DENVER, Oct. 30 /PRNewswire/ -- TeleTech Holdings, Inc. (Nasdaq: TTEC), a
leading global provider of customer relationship management (CRM) services and
solutions, today announced third quarter 2001 financial results in line with
previous guidance. Additionally, in October TeleTech successfully completed a
$75 million private debt placement of 7-year and 10-year unsecured senior
notes.
THIRD QUARTER 2001 FINANCIAL RESULTS
Revenues for the third quarter 2001 were $222.8 million, representing a
decrease of $9.0 million or 3.9 percent from $231.8 million in the year ago
quarter. Revenues for the third quarter were in line with previous guidance,
and as expected, remained relatively unchanged from second quarter 2001
revenues of $225.2 million. The year over year revenue decrease was primarily
attributable to declines in certain client programs as a result of the
difficult economic climate.
International outsourced revenues for the third quarter were
$94.6 million, an increase of nearly 11 percent from $85.6 million in the
third quarter 2000. This increase was primarily attributable to growth in
TeleTech's operations in its Asia Pacific region as well as growth in its
Canadian and Mexican operations supporting its labor arbitrage strategy.
The company reported earnings of 10 cents per diluted share, before a
two-cent charge related to the operations of enhansiv, a software-based CRM
solution company in which TeleTech holds a minority interest. As a result,
net income for the third quarter 2001 was $6.2 million or 8 cents per diluted
share. This compares to net income of $6.9 million or 9 cents per diluted
share in the second quarter 2001 and net income of $13.3 million or 17 cents
per diluted share in the year ago quarter. The effects of nonrecurring items
are excluded from these results. As expected, TeleTech's earnings continue to
be impacted by excess capacity in its multi-client customer interaction
centers.
As originally disclosed in TeleTech's third quarter 2001 business outlook
in August 2001, TeleTech completed a workforce reduction resulting from
streamlining its business processes and aligning its workforce to match
current client volumes. As a result, TeleTech recorded a nonrecurring,
pre-tax charge of $6.7 million, including $0.7 million related to a workforce
reduction at enhansiv. The total nonrecurring charge of $6.7 million was in
line with the original estimated range of between $6 million and $7 million.
Including the nonrecurring charge, net income in the third quarter was
$2.1 million or 3 cents per diluted share.
Since the end of the second quarter 2001, TeleTech has made substantial
progress on several fronts to streamline operations and strengthen its balance
sheet to position the company for renewed revenue and earnings growth in 2002.
These include:
-
Strengthening the executive leadership team. In October the TeleTech
Board of Directors appointed James E. Barlett as Vice Chairman and
Kenneth D. Tuchman as its permanent Chief Executive Officer (CEO).
Barlett and Tuchman bring complementary strengths to the business.
The TeleTech Board believes the combination of Tuchman's
entrepreneurial spirit, long-term vision, twenty years of experience in
the CRM industry and close attention to the financial details of the
business with Barlett's proven track record, industry relationships,
international expertise and operational know-how will create an
unparalleled leadership team.
-
Signing several new client relationships including Blue Shield of
California in North America, Anatel in Latin America, Qantas in
Australia, Tranz Rail in New Zealand and Volvo Cars of North America
at Newgen.
-
Reducing selling, general and administrative (SG&A) costs. SG&A costs
were $48.0 million in the third quarter compared to $49.6 million in
the second quarter 2001 and $51.2 million in the year ago quarter.
Third quarter 2001 SG&A fell to 21.5 percent of revenues from a high of
24.0 percent of revenues in the first quarter 2001. TeleTech believes
it can further reduce overhead costs and achieve a sustainable SG&A
level that approximates 20 percent of revenues, by mid-2002.
-
Improving operating margin. Operating margin was 7.3 percent for the
third quarter 2001 representing the second consecutive quarter increase
from 6.6 percent and 6.8 percent in the first and second quarter 2001,
respectively. The effects of nonrecurring items are excluded from the
operating margin comparisons.
-
Controlling capital expenditures. Capital expenditures for the third
quarter 2001 were $8.0 million. This represents a decrease from
capital expenditures of $24.0 million and $15.2 million in the first
and second quarter 2001, respectively. Capital expenditures for 2001
are before expenditures for TeleTech's formerly planned headquarters
building, which was sold in October 2001.
-
Increasing financial liquidity. TeleTech's cash and short-term
investments grew to $72.3 million as a result of controlling capital
expenditures and managing working capital. In October, TeleTech
further strengthened its financial liquidity by completing a
$75 million private placement of senior, unsecured notes and receiving
nearly $12 million in net proceeds from the sale of its formerly
planned headquarters building.
BALANCE SHEET
As of September 30, 2001, TeleTech had $72.3 million of cash and
short-term investments, up nearly $25 million from $47.4 million at the end of
the second quarter. During the third quarter, TeleTech paid off the majority
of its international borrowings and as a result, total debt decreased by
$9.1 million to $89.1 million.
During the third quarter 2001, TeleTech generated free cash flow of
$28.9 million. TeleTech expects to be free cash flow positive again in the
fourth quarter 2001.
Additionally during the third quarter 2001, TeleTech received
$10.3 million in cash resulting from a decision by Verizon, one of TeleTech's
clients, to forego construction of an additional customer interaction center.
Verizon initially anticipated a need for this center in its agreement with
TeleTech signed back in 1998 for Verizon's competitive local exchange carrier
(CLEC) business. In late 2000, Verizon elected to exit its CLEC operations
and fulfill their obligation to TeleTech with work from other Verizon
strategic business units in existing TeleTech customer interaction centers.
The $10.3 million received by TeleTech will be amortized over a three-year
period in accordance with Staff Accounting Bulletin 101.
SUBSEQUENT EVENTS
In October, TeleTech further strengthened its capital structure and closed
a $75 million private offering of 7-year and 10-year senior, unsecured notes
at a weighted average coupon rate of 7.08 percent. The completion of this
private placement nearly doubles TeleTech's borrowing capacity and TeleTech
will use these monies to pay down the $73.5 million borrowed on its unsecured
revolving line of credit. TeleTech expects to maintain its unsecured
revolving line of credit to provide the company with additional liquidity as
needed. Also in October, TeleTech completed the sale of its formerly planned
headquarters building and received net proceeds of nearly $12 million. The
loss reserves previously recorded by TeleTech for the sale of the building
were adequate and no additional charge was required.
"I am delighted to say we have proactively addressed many of our key
business priorities in the third quarter and made positive underlying changes
in the financial and operating structure of the business," stated Margot
O'Dell, TeleTech's Chief Financial Officer. "Third quarter 2001 operating
margins improved to 7.3 percent, a 70 basis point improvement from the first
quarter 2001. We generated free cash flow for the second consecutive quarter,
paid off the majority of international debt, sold our formerly planned
headquarters building and successfully raised $75 million in a private note
placement completed in October. We believe our ability to raise long-term
debt in this constrained capital environment is a strong endorsement of our
market position and the significant opportunity ahead for outsourced CRM
services. I believe these achievements, in combination with the strength of
our leadership team, create a strong foundation for 2002."
BUSINESS OUTLOOK
The following statements are based on current expectations regarding
TeleTech's outlook for its future financial results.
TeleTech expects fourth quarter 2001 revenues to range between
$215 million and $225 million.
The company expects fourth quarter 2001 earnings per diluted share will
range between $0.08 cents and $0.09 cents per share, including the impact of
enhansiv's operations.
As a result of stringent capital controls and effective asset
reutilization, capital expenditures for 2001 are now estimated to approximate
$60 million, before expenditures for TeleTech's formerly planned headquarters
building sold in October. This estimate is down nearly 50 percent from
TeleTech's 2000 capital expenditures of $118 million and down from its most
recent 2001 capital expenditure estimate of between $65 million and
$70 million.
"At the time I assumed the CEO role in March of this year, I refocused the
company on a back to basics strategy and committed to focus on several key
business priorities, most of which have been addressed in the third quarter,"
stated Ken Tuchman, TeleTech's Chairman and Chief Executive Officer. "While
we continue to be challenged by excess capacity and a difficult economic
environment, including uncertainties surrounding current world events, we are
pleased to see continuing operating margin improvement from the actions we
have taken to control costs and capital expenditures. As we look to 2002, we
are optimistic about the foundation we are building. Jim Barlett, our
recently appointed Vice Chairman, has already immersed himself in the
operations of the business and will continue to drive additional cost savings.
We will continue to fortify the pipeline of new business opportunities and
further strengthen and expand relationships with new and existing clients. As
we fill available capacity, there is significant earnings leverage in our
model. We believe this focus, along with stringent controls on operating
expenses and capital spending, will enable TeleTech to leverage its core
investments and return to consistent revenue and earnings growth in 2002."
CONFERENCE CALL
TeleTech executive management will host a conference call to discuss third
quarter 2001 financial results today at 5:00 p.m. ET. To participate, please
dial 712-271-0561 (passcode: TeleTech). Replay of the conference call will be
available by dialing 402-220-3459 (no passcode required), starting at
approximately 8:00 p.m. ET and will play until November 15, 2001. The
conference call will also be simulcast live on the Internet via TeleTech's web
site at http://www.teletech.com. Replay will be available at this location
for 30 days.
TELETECH PROFILE
Founded in 1982, TeleTech is a leading provider of integrated customer
relationship management solutions (CRM) for global organizations predominantly
in the communications, financial services, technology, government and
transportation industries. TeleTech has operations in twelve countries which
include Argentina, Australia, Brazil, Canada, China, Ireland, Mexico, New
Zealand, Scotland, Singapore, Spain and the U.S. TeleTech's CRM capabilities
including B2B electronic channel management and database management, help
companies inform, acquire, serve, grow and retain their customers throughout
the entire relationship lifecycle. TeleTech integrates a full spectrum of
voice and Internet communications, including e-mail response, "chat" and
extensive Web co-browsing capabilities. Information regarding TeleTech
Holdings can be found on the Worldwide Web at http://www.teletech.com.
FORWARD LOOKING STATEMENTS
All statements not based on historical fact are forward-looking statements
that involve substantial risks and uncertainties. In accordance with the
Private Securities Litigation Reform Act of 1995, following are important
factors that could cause TeleTech's actual results to differ materially from
those expressed or implied by such forward-looking statements: including the
ability of its newly appointed officers to further strengthen its industry
position and achieve continued growth in revenues and earnings; lower than
anticipated customer interaction center capacity utilization; the loss or
delay in implementation of a customer management program; TeleTech's ability
to build-out facilities in a timely and economic manner; greater than
anticipated competition from new entrants into the customer care market,
causing increased price competition or loss of clients; the loss of one or
more significant clients; higher than anticipated start-up costs associated
with new business opportunities and ventures; TeleTech's ability to predict
future revenue and associated costs, as well as the potential volume or
profitability of any future technology or consulting sales; TeleTech's
agreements with clients may be canceled on relatively short notice; and
TeleTech's ability to generate a specific level of revenue is dependent upon
customer interest in and use of the products and services of TeleTech's
clients. Readers are encouraged to review TeleTech's 2000 Annual Report on
Form 10-K, first and second quarter 2001 Form 10-Qs, and other publicly filed
documents which describe other important factors that may impact TeleTech's
business, results of operations and financial condition. TeleTech undertakes
no obligation to update its forward-looking statements after the date of this
release.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2001 2000 2001 2000
Revenues $222,818 $231,806 $685,909 $641,507
Operating expenses:
Costs of services 143,141 144,498 439,285 412,223
Selling, general &
administrative 48,001 51,227 154,650 133,860
Depreciation and
amortization 15,423 13,058 44,811 34,113
Non-recurring items 5,997(1) 3,419(5) 33,248(3) 3,419(5)
Total operating
expenses 212,562 212,202 671,994 583,615
Operating Income 10,256 19,604 13,915 57,892
Other income
(expense) (5,432) 1,048 (9,299) 1,055
Non-recurring items (675)(2) 32,120(6) (17,175)(4) 44,851(6)
Income Before Income
Taxes 4,149 52,772 (12,559) 103,798
Income tax expense
(benefit) 1,637 19,864 (4,688) 37,610
Net Income before
Minority Interest 2,512 32,908 (7,871) 66,188
Minority Interest (386) (526) (1,237) (925)
Net Income $2,126 $32,382 $(9,108) $65,263
Basic Earnings
Per Share $0.03 $0.44 $(0.12) $0.88
Diluted Earnings
Per Share $0.03 $0.41 $(0.12) $0.82
Operating Margin 4.6% 8.5% 2.0% 9.0%
Net Income Margin 1.0% 14.0% -1.3% 10.2%
Effective Tax Rate 39.5% 37.6% 37.3% 36.2%
Shares Outstanding
Basic 76,336 74,287 75,537 73,877
Diluted 76,863 79,517 75,537 79,155
Excluding
Non-recurring items:
Operating Income $16,253 $23,023 $47,163 $61,311
Operating Margin 7.3% 9.9% 6.9% 9.6%
Net Income $6,161 $13,338 $21,310 $36,097
Basic Earnings
Per Share $0.08 $0.18 $0.28 $0.49
Diluted Earnings
Per Share $0.08 $0.17 $0.28 $0.46
Diluted shares
outstanding 76,863 79,517 76,723 79,155
Effective Tax Rate 39.5% 39.3% 40.2% 39.1%
Notes:
1.Represents a non-recurring, pre-tax charge of $6.0mm related to a
workforce reduction.
2.Represents a non-recurring, pre-tax charge of $.7mm related to a
workforce reduction for a non-consolidated subsidiary.
3. Represents the non-recurring, pre-tax charge described in Note 1 above,
in addition to $27.3mm of other non-recurring charges recorded in the
first and second quarters of 2001 related to a workforce reduction, the
closure of a customer interaction center, and the write down of the
company's formerly planned headquarters building.
4. Represents the non-recurring, pre-tax charge described in Note 2 above,
in addition to a $16.5mm non-recurring charge recorded in the second
quarter 2001 related to the asset impairment of the company's
investment in enhansiv.
5. Represents a non-recurring, pre-tax loss on disposition of a
subsidiary.
6.Represents a non-recurring, pre-tax gain principally due to the sale
of a portion of an equity investment
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2001 2000
ASSETS
Current assets:
Cash and cash equivalents $67,040 $58,797
Investment in available-for-sale
securities 1,288 16,774
Short-term investments 3,964 8,904
Accounts receivable, net 161,510 193,351
Other current assets 39,358 23,595
Total current assets 273,160 301,421
Property and Equipment, net 182,915 178,760
Other assets 101,048 100,718
Total assets $557,123 $580,899
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $121,107 $128,298
Total noncurrent liabilities 85,379 76,427
Minority interest 14,046 12,809
Total stockholders' equity 336,591 363,365
Total liabilities and stockholders' equity $557,123 $580,899
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(In thousands)
Three months ended Nine months ended
September 30, September 30,
2001 2000 2001 2000
Cash flow from operating
activities:
Net income (loss) $2,126 $32,382 $(9,108) $65,263
Adjustments to reconcile
net income to net cash
provided from operating
activities:
Depreciation and
amortization 15,423 12,739 44,811 33,794
Other 22,860 (49,453) 40,666 (98,972)
Net cash provided by
(used in) operating
activities $40,409 $(4,332) $76,369 $85
Total Capital Expenditures
- Note 1 $8,018 $31,539 $47,169 $81,475
Notes:
1. Excludes investments in real estate held for sale.
SOURCE TeleTech Holdings, Inc.
CONTACT: Karen Breen, +1-303-397-8592, Karen.breen@teletech.com, or Dan
Campbell, Investor Relations, +1-303-397-8634, Dan.campbell@teletech.com, both
of TeleTech Holdings, Inc./
