DENVER, Aug. 14 /PRNewswire-FirstCall/ -- TeleTech Holdings, Inc.
(Nasdaq: TTEC), a global provider of customer management solutions, today
announced second quarter 2003 results. The company also filed its Report on
Form 10-Q with the Securities and Exchange Commission ("SEC") for the second
quarter ended June 30, 2003.
The second quarter included:
* Revenue of $240.0 million, down $5.8 million or 2.4 percent
sequentially from $245.8 million in the first quarter 2003 and down
$13.7 million or 5.4 percent from $253.7 million in the second quarter
2002.
* A net loss of $43.7 million or $0.59 per diluted share versus net
income of $3.9 million or $0.05 per diluted share in the prior year
quarter.
* As previously announced, the incurrence of certain charges, including
$31.9 million to record a non-cash, deferred tax valuation allowance as
an increase in tax expense. In addition, $12.0 million in pre-tax
charges to reduce the carrying value of certain worldwide facilities,
record a lease termination charge related to the closure of the Kansas
City facility, undertake a reduction in workforce of approximately 120
non-agent positions and record the minimum estimated liability related
to the applicability of sales or use tax for services performed by its
database marketing and consulting segment. Of the $12.0 million in
pre-tax charges, approximately $7 million are non-cash items.
* Ending the quarter with cash and cash equivalents of $105.0 million,
total debt of $117.8 million and total equity of $280.3 million.
* Successfully obtaining amendments to the company's senior note and
revolving credit agreements.
* Commencing a profit improvement plan focused on service delivery
standardization to take advantage of our global scale, improved
workforce utilization and targeted cost saving initiatives to reduce
the company's cost structure by $40 million annually. Furthermore, the
company expects to record a pre-tax charge of up to $3.0 million in the
third quarter 2003 related to an additional reduction in workforce
completed in the third quarter and the final component of the costs
associated with the closure of the Kansas City facility.
EXECUTIVE COMMENTARY
Commenting on the company's performance, Kenneth Tuchman, Chairman and
Chief Executive Officer said, "As previously announced, we reported a net loss
for the quarter. This was due, in large part, to recording a non-cash charge
of approximately $32 million to establish a reserve for our deferred tax
asset. The weaker operating performance resulted from the ramp down of the
United States Postal Service project and certain multi-client center programs
in North America, lower volumes within certain client programs and weaker than
expected performance in our Latin America region. Although we won several
smaller new client agreements during the quarter and renewed certain customer
relationships, our performance continues to be negatively impacted by the
recessionary economy, which I believe has caused an extension of the already
long sales cycle."
"Recognizing these circumstances, we have commenced taking the actions
previously announced to reduce our annualized cost run-rate by at least $40
million," said Tuchman. "The plan is underway and is intended to position
TeleTech to be a profitable competitor in an industry expected to grow at a
compounded annual growth rate of approximately 13 percent through 2007
according to a recent IDC report. In addition, we are investing in our sales
force and new products, and I am confident we will announce multiple contracts
in the third quarter. We are laser focused on our cost containment
initiatives and closing new business, and believe we will be operating
profitably in the fourth quarter."
"We are very pleased our lenders have taken the time and interest to
understand our business plan and the profit improvement initiatives that
management of the company is undertaking," said Dennis Lacey, TeleTech's
Executive Vice President and Chief Financial Officer. "I am pleased to have
joined the TeleTech team and look forward to working with Ken and the other
senior executives to drive improved financial performance."
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
second quarter 2003 financial results on Friday, August 15 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 Friday, August 29, 2003.
TELETECH PROFILE
For twenty years, TeleTech has managed the customer experience for some of
the world's largest enterprises. TeleTech's 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 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 ability to transition work from higher cost centers to
lower cost markets; 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 ability to successfully execute an intercreditor agreement
related to the company's recently amended debt agreements; 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 and second 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 Six months ended
June 30, June 30,
2003 2002 2003 2002
Revenues $239,995 $253,685 $485,784 $507,716
Operating expenses:
Costs of services 172,380 178,894 349,337 354,439
Selling, general &
administrative 58,308(1) 48,249 107,484(1) 96,496
Depreciation and
amortization 14,489 13,687 27,863 28,626
Impairment Loss 6,955(2) -- 6,955(2) --
Restructuring charges,
net 1,741(3) 5,201(6) 1,153(5) 5,201(6)
Total operating
expenses 253,873 246,031 492,792 484,762
Operating Income (Loss) (13,878) 7,654 (7,008) 22,954
Other expense (5,011) (1,468) (6,918) (5,512)
Income (Loss) Before
Income Taxes (18,889) 6,186 (13,926) 17,442
Income tax expense 24,520(4) 2,443 26,456(4) 6,887
Income (Loss) before
Minority Interest and
Cumulative Effect of
Change in Accounting
Principle (43,409) 3,743 (40,382) 10,555
Minority Interest (291) 170 (553) 120
Income (Loss) before
Cumulative Effect of
Change in Accounting
Principle (43,700) 3,913 (40,935) 10,675
Cumulative Effect of
Change in Accounting
Principle -- -- -- (11,541)(7)
Net Income (Loss) $(43,700) $3,913 $(40,935) $(866)
Basic Earnings Per
Share before
Cumulative Effect of
Change in Accounting
Principle $0.14
Diluted Earnings Per
Share before
Cumulative Effect of
Change in Accounting
Principle $0.14
Basic Earnings (Loss)
Per Share $(0.59) $0.05 $(0.55) $(0.01)
Diluted Earnings (Loss)
Per Share $(0.59) $0.05 $(0.55) $(0.01)
Operating Margin (5.8)% 3.0% (1.4)% 4.5%
Net Income (Loss) Margin (18.2)% 1.5% (8.4)% (0.2)%
Effective Tax Rate (129.8)% 39.5% (190.0)% 39.5%
Weighted Average Shares
Basic 74,157 77,335 74,137 77,045
Diluted 74,157 78,948 74,137 77,045
Notes:
1. Includes a $3.3 million accrual for an estimated sales or use tax
liability related to the Database Marketing and Consulting segment.
2. Represents a $7.0 million pre-tax charge related to the impairment
of fixed assets in connection with SFAS No. 144.
3. Represents a $1.0 million pre-tax charge related to a reduction in
force, a $0.9 million pre-tax charge related to facility exit charges
in connection with SFAS No. 146, and a $(0.2) million pre-tax benefit
related to revised estimates of restructuring charges from 2002.
4. Includes a $31.9 million charge for the impairment of deferred tax
assets.
5. Represents the $1.7 million pre-tax charge described in Note 3 above,
in addition to the $0.6 million pre-tax benefit recorded in the first
quarter of 2003 related to revised estimates of restructuring
charges.
6. Represents $5.2 million of pre-tax charges related to a reduction in
force, the closure of customer interaction centers, and the
impairment of a property lease.
7. Represents the adoption of SFAS No. 142 "Accounting for Goodwill and
Other Intangibles".
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2003 2002
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $104,994 $144,792
Accounts receivable, net 163,608 137,598
Other current assets 47,017 44,841
Total current assets 315,619 327,231
Property and equipment, net 153,742 123,093
Other assets 79,355 90,264
Total assets $548,716 $540,588
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $130,688 $136,334
Total noncurrent liabilities 126,507 84,518
Minority interest 11,247 13,577
Total stockholders' equity 280,274 306,159
Total liabilities and stockholders'
equity $548,716 $540,588
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF CASH FLOWS
(In thousands)
(Unaudited)
Six months ended Three months ended
June 30, June 30,
2003 2002 2003 2002
Cash flow from operating
activities:
Net income (loss) $(40,935) $(866) $(43,700) $3,913
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 27,863 28,626 14,489 13,687
Other 3,305 (21,051) 35,856 18,530
Net cash provided by (used in)
operating activities $(9,767) $18,250 $6,645 $36,130
Total Capital Expenditures $58,291(1) $16,832 $11,709 $7,858
Free Cash Flow $(68,058) $1,418 $(5,064) $28,272
Notes :
1. Total capital expenditures for the six months ended June 30, 2003
include the purchase of TeleTech's corporate headquarters building
for $38.2 million.
SOURCE TeleTech Holdings, Inc.
