Year Over Year Fourth Quarter Revenue Grows 12 Percent;
Full Year Revenues Exceed $1 Billion for the First Time in the
Company's History
DENVER, Feb. 11 /PRNewswire-FirstCall/ --
TeleTech Holdings, Inc. (Nasdaq: TTEC), a leading global provider of customer
management solutions, today announced fourth quarter 2002 results in line with
company guidance.
REVENUE
Revenue for the fourth quarter 2002 was $257.8 million, compared to
revenue of $251.9 million in the third quarter 2002, and up $27.6 million, or
12.0 percent, from $230.2 million in the year ago quarter.
Revenue for the twelve months ended December 31, 2002 was $1,017 million,
up 11.1 percent from $916 million in the year ago period.
EARNINGS PER SHARE
TeleTech reported a fourth quarter 2002 net loss of $26.1 million, or
35 cents per diluted share, on a generally accepted accounting principles
(GAAP) basis.
Excluding the effects of a $46.1 million restructuring and asset
impairment charge discussed in "Proforma Items" below, and detailed in the
attached table, TeleTech reported fourth quarter 2002 proforma net income of
$5.2 million and earnings per diluted share of 7 cents, in line with the
company's guidance of 7 cents to 9 cents. This compares to proforma net
income of $6.2 million, or 8 cents per diluted share, in the third quarter
2002, and proforma net income of $7.2 million, or 9 cents per diluted share,
in the year ago quarter.
TeleTech reported a full year 2002 net loss of $16.8 million, or 22 cents
per diluted share, under GAAP. Excluding proforma items, TeleTech reported
full year 2002 net income of $25.2 million and earnings per diluted share of
33 cents. This compares to net income of $28.6 million, or 37 cents per
diluted share, in the year ago period.
"In 2002, TeleTech celebrated its 20th anniversary, exceeded $1 billion in
revenues, delivered steady results despite a challenging business environment,
and successfully launched one of the largest customer management relationships
in the history of our industry," said Kenneth Tuchman, TeleTech's Chairman and
Chief Executive Officer. "Additionally, we renewed a significant client
relationship in the communications industry, and won new business in each of
the geographic regions where we operate."
"As we begin 2003, we remain sharply focused on winning new business,
growing existing client relationships, and continuing to invest in new
solutions that enhance the company's competitive position," continued Tuchman.
"The opportunities in our sales pipeline are progressing and we are well
positioned to win additional new business in the first half of 2003. Clients
continue to value our extensive vertical industry expertise and integrated
solution offering, which further strengthens their ability to improve customer
loyalty and increase brand awareness."
Selling, general and administrative (SG&A) costs were $53.5 million, or
20.7 percent of revenues, in the fourth quarter 2002, up from 19.4 percent in
the third quarter 2002, and down from 21.4 percent in the year ago quarter.
For the full year 2002, SG&A costs were 19.6 percent of revenues, down from
22.3 percent of revenues in 2001.
Operating margin was 3.6 percent for the fourth quarter 2002, down
sequentially from 4.3 percent in the third quarter 2002, and down from
7.5 percent in the fourth quarter 2001. For the full year 2002, operating
margin was 4.7 percent, down from 7.0 percent in 2001. The decrease in
operating margin from 2001 to 2002 is due primarily to available capacity in
its North American and European operations, as well as lower operating results
at Percepta, TeleTech's joint venture with Ford Motor Company. The effects of
proforma items are excluded from these comparisons.
TeleTech generated $47.5 million in free cash flow during the fourth
quarter 2002, and $75.7 million for the full year 2002.
Capital expenditures for the fourth quarter 2002 were $8.4 million, down
sequentially from $12.7 million in the third quarter 2002, and up from
$4.9 million in the year ago quarter. Capital expenditures for 2002 were
$37.9 million, down from $52.1 million in 2001.
As a result of strong cash management, TeleTech's cash and short-term
investments were $144.8 million at the end of the fourth quarter 2002, an
increase of $37.8 million from $107.0 million at the end of the third quarter
2002, and up from $104.2 million at the end of 2001.
During the fourth quarter 2002 the company completed its common stock
repurchase program, purchasing 975,000 shares for $7.0 million. Since
inception of the share repurchase program in late 2001, the company
repurchased a total of 3.8 million shares for $25 million through
December 31, 2002.
"This year we achieved a number of financial objectives that better
position TeleTech for long-term growth," said Margot O'Dell, TeleTech's Chief
Financial Officer. "We generated over $75 million in free cash flow while
investing in our global footprint, and continued our share repurchase program.
We decreased days sales outstanding to 49 days at the end of 2002, down from
65 days at the end of 2001, and renewed a four-year, $85 million revolving
credit facility. Our balance sheet remains strong with $145 million in cash
and short-term investments and a debt to capitalization ratio of
21.0 percent."
"As we enter the new year, we continue to focus on tight fiscal controls
and closing new client relationships to leverage our infrastructure," O'Dell
continued. "We are placing additional emphasis on driving improved gross
margins having made solid progress in reducing SG&A costs in 2002. We
believe we are well positioned to remain a leader in our industry and will
continue to leverage our international footprint and infrastructure to deliver
flexible, cost effective solutions to our clients."
PROFORMA ITEMS
As originally announced on December 19, 2002, TeleTech recorded a
$46.1 million restructuring and asset impairment charge in the fourth quarter
2002. Given the difficult global business environment, TeleTech reduced the
carrying value of certain assets associated with its U.S., European, and Latin
American operations and announced a worldwide workforce reduction of
approximately 200 professional employees. In addition, during the fourth
quarter 2002 TeleTech acquired the shares of enhansiv holdings, inc. ("EHI")
common stock from the four remaining outside shareholders of EHI.
Consequently, TeleTech owns 100 percent of the common stock of EHI.
Approximately $39.1 million were non-cash charges related to asset
impairments and the write-down of certain deferred tax assets, with the
remaining $7.0 million cash-related, primarily for severance and the EHI
transaction.
BUSINESS OUTLOOK
The following statements are based on current expectations regarding
TeleTech's outlook for its future financial results.
TeleTech believes first quarter 2003 revenue will range between
$240 million and $245 million, and earnings per diluted share will range
between 4 cents and 6 cents per share, excluding proforma items.
The sequential decrease in revenue and earnings per diluted share is
primarily due to normal declines in seasonal revenue, as well as lower volumes
associated with the company's global communications vertical.
CONFERENCE CALL
TeleTech executive management will host a conference call to discuss
fourth quarter 2002 financial results today at 5:00 p.m. ET. You are invited
to join a live webcast of the call by visiting the "Investors" section of the
TeleTech website at www.teletech.com . If you are unable to participate
during the live webcast, a replay of the call will be available on the
TeleTech website through Tuesday, February 25, 2003.
TELETECH PROFILE
For twenty years, TeleTech has managed the customer experience for some of
the world's largest enterprises. TeleTech's innovative customer care services
help companies acquire, serve, grow, and retain customers throughout the
entire relationship lifecycle. TeleTech offers solutions to a variety of
industries including financial services, transportation, communications,
government, healthcare, and travel. With a presence that spans North America,
Asia-Pacific, Europe, and Latin America, TeleTech provides comprehensive
customer care services to global organizations. Additional information on
TeleTech can be found at 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:
TeleTech's ability to predict future revenue and associated costs; 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
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 2001 Form
10-K, first, second, and third quarter 2002 Forms 10-Q, 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 OPERATIONS
(In thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
2002 2001 2002 2001
Revenues $257,831 $230,235 $1,017,436 $916,144
Operating expenses:
Costs of services 180,503 148,138 712,585 587,423
Selling, general &
administrative 53,496 49,355 198,959 204,005
Depreciation and
amortization 14,538 15,497 57,725 60,308
Restructuring and asset
impairment charges 37,071(1) -- 42,272(4) 33,248(6)
Total operating
expenses 285,608 212,990 1,011,541 884,984
Operating Income (Loss) (27,777) 17,245 5,895 31,160
Other income (expense) (1,067) (4,927) (7,930) (14,226)
Restructuring and asset
impairment charges (2,333)(2) -- (2,333)(2) (17,175)(7)
Income (Loss) Before
Income Taxes (31,177) 12,318 (4,368) (241)
Income tax expense
(benefit) (4,944)(3) 4,862 1,606(3) 174
Income (Loss) before
Minority Interest and
Cumulative Effect of
Change in Accounting
Principle (26,233) 7,456 (5,974) (415)
Minority Interest 88 (273) 760 (1,510)
Income (Loss) before
Cumulative Effect of
Change in Accounting
Principle (26,145) 7,183 (5,214) (1,925)
Cumulative Effect of
Change in Accounting
Principle -- -- (11,541)(5) --
Net Income (Loss) $(26,145) $7,183 $(16,755) $(1,925)
Basic Earnings Per Share
before Cumulative
Effect of Change in
Accounting Principle $(0.07)
Diluted Earnings Per
Share before Cumulative
Effect of Change in
Accounting Principle $(0.07)
Basic Earnings (Loss)
Per Share $(0.35) $0.09 $(0.22) $(0.03)
Diluted Earnings (Loss)
Per Share $(0.35) $0.09 $(0.22) $(0.03)
Operating Margin -10.8% 7.5% 0.6% 3.4%
Net Income (Loss) Margin -10.1% 3.1% -1.6% -0.2%
Effective Tax Rate 15.9% 39.5% -36.8% -72.2%
Weighted Average Shares
Basic 74,749 76,607 76,383 75,804
Diluted 74,749 77,743 76,383 75,804
Excluding Restructurings,
Asset Impairment Charges
and Cumulative Effect of
Change in Accounting
Principle:
Operating Income $9,294 $17,245 $48,167 $64,408
Operating Margin 3.6% 7.5% 4.7% 7.0%
Net Income $5,197 $7,183 $25,235 $28,583
Basic Earnings Per Share $0.07 $0.09 $0.33 $0.38
Diluted Earnings Per
Share $0.07 $0.09 $0.33 $0.37
Diluted shares
outstanding 75,328 77,743 77,579 76,978
Effective Tax Rate 37.9% 39.5% 39.2% 40.0%
Notes:
1. Represents a $4.3 mm pre-tax charge related to a workforce
reduction, and a $32.8 mm pre-tax charge related to the impairment
of fixed assets in connection with SFAS No. 144.
2. Represents a $2.3 mm pre-tax charge related to the acquisition of
the remaining outstanding shares of enhansiv.
3. Includes a $6.7 mm charge for the impairment of deferred tax assets.
4. Represents the $37.1 mm pre-tax charge described in Note 1 above, in
addition to $5.2 mm of pre-tax charges recorded in the second
quarter of 2002 related to a workforce reduction, the closure of
customer interaction centers, and the impairment of a property
lease.
5. Represents the adoption of SFAS No. 142 "Accounting for Goodwill and
Other Intangibles".
6. Represents $33.2 mm of pre-tax charges recorded in the first, second
and third quarters of 2001 related to workforce reductions, the
closure of a customer interaction center, and the write down
of the carrying value of the company's formerly planned
headquarters building.
7. Represents a $16.5 mm pre-tax charge recorded in the second quarter
of 2001 related to the asset impairment of the company's
investment in enhansiv, and a $0.7 mm pre-tax charge related to a
workforce reduction for enhansiv.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS TO PROFORMA EARNINGS
(In thousands)
Three months ended
Twelve months ended
December 31, December 31,
2002 2001 2002 2001
Operating Income (Loss)
- GAAP $(27,777) $17,245 $5,895 $31,160
Restructuring and Asset
Impairment Charges:
Workforce reductions 4,255 -- 9,456 18,515
Asset impairment in
connection with
SFAS No. 144 32,413 -- 32,413 --
Other 403 -- 403 --
Closure of customer
interaction center -- -- -- 7,733
Writedown of company's
formerly planned
headquarters building -- -- -- 7,000
Total restructuring
and asset
impairment
charges 37,071 -- 42,272 33,248
Operating Income
- Proforma $9,294 $17,245 $48,167 $64,408
Net Income (Loss)
- GAAP $(26,145) $7,183 $(16,755) $(1,925)
Restructuring and Asset
Impairment Charges:
Workforce reductions
- tax effected 2,587 -- 5,734 11,202
Asset impairment in
connection with SFAS
No. 144 - tax
effected 20,384 -- 20,384 --
Other - tax effected 245 -- 245 --
Acquisition of the
remaining shares of
enhansiv - tax
effected 1,418 -- 1,418 --
Deferred tax asset
impairment 6,707 -- 2,668 --
Goodwill impairment
in connection
with SFAS No. 142
- tax effected -- -- 11,541 --
Closure of customer
interaction center
- tax effected -- -- -- 4,678
Writedown of company's
formerly planned
headquarters building
- tax effected -- -- -- 4,235
Asset impairment of
the company's investment
in enhansiv - tax
effected -- -- -- 9,985
Workforce reductions
at enhansiv - tax
effected -- -- -- 408
Total restructuring
and asset impairment
charges 31,342 -- 41,990 30,508
Net Income - Proforma $5,197 $7,183 $25,235 $28,583
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2002 2001
ASSETS
Current assets:
Cash and cash equivalents $144,792 $95,430
Investment in available-for-sale
securities -- 2,281
Short-term investments 23 6,460
Accounts receivable, net 137,598 162,344
Other current assets 44,818 41,911
Total current assets 327,231 308,426
Property and Equipment, net 123,093 177,959
Other assets 90,264 87,554
Total assets $540,588 $573,939
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $136,334 $123,221
Total noncurrent liabilities 84,518 88,449
Minority interest 13,577 14,319
Total stockholders' equity 306,159 347,950
Total liabilities and stockholders'
equity $540,588 $573,939
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(In thousands)
Twelve months ended Three months ended
December 31, December 31,
2002 2001 2002 2001
Cash flow from operating
activities:
Net income (loss) $(16,755) $(1,925) $(26,145) $7,183
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Cumulative Effect of
Change in Accounting
Principle 11,541 -- -- --
Depreciation and
amortization 57,725 60,308 14,538 15,497
Impairment of Fixed
Assets 32,413 -- 32,413 --
Other 28,738 45,186 35,179 4,520
Net cash provided by
operating activities $113,662 $103,569 $55,985 $27,200
Total Capital Expenditures
- Note 1 $37,940 $52,073 $8,436 $4,904
Free Cash Flow $75,722 $51,496 $47,549 $22,296
Notes:
1. Total capital expenditures in 2001 exclude any investments in real
estate held for sale of $25.5 million, which related to the company's
former planned headquarters building.
SOURCE TeleTech Holdings, Inc.
