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ACQUISITIONS | 12 Months Ended
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Dec. 31, 2015
ACQUISITIONS [ABSTRACT] |
ACQUISITIONS | (2)ACQUISITIONS rogenSi In the third quarter of 2014, as an addition to the Customer Strategy Services (“CSS”) segment, the Company acquired substantially all operating assets of rogenSi Worldwide PTY, Ltd., a global leadership, change management, sales, performance training and consulting company. The total purchase price was $34.3 million, subject to certain working capital adjustments, and consists of $18.0 million in cash at closing and an estimated $14.5 million in three earn-out payments, contingent on the acquired companies and TeleTech’s CSS segment achieving certain agreed earnings before interest, taxes, depreciation and amortization (“EBITDA”) targets, as defined in the sale and purchase agreement. 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 total contingent consideration possible per the sale and purchase agreement ranges from zero to $17.6 million and 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 by applying a probability weighted discounted cash flow model 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 $15.3 million. The $15.3 million of expected future payments was calculated using a 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. During the fourth quarter of 2014, the third quarter of 2015, and the fourth quarter of 2015, the Company recorded fair value adjustments of the contingent consideration of $0.5 million, $0.8 million, and $(0.3) million, respectively, based on revised estimates noting higher or lower probability of exceeding the EBITDA targets (see Note 9). As of December 31, 2015, the fair value of the contingent consideration was $9.8 million, of which $5.7 million and $4.1 million were included in Other accrued expenses and Other long-term liabilities in the accompanying Consolidated Balance Sheets, respectively. The following summarizes the fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):
|  | Acquisition Date |
|  | Fair Value |
Cash |  | $ | 2,670 |
Accounts receivable, net |  |  | 6,417 |
Other assets |  |  | 2,880 |
Property, plant and equipment |  |  | 578 |
Deferred tax assets, net |  |  | 449 |
Customer relationships |  |  | 6,331 |
Tradename / trademarks |  |  | 5,545 |
Non-compete agreements |  |  | 927 |
Goodwill |  |  | 17,260 |
|  |  | 43,057 |
Accounts payable |  |  | 708 |
Accrued employee compensation and benefits |  |  | 2,203 |
Accrued expenses |  |  | 1,146 |
Other |  |  | 4,597 |
|  |  | 8,654 |
Total purchase price |  | $ | 34,403 |
In the third quarter of 2015, the Company finalized its valuation of rogenSi for the acquisition date assets acquired and liabilities assumed. The only material adjustment was an increase to the balances for tradename/ trademarks, customer relationships and non-compete agreements by $3.4 million and a resulting decrease to goodwill of $3.4 million. In connection with this valuation finalization, a reduction to amortization expense of $0.3 million was recorded during the quarter ended September 30, 2015. The rogenSi customer relationships and non-compete agreements will be amortized over useful life of 70 months and 30 months, respectively. The goodwill recognized from the rogenSi acquisition is attributable, but not limited to, the acquired workforce and expected synergies within CSS. None of the tax basis of the acquired intangibles and goodwill 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, as an addition to the Customer Management Services (“CMS”) segment, the Company acquired a 100% interest in Sofica Group, a Bulgarian joint stock company (“Sofica”). Sofica provides customer lifecycle management and other business process services across multiple channels in multiple sites in over 18 languages. The purchase price of $14.2 million included $9.4 million in cash consideration (including working capital adjustments) and an estimated $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. The total contingent consideration possible per the stock purchase agreement ranges from zero to $7.5 million. Additionally, the 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 and fourth quarters of 2014, the Company recorded fair value adjustments of the contingent consideration of $1.8 million and $0.6 million, respectively based on revised estimates noting higher probability of exceeding the EBITDA targets (see Note 9). During the second quarter of 2015, the Company recorded a negative fair value adjustment for contingent consideration of $0.5 million based on revised estimates noting lower profitability than initially estimated. As of December 31, 2015, the fair value of the remaining contingent consideration was $3.2 million, which was included in Other accrued expenses in the accompanying Consolidated Balance Sheets. In the first quarter of 2015, the Company finalized its valuation of Sofica for the acquisition date assets acquired and liabilities assumed. There were no material measurement period adjustments in 2015. Other Acquisitions WebMetro In the third quarter of 2013, as an addition to the Customer Growth Services (“CGS”) segment, the Company acquired 100% of WebMetro, a California corporation (“WebMetro”), a digital marketing agency. The total purchase price was $17.8 million. The Company was obligated to make earn-out payments during 2014 and 2015 if WebMetro achieved specified EBITDA targets, as defined by the stock purchase agreement. The fair value of the contingent payments was measured based on significant inputs not observable in the market (Level 3 inputs). Key assumptions include a discount rate of 5.3% and expected future value of payments of $2.6 million. The $2.6 million of expected future payments was calculated using probability weighted EBITDA assessment with the highest probability associated with WebMetro achieving the targeted EBITDA for each earn-out year. As of the acquisition date, the fair value of the contingent payments was approximately $2.5 million. The first contingent payment of $1.0 million was completed 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 was remote (see Note 9). As of December 31, 2014, the fair value of the remaining contingent consideration was zero. 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 a cquired businesses purchased in 2014 and 2013 noted above contributed revenues of $65.9 million, $43.2 million, and $6.4 million, and income from operations of $0.6 million, $5.3 million, and $0.9 million inclusive of $4.2 million, $3.3 million, and $0.8 million of acquired intangible amortization, to the Company for the years ended December 31, 2015, 2014 and 2013, respectively. Investments CaféX In the first quarter of 2015, the Company invested $9.0 million in CafeX Communications, Inc. (“CaféX”) through the purchase of a portion of the Series B Preferred Stock of CaféX. CaféX is a provider of omni-channel web-based real time communication (WebRTC) solutions that enhance mobile applications and websites with in-app video communication and screen share technology to increase customer satisfaction and enterprise efficiency. TeleTech anticipates deploying the CaféX technology as part of the TeleTech customer experience offerings within the CMS business segment and as part of its Humanify platform. At December 31, 2015, the Company owns 17.2% of the total equity of CaféX. The investment is accounted for under the cost method of accounting. The Company evaluates its investments for possible other-than-temporary impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company tested the investment in CaféX for impairment and concluded that the investment was not impaired at December 31, 2015.

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