CVG 12.31.2014 11-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 11-K
______________________
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ý | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2014
OR
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¨ | 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 1-14379
__________________________________________
CONVERGYS CORPORATION RETIREMENT AND SAVINGS PLAN
CONVERGYS CORPORATION
201 East Fourth Street
Cincinnati, Ohio 45202
Convergys Corporation Retirement and Savings Plan
Financial Statements and Supplemental Schedule
Years Ended December 31, 2014 and 2013
Contents
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Financial Statements | |
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Supplemental Schedule | |
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Report of Independent Registered Public Accounting Firm
To the Convergys Employee Benefits Committee of the Convergys Corporation
Retirement and Savings Plan:
We have audited the accompanying statements of net assets available for benefits of the Convergys Corporation Retirement and Savings Plan (the “Plan”) as of December 31, 2014 and 2013 and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2014 and 2013, and the changes in net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.
The supplemental information in the accompanying schedule of assets (held at end of year) as of December 31, 2014 has been subjected to audit procedures performed in conjunction with the audit of the Plan's 2014 financial statements. The supplemental information is presented for the purpose of additional analysis and is not a required part of the financial statements but include supplemental information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental information is the responsibility of the Plan's management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information in the accompanying schedule of assets (held at end of year) as of December 31, 2014 is fairly stated in all material respects in relation to the 2014 financial statements as a whole.
/s/ Moore, Colson & Company, P.C.
Marietta, Georgia
June 25, 2015
Convergys Corporation Retirement and Savings Plan
Statements of Net Assets Available for Benefits
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| | | | | | | |
| | December 31 |
| | 2014 | 2013 |
Assets | | | |
Investments | | $ | 425,107,336 |
| $ | 438,472,110 |
|
| | | |
Receivables: | | | |
Participant contributions | | 592,792 |
| 278,586 |
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Employer contributions | | 269,781 |
| 121,354 |
|
Notes receivable from participants | | 7,111,080 |
| 7,531,708 |
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Other assets | | 1,050 |
| 5,585 |
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Total assets | | 433,082,039 |
| 446,409,343 |
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| | | |
Liabilities | | | |
Excess contributions payable | | — |
| 2,492,431 |
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Total liabilities | | — |
| 2,492,431 |
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| | | |
Net assets reflecting investments at fair value | | 433,082,039 |
| 443,916,912 |
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Adjustment from fair value to contract value for fully benefit-responsive investment contract | | (388,201 | ) | (401,806 | ) |
Net assets available for benefits | | $ | 432,693,838 |
| $ | 443,515,106 |
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See accompanying notes.
Convergys Corporation Retirement and Savings Plan
Statements of Changes in Net Assets Available for Benefits
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| | | | | | | |
| | Year Ended December 31 |
| | 2014 | 2013 |
Additions: | | | |
Participant contributions | | $ | 13,738,973 |
| $ | 11,900,749 |
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Employer contributions | | 6,697,647 |
| 4,998,500 |
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Rollover contributions | | 676,194 |
| 919,952 |
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Dividend, interest, and other income | | 19,934,658 |
| 13,679,489 |
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Net appreciation in fair market value of investments | | 6,526,243 |
| 71,460,428 |
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Interest income on notes receivable from participants | | 304,934 |
| 346,436 |
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Total additions | | 47,878,649 |
| 103,305,554 |
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Deductions: | | | |
Benefits paid to participants | | 58,577,979 |
| 70,702,203 |
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Administrative expenses | | 121,938 |
| 99,735 |
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Total deductions | | 58,699,917 |
| 70,801,938 |
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| | | |
Net (decrease) increase | | (10,821,268 | ) | 32,503,616 |
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Net assets available for benefits at beginning of year | | 443,515,106 |
| 411,011,490 |
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Net assets available for benefits at end of year | | $ | 432,693,838 |
| $ | 443,515,106 |
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See accompanying notes.
Convergys Corporation Retirement and Savings Plan
Notes to Financial Statements
December 31, 2014 and 2013
1. Description of Plan
The following description of the Convergys Corporation Retirement and Savings Plan (the Plan) provides only general information. Participants should refer to the Plan Document or Summary Plan Description for a more complete description of the Plan's provisions. Convergys Corporation (the Company) is the Plan Sponsor.
General
The Plan is a defined contribution plan available to all eligible employees who are twenty-one years of age or older of Convergys and related companies (a Participating Company). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Convergys Employee Benefits Committee (the Committee) is responsible for the general administration of the Plan. Fidelity Management Trust Company (FMTC) is the trustee of and recordkeeper for the Plan.
Contributions
Each year, participants may contribute a percentage of their pretax annual compensation, as defined in the Plan and set by the Committee. Participants may also rollover qualified distributions from other defined benefit or defined contribution plans. Each participant has the discretion to choose from a variety of mutual funds and common/collective trusts offered under the standard investment plan and can change their investment options on a daily basis. Participants also have the option to create a self-directed brokerage account and invest their contributions in securities not offered under the standard investment plan. The self-directed brokerage account allows plan participants to invest in a wide array of securities, mainly registered investment companies and common stock, beyond those offered under the standard plan offering. On January 1, 2014, the plan was amended to allow Convergys to contribute an employer match equal to 100% of the first 3% and 50% of the next 2% of eligible compensation deferred by the participant, provided that the participant has completed at least 1,000 hours of service during the 12-month period beginning on the date of first employment by Convergys. Prior to January 1, 2014, Convergys provided a match equal to 100% of the first 3% of eligible compensation deferred by the participant. Following this amendment, the Plan utilizes a safe harbor design under Section 401(K)(12) of the IRC. The matching Participating Company contributions are invested in the same investment options as the participants' elective contributions.
Participants age 50 and older (and those who will turn age 50 by December 31 of a given plan year), may take advantage of catch up contributions under the Internal Revenue Code (the Code). If age 50 or older, participants may save an additional 1% to 50% of pay, subject to Internal Revenue Code limits.
Participant Accounts
Each participant's account is credited with the participant's contribution and the Participating Company contributions and allocations of plan earnings and administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account.
Administrative Expenses
Certain costs and expenses of administering the Plan are paid by the Company except for fees paid to the investment managers from their respective funds and certain fees paid directly by the participants.
Vesting
Participants are vested immediately in their contributions plus actual earnings thereon. Participants are vested immediately in the Participating Company contribution portion of their accounts plus actual earnings thereon.
Participant Loans
Participants may borrow from their accounts up to a maximum of $50,000 or 50% of their vested account balance, whichever is less. The loans are secured by the balance in the participant's account and bear interest at the prime lending rate plus 1% at the time the loan is initiated. Loans generally must be repaid within five years, unless the participant ceases to be an employee of a Participating Company, at which point any outstanding loan becomes immediately due and payable.
Convergys Corporation Retirement and Savings Plan
Notes to Financial Statements (continued)
1. Description of Plan (continued)
Payment of Benefits
Distribution of a participant's vested account balance is made in one lump-sum payment to the participant, or to their beneficiary, upon termination of employment, permanent disability, or death. Participant accounts that are vested and in excess of $5,000 will not be distributed to the participant before they attain age 70 1/2 without the written consent of the participant. Participants may apply for hardship withdrawals, subject to approval by the Plan Administrator. Contributions and earnings are taxable to the participants, subject to certain exceptions, upon withdrawal from the Plan.
Company Stock Fund
The Plan invests in common stock of the Company through its Convergys Corporation Shares Fund. The Company has implemented a dividend pass through election for its participants.
Each participant is entitled to exercise voting rights attributable to the shares allocated to their account and is notified by the Company prior to the time that such rights may be exercised. The trustee is not permitted to vote any allocated shares for which instructions have not been given by a participant. The trustee votes any unallocated shares in the same proportion as those shares that were allocated, unless the Committee directs the trustee otherwise. Participants have the same voting rights in the event of a tender or exchange offer.
Excess Contributions Payable
Amounts payable to participants for contributions in excess of amounts allowed by the IRS are recorded as a liability with a corresponding reduction to contributions. The Plan distributed the excess contributions to the applicable participants prior to March 15, 2014 for the plan year ended December 31, 2013. There were no excess contributions payable for the plan year ended December 31, 2014.
2. Summary of Accounting Policies
Basis of Accounting
The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (U.S. GAAP).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes and supplemental schedule. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Fair value is defined 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 (an exit price). See Note 4 for further discussion and disclosures related to the fair value measurements. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) in fair value includes the Plan's gains (losses) on investments bought and sold, as well as held during the year.
The Fidelity Managed Income Portfolio invests in fully benefit-responsive investment contracts. This fund is recorded at fair value (see Note 4); however, since these contracts are fully benefit-responsive, an adjustment is reflected in the statements of net assets available for benefits to present these investments at contract value. Contract value is the relevant measurement attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to
Convergys Corporation Retirement and Savings Plan
Notes to Financial Statements (continued)
2. Summary of Accounting Policies (continued)
initiate permitted transactions under the terms of the Plan. The contract value represents contributions plus earnings, less participant withdrawals and administrative expenses.
Contract value is equal to principal balance plus accrued interest. There are no reserves against contract value for credit risk of the contract issuer or otherwise. Certain events limit the ability of the Plan to transact at contract value with the issuer. Such events include the following: (i) amendments to the plan documents (including complete or partial plan termination or merger with another plan); (ii) changes to plan's prohibition on competing investment options or deletion of equity wash provisions; (iii) bankruptcy of the plan sponsor or other plan sponsor events (e.g., divestitures or spin-offs of a subsidiary) that cause a significant withdrawal from the plan; or (iv) the failure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA. The Plan Administrator does not believe that any such event that would limit the Plan's ability to transact at contract value with participants is probable of occurring.
Notes Receivable from Participants
Notes receivable from participants represent participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2014 or 2013. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.
3. Investments
During 2014 and 2013, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in fair value as follows:
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| | | | | | | |
| | 2014 | 2013 |
Net realized and unrealized appreciation in fair value of investments: | | | |
Shares of registered investment companies | | $ | (1,941,035 | ) | $ | 46,274,036 |
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Common/collective trusts | | 8,878,559 |
| 18,107,157 |
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Common stock | | (408,470 | ) | 6,780,438 |
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Other | | (2,811 | ) | 298,797 |
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| | $ | 6,526,243 |
| $ | 71,460,428 |
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The following presents investments that represent 5% or more of the Plan's net assets available for benefits at December 31 as follows:
Convergys Corporation Retirement and Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
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| | | | | | | |
| | 2014 | 2013 |
Common Stock: | | | |
Convergys Corporation Shares Fund | | $ | 21,774,945 |
| $ | 25,821,968 |
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Investments in shares of registered investment companies: | | | |
MFS Value R4 | | 24,286,679 |
| 24,570,924 |
|
Fidelity Growth Company Fund | | 44,113,330 |
| 41,467,239 |
|
PIMCO Total Return Fund | | (a) |
| 23,973,984 |
|
AF Europac Growth R4 | | 25,243,189 |
| 29,760,564 |
|
Rainier Small/Mid Cap I | | (a) |
| 23,018,728 |
|
Hotchkis & Wiley Mid Cap Value I Fund | | 21,697,675 |
| (a) |
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Common/Collective Trust Funds: | |
|
|
NTGI SP500 Equity Index | | 70,809,212 |
| 69,268,294 |
|
Fidelity Managed Income Portfolio II (at contract value)* | | 26,584,255 |
| 28,142,849 |
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* The fair value of the Plan's investment in this investment was $26,972,456 and $28,544,655 at December 31, 2014 and 2013, respectively.
(a) Investment is less than 5%.
4. Fair Value Measurements
Fair value is defined 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 (i.e., an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
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• | Level 1 - Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities. |
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• | Level 2 - Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: |
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◦ | Quoted prices for similar assets and liabilities in active markets |
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◦ | Quoted prices for identical or similar assets or liabilities in markets that are not active |
| |
◦ | Observable inputs other than quoted prices that are used in the valuation of the asset or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals) |
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◦ | Inputs that are derived principally from or corroborated by observable market data by correlation or other means |
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• | Level 3 - Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include managements own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). |
The asset's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
Convergys Corporation Retirement and Savings Plan
Notes to Financial Statements (continued)
4. Fair Value Measurements (continued)
The following is a description of the valuation methods used for assets measured at fair value. There have been no significant changes in methodologies used at December 31, 2014, as compared to December 31, 2013.
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• | Registered investment companies: The fair values of these securities are based on observable market quotations for identical assets and are priced on a daily basis at the close of business. |
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• | Interest-bearing cash: The carrying value approximates fair value. |
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• | Common/collective trusts: The collective trust funds are public investment vehicles valued using a Net Asset Value (NAV) provided by the manager of each fund. The NAV is based on the underlying net assets owned by the fund, divided by the number of shares outstanding. The NAV's unit price is quoted on a private market that is not active. However, the NAV is based on the fair value of the underlying securities within the fund, which are traded on an active market, and valued at the closing price reported on the active market on which those individual securities are traded. The significant investment strategies of the funds are as described in the financial statements provided by each fund. There are no restrictions on redemptions from these funds. |
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• | Common stocks: The fair values of these securities are based on observable market quotations for identical assets and are valued at the closing price reported on the active market on which the individual securities are traded. |
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• | Self-directed brokerage accounts: The self-directed brokerage account allows participants to invest in a wide array of securities. Participants can invest their plan assets in individual securities such as mutual funds, individual stocks and debt securities. The fair values of these securities are based on observable market quotations for identical assets and are valued at the closing price reported on the active market on which the individual securities are traded. |
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• | Other investments: Consist of investments in U.S. Government Securities, Corporate Debt Securities, Preferred Stocks, and Call Options. The fair values of these securities are based on observable market quotations for identical assets and are valued at the closing price reported on the active market on which the individual securities are traded. |
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement.
Convergys Corporation Retirement and Savings Plan
Notes to Financial Statements (continued)
4. Fair Value Measurements (continued)
The following tables set forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31:
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| 2014 |
| Total | (Level 1) | (Level 2) | (Level 3) |
Investments: | | | | |
Registered investment companies: | | | | |
Lifecycle Funds | $ | 76,618,466 |
| $ | 76,618,466 |
| $ | — |
| $ | — |
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Bond/Fixed Income | 30,256,939 |
| 30,256,939 |
| — |
| — |
|
Balanced/Hybrid | 17,651,341 |
| 17,651,341 |
| — |
| — |
|
Domestic Equity | 128,940,267 |
| 128,940,267 |
| — |
| — |
|
International | 25,243,189 |
| 25,243,189 |
| — |
| — |
|
Common/collective trusts: |
|
|
|
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Stable Value (a) | 26,972,456 |
| — |
| 26,972,456 |
| — |
|
Fixed income (b) | 1,361,614 |
| — |
| 1,361,614 |
| — |
|
Domestic Equity (c) | 72,389,478 |
| — |
| 72,389,478 |
| — |
|
International (d) | 1,445,121 |
| — |
| 1,445,121 |
| — |
|
Self-directed Brokerage Accounts: |
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|
|
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Cash | 5,059,874 |
| 5,059,874 |
| — |
| — |
|
Registered investment companies: | | | | |
External Fund | 3,474,967 |
| 3,474,967 |
| — |
| — |
|
Fidelity Fund | 1,778,105 |
| 1,778,105 |
| — |
| — |
|
Common Stock | 10,852,769 |
| 10,852,769 |
| — |
| — |
|
Other | 458,318 |
| 458,318 |
| — |
| — |
|
Interest-bearing cash | 22,753 |
| 22,753 |
| — |
| — |
|
Common Stock of the Company | 21,776,443 |
| 21,776,443 |
| — |
| — |
|
Common Stock - Telecommunications | 805,236 |
| 805,236 |
| — |
| — |
|
Total Investments | $ | 425,107,336 |
| $ | 322,938,667 |
| $ | 102,168,669 |
| $ | — |
|
Convergys Corporation Retirement and Savings Plan
Notes to Financial Statements (continued)
4. Fair Value Measurements (continued)
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| | | | | | | | | | | | |
| 2013 |
| Total | (Level 1) | (Level 2) | (Level 3) |
Investments: | | | | |
Registered investment companies: | | | | |
Lifecycle Funds | $ | 75,384,484 |
| $ | 75,384,484 |
| $ | — |
| $ | — |
|
Bond/Fixed Income | 34,308,894 |
| 34,308,894 |
| — |
| — |
|
Balanced/Hybrid | 17,653,614 |
| 17,653,614 |
| — |
| — |
|
Domestic Equity | 134,193,403 |
| 134,193,403 |
| — |
| — |
|
International | 29,760,564 |
| 29,760,564 |
| — |
| — |
|
Common/collective trusts: |
|
|
|
|
Stable Value (a) | 28,544,655 |
| — |
| 28,544,655 |
| — |
|
Fixed Income (b) | 782,615 |
| — |
| 782,615 |
| — |
|
Domestic Equity (c) | 70,376,495 |
| — |
| 70,376,495 |
| — |
|
International (d) | 1,049,881 |
| — |
| 1,049,881 |
| — |
|
Self-directed Brokerage Accounts: |
|
|
|
|
Cash | 5,642,047 |
| 5,642,047 |
| — |
| — |
|
Registered investment companies: |
|
|
|
|
External Fund | 2,987,360 |
| 2,987,360 |
| — |
| — |
|
Fidelity Fund | 1,248,514 |
| 1,248,514 |
| — |
| — |
|
Common Stock | 9,322,327 |
| 9,322,327 |
| — |
| — |
|
Other | 334,362 |
| 334,362 |
| — |
| — |
|
Interest-bearing cash | 32,798 |
| 32,798 |
| — |
| — |
|
Common Stock of the Company | 25,823,480 |
| 25,823,480 |
| — |
| — |
|
Common Stock - Telecommunications | 1,026,617 |
| 1,026,617 |
| — |
| — |
|
Total Investments | $ | 438,472,110 |
| $ | 337,718,464 |
| $ | 100,753,646 |
| $ | — |
|
(a) This category includes the Fidelity Managed Income Portfolio II. The fund's investment objective is to seek the preservation of capital and to provide a competitive level of income over time that is consistent with the preservation of capital. The fund primarily invests in assets (typically fixed income securities or bond funds and may include derivative instruments such as futures contracts and swap agreements) and enters into “wrapper” contracts issued by third parties and invests in cash equivalents represented by shares in a money market fund. The fair value of this fund has been estimated based on the fair value of the underlying investment contracts in the fund as reported by the issuer to the fund. The fair value differs from the contract value. As previously discussed in Note 2, contract value is the relevant measurement attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Plan is required to provide a one year redemption notice to liquidate its entire share in the fund.
(b) This category includes the Northern Trust Global Investments (NTGI) Aggregate Bond Index, which invests in U.S. government and agency securities, municipal bonds, and corporate notes and bonds. The primary objective of this fund is to hold a portfolio representative of the overall United States bond and debt market, as characterized by the Barclays U.S. Capital Aggregate Bond Index.
(c) This category includes the NTGI Russell 2000 Equity Index and the NTGI S&P 500 Equity Index, which invests in both small and large cap domestic equity securities. These funds seek to duplicate the investment composition and overall performance of the stocks included in the Russell 2000 Index and the S&P 500 Index, respectively.
(d) This category includes the NTGI Collective EAFE Index, which seeks to outperform the Morgan Stanley Capital International, Inc. (MSCI) Europe, Australia, and Far East Index (EAFE) by investing in internationally based companies listed on U.S. exchanges with the potential for significantly higher growth.
Convergys Corporation Retirement and Savings Plan
Notes to Financial Statements (continued)
5. Related Party Transactions
Certain Plan investments are shares of mutual funds and common/collective trust managed by Fidelity Investments, a related company to Fidelity Management Trust Company. Fidelity Management Trust Company is the trustee as defined by the Plan, and therefore, these transactions qualify as party-in-interest transactions. Certain professional and accounting fees incurred in connection with the operation of the Plan are paid directly by Convergys. The Company serves as the Plan Sponsor and the Plan does hold common stock in the Plan Sponsor.
6. Tax Status
The Plan has received a determination letter from the Internal Revenue Service (IRS) dated June 18, 2014, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code or IRC) and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax-exempt.
Accounting principles generally accepted in the United States require plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. The plan administrator has analyzed the tax positions taken by the Plan and has concluded that as of December 31, 2014, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions, and in November 2012, the IRS started an audit of the 2009 and 2010 plan years. This audit concluded in July 2014 and there were no audit findings communicated by the IRS to Plan Management. The Plan Administrator believes it is no longer subject to income tax examinations for years prior to 2011.
7. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statements of net assets available for benefits.
8. Plan Termination
Although Convergys has not expressed any intent to do so, the Company reserves the right under the Plan to discontinue its contributions at any time and terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, the participant's accounts will be distributed per the terms of the Plan Document.
9. Differences Between Financial Statements and Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
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| | | | | | | |
| | December 31 |
| | 2014 | 2013 |
Net assets available for benefits per the financial statements | | $ | 432,693,838 |
| $ | 443,515,106 |
|
Amounts allocated to withdrawn participants | | (394,462 | ) | (206,943 | ) |
Adjustment from fair value to contract value for fully benefit-responsive investment contract | | 388,201 |
| 401,806 |
|
Net assets available for benefits per Form 5500 | | $ | 432,687,577 |
| $ | 443,709,969 |
|
Convergys Corporation Retirement and Savings Plan
Notes to Financial Statements (continued)
9. Differences Between Financial Statements and Form 5500 (continued)
The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500 for the year ended December 31, 2014:
|
| | | | |
Benefits paid to participants per the financial statements | | $ | 58,577,979 |
|
Add: Amounts allocated on Form 5500 to withdrawn participants at December 31, 2014 | | 394,462 |
|
Less: Amounts allocated on Form 5500 to withdrawn participants at December 31, 2013 | | 206,943 |
|
Benefits paid to participants per the Form 5500 | | $ | 58,765,498 |
|
Amounts allocated to withdrawn participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to year-end, but not yet paid.
The following is a reconciliation of total additions per the financial statements to total income per the Form 5500 for the year ended December 31, 2014:
|
| | | | |
Total additions per the financial statements | | $ | 47,878,649 |
|
Add: Adjustment from fair value contract value for fully benefit-responsive investment contract at December 31, 2014 | | 388,201 |
|
Less: Adjustment from fair value to contract value for fully benefit-responsive investment contract at December 31, 2013 | | 401,806 |
|
Total income per the Form 5500 | | $ | 47,865,044 |
|
10. Subsequent Event
On March 3, 2014, Convergys completed its acquisition of SGS Holdings, Inc. (Stream), a global customer management leader, providing technical support, customer care and sales, for Fortune 1000 companies. Effective January 1, 2015, the Plan was amended to include Stream as a Participating Company of the Plan.
Supplemental Schedule
Convergys Corporation Retirement and Savings Plan
EIN #31-1598292 Plan #002
Schedule H, Line 4i - Schedule of Assets
(Held at End of Year)
December 31, 2014
|
| | | | | | |
Identity of Issue, Borrower, Lessor or Similar Party | Description of Investment, Including Maturity Date, Rate of Interest, Par or Maturity Value | | Current Value |
| | | |
Common Stock | | | |
*Convergys Corporation Shares Fund | 1,068,971 |
| shares | $ | 21,774,945 |
|
Cincinnati Bell Shares Fund | 252,100 |
| shares | 804,200 |
|
Stock Purchase Account |
|
| | 2,534 |
|
|
| | 22,581,679 |
|
Registered Investment Companies |
| |
|
*Fidelity Cash Reserve Fund | 22,753 |
| shares | 22,753 |
|
*Fidelity Freedom 2005 Fund | 9,190 |
| shares | 110,183 |
|
*Fidelity Freedom 2010 Fund | 149,668 |
| shares | 2,303,394 |
|
*Fidelity Freedom 2015 Fund | 217,203 |
| shares | 2,738,929 |
|
*Fidelity Freedom 2020 Fund | 757,192 |
| shares | 11,630,470 |
|
*Fidelity Freedom 2025 Fund | 876,997 |
| shares | 11,523,738 |
|
*Fidelity Freedom 2030 Fund | 946,148 |
| shares | 15,261,372 |
|
*Fidelity Freedom 2035 Fund | 828,312 |
| shares | 10,983,420 |
|
*Fidelity Freedom 2040 Fund | 1,103,031 |
| shares | 10,302,314 |
|
*Fidelity Freedom 2045 Fund | 517,344 |
| shares | 5,437,286 |
|
*Fidelity Freedom 2050 Fund | 295,781 |
| shares | 3,126,401 |
|
*Fidelity Freedom 2055 Fund | 65,061 |
| shares | 760,562 |
|
*Fidelity Freedom Income Fund | 210,742 |
| shares | 2,440,397 |
|
*Fidelity Growth Company Fund | 334,471 |
| shares | 44,113,330 |
|
*Fidelity High Income Fund | 1,049,930 |
| shares | 9,344,380 |
|
*Fidelity Puritan Fund | 821,375 |
| shares | 17,651,341 |
|
Hotchkis & Wiley Mid Cap Value I Fund | 528,181 |
| shares | 21,697,675 |
|
MS Small Company Growth Portfolio B Fund | 581,260 |
| shares | 9,596,603 |
|
PIMCO Total Return Fund | 1,961,779 |
| shares | 20,912,559 |
|
Rainier Small/Mid Cap I | 458,646 |
| shares | 20,313,436 |
|
Royce Total Return Fund | 606,007 |
| shares | 8,932,544 |
|
MFS Value R4 | 695,097 |
| shares | 24,286,679 |
|
AF Europac Growth R4 | 545,681 |
| shares | 25,243,189 |
|
|
| | 278,732,955 |
|
Common/Collective Trust Funds |
| |
|
*Fidelity Managed Income Portfolio II | 26,584,255 |
| units | 26,972,456 |
|
NTGI COLL EAFE Index | 10,973 |
| units | 1,445,121 |
|
NTGI RUS 2000 Equity Index | 8,265 |
| units | 1,580,266 |
|
NTGI AGGR Bond Index | 11,575 |
| units | 1,361,614 |
|
NTGI SP500 Equity Index | 256,872 |
| units | 70,809,212 |
|
| | | 102,168,669 |
|
Other Investments | | |
|
Participant Self-Directed Brokerage Accounts | | | 21,624,033 |
|
Investments at Fair Value | | | 425,107,336 |
|
| | |
|
Convergys Corporation Retirement and Savings Plan
EIN #31-1598292 Plan #002
Schedule H, Line 4i - Schedule of Assets (continued)
(Held at End of Year)
December 31, 2014
|
| | | | | | |
Loans | | |
|
*Participant loans | | Varying maturity dates with interest rates ranging from 4.25% to 10.50% | 7,111,080 |
|
| | | |
Total investments | | | $ | 432,218,416 |
|
*Indicates parties-in-interest to the Plan.
Cost is not required as all investments are participant directed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Convergys Corporation Employee Benefits Committee have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
CONVERGYS CORPORATION RETIREMENT AND SAVINGS PLAN
|
| |
By: | /s/ Taylor C. Greenwald |
| Taylor C. Greenwald |
| Senior Vice President and Controller |
June 25, 2015