Provides Update on Cost Reduction Initiatives
DENVER, March 8 /PRNewswire-FirstCall/ -- TeleTech Holdings, Inc.
(Nasdaq: TTEC), a global provider of customer management solutions, today
announced fourth quarter and full year 2003 financial results. The company
also filed its Annual Report on Form 10-K with the Securities and Exchange
Commission for the year ended December 31, 2003.
The full year 2003 results were revenue of $992.3 million, down
$25.1 million, or 2.5 percent, from revenue of $1,017.4 million in 2002.
Income from operations was $10.3 million in 2003 compared to $5.9 million in
2002. The company reported a net loss in 2003 of $41.2 million, or $0.56 per
share, compared to a net loss of $16.8 million, or $0.22 cents per share, in
2002. Included in the 2003 net loss were (i) $29.9 million of non-cash
charges related to establishing deferred tax asset valuation allowances,
(ii) approximately $6.2 million of non-cash charges related to the write-down
of deferred tax assets along with tax adjustments to certain prior years'
financial results, and (iii) net charges of $10.6 million (pre-tax) related to
workforce reductions and the closure or impairment of certain customer
management centers.
The fourth quarter 2003 results were a net loss of $2.4 million, or
$0.03 per share, down from net income of $2.1 million, or $0.03 cents per
diluted share, in the third quarter of 2003 and up from a net loss of
$22.1 million, or $0.30 per share, in the prior year quarter.
The fourth quarter of 2003 also included, among other items detailed in
the Annual Report on Form 10-K:
* The highest quarterly revenue in the company's history of
$261.6 million, sequentially up $16.7 million, or 6.8 percent, from
$244.9 million in the third quarter of 2003 and up $3.8 million, or
1.5 percent, from $257.8 million in the fourth quarter of 2002.
* Income from operations of $8.1 million, down from $9.1 million in the
third quarter of 2003 and up from a loss from operations of
$27.8 million in the fourth quarter of 2002.
* Announcing new relationships with two large U.S. retailers of
consumer electronics and launching new or expanded global business for
clients in several industries including travel, technology and
financial services.
* Ending the quarter with cash and cash equivalents of $141.7 million,
up from $127.0 million in the third quarter, and down from
$144.8 million at December 31, 2002. Total debt was $129.2 million at
quarter end, placing TeleTech in a net positive cash position
(calculated as cash and cash equivalents less total debt).
* Improving accounts receivable collections and reducing days sales
outstanding (DSOs) to 51 days, down from 53 days in the third quarter.
* Generating $18.9 million of free cash flow, calculated as cash flow
from operating activities of $28.3 million less capital expenditures
of $9.4 million. This compares to free cash flow of $28.4 million in
the third quarter and $47.5 million in the year ago quarter.
* A $5.5 million tax expense primarily related to establishing a
deferred tax asset valuation allowance for certain international
locations and adjustments related to several prior periods.
* Recording a $3.0 million (after-tax) reduction of revenue during the
fourth quarter of 2003 compared to the prior quarter resulting from
performance-based pricing, principally with one client program.
* As previously announced, in July 2003, TeleTech adopted Emerging
Issues Task Force No. 00-21, "Revenue with Multiple Deliverables,"
which became effective for new client agreements entered into after
June 30, 2003. As a result, the fourth quarter included the deferral
of $2.1 million (after-tax) of operating income related to the launch
of new client programs.
* Severance costs of $1.0 million (after-tax).
* Partially offsetting the above items was a $2.9 million (after-tax)
benefit from the reversal of previously recorded 2003 bonus accruals.
EXECUTIVE COMMENTARY
Commenting on the company's results, Dennis Lacey, chief financial
officer, said, "We are focused on tight fiscal controls, further cost
reductions, enhanced pricing practices and pursuing various tax planning
strategies designed to reduce our tax burden and generate potential tax
refunds."
Kenneth Tuchman, chairman and chief executive officer, said, "I am not
pleased to report a net loss for the fourth quarter and the full year.
However, I recognize that a portion of this loss is attributable to actions
being taking to position the company for future profitable growth, including
streamlining our global operations, incurring costs to launch new client
programs, and, importantly, investing in expanded solutions around our core
offering and at Newgen."
"We believe our sales pipeline continues to be robust," said Tuchman.
"However, we are selective in which new business opportunities we pursue and
are only focused on opportunities that take advantage of our capabilities,
meet our targeted hurdle rates and offer an appropriate return for our
shareholders. We are well positioned to contend for this new business given
our global reach, centralized delivery model and our proven reputation in
launching and delivering large, complex customer management engagements."
"Looking ahead, this approach, along with lowered profitability in our
North American Customer Care and Database Marketing and Consulting segments,
as well as the recent accounting rules related to the launch of new client
programs in the first quarter, will result in our financial performance
lagging behind our actions to return our company to profitability," said
Tuchman.
"We believe our efforts to transition the company to profitability will
last at least through the first half of 2004 as we continue our cost reduction
initiatives, work to improve the profitability of certain client programs and
more fully utilize our global capacity," said Tuchman. "These steps are
necessary to position our company for improved future performance. On a
positive note, we expect to achieve the $40 million in annualized cost
savings, as previously announced, during 2004."
SEC FILINGS
The company's filings with the Securities and Exchange Commission are
available in the "Investors" section of TeleTech's website, which can be found
at www.teletech.com.
CONFERENCE CALL
TeleTech executive management will host a conference call to discuss
fourth quarter and full year 2003 financial results on Tuesday, March 9, 2004,
at 11:00 a.m. Eastern Time. 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,
March 23, 2004.
ABOUT TELETECH
TeleTech is a global leader of integrated customer solutions designed to
help clients acquire and grow profitable relationships with their customers.
TeleTech has built a worldwide capability supported by more than
33,000 professionals in North America, Latin America, Asia-Pacific and Europe.
For additional information, visit 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 and its subsidiaries' actual results to
differ materially from those expressed or implied by such forward-looking
statements, including: under generally accepted accounting principles, the
revenues, expenses and profits associated with the launch of new client
agreements may be expensed up front or deferred over the life of the client
contract, and, accordingly, the profitability of these agreements may be
disproportionately skewed toward later periods; the impact to current and
future earnings related to the possibility of refinancing the company's
existing debt agreements, including the possibility of owing a make-whole
provision associated with the company's senior note agreements, and the cost
of terminating the interest rate swap, among others; economic or political
changes affecting the countries in which the company operates; greater than
anticipated competition in the customer care market, causing adverse pricing
and more stringent contractual terms; the risks associated with losing one or
more significant client relationships; execution risks associated with
operating individual client programs to avoid incurring penalties; the renewal
of client or vendor relationships on favorable terms; higher than anticipated
start-up costs associated with new business opportunities and ventures; the
company's ability to find cost effective locations, obtain favorable lease
terms and build or retrofit facilities in a timely and economic manner; risks
associated with attracting and retaining cost-effective labor at the company's
customer management centers; consumers' concerns or adverse publicity
regarding the products of the company's clients; the company's ability to
close new business in 2004 and fill excess capacity; execution risks
associated with achieving the targeted $40 million in annualized cost savings;
the possibility of additional asset impairments and restructuring charges; the
ultimate liability associated with the amount of past sales or use tax
obligations; risks associated with changes in foreign currency exchange rates;
changes in accounting policies and practices promulgated by standard setting
bodies; and, new legislation or government regulation that impacts the
customer care industry. Readers should review the company's Form 10-K for the
year ended December 31, 2003 and other documents filed with the Securities and
Exchange Commission, which describe in greater detail these and other
important factors that may impact the company's business, results of
operations, financial condition and cash flows. The company assumes no
obligation to update its forward-looking statements to reflect actual results
or changes in factors affecting such forward-looking statements.
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,
2003 2002 2003 2002
Revenues $261,630 $257,831 $992,340 $1,017,436
Operating
expenses:
Costs of
services 185,456 180,503 702,610 712,585
Selling, general
& administrative 51,274 53,496 210,245 (3) 198,959
Depreciation and
amortization 15,560 14,538 58,596 57,725
Impairment loss -- 32,816 (7) 6,955 (4) 32,816 (7)
Restructuring
charges, net 1,198 (1) 4,255 (8) 3,676 (5) 9,456 (10)
Total
operating
expenses 253,488 285,608 982,082 1,011,541
Operating income
(loss) 8,142 (27,777) 10,258 5,895
Other expense (3,947) (3,400) (9) (13,030) (10,263) (9)
Income (loss)
before income
taxes 4,195 (31,177) (2,772) (4,368)
Income tax expense 6,353 (2) (8,983) 37,218 (6) 1,606 (11)
Loss before
minority interest
and cumulative
effect of change
in accounting
principle (2,158) (22,194) (39,990) (5,974)
Minority interest (193) 88 (1,216) 760
Loss before
cumulative effect
of change in
accounting
principle (2,351) (22,106) (41,206) (5,214)
Cumulative effect
of change in
accounting
principle -- -- -- (11,541) (12)
Net loss $(2,351) $(22,106) $(41,206) $(16,755)
Basic loss per
share before
cumulative effect
of change in
accounting
principle $(0.07)
Diluted loss per
share before
cumulative effect
of change in
accounting
principle $(0.07)
Basic loss per
share $(0.03) $(0.30) $(0.56) $(0.22)
Diluted loss per
share $(0.03) $(0.30) $(0.56) $(0.22)
Operating margin 3.1% (10.8)% 1.0% 0.6%
Net loss margin (0.9)% (8.6)% (4.2)% (1.6)%
Effective tax rate 151.4% 28.8% (1342.6)% (36.8)%
Weighted average
shares
Basic 74,381 74,749 74,206 76,383
Diluted 74,381 74,749 74,206 76,383
Notes:
1. Represents a $1.0 million charge related to a reduction in force, and
a $0.2 million charge related to facility exit charges in connection
with SFAS No. 146.
2. Includes a $5.5 million charge for the impairment of deferred tax
assets and other income tax adjustments.
3. Includes a $3.6 million accrual for an estimated sales or use tax
liability related to the Database Marketing and Consulting segment.
4. Represents a $7.0 million charge related to the impairment of fixed
assets in connection with SFAS No. 144.
5. Represents the $1.2 million charge described in Note 1 above, in
addition to a $2.9 million charge related to a reduction in force, a
$1.5 million charge related to facility exit charges in connection
with SFAS No. 146 and a $(1.9) million benefit related to revised
estimates of restructuring charges.
6. Includes the $5.5 million charge described in Note 2 above, in
addition to $30.6 million in charges for the impairments and
write-off of certain deferred tax assets.
7. Represents a $32.8 million charge related to the impairment of fixed
assets in connection with SFAS No. 144.
8. Represents a $4.3 million charge related to a reduction in force.
9. Includes a $2.3 million charge related to the acquisition of the
remaining outstanding shares of enhansiv.
10. Represents the $4.3 million charge described in Note 8 above, in
addition to a $5.2 million charge related to a reduction in force,
the closure of customer management centers and the impairment of a
property lease.
11. Includes a $6.7 million charge for the impairment of deferred tax
assets.
12. Represents the adoption of SFAS No. 142 "Accounting for Goodwill and
Other Intangibles."
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2003 2002
ASSETS
Current assets:
Cash and cash equivalents $141,687 $144,792
Accounts receivable, net 145,132 137,598
Other current assets 32,730 44,841
Total current assets 319,549 327,231
Property and equipment, net 148,690 123,093
Other assets 83,035 90,264
Total assets $551,274 $540,588
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $137,039 $136,334
Line of credit 39,000 --
Senior notes 63,000 75,000
Other noncurrent liabilities 14,064 9,518
Minority interest 9,354 13,577
Total stockholders' equity 288,817 306,159
Total liabilities and stockholders'
equity $551,274 $540,588
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF CASH FLOWS
(In thousands)
Twelve months ended Three months ended
December 31, December 31,
2003 2002 2003 2002
Cash flow from operating
activities:
Net loss $(41,206) $(16,755) $(2,351) $(22,106)
Adjustments to
reconcile net loss
to net cash provided
by operating
activities:
Cumulative effect
of change in
accounting
principle -- 11,541 -- --
Depreciation and
amortization 58,596 57,725 15,560 14,538
Other 40,881 61,151 15,106 63,553
Net cash provided by
operating activities $58,271 $113,662 $28,315 $55,985
Total capital
expenditures $79,053 (1) $37,940 $9,418 $8,436
Free cash flow (cash
flow from operating
activities less total
capital expenditures) $(20,782) $75,722 $18,897 $47,549
Notes:
1. Total capital expenditures for the twelve months ended December 31,
2003 include the purchase of TeleTech's corporate headquarters
building for $38.2 million.
SOURCE TeleTech Holdings, Inc.
