5 -45.2% 35.0 54.3 -18.0%
Adjusted EBITDA Margin 7.8% 12.6% -4.8 p.p. 11.4% 12.7% -1.3 p.p.
Operating Income/(loss) (8.0) (2.9) N.M (16.2) (8.9) 129.8%
Brazil Revenue Mix

 

 

 

In Brazil, Multisector sales increased 11.2% YoY, while TEF sales decreased 51.5%, leading to an 11.9% decrease in total revenues.

On a year-to-date basis, Multisector sales as a percentage of Brazil’s total revenue expanded 680 basis points, primarily due to higher sales to Born-Digital clients acquired during 2019 and new clients in 2020. Among new clients this year is Riot Games, a US-based company that develops and publishes popular video games, such as League of Legends. In May, Atento signed a partnership agreement with Riot Games to provide services to Brazilian game players. Atento was selected because of its ability to create Customer Experience environments consistent with Riot Games’ culture and to hire, manage and maintain CX specialists with appropriate profiles and gaming experience.

The decrease in TEF sales in Brazil during the second quarter was mainly due to the discontinuation of unprofitable programs since the fourth quarter of 2019 and to the pandemic’s impact on volumes, mostly during April and part of May, as the company decided to focus its delivery capacity to the Multisector clients.

Brazil’s reported EBITDA decreased 45.2% to $10.6 million, with the EBITDA margin contracting 480 basis points to 7.8%, mainly due to the Covid-19 impact.

 

 3 
  
 

 

 

Americas Region

($ in millions) Q2 2020 Q2 2019 CCY growth YTD 2020 YTD 2019 CCY growth
Americas Region            
Revenue 129.9 171.8 -11.4% 277.3 333.5 -5.2%
Adjusted EBITDA 14.5 18.6 -10.7% 28.2 32.7 -5.2%
Adjusted EBITDA Margin 11.2% 10.8% 0.3 p.p. 10.2% 9.8% 0.4 p.p.
Operating Income/(loss) (0.3) 0.4 N.M (7.1) (7.2) 24.6%
             
Americas Revenue Mix

 

 

 

Second quarter Americas revenue decreased 11.4% to $129.9 million. In total, Multisector sales decreased 1.6% during the quarter, with an above 50% growth in US Multisector clients helping offset lower volumes in Peru and Argentina, countries with stricter lockdown rules and highly impacted by Covid-19. As a percentage of the region’s revenue, Multisector sales expanded 360 basis points, compared to the first six months of 2019. Lower volumes resulting from the pandemic also mainly accounted for the 31.7% decrease in TEF revenues in the region.

Reported EBITDA in the Americas decreased 10.7% to $14.5 million on lower volumes during the second quarter, while the corresponding margin expanded 30 basis points to 11.2%, despite the impact of Covid-19, due to a better revenue mix and cost management.

 

EMEA Region

($ in millions) Q2 2020 Q2 2019 CCY growth YTD 2020 YTD 2019 CCY growth
EMEA Region            
Revenue 50.5 61.2 -15.7% 108.0 123.3 -10.2%
Adjusted EBITDA (0.3) 5.5 N.M 3.5 11.8 -69.8%
Adjusted EBITDA Margin -0.5% 9.0% -9.5 p.p. 3.2% 9.6% -6.4 p.p.
Operating Income/(loss) (3.4) 4.2 N.M (3.9) 0.2 N.M
EMEA Revenue Mix

 

 

Multisector sales continued to expand in the region, with the 3.2% growth in the quarter helping to further diversify revenues. On a six-month basis, Multisector sales expanded 840 basis points year-over-year to 48.3% of EMEA revenue. TEF sales were impacted by lower volumes, mainly due to Covid-19, leading to a 28.1% decrease, resulting in a 15.7% year-over-year decline in the region’s overall revenue.

 4 
  
 

EMEA’s second quarter EBITDA decreased to slightly below the breakeven point, from $5.5 million in the same quarter of last year. At the end of the quarter, the region’s EBITDA margin was negative 0.5% versus a positive 9.0% in the comparable 2019 period, mostly due to the impact of Covid-19.

Cash Flow and Capital Structure

($ in millions) Q2 2020 Q2 2019 YTD 2020 YTD 2019
Consolidated Cash Flow Statement        
Net Cash (used in) from Operating activities 53.4 26.5 57.7 -13.3
Net Cash used in Investing activities -7.3 -21.4 -18.6 -38.1
Net Cash provided by Financing activities -1.6 32.0 57.2 33.8
Net (increase/decrease) in cash and cash equivalents 44.5 37.1 96.3 -17.5

 

Additional operational improvements under the transformation plan further enhanced Atento’s working capital, resulting in higher operating and free cash flows, with the former increasing twofold to $51.1 million and the latter turning positive to $44.1 million in the second quarter. During the quarter, the Company obtained another $10 million in one-off overdue collections, bringing the total to $30 million year-to-date. During the first six months of the year, Atento’s DSO were reduced by approximately 4 days, while DPO improved by circa 13 days, due to strengthened collections and procurement policies.

Cash capex was equivalent to 2.7% of revenues during the first six months of 2020, and includes costs associated with shifting a portion of Atento’s call center employees to the WAHA model. Owing to the impact of the Covid-19 pandemic on Atento’s markets, all non-essential capital expenditures remained suspended mainly in April and May.

At June 30, 2020, cash and cash equivalents totaled $207.2 million, up 9.0% when excluding drawdowns of $80 million from existing credit lines during the first six months of 2020. Net debt was $525.9 million, which includes $129.6 million related to IFRS16. Atento’s total debt has an average maturity of 2.1 years and an average LTM cost of 7.0%. At the end of the second quarter, the LTM net debt-to-EBITDA ratio was 4.0 times, which is a controllable level due to the Company’s strong financial liquidity and the normalization of EBITDA generation in June. The Company has initiated the process to refinance the $500 million 2022 bond, with the aim of extending the maturity of the debt and improving Atento’s capital structure.

 

($ in millions) as of June 30, 2020 Maturity Interest Rate Outstanding Balance 2Q20
Indebtness      
Senior Secured Notes 2022 6.125% 503.8
Super Senior Credit Facility 2020 5.223% 50.7
Other Credit Facilities 2020 CDI + 2.40% 35.9
Other borrowings and leases 2023 Variable 12.4
BNDES (BRL) 2022 TJLP + 2.0% 0.7
Debt with third parties 603.5
Leasing (IFRS16) 129.6
Gross Debt (third parties + IFRS16) 733.1
Cash and Cash Equivalents 207.2
Net Debt 525.9

 

 5 
  
 

Update On Covid-19 Response: Company Continues Effectively Executing Transformation Plan and Preparing to Capture Post-crisis Market Opportunities

As a socially responsible company, Atento remains fully committed to helping ensure that its remote and secure customer services remain available to people and businesses in the 13 countries where it operates. This commitment includes maintaining robust health and safety protocols and measures to protect employees at Atento facilities, to help ensure business continuity for the duration of the Covid-19 pandemic.

Currently, Atento has over 64,000 work-at-home agents (WAHA), or approximately 60% of its call center employees. For agents working at Atento call centers, most of which are operational, individual workstations are still kept at safe distances and personal work equipment (individual headset, keyboard, mouse, etc.) remains available. With operating capacity at 97.5%, the Company has a broad capacity to meet the needs of all clients. The transition to a WAHA model was facilitated by the digital transformation process underway, since 2019, under Atento’s Three Horizon Transformation Plan, which has included re-skilling as well as digital recruiting, onboarding and training.

This model as well as other enhanced digital capabilities are also allowing the Company to capture medium- and long-term CRM and BPO opportunities arising from dramatic shifts in consumer behaviors and related changes being implemented by emerging and established companies seeking to attract and retain more customers in Latin America, the US and Europe. The growing strength of Atento’s digital capabilities, evolving portfolio of Next Generation Services and journey orchestration, coupled with accelerated operational improvements that are resulting in a more competitive cost structure, are allowing the Company to continue leading Next Generation Customer Experience in the future.

Share Repurchase Program

Under a $30 million 12-month share buyback program approved by Atento’s Board of Directors earlier in the year, the Company purchased $0.4 million of shares during the second quarter.

Reverse Share Split

On July 28, 2020, Atento announced that the Company’s shareholders had approved the conversion of the entire share capital of 75,406,357 ordinary shares into 15,000,000 ordinary shares, without nominal value, using a conversion ratio of 5.027090466672970, effective after trading hours on July 29, 2020. Atento’s ordinary shares started trading on a split-adjusted basis on the NYSE at the open of trading on July 30, 2020.

The Company proposed to effect the reverse share split in response to a notification received from the NYSE that its ordinary shares did not meet the minimum price threshold average closing price of $1.00 per share over a consecutive 30-trading day period. Although Atento’s ordinary shares had resumed trading above this threshold, the reverse share split is intended to provide a structural solution to allow the Company to remain compliant with NYSE’s listing rules.

Awards and Recognitions

Atento was recognized recently by the Everest Group as one of the leading companies in Customer Experience Management in its annual PEAK Matrix® Assessment 2020. Among Major Contenders, Atento was the only company rated a Star Performer, a title conferred to providers that demonstrate the most improvement over time on the Matrix. Atento stood out for promoting a culture of co-innovation, offering integrated multi-channel capabilities based on Artificial Intelligence, IoT (Internet of Things) and RPA (Robotic Process Automation), among other digital strengths, and for building an increasingly satisfying customer experience. The Star Performer rating reflects the competitiveness of Atento’s offerings in the CRM/BPO market, where companies increasingly expect their service providers to exhibit proactiveness and drive innovation.

 

Conference Call

The Company will host a conference call and webcast on Thursday, August 6, 2020 at 11:00 am ET to discuss its financial results. The conference call can be accessed by dialing: USA: +1 (412) 717-9627; UK: (+44) 20 3795 9972; Brazil: (+55) 11 3181-8565; or Spain: (+34) 91 038 9593. It can also be acess by web phone (Click here) No passcode is required. Individuals who dial in will be asked to identify themselves and their affiliations. The live webcast of the conference call will be available on Atento's Investor Relations website at investors.atento.com. A web-based archive of the conference call will also be available at the above website.

 6 
  
 

 

About Atento

Atento is the largest provider of customer relationship management and business process outsourcing (CRM BPO) services in Latin America, and among the top five providers globally, based on revenues. Atento is also a leading provider of nearshoring CRM/BPO services to companies that carry out their activities in the United States. Since 1999, the company has developed its business model in 13 countries where it employs 150,000 people. Atento has over 400 clients to whom it offers a wide range of CRM/BPO services through multiple channels. Atento’s clients are mostly leading multinational corporations in sectors such as telecommunications, banking and financial services, health, retail and public administrations, among others. In 2019, Atento was named one of the World’s 25 Best Multinational Workplaces and one of the Best Multinationals to Work for in Latin America by Great Place to Work®. Atento is also the world’s first CRM company to be ISO 56002 certified in Innovation Management. Atento’s shares trade under the symbol ATTO on the New York Stock Exchange (NYSE). For more information visit www.atento.com.

 

Investor Relations 
Shay Chor 
+ 55 11 3293-5926
shay.chor@atento.com

Investor Relations 

Fernando Schneider

+ 55 11 3779-8119

fernando.schneider@atento.com

Media Relations 
Pablo Sánchez Pérez

+34 670031347
pablo.sanchez@atento.com

 

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "continue" or similar terminology. These statements reflect only Atento's current expectations and are not guarantees of future performance or results. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the Covid-19 pandemic on our business operations, financial results and financial position and on the world economy. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties include, but are not limited to, competition in Atento's highly competitive industries; increases in the cost of voice and data services or significant interruptions in these services; Atento's ability to keep pace with its clients' needs for rapid technological change and systems availability; the continued deployment and adoption of emerging technologies; the loss, financial difficulties or bankruptcy of any key clients; the effects of global economic trends on the businesses of Atento's clients; the non-exclusive nature of Atento's client contracts and the absence of revenue commitments; security and privacy breaches of the systems Atento uses to protect personal data; the cost of pending and future litigation; the cost of defending Atento against intellectual property infringement claims; extensive regulation affecting many of Atento's businesses; Atento's ability to protect its proprietary information or technology; service interruptions to Atento's data and operation centers; Atento's ability to retain key personnel and attract a sufficient number of qualified employees; increases in labor costs and turnover rates; the political, economic and other conditions in the countries where Atento operates; changes in foreign exchange rates; Atento's ability to complete future acquisitions and integrate or achieve the objectives of its recent and future acquisitions; future impairments of our substantial goodwill, intangible assets, or other long-lived assets; and Atento's ability to recover consumer receivables on behalf of its clients. In addition, Atento is subject to risks related to its level of indebtedness. Such risks include Atento's ability to generate sufficient cash to service its indebtedness and fund its other liquidity needs; Atento's ability to comply with covenants contained in its debt instruments; the ability to obtain additional financing; the incurrence of significant additional indebtedness by Atento and its subsidiaries; and the ability of Atento's lenders to fulfill their lending commitments. Atento is also subject to other risk factors described in documents filed by the company with the United States Securities and Exchange Commission. 

These forward-looking statements speak only as of the date on which the statements were made. Atento undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

 7 
  
 

SELECTED FINANCIAL DATA:

The following selected financial information should be read in conjunction with the interim consolidated financial statements presented elsewhere in the Form 6-K.

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2020

 

($ in millions, except percentage changes) For the three months ended June 30, Change (%) Change excluding FX (%) For the six months ended June 30, Change (%) Change excluding FX (%)
2019 2020 2019 2020
(unaudited)     (unaudited)    
Revenue 441,1 314,5 (28.7) (12.1) 877.8 689.9 (21.4) (7.3)
Other operating income 0.7 1.1 50.3 65.0 1.4 2.0 43.3 54.5
Other gains and own work capitalized 0.1 - (100.0) (100.0) 0.1 - (95.1) (95.1)
Operating expenses:                
Supplies (15.1) (16.0) 6.1 31.3 (31.9) (32.7) 2.6 20.1
Employee benefit expenses (334.7) (245.0) (26.8) (10.0) (674.0) (534.0) (20.8) (6.7)
Depreciation (19.9) (17.8) (10.3) 12.2 (41.7) (37.6) (9.8) 6.4
Amortization (13.3) (10.9) (18.4) 1.4 (26.9) (22.6) (16.0) (1.0)
Changes in trade provisions (1.5) (1.4) (4.6) 24.8 (1.5) (1.9) 31.7 71.9
Impairment charges - - N.M. N.M. - - (100.0) (100.0)
Other operating expenses (48.1) (31.1) (35.5) (22.4) (87.3) (60.3) (30.9) (19.4)
Total operating expenses (432.6) (322.2) (25.5) (8.5) (863.2) (689.1) (20.2) (6.0)
Operating profit 9.3 (6.5) N.M. N.M. 16.1 2.8 (82.5) (76.7)
Finance income 2.1 8.6 N.M. N.M. 4.4 11.0 147.5 N.M.
Finance costs (19.7) (17.0) (14.0) (1.6) (37.9) (32.8) (13.3) (2.8)
Net foreign exchange loss (1.4) (5.8) N.M. N.M. (3.0) (9.3) N.M. N.M.
Net finance expense (19.1) (14.2) (25.6) (8.4) (36.4) (31.1) (14.6) 3.8
Loss before income tax (9.7) (20.7) 112.9 130.0 (20.3) (28.3) 39.0 57.7
Income tax benefit/(expense) 3.1 2.4 (23.8) (21.1) (31.9) 2.5 (107.9) (107.9)
Loss for the period (6.6) (18.3) N.M. N.M. (52.2) (25.8) (50.7) (48.5)
(Loss)/profit attributable to:                
Owners of the parent (6.9) (18.3) N.M. N.M. (52.8) (25.8) (51.2) (49.0)
Non-controlling interest 0.2 - (100.0) (100.0) 0.6 - (100.0) (100.0)
Loss for the period (6.6) (18.3) N.M. N.M. (52.2) (25.8) (50.7) (48.5)
Other financial data:                
EBITDA (1) (unaudited) 42.6 22.2 (47.8) (33.0) 84.6 63.0 (25.6) (10.2)
Adjusted EBITDA (1) (unaudited) 42.6 22.2 (47.8) (33.0) 84.6 63.0 (25.6) (10.2)

(1) For the reconciliation of these non-GAAP measures to the closest comparable IFRS measure, see section "Summary Consolidated Historical Financial Information - Reconciliation of EBITDA and Adjusted EBITDA to profit/(loss)".

N.M. means not meaningful

 

 

 8 
  
 

 

Consolidated Statements of Operations by Segment for the Three Months Ended June 30, 2019 and 2020

 

($ in millions, except percentage changes) For the three months ended June 30, Change (%) Change Excluding  FX (%) For the six months ended June 30, Change (%) Change Excluding  FX (%)
2019 2020 2019 2020
  (unaudited)
Revenue:                
Brazil 210.4 135.2 (35.7) (11.9) 428.7 307.3 (28.3) (9.2)
Americas 171.8 129.9 (24.4) (11.4) 333.5 277.3 (16.9) (5.2)
EMEA 61.2 50.5 (17.4) (15.7) 123.3 108.0 (12.4) (10.2)
Other and eliminations (1) (2.3) (1.1) (49.8) (42.4) (7.7) (2.6) (66.1) (63.6)
Total revenue 441.1 314.5 (28.7) (12.1) 877.8 689.9 (21.4) (7.3)
Operating expenses:                
Brazil (204.8) (141.6) (30.8) (5.2) (419.9) (309.4) (26.3) (6.7)
Americas (165.1) (128.9) (21.9) (8.4) (330.0) (278.1) (15.7) (3.7)
EMEA (59.6) (54.3) (8.9) (7.0) (121.4) (112.7) (7.2) (4.8)
Other and eliminations (1) (3.1) 2.7 N.M. N.M. 8.0 11.2 39.2 99.7
Total operating expenses (432.6) (322.2) (25.5) (8.5) (863.2) (689.1) (20.2) (6.0)
Operating profit/(loss):                
Brazil 5.7 (6.4) N.M. N.M. 9.0 (2.1) (123.2) (130.0)
Americas 7.0 2.0 (71.0) (66.9) 4.1 0.5 (87.9) (87.9)
EMEA 2.0 (3.8) N.M. N.M. 2.6 (4.2) N.M. N.M.
Other and eliminations (1) (5.3) 1.6 (129.7) (128.5) 0.4 8.6 N.M. N.M.
Total operating profit/(loss) 9.3 (6.5) N.M. N.M. 16.1 2.8 (82.5) (76.7)
Net finance expense:                
Brazil (8.8) (5.1) (42.2) (20.4) (20.8) (21.6) 3.6 31.1
Americas (4.3) (0.7) (83.7) (77.6) (9.5) (4.8) (49.2) (35.7)
EMEA (0.1) (0.5) N.M. N.M. (0.8) (0.5) (41.3) (39.4)
Other and eliminations (1) (5.9) (8.0) 35.2 35.5 (5.2) (4.2) (19.5) (19.0)
Total net finance expense (19.1) (14.2) (25.6) (8.4) (36.4) (31.1) (14.6) 3.8
Income tax benefit/(expense):                
Brazil 0.1 3.5 N.M. N.M. 3.0 7.5 148.6 N.M.
Americas (2.4) (1.6) (31.8) (34.5) (1.8) (2.8) 58.8 24.3
EMEA 2.4 0.9 (63.2) (63.3) (1.6) 0.7 (144.8) (147.5)
Other and eliminations (1)(3) 2.9 (0.4) (112.5) (112.5) (31.5) (2.9) (91.0) (90.7)
Total income tax benefit/(expense) 3.1 2.4 (23.8) (21.1) (31.9) 2.5 (107.9) (107.9)
Profit/(loss) for the period:                
Brazil (2.9) (8.0) N.M. N.M. (8.9) (16.2) 83.1 129.8
Americas 0.4 (0.3) N.M. (146.9) (7.2) (7.1) (1.3) 24.6
EMEA 4.2 (3.4) N.M. N.M. 0.2 (3.9) N.M. N.M.
Other and eliminations (1) (8.3) (6.7) (18.5) (21.0) (36.3) 1.5 (104.2) (104.1)
Loss for the period (6.6) (18.3) N.M. N.M. (52.2) (25.8) (50.7) (48.5)
Profit/(loss) attributable to:                
Owners of the parent (6.9) (18.3) N.M. N.M. (52.8) (25.8) (51.2) (49.0)
Non-controlling interest 0.2 - (100.0) (100.0) 0.6 - (100.0) (100.0)
Other financial data:                
EBITDA (2):                
Brazil 23.8 8.7 (63.3) (49.4) 46.3 29.8 (35.6) (18.3)
Americas 18.7 12.6 (32.4) (22.1) 28.6 22.8 (20.3) (12.9)
EMEA 5.2 (0.8) (116.2) (116.6) 9.2 1.7 (81.4) (80.8)
Other and eliminations (1) (5.2) 1.7 (131.8) (130.2) 0.5 8.7 N.M. N.M.
Total EBITDA (unaudited) 42.6 22.2 (47.8) (33.0) 84.6 63.0 (25.6) (10.2)
Adjusted EBITDA (2):                
Brazil 26.5 10.6 (60.2) (45.2) 54.3 35.0 (35.6) (18.0)
Americas 18.6 14.5 (21.9) (10.7) 32.7 28.2 (13.8) (5.2)
EMEA 5.5 (0.3) (104.9) (105.0) 11.8 3.5 (70.6) (69.8)
Other and eliminations (1) (8.0) (2.6) (67.5) (66.4) (14.2) (3.7) (74.1) (73.3)
Total Adjusted EBITDA (unaudited) 42.6 22.2 (47.8) (33.0) 84.6 63.0 (25.6) (10.2)

(1) Included revenue and expenses at the holding-company level (such as corporate expenses and acquisition related expenses), as applicable, as well as consolidation adjustments. N.M. means not meaningful

 

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Balance Sheet ($ Thousands)

 

ASSETS    
December 31, June 30,
2019 2020
  (audited) (unaudited)
NON-CURRENT ASSETS 765,839 602,715
     
Intangible assets 160,041 115,629
Goodwill 119,902 98,229
Right-of-use assets 181,564 124,363
Property, plant and equipment 116,893 89,043
Non-current financial assets 82,158 73,919
Trade and other receivables 22,124 16,635
Other non-current financial assets 54,652 41,093
Derivative financial instruments 5,382 16,191
Other taxes receivable 5,650 4,638
Deferred tax assets 99,631 96,894
     
CURRENT ASSETS 538,772 559,160
     
Trade and other receivables 388,308 310,157
Trade and other receivables 359,599 282,832
Current income tax receivable 28,709 27,325
Derivative financial instruments - 1,405
Other taxes receivable 24,664 39,221
Other current financial assets 1,094 1,183
Cash and cash equivalents 124,706 207,194
     
TOTAL ASSETS 1,304,611 1,161,875
 10 
  
 

 

 

     
EQUITY AND LIABILITIES December 31, June 30,
2019 2020
  (audited) (unaudited)
     
TOTAL EQUITY 207,020 89,254
EQUITY ATTRIBUTABLE TO:    
OWNERS OF THE PARENT COMPANY 207,020 89,254
     
Share capital 49 49
Share premium 619,461 613,647
Treasury shares (19,319) (11,593)
Retained losses (127,070) (156,011)
Translation differences (271,273) (317,998)
Cash flow / Net investment Hedge (8,872) (51,471)
Stock-based compensation 14,044 12,631
     
NON-CURRENT LIABILITIES 718,989 655,491
     
Deferred tax liabilities 20,378 14,282
Debt with third parties 633,498 586,092
Derivative financial instruments 2,289 4,812
Provisions and contingencies 48,326 39,715
Non-trade payables 11,744 8,699
Other taxes payable 2,754 1,891
     
CURRENT LIABILITIES 378,602 417,130
     
Debt with third parties 87,117 147,030
Derivative financial instruments 167 -
Trade and other payables 272,547 247,501
Trade payables 71,676 68,215
Income tax payables 12,671 15,005
Other taxes payables 93,765 91,762
Other non-trade payables 94,435 72,519
Provisions and contingencies 18,771 22,595
TOTAL EQUITY AND LIABILITIES 1,304,611 1,161,875

 

 

 11 
  
 

Cash Flow ($ thousand)

 

   For the three months ended June 30,  For the six months ended June 30,
  2019 2020 2019 2020
  (unaudited)
Operating activities        
Loss before income tax (9.7) (20.7) (20.3) (28.3)
Adjustments to reconcile loss before income tax to net cash flows:        
Amortization and depreciation 33.2 28.7 68.5 60.2
Changes in trade provisions 1.5 1.4 1.5 1.9
Share-based payment expense 1.5 0.5 2.1 1.1
Change in provisions 12.0 12.3 21.6 16.4
Grants released to income (0.2) (0.2) (0.4) (0.3)
Losses on disposal of property, plant and equipment 0.1 - 0.1 0.2
Finance income (2.1) (8.6) (4.4) (11.0)
Finance costs 19.7 17.0 37.9 32.8
Net foreign exchange differences 1.4 5.8 3.0 9.3
Change in other (gains)/ losses and own work capitalized (7.5) 0.9 2.1 (0.4)
  59.4 57.8 131.9 110.2
Changes in working capital:        
Changes in trade and other receivables (35.6) 27.4 (105.2) (9.8)
Changes in trade and other payables 38.0 22.3 33.4 32.6
Other assets/(payables) (0.9) (26.2) 3.5 (21.8)
  1.5 23.5 (68.3) 1.0
         
Interest paid (4.9) (2.3) (23.2) (22.0)
Interest received 0.3 0.3 0.3 10.1
Income tax paid (10.7) (0.4) (14.4) (7.5)
Other payments (9.4) (4.8) (19.1) (5.7)
  (24.7) (7.2) (56.5) (25.1)
Net cash flows from/(used in) operating activities 26.5 53.4 (13.3) 57.7
Investing activities        
Payments for acquisition of intangible assets (0.6) (3.5) (15.7) (3.6)
Payments for acquisition of property, plant and equipment (3.2) (3.8) (6.5) (14.8)
Acquisition of subsidiaries, net of cash acquired (14.9) - (14.9) -
Payments for financial instruments (0.9) - (1.1) (0.3)
Proceeds from sale of PP&E and intangible assets (1.8) - - -
Net cash flows used in investing activities (21.4) (7.3) (38.1) (18.6)
Financing activities        
Proceeds from borrowing from third parties 113.8 22.9 150.3 100.4
Repayment of borrowing from third parties (65.2) (13.9) (86.3) (23.3)
Payments of lease liabilities (16.0) (10.0) (29.7) (19.4)
Acquisition of treasury shares (0.5) (0.5) (0.5) (0.5)
Net cash flows provided by/(used in) financing activities 32.0 (1.6) 33.8 57.1
Net (decrease)/increase in cash and cash equivalents 37.1 44.5 (17.5) 96.2
Foreign exchange differences 1.6 (0.1) 0.6 (13.9)
Cash and cash equivalents at beginning of period 77.9 162.8 133.5 124.7
Cash and cash equivalents at end of period 116.6 207.2 116.6 207.2

 

 

 12 
  
 

 

Adjustments to EBITDA by Quarter

 

    Fiscal 2018 Fiscal 2019 Fiscal 2020
($  in millions)   Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2
Profit/(loss) for the period   (1.7) 4.0 3.1 15.0 20.5 (45.6) (6.6) 1.3 (29.6) (80.7) (7.4) (18.3)
Net finance expense   19.6 21.9 18.3 (4.2) 55.6 17.3 19.1 13.8 6.9 57.1 16.9 14.2
Income tax expense   5.5 (0.5) 3.8 4.6 13.4 (2.9) (3.1) 2.3 2.0 36.2 (0.2) (2.4)
Write-off of deferred tax assets   - - - - - 37.8 - - - - - -
Depreciation and amortization   26.3 23.6 21.8 23.6 95.2 35.3 33.2 30.8 41.4 140.8 31.5 28.7
EBITDA (non-GAAP) (unaudited)   49.8 49.1 46.9 39.0 184.8 42.0 42.6 48.1 20.7 153.4 40.8 22.2
Adjusted EBITDA (non-GAAP) (unaudited)   49.8 49.1 46.9 39.0 184.8 42.0 42.6 48.1 20.7 153.4 40.8 22.2
Adjusted EBITDA Margins   10.1% 10.4% 10.9% 9.2% 10.2% 9.6% 9.6% 12.8% 5.0% 9.0% 10.9% 7.1%

 

IFRS 16 Effect

 

  IFRS 16: Effect (YTD 2020)
Revenue 0.0
EBITDA 27.1
Depreciation & Amortization (22.3)
Operating Profit 4.8
Finance costs (6.8)
(Loss)/profit before income tax (2.0)
Income tax expense 0.0
(Loss)/profit after income tax (2.0)

 

Add-Backs to Net Income by Quarter

 

  Fiscal 2018 Fiscal 2019 Fiscal 2020
($ in millions, except percentage changes) Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2
Profit/(Loss) attributable to equity holders of the parent (1.7) 4.0 3.1 15.0 20.5 (45.6) (6.6) 1.3 (29.6) (80.7) (7.4) (18.3)
Amortization of Acquisition related Intangible assets 5.7 5.3 5.1 5.1 21.2 5.1 5.0 4.9 5.5 20.6 5.0 4.3
Net foreign exchange gain on financial instruments 3.1 (9.0) 5.9 - 0.0 - - - -   -  
Net foreign exchange impacts 2.8 19.0 9.3 (2.3) 28.8 1.6 1.4 (2.3) 8.4 9.1 3.5 5.8
Tax effect (2.4) (3.7) (4.6) (1.6) (11.3) 33.2 (6.6) (1.0) 2.2 27.7 (4.5) (2.0)
Other - - - - - 0.6 - (0.6) -      
Adjusted Earnings (non-GAAP) (unaudited) 7.5 15.1 15.7 16.2 59.1 (5.1) (6.8) 2.3 (13.5) (23.3) (3.4) (10.2)
Adjusted Basic Earnings per share (in U.S. dollars) (*) (unaudited). 0.10 0.20 0.25 0.22 0.80 (0.07) (0.09) 0.03 (0.19) (0.32) (0.05) (0.14)
Adjusted Earnings attributable to Owners of the parent  (non-GAAP) (unaudited) 7.8 14.3 18.4 15.7 57.2 (5.5) (7.0) 2.3 (13.5) (23.9) (3.4) (10.2)
Adjusted basic Earnings per share  attributable to Owners of the parent (in U.S. dollars) (**) (unaudited) 0.10 0.19 0.25 0.21 0.77 (0.07) (0.09) 0.03 (0.19) (0.32) (0.05) (0.14)
Adjusted Earnings per share (in U.S. dollars) in the reverse split basis 0.51 1.01 1.27 1.11 4.02 (0.35) (0.46) 0.16 (0.97) (1.63) (0.24) (0.72)
Adjusted Earnings attributable to Owners of the parent (in U.S. dollars) in the reverse split basis 0.53 0.96 1.25 1.06 3.87 (0.37) (0.47) 0.16 (0.97) (1.66) (0.24) (0.72)
(*)We define non-recurring items as items that are limited in number, clearly identifiable, unusual, are unlikely to be repeated in the near future in the ordinary course of business and that have a material impact on the consolidated results of operations. Non-recurring items can be summarized as demonstrated below:
 13 
  
 

 

(a)Amortization of acquisition related intangible assets represents the amortization expense of customer base, recorded as intangible assets. This customer base represents the fair value (within the business combination involving the acquisition of control of Atento Group) of the intangible assets arising from service agreements (tacit or explicitly formulated in contracts) with Telefónica Group and with other customers.
(b)Since April 1, 2015, the Company designated the foreign currency risk on certain of its subsidiaries as net investment hedges using financial instruments as the hedging items. As a consequence, any gain or loss on the hedging instrument, related to the effective portion of the hedge is recognized in other comprehensive income (equity) as from that date. The gains or losses related to the ineffective portion are recognized in the statements of operations and for comparability, and those adjustments are added back to calculate Adjusted Earnings.
(c)The tax effect represents the impact of the taxable adjustments based on tax nominal rate by country. For the three months ended March 31, 2019, in the context of a global Tax Audit of the periods 2013-2016, Atento Spain, as the representative company of the tax group comprised of the Spanish direct subsidiaries of Atento S.A., signed a tax agreement with the Spanish tax authorities. The criteria adopted by the Tax Administration was in connection with certain aspects, among others, of the deductibility of certain specific intercompany financing and operating expenses originated during the acquisition of Atento Spain, which was different from the tax treatment applied by the Company. As a result of this discrepancy, the amount of the tax credits of the Spanish tax group, together with the corresponding effects in subsequent tax periods, has being reduced in an amount of $33.5 million.
(**)Adjusted Earnings per share is calculated based on weighted average number of ordinary shares outstanding of 74,157,789 and 71,020,356 for the three months ended June 30, 2019 and 2020, respectively.

 

(***) Adjusted Earnings per share in the reverse split basis is calculated by applying the ratio of conversion of 5.027090466672970 used in the reverse split into the previous weighted average number of ordinary shares outstanding

 

Effective Tax Rate

 

($ in millions, except percentage changes) Fiscal 2018 Fiscal 2019 YTD 2020 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020
Profit/(loss) before tax1 33.9 (44.5) (28.3) 3.9 3.6 6.9 19.6 (10.6) (9.7) 3.5 (27.6) (7.6) (20.7)
(+) Total Add-backs to Net Income (excluding tax effect) 50.0 29.7 18.6 11.5 15.3 20.3 2.8 7.3 6.5 2.0 13.9 8.5 10.1
Amortization of Acquisition related Intangible assets 21.2 20.6 9.3 5.7 5.3 5.1 5.1 5.1 5.0 4.9 5.5 5.0 4.3
Net foreign exchange gain on financial instruments 0.0 - - 3.1 (9.0) 5.9 - - - - - - -
Net foreign exchange impacts 28.8 9.1 9.3 2.8 19.0 9.3 (2.3) 1.6 1.4 (2.3) 8.4 3.5 5.8
Other - - - - - - - 0.6 - (0.6) - - -
= Recurring Profit/(loss) before tax (non-GAAP) (unaudited) 83.9 (14.8) (9.7) 15.4 18.9 27.2 22.4 (3.3) (3.2) 5.5 (13.7) 0.9 (10.6)
(-) Recurring Tax (24.7) (8.5) (3.7) (7.9) (3.2) (8.4) (6.2) (1.8) (3.5) (3.3) 0.1 (4.3) 0.4
Income tax expense (reported) (13.4) (36.2) 2.6 (5.5) 0.5 (3.8) (4.6) (35.0) 3.1 (2.3) (2.0) 0.2 2.4
Tax effect (non-recurring) (11.3) 27.7 (6.3) (2.4) (3.7) (4.6) (1.6) 33.2 (6.6) (1.0) 2.2 (4.5) (2.0)
= Adjusted Earnings (non-GAAP) (unaudited) 59.2 (23.2) (13.4) 7.5 15.7 18.7 16.2 (5.1) (6.8) 2.2 (13.5) (3.4) (10.2)
                           
Recurring ETR 30.5% 57.4% 38.5% 51.3% 17.7% 31.1% 31.4% 53.6% 108.8% 60.3% 0.8% 468.9% 3.8%

1 Profit/(loss) before income tax from continuing operations

Financing Arrangements

Net debt with third parties as of June 30, 2019 and 2020 is as follow:

 

($ in millions, except Net Debt/Adj. EBITDA LTM) On June 30, 2019 On June 30, 2020
Cash and cash equivalents 116.6 207.2
Debt:    
     Senior Secured Notes 499.9 503.8
     Super Senior Credit Facility - 50.7
     BNDES 1.4 0.7
     Lease Liabilities (3) 169.6 134.7
     Other Borrowings 17.2 43.3
Total Debt 688.1 733.1
Net Debt with third parties (1) (unaudited) 571.5 525.9
   EBITDA LTM (2) (non-GAAP) (unaudited) 173.4 131.8
Net Debt/Adjusted EBITDA LTM (non-GAAP) (unaudited) 3.3x 4.0x
 14 
  
 
(1)In considering our financial condition, our management analyzes Net debt with third parties, which is defined as total debt less cash and cash equivalents. Net debt with third parties is not a measure defined by IFRS and it has limitations as an analytical tool. Net debt with third parties is neither a measure defined by or presented in accordance with IFRS nor a measure of financial performance and should not be considered in isolation or as an alternative financial measure determined in accordance with IFRS. Net debt is not necessarily comparable to similarly titled measures used by other companies.
(2)EBITDA LTM (Last Twelve Months)
(3)Consider the impact in June 30, 2020 of application of IFRS16 (former operating leases not related to short-term or low-value leases are now shown as debt) was $129.6 million and $5.1 million of other financial leases.

 

Revenue Mix by Service Type

 

  Fiscal 2018 Fiscal 2019 Fiscal 2020
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2
Customer Service 51.1% 51.8% 50.6% 50.3% 50.7% 51.7% 52.0% 53.0% 54.6% 52.8% 56.4% 60.9%
Sales 18.1% 18.0% 18.3% 18.5% 17.7% 17.0% 16.9% 16.9% 15.6% 16.6% 13.3% 9.8%
Collection 7.3% 7.5% 8.2% 8.8% 8.2% 7.9% 7.8% 7.4% 7.1% 7.5% 7.1% 7.0%
Back Office 12.0% 12.2% 13.1% 12.5% 12.9% 12.8% 12.3% 12.8% 13.0% 12.7% 13.5% 13.0%
Technical Support 7.7% 6.9% 6.3% 6.3% 6.9% 6.7% 7.1% 6.2% 5.9% 6.4% 6.1% 5.9%
Others 3.8% 3.7% 3.5% 3.6% 3.6% 3.9% 3.9% 3.7% 3.8% 4.0% 3.6% 3.3%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

 

Number of Workstations and Delivery Centers

 

  Number of Workstations Number of Service
Delivery Centers (1)
  2019 2020 2019 2020
Brazil        49,592        49,211             34                 31
Americas        37,579        38,847             50                 48
Argentina (2)           4,474           4,358             12                 12
Central America (3)           2,510           2,845                4                   3
Chile           2,829           2,484                4                   4
Colombia           8,731           9,133                9                   9
Mexico           9,319           9,881             15                 14
Peru           8,513           8,847                3                   3
United States (4)           1,203           1,299                3                   3
EMEA           5,344           5,171             15                 14
Spain           5,344           5,171             15                 14
Total        92,515        93,229             99                 93

 

FX Rates

FX Assumptions (Average) Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 FY 2019 Q1 2020 Q2 2020
Euro (EUR) 0.81 0.84 0.86 0.88 0.85 0.88 0.89 0.90 0.90 0.89 0.91 0.91
Brazilian Real (BRL) 3.25 3.60 3.96 3.81 3.65 3.77 3.92 3.97 4.12 3.94 4.46 5.38
Mexican Peso (MXN) 18.71 19.42 18.98 19.85 19.24 19.20 19.12 19.44 19.25 19.25 20.00 23.33
Colombian Peso (COP) 2,858.33 2,838.34 2,961.69 3,162.98 2,955.34 3,135.29 3,240.94 3,340.81 3,408.36 3,281.35 3,534.22 3,847.83
Chilean Peso (CLP) 601.97 620.73 663.19 679.62 641.38 667.01 683.69 705.50 754.86 702.77 802.78 823.43
Peruvian Soles (PEN) 3.24 3.26 3.29 3.36 3.29 3.32 3.32 3.34 3.36 3.34 3.40 3.43
Argentinean Peso (ARS) 19.71 23.55 32.09 37.12 28.12 39.05 43.91 50.56 59.38 48.22 61.55 67.64