First Quarter Revenue of $245.8 Million, Net Income of $2.8 Million;
Announces Management Appointments to Enhance Focus on Key Business Initiatives
DENVER, April 29 /PRNewswire-FirstCall/ --
TeleTech Holdings, Inc. (Nasdaq: TTEC), a leading global provider of customer
management solutions, today announced first quarter 2003 results and certain
management appointments.
Revenue for the first quarter 2003 was $245.8 million, down $12.0 million
or 4.7 percent from $257.8 million in the fourth quarter 2002, and down
$8.2 million or 3.2 percent from $254.0 million in the year ago quarter. The
sequential decrease was primarily attributable to normal and expected first
quarter seasonal volume declines. The decrease from the year ago quarter is
related to a short-term project completed for several cable clients during the
first quarter 2002.
Net income for the first quarter 2003 was $2.8 million, or 4 cents per
diluted share. This compares to a loss per diluted share of 29 cents in the
fourth quarter 2002, and a loss per diluted share of 6 cents in the year ago
quarter. The above net income and earnings per diluted share results are
shown on a generally accepted accounting principle (GAAP) basis. The
following table provides information on 2002 financial results excluding
certain charges.
Selling, general and administrative (SG&A) costs were $47.7 million, or
19.4 percent of revenues, in the first quarter 2003, down from 20.7 percent in
the fourth quarter 2002, and up from 19.0 percent in the year ago quarter.
Operating margin was 2.4 percent for the first quarter 2003, down
sequentially from 3.6 percent in the fourth quarter 2002, excluding
restructuring and asset impairment charges, and down from 6.0 percent in the
first quarter 2002. The decrease in operating margin from 2002 to 2003 is
primarily attributable to the continued transition of a large client to lower
cost locations, and available capacity in TeleTech's North American and
European operations.
"In the first quarter, TeleTech renewed several important client
relationships and returned its Percepta joint venture to profitability," said
Kenneth Tuchman, TeleTech's Chairman and Chief Executive Officer. "Our
primary focus continues to be closing business with new and existing clients
to leverage existing capacity. The opportunities in our sales pipeline are
progressing and we believe we are well positioned to win new business in the
first half of 2003.
"We are not pleased with our recent operating margin performance, and are
sharply focused on improving profitability and shareholder returns," continued
Tuchman. "Our goal is to end 2003 with an operating margin between 4 and 6
percent. We believe this can be accomplished through a combination of
launching new business and a targeted improvement in gross margin of 1 to 2
percent by year-end. The gross margin improvement is expected to come from
several initiatives including revenue optimization and increased employee
productivity, as well as cost reduction efforts across the business."
TeleTech's cash and short-term investments were $117.8 million at the end
of the first quarter 2003, compared to $144.8 million at the end of 2002. The
decrease was due primarily to days sales outstanding returning to a more
normalized level of 56 days in the first quarter, up from 49 days at the end
of 2002.
Capital expenditures for the first quarter 2003 were $46.6 million,
including the company's $38.2 million purchase of its corporate headquarters
building. Excluding the corporate headquarters building purchase, first
quarter 2003 capital expenditures were $8.4 million. This was comparable to
$8.4 million in the fourth quarter 2002, and down from $9.0 million in the
year ago quarter.
"We continue to conservatively manage our balance sheet and believe we are
making progress toward signing new business to further leverage our
infrastructure," said Margot Tekavec, TeleTech's Chief Financial Officer. "As
an organization we are focused on near term margin improvement, and are
aggressively pursuing an extensive profit improvement plan. TeleTech has
maintained a solid financial position, with over $117 million in cash and a
conservative debt to capitalization ratio. Looking ahead, we are confident
the company will further its legacy of demonstrating leadership in a dynamic
and competitive industry, even in a difficult economic environment."
BUSINESS OUTLOOK
The following statements are based on current expectations regarding
TeleTech's outlook for its future financial results.
TeleTech believes second quarter 2003 revenue will decrease slightly from
first quarter 2003 due primarily to the anticipated ramp down of the majority
of its work with the United States Postal Service and lower volumes in certain
client programs due to recent global events. As a result, earnings per
diluted share for the second quarter 2003 will decrease sequentially
commensurate with the revenue decline.
TeleTech believes financial performance will improve in the second half of
2003 from a combination of ramping new business and pursuing certain profit
improvement initiatives and the company's goal is to exit 2003 with an
operating margin between 4 to 6 percent. TeleTech believes SG&A, along with
depreciation and amortization, as a percentage of revenue, will continue to be
in a range similar to the last several quarters.
MANAGEMENT APPOINTMENTS
Margot Tekavec, Chief Financial Officer and Executive Vice President of
International Operations, has been named Executive Vice President of Global
Operations, responsible for strengthening TeleTech's worldwide operations and
improving its financial performance. Dennis J. Lacey will join TeleTech from
CKE Restaurants, Inc, (CKE), and succeed Margot as Chief Financial Officer.
Margot has provided strong leadership and made significant contributions
in strengthening and automating the company's financial controls and reporting
systems, along with improving TeleTech's balance sheet. Through aggressive
working capital management, Margot has been instrumental in improving
TeleTech's net cash provided by operating activities from $36.3 million in
2000 to $113.7 million in 2002. Furthermore, by enhancing the capital
appropriation and review process, capital expenditures were lowered to $37.9
million in 2002 from $118.0 million in 2000.
"I am excited about the opportunity to lead TeleTech's global operations,"
said Margot Tekavec. "TeleTech's success over the past 20 years has centered
around its people, processes and technology and I look forward to turning my
focus to our worldwide operations to realize the benefits of our profit
improvement plan and our efforts to build a global operating company."
Dennis will join TeleTech on May 5, 2003, from CKE where he has been
Executive Vice President and Chief Financial Officer since April 2001. CKE had
fiscal year 2002 revenue of $1.5 billion, employs 33,000 people and operates
nearly 3,400 restaurants, including Carl's Jr., Hardee's and La Salsa Fresh
Mexican Grills in 43 states and in 15 countries.
While at CKE, Dennis implemented a strategic plan to improve CKE's
profitability and negotiated new financing. Additionally, he was instrumental
in lowering CKE's SG&A expenses by 20 percent. Prior to joining CKE, he was
Chief Financial Officer of Imperial Bancorporation from 1998 to 2001 and Chief
Executive Officer of Capital Associates, Inc. from 1989 to 1998. In 1976,
Dennis began a 13-year career with Coopers and Lybrand, including serving as
an audit partner.
"I look forward to joining TeleTech at this time in the company's
development," stated Dennis J. Lacey, TeleTech's new Chief Financial Officer.
"The opportunities for continued growth in the global customer management
outsourcing industry continue to be strong and I look forward to working with
Ken, Margot and the entire TeleTech team."
"The management changes announced today are part of a plan that has been
in place for over a year to streamline the organization and further our
transformation to a global operating company," said Kenneth Tuchman. "This is
a natural evolution in the company's development, and we believe these changes
will improve performance through increased focus on standardization, financial
controls and driving operational excellence in every area of our business.
"Margot has provided strong leadership to many key areas of the company,
including finance, administration, procurement, real estate and international
operations, and we congratulate her on her new responsibilities," continued
Tuchman. "The Board has tremendous confidence in Margot, and we look forward
to her contributions in leading our global operations.
"Dennis is a seasoned executive with a successful track record, and we
welcome him to TeleTech," added Tuchman. "Dennis' knowledge of the service
industry is a natural complement to TeleTech's business model. We are
confident his financial expertise and extensive business background will
further strengthen our motivated and talented executive leadership team."
CONFERENCE CALL
TeleTech executive management will host a conference call to discuss first
quarter 2003 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, May 13, 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 2002 Form
10-K, and other publicly filed documents, which describe in greater detail
these and other important factors that may impact TeleTech's business, results
of operations, financial condition and cash flows. 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
March 31,
2003 2002
Revenues $245,789 $254,031
Operating expenses:
Costs of services 179,377 175,545
Selling, general & administrative 47,727 48,247
Depreciation and amortization 13,374 14,939
Restructuring charge (588) --
Total operating expenses 239,890 238,731
Operating Income 5,899 15,300
Other income (expense) (936) (4,044)
Income Before Income Taxes 4,963 11,256
Income tax expense 1,936 4,444
Income before Minority Interest and
Cumulative Effect of Change in
Accounting Principle 3,027 6,812
Minority Interest (262) (50)
Income before Cumulative Effect of
Change in Accounting Principle 2,765 6,762
Cumulative Effect of Change in
Accounting Principle -- (11,541)(1)
Net Income (Loss) $2,765 $(4,779)
Basic Earnings Per Share before
Cumulative Effect of Change in
Accounting Principle $0.09
Diluted Earnings Per Share before
Cumulative Effect of Change in
Accounting Principle $0.09
Basic Earnings (Loss) Per Share $0.04 $(0.06)
Diluted Earnings (Loss) Per Share $0.04 $(0.06)
Operating Margin 2.4% 6.0%
Net Income (Loss) Margin 1.1% (1.9)%
Effective Tax Rate 39.0% 39.5%
Weighted Average Shares
Basic 74,117 76,755
Diluted 74,531 76,755
Notes:
1. Represents the adoption of SFAS No. 142 "Accounting for Goodwill and
Other Intangibles".
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS TO ADJUSTED EARNINGS
(In thousands, except per share data)
Three months ended Three months ended
December 31, March 31,
2002 2002
Net Loss - GAAP $(22,106) $(4,779)
Restructuring and Asset Impairment
Charges:
Workforce reductions - tax effected 2,587 --
Asset impairment in connection with
SFAS No. 144 - tax effected 20,384 --
Other - tax effected 245 --
Acquisition of the remaining shares
of enhansiv - tax effected 1,419 --
Deferred tax asset impairment 2,668 --
Goodwill impairment in connection
with SFAS No. 142 -- 11,541
Total restructuring and
asset impairment charges 27,303 11,541
Net Income - Adjusted $5,197 $6,762
Diluted EPS - GAAP $(0.29) $(0.06)
Diluted EPS - Adjusted $0.07 $0.09
Diluted Shares Outstanding 75,328 78,846
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2003 2002
ASSETS
Current assets:
Cash and cash equivalents $117,800 $144,792
Accounts receivable, net 152,391 137,598
Other current assets 42,258 44,841
Total current assets 312,449 327,231
Property and equipment, net 157,408 123,093
Other assets 99,300 90,264
Total assets $569,157 $540,588
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $120,389 $136,334
Total noncurrent liabilities 124,995 84,518
Minority interest 12,939 13,577
Total stockholders' equity 310,834 306,159
Total liabilities and stockholders'
equity $569,157 $540,588
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF CASH FLOWS
(In thousands)
Three months ended
March 31,
2003 2002
Cash flow from operating activities:
Net income (loss) $2,765 $(4,779)
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 13,374 14,939
Other (31,516) (39,581)
Net cash provided by operating
activities $(15,377) $(17,880)
Total Capital Expenditures $46,582(1) $8,974
Free Cash Flow $(61,959) $(26,854)
Notes:
1. Total capital expenditures in 2003 include the purchase of
TeleTech's corporate headquarters building for $38.2 M.
SOURCE TeleTech Holdings, Inc.
