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