Significantly Reduces Debt While Increasing Revenue and Operating Income Over
Prior Year Quarter
Generates $37 Million of Free Cash Flow
DENVER, Nov. 3 /PRNewswire-FirstCall/ -- TeleTech Holdings, Inc.
(Nasdaq: TTEC), a leading global provider of customer management and business
process outsourcing (BPO) solutions, today announced third quarter 2004
financial results. The company also filed its Quarterly Report on Form 10-Q
with the Securities and Exchange Commission for the quarter ended September
30, 2004.
Third Quarter Third Quarter
2004 2003
Financial Results
Revenue $256.3M $244.9M
Operating income $12.0M $9.1M
Net income $10.3M $2.1M
EPS -- diluted $0.14 $0.03
Other Data
Operating margin percentage 4.7% 3.7%
Net cash* $42.6M $(2.0)M
Free cash flow* $37.3M $28.4 M
Days sales outstanding 58 53
*See reconciliation of Non-GAAP measures below.
Third quarter highlights and recent new business wins include:
* TeleTech was awarded a five-year contract with the U.S. General
Services Administration. In addition, TeleTech announced today the
signing of a new, five-year agreement with a Fortune 50 company valued
at an estimated $150 million over the term of the relationship.
Further, TeleTech has renewed key long-term client agreements totaling
$440 million, $350 million of which is estimated to be recognized over
a five-year period and the remaining $90 million is anticipated to
renew automatically on an annual basis.
* Income from operations was $12.0 million for the third quarter 2004, up
$2.8 million from $9.1 million for the year ago quarter and down from
$14.5 million in the second quarter 2004. The year-over-year
improvement is primarily a result of the company's ongoing initiatives
to grow new and existing client relationships, improve profitability on
certain client programs, and achieve global cost reduction goals.
Additional information regarding comparability to the year ago quarter
is included in the company's third quarter 2004 Quarterly Report on
Form 10-Q.
* TeleTech achieved the previously announced second phase of its cost
reduction efforts, which will result in $20 million of savings during
2005. When combined with the first phase cost reduction of $40 million
originally announced in August 2003, the company has taken $60 million
of costs out of its global operations on an annualized, future run-rate
basis.
* As previously announced, the Company has eliminated virtually all of
its debt, reducing its revolving credit facility borrowings by
$58 million in the third quarter 2004 and by $114 million, or nearly
90 percent, since the beginning of 2004. This was achieved via a
combination of generating significant free cash flow and tax planning
strategies, some of which are still ongoing, that provided access to
existing cash resources previously held offshore.
* As part of the third quarter debt reduction, TeleTech elected to
terminate an interest rate swap agreement on September 30, 2004 that
was originally scheduled to expire in December 2006. The interest rate
swap agreement related to outstanding borrowings of $38 million under
TeleTech's revolving credit facility. While the termination of the
interest rate swap agreement resulted in a pre-tax cash charge of
$2.8 million in the third quarter of 2004, TeleTech's decision to repay
the $38 million in debt and terminate the swap agreement is anticipated
to result in future pre-tax net interest expense savings of
approximately $4.8 million from October 2004 through December 2006.
* As previously disclosed, TeleTech has been pursuing various tax
planning strategies. As a result of these efforts, TeleTech recorded
an income tax benefit of $5.4 million in the third quarter 2004 which
is reflected as a credit to income tax expense in the Consolidated
Statement of Operations.
EXECUTIVE COMMENTARY
Kenneth Tuchman, chairman and chief executive officer, said, "Our return
to sustained profitability in 2004 has enabled us to invest in our sales and
solution efforts, to reduce significantly our debt, and to position the
Company for continued growth in 2005. Our primary focus is pursuing new and
expanded existing client opportunities, developing and launching new
solutions, and executing our cost reduction initiatives."
Commenting on the company's results, Dennis Lacey, chief financial
officer, said, "We are pleased to see our previously announced plans to
improve profitability continue into the third quarter. With nearly $60
million in cash, minimal debt, and an available $100 million revolving credit
facility, TeleTech is well positioned financially to pursue its growth
initiatives."
NON-GAAP FINANCIAL MEASURES
Pursuant to Regulation G as promulgated by the Securities and Exchange
Commission, the schedule below provides a calculation of TeleTech's third
quarter 2004 non-GAAP measures including "net cash" and "free cash flow" as
disclosed above.
Third Quarter 2004
(in millions)
Net Cash:
Cash and cash equivalents $57.6 M
Less: current portion of long-term debt and
capital lease obligations $(0.3)M
Long-term capital lease obligations $(0.1)M
Line of credit $(7.2)M
Other long-term debt $(0.2)M
Grant advances $(7.2)M
Net Cash $42.6 M
Third Quarter 2004
(in millions)
Free Cash Flow:
Net cash provided by operating activities $43.1 M
Less: purchases of property and equipment $(5.8)M
Free Cash Flow $37.3 M
These Non-GAAP financial measures should be used in addition to, but not
as a substitute for, the Company's comparable GAAP measures. They are
presented because TeleTech's management uses this information when evaluating
current results of operations, and believes this information provides the
users of the financial statements with a useful comparison of TeleTech's
current results of operations with past and future periods.
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 hold a conference call to discuss third
quarter 2004 financial results on Thursday, November 4, 2004, at 10:00 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 Thursday, November 18, 2004.
ABOUT TELETECH
TeleTech is a global leader of integrated customer solutions and business
process outsourcing designed to help clients acquire, grow, and retain
profitable relationships with their customers. TeleTech strengthens customer
relationships for its clients by providing a combination of technologies,
processes, professional services, and global infrastructure. Headquartered in
Denver, Colo., TeleTech's worldwide capabilities are 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
This press release may contain certain forward-looking statements relating
to future results. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. These forward-looking
statements are subject to risks and uncertainties that may cause TeleTech's
and its subsidiaries' actual results to differ materially from those expressed
or implied by such forward-looking statements, including but not limited to
the following: the estimated value of new or renewed client agreements; the
ability to successfully develop and launch new solutions; the possibility of
the Company's Database Marketing and Consulting segment not returning to
historic levels of profitability; greater than anticipated competition in the
customer care market, causing adverse pricing and more stringent contractual
terms; risks associated with losing or not renewing significant client
relationships, or early termination of a client agreement; the Company's
ability to close new business and fill excess capacity; consumers' concerns or
adverse publicity regarding the products of the Company's clients; higher than
anticipated start-up costs or lead times associated with new ventures or
business in new markets; execution risks associated with performance-based
pricing metrics in certain client agreements; execution risks associated with
achieving targeted annualized cost or interest expense reductions; 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; the possibility of additional asset impairments
and restructuring charges; risks associated with weather-related events;
changes in foreign currency exchange rates; economic or political changes
affecting the countries in which the Company operates; changes in accounting
policies and practices promulgated by standard setting bodies; and, new
legislation or government regulation that impacts the customer care industry.
Please refer to the Company's filings with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for the year
ended 2003 and other more recent SEC filings, for a detailed discussion of
factors discussed above 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,
2004 2003 2004 2003
Revenues $256,329 $244,926 $787,205 $730,710
Operating expenses:
Costs of services 187,057 181,932 583,738 558,399
Selling, general &
administrative 43,072 37,372 122,816 (4) 117,726 (10)
Depreciation and
amortization 14,304 15,173 44,492 43,036
Impairment loss -- -- 2,641 (5) 6,955 (11)
Restructuring
charges, net (54) (1) 1,325 (8) 2,110 (6) 2,478 (12)
Total
operating
expenses 244,379 235,802 755,797 728,594
Operating Income 11,950 9,124 31,408 2,116
Other expense (344) (2,165) (2,834) (9,083)
Debt restructuring
charges (2,756) (2) -- (10,402) (7) --
Income (Loss) Before
Income Taxes 8,850 6,959 18,172 (6,967)
Income tax expense
(benefit) (1,396) (3) 4,409 (9) 4,512 (3) 30,865 (13)
Income (Loss) before
Minority Interest 10,246 2,550 13,660 (37,832)
Minority interest 68 (470) 316 (1,023)
Net Income (Loss) $10,314 $2,080 $13,976 $(38,855)
Basic Earnings
(Loss) Per Share $0.14 $0.03 $0.19 $(0.52)
Diluted Earnings
(Loss) Per Share $0.14 $0.03 $0.18 $(0.52)
Operating Margin 4.7% 3.7% 4.0% 0.3%
Net Income Margin 4.0% 0.8% 1.8% (5.3)%
Effective Tax Rate (15.8)% 63.4% 24.8% (443.0)%
Weighted Average
Shares
Basic 74,612 74,169 74,733 74,148
Diluted 75,944 74,673 75,909 74,148
Notes:
1. Represents a $0.5 million charge related to a reduction in force,
and a $(0.6) million benefit related to revised estimates of
restructuring charges.
2. Represents a $2.8 million one-time charge related to the
termination of an interest rate swap agreement.
3. Includes a $5.4 million tax benefit related to implementation of
certain tax planning strategies.
4. Includes a $1.9 million reversal of part of the estimated sales or
use tax liability related to the Database Marketing and Consulting
segment.
5. Represents a $2.6 million charge related to the impairment of fixed
assets in connection with SFAS No. 144.
6. Represents the $(0.1) million benefit described in Note 1 above, in
addition to a $1.8 million charge related to a reduction in force, a
$(0.1) million benefit related to revised estimates of restructuring
charges, and a $0.4 million charge related to a facility exit charge
in connection with SFAS No. 146.
7. Represents the $2.8 million charge described in Note 2 above, in
addition to a $7.6 million one-time charge related to restructuring
of the Company's debt facilities including a make-whole payment.
8. 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.
9. Includes a $3.0 million charge for the impairment of deferred tax
assets.
10. Includes a $3.3 million accrual for an estimated sales or use tax
liability related to the Database Marketing and Consulting segment.
11. Represents a $7.0 million charge related to the impairment of
fixed assets in connection with SFAS No. 144.
12. Represents the $1.3 million charge described in Note 8 above, in
addition to a $1.0 million charge related to a reduction in force,
a $0.9 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.
13. Includes a $34.9 million charge for the impairment of deferred tax
assets.
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
2004 2003
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $57,599 $141,687
Accounts receivable, net 160,330 145,132
Other current assets 32,903 32,730
Total current assets 250,832 319,549
Property and equipment, net 130,864 148,690
Other assets 76,633 83,035
Total assets $458,329 $551,274
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $124,495 $137,039
Line of credit 7,200 39,000
Senior notes -- 63,000
Other noncurrent liabilities 15,541 14,064
Minority interest 7,769 9,354
Total stockholders' equity 303,324 288,817
Total liabilities and stockholders'
equity $458,329 $551,274
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
RECONCILIATION OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended Three months ended
September 30, September 30,
2004 2003 2004 2003
Cash flow from operating
activities:
Net income (loss) $13,976 $(38,855) $10,314 $2,080
Adjustments to
reconcile net income
(loss) to net cash
provided by
operating activities:
Depreciation and
amortization 44,492 43,036 14,304 15,173
Other 1,399 25,775 18,502 22,470
Net cash provided by
operating
activities $59,867 $29,956 $43,120 $39,723
Total Capital
Expenditures $26,151 $69,635 (1) $5,808 $11,344
Free Cash Flow $33,716 $(39,679) $37,312 $28,379
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.
-0- 11/03/2004
/CONTACT: Investor Relations, Karen Breen, +1-303-397-8592, or Dan
Campbell, +1-303-397-8634, or Media Relations, Julie Lucas, +1-303-397-8555,
all of TeleTech Holdings, Inc./
/Photo: http://www.newscom.com/cgi-bin/prnh/20010130/TELETECHLOGO
PRN Photo Desk, photodesk@prnewswire.com /
/Web site: http://www.teletech.com /
(TTEC)
CO: TeleTech Holdings, Inc.
ST: Colorado
IN: CPR TLS MLM
SU: ERN CCA MAV
SF-CC
-- LAW016 --
1351 11/03/2004 16:56 EST http://www.prnewswire.com
