DENVER, Nov. 5 /PRNewswire-FirstCall/ -- TeleTech Holdings, Inc.
(Nasdaq: TTEC), a global provider of customer solutions, today announced third
quarter 2003 results. The company also filed its Report on Form 10-Q with the
Securities and Exchange Commission ("SEC") for the third quarter ended
September 30, 2003.
The third quarter included:
- Revenue of $244.9 million, up $4.9 million or 2.1 percent sequentially
from $240.0 million in the second quarter 2003 and down $7.0 million or
2.8 percent from $251.9 million in the third quarter 2002.
- Operating margin of 3.7 percent, up sequentially from negative 5.8
percent in the second quarter 2003 and down from 4.3 percent in the
third quarter 2002.
- Net income of $2.1 million or $0.03 per diluted share, up from a net
loss of $43.7 million or 59 cents per diluted share in the second
quarter 2003 and down from net income of $6.2 million or $0.08 per
diluted share in the prior year quarter.
- Recording certain charges including a $1.3 million pre-tax, net
restructuring charge related primarily to a reduction in workforce of
approximately 130 administrative positions and a $3.0 million charge to
tax expense to increase the company's deferred tax valuation allowance.
Of the above-mentioned charges, $1.9 million are cash related.
- Announcing an expanded multi-year relationship with Blue Shield of
California, and new business with Banco Santander in Brazil and BMW in
New Zealand.
- Improving capacity utilization in the company's multi-client customer
management centers from 61 percent in the second quarter 2003 to 69
percent in the third quarter 2003, a sequential increase of 13 percent.
- Strengthening the company's financial profile by ending the quarter with
cash and cash equivalents of $127.0 million, up from $105.0 million in
the prior quarter. Total financial debt was $116.8 million at quarter
end, placing TeleTech in a net positive cash position.
- Improving accounts receivable collections by reducing days sales
outstanding (DSOs) to 53 days, down from 62 days in the previous
quarter.
- Generating $28.4 million of free cash flow, calculated as cash flows
from operating activities of $39.7 million less capital expenditures of
$11.3 million.
- Successfully completing the intercreditor agreement with the company's
senior note and revolving credit lenders.
- Commencing a profit improvement plan focused on improved workforce
utilization, service delivery standardization and targeted cost saving
initiatives to reduce the company's cost structure by $40 million
annually. The company has achieved approximately $20 million of the $40
million annualized cost savings goal for 2004.
EXECUTIVE COMMENTARY
Commenting on the company's results, Kenneth Tuchman, Chairman and Chief
Executive Officer said, "We are pleased with our improved financial
performance in the third quarter. The sequentially stronger performance was
achieved through a combination of higher revenues, improved performance in
certain client programs and a relentless focus on our previously announced
profit improvement plan. We remain committed to improving profitability and
made significant progress this quarter in signing new business, reducing costs
and continuing to build a strong pipeline of additional business
opportunities."
"We are encouraged by early signs of a recovery in our business and are
seeing increased demand for our services worldwide," said Tuchman. "TeleTech
is well positioned as a true global provider of customer solutions given our
presence in the Americas, Europe and Asia-Pacific. We continue to invest in
building our sales and solutions capabilities to help companies distance
themselves from their competition by developing deeper and longer-lasting
customer relationships that ultimately drive increased revenue and
profitability."
SEC FILINGS
The company's filings with the SEC 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 third
quarter 2003 financial results on Thursday, November 6 at 11:00 a.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 Thursday, November 20, 2003.
ABOUT TELETECH
TeleTech, a leading provider of integrated customer solutions, partners
with global clients to develop and execute relevant solutions that enable them
to build and grow profitable relationships with their customers. TeleTech has
built a global capability supported by 62 customer management centers that
employ more than 31,000 professionals spanning 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: economic or political changes affecting the countries
in which the company operates; greater than anticipated competition in the
customer care market, causing increased price competition or loss of clients;
the reliance on a few major clients; the risks associated with losing one or
more significant client relationships; the renewal of client or vendor
relationships on favorable terms; the risks associated with client
concentration; the company's ability to develop and successfully manage new
technology or Database Marketing and Consulting sales; the company's ability
to collect monies owed from clients per contract terms and conditions in a
timely manner; 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; lower than anticipated customer
management center capacity utilization; consumers' concerns or adverse
publicity regarding the products of the company's clients; the company's
ability to close new business in 2003 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 for its Database Marketing and Consulting and North
American Outsourcing segments; changes in workers' compensation and general
liability premiums; increases in healthcare costs; risks associated with
changes in foreign currency exchange rates; changes in accounting policies and
practices pronounced 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, 2002, Forms
10-Q for the first, second and third quarters of 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)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
Revenues $244,926 $251,889 $730,710 $759,605
Operating expenses:
Costs of services 167,817 177,643 517,154 532,082
Selling, general &
administrative 51,487 48,967 158,971 (3) 145,463
Depreciation and
amortization 15,173 14,561 43,036 43,187
Impairment Loss -- -- 6,955 (4) --
Restructuring charges,
net 1,325 (1) -- 2,478 (5) 5,201 (7)
Total operating
expenses 235,802 241,171 728,594 725,933
Operating Income 9,124 10,718 2,116 33,672
Other expense (2,165) (1,351) (9,083) (6,863)
Income (Loss) Before Income
Taxes, Minority Interest
and Cumulative Effect of
Change in Accounting
Principle 6,959 9,367 (6,967) 26,809
Income tax expense 4,409 (2) 3,702 30,865 (6) 10,589
Income (Loss) before
Minority Interest and
Cumulative Effect of
Change in Accounting
Principle 2,550 5,665 (37,832) 16,220
Minority Interest (470) 552 (1,023) 672
Income (Loss) before
Cumulative Effect of
Change in Accounting
Principle 2,080 6,217 (38,855) 16,892
Cumulative Effect of
Change in Accounting
Principle -- -- -- (11,541)(8)
Net Income (Loss) $2,080 $6,217 $(38,855) $5,351
Basic Earnings Per Share
before Cumulative Effect
of Change in Accounting
Principle $0.22
Diluted Earnings Per Share
before Cumulative Effect
of Change in Accounting
Principle $0.22
Basic Earnings (Loss) Per
Share $0.03 $0.08 $(0.52) $0.07
Diluted Earnings (Loss)
Per Share $0.03 $0.08 $(0.52) $0.07
Operating Margin 3.7% 4.3% 0.3% 4.4%
Net Income (Loss) Margin 0.8% 2.5% (5.3)% 0.7%
Effective Tax Rate 63.4% 39.5% (443.0)% 39.5%
Weighted Average Shares
Basic 74,169 76,694 74,148 76,928
Diluted 74,673 77,195 74,583 78,329
Notes:
1. Represents a $1.6 million charge related to a reduction in force, a
$0.5 million charge related to facility exit charges in connection
with SFAS No. 146, and a $(0.8) million benefit related to revised
estimates of restructuring charges from 2002.
2. Includes a $3.0 million charge for the impairment of deferred tax
assets.
3. Includes a $3.3 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 $1.3 million charge described in Note 1 above, in
addition to a $1.0 million charge related to a reduction in force, a
$1.0 million charge related to facility exit charges in connection
with SFAS No. 146 and a $(0.8) million benefit related to revised
estimates of restructuring charges.
6. Includes $34.9 million in charges for the impairment of deferred tax
assets.
7. Represents $5.2 million of pre-tax charges related to a reduction in
force, the closure of customer management centers and the
impairment of a property lease.
8. Represents the adoption of SFAS No. 142 "Accounting for Goodwill and
Other Intangibles".
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2003 2002
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $126,983 $144,792
Accounts receivable, net 142,143 137,598
Other current assets 36,578 44,841
Total current assets 305,704 327,231
Property and equipment, net 150,176 123,093
Other assets 84,331 90,264
Total assets $540,211 $540,588
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $128,127 $136,334
Line of credit 39,000 --
Senior notes 75,000 75,000
Other noncurrent liabilities 12,461 9,518
Minority interest 10,819 13,577
Total stockholders' equity 274,804 306,159
Total liabilities and stockholders'
equity $540,211 $540,588
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended Three months ended
September 30, September 30,
2003 2002 2003 2002
Cash flow from operating
activities:
Net income (loss) $(38,855) $5,351 $2,080 $6,217
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 43,036 43,187 15,173 14,561
Other 25,775 (2,402) 22,469 18,649
Net cash provided by
operating activities $29,956 $57,677 $39,722 $39,427
Total Capital Expenditures $69,635 (1) $29,504 $11,344 $12,672
Free Cash Flow $(39,679) $28,173 $28,378 $26,755
Notes :
1. Total capital expenditures for the nine months ended
September 30, 2003 include the purchase of TeleTech's corporate
headquarters building for $38.2 million.
SOURCE TeleTech Holdings, Inc.
