SITEL Worldwide Corp - FORM 10-Q - November 5, 2014

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EXCEL - IDEA: XBRL DOCUMENT - SITEL Worldwide CorpFinancial_Report.xls
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 15D-14(A) UNDER THE SE - SITEL Worldwide Corpq32014exhibit312.htm
EX-10.1 - BOARD AGREEMENT BETWEEN DAVID GARNER AND SITEL WORLDWIDE CORPORATION, DATED AUGU - SITEL Worldwide Corpa2014ex101boardagreement-d.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. 1350 - SITEL Worldwide Corpq32014exhibit321.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 15D-14(A) UNDER THE SE - SITEL Worldwide Corpq32014exhibit311.htm
EX-10.2 - BOARD AGREEMENT BETWEEN BOB MAHONEY AND SITEL WORLDWIDE CORPORATON, DATED AUGUST - SITEL Worldwide Corpa2014ex102boardagreement-b.htm
EX-10.4 - BOARD AGREEMENT BETWEEN PETER SHEA AND SITEL WORLDWIDE CORPORATON, DATED AUGUST - SITEL Worldwide Corpa2014ex104boardagreement-p.htm
EX-10.3 - BOARD AGREEMENT BETWEEN KEITH POWELL AND SITEL WORLDWIDE CORPORATON, DATED AUGUS - SITEL Worldwide Corpa2014ex103boardagreement-k.htm
EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. 1350 - SITEL Worldwide Corpq32014exhibit322.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 (Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    
For the quarterly period ended
September 30, 2014
 
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    
For the transition period from
 
to
 
    
Commission file number 333-172952
 
SITEL WORLDWIDE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
    
Delaware
 
16-1556476
(State or Other Jurisdiction of
 
(I.R.S. Employer Identification No.)
Incorporation or Organization)
 
 
 
 
 
3102 West End Avenue
 
 
Two American Center, Suite 900
 
 
Nashville, Tennessee
 
37203
(Address of Principal Executive Offices)
 
(Zip Code)
 
 
 
Registrant's Telephone Number, Including Area Code:
 
(615) 301-7100
    
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES o    NO þ

The Registrant is a voluntary filer of reports required of companies with public securities under Section 13 or 15(d) of the Securities Exchange Act of 1934 and has filed all reports which would have been required of the Registrant during the preceding 12 months had it been subject to such provisions.

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
YES þ    NO o
    
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
 
Large accelerated filer
o
 
Accelerated filer
o
 
Non-accelerated filer
þ
(Do not check if a smaller reporting company)
Smaller reporting company
o
    

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act.)
YES o    NO þ
    
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.
 
Outstanding
Class
October 31, 2014
Class A, $0.01 par value
38,203,599
Class B, $0.01 par value
88,281,647
Class C, $0.01 par value
23,990


TABLE OF CONTENTS
 
 
 
Item
 
Page No.
PART I
1.
 
 
 
 
 
2.
3.
4.
 
 
 
PART II
1.
1A.
6.
 


PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS (UNAUDITED)

SITEL Worldwide Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands of U.S. dollars)



 
September 30, 2014
 
December 31, 2013
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
15,862

 
$
7,366

Accounts receivable (net of allowance for doubtful accounts of $2,567 and $2,081, respectively)
265,046

 
242,472

Prepaids and other current assets
62,311

 
53,832

Total current assets
343,219

 
303,670

Property and equipment, net
89,976

 
89,662

Goodwill
117,708

 
117,709

Other intangible assets, net
36,024

 
36,547

Deferred income taxes
29,241

 
35,975

Other noncurrent assets
34,402

 
36,658

Total assets
$
650,570

 
$
620,221

Liabilities and Stockholders’ Deficit
 
 
 
Current liabilities
 
 
 
Accounts payable
$
22,242

 
$
20,161

Accrued payroll and benefits
90,168

 
76,646

Accrued liabilities and other
90,844

 
85,235

Income taxes payable
7,821

 
7,510

Current portion of capital lease obligations
2,761

 
2,005

Total current liabilities
213,836

 
191,557

Long-term debt
716,165

 
734,614

Capital lease obligations
3,502

 
3,125

Deferred income taxes
3,710

 
3,828

Other noncurrent liabilities
43,050

 
51,202

Total liabilities
980,263

 
984,326


3
SITEL Worldwide Corporation
Condensed Consolidated Balance Sheets (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

 
September 30, 2014
 
December 31, 2013
Commitments and contingencies (see Note 10)

 

Redeemable preferred stock, 20,000,000 convertible shares authorized, issuable in series:
 
 
 
Series B, $0.01 par value; 39,947 shares issued and outstanding at September 30, 2014 and December 31, 2013
72,976

 
66,982

Series C, $0.01 par value; 28,881 shares issued and outstanding at September 30, 2014 and December 31, 2013
66,722

 
59,056

Series D, $0.01 par value; 75,000 shares issued and outstanding at September 30, 2014 and none issued at December 31, 2013
78,858

 
—

Stockholders’ deficit
 
 
 
Subsidiary exchangeable preferred stock, no par value; 1,713,321 shares authorized, issued, and outstanding at September 30, 2014 and December 31, 2013
2,665

 
2,665

Common stock, 361,000,000 shares authorized; 225,000,000 Class A shares, 128,500,000 Class B convertible shares, and 7,500,000 Class C shares
 
 
 
Class A, $0.01 par value; 41,718,810 shares (including 9,040,858 restricted shares) and 40,699,602 shares (including 8,268,358 restricted shares) issued at September 30, 2014 and December 31, 2013, respectively; 38,176,187 shares and 38,234,495 shares outstanding at September 30, 2014 and December 31, 2013, respectively
327

 
325

Class B, $0.01 par value; convertible into Class A common stock on 1:1 basis; 88,281,647 shares issued and outstanding at September 30, 2014 and December 31, 2013
882

 
882

Class C, $0.01 par value; 6,751,263 shares issued and 23,990 shares outstanding at September 30, 2014 and December 31, 2013
68

 
68

Additional paid-in capital
342,331

 
357,518

Accumulated deficit
(832,952
)
 
(788,390
)
Accumulated other comprehensive loss, net of tax
(49,947
)
 
(53,964
)
Treasury shares, at cost
(11,623
)
 
(9,247
)
Total stockholders’ deficit
(548,249
)
 
(490,143
)
Total liabilities and stockholders’ deficit
$
650,570

 
$
620,221

See accompanying Notes to Condensed Consolidated Financial Statements.


4
SITEL Worldwide Corporation
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
(in thousands of U.S. dollars)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Revenues
$
359,089

 
$
353,368

 
$
1,058,315

 
$
1,067,364

Operating expenses
 
 
 
 
 
 
 
Costs of services*
240,388

 
231,089

 
714,498

 
701,744

Selling, general, and administrative expenses*
86,189

 
91,072

 
265,543

 
274,513

Depreciation and amortization of property and equipment
9,510

 
8,674

 
26,470

 
26,349

Amortization of intangible assets
—

 
1,592

 
523

 
4,826

Restructuring and exit charges
2,853

 
1,430

 
18,657

 
6,732

Loss (gain) on foreign currency transactions
3,607

 
(979
)
 
3,797

 
(36
)
Loss on sale of subsidiary
—

 
—

 
—

 
4,558

Impairment and loss (gain) on disposal of assets
674

 
(501
)
 
701

 
(710
)
Other (income) expense, net
(81
)
 
4

 
(119
)
 
(289
)
Operating income
15,949

 
20,987

 
28,245

 
49,677

Interest and other financing costs, net
19,678

 
21,200

 
62,667

 
59,861

Loss before income taxes
(3,729
)
 
(213
)
 
(34,422
)
 
(10,184
)
Income tax provision (benefit)
385

 
(9,438
)
 
10,140

 
(5,463
)
Net (loss) income
(4,114
)
 
9,225

 
(44,562
)
 
(4,721
)
Other comprehensive (loss) income:
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of tax if $0
(3,965
)
 
63

 
(552
)
 
(9,469
)
Unrealized (loss) gain on derivative valuation, net of tax expense (benefit) of $30, $0, $(2,123) and $598, respectively
(1,451
)
 
(831
)
 
4,458

 
(6,989
)
Reclassification of pension amounts realized in Net (loss) income, net of tax benefit of $3, $0, $3, and $0, respectively
39

 
(32
)
 
111

 
(105
)
Total other comprehensive (loss) income
(5,377
)
 
(800
)
 
4,017

 
(16,563
)
Comprehensive (loss) income
$
(9,491
)
 
$
8,425

 
$
(40,545
)
 
$
(21,284
)
* Exclusive of Depreciation and amortization of property and equipment
See accompanying Notes to Condensed Consolidated Financial Statements.





5
SITEL Worldwide Corporation
Condensed Consolidated Statements of Changes in Stockholders' Deficit - Schedule 1
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

-- Schedule 1 --
 
Shares Issued
 
Par Value
 
 
 
 
 
 
 
Class A
Common
Stock
 
Class B
Common
Stock
 
Class C
Common
Stock
 
Class A
Common
Stock
 
Class B
Common
Stock
 
Class C
Common
Stock
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Subtotal
Balances at December 31, 2013
40,699,602

 
88,281,647

 
6,751,263

 
$
325

 
$
882

 
$
68

 
$
357,518

 
$
(788,390
)
 
$
(429,597
)
Restricted shares granted
880,000

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Restricted shares forfeited
(107,500
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Purchase of treasury stock
—

 
—

 
—

 
—

 
—

 
—

 
2,376

 
—

 
2,376

Non-cash stock granted
246,708

 
—

 
—

 
2

 
—

 
—

 
135

 
—

 
137

Preferred B, C, and D stock accretion and BCF
—

 
—

 
—

 
—

 
—

 
—

 
(17,698
)
 
—

 
(17,698
)
Net loss
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(44,562
)
 
(44,562
)
Balances at September 30, 2014
41,718,810

 
88,281,647

 
6,751,263

 
$
327

 
$
882

 
$
68

 
$
342,331

 
$
(832,952
)
 
$
(489,344
)
See accompanying Notes to Condensed Consolidated Financial Statements.

6
SITEL Worldwide Corporation
Condensed Consolidated Statements of Changes in Stockholders' Deficit - Schedule 2
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

-- Schedule 2 --
 
 
 
Accumulated Other Comprehensive Loss
 
 
 
 
 
 
 
 
 
Totals
from
Schedule 1
 
Foreign
Currency
Translation
 
Defined
Benefit
Pension/
Other
 
Unrealized
Gain on
Derivatives
Valuation
 
Subsidiary
Exchangeable
Stock
 
Treasury
Stock
Shares
 
Treasury
Stock
Capital
 
Total
Balances at December 31, 2013
$
(429,597
)
 
$
(40,007
)
 
$
(1,632
)
 
$
(12,325
)
 
$
2,665

 
9,192,380

 
$
(9,247
)
 
$
(490,143
)
Purchase of treasury stock
2,376

 
—

 
—

 
—

 
—

 
1,077,516

 
(2,376
)
 
—

Non-cash stock granted
137

 
—

 
—

 
—

 
—

 
—

 
—

 
137

Preferred B, C, and D stock accretion and BCF
(17,698
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(17,698
)
Reclassification of pension amounts realized in net loss, net of tax benefit of $3
—

 
—

 
111

 
—

 
—

 
—

 
—

 
111

Unrealized gain on derivative, net of tax benefit of $2,123
—

 
—

 
—

 
4,458

 
—

 
—

 
—

 
4,458

Net loss
(44,562
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(44,562
)
Foreign currency translation adjustment, net of tax of $0
—

 
(552
)
 
—

 
—

 
—

 
—

 
—

 
(552
)
Balances at September 30, 2014
$
(489,344
)
 
$
(40,559
)
 
$
(1,521
)
 
$
(7,867
)
 
$
2,665

 
10,269,896

 
$
(11,623
)
 
$
(548,249
)
See accompanying Notes to Condensed Consolidated Financial Statements.

7
SITEL Worldwide Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of U.S. dollars)

 
Nine Months Ended September 30,
 
2014
 
2013
Cash flows from operating activities
 
 
 
Net loss
$
(44,562
)
 
$
(4,721
)
Adjustments to reconcile Net loss to net cash flows relating to operating activities:
 
 
 
Depreciation and amortization (including intangible assets)
26,993

 
31,175

Deferred income taxes
4,779

 
(8,484
)
Non-cash derivative activity
5,513

 
6,071

Amortization of debt issue costs and original issue discount
3,952

 
3,645

Amortization of deferred training revenue, net of costs
(1,645
)
 
(3,793
)
Impairment of property and equipment and other long-term assets
446

 
—

Loss on sale of subsidiary
—

 
4,558

Other non-cash items, net
454

 
(1,175
)
Change in book overdrafts
(3,145
)
 
(945
)
Changes in operating assets and liabilities, net
(10,972
)
 
15,990

Net cash (used in) provided by operating activities
(18,187
)
 
42,321

Cash flows from investing activities
 
 
 
Purchases of property and equipment
(26,136
)
 
(18,576
)
Proceeds from disposition of property and equipment
1,219

 
275

Net cash used in investing activities
(24,917
)
 
(18,301
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of Series D Preferred Stock, net
74,820

 
—

Payments on long-term debt and capital lease obligations
(287,560
)
 
(581,996
)
Proceeds from long-term debt
267,801

 
560,632

Payment of interest rate swap, net
(2,757
)
 
(2,688
)
Payments of debt issue costs
(719
)
 
(16
)
Net cash provided by (used in) financing activities
51,585

 
(24,068
)
Effect of exchange rate on cash and cash equivalents
15

 
95

Net change in cash and cash equivalents
8,496

 
47

Cash and cash equivalents:
 
 
 
Beginning of period
7,366

 
12,245

End of period
$
15,862

 
$
12,292

See accompanying Notes to Condensed Consolidated Financial Statements.



8
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)


1.
Overview and Basis of Presentation
Overview
SITEL Worldwide Corporation, including consolidated subsidiaries ("we", "our", “Sitel", or “the Company”), is a majority-owned subsidiary of Onex Corporation ("Onex") and is one of the world's largest and most diversified providers of customer care outsourcing services. We offer our clients a wide array of services, including customer service, technical support, customer acquisition, retention and revenue generation services, and back office support. The majority of our customer care services are inbound and delivered telephonically, but we are increasingly asked to provide services through other communication channels, including email, online chat, interactive voice response ("IVR"), and social media channels. We serve a broad range of industry end–markets, including financial services, technology, wireless, retail and consumer products, telecommunications, media and entertainment, energy and utilities, travel and transportation, internet service providers, insurance, public sector, and healthcare.
We are organized geographically and have two reporting segments: (1) "Americas," which refers to North America, Latin America, and Asia Pacific; and (2) "EMEA," which refers to Europe, the Middle East, and Africa. Each reporting segment performs substantially the same services for clients.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of the Company are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and, in the opinion of management, include all adjustments necessary for a fair statement of the financial position, results of operations, and cash flows for each period shown. Certain items have been reclassified from their prior period classifications to conform to the current year presentations. These reclassifications had no effect on net income or stockholders' equity as previously reported. All adjustments are of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The December 31, 2013 Condensed Consolidated Balance Sheet data was derived from the Company’s year-end audited Consolidated Financial Statements as presented in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on February 19, 2014. The Company’s interim Condensed Consolidated Financial Statements are not necessarily indicative of the financial position or operating results for an entire year. The accompanying interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in Item 8 of Part II of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
Recent Accounting Pronouncements
In March 2013, the FASB issued ASU No. 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force) ", which applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. ASU No. 2013-05 is effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The adoption of this guidance did not have a material effect on our financial statements and related disclosures.
In July 2013, the FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (Topic 740)", which provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should

9
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments in ASU 2013-11 do not require new recurring disclosures. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. Adoption of ASU 2013-11 during the first quarter of 2014 resulted in a decrease in both Deferred tax assets and Other noncurrent liabilities of $2,786.
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", which applies to customer contracts for the transfer of goods or services or nonfinancial assets, unless those contracts are within the scope of other standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual and interim reporting periods beginning after December 15, 2016. Early application is not permitted. The amendments should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this Update recognized at the date of initial application. If an entity elects the transition method, it should provide additional disclosures in the reporting periods that include the date of initial application of the amount by which each financial statement line item is affected in the current reporting period compared to the guidance that was in effect before the change. In addition, an explanation of the reasons for significant changes are required in the disclosure. The Company is currently evaluating the effect of ASU 2014-09 on our financial statements.
Out of Period Adjustments
During the nine months ended September 30, 2014, we identified prior period accounting errors related to the understatement of an accrued liability, the overstatement of certain deposits, and the overstatement of foreign currency transaction losses. The errors were not material to prior years' financial statements and are not expected to be material to the 2014 results. Therefore, we recorded the error corrections in the same quarters they were identified, which increased Loss before income taxes and Net loss by $961 and $625, respectively, for the first quarter of 2014 and decreased Loss before income taxes and Net loss by $1,400 for the second quarter of 2014. The aggregate impact of the corrections for the nine months ended September 30, 2014 was a $439 decrease in Loss before income taxes and a $775 decrease in Net loss.
2.
Property and Equipment
The composition of Property and equipment is as follows:
 
September 30, 2014
 
December 31, 2013
Land
$
3,554

 
$
3,554

Buildings and improvements
26,458

 
26,219

Leasehold improvements
70,835

 
64,506

Computer software
49,828

 
46,850

Equipment
181,383

 
171,259

Furniture and fixtures
30,607

 
29,834

Total original cost
362,665

 
342,222

Less: Accumulated depreciation
(280,205
)
 
(261,635
)
Net, excluding construction in progress
82,460

 
80,587

Construction in progress
7,516

 
9,075

Property and equipment, net
$
89,976

 
$
89,662

Depreciation expense was $9,510 and $26,470 for the three and nine months ended September 30, 2014, compared to $8,674 and $26,349 for the same periods in 2013.

10
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

3.
Goodwill and Other Intangible Assets
The carrying amount of Goodwill decreased $1 during the nine months ended September 30, 2014, due to foreign currency translation.
The following table presents our Other intangible assets as of September 30, 2014:
 
Gross
Intangibles
 
Accumulated Amortization and Impairment Charges
 
Net
Intangibles
Customer relationships
$
89,686

 
$
(89,686
)
 
$
—

Trademark and trade name (indefinite lived)
40,200

 
(4,176
)
 
36,024

 
$
129,886

 
$
(93,862
)
 
$
36,024

The following table presents our Other intangible assets as of December 31, 2013:
 
Gross
Intangibles
 
Accumulated Amortization and Impairment Charges
 
Net
Intangibles
Customer relationships
$
89,686

 
$
(89,163
)
 
$
523

Trademark and trade name (indefinite lived)
40,200

 
(4,176
)
 
36,024

 
$
129,886

 
$
(93,339
)
 
$
36,547

We amortize intangible assets with definite lives over their estimated useful lives, using the straight-line method. Intangible asset amortization expense was $0 and $523 for the three and nine months ended September 30, 2014, respectively. Amortization expense for the same periods of 2013 was $1,592 and $4,826, respectively. We do not expect additional amortization expense to be recognized during the remainder of the year ended December 31, 2014.
4.
Restructuring and Exit Activities
Given the nature of the industry we operate in, we evaluate and assess our worldwide operations in an effort to rationalize facility and labor costs, further streamline our operations in order to align resources to support growth, and appropriately shift the geographic mix of Company resources. Restructuring expense during the three months ended September 30, 2014 for activities initiated in 2014 was $2,260, of which $2,112 related to severance costs and $148 related to facility exit costs. Restructuring expense during the nine months ended September 30, 2014 for activities initiated in 2014 was $16,271, of which $14,750 related to severance costs and $1,521 related to facility exit costs. For these activities, the remaining severance-related accrual of $5,479 is expected to be paid during the remainder of 2014 and the remaining facility exit costs accrual of $868 is expected to be paid during the remainder of 2014 through the year 2016 as the related leases expire.
Restructuring expense during the three months ended September 30, 2014 for activities initiated prior to 2014 was $593, of which $388 related to severance costs and $205 related to facility exit costs. Restructuring expense during the nine months ended September 30, 2014 for activities initiated prior to 2014 was $2,386, of which $1,633 related to severance costs and $753 related to facility exit costs. For these activities, the remaining severance-related accrual of $663 is expected to be paid by the end of 2014, and the remaining accrual for facility exit costs of $2,081 is expected to be paid during the remainder of 2014 through the year 2017 as the related leases expire. Total expected expenses during the remainder of 2014 relating to restructuring activities already initiated as of September 30, 2014 are $2,518.

11
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

The liability for restructuring activities initiated in 2014 consisted of the following:
 
 
 
Facility
 
 
 
 
 
Exit and
 
 
 
Severance
 
Other
 
Total
December 31, 2013
$
—

 
$
—

 
$
—

Costs accrued (offset was to expense)
14,750

 
1,521

 
16,271

Cash payments
(8,897
)
 
(603
)
 
(9,500
)
Foreign exchange and other
(374
)
 
(50
)
 
(424
)
September 30, 2014
$
5,479

 
$
868

 
$
6,347

Current portion of restructuring included in Accrued liabilities and other
$
5,475

 
$
868

 
$
6,343

Long-term portion of restructuring included in Other noncurrent liabilities
$
4

 
$
—

 
$
4

Restructuring expense during the three and nine months ended September 30, 2014 for activities initiated in 2014 was $1,408 and $13,365 for EMEA and $852 and $2,906 for the Americas, respectively.
The liability for restructuring activities initiated in 2013 and prior years consisted of the following:
 
 
 
Facility
 
 
 
 
 
Exit and
 
 
 
Severance
 
Other
 
Total
December 31, 2013
$
1,293

 
$
3,235

 
$
4,528

Costs accrued (offset was to expense)
1,247

 
753

 
2,000

Cash payments
(1,763
)
 
(1,813
)
 
(3,576
)
Foreign exchange and other
(114
)
 
(94
)
 
(208
)
September 30, 2014
$
663

 
$
2,081

 
$
2,744

Current portion of restructuring included in Accrued liabilities and other
$
663

 
$
1,249

 
$
1,912

Long-term portion of restructuring included in Other noncurrent liabilities
$
—

 
$
832

 
$
832

 
 
 
 
 
 
Activity not reflected within the restructuring liability:
 
 
 
 
 
Costs expensed
$
386

 
$
—

 
$
386

Cash payments
$
(30
)
 
$
—

 
$
(30
)
Restructuring expense during the three and nine months ended September 30, 2014 for activities initiated in 2013 and prior years was $426 and $1,141 for EMEA and $167 and $1,245 for the Americas, respectively. As of September 30, 2014, cumulative restructuring costs related to such activities are $14,848, of which $7,761 relates to EMEA and $7,087 relates to the Americas.

12
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

5.
Long-Term Debt
The composition of Long-term debt is as follows:
 
September 30, 2014
 
December 31, 2013
Senior Notes
$
295,771

 
$
295,073

Senior Secured Notes
195,089

 
194,045

Senior Secured Credit Facility:
 
 
 
Revolvers:
 
 
 
U.S. revolver
—

 
18,000

Canadian revolver
—

 
—

Term Loans:
 
 
 
U.S. dollar term loan
177,973

 
177,973

Euro term loan
28,130

 
30,191

British pound sterling term loan
19,202

 
19,332

Total debt
716,165

 
734,614

Less: Debt maturing within one year
—

 
—

Total long-term debt
$
716,165

 
$
734,614

Senior Notes
On March 18, 2010, SITEL, LLC and Sitel Finance Corp. (the "Issuers") issued in a private placement, 11.5% senior notes due 2018 (the “Senior Notes”) having an aggregate principal amount of $300,000 with an original issue discount of $7,638. The Senior Notes are general unsecured obligations of the Company and are senior in right of payment to all existing and future indebtedness, if any, that is by its terms expressly subordinated to the Senior Notes. The Senior Notes are guaranteed by the Company’s domestic subsidiaries and will mature on April 1, 2018. Interest accrues on the Senior Notes at a rate of 11.5% annually, and is payable semi-annually in arrears on April 1 and October 1.
Senior Secured Notes
On April 20, 2012, the Issuers issued in a private placement, 11.0% senior secured notes ("Senior Secured Notes") due 2017 having an aggregate principal amount of $200,000 with an original issue discount of $8,000. The Senior Secured Notes are guaranteed by the Company and its domestic subsidiaries, are secured on an equal and ratable basis with all obligations of the Issuers and the guarantors under the Company's senior secured credit facility (the “Senior Secured Credit Facility”), and will mature on April 1, 2017. Interest accrues on the Senior Secured Notes at a rate of 11.0% annually and is payable semi-annually in arrears on February 1 and August 1.
Both the Senior Notes and the Senior Secured Notes contain customary covenants and restrictions on the activities of SITEL, LLC, Sitel Finance Corp. and SITEL, LLC's restricted subsidiaries, including, but not limited to, the incurrence of additional indebtedness; dividends or distributions in respect of capital stock or certain other restricted payments or investments; entering into agreements that restrict distributions from restricted subsidiaries; the sale or disposal of assets, including capital stock of restricted subsidiaries; transactions with affiliates; the incurrence of liens; and mergers, consolidations or the sale of substantially all of SITEL, LLC's assets.
Senior Secured Credit Facility
The Company's Senior Secured Credit Facility initially provided for available borrowings in an aggregate amount of $760,000. Components of the Senior Secured Credit Facility are (1) the $675,000 aggregate principal amount term loans, including a $550,000 U.S. dollar loan, a €51,447 Euro loan, and a £30,000 British pound sterling loan (collectively, the "Term Loans"), and (2) the $85,000 aggregate principal amount revolvers, consisting of a $75,000 U.S. revolver and a $10,000 Canadian revolver (made available in Canadian dollars) (collectively, the "Revolvers"). In January 2013, the non-extended portion of our U.S. revolver expired, reducing the borrowing capacity under the Revolvers to $61,250 from $85,000.

13
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

All Term Loans mature on January 30, 2017 and amortize in equal quarterly installments in an aggregate annual amount equal to 0.25% of the original principal amount with the balance payable at maturity. Payments on the principal amount have exceeded the cumulative amortization schedule, thus no amount is due until maturity. Interest on the U.S. term loan is based, at our option, on LIBOR plus the applicable margin of 7.25%, or the higher of the federal funds rate plus 0.50% or the prime rate plus the applicable margin of 6.25%. Interest on the Euro term loan is based on EURIBOR plus the applicable margin of 7.25%. Interest on the British pound sterling term loan is based on LIBOR plus the applicable margin of 7.25%. We have an interest rate swap agreement for the notional amount of $175,000 against our Term Loans that is based on a rate of 2.315% versus three month LIBOR.
The Revolvers mature on January 30, 2016. A commitment fee is payable quarterly at 1.00% per annum of the undrawn portion of the Revolvers. Interest on the U.S. revolver is based, at our option, on LIBOR plus the applicable margin of 7.25%, or the higher of the federal funds rate plus 0.50% or the prime rate plus the applicable margin of 6.25%. Interest on the Canadian revolver is based, at our option, on the Canadian banker's acceptance rate (the "BA Rate") plus the applicable margin of 7.25%, or the higher of the one month BA Rate plus 0.75% or the Canadian prime rate plus the applicable margin of 6.25%. At September 30, 2014 and December 31, 2013, we had $59,244 and $42,242 available under the Revolvers after utilizing $2,006 and $1,008 for letters of credit outstanding.
Borrowings under the Senior Secured Credit Facility are collateralized by interests granted on a substantial portion of our worldwide assets and are guaranteed by certain subsidiary guarantors.
The Senior Secured Credit Facility also contains customary affirmative and negative covenants such as restricting certain corporate actions, including asset dispositions, acquisitions, the payment of dividends, changes of control, the incurrence of indebtedness, providing financing and investments and transactions with affiliates. Under the Senior Secured Credit Facility, we are required to comply with certain financial covenants on a quarterly and annual basis. During the first quarter of 2014, we executed the sixth amendment to our Senior Secured Credit Facility (the "Sixth Amendment"), which decreased the Minimum Interest Coverage Ratio and increased the maximum permitted Senior Secured Leverage Ratio, effective the first quarter of 2014. We paid debt issuance and other financing costs of $1,499 during the first nine months of 2014 related to the Sixth Amendment, of which $719 were deferred and recorded in Other noncurrent assets to be amortized over the remaining term of the facility.
Future maturities of the Company's outstanding Long-term debt as of September 30, 2014 are summarized as follows:
2014
$
—

2015
—

2016
—

2017
425,305

2018
300,000

2019 and thereafter 
—

Total debt payments
725,305

Less amount representing unamortized debt discount
(9,140
)
Total debt balance at September 30, 2014
$
716,165

6.
Redeemable Preferred Stock
We are authorized to issue in series up to 20,000,000 shares of preferred stock with a par value of $0.01. To date, we have authorized the issuance of three series of preferred shares—Series B, Series C, and Series D. Our Board of Directors determines the voting rights, dividend policy, and conversion rights of each series of these preferred shares. The majority of each series of these preferred shares are held by Onex and other related parties. Each series has a mandatory redemption date of July 2, 2018 for cash and the right to be converted, at any time through the redemption date at the option of the holder, into the Company's Class A Voting Common Stock (initially at $4.85 per share for Series B, $1.50 per share for Series C, and $0.77 per share for Series D), in settlement of these obligations (including all accumulated and unpaid dividends through the redemption date). The net value of the preferred shares is recorded as Redeemable preferred stock (outside of permanent equity).

14
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

The Series B, C, and D Preferred Stock contain an optional cash redemption call option that is only exercisable by the Company. Since Onex controls the majority of our Board of Directors, accounting guidance requires that we account for this as an in-substance put option, since it assumes that Onex could force the execution of the call option. The in-substance put option meets the qualifications of a derivative, requiring it to be separated from the host instrument and recorded as a liability at fair value, with subsequent changes in the fair value recorded to the income statement. We have determined that the value is immaterial as of September 30, 2014 and December 31, 2013, thus no adjustment to the carrying value of the stock has been recorded in relation to the in-substance put option.
Series D Preferred Stock
On May 8, 2014, we authorized the issuance of 125,000 shares of 16% Cumulative Participating Preferred Stock, Series D (the "Series D Preferred Stock"). On May 8, 2014, we executed a subscription agreement with Onex Clientlogic Holdings LLC to issue up to 75,000 shares of the Series D Preferred Stock at a rate of $1,000 per share. Pursuant to this offer, we received proceeds of $75,000 from Onex Clientlogic Holdings LLC and other existing shareholders during the second quarter of 2014, which the Company intends to use to fund sales growth, invest in our clients, and execute ongoing cost initiatives. The Series D Preferred Stock ranks senior to each other class of the Company's stock in liquidation rights. Holders of the Series D Preferred Stock are entitled to receive cumulative dividends at the rate of 16% of the liquidation preference per share per annum, which accrue from inception and are payable at the mandatory redemption date or upon declaration by our Board of Directors. Accrued dividends are recorded to Additional paid-in capital.
At September 30, 2014, the number of shares of Series D Preferred Stock issued and outstanding was 75,000. During the nine months ended September 30, 2014, we incurred fees associated with the issuance of the Series D Preferred Stock totaling $180 related to a fairness opinion issued by a third party. These fees were deferred and recorded outside of permanent equity as a reduction of the related proceeds, to be accreted to Additional paid-in capital from the date of issuance to the stated redemption date. The liquidation value of the Series D Preferred Stock, including accrued dividends payable, at September 30, 2014 of $78,858 is net of deferred financing costs of $165.
Series C Preferred Stock
On December 10, 2008, we authorized the issuance of 125,000 shares of Series C Preferred Stock. At September 30, 2014 and December 31, 2013, the number of shares of Series C Preferred Stock issued and outstanding was 28,881.
When the conversion option of the Series C Preferred Stock into Class A Voting Common Stock at $1.50 per share is less than the fair value of the common stock on issuance date, there is a Beneficial Conversion Feature (“BCF”) associated with the preferred stock. The value of the BCF is recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value to Additional paid-in capital. For the Series C Preferred Stock owned by certain other related parties, this discount is accreted from the date of issuance to the stated redemption date. For the Series C Preferred Stock owned by Onex, the BCF is immediately amortized to the date of issuance due to existence of the in-substance put option on the stock discussed above.
The liquidation value of the Series C Preferred Stock, including accrued dividends payable, at September 30, 2014 of $66,722 is net of deferred financing costs of $145 and the BCF of $1,494. The liquidation value of the Series C Preferred Stock, including accrued dividends payable, at December 31, 2013 of $59,056 is net of deferred financing costs of $174 and the BCF of $1,793. Holders of the Series C Preferred Stock are entitled to receive cumulative dividends at the rate of 16% of the liquidation preference per share per annum, which accrue from inception and are payable at the mandatory redemption date or upon declaration by our Board of Directors.
Series B Preferred Stock
On April 3, 2008, we authorized the issuance of 125,000 shares of Series B Preferred Stock. At September 30, 2014 and December 31, 2013, the number of shares of Series B Preferred Stock issued and outstanding was 39,947.
The liquidation value of the Series B Preferred Stock, including accrued dividends payable, at September 30, 2014 of $72,976 and at December 31, 2013 of $66,982, is net of deferred financing costs of $221 and $265, respectively. Holders of the Series B Preferred Stock are entitled to receive cumulative dividends at the rate of 12% of the liquidation preference per share

15
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

per annum, which accrue from inception and are payable at the mandatory redemption date or upon declaration by our Board of Directors.
7.
Stock-Based Compensation
The Company’s operating results for the three and nine months ended September 30, 2014 included stock-based compensation expense for issued stock grants of $15 and $137, respectively, compared to $61 and $191, respectively, for the same periods in 2013. These grants were primarily related to director and executive compensation. A summary of restricted stock and restricted stock unit activity is set forth below:
Restricted Stock Activity
 
 
Weighted
 
 
 
Average
 
 
 
Grant Date
 
Shares
 
Fair Value
Unvested at December 31, 2013
8,268,358

 
$
7,611

Granted
880,000

 
502

Vested
—

 
—

Converted
—

 
—

Forfeited
(107,500
)
 
(148
)
Unvested at September 30, 2014
9,040,858

 
$
7,965

Restricted Stock Unit Activity
 
 
Weighted
 
 
 
Average
 
 
 
Grant Date
 
Shares
 
Fair Value
Unvested at December 31, 2013
1,616,500

 
$
3,954

Granted
20,000

 
11

Vested
—

 
—

Forfeited
(158,000
)
 
(498
)
Unvested at September 30, 2014
1,478,500

 
$
3,467


During the nine months ended September 30, 2014, we issued 880,000 shares of Class A Common Stock to various executives pursuant to the terms of a Restricted Stock Grant Plan and Agreement with each executive. The restricted shares will generally be earned based on the attainment of specified goals achieved over a performance period.
As of September 30, 2014, there was approximately $8,957 of total unrecognized compensation cost (including the effect of expected forfeitures) related to unvested restricted stock and restricted stock units that the Company had not recorded. We will recognize the cost for restricted stock units over a period of three years following the occurrence of a change in control, initial public offering, or liquidity event, as defined in our Restricted Plans. We will recognize the cost for restricted shares either immediately, over a two-year period, or over a three-year period, depending on the terms of the restricted share agreement, commencing upon a change in control, initial public offering, or liquidity event.
8.
Income Taxes
The effective tax rate of (29.5)% for the nine months ended September 30, 2014 differs from the effective tax rate of 53.6% for the same period of 2013 primarily due to the greater pre-tax book loss for the nine months ended September 30, 2014 and release of valuation allowance on U.S. state deferred income taxes of $744 and $10,419 on deferred tax assets of our French subsidiary for the same period of 2013. In addition, tax expense resulting from changes in the intra-period allocation to continuing operations of $2,123 was recorded during the nine months ended September 30, 2014 compared to a tax benefit of $598 recorded in the same period of 2013, and tax expense of $797 related to foreign uncertain tax positions and tax audits was recorded during the nine months ended September 30, 2014 compared to a tax benefit of $4,919 recorded in the same period of 2013.

16
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations (the "Income Tax Allocation"). Through the third quarter of 2014, as a result of the Income Tax Allocation, we recorded a non-cash deferred income tax expense of $1,676 against Other comprehensive income as a result of year-to-date gains from mark-to-market fluctuations on foreign currency hedges that are designated as accounting hedges and an offsetting non-cash income tax benefit of $1,676 in continuing operations. Also during the first quarter of 2014, the 2013 hedge portfolio was fully settled resulting in the reversal of previously recorded tax benefits resulting in non-cash income tax expense of $3,799.
Our gross unrecognized tax benefits (excluding interest and penalties) decreased from $30,717 at December 31, 2013 to $30,264 at September 30, 2014, primarily resulting from statute expirations. There was a cash payment of $320 associated with an audit settlement in a foreign jurisdiction. The total amount of unrecognized tax benefits (including interest and penalties) that would affect income tax expense, if ever recognized in the financial statements is $32,630. We believe that it is reasonably possible that within the next 12-month period, the amount of unrecognized tax benefits for certain foreign tax positions might be reduced by $304 as a result of statute expirations or final resolution.
9.
Employee Benefits and Compensation
We have defined benefit pension plans covering certain employees outside of the United States. These plans are administered by a third party and include limited activity. The components of the net pension liability of $5,820 at September 30, 2014 and $5,988 at December 31, 2013 are included in Other noncurrent liabilities. Net periodic pension cost consisted of the following:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Service cost
$
163

 
$
137

 
$
504

 
$
411

Interest cost
113

 
87

 
347

 
260

Expected return on plan assets
(86
)
 
(77
)
 
(251
)
 
(225
)
Past service costs
40

 
38

 
116

 
120

Amortization of actuarial gains and losses and other
(4
)
 
(70
)
 
(8
)
 
(225
)
Net periodic pension cost
$
226

 
$
115

 
$
708

 
$
341

We also sponsor various employee retirement plans. In the United States, the Company sponsors a 401(k) savings plan that covers substantially all U.S. employees. In both Canada and Europe, the Company sponsors similar defined contribution plans. Expenses related to the defined contribution plans were $438 and $1,254 in the three and nine months ended September 30, 2014, respectively. Expenses related to these plans in the same periods of 2013 were $204 and $629, respectively.
10.
Commitments and Contingencies
The Company and its subsidiaries from time to time are subject to legal claims arising in the ordinary course of business. While the Company is unable to predict the outcome of these matters, it believes, based upon currently available facts, that adequate provision for such claims has been made. However, adverse developments could negatively impact earnings in particular future fiscal periods.
During 2011, the French tax authorities assessed SITEL France approximately €7,900 (equivalent to approximately $10,130 as of September 30, 2014) for the periods from 2007 to July 2010 for input value added taxes related to its performance of intermediary insurance services for the sale of insurance products on behalf of its insurance clients. During December 2013, the French tax authorities reduced the assessment to approximately €1,247 (equivalent to approximately $1,600 as of September 30, 2014). On January 6, 2014, the Company paid the assessment to perfect its rights in the event litigation is necessary to resolve the matter. As of September 30, 2014, we have accrued a portion of the assessment within Selling, general, and administrative expenses ("SG&A") equal to our estimated obligation under this matter. No liability related to this matter was recorded as of December 31, 2013.
In April 2008, the local Sao Paulo, Brazil tax authorities assessed our Brazilian subsidiary (“SITEL Brazil”) for the alleged non-payment of local sales taxes in the original amount of approximately R$3,500 (equivalent to approximately $1,460

17
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

as of September 30, 2014) for a period extending from 2004 to October 2008. The assessment relates to billings made to a domestic Brazilian client for which SITEL Brazil provided on site agent support at the client’s site located in Barueri City, Brazil. Local sales taxes on services provided in Brazil are assessed based on the actual location where services are rendered. SITEL Brazil paid local sales taxes to Barueri City, however the Sao Paulo tax authorities contend erroneously that the services were performed in Sao Paolo where SITEL Brazil maintains an office. SITEL Brazil appealed the original assessment and in March 2010, the tax authorities ruled against SITEL Brazil. In October 2010, SITEL Brazil received a formal demand to pay the assessment, which at the time totaled R$7,700 due to increases in interest and penalties. SITEL Brazil deposited R$7,700 with the tax authorities in December 2010 and filed its defense with the courts in January 2011. We are currently unable to predict the probable outcome of this matter and are not able to reasonably estimate the amount of loss, if any. No liability related to this matter was recorded as of September 30, 2014 and December 31, 2013.
11.
Derivative Financial Instruments
We are exposed to a variety of market risks, including the effects of changes in foreign currency exchange rates and interest rates. Our policies allow for the use of derivative financial instruments to prudently manage foreign currency exchange rate and interest rate exposure, but do not allow derivatives to be used for speculative purposes. Derivatives that we use are primarily foreign currency forward contracts and interest rate swaps. Our derivative activities are subject to the management, direction, and control of our senior financial officers. Risk management practices, including the use of financial derivative instruments, are presented to our Board of Directors at least annually.
Foreign Currency Exchange Rate Risk
We conduct a significant portion of our business in currencies other than the U.S. dollar. Our subsidiaries generally use the local currency as their functional currency for paying labor and other operating costs. Conversely, revenues for some of these foreign subsidiaries are derived from client contracts that are invoiced and collected in a different currency, principally in U.S. dollars, as well as other currencies such as Euro, British pound sterling, or Australian dollars. To hedge against the risk of fluctuations in our subsidiaries' functional currency, we have contracted with financial institutions to acquire (utilizing forward contracts) the functional currency of the foreign subsidiary at a fixed counterparty exchange rate at specific dates in the future. As of September 30, 2014, our forward contracts mature within the next fifteen months.
Interest Rate Risk
Interest rate movements create a degree of risk by affecting the amount of our interest payments. Our practice is to use interest rate swap agreements to manage our exposure to interest rate changes.
In connection with the Senior Secured Credit Facility dated January 30, 2007, we entered into an interest rate swap to convert $400,000 (reduced to $350,000 on March 31, 2009) of our floating rate debt into fixed rate debt. We elected not to designate this swap for hedge accounting treatment. On November 28, 2011 we amended the interest rate swap agreement to extend the term through December 31, 2016 and decreased the notional amount to $175,000 as of March 31, 2012. The fair value of this interest rate swap is classified as part of Accrued liabilities and other of $3,414 and $3,526 and as Other noncurrent liabilities of $1,917 and $4,061 as of September 30, 2014 and December 31, 2013, respectively.
For the three and nine months ended September 30, 2014, we recorded losses of $931 and $2,757 for settled interest payments, compared to losses of $932 and $2,688 for the three and nine months ended September 30, 2013. Additionally, there was a non-cash mark-to-market valuation decrease in the liability of $424 and an increase in the liability of $491 for the three and nine months ended September 30, 2014, compared to an increase in the liability of $1,060 and reduction in the liability of $808 for the three and nine months ended September 30, 2013. These amounts are reflected in Interest and other financing costs, net.

18
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

Fair Values in the Condensed Consolidated Balance Sheets
 
 
Derivative Assets
 
Derivative Liabilities
 
 
 
 
September 30,
2014
 
December 31,
2013
 
 
 
September 30,
2014
 
December 31,
2013
 
 
Balance
Sheet
Classification
 
Fair
Value
 
Fair
Value
 
Balance
Sheet
Classification
 
Fair
Value
 
Fair
Value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
Prepaids and other current assets
 
$
336

 
$
62

 
Accrued liabilities and other
 
$
2,956

 
$
4,996

Foreign exchange contracts
 
Other noncurrent assets
 
23

 
—

 
Other noncurrent liabilities
 
223

 
—

Total
 
 
 
$
359

 
$
62

 
 
 
$
3,179

 
$
4,996

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Interest rate contract - ST
 
Prepaids and other current assets
 
$
—

 
$
—

 
Accrued liabilities and other
 
$
3,414

 
$
3,526

Interest rate contract - LT
 
Other noncurrent assets
 
—

 
—

 
Other noncurrent liabilities
 
1,917

 
4,061

Foreign exchange contracts
 
Prepaids and other current assets
 
409

 
341

 
Accrued liabilities and other
 
2,517

 
3,264

Foreign exchange contracts
 
Other noncurrent assets
 
13

 
—

 
Other noncurrent liabilities
 
54

 
—

Total
 
 
 
$
422

 
$
341

 
 
 
$
7,902

 
$
10,851

Total derivatives
 
 
 
$
781

 
$
403

 
 
 
$
11,081

 
$
15,847


19
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Comprehensive (Loss) Income
Derivatives in
Cash Flow
Hedging
Relationships
 
Amount of (Loss) or Gain Recognized in OCI on Derivative
(Effective Portion)
 
Location of Loss
Reclassified from
Accumulated OCI into Income
(Effective Portion)
 
Amount of (Loss) or Gain
Reclassified from
Accumulated OCI
into Income
 
Three Months Ended September 30,
 
Three Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Foreign exchange contracts
 
$
(1,797
)
 
$
(2,179
)
 
COS and SG&A
 
$
(376
)
 
$
(1,348
)
Total
 
$
(1,797
)
 
$
(2,179
)
 
 
 
$
(376
)
 
$
(1,348
)
 
 
 
 
 
 
 
 
 
 
 
Derivatives in
Cash Flow
Hedging
Relationships
 
Amount of (Loss) or Gain Recognized in OCI on Derivative
(Effective Portion)
 
Location of Loss
Reclassified from
Accumulated OCI into Income
(Effective Portion)
 
Amount of (Loss) or Gain
Reclassified from
Accumulated OCI
into Income
 
Nine Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Foreign exchange contracts
 
$
(1,532
)
 
$
(6,466
)
 
COS and SG&A
 
$
(3,867
)
 
$
(75
)
Total
 
$
(1,532
)
 
$
(6,466
)
 
 
 
$
(3,867
)
 
$
(75
)
For the three and nine months ended September 30, 2014 we recorded losses of $226 and $2,320, respectively, compared to losses of $833 and $25, respectively, for the same periods in 2013 to Cost of services. For the three and nine months ended September 30, 2014, we recorded losses of $150 and $1,547, respectively, compared to losses of $515 and $50, respectively, for the same periods in 2013 to SG&A for the effective portion of settled hedge contracts. We expect unrealized losses of $2,717 will be reclassified from Accumulated other comprehensive loss (“AOCL”) to Cost of services and SG&A over the next twelve months. However, this amount and other future reclassifications from AOCL will fluctuate with movements in the underlying market price of the forward contracts. The estimates of fair value are based on applicable and commonly used pricing models and prevailing financial market information as of September 30, 2014.
For the three and nine months ended September 30, 2014 we recognized gains on foreign currency transactions related to the ineffective portion of the derivative instruments of $0 and $3, respectively, compared to losses of $104 and $197, respectively, for the same periods in 2013.
Derivatives Not
Designated as Hedging Instruments        
 
Location of (Loss) or Gain
Recognized in Income on Derivative
 
Amount of (Loss) or
Gain Recognized in
Income on Derivative
 
Amount of (Loss) or
Gain Recognized in
Income on Derivative
Three Months Ended September 30,
 
Nine Months Ended September 30,
2014
 
2013
 
2014
 
2013
Foreign exchange contracts
 
COS and SG&A
 
$
(257
)
 
$
(646
)
 
$
(33
)
 
$
(1,210
)
Foreign exchange contracts
 
Foreign currency transactions
 
(1,683
)
 
3,301

 
(481
)
 
5,231

Total
 
 
 
$
(1,940
)
 
$
2,655

 
$
(514
)
 
$
4,021

For the three and nine months ended September 30, 2014, we recorded losses of $154 and $20, respectively, compared to losses of $388 and $726, respectively, for the same periods in 2013 to Cost of services for derivatives not designated as hedging contracts. For the three and nine months ended September 30, 2014, we recorded losses of $103 and $13, respectively, compared to losses of $258 and $484, respectively, for the same periods in 2013 to SG&A for derivatives not designated as hedging contracts.

20
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

Current Contracts
At September 30, 2014, the Company had the following outstanding financial contracts that were entered to hedge foreign exchange and interest rate risk:
Derivatives in Cash Flow Relationship
Notional Amount 
Interest rate contract
$
175,000

Foreign exchange contracts
170,482

12.
Fair Value Measurements
The fair values of Cash and cash equivalents, short-term investments, trade receivables, and trade payables are valued as Level 1 items. The carrying value of these assets and liabilities approximates their fair value due to the short-term maturities. The terms of the Senior Secured Credit Facility, Senior Secured Notes, and Senior Notes include debt with variable and fixed interest rates, totaling $716,165 and $734,614 at September 30, 2014 and December 31, 2013, respectively. The estimated fair value of such debt was $717,000 and $754,000 at September 30, 2014 and December 31, 2013, respectively. The fair value of debt with fixed interest rates was determined using the quoted market prices of debt instruments with similar terms and maturities which are considered Level 2 inputs. The fair value of debt with variable interest rates was also measured using Level 2 inputs. These inputs included good faith estimates of the market value for the particular debt instrument, which represent the amount an independent market participant would provide, based upon market observations and other factors relevant under the circumstances.
U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are classified into a hierarchy by the inputs used to perform the fair value calculation as follows:
Level 1 – Fair value based on unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 – Modeled fair value with model inputs that are all observable market values.
Level 3 – Modeled fair value with at least one model input that is not an observable market value.

21
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

The following tables summarize the value of financial instruments by the pricing levels defined above as of September 30, 2014 and December 31, 2013. There were no transfers between pricing levels for the nine month period ended September 30, 2014.
 
Fair Value Measurements at September 30, 2014
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Foreign currency forward contracts
$
781

 
$
—

 
$
781

 
$
—

Total
$
781

 
$
—

 
$
781

 
$
—

Liabilities
 
 
 
 
 
 
 
Foreign currency forward contracts
$
5,750

 
$
—

 
$
5,750

 
$
—

Interest rate derivative instrument
5,331

 
—

 
5,331

 
—

Total
$
11,081

 
$
—

 
$
11,081

 
$
—

 
Fair Value Measurements at December 31, 2013
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Foreign currency forward contracts
$
403

 
$
—

 
$
403

 
$
—

Total
$
403

 
$
—

 
$
403

 
$
—

Liabilities
 
 
 
 
 
 
 
Foreign currency forward contracts
$
8,260

 
$
—

 
$
8,260

 
$
—

Interest rate derivative instrument
7,587

 
—

 
7,587

 
—

Total
$
15,847

 
$
—

 
$
15,847

 
$
—

We value derivatives based on current market prices of comparable instruments or, if none are available, on pricing models or formulas using current market and model assumptions. Our interest rate derivative instrument is a pay-fixed, receive-variable, interest rate swap based on LIBOR swap rate. The LIBOR swap rate is observable at commonly quoted intervals for the full term of the swap and therefore is considered a Level 2 item. Our foreign currency forward contracts are contracts to buy foreign currency at a fixed rate for delivery on a specified future date or period. The foreign exchange rate is observable for the full term of the swap and is therefore also considered a Level 2 item. The fair value measurement of a liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the Company's and counterparty's creditworthiness have also been factored into the fair value measurement of these derivative instruments.
We measure our intangible assets at fair value on a nonrecurring basis. These assets are classified in Level 3 of the fair value hierarchy. We test all existing Goodwill and other indefinite-lived intangibles (trademark and trade name) for impairment at least annually and more frequently if circumstances indicate that the carrying amount exceeds fair value. We conduct annual impairment tests as of December 31.
We estimate the fair values of Goodwill and other indefinite-lived intangibles utilizing multiple measurement techniques performed. The estimation is primarily determined based on an estimate of future cash flows (income approach) discounted at a market derived weighted average cost of capital. The income approach has been determined to be the most representative because our equity does not have an active trading market. Other unobservable inputs used in these valuations include managements' cash flow projections and estimated terminal growth rates. The valuation of indefinite-lived intangible assets also includes an unobservable input for royalty rate, which is based on rates used by comparable industries. We then use a public company model (which uses peer group valuation metrics) to confirm the measurement.
No impairment charges related to Goodwill and Other intangible assets were recorded during the three and nine months ended September 30, 2014 and 2013.
Long-lived assets are measured at fair value on a non-recurring basis and are classified in Level 3 of the fair value hierarchy. The fair value is estimated utilizing unobservable inputs, including appraisals on real estate as well as evaluations of the marketability and potential relocation of other assets in similar condition and similar market areas. We analyze our long-lived assets on a quarterly basis for any triggering events that would cause us to perform an impairment test. We recorded

22
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

impairment charges of $446 related to software in the Americas for the three and nine months ended September 30, 2014. No impairment charges related to long-lived assets were recorded during the three and nine months ended September 30, 2013.
We have certain annuity contracts included within Other noncurrent assets on the accompanying Condensed Consolidated Balance Sheets. These assets are measured at fair value on a non-recurring basis using third-party recoverability information and are classified in Level 3 of the fair value hierarchy. During the three and nine months ended September 30, 2013, we received approximately $500 in liquidation payments related to certain fully-impaired annuity contracts in the Americas, which was recorded as a gain to Impairment and (gain) loss on disposal of assets for the three and nine months ended September 30, 2013. No impairment charges related to Other noncurrent assets were recorded during the three and nine months ended September 30, 2014.
13.
Accumulated Other Comprehensive Loss
Changes in Accumulated Other Comprehensive Loss by Component (a) 
 
 
For the Three Months Ended September 30, 2014
 
 
Gains and Losses on Cash Flow Hedges
 
Defined Benefit Pension Items
 
Foreign Currency Items
 
Total
Beginning balance
 
$
(6,416
)
 
$
(1,560
)
 
$
(36,594
)
 
$
(44,570
)
Other comprehensive loss before reclassifications, net of tax expense of $30, $0, $0, and $30, respectively
 
(1,827
)
 
—

 
(3,965
)
 
(5,792
)
Amounts reclassified from accumulated other comprehensive loss, net of tax benefit of $0, $3, $0, and $3, respectively
 
376

 
39

 
—

 
415

Net current-period other comprehensive (loss) income
 
(1,451
)
 
39

 
(3,965
)
 
(5,377
)
Ending balance
 
$
(7,867
)
 
$
(1,521
)
 
$
(40,559
)
 
$
(49,947
)
 
 
For the Three Months Ended September 30, 2013
 
 
Gains and Losses on Cash Flow Hedges
 
Defined Benefit Pension Items
 
Foreign Currency Items
 
Total
Beginning balance
 
$
(11,586
)
 
$
(157
)
 
$
(37,420
)
 
$
(49,163
)
Other comprehensive (loss) income before reclassifications, net of tax of $0
 
(2,179
)
 
—

 
63

 
(2,116
)
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax of $0
 
1,348

 
(32
)
 
—

 
1,316

Net current-period other comprehensive loss
 
(831
)
 
(32
)
 
63

 
(800
)
Ending balance
 
$
(12,417
)
 
$
(189
)
 
$
(37,357
)
 
$
(49,963
)

23
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

 
 
For the Nine Months Ended September 30, 2014
 
 
Gains and Losses on Cash Flow Hedges
 
Defined Benefit Pension Items
 
Foreign Currency Items
 
Total
Beginning balance
 
$
(12,325
)
 
$
(1,632
)
 
$
(40,007
)
 
$
(53,964
)
Other comprehensive loss before reclassifications, net of tax expense of $1,676, $0, $0, and 1,676, respectively
 
(3,208
)
 
—

 
(552
)
 
(3,760
)
Amounts reclassified from accumulated other comprehensive loss, net of tax benefit of $3,799, $3, $0, and $3,802, respectively
 
7,666

 
111

 
—

 
7,777

Net current-period other comprehensive income (loss)
 
4,458

 
111

 
(552
)
 
4,017

Ending balance
 
$
(7,867
)
 
$
(1,521
)
 
$
(40,559
)
 
$
(49,947
)
 
 
For the Nine Months Ended September 30, 2013
 
 
Gains and Losses on Cash Flow Hedges
 
Defined Benefit Pension Items
 
Foreign Currency Items
 
Total
Beginning balance
 
$
(5,428
)
 
$
(84
)
 
$
(27,888
)
 
$
(33,400
)
Other comprehensive loss before reclassifications, net of tax expense of $598, $0, $0, and $598, respectively
 
(7,064
)
 
—

 
(9,469
)
 
(16,533
)
Amounts reclassified from accumulated other comprehensive loss, net of tax of $0
 
75

 
(105
)
 
—

 
(30
)
Net current-period other comprehensive loss
 
(6,989
)
 
(105
)
 
(9,469
)
 
(16,563
)
Ending balance
 
$
(12,417
)
 
$
(189
)
 
$
(37,357
)
 
$
(49,963
)
(a) Amounts in parentheses indicate debits to Accumulated other comprehensive loss.


24
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

Reclassifications out of Accumulated Other Comprehensive Loss (a) 
For the Three Months Ended September 30, 2014
Details about Accumulated Other Comprehensive Loss Components
 
Amount Reclassified from Accumulated Other Comprehensive Loss
 
Affected Line Item in the Statement Where Net Income is Presented
Gains and losses on cash flow hedges
 
 
 
 
Foreign exchange contracts
 
$
(226
)
 
COS
 
 
(150
)
 
SG&A
 
 
(376
)
 
Total before tax
 
 
—

 
Tax (expense) or benefit
 
 
$
(376
)
 
Net of tax
 
 
 
 
 
Amortization of defined benefit pension items
 
 
 
 
Prior service costs
 
$
(40
)
 
SG&A
Actuarial gains
 
4

 
SG&A
 
 
(36
)
 
Total before tax
 
 
(3
)
 
Tax (expense) or benefit
 
 
$
(39
)
 
Net of tax
 
 
 
 
 
Total reclassifications for the period
 
$
(415
)
 
Net of tax
For the Three Months Ended September 30, 2013
Details about Accumulated Other Comprehensive Loss Components
 
Amount Reclassified from Accumulated Other Comprehensive Loss
 
Affected Line Item in the Statement Where Net Income is Presented
Gains and losses on cash flow hedges
 
 
 
 
Foreign exchange contracts
 
$
(833
)
 
COS
 
 
(515
)
 
SG&A
 
 
(1,348
)
 
Total before tax
 
 
—

 
Tax (expense) or benefit
 
 
$
(1,348
)
 
Net of Tax
 
 
 
 
 
Amortization of defined benefit pension items
 
 
 
 
Prior service costs
 
$
(38
)
 
SG&A
Actuarial gains
 
70

 
SG&A
 
 
32

 
Total before tax
 
 
—

 
Tax (expense) or benefit
 
 
$
32

 
Net of Tax
 
 
 
 
 
Total reclassifications for the period
 
$
(1,316
)
 
Net of Tax

25
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

For the Nine Months Ended September 30, 2014
Details about Accumulated Other Comprehensive Loss Components
 
Amount Reclassified from Accumulated Other Comprehensive Loss
 
Affected Line Item in the Statement Where Net Income is Presented
Gains and losses on cash flow hedges
 
 
 
 
Foreign exchange contracts
 
$
(2,320
)
 
COS
 
 
(1,547
)
 
SG&A
 
 
(3,867
)
 
Total before tax
 
 
(3,799
)
 
Tax (expense) or benefit
 
 
$
(7,666
)
 
Net of tax
 
 
 
 
 
Amortization of defined benefit pension items
 
 
 
 
Prior service costs
 
$
(116
)
 
SG&A
Actuarial gains
 
8

 
SG&A
 
 
(108
)
 
Total before tax
 
 
(3
)
 
Tax (expense) or benefit
 
 
$
(111
)
 
Net of tax
 
 
 
 
 
Total reclassifications for the period
 
$
(7,777
)
 
Net of tax
For the Nine Months Ended September 30, 2013
Details about Accumulated Other Comprehensive Loss Components
 
Amount Reclassified from Accumulated Other Comprehensive Loss
 
Affected Line Item in the Statement Where Net Income is Presented
Gains and losses on cash flow hedges
 
 
 
 
Foreign exchange contracts
 
$
(25
)
 
COS
 
 
(50
)
 
SG&A
 
 
(75
)
 
Total before tax
 
 
—

 
Tax (expense) or benefit
 
 
$
(75
)
 
Net of tax
 
 
 
 
 
Amortization of defined benefit pension items
 
 
 
 
Prior service costs
 
$
(120
)
 
SG&A
Actuarial gains
 
225

 
SG&A
 
 
105

 
Total before tax
 
 
—

 
Tax (expense) or benefit
 
 
$
105

 
Net of tax
 
 
 
 
 
Total reclassifications for the period
 
$
30

 
Net of tax
(a) Amounts in parentheses indicate debits to profit/loss.

26
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

14.
Related Party Transactions
Sale of Subsidiary
On March 29, 2013, the Company sold all of its common stock, totaling 1,287,000 shares, in its Sitel Belgium NV (“Belgium”) subsidiary to HV Management Consulting BVBA (“HVMC”), a company of which the controlling shareholder and chief executive officer is the former Belgium country manager and director, for a nominal price. During the nine months ended September 30, 2013, the Company recorded a Loss on sale of subsidiary of $4,558 related to the Belgium sale in the accompanying Condensed Consolidated Statements of Comprehensive (Loss) Income.
In addition to the sale of stock, the Company also agreed to provide support services and certain sub-contract services to HVMC and Belgium following the date of closing in order to assist in the transition. Certain information technology assets and employees were transitioned to another Company affiliate concurrently with the sale. The Company continues to provide these services as of September 30, 2014.
NAFS Purchase
On August 31, 2011, our wholly owned subsidiary, NAFS, now known as NA Liquidating Company, Inc., executed a Membership Interest Purchase Agreement with David Garner, our former Chief Executive Officer and Non-Executive Chairman of the Company’s Board of Directors, and current Board member. Pursuant to the agreement, Mr. Garner agreed to purchase directly or indirectly through an affiliate, Emory Enterprises, LLC ("Emory"), certain assets and obligations comprising NAFS's third party collections business based in Buffalo, New York (the "NAFS Business"). To facilitate this transaction, NAFS agreed to transfer the assets and obligations of the NAFS Business to a newly formed limited liability company ("NAFS Buffalo").
A portion of the purchase price for the NAFS Business was paid at closing on August 31, 2011, with the remainder to be paid in equal monthly installments over a thirty-six month period commencing March 2012. The NAFS Business was deconsolidated effective August 1, 2011. In addition, commencing August 31, 2011 and ending January 30, 2014, we provided certain outsourced information technology services to NAFS Buffalo and Emory. These services were provided to NAFS Buffalo and Emory to support continuing information technology requirements. The parties also entered an additional service agreement in August 2011 pursuant to which NAFS Buffalo and/or is affiliates agreed to continue to service one of the Company’s clients.
On February 13, 2013, we entered into an agreement with Mr. Garner and Emory pursuant to which we deferred payment of certain information technology service fees charged from February 1, 2012 through January 31, 2013 and amended such service agreements to reduce certain 2013 fees and provide for their ultimate termination. On January 30, 2014, we entered into a new agreement to defer payment of additional past due amounts of $46 and the remaining purchase price receivable of $398 owed to the Company by Emory and Mr. Garner related to the 2011 purchase of the NAFS Business. The Company also agreed to defer payment of the information technology service fees of $176 charged during 2013. These deferred payment amounts were added to the principal and accrued interest owed under the original note, which amounted to $193 as of December 31, 2013. The original note was amended and restated in the principal amount of $813 and is recorded in Other noncurrent assets at September 30, 2014 and December 31, 2013. The note is guaranteed by Mr. Garner on a recourse basis, and is due December 15, 2017. Mr. Garner’s guarantee is secured by a security interest in all of Mr. Garner’s preferred and common stock in the Company granted pursuant to a stock pledge agreement.
15.
Operating Segment and Geographical Information
Our two reportable segments, Americas and EMEA, are organized by geographic operating units that portray similar economic characteristics. The segment information presented below reflects the internal management reporting that the chief operating decision maker ("CODM") uses to evaluate segment performance and allocate resources, which is solely based on segment revenues, gross margin (segment revenues less segment cost of sales), segment SG&A expense, and the segment operating results as calculated below.
Certain Revenues, Costs of services, and SG&A amounts are excluded from the CODM evaluation of our segments, as the CODM believes they are not representative of segment performance. In addition, the CODM does not review assets or the associated depreciation and amortization at the reportable segment level. Therefore, we do not allocate these items to our reportable segments or present these items at the segment level in our internal management reporting. These unallocated

27
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

amounts, as well as other income and expenses that are managed at the corporate level, are presented below in the reconciliation of segment operating results to our consolidated Loss before income taxes.
We have modified previously reported SG&A to exclude certain foreign exchange transactions that are no longer presented at the segment level in our internal management reporting that is provided to and used by the CODM. SG&A presented for the nine months ended September 30, 2014 is also exclusive of the net operating results of a certain site that was closed during the second quarter of 2014.
Information about the Company’s reportable segments is as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Americas
 
 
Revenues
 
$
223,947

 
$
223,322

 
$
647,557

 
$
665,588

Gross margin
 
80,290

 
83,203

 
231,547

 
250,857

SG&A
 
46,529

 
50,315

 
142,532

 
149,846

Segment operating results
 
$
33,761

 
$
32,888

 
$
89,015

 
$
101,011

GM%
 
35.9
%
 
37.3
%
 
35.8
%
 
37.7
%
SG&A%
 
20.8
%
 
22.5
%
 
22.0
%
 
22.5
%
Op Results%
 
15.1
%
 
14.7
%
 
13.7
%
 
15.2
%

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
EMEA
 
 
Revenues
 
$
135,112

 
$
130,046

 
$
410,679

 
$
401,765

Gross margin
 
38,533

 
39,535

 
111,686

 
115,620

SG&A
 
29,193

 
27,886

 
90,361

 
87,238

Segment operating results
 
$
9,340

 
$
11,649

 
$
21,325

 
$
28,382

GM%
 
28.5
%
 
30.4
%
 
27.2
%
 
28.8
%
SG&A%
 
21.6
%
 
21.4
%
 
22.0
%
 
21.7
%
Op Results%
 
6.9
%
 
9.0
%
 
5.2
%
 
7.1
%

28
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

Reconciliation of Segment operating results to consolidated Loss before income taxes:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Segment operating results:
 
 
 
 
 
 
 
 
Americas
 
$
33,761

 
$
32,888

 
$
89,015

 
$
101,011

EMEA
 
9,340

 
11,649

 
21,325

 
28,382

Total
 
43,101

 
44,537

 
110,340

 
129,393

 
 
 
 
 
 
 
 
 
Corporate and other(1)
 
10,589

 
13,330

 
32,066

 
38,286

Depreciation and amortization
 
9,510

 
10,266

 
26,993

 
31,175

Restructuring and exit charges
 
2,853

 
1,430

 
18,657

 
6,732

Loss on sale of subsidiary
 
—

 
—

 
—

 
4,558

Other operating expense (income)(2)
 
4,200

 
(1,476
)
 
4,379

 
(1,035
)
Operating income
 
15,949

 
20,987

 
28,245

 
49,677

Interest and other financing costs, net
 
19,678

 
21,200

 
62,667

 
59,861

Loss before income taxes
 
$
(3,729
)
 
$
(213
)
 
$
(34,422
)
 
$
(10,184
)
(1) Represents other operating income and expenses not allocated to segments for internal management reporting purposes, including certain corporate employee compensation, corporate overhead, stock-based compensation, and the net operating results of disposed subsidiaries, which are not material to segment operating results.
(2) Includes amounts from the Condensed Consolidated Statements of Comprehensive (Loss) Income for Loss (gain) on foreign currency transactions, Impairment and loss (gain) on disposal of assets, and Other (income) expense, net.

29
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

16.
Supplemental Condensed Consolidated Financial Information
The following guarantor financial information is presented to comply with U.S. SEC disclosure requirements, specifically Rule 3-10 of Regulation S-X.
The Senior Secured Notes and Senior Notes are guaranteed jointly and severally, and in the case of the Senior Secured Notes, on a senior secured basis, by the Issuers' parent company, SITEL Worldwide, and by each of SITEL Worldwide's existing and future direct and indirect domestic subsidiaries that are 100% owned by SITEL Worldwide that are guarantors under the Senior Secured Credit Facility (the “Subsidiary Guarantors”). The guarantees are not full and unconditional because Subsidiary Guarantors can be released and relieved of their obligations under certain customary circumstances contained in the indenture governing the Senior Notes and Senior Secured Notes. These circumstances include the following, so long as other applicable provisions of the indentures are adhered to: any sale or other disposition of all or substantially all of the assets of any Subsidiary Guarantors, any sale or other disposition of capital stock of any Subsidiary Guarantors, or designation of any restricted subsidiary that is a Subsidiary Guarantor as an unrestricted subsidiary.
The Condensed Consolidating Statements of Comprehensive (Loss) Income are presented net of intercompany activity. The following supplemental financial information sets forth, on a consolidating basis based on the equity method of accounting, balance sheets, statements of comprehensive income and loss, and statements of cash flows for the Company, the Subsidiary Guarantors, and the Company's non-guarantor subsidiaries.

30
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

SITEL Worldwide Corporation
Condensed Consolidating Balance Sheet
September 30, 2014
(in thousands of U.S. dollars)
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
—

 
$
—

 
$
15,862

 
$
—

 
$
15,862

Accounts receivable (net of allowance for doubtful accounts)
—

 
—

 
127,728

 
137,318

 
—

 
265,046

Prepaids and other current assets
293,222

 
10,118

 
208,695

 
335,264

 
(784,988
)
 
62,311

Total current assets
293,222

 
10,118

 
336,423

 
488,444

 
(784,988
)
 
343,219

Property and equipment, net
48

 
—

 
39,372

 
50,556

 
—

 
89,976

Goodwill
—

 
—

 
16,690

 
101,018

 
—

 
117,708

Other intangible assets, net
—

 
—

 
16,104

 
19,920

 
—

 
36,024

Deferred income taxes
—

 
—

 
4,558

 
24,683

 
—

 
29,241

Investments in affiliates
(490,752
)
 
519,878

 
187,562

 
—

 
(216,688
)
 
—

Other noncurrent assets
1,691

 
93,853

 
44,655

 
24,610

 
(130,407
)
 
34,402

Total assets
$
(195,791
)
 
$
623,849

 
$
645,364

 
$
709,231

 
$
(1,132,083
)
 
$
650,570

Liabilities and Stockholders' (Deficit) Equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
207

 
$
—

 
$
8,195

 
$
13,840

 
$
—

 
$
22,242

Accrued payroll and benefits
—

 
—

 
20,301

 
69,867

 
—

 
90,168

Accrued liabilities and other
133,478

 
460,578

 
74,364

 
207,412

 
(784,988
)
 
90,844

Income taxes payable
217

 
—

 
327

 
7,277

 
—

 
7,821

Current portion of capital lease obligations
—

 
—

 
2,640

 
121

 
—

 
2,761

Total current liabilities
133,902

 
460,578

 
105,827

 
298,517

 
(784,988
)
 
213,836

Long-term debt
—

 
668,833

 
—

 
47,332

 
—

 
716,165

Capital lease obligations
—

 
—

 
3,391

 
111

 
—

 
3,502

Deferred income taxes
—

 
—

 
3,710

 
—

 
—

 
3,710

Other noncurrent liabilities
—

 
1,917

 
12,558

 
158,982

 
(130,407
)
 
43,050

Total liabilities
133,902

 
1,131,328

 
125,486

 
504,942

 
(915,395
)
 
980,263

Series B PIK preferred stock
72,976

 
—

 
—

 
—

 
—

 
72,976

Series C PIK preferred stock, net of beneficial conversion feature
66,722

 
—

 
—

 
—

 
—

 
66,722

Series D PIK preferred stock
78,858

 
—

 
—

 
—

 
—

 
78,858

Stockholders' (deficit) equity
 
 
 
 
 
 
 
 
 
 
 
Subsidiary exchangeable preferred stock
2,665

 
—

 
—

 
—

 
—

 
2,665

Common stock
1,277

 
—

 
536

 
168,965

 
(169,501
)
 
1,277

Additional paid-in capital
342,331

 
105,786

 
668,880

 
309,794

 
(1,084,460
)
 
342,331

Accumulated deficit
(832,952
)
 
(562,454
)
 
(99,564
)
 
(280,183
)
 
942,201

 
(832,952
)
Accumulated other comprehensive (loss) income, net of tax
(49,947
)
 
(50,811
)
 
(49,974
)
 
5,713

 
95,072

 
(49,947
)
Treasury shares, at cost
(11,623
)
 
—

 
—

 
—

 
—

 
(11,623
)
Total stockholders' (deficit) equity
(548,249
)
 
(507,479
)
 
519,878

 
204,289

 
(216,688
)
 
(548,249
)
Total liabilities and stockholders' (deficit) equity
$
(195,791
)
 
$
623,849

 
$
645,364

 
$
709,231

 
$
(1,132,083
)
 
$
650,570


31
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

SITEL Worldwide Corporation
Condensed Consolidating Balance Sheet
December 31, 2013
(in thousands of U.S. dollars)
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
—

 
$
—

 
$
136

 
$
7,230

 
$
—

 
$
7,366

Accounts receivable (net of allowance for doubtful accounts)
—

 
—

 
112,222

 
130,250

 
—

 
242,472

Prepaids and other current assets
245,718

 
322

 
166,728

 
302,244

 
(661,180
)
 
53,832

Total current assets
245,718

 
322

 
279,086

 
439,724

 
(661,180
)
 
303,670

Property and equipment, net
206

 
—

 
37,840

 
51,616

 
—

 
89,662

Goodwill
—

 
—

 
16,690

 
101,019

 
—

 
117,709

Other intangible assets, net
—

 
—

 
16,104

 
20,443

 
—

 
36,547

Deferred income taxes
1,980

 
—

 
4,558

 
29,437

 
—

 
35,975

Investments in affiliates
(470,679
)
 
482,165

 
186,528

 
—

 
(198,014
)
 
—

Other noncurrent assets
2,972

 
87,280

 
47,460

 
24,023

 
(125,077
)
 
36,658

Total assets
$
(219,803
)
 
$
569,767

 
$
588,266

 
$
666,262

 
$
(984,271
)
 
$
620,221

Liabilities and Stockholders' (Deficit) Equity
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
502

 
$
—

 
$
5,842

 
$
13,817

 
$
—

 
$
20,161

Accrued payroll and benefits
3,342

 
—

 
12,230

 
61,074

 
—

 
76,646

Accrued liabilities and other
138,053

 
367,032

 
69,461

 
171,869

 
(661,180
)
 
85,235

Income taxes payable
426

 
82

 
187

 
6,815

 
—

 
7,510

Current portion of capital lease obligations
—

 
—

 
1,583

 
422

 
—

 
2,005

Total current liabilities
142,323

 
367,114

 
89,303

 
253,997

 
(661,180
)
 
191,557

Long-term debt
—

 
685,090

 
—

 
49,524

 
—

 
734,614

Capital lease obligations
—

 
—

 
2,993

 
132

 
—

 
3,125

Deferred income taxes
—

 
—

 
3,828

 
—

 
—

 
3,828

Other noncurrent liabilities
1,979

 
4,062

 
9,977

 
160,260

 
(125,076
)
 
51,202

Total liabilities
144,302

 
1,056,266

 
106,101

 
463,913

 
(786,256
)
 
984,326

Series B PIK preferred stock
66,982

 
—

 
—

 
—

 
—

 
66,982

Series C PIK preferred stock, net of beneficial conversion feature
59,056

 
—

 
—

 
—

 
—

 
59,056

Stockholders' (deficit) equity
 
 
 
 
 
 
 
 
 
 
 
Subsidiary exchangeable preferred stock
2,665

 
—

 
—

 
—

 
—

 
2,665

Common stock
1,275

 
—

 
536

 
168,965

 
(169,501
)
 
1,275

Additional paid-in capital
357,518

 
105,786

 
668,881

 
309,793

 
(1,084,460
)
 
357,518

Accumulated deficit
(788,390
)
 
(536,750
)
 
(131,717
)
 
(279,318
)
 
947,785

 
(788,390
)
Accumulated other comprehensive (loss) income, net of tax
(53,964
)
 
(55,535
)
 
(55,535
)
 
2,909

 
108,161

 
(53,964
)
Treasury shares, at cost
(9,247
)
 
—

 
—

 
—

 
—

 
(9,247
)
Total stockholders' (deficit) equity
(490,143
)
 
(486,499
)
 
482,165

 
202,349

 
(198,015
)
 
(490,143
)
Total liabilities and stockholders' (deficit) equity
$
(219,803
)
 
$
569,767

 
$
588,266

 
$
666,262

 
$
(984,271
)
 
$
620,221


32
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

SITEL Worldwide Corporation
Condensed Consolidating Statement of Comprehensive (Loss) Income
Three Months Ended September 30, 2014
(in thousands of U.S. dollars)
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Revenues
$
—

 
$
—

 
$
117,486

 
$
241,603

 
$
—

 
$
359,089

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Costs of services*
—

 
—

 
74,974

 
165,414

 
—

 
240,388

Selling, general, and administrative expenses*
5,860

 
38

 
19,709

 
60,582

 
—

 
86,189

Depreciation and amortization of property and equipment
10

 
—

 
3,993

 
5,507

 
—

 
9,510

Restructuring and exit charges
—

 
—

 
668

 
2,185

 
—

 
2,853

(Gain) loss on foreign currency transactions
(399
)
 
2,109

 
(2,539
)
 
4,436

 
—

 
3,607

Other, net
23

 
(25
)
 
445

 
150

 
—

 
593

Operating (loss) income
(5,494
)
 
(2,122
)
 
20,236

 
3,329

 
—

 
15,949

Interest and other financing costs, net
—

 
17,537

 
1,726

 
415

 
—

 
19,678

Equity in earnings of subsidiaries
(1,627
)
 
(20,743
)
 
(2,210
)
 
—

 
24,580

 
—

(Loss) income before income taxes
(3,867
)
 
1,084

 
20,720

 
2,914

 
(24,580
)
 
(3,729
)
Income tax provision (benefit)
247

 
—

 
(23
)
 
161

 
—

 
385

Net (loss) income
(4,114
)
 
1,084

 
20,743

 
2,753

 
(24,580
)
 
(4,114
)
Other comprehensive (loss) income
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of tax of $0
(3,965
)
 
(3,272
)
 
(2,788
)
 
(993
)
 
7,053

 
(3,965
)
Unrealized (loss) gain on derivative valuation, net of tax expense of $30
(1,451
)
 
(1,451
)
 
(1,451
)
 
427

 
2,475

 
(1,451
)
Reclassification of pension amounts realized in Net (loss) income, net of tax benefit of $3
39

 
39

 
39

 
39

 
(117
)
 
39

Comprehensive (loss) income
$
(9,491
)
 
$
(3,600
)
 
$
16,543

 
$
2,226

 
$
(15,169
)
 
$
(9,491
)
*Exclusive of Depreciation and amortization of property and equipment

33
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

SITEL Worldwide Corporation
Condensed Consolidating Statement of Comprehensive (Loss) Income
Nine Months Ended September 30, 2014
(in thousands of U.S. dollars)
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Revenues
$
—

 
$
—

 
$
328,358

 
$
729,957

 
$
—

 
$
1,058,315

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Costs of services*
—

 
—

 
214,001

 
500,497

 
—

 
714,498

Selling, general, and administrative expenses*
18,565

 
116

 
66,052

 
180,810

 
—

 
265,543

Depreciation and amortization of property and equipment
158

 
—

 
9,839

 
16,473

 
—

 
26,470

Amortization of intangible assets
—

 
—

 
—

 
523

 
—

 
523

Restructuring and exit charges
—

 
—

 
1,133

 
17,524

 
—

 
18,657

(Gain) loss on foreign currency transactions
(546
)
 
1,732

 
(4,751
)
 
7,362

 
—

 
3,797

Other, net
18

 
(19
)
 
476

 
107

 
—

 
582

Operating (loss) income
(18,195
)
 
(1,829
)
 
41,608

 
6,661

 
—

 
28,245

Interest and other financing costs, net
—

 
56,028

 
4,492

 
2,147

 
—

 
62,667

Equity in earnings of subsidiaries
24,101

 
(32,153
)
 
2,468

 
—

 
5,584

 
—

(Loss) income before income taxes
(42,296
)
 
(25,704
)
 
34,648

 
4,514

 
(5,584
)
 
(34,422
)
Income tax provision
2,266

 
—

 
2,495

 
5,379

 
—

 
10,140

Net (loss) income
(44,562
)
 
(25,704
)
 
32,153

 
(865
)
 
(5,584
)
 
(44,562
)
Other comprehensive (loss) income
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of tax of $0
(552
)
 
155

 
992

 
2,090

 
(3,237
)
 
(552
)
Unrealized gain on derivative valuation, net of tax benefit of $2,123
4,458

 
4,458

 
4,458

 
603

 
(9,519
)
 
4,458

Reclassification of pension amounts realized in Net (loss) income, net of tax benefit of $3
111

 
111

 
111

 
111

 
(333
)
 
111

Comprehensive (loss) income
$
(40,545
)
 
$
(20,980
)
 
$
37,714

 
$
1,939

 
$
(18,673
)
 
$
(40,545
)
*Exclusive of Depreciation and amortization of property and equipment

34
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

SITEL Worldwide Corporation
Condensed Consolidating Statement of Comprehensive Income
Three Months Ended September 30, 2013
(in thousands of U.S. dollars)
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Revenues
$
—

 
$
—

 
$
109,326

 
$
244,042

 
$
—

 
$
353,368

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Costs of services*
—

 
—

 
66,666

 
164,423

 
—

 
231,089

Selling, general, and administrative expenses*
7,865

 
34

 
21,919

 
61,254

 
—

 
91,072

Depreciation and amortization of property and equipment
102

 
—

 
2,806

 
5,766

 
—

 
8,674

Amortization of intangible assets
—

 
—

 
—

 
1,592

 
—

 
1,592

Restructuring and exit charges
—

 
—

 
199

 
1,231

 
—

 
1,430

Loss (gain) on foreign currency transactions
169

 
(1,160
)
 
(438
)
 
450

 
—

 
(979
)
Other, net
35

 
—

 
2

 
(534
)
 
—

 
(497
)
Operating (loss) income
(8,171
)
 
1,126

 
18,172

 
9,860

 
—

 
20,987

Interest and other financing costs, net
—

 
20,547

 
850

 
(197
)
 
—

 
21,200

Equity in earnings of subsidiaries
(17,500
)
 
(36,410
)
 
(18,815
)
 
—

 
72,725

 
—

Income (loss) before income taxes
9,329

 
16,989

 
36,137

 
10,057

 
(72,725
)
 
(213
)
Income tax provision (benefit)
104

 
—

 
(273
)
 
(9,269
)
 
—

 
(9,438
)
Net income (loss)
9,225

 
16,989

 
36,410

 
19,326

 
(72,725
)
 
9,225

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of tax of $0
63

 
(469
)
 
(469
)
 
(685
)
 
1,623

 
63

Unrealized loss on derivative valuation, net of tax of $0
(831
)
 
(831
)
 
(831
)
 
(1,036
)
 
2,698

 
(831
)
Reclassification of pension amounts realized in Net income (loss), net of tax of $0
(32
)
 
(32
)
 
(32
)
 
(32
)
 
96

 
(32
)
Comprehensive income (loss)
$
8,425

 
$
15,657

 
$
35,078

 
$
17,573

 
$
(68,308
)
 
$
8,425

*Exclusive of Depreciation and amortization of property and equipment

35
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

SITEL Worldwide Corporation
Condensed Consolidating Statement of Comprehensive (Loss) Income
Nine Months Ended September 30, 2013
(in thousands of U.S. dollars)
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Revenues
$
—

 
$
—

 
$
310,515

 
$
756,849

 
$
—

 
$
1,067,364

Operating expenses
 
 
 
 
 
 
 
 
 
 
 
Costs of services*
—

 
—

 
187,864

 
513,880

 
—

 
701,744

Selling, general, and administrative expenses*
24,720

 
104

 
63,674

 
186,015

 
—

 
274,513

Depreciation and amortization of property and equipment
314

 
—

 
8,332

 
17,703

 
—

 
26,349

Amortization of intangible assets
—

 
—

 
—

 
4,826

 
—

 
4,826

Restructuring and exit charges
—

 
—

 
744

 
5,988

 
—

 
6,732

Loss (gain) on foreign currency transactions
178

 
71

 
293

 
(578
)
 
—

 
(36
)
Loss on sale of subsidiary
—

 
—

 
—

 
4,558

 
—

 
4,558

Other, net
152

 
—

 
(249
)
 
(902
)
 
—

 
(999
)
Operating (loss) income
(25,364
)
 
(175
)
 
49,857

 
25,359

 
—

 
49,677

Interest and other financing costs, net
8

 
55,457

 
2,360

 
2,036

 
—

 
59,861

Equity in earnings of subsidiaries
(20,962
)
 
(74,924
)
 
(26,115
)
 
—

 
122,001

 
—

(Loss) income before income taxes
(4,410
)
 
19,292

 
73,612

 
23,323

 
(122,001
)
 
(10,184
)
Income tax provision (benefit)
311

 
—

 
(1,312
)
 
(4,462
)
 
—

 
(5,463
)
Net (loss) income
(4,721
)
 
19,292

 
74,924

 
27,785

 
(122,001
)
 
(4,721
)
Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of tax of $0
(9,469
)
 
(8,876
)
 
(8,876
)
 
(9,905
)
 
27,657

 
(9,469
)
Unrealized loss on derivative valuation, net of tax expense of $598
(6,989
)
 
(6,989
)
 
(6,989
)
 
(682
)
 
14,660

 
(6,989
)
Reclassification of pension amounts realized in Net (loss) income, net of tax of $0
(105
)
 
(105
)
 
(105
)
 
(105
)
 
315

 
(105
)
Comprehensive (loss) income
$
(21,284
)
 
$
3,322

 
$
58,954

 
$
17,093

 
$
(79,369
)
 
$
(21,284
)
*Exclusive of Depreciation and amortization of property and equipment

36
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

SITEL Worldwide Corporation
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2014
(in thousands of U.S. dollars)
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(44,562
)
 
$
(25,704
)
 
$
32,153

 
$
(865
)
 
$
(5,584
)
 
$
(44,562
)
Undistributed equity in earnings of subsidiaries
24,101

 
(32,153
)
 
2,468

 
—

 
5,584

 
—

Adjustments to reconcile Net (loss) income to net cash flows relating to operating activities:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization (including intangible assets)
158

 
—

 
9,839

 
16,996

 
—

 
26,993

Deferred income taxes
1,980

 
—

 
2,123

 
676

 
—

 
4,779

Non-cash derivative activity
—

 
915

 
3,563

 
1,035

 
—

 
5,513

Amortization of debt issue costs and original issue discount
—

 
3,831

 
—

 
121

 
—

 
3,952

Impairment of property and equipment and other long-term assets
—

 
—

 
446

 
—

 
—

 
446

Other non-cash items, net
134

 
—

 
(1,085
)
 
(240
)
 
—

 
(1,191
)
Change in book overdrafts
—

 
—

 
(2,501
)
 
(644
)
 
—

 
(3,145
)
Changes in operating assets and liabilities, net
(56,631
)
 
74,640

 
(37,939
)
 
8,958

 
—

 
(10,972
)
Net cash (used in) provided by operating activities
(74,820
)
 
21,529

 
9,067

 
26,037

 
—

 
(18,187
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
—

 
—

 
(9,172
)
 
(16,964
)
 
—

 
(26,136
)
Proceeds from disposition of property and equipment
—

 
—

 
1,199

 
20

 
—

 
1,219

Net cash used in investing activities
—

 
—

 
(7,973
)
 
(16,944
)
 
—

 
(24,917
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Proceeds from issuance of Series D Preferred Stock, net
74,820

 
—

 
—

 
—

 
—

 
74,820

Payments on long-term debt and capital lease obligations
—

 
(263,554
)
 
(1,230
)
 
(22,776
)
 
—

 
(287,560
)
Proceeds from long-term debt
—

 
245,501

 
—

 
22,300

 
—

 
267,801

Payment of interest rate swap, net
—

 
(2,757
)
 
—

 
—

 
—

 
(2,757
)
Payments of debt issue costs
—

 
(719
)
 
—

 
—

 
—

 
(719
)
Net cash provided by (used in) financing activities
74,820

 
(21,529
)
 
(1,230
)
 
(476
)
 
—

 
51,585

Effect of exchange rate on cash and cash equivalents
—

 
—

 
—

 
15

 
—

 
15

Net change in cash and cash equivalents
—

 
—

 
(136
)
 
8,632

 
—

 
8,496

Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
Beginning of period
—

 
—

 
136

 
7,230

 
—

 
7,366

End of period
$
—

 
$
—

 
$
—

 
$
15,862

 
$
—

 
$
15,862


37
SITEL Worldwide Corporation
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(in thousands of U.S. dollars, except share and per share data)

SITEL Worldwide Corporation
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2013
(in thousands of U.S. dollars)
 
Parent
 
Issuers
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Total
Consolidated
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(4,721
)
 
$
19,292

 
$
74,924

 
$
27,785

 
$
(122,001
)
 
$
(4,721
)
Undistributed equity in earnings of subsidiaries
(20,962
)
 
(74,924
)
 
(26,115
)
 
—

 
122,001

 
—

Adjustments to reconcile Net (loss) income to net cash flows relating to operating activities:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization (including intangible assets)
314

 
—

 
8,332

 
22,529

 
—

 
31,175

Deferred income taxes
—

 
—

 
(933
)
 
(7,551
)
 
—

 
(8,484
)
Non-cash derivative activity
—

 
(505
)
 
2,751

 
3,825

 
—

 
6,071

Amortization of debt issue costs and original issue discount
—

 
3,579

 
—

 
66

 
—

 
3,645

Loss on sale of subsidiary
—

 
—

 
—

 
4,558

 
—

 
4,558

Other non-cash items, net
223

 
—

 
(2,412
)
 
(2,779
)
 
—

 
(4,968
)
Change in book overdrafts
—

 
(1,586
)
 
324

 
317

 
—

 
(945
)
Changes in operating assets and liabilities, net
25,138

 
76,174

 
(47,792
)
 
(37,530
)
 
—

 
15,990

Net cash (used in) provided by operating activities
(8
)
 
22,030

 
9,079

 
11,220

 
—

 
42,321

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
(23
)
 
—

 
(8,320
)
 
(10,233
)
 
—

 
(18,576
)
Proceeds from disposition of property and equipment
—

 
—

 
—

 
275

 
—

 
275

Net cash used in investing activities
(23
)
 
—

 
(8,320
)
 
(9,958
)
 
—

 
(18,301
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
Payments on long-term debt and capital lease obligations
—

 
(576,200
)
 
(1,204
)
 
(4,592
)
 
—

 
(581,996
)
Proceeds from long-term debt
—

 
556,941

 
—

 
3,691

 
—

 
560,632

Payment of interest rate swap, net
—

 
(2,688
)
 
—

 
—

 
—

 
(2,688
)
Payments of debt issue costs
—

 
(15
)
 
—

 
(1
)
 
—

 
(16
)
Net cash (used in) provided by financing activities
—

 
(21,962
)
 
(1,204
)
 
(902
)
 
—

 
(24,068
)
Effect of exchange rate on cash and cash equivalents
31

 
(68
)
 
445

 
(313
)
 
—

 
95

Net change in cash and cash equivalents
—

 
—

 
—

 
47

 
—

 
47

Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
Beginning of period
—

 
—

 
—

 
12,245

 
—

 
12,245

End of period
$
—

 
$
—

 
$
—

 
$
12,292

 
$
—

 
$
12,292


38
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands of U.S. dollars, except share and per share data)

Overview
We are one of the world's largest and most diversified providers of customer care outsourcing services. We offer our clients a wide array of services, including customer service, technical support, customer acquisition, retention and revenue generation services, and back office support. The majority of our customer care services are inbound and delivered telephonically, but we are increasingly asked to provide services through other communication channels, including email, online chat, IVR, and social media channels. We serve a broad range of industry end–markets, including financial services, technology, wireless, retail and consumer products, telecommunications, media and entertainment, energy and utilities, travel and transportation, internet service providers, insurance, public sector, and healthcare.
We strive to deliver value to our clients by reducing their operating costs, as well as increasing their revenue through improved customer satisfaction, increased retention and more effective sales interactions. Many of our clients seek providers who offer a complete suite of customer care services tailored to the needs of their particular end-market. Our top ten clients utilize, on average, four of our services.
We are organized geographically and have two reporting segments: (1) "Americas," which refers to North America, Latin America, and Asia Pacific; and (2) "EMEA," which refers to Europe, the Middle East, and Africa. Each reporting segment performs substantially the same services for clients.
Our global and flexible operating platform is one of the industry’s most geographically diverse, with services delivered in 40 languages through a network of approximately 110 customer contact centers and related facilities in 23 countries. We have approximately 42,700 employees based in the Americas and approximately 16,400 employees based in EMEA. Our blend of domestic, near-shore, and off-shore locations allows us to provide customized client solutions, whether to service customers in a single country or across many different countries at various price points. Our standardized practices and regionalized support functions are designed to achieve consistent, quality service throughout the world.
Forward-Looking Statements
This report contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, which are based on the beliefs and assumptions of our management regarding, among other things, our plans, strategies and prospects, both business and financial. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning our possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. These statements discuss potential risks and uncertainties; therefore, our actual future results could be materially different than those expressed in our forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date they were made. We do not undertake any obligation to make any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by law, including the securities laws of the United States and rules and regulations of the SEC. See the discussion in the “Risk Factors” and “Caution Concerning Forward-Looking Statements” sections of the Company’s Annual Report on Form 10-K filed with the SEC on February 19, 2014. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained in the section entitled “Risk Factors” included in such Annual Report as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.
Critical Accounting Policies and Estimates
Our discussion and analysis of results of operations and financial condition are based upon our Condensed Consolidated Financial Statements and the Notes thereto. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the amounts reported in the Condensed Consolidated Financial Statements and Notes thereto. Certain of our accounting policies are considered critical, due to the level of subjectivity and judgment necessary in applying these policies and because the impact of these estimates and assumptions on our financial condition and operating performance may be material. On an ongoing basis, we evaluate our estimates and judgments in these areas based on historic

39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

experience and other relevant factors. The estimates as of the date of the financial statements reflect our best judgment giving consideration to all currently available facts and circumstances. We believe our estimates and judgments are reasonable, however, actual results and the timing of the recognition of such amounts could differ from those estimates.
We have used methodologies that are consistent from year to year in all material respects. For details concerning these critical accounting policies and estimates, please refer to the audited Consolidated Financial Statements and the Notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on February 19, 2014. Any deviation from these policies or estimates could have a material impact on our Condensed Consolidated Financial Statements.
Results of Operations
Three Months Ended September 30, 2014 Compared to Three Months Ended September 30, 2013
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and segment data therein. Results for interim periods may not be indicative of the results for the full years. The table below presents statement of operations data, including the amount and percentage changes for the periods indicated, as well as Revenues, Costs of services, and Selling, general, and administrative expenses ("SG&A") adjusted to exclude the impact of foreign exchange translation. See Non-GAAP Measures for more information on the computation of Revenues, Costs of services, and SG&A that have been adjusted to exclude the impact of foreign exchange translation.

40
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

 
Three Months Ended September 30,
 
Dollar
Change
 
Percentage
Change
 
Percentage Change Excluding Foreign Exchange
 
Foreign Exchange Impact
 
2014
 
2013
 
 
 
 
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Americas
$
223,947

 
$
223,322

 
$
625

 
0.3
 %
 
0.1
 %
 
$
307

EMEA
135,112

 
130,046

 
5,066

 
3.9
 %
 
2.8
 %
 
1,393

Other
30

 
—

 
30

 
na

 
na

 
—

Total revenues
359,089

 
353,368

 
5,721

 
1.6
 %
 
1.1
 %
 
1,700

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Costs of services:
 
 
 
 
 
 
 
 
 
 
 
Americas
143,657

 
140,119

 
3,538

 
2.5
 %
 
3.4
 %
 
(1,269
)
EMEA
96,579

 
90,511

 
6,068

 
6.7
 %
 
5.4
 %
 
1,195

Other
152

 
459

 
(307
)
 
(66.9
)%
 
6.5
 %
 
(337
)
Total costs of services
240,388

 
231,089

 
9,299

 
4.0
 %
 
4.2
 %
 
(411
)
Selling, general and administrative expenses:
 
 
 
 
 
 
 
 
 
 
 
Americas
46,529

 
50,315

 
(3,786
)
 
(7.5
)%
 
(6.2
)%
 
(652
)
EMEA
29,193

 
27,886

 
1,307

 
4.7
 %
 
3.1
 %
 
455

Other
10,467

 
12,871

 
(2,404
)
 
(18.7
)%
 
(20.2
)%
 
190

Total selling, general and administrative expenses
86,189

 
91,072

 
(4,883
)
 
(5.4
)%
 
(5.4
)%
 
(7
)
Depreciation and amortization of property and equipment
9,510

 
8,674

 
836

 
9.6
 %
 
na

 
na

Amortization of intangible assets
—

 
1,592

 
(1,592
)
 
(100.0
)%
 
na

 
na

Restructuring and exit charges
2,853

 
1,430

 
1,423

 
99.5
 %
 
na

 
na

Loss (gain) on foreign currency transactions
3,607

 
(979
)
 
4,586

 
468.4
 %
 
na

 
na

Impairment and loss (gain) on disposal of assets
674

 
(501
)
 
1,175

 
234.5
 %
 
na

 
na

Other (income) expense, net
(81
)
 
4

 
(85
)
 
(2,125.0
)%
 
na

 
na

Operating income
15,949

 
20,987

 
(5,038
)
 
(24.0
)%
 
na

 
na

Interest and other financing costs, net
19,678

 
21,200

 
(1,522
)
 
(7.2
)%
 
na

 
na

Loss before income taxes
(3,729
)
 
(213
)
 
(3,516
)
 
(1,650.7
)%
 
na

 
na

Income tax provision (benefit)
385

 
(9,438
)
 
9,823

 
104.1
 %
 
na

 
na

Net (loss) income
$
(4,114
)
 
$
9,225

 
$
(13,339
)
 
(144.6
)%
 
na

 
na

Revenues
We reported Revenues of $359,089 for the three months ended September 30, 2014, an increase of $5,721, compared to $353,368 for the three months ended September 30, 2013. Excluding the $1,700 impact of foreign exchange translation, Revenues increased $4,021 in the third quarter of 2014, compared to the third quarter of 2013. Revenues increased in the third quarter of 2014 (excluding the impact of foreign exchange translation) primarily due to net growth from existing client campaigns of $20,100, with $12,100 attributable to the Americas and $8,000 attributable to EMEA. In addition, revenue from new clients was $11,800, of which $8,800 related to Americas and $3,000 related to EMEA.

41
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

These increases were partially offset by $27,900 of attrition, of which $20,600 related to the Americas and $7,300 related to EMEA.
Costs of Services
Costs of services were $240,388 for the three months ended September 30, 2014, an increase of $9,299, compared to $231,089 for the three months ended September 30, 2013. Excluding the impact of foreign exchange translation of $411, Costs of services increased $9,710 during the three months ended September 30, 2014, as compared to the same period of 2013. Excluding the impact of foreign exchange translation of $2,111, gross margin decreased $5,689 during the three months ended September 30, 2014, as compared to the same period of 2013. The decrease in gross margin is due to commercial and execution issues with certain customers.
SG&A
SG&A expenses were $86,189 for the three months ended September 30, 2014, a decrease of $4,883, compared to $91,072 for the three months ended September 30, 2013. Excluding the impact of foreign currency translation of $7, SG&A decreased $4,876 during the three months ended September 30, 2014, compared to the same period of 2013. The decrease was primarily related to SG&A initiatives around employee and telecommunication expenses.
Depreciation and Amortization of Property and Equipment
Depreciation and amortization of property and equipment was $9,510 for the three months ended September 30, 2014, an increase of $836 or 9.6%, as compared to $8,674 for the three months ended September 30, 2013. The increase was primarily related to new assets being placed in service during the quarter.
Amortization of Intangible Assets
Amortization of intangible assets was $0 for the three months ended September 30, 2014, compared to $1,592 for the three months ended September 30, 2013. The decrease is due to the customer relationship intangibles becoming fully amortized during the first quarter of 2014.
Restructuring and Exit Charges
Given the nature of the industry we operate in, we evaluate and assess our worldwide operations in an effort to rationalize facility and labor costs, further streamline our operations in order to align resources to support growth, and appropriately shift the geographic mix of Company resources. This evaluation has resulted in restructuring activities and their related charges, as summarized below.
Restructuring and exit charges were $2,853 for the three months ended September 30, 2014, an increase of $1,423, as compared to $1,430 for the three months ended September 30, 2013. Restructuring charges for the third quarter of 2014 included severance costs of $2,500 and site closure costs of $353, which are primarily ongoing lease and other contractual obligations.
During the three months ended September 30, 2014, 1,178 positions were eliminated, resulting in total restructuring charges of $2,260 and estimated annualized savings of $3,065. The remaining accrual for 2014 severance-related activities of $5,479 is expected to be paid during the remainder of 2014 and the remaining facility exit costs accrual of $868 is expected to be paid during the remainder of 2014 through the year 2016 as the related leases expire.
In the third quarter of 2014, we recognized expense of $593 relating to restructuring activities that were initiated in 2013 and prior years. These activities are expected to be completed by the end of 2017 as the related leases expire. The remaining accrual for severance-related activities of $663 is expected to be paid by the end of 2014, and the remaining accrual for facility exit costs of $2,081 is expected to be paid during the remainder of 2014 through 2017 as the related leases expire.

42
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

Loss (Gain) on Foreign Currency Transactions
We recognized a loss on foreign currency transactions of $3,607 for the three months ended September 30, 2014, compared to a gain of $979 for the three months ended September 30, 2013. The variance is attributable to foreign currency rate fluctuations, primarily related the strengthening of the U.S. Dollar and the British Pound Sterling against the Euro.
Impairment and Loss (Gain) on Disposal of Assets
We recognized a loss on Impairment and loss (gain) on disposal of assets of $674 for the three months ended September 30, 2014, compared to a gain of $501 for the three months ended September 30, 2013. During the third quarter of 2013, we received approximately $500 in liquidation payments related to certain fully-impaired annuity contracts in the Americas, which was recorded as a gain to Impairment and loss (gain) loss on disposal of assets. During the third quarter of 2014, we recorded a loss on sale of assets in addition to impairing certain software in the Americas.
Interest and Other Financing Costs, Net
Interest and other financing costs were $19,678 for the three months ended September 30, 2014, a decrease of $1,522, compared to $21,200 for the three months ended September 30, 2013. The decrease was primarily attributable to non-cash mark-to-market fluctuations on our interest rate swap for the three months ended September 30, 2014.
Income Tax Provision (Benefit)
The provision for income taxes was $385 for the three months ended September 30, 2014, compared to a benefit of $9,438 for the three months ended September 30, 2013. The increase in tax expense resulted primarily from the release of valuation allowance on deferred tax assets of our French subsidiary totaling $10,419 recorded during the three months ended September 30, 2013.
Management will continue to assess our ability to realize the deferred tax benefits in jurisdictions which currently have valuation allowances. There are certain state and foreign jurisdictions where management feels it is necessary to see further evidence of sustained achievement towards financial targets before any valuation allowance can be released with respect to these operations. It is not anticipated that the Company will release any remaining portion of valuation allowances with respect to these operations during 2014.
Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and segment data therein. Results for interim periods may not be indicative of the results for the full years. The table below presents statement of operations data, including the amount and percentage changes for the periods indicated, as well as Revenues, Costs of services, and SG&A adjusted to exclude the impact of foreign exchange translation. See Non-GAAP Measures for more information on the computation of Revenues, Costs of services, and SG&A that have been adjusted to exclude the impact of foreign exchange translation.

43
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

 
Nine Months Ended September 30,
 
Dollar
Change
 
Percentage
Change
 
Percentage Change Excluding Foreign Exchange
 
Foreign Exchange Impact
 
2014
 
2013
 
 
 
 
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Americas
$
647,557

 
$
665,588

 
$
(18,031
)
 
(2.7
)%
 
(1.2
)%
 
$
(9,874
)
EMEA
410,679

 
401,765

 
8,914

 
2.2
 %
 
(1.2
)%
 
13,784

Other
79

 
11

 
68

 
618.2
 %
 
na

 
3

Total revenues
1,058,315

 
1,067,364

 
(9,049
)
 
(0.8
)%
 
(1.2
)%
 
3,913

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Costs of services:
 
 
 
 
 
 
 
 
 
 
 
Americas
416,010

 
414,731

 
1,279

 
0.3
 %
 
2.3
 %
 
(8,280
)
EMEA
298,993

 
286,145

 
12,848

 
4.5
 %
 
0.8
 %
 
10,509

Other
(505
)
 
868

 
(1,373
)
 
(158.2
)%
 
1.0
 %
 
(1,382
)
Total costs of services
714,498

 
701,744

 
12,754

 
1.8
 %
 
1.7
 %
 
847

Selling, general and administrative expenses:
 
 
 
 
 
 
 
 
 
 
 
Americas
142,532

 
149,846

 
(7,314
)
 
(4.9
)%
 
(2.4
)%
 
(3,643
)
EMEA
90,361

 
87,238

 
3,123

 
3.6
 %
 
(0.1
)%
 
3,198

Other
32,650

 
37,429

 
(4,779
)
 
(12.8
)%
 
(15.5
)%
 
1,008

Total selling, general and administrative expenses
265,543

 
274,513

 
(8,970
)
 
(3.3
)%
 
(3.5
)%
 
563

Depreciation and amortization of property and equipment
26,470

 
26,349

 
121

 
0.5
 %
 
na

 
na

Amortization of intangible assets
523

 
4,826

 
(4,303
)
 
(89.2
)%
 
na

 
na

Restructuring and exit charges
18,657

 
6,732

 
11,925

 
177.1
 %
 
na

 
na

Loss (gain) on foreign currency transactions
3,797

 
(36
)
 
3,833

 
10,647.2
 %
 
na

 
na

Loss on sale of subsidiary
—

 
4,558

 
(4,558
)
 
(100.0
)%
 
na

 
na

Impairment and loss (gain) on disposal of assets
701

 
(710
)
 
1,411

 
198.7
 %
 
na

 
na

Other income, net
(119
)
 
(289
)
 
170

 
58.8
 %
 
na

 
na

Operating income
28,245

 
49,677

 
(21,432
)
 
(43.1
)%
 
na

 
na

Interest and other financing costs, net
62,667

 
59,861

 
2,806

 
4.7
 %
 
na

 
na

Loss before income taxes
(34,422
)
 
(10,184
)
 
(24,238
)
 
(238.0
)%
 
na

 
na

Income tax provision (benefit)
10,140

 
(5,463
)
 
15,603

 
285.6
 %
 
na

 
na

Net loss
$
(44,562
)
 
$
(4,721
)
 
$
(39,841
)
 
(843.9
)%
 
na

 
na

Revenues
We reported Revenues of $1,058,315 for the nine months ended September 30, 2014, a decrease of $9,049, compared to $1,067,364 for the three months ended September 30, 2013. Excluding the $3,913 impact of foreign exchange translation, Revenues decreased $12,962 in the first nine months of 2014, compared to the first nine months of 2013. Revenues decreased in the first nine months of 2014 (excluding the impact of foreign exchange translation) primarily due to $97,200 of attrition, of

44
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

which $64,300 related to the Americas and $32,900 related to EMEA. These decreases were partially offset by revenue from new clients of $49,500, with $34,400 attributable to the Americas and $15,100 attributable to EMEA. In addition, net growth of existing client campaigns was $34,800, of which $21,800 related to Americas and $13,000 related to EMEA.
Costs of Services
Costs of services were $714,498 for the nine months ended September 30, 2014, an increase of $12,754, compared to $701,744 for the nine months ended September 30, 2013. Excluding the impact of foreign exchange translation of $847, Costs of services increased $11,907 during the nine months ended September 30, 2014, as compared to the same period of 2013. Excluding the impact of foreign exchange translation of $3,066, gross margin decreased $24,869 during the nine months ended September 30, 2014, as compared to the same period of 2013. The decrease in gross margin is due to commercial and execution issues with certain customers.
SG&A
SG&A expenses were $265,543 for the nine months ended September 30, 2014, a decrease of $8,970, compared to $274,513 for the nine months ended September 30, 2013. Excluding the impact of foreign currency translation of $563, SG&A decreased $9,533 during the nine months ended September 30, 2014, compared to the same period of 2013. The decrease was primarily related to SG&A initiatives around employee, consultant, facility, and telecommunication expenses.
Depreciation and Amortization of Property and Equipment
Depreciation and amortization of property and equipment was $26,470 for the nine months ended September 30, 2014, an increase of $121 or 0.5%, as compared to $26,349 for the nine months ended September 30, 2013.
Amortization of Intangible Assets
Amortization of intangible assets was $523 for the nine months ended September 30, 2014, a decrease of $4,303, or 89.2%, compared to $4,826 for the nine months ended September 30, 2013. The decrease is primarily related to the customer relationship intangibles becoming fully amortized during the first quarter of 2014 resulting in no amortization expense recorded during the second or third quarters of 2014.
Restructuring and Exit Charges
Given the nature of the industry we operate in, we evaluate and assess our worldwide operations in an effort to rationalize facility and labor costs, further streamline our operations in order to align resources to support growth, and appropriately shift the geographic mix of Company resources. This evaluation has resulted in restructuring activities and their related charges, as summarized below.
Restructuring and exit charges were $18,657 for the nine months ended September 30, 2014, an increase of $11,925, as compared to $6,732 for the nine months ended September 30, 2013. Restructuring charges for the first nine months of 2014 included severance costs of $16,383 and site closure costs of $2,274, which are primarily ongoing lease and other contractual obligations.
During the nine months ended September 30, 2014, 2,551 positions were eliminated and two sites were closed, resulting in total restructuring charges of $16,271 and estimated annualized savings of $5,547. The remaining accruals for 2014 severance-related activities of $5,479 is expected to be paid during the remainder of 2014 and the remaining facility exit costs accrual of $868 is expected to be paid during the remainder of 2014 through the year 2016 as the related leases expire.
In the first nine months of 2014, we recognized expense of $2,386 relating to restructuring activities that were initiated in 2013 and prior years. These activities are expected to be completed by the end of 2017 as the related leases expire. The remaining accrual for severance-related activities of $663 is expected to be paid by the end of 2014, and the remaining accrual for facility exit costs of $2,081 is expected to be paid during the remainder of 2014 through 2017 as the related leases expire.

45
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

Loss (Gain) on Foreign Currency Transactions
We recognized a loss on foreign currency transactions of $3,797 for the nine months ended September 30, 2014, compared to a gain of $36 for the nine months ended September 30, 2013. The variance is attributable to foreign currency rate fluctuations, primarily related the strengthening of the U.S. Dollar and the British Pound Sterling against the Euro in addition to the aforementioned out of period adjustment during the second quarter of 2014.
Impairment and Loss (Gain) on Disposal of Assets
We recognized a loss on Impairment and loss (gain) on disposal of assets of $701 for the nine months ended September 30, 2014, compared to a gain of $710 for the nine months ended September 30, 2013. During the third quarter of 2013, we received approximately $500 in liquidation payments related to certain fully-impaired annuity contracts in the Americas. During the third quarter of 2014, we recorded a loss on sale of assets in addition to impairing certain software in the Americas.
Interest and Other Financing Costs, Net
Interest and other financing costs were $62,667 for the nine months ended September 30, 2014, an increase of $2,806, compared to $59,861 for the nine months ended September 30, 2013. The increase was primarily attributable to non-cash mark-to-market fluctuations related to our interest rate swap.
Income Tax Provision (Benefit)
The provision for income taxes was $10,140 for the nine months ended September 30, 2014, compared to a benefit of $5,463 for the nine months ended September 30, 2013. The increase in tax expense resulted primarily from the release of valuation allowance on U.S. state deferred income taxes of $744 and $10,419 on deferred tax assets of our French subsidiary recorded during the nine months ended September 30, 2013. We also recognized additional tax expense primarily resulting from changes in the intra-period allocation to continuing operations of $2,123 recorded during the nine months ended September 30, 2014 compared to a tax benefit of $598 recorded in the same period of 2013, and tax expense of $797 related to foreign uncertain tax positions and tax audits recorded during the nine months ended September 30, 2014 compared to a tax benefit of $4,919 recorded in the same period of 2013.
We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations (the "Income Tax Allocation"). Through the third quarter of 2014, as a result of the Income Tax Allocation, we recorded a non-cash deferred income tax expense of $1,676 against Other comprehensive income as a result of year-to-date gains from mark-to-market fluctuations on foreign currency hedges that are designated as accounting hedges and an offsetting non-cash income tax benefit of $1,676 in continuing operations. Also during the first quarter of 2014, the 2013 hedge portfolio was fully settled resulting in the reversal of previously recorded tax benefits resulting in non-cash income tax expense of $3,799.
Management will continue to assess our ability to realize the deferred tax benefits in jurisdictions which currently have valuation allowances. There are certain state and foreign jurisdictions where management feels it is necessary to see further evidence of sustained achievement towards financial targets before any valuation allowance can be released with respect to these operations. It is not anticipated that the Company will release any remaining portion of valuation allowances with respect to these operations during 2014.
Client Concentration
Our ten largest clients represented approximately 38.1% and 37.2%, respectively, of our revenues for the three and nine months ended September 30, 2014, as compared to 38.2% and 37.1%, respectively, for the comparable periods in 2013. No client accounted for more than 10% of our total revenues during these periods.
Liquidity and Capital Resources
Our principal sources of liquidity are net cash provided by operating activities, borrowings under our Senior Secured Credit Facility, and proceeds from the issuances of our Senior Secured Notes, Senior Notes, and equity. We expect that these will continue to be our principal sources of cash in the future. Our principal uses of cash have included debt service, capital

46
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

expenditures, restructuring activities, and the financing of working capital. We expect that these will continue to be our principal uses of cash in the future.
We manage a centralized global treasury function in the United States with a particular focus on concentrating and safeguarding our global Cash and cash equivalent reserves. While we generally prefer to hold U.S. dollars, we maintain adequate cash in the functional currency of our foreign subsidiaries to support local operating costs. We protect our cash reserves by maintaining sound cash management practices, relationships with reputable banking partners, and highly liquid investments. We continuously review our assertion for indefinitely reinvested earnings in line with our global cash strategy. Based on forecasted cash needs, no changes to our assertion are necessary at this time.
We believe that cash generated from operations, existing cash balances, and borrowings under our Senior Secured Credit Facility or other financing arrangements will be sufficient to meet our working capital requirements, anticipated capital expenditures, and scheduled debt payments.
The amount of capital required over the next 12 months will also depend on our levels of investment in infrastructure necessary to maintain, upgrade, or replace existing assets or to develop new customer contact centers. Our working capital and capital expenditure requirements could also increase materially in the event cash is required to fund new strategic initiatives, the resolution of certain litigation or administration disputes, or other unexpected business expenses. These factors could require that we raise additional capital through future debt or equity financing or reduce certain capital and other expenditures.
We expect our operations to continue to require capital expenditures consistent with prior periods to support the growth of our business. We expect to continue to finance equipment purchases through proceeds from our operations, our Senior Secured Credit Facility, and our ability to acquire equipment through operating and capital lease obligations with various equipment vendors and lending institutions.
Cash Flows
Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013
The following summarizes our primary sources and uses of cash in the periods presented (in thousands):
 
 
 
 
 
Increase
 
Nine Months Ended September 30,
 
(Decrease) to
 
 
Net Cash Flow
 
2014
 
2013
 
Amount
Cash provided by (used in):
 
 
 
 
 
Operating activities
$
(18,187
)
 
$
42,321

 
$
(60,508
)
Investing activities
(24,917
)
 
(18,301
)
 
6,616

Financing activities
51,585

 
(24,068
)
 
75,653

Operating Activities.    Cash used in operations was $18,187 during the nine months ended September 30, 2014, compared to a source of cash of $42,321 during the nine months ended September 30, 2013. The $60,508 decrease compared to the same period in 2013 was primarily driven by an increase in Net loss. In addition, there was decrease in cash from the changes in working capital as a result of an increase in Accounts receivable. The increase in Accounts receivable was due to the timing of cash receipts in the current quarter as compared to prior year.
Investing Activities.    Cash used in investing activities was $24,917 during the nine months ended September 30, 2014 compared to $18,301 during the comparable period in 2013. The $6,616 increase was primarily due to increases in capital expenditures partially offset by proceeds received on the disposition of an asset held for sale in the Americas during the nine months ended September 30, 2014.
Financing Activities.    Cash provided by financing activities was $51,585 during the nine months ended September 30, 2014, compared to a use of cash of $24,068 during the same period in 2013. The $75,653 increase was primarily due to the issuance of Series D Preferred Stock during the nine months ended September 30, 2014.
Cash Position, Working Capital and Indebtedness

47
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

As of September 30, 2014, our total Cash and cash equivalents were $15,862 and we had total indebtedness of $722,428. Working capital was $129,383 at September 30, 2014, compared to $112,113 at December 31, 2013, while adjusted working capital (defined as current assets (excluding Cash and cash equivalents and restricted cash) less current liabilities (excluding current portion of long-term debt and book overdrafts)) was $112,039 at September 30, 2014, compared to $105,965 at December 31, 2013, an increase of $6,074. Adjusted working capital is a non-GAAP measure. See "Non-GAAP Measures" for a reconciliation of this non-GAAP measure.
Long-Term Debt
Senior Notes
On March 18, 2010, SITEL, LLC and Sitel Finance Corp. (the "Issuers") issued the 11.5% Senior Notes due April 1, 2018 having an aggregate principal amount of $300,000 with an original issuance discount of $7,638. The Senior Notes are general unsecured obligations of SITEL Worldwide Corporation and are senior in right of payment to all existing and future indebtedness, if any, that is by its terms expressly subordinated to the Senior Notes. The Senior Notes are guaranteed by our domestic subsidiaries and will mature on April 1, 2018. Interest accrues on the Senior Notes at a rate of 11.5% annually, and is payable semi-annually in arrears on April 1 and October 1. Proceeds from the Senior Notes offering were used to pay down approximately $231,600 of the Term Loans and 100.0% of the outstanding balance on the Revolvers, both of which are discussed further below.
We are not required to make mandatory redemptions or sinking fund payments with respect to the Senior Notes; however at any time prior to August 1, 2013, the issuers of the Senior Notes may, on any one or more occasions, redeem up to 35.0% of the aggregate principal amount of Senior Notes with the net proceeds of certain equity offerings at 111.5%. Prior to April 1, 2014, the Senior Notes may be redeemed in part or in full at a redemption price equal to 100.0% of the principal amount of the Senior Notes, plus a make-whole premium calculated in accordance with the indenture governing the Senior Notes and accrued and unpaid interest. On or after April 1, 2014, the Senior Notes may be redeemed in part or in full at the following percentages of the outstanding principal amount prepaid: 105.750% prior to April 1, 2015; 102.875% on or after April 1, 2015, but prior to April 1, 2016; and 100.000% on or after April 1, 2016.
The indenture governing the Senior Notes contains customary covenants and restrictions on the activities of SITEL, LLC, Sitel Finance and SITEL, LLC's restricted subsidiaries, including, but not limited to, the incurrence of additional indebtedness; dividends or distributions in respect of capital stock or certain other restricted payments or investments; entering into agreements that restrict distributions from restricted subsidiaries; the sale or disposal of assets, including capital stock of restricted subsidiaries; transactions with affiliates; the incurrence of liens; and mergers, consolidations or the sale of substantially all of SITEL, LLC's assets. Certain of these covenants will be suspended if the Senior Notes are assigned an investment grade rating by both Standard & Poor's Rating Services and Moody's Investor Service, Inc. and no default has occurred or is continuing. If either rating on the Senior Notes should subsequently decline to below investment grade, the suspended covenants will be reinstated.
Senior Secured Notes
On April 20, 2012, the Issuers issued the 11.0% Senior Secured Notes due August 1, 2017, having an aggregate principal amount of $200,000 with an original issuance discount of $8,000. The Senior Secured Notes are guaranteed by our domestic subsidiaries and will mature on August 1, 2017. The Senior Secured Notes and the guarantees are the senior obligations of the Issuers and the guarantors and are secured on a first-priority basis by a lien on substantially all of the assets of the Issuers and the guarantors, subject to certain exceptions. Interest accrues on the Senior Secured Notes at a rate of 11.0% annually, and is payable semi-annually in arrears on February 1 and August 1. Proceeds from the Senior Secured Notes offering were used to pay down approximately $128,900 of the Term Loans and 100.0% of the outstanding balance on the Revolvers, both of which are discussed further below.
We are not required to make mandatory redemptions or sinking fund payments with respect to the Senior Secured Notes; however at any time prior to August 1, 2014, the issuers of the Senior Notes may, on any one or more occasions, redeem up to 35.0% of the aggregate principal amount of Senior Secured Notes with the net proceeds of certain equity offerings at 111.0%. Prior to August 1, 2014, the Senior Secured Notes may be redeemed in part or in full at a redemption price equal to 100.0% of the principal amount of the Senior Secured Notes, plus a make-whole premium calculated in accordance with the indenture governing the Senior Secured Notes and accrued and unpaid interest. On or after August 1, 2014, the Senior Secured Notes may be redeemed in part or in full at the following percentages of the outstanding principal amount prepaid: 105.500% prior to August 1, 2015; 102.750% on or after August 1, 2015, but prior to August 1, 2016; and 100.000% on or after August 1, 2016.

48
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

The indenture governing the Senior Secured Notes contains customary covenants and restrictions on the activities of SITEL, LLC, Sitel Finance and SITEL, LLC's restricted subsidiaries, including, but not limited to, the incurrence of additional indebtedness; dividends or distributions in respect of capital stock or certain other restricted payments or investments; entering into agreements that restrict distributions from restricted subsidiaries; the sale or disposal of assets, including capital stock of restricted subsidiaries; transactions with affiliates; the incurrence of liens; and mergers, consolidations or the sale of substantially all of SITEL, LLC's assets.
2007 Senior Secured Credit Facility
Overview
On January 30, 2007, we entered into a Senior Secured Credit Facility among a syndicate of banks with Goldman Sachs Credit Partners L.P. as joint lead arranger, joint bookrunner, administrative agent and collateral agent and GE Capital Markets, Inc. as joint lead arranger and joint bookrunner. The Senior Secured Credit Facility originally provided for total available borrowings in an aggregate principal amount of approximately $760,000, which included $85,000 of revolvers maturing on January 30, 2013, consisting of a $50,000 U.S. revolver, a $7,000 Canadian revolver (made available in Canadian dollars) and a $28,000 U.K. revolver (made available in Euro and British pound sterling) (collectively, the "Revolvers"), and $675,000 of term loans maturing on January 30, 2014, consisting of a $550,000 U.S. term loan, a €51,447 Euro term loan, and a £30,000 British pound sterling term loan (collectively, the "Term Loans"). SITEL, LLC is the borrower under the U.S. term loan and the U.S. revolver, ClientLogic Holding Limited is the borrower under the Euro term loan, the British pound sterling term loan and the U.K. revolver, and SITEL Canada Corporation (formerly known as ClientLogic Canada Corporation) is the borrower under the Canadian revolver.
As of September 30, 2014, we had an aggregate of $225,305 of outstanding indebtedness under our Senior Secured Credit Facility, which consisted of $225,305 of Term Loans and $0 of Revolvers. Our Term Loans consisted of $177,973 outstanding on the U.S. term loan, $28,130 outstanding on the Euro term loan, and $19,202 outstanding on the British pound sterling term loan. In addition, we had outstanding letters of credit of $2,006 as of that date. As of September 30, 2014, we had $59,244 available for additional borrowings under our Revolvers.
First Amendment
On December 9, 2008, we entered into the first amendment to our Senior Secured Credit Facility (the "First Amendment") which, among other matters, modified applicable interest rates, certain negative covenants and financial covenant thresholds. In addition, the First Amendment permitted us to offer to purchase the outstanding Term Loans at a discount to par using a portion of the net proceeds we received from the sales of our series C preferred stock we completed in 2008. We received approximately $29,600 through the issuance of series C preferred stock which was a condition to entering into the First Amendment. As required under the First Amendment, we offered to purchase Term Loans under the Senior Secured Credit Facility, and in December 2008, we purchased $27,047 of outstanding principal under the Term Loans for $15,000, which Term Loans were subsequently canceled and retired.
Second Amendment
In April 2009, we entered into the second amendment to our Senior Secured Credit Facility which effected a technical amendment clarifying certain terms governing minimum borrowing amounts under certain interest rates including London Interbank Offer Rate ("LIBOR").
Third Amendment
In February 2010, we entered into a third amendment to the Senior Secured Credit Facility (the "Third Amendment") to, among other things, permit the issuance of the Senior Notes, improve the terms of mandatory prepayment requirements, and modify our Senior Secured Leverage Ratio covenant and Minimum Interest Coverage Ratio covenant.
Fourth Amendment
During the second quarter of 2011, we entered into the fourth amendment to the Senior Secured Credit Facility (the "Fourth Amendment") to, among other things, allow flexibility to refinance or prepay the non-extended portions of the Term Loans prior to the extended portions, and to refinance, extend or replace the Revolvers and Term Loans; increase the Senior Secured Leverage Ratio covenant levels; and decrease the Minimum Interest Coverage Ratio covenant levels.

49
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

Fifth Amendment
In April 2012, we entered into the fifth amendment to the Senior Secured Credit Facility (the "Fifth Amendment") which allowed for the issuance and sale of the Senior Secured Notes, modified our Senior Secured Leverage Ratio covenant and Minimum Interest Coverage Ratio covenant and changed the currency mix of our lenders' revolver commitments. During the second quarter of 2012, a portion of the proceeds received from the issuance of the Senior Secured Notes were used to prepay the outstanding balances on the non-extended term loans, which were due in January 2014.
Sixth Amendment
In February 2014, we entered into the sixth amendment to the Senior Secured Credit Facility (the "Sixth Amendment") which increased our Senior Secured Leverage Ratio and decreased our Minimum Interest Coverage Ratio covenant levels.
Interest
The Term Loans mature in January 2017. All Term Loans amortize in equal quarterly installments in an aggregate annual amount equal to 0.25% of the original principal amount with the balance payable at maturity. Payments on the principal amount have exceeded the cumulative amortization schedule, thus no amount is due until maturity. Interest on the U.S. term loan is based, at our option, on LIBOR plus the applicable margin of 7.25% or the higher of (i) the federal funds rate plus 0.50% or (ii) the banks’ prime rate, plus the applicable margin of 6.25%. Interest on the Euro term loan is based on EURIBOR plus the applicable margin of 7.25%. Interest on the British pound sterling term loan is based on LIBOR plus the applicable margin of 7.25%. We have an interest rate swap agreement for the notional amount of $175,000 against our Term Loans that is based on a rate of 2.315% versus three month LIBOR.
The Revolvers mature in January 2016. In January 2013, the non-extended portion of our U.S. Revolver expired, reducing the borrowing capacity under the Revolvers from $85,000 to $61,250. A commitment fee is payable quarterly at 1.00% per annum of the undrawn portion of the Revolvers. Interest on the U.S. revolver is based, at our option, on LIBOR plus the applicable margin of 7.25%, or the higher of the federal funds rate plus 0.50% or the prime rate plus the applicable margin of 6.25%. Interest on the Canadian revolver is based, at our option, on the Canadian banker's acceptance rate plus the applicable margin of 7.25% or the higher of the one month BA Rate 0.75% or the Canadian prime rate plus the applicable margin of 6.25%.
For the nine months ended September 30, 2014, including the impact of our interest rate swap, the weighted average interest rate on the Term Loans was 8.71%. The weighted average rate on the Revolvers was 8.25% for the same period. Specified interest rates for the Euro term loan and British pound sterling term loan are as described in the Senior Secured Credit Facility. The applicable margins under the Senior Secured Credit Facility increased by 50 basis points in August 2014 per the terms of the agreement.
Covenants
We are required under the terms of the Senior Secured Credit Facility to maintain certain financial covenants on a quarterly and annual basis, specifically:
Senior Secured Leverage Ratio.    The senior secured leverage ratio is the ratio of our total funded debt that is secured by a lien on any of our assets or equity interests or any of our subsidiaries to our Adjusted EBITDA (as defined in the amended Senior Secured Credit Facility) for each period of four consecutive quarters ending during the term of the Senior Secured Credit Facility.
Minimum Interest Coverage Ratio.    The minimum interest coverage ratio is the ratio of Adjusted EBITDA to cash interest expense (net of interest income) for each period of four consecutive quarters ending during the term of the Senior Secured Credit Facility.
Maximum Capital Expenditures.    The maximum capital expenditures covenant in our Senior Secured Credit Facility limits our annual capital spending, cash restructuring in excess of $10,000 and our acquisition expenses in excess of $10,000 to a pre-established limit each year and allows for carryover of unused spend.
The Senior Secured Credit Facility also contains customary affirmative and negative covenants such as restricting certain corporate actions, including asset dispositions, acquisitions, the payment of dividends, changes of control, the incurrence of indebtedness, providing financing and investments and transactions with affiliates.

50
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

We were in compliance with all debt covenants under the Senior Secured Credit Facility as of September 30, 2014. We believe that we will continue to be in compliance with restrictive covenants in our Senior Secured Credit Facility throughout the next twelve months.
Off-Balance Sheet Arrangements
Our off balance sheet arrangements primarily consist of our operating leases and standby letters of credit. We lease property and equipment under non-cancelable operating lease arrangements with initial or remaining lease terms in excess of one year. At September 30, 2014, the future lease commitments relating to our operating leases were $122,949. We utilize standby letters of credit to support workers’ compensation policy requirements, performance obligations, tax obligations, and certain operating leases. These obligations will expire at various dates through June 2015, and are renewed as required. The outstanding commitment on these obligations at September 30, 2014 was $2,006.
Non-GAAP Measures
We use Adjusted working capital and Revenues, Costs of services, and SG&A that have been adjusted to exclude the impact of foreign exchange translation as non-GAAP measures.
The computation of Adjusted working capital is as follows:
 
September 30, 2014
 
December 31, 2013
Working capital (a)
$
129,383

 
$
112,113

Adjustments:
 
 
 
Cash and cash equivalents
(15,862
)
 
(7,366
)
Restricted cash
(4,623
)
 
(4,312
)
Current portion of capital lease obligations
2,761

 
2,005

Book overdrafts
380

 
3,525

Total adjustments
(17,344
)
 
(6,148
)
Adjusted working capital
$
112,039

 
$
105,965

(a) Defined as current assets less current liabilities from the Condensed Consolidated Balance Sheets.
We believe that Adjusted working capital provides a meaningful measure of our operational results and underlying performance.

51
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
(in thousands of U.S. dollars, except share and per share data)

The computation of Revenues, Costs of services, and SG&A that have been adjusted to exclude the impact of foreign exchange translation is as follows:
 
Three Months Ended September 30,
 
 
 
 
 
 
 
 
 
 
 
2014
 
2013
 
Dollar
Change
 
Percentage
Change
 
Percentage Change Excluding Foreign Exchange
 
Foreign Exchange Impact
 
$ Change without Foreign exchange impact
Total revenues
$
359,089

 
$
353,368

 
$
5,721

 
1.6
 %
 
1.1
 %
 
$
1,700

 
$
4,021

Total costs of services
240,388

 
231,089

 
9,299

 
4.0
 %
 
4.2
 %
 
(411
)
 
9,710

Total SG&A
86,189

 
91,072

 
(4,883
)
 
(5.4
)%
 
(5.4
)%
 
(7
)
 
(4,876
)
 
Nine Months Ended September 30,
 
 
 
 
 
 
 
 
 
 
 
2014
 
2013
 
Dollar
Change
 
Percentage
Change
 
Percentage Change Excluding Foreign Exchange
 
Foreign Exchange Impact
 
$ Change without Foreign exchange impact
Total revenues
$
1,058,315

 
$
1,067,364

 
$
(9,049
)
 
(0.8
)%
 
(1.2
)%
 
$
3,913

 
$
(12,962
)
Total costs of services
714,498

 
701,744

 
12,754

 
1.8
 %
 
1.7
 %
 
847

 
11,907

Total SG&A
265,543

 
274,513

 
(8,970
)
 
(3.3
)%
 
(3.5
)%
 
563

 
(9,533
)
We believe that the presentation of Revenue, Costs of services, and SG&A excluding the impact of foreign exchange translation provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance.
The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP and may not be comparable to other companies' non-GAAP measures with similar titles.

52
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risks” in the Company’s Annual Report on Form 10-K filed with the SEC on February 19, 2014. As of September 30, 2014, there has been no material change in this information.
ITEM 4. CONTROLS AND PROCEDURES
We carried out an evaluation required by the Securities Exchange Act of 1934, as amended (the “1934 Act”), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the 1934 Act) as of September 30, 2014. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the 1934 Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2014, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
There have been no changes in our internal control over financial reporting during the three months ended September 30, 2014 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS
See Note 10 “Commitments and Contingencies” to the accompanying unaudited interim Condensed Consolidated Financial Statements.
ITEM 1A. RISK FACTORS
For a detailed discussion of the risks and uncertainties associated with our business see “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC on February 19, 2014. There have been no material changes to these risk factors since that report.
ITEM 6. EXHIBITS
a)
Exhibits
 
 
 
No.
 
Exhibit Description
10.1
 
BOARD AGREEMENT BETWEEN DAVID GARNER AND SITEL WORLDWIDE CORPORATION, DATED AUGUST 5, 2014
10.2
 
BOARD AGREEMENT BETWEEN BOB MAHONEY AND SITEL WORLDWIDE CORPORATION, DATED AUGUST 5, 2014
10.3
 
BOARD AGREEMENT BETWEEN KEITH POWELL AND SITEL WORLDWIDE CORPORATION, DATED AUGUST 5, 2014
10.4
 
BOARD AGREEMENT BETWEEN PETER SHEA AND SITEL WORLDWIDE CORPORATION, DATED AUGUST 5, 2014
31.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934
31.2
 
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934
32.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. 1350
32.2
 
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. 1350
101.INS
 
XBRL INSTANCE DOCUMENT
101.SCH
 
XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
101.CAL
 
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
101.DEF
 
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
101.LAB
 
XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
101.PRE
 
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

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SIGNATURE
    
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SITEL Worldwide Corporation
Date:
November 5, 2014
By:
/s/ Patrick Tolbert
 
 
 
Name:
Patrick Tolbert
 
 
 
Title:
Chief Operating and Financial Officer and Director
 
 
 
 
(Duly authorized officer and principal financial officer)

55

SITEL Worldwide Corp Reports