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ACQUISITIONS | 9 Months Ended
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Sep. 30, 2014
ACQUISITIONS [ABSTRACT] |
ACQUISITIONS | (2) ACQUISITIONS rogenSi In the third quarter of 2014, the Company acquire d substantially all operating assets of rogenSi Worldwide PTY, Ltd., a global sales and leadership performance training and applied leadership consulting company. The total purchase price wa s $3 3.8 million, subject to certain working capital adjustments, and consists of $17.5 million in cash at closing and $1 4.5 million in three earn-out payments, contingent on the acquired companies and TeleTech's CSS business segment achieving certain agreed earnings before interest, taxes, depreciation and amortization (“EBITDA”) targets, as defined in the sale and purchase a greement. Additionally, the estimated purchase price included a $1.8 million hold-back payment for contingencies as defined in the sale and purchase agreement which will be paid in the first quarter of 2016, if required. The earn-out payments are payable in early 2015, 2016 and 2017, based on July 1, 2014 through December 31, 2014, and full year 2015 and 2016 performance, respectively. The fair value of the contingent consideration was measured based on significant inputs not observable in the market (Level 3 inputs). Key assumptions include a discount rate of 4.6% and expected future value of payments of $1 5.3 million. The $15.3 million of expected future payments was calculated using probability weighted EBITDA assessment with the highest probability associated with rogenSi achieving the targeted EBITDA for each earn-out year. As of the acquisition date, the fair value of the contingent consideration was approximately $14.5 million. As of September 30, 2014, the fair value of the contingent consideration was $14.5 million, of which $5.8 million and $8.7 million were included in Other accrued expenses and Other long-term liabilities in the accompanying Consolidated Balance Sheets, respectively. The following summarizes the preliminary estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):
|  | Preliminary Estimate of Acquisition Date Fair Value
Cash | $ | 2,668
Accounts receivable |  | 6,415
Other assets |  | 3,342
Property, plant and equipment |  | 578
Customer relationships |  | 9,169
Goodwill |  | 18,038
|  |  | 40,210
Accounts payable |  | 715
Accrued employee compensation and benefits |  | 2,199
Accrued expenses |  | 1,112
Other |  | 2,427
|  |  | 6,453
| Total purchase price | $ | 33,757
The estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending completion of a valuation, thus are subject to revisions that may result in adjustments to the values presented above. The rogenSi customer relationships have been estimated based on similar acquisitions and are amortized over an estimated useful life of five years. The goodwill recognized from the rogenSi acquisition is estimated to be attributable, but not limited to, the acquired workforce and expected synergies within CSS and the Company's other segments. A portion of the tax basis of the acquired intangibles and goodwill, determined by jurisdiction, will be deductible for income tax purposes. The acquired goodwill and the operating results of rogenSi are reported within the CSS segment from the date of acquisition. Sofica In the first quarter of 2014, the Company acquired a 100% interest in Sofica Group, a Bulgarian joint stock company (“Sofica”). Sofica provides customer lifecycle management and oth er business process services across multiple channels in multiple sites in over 18 languages. The estimated purchase pric e of $1 4.2 million included $9.4 million in cash consideration (in clu ding working capital adjustment s) and $3.8 million in earn-out payments, payable in 2015 and 2016, contingent on Sofica achieving specified EBITDA targets, as defined by the stock purchase agreement. Additionally, the estimated purchase price includes a $1.0 million hold-back payment for contingencies as defined in the stock purchase agreement which will be paid in the second quarter of 2016, if required. The fair value of the contingent consideration was measured based on significant inputs not observable in the market (Level 3 inputs). Key assumptions include a discount rate of 5.0% and expected future value of payments of $4.0 million. The $4.0 million of expected future payments was calculated using a probability weighted EBITDA assessment with the highest probability associated with Sofica achieving the targeted EBITDA for each earn-out year. As of the acquisition date, the fair value of the contingent consideration was approximately $3.8 million. During the third quarter of 2014, the Company recorded a fair value adjustment of the contingent consideration of $1.8 million based on revised estimates noting higher probability of exceeding the EBITDA targets (see Note 7). As of September 30, 2014, the fair value of the contingent consideration was $5.7 million, of which $2.8 million and $2.9 million were included in Other accrued expenses and Other long-term liabilities in the accompanying Consolidated Balance Sheets, respectively. The following summarizes the preliminary estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):
|  | Preliminary Estimate of Acquisition Date Fair Value
Cash | $ | 857
Accounts receivable |  | 3,175
Other assets |  | 378
Property, plant and equipment |  | 653
Customer relationships |  | 3,531
Goodwill |  | 7,603
|  |  | 16,197
Accounts payable |  | 296
Accrued employee compensation and benefits |  | 697
Accrued expenses |  | 664
Deferred tax liability and other |  | 368
|  |  | 2,025
| Total purchase price | $ | 14,172
The estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending completion of a valuation, thus are subject to revisions that may result in adjustments to the values presented above. The Sofica customer relationships have been estimated based on similar acquisitions and are amortized over an estimated useful life of five years. The goodwill recognized from the Sofica acquisition was attributable primarily to the acquired workforce of Sofica, expected synergies, and other factors. A portion of the tax basis of the acquired intangibles and goodwill, determined by jurisdiction, will be deductible for income tax purposes. The acquired goodwill and the operating results of Sofica are reported within the CMS segment from the date of acquisition. WebMetro In the third quarter of 2013, the Company acquired 100% of WebMetro, a California corporation (“WebMetro”), a digital marketing agency. The total purchase price was $17.8 million, including $15.3 million in cash consideration (inclusive of working capital adjustment s) and $2.5 million in earn-out payments, payable in 2014 and 2015, contingent on WebMetro achieving specified EBITDA targets, as defined by the stock purchase agreement. The first contingent payment of $1.0 million was made in the second quarter of 2014. During the third quarter of 2014, the Company recorded a fair value adjustment to reduce the contingent consideration by $1.7 million based on revised estimates noting the achievement of the EBITDA target is remote (see Note 7). The acquired goodwill and the operating results of WebMetro are reported within the CGS segment. In the third quarter of 2014, the Company finalized its valuation of WebMetro for the acquisition date assets acquired and liabilities assumed. There were no material measurement period adjustments in 2014. Financial Impact of Acquired Businesses The acquired businesses purchased in 2014 and 2013 noted above contributed revenues of $11.1 million and $23.9 million and income from operations of $1.0 million and $1.9 million, inclusive of $0.8 million and $2.1 million of acquired intangible amortization, to the Company for the three and nine months ended September 30, 2014. The acquired businesses purchased in 2013 noted above contributed revenues of $2.5 million and $2.5 million and income from operations of $0.4 million and $0.4 million, inclusive of $0.3 million and $0.3 million of acquired intangibles amortization to the Company for the three and nine months ended September 30, 2013. Peppers & Rogers Group In the third quarter of 2013, the Company acquired the remaining 20% interest in Peppers & Rogers Group (“PRG”) for $425 thousand. The buy-out accelerated TeleTech's rights pursuant to the sale and purchase agreement to acquire the remaining portion of the business in 2015.

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