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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO Section 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO Section 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________
Commission file number 0-21055
TELETECH HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1291044
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 LINCOLN STREET, SUITE 1400
DENVER, COLORADO 80203
(Address of principal (Zip Code)
executive office)
(303) 894-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock November 8, 1996
Common Stock, par value $.01 per share 55,103,030
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TELETECH HOLDINGS, INC.
FORM 10-Q
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--September 30, 1996 and
December 31, 1995 3
Condensed consolidated statements of income--Three months ended
September 30, 1996 and 1995; Nine months ended September 30, 1996
and 1995. 5
Condensed consolidated statements of cash flows--Nine months ended
September 30, 1996 and 1995. 6
Notes to condensed consolidated financial statements--
September 30, 1996 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
PART I. FINANCIAL INFORMATION
2
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
December 31, September 30,
1995 1996
------------ -------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . $ 42 $ 5,972
Short-term investments. . . . . . . . . . . . . . . . . 10,361 53,301
Accounts receivable, net of allowance for doubtful
accounts of $789 and $1,316, respectively . . . . . 9,786 27,949
Prepaids and other assets . . . . . . . . . . . . . . . 238 493
Deposits. . . . . . . . . . . . . . . . . . . . . . . . 220 526
Deferred tax asset. . . . . . . . . . . . . . . . . . . 486 848
------- --------
Total current assets . . . . . . . . . . . . . . . 21,133 89,089
------- --------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $6,059 and $9,225, respectively . . . . 9,104 22,959
------- --------
OTHER ASSETS:
Deferred contract costs (net of amortization of $1,081
at September 30). . . . . . . . . . . . . . . . . . 346 1,528
Goodwill (net of amortization of $184). . . . . . . . . - 3,102
Investment in affiliated company accounted for under the
equity method . . . . . . . . . . . . . . . . . . . - 681
Other assets. . . . . . . . . . . . . . . . . . . . . . - 548
------- --------
Total assets . . . . . . . . . . . . . . . . . . . . $30,583 $117,907
------- --------
------- --------
The accompanying notes are an integral part of these balance sheets.
3
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
LIABILITIES AND STOCKHOLDERS EQUITY
December 31, September 30,
1995 1996
------------ -------------
(unaudited)
CURRENT LIABILITIES:
Bank overdraft. . . . . . . . . . . . . . . . . . . . . $ 1,427 $ -
Short term borrowings . . . . . . . . . . . . . . . . . 1,000 -
Current portion of capital lease obligations. . . . . . 1,256 4,154
Current portion of other long-term debt . . . . . . . . 196 205
Accounts payable. . . . . . . . . . . . . . . . . . . . 2,604 5,148
Accrued employee compensation . . . . . . . . . . . . . 1,743 7,795
Other accrued expenses. . . . . . . . . . . . . . . . . 1,262 8,194
Customer advances, deposits and deferred income . . . . 340 1,078
--------- ---------
Total current liabilities . . . . . . . . . . . . . 9,828 26,574
DEFERRED TAX LIABILITIES . . . . . . . . . . . . . . . . . 507 596
LONG-TERM DEBT, net of current portion:
Capital lease obligations . . . . . . . . . . . . . . . 3,193 9,780
Other debt. . . . . . . . . . . . . . . . . . . . . . . 397 242
--------- ---------
Total liabilities . . . . . . . . . . . . . . . . . 13,925 37,192
--------- ---------
MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK:
$6.45 par value, 1,860,000 shares authorized 1,860,000
and zero shares issued and outstanding including accrued
dividends of $867 . . . . . . . . . . . . . . . . . . . 12,867 -
--------- ---------
STOCKHOLDERS EQUITY:
Common stock, $.01 par value, 150,000,000 shares
authorized, 40,700,000 and 55,046,240 shares issued,
40,700,000 and 54,947,430 shares outstanding. . . . . . 407 550
Additional paid-in capital. . . . . . . . . . . . . . . 1,847 72,789
Cumulative translation adjustment . . . . . . . . . . . - 167
Unearned compensation-restricted stock. . . . . . . . . - (296)
Treasury stock, 98,810 shares, at cost. . . . . . . . . - (988)
Retained earnings . . . . . . . . . . . . . . . . . . . 1,537 8,493
--------- ---------
Total stockholders equity. . . . . . . . . . . . . . 3,791 80,715
--------- ---------
Total liabilities and stockholders equity. . . . . . $ 30,583 $ 117,907
--------- ---------
--------- ---------
The accompanying notes are an integral part of these balance sheets.
4
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
1995 1996 1995 1996
REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . $12,692 $50,057 $34,983 $106,675
------- ------- ------- --------
OPERATING EXPENSES:
Costs of Services . . . . . . . . . . . . . . . . . . . 6,899 31,376 18,775 63,097
Selling, general and
administrative expenses . . . . . . . . . . . . . . 4,575 11,780 13,169 30,399
------- ------- ------- --------
Total operating expenses. . . . . . . . . . . . . . . . 11,474 43,156 31,944 93,496
------- ------- ------- --------
INCOME FROM OPERATIONS . . . . . . . . . . . . . . . . . . 1,218 6,901 3,039 13,179
------- ------- ------- --------
OTHER INCOME (EXPENSES):
Interest expense. . . . . . . . . . . . . . . . . . . . (109) (339) ( 336) (799)
Interest income . . . . . . . . . . . . . . . . . . . . 249 411 434 625
Equity in losses of affiliated company. . . . . . . . . - (10) - (66)
Other . . . . . . . . . . . . . . . . . . . . . . . . . (102) 37 2,313 (205)
------- ------- ------- --------
38 99 2,411 (445)
------- ------- ------- --------
Income before income taxes. . . . . . . . . . . . . . . 1,256 7,000 5,450 12,734
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . . 394 2,941 2,167 5,357
------- ------- ------- --------
Net income. . . . . . . . . . . . . . . . . . . . . . . $ 862 $ 4,059 $ 3,283 $ 7,377
------- ------- ------- --------
------- ------- ------- --------
SHARES USED IN COMPUTING PRO FORMA NET INCOME
PER COMMON AND COMMON EQUIVALENT SHARE. . . . . . . . . 54,328 57,448 54,296 55,368
------- ------- ------- --------
------- ------- ------- --------
PRO FORMA NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE. . . . . . . . . . . . . . . . . . . . $ .02 $ .07 $ .06 $ .13
------- ------- ------- --------
------- ------- ------- --------
The accompanying notes are an integral part of these statements.
5
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(Unaudited)
1995 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income. . . . . . . . . . . . . . . . . . . . . . . $ 3,283 $ 7,377
Adjustments to reconcile net income to net cash
provided by (used in) operating activities-
Depreciation and amortization . . . . . . . . . . . . 1,554 4,431
Allowance for doubtful accounts . . . . . . . . . . . 67 527
Equity in loss of affiliated company. . . . . . . . . - 66
Deferred taxes on income. . . . . . . . . . . . . . . 127 (273)
Deferred compensation expense . . . . . . . . . . . . - 84
Changes in assets and liabilities-
Accounts receivable . . . . . . . . . . . . . . . . (3,583) (17,403)
Prepaids and other current assets . . . . . . . . . (140) (365)
Deferred contract costs . . . . . . . . . . . . . . - (2,263)
Other assets. . . . . . . . . . . . . . . . . . . . 54 (201)
Accounts payable and accrued liabilities. . . . . . 1,153 13,506
Customer advances and deferred income . . . . . . . 610 301
-------- --------
Net cash provided by
operating activities . . . . . . . . . . . . . . . 3,125 5,787
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment. . . . . . . . . . . $ (649) $ (5,410)
Purchase of Access 24, net of cash acquired . . . . . . - (2,431)
Proceeds from sale of Access 24 UK Limited. . . . . . . - 3,903
Increase in short-term investments . . . . . . . . . . (10,219) (42,940)
-------- --------
Net cash used in investing activities . . . . . . . . . (10,868) (46,878)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings. . . . $ 861 $ (1,000)
Net decrease in bank overdraft. . . . . . . . . . . . . (560) (1,427)
Payments on long-term debt. . . . . . . . . . . . . . . (577) (640)
Payments under capital leases . . . . . . . . . . . . . (820) (1,587)
Proceeds from issuance of common stock, net
of offering costs . . . . . . . . . . . . . . . . . - 52,565
Acquisition of treasury stock . . . . . . . . . . . . . (988)
Distributions to stockholder. . . . . . . . . . . . . . (1,695) -
Issuance of preferred stock . . . . . . . . . . . . . . 12,000 -
Payments under subordinated notes payable
to stockholder . . . . . . . . . . . . . . . . . . . (1,104) -
-------- --------
Net cash provided by financing activities. . . . . . . 8,105 46,923
-------- --------
Effect of exchange rate changes on cash. . . . . . . . . . - 98
NET INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . 362 5,930
CASH AND CASH EQUIVALENTS, beginning of period . . . . . . 38 42
-------- --------
CASH AND CASH EQUIVALENTS, end of period . . . . . . . . . $ 400 $ 5,972
-------- --------
-------- --------
The accompanying notes are an integral part of these statements.
6
TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE (1)--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. The condensed consolidated financial
statements reflect all adjustments (consisting of only normal recurring
accruals) which, in the opinion of management, are necessary to present fairly
the financial position, results of operations and cash flows of TeleTech
Holdings, Inc. and subsidiaries as of September 30, 1996 and 1995 and for the
periods then ended. Operating results for the three and nine month periods
ended September 30, 1996 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1996.
The unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated and combined financial statements and
footnotes thereto included in the Companys registration statement on Form S-1
dated October 31, 1996.
NOTE (2)--INITIAL PUBLIC OFFERING OF COMMON STOCK
On August 6, 1996 the Company completed an initial public offering
of its common stock. The Company sold 4,000,000 shares of common stock at an
offering price of $14.50 per share. Total proceeds after deducting $5,435,000
in estimated costs associated with the offering were $52,565,000. Immediately
prior to the closing of the offering the Company completed a five-for-one
share common stock split. All common stock amounts, equivalent share amounts
and per share amounts included in the accompanying financial statements and
related notes have been adjusted to give effect to the stock split. In
connection with the public offering, 9,300,000 shares of common stock were
issued upon the conversion of all 1,860,000 outstanding shares of preferred
stock and 98,810 shares of treasury stock were acquired at a cost of $988,100.
NOTE (3)--ACQUISITION OF ACCESS 24 SERVICE CORPORATION PTY. LIMITED AND SALE OF
ACCESS 24 LIMITED COMMON STOCK
On January 1, 1996, the Company acquired 100% of the common stock of
Access 24 Service Corporation Pty. Limited (with its subsidiaries "Access 24"),
for consideration of $7.1 million, consisting of $2.27 million plus 970,240
shares of common stock. Access 24 provides inbound, toll-free customer
service, primarily to the health care and financial services sector in
Australia, the United Kingdom and New Zealand.
On April 30, 1996, the Company completed the sale of 50% of the common
stock of Access 24 Limited ("Access 24 UK") to PPP Health Care Group plc ("PPP")
for cash of $3.8 million. Access 24 UK is the United Kingdom subsidiary,
acquired by the Company as part of the Access 24 acquisition, which operates a
call center in London, England, In addition PPP also purchased 1,000,000
preferred shares of Access 24 UK for consideration of $1.5 million. The
preferred shares have a par value of 1 pound each and dividends are cumulative
at the rate of 7% per annum. A portion of the proceeds from the preferred
stock were used to repay outstanding advances from Access 24.
This acquisition of Access 24 has been accounted for using the purchase
method. The proceeds from the sale of 50% of the stock of Access 24 UK in
excess of the proportionate share of the carrying amounts of the Access 24 UK
assets and liabilities has been reflected as a reduction of the goodwill
arising from the Access 24 acquisition. The remaining 50% interest in Access
24 UK is accounted for using the equity method of accounting. Under the equity
method, the Company's investment is initially recorded at cost and is adjusted
to recognize the Company's 50% share of net earnings or losses of the
7
TELETECH HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
SEPTEMBER 30, 1996
affiliated company. The excess of the cost of the investment over the
underlying net assets of Access 24 UK is being amortized using the straight line
method over 15 years.
The pro forma results of operations for the nine months ended September
30, 1995, as if the acquisition of Access 24 and the subsequent sale of Access
24 UK occurred on January 1, 1995 are as follows (in thousands except per share
amounts):
As Access Pro
Reported 24 Forma
-------- ------ -------
Revenue $34,983 $7,300 $42,283
------- ------ -------
------- ------ -------
Net income $ 3,283 $ (80) $ 3,203
------- ------ -------
------- ------ -------
Pro Forma Earnings per share $ 0.06 $ 0.06
------- -------
------- -------
NOTE (4)--EARNINGS PER SHARE
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, for purposes of determining the average number of common shares
outstanding for periods prior to completion of the public offering, common
stock and common stock equivalent shares issued by the Company at prices below
the public offering price during the 12 month period prior to the offering date
(using the treasury stock method) have been included in the calculation as if
they were outstanding for all periods presented. Common stock amounts and
equivalent share amounts have been adjusted retroactively to give effect to the
stock split. The shares of convertible preferred stock were considered common
stock equivalents due to the mandatory conversion provision.
NOTE (5)--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NONCASH INVESTING
AND FINANCING ACTIVITIES (IN THOUSANDS):
Nine Months Ended September 30,
-------------------------------
1996 1995
------- -------
Cash paid for interest $ 746 $ 330
Cash paid for income taxes $ 2,541 $ 1,700
Noncash investing and financing activities:
Assets acquired through capital leases $ 9,467 $ 3,500
Stock issued in purchase of Access 24 $ 4,851 $ -
Restricted stock issued under employment
agreements $ 380 $ -
NOTE (6)-SUBSEQUENT EVENTS
On November 6, 1996 the Company completed a secondary offering covering
the sale of 4.0 million shares of common stock at a price of $31 per share.
All 4.0 million shares were sold by selling stockholders. The Company granted
an over-allotment option to the underwriters providing for the sale of up to
600,000 shares by the Company. This option was subsequently exercised.
Expenses of the offering will be paid pro-rata by the selling shareholders and
the Company based upon the number of shares sold. Total proceeds to the
Company from the over allotment after deducting commissions and the pro-rata
share of the offering costs will be approximately $17.5 million.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30,1995
Revenues increased $71.7 million or 205%, to $106.7 million for the nine
months ended September 30, 1996 from $35.0 million for the nine months ended
September 30, 1995. The increase resulted from $9.1 million in revenues of
Access 24, which was acquired in the first quarter of 1996, $26.2 million in
revenues from new clients and $48.3 million in increased revenue from existing
clients. These increases were offset in part by contract expirations and
other client reductions, including the loss of $6.1 million in revenues due to
the expiration of the Continental Airlines contract in the first quarter of
1996. Revenues in the nine months ended September 30, 1996 reflect the
additional capacity provided by the opening of the Thornton Call Center in April
1996 and to a lessor extent the additional capacity provided by the opening of
the Van Nuys Call Center in July 1996.
The Company's three largest clients for the nine months ended September 30,
1996 were AT&T, United Parcel Service and CompuServe, which accounted for
30%,22% and 17%, respectively, of the Company's revenues. In September 1996 the
Company and CompuServe agreed to limit the monthly fees the Company charges
CompuServe under the largest program the Company provides to CompuServe, which
will effectively reduce the number of workstations that the Company dedicates to
such program. The Company has redeployed most, and in the near future expects
to have redeployed all, of the workstations previously dedicated to such
CompuServe program to new programs, including another program that the Company
provides for CompuServe. Consequently, the Company does not expect this
reduction to materially decrease the Company's capacity utilization. Although
the Company expects that the revenues it will realize under this program in the
fourth quarter of 1996 and in the first quarter of 1997 will be lower than
amounts received in the second and third quarters of 1996, the Company currently
expects that increased revenues from existing and new client programs will more
than offset such loss in revenues.
Costs of services increased $44.3 million, or 236%, to $63.1 million for
the nine months ended September 30, 1996 from $18.8 million for the nine months
ended September 30, 1995. Costs of services as a percentage of revenues
increased from 54% for the nine months ended September 30, 1995 to 59% for the
nine months ended September 30, 1996. The increase in the costs of services as
a percentage of revenues is a result of the significant revenues received in
1996 from the Company's facilities management program, under which the Company
commenced significant operations in April 1996. Facilities management programs
have higher costs of services as a percentage of revenues than fully outsourced
programs. The Company did not generate any revenues in the nine months ended
September 30, 1995 from facilities management programs.
Selling, general and administrative expenses increased $17.2 million, or
131% to $30.4 million for the nine months ended September 30, 1996 from $13.2
million for the nine months ended September 30, 1995. This increase is
primarily the result of increased revenues during the period. Selling, general
and administrative expenses as a percentage of revenues decreased from 38% for
the nine months ended September 30, 1995 to 29% for the nine months ended
September 30, 1996 primarily as a result of spreading fixed costs over a larger
revenue base as well as the impact of the Company's facilities management
program, which has insignificant additional selling, general and administrative
expenses.
As a result of the foregoing factors, income from operations increased
$10.1 million or 334%, to $13.2 million for the nine months ended September 30,
1996 from $3.0 million for the six months ended September 30, 1995. Operating
income as a percentage of revenues increased from 8.7% for the nine months ended
September 30, 1995 to 12.4% for the nine months ended September 30, 1996.
This is primarily the result of the spreading of fixed costs over a larger
revenue base.
9
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
Other expense totaled $445,000 for the nine months ended September 30,
1996 compared with other income of $2.4 million during the nine months ended
September 30, 1996. This is primarily due to 1995 reflecting the impact of the
$2.4 million one time payment made during the first quarter of 1995 by a former
client in connection with the early termination of a contract.
As a result of the foregoing factors, net income increased $4.1 or 125%, to
$7.4 million for the nine months ended September 30, 1996 from $3.3 million
for the nine months ended September 30, 1995. Excluding the one-time payment,
net income for the nine months ended September 30, 1995 would have been $1.8
million ($0.03 per share). Accordingly net income would have increased $5.6
million, or 311%, in the first nine months of 1996 compared with 1995.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
Revenues increased $37.4 million or 294%, to $50.1 million for the three
months ended September 30, 1996 from $12.7 million for the three months ended
September 30, 1995. The increase resulted from $3.3 million in revenues of
Access 24, which was acquired in the first quarter of 1996, $17.4 million in
revenues from new clients and $22.1 million in increased revenue from existing
clients. These increases were offset by contract expirations and other client
reductions, including the loss of $2.6 million in revenues due to the
expiration of the Continental Airlines contract in the first quarter of 1996.
Revenues in the three months ended September 30, 1996 reflect the additional
capacity provided by the opening of the Thornton Call Center in April 1996 and
to a lessor extent the additional capacity provided by the opening of the Van
Nuys Call Center in July 1996.
Costs of services increased $24.5 million, or 355%, to $31.4 million for
the three months ended September 30, 1996 from $6.9 million for the three months
ended September 30, 1995. Costs of services as a percentage of revenues
increased from 54% for the three months ended September 30, 1995 to 63% for the
three months ended September 30, 1996. The increase in the costs of services as
a percentage of revenues is a result of the significant revenues received in
1996 from the Company's facilities management program, under which the Company
commenced significant operations in April 1996. Facilities management programs
have higher costs of services as a percentage of revenues than fully outsourced
programs. The Company did not generate any revenues in the nine months ended
September 30, 1995 from facilities management programs. Facilities management
programs have higher costs of services as a percentage of revenues than fully
outsourced programs. The Company did not generate any revenues in the three
months ended September 30, 1995 from facilities management programs.
Selling, general and administrative expenses increased $7.2 million, or
158% to $11.8 million for the three months ended September 30, 1996 from $4.6
million for the three months ended September 30, 1995. This increase is
primarily the result of increased revenues during the period. Selling, general
and administrative expenses as a percentage of revenues decreased from 36% for
the three months ended September 30, 1995 to 24% for the three months ended
September 30, 1996 primarily as a result of spreading fixed costs over a larger
revenue base as well as the impact of the Company's facilities management
program, which has insignificant additional selling, general and administrative
expenses.
As a result of the foregoing factors, income from operations increased
$5.7 million, or 467%, to $6.9 million for the three months ended September 30,
1996 from $1.2 million for the three months ended September 30, 1995. Operating
income as a percentage of revenues increased from 10% for the three months ended
September 30, 1995 to 14% for the three months ended September 30, 1996.
Other income increased $61,000 to $99,000 during the three months ended
September 30, 1996 compared with $38,000 for the three months ended September
30, 1995. This is a result of increased interest income resulting from the
invested proceeds from the initial public offering.
10
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
As a result of the foregoing factors, net income increased $3.2 million or
371%, to $4.1 million for the three months ended September 30, 1996 from
$862,000 for the three months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996 the Company had cash and cash equivalents of $5.9
million and short-term investments of $53.3 million. Cash provided by operating
activities was $5.8 million for the nine months ended September 30, 1996.
Cash used in investing activities was $46.9 million for the nine months
ended September 30, 1996 which includes $42.9 million in increased short-term
investments resulting from the net proceeds from the initial public offering.
The Company incurred capital expenditures of $5.4 million, excluding $9.5
million in assets acquired under capital leases. In addition, the Company used
$2.4 million in connection with the Access 24 acquisition. These expenditures
were offset by the receipt of $3.9 million from the sale of 50% of Access 24
UK. See Note 3 to the unaudited consolidated financial statements.
Cash requirements for operating and financing activities for the nine
months ended September 30, 1996 were financed with $46.9 million in cash flow
from financing activities consisting of $52.6 million in net proceeds from the
initial public offering , net of capital lease payments, reduction in short
term borrowing and the reduction of the bank overdraft.
The Company has a $15 million unsecured revolving operating line of credit
which expires on May 31, 1998. At September 30, 1996 there were no outstanding
borrowings under this agreement. In addition, the Company has two master lease
agreements. Under one agreement the Company may lease equipment up to an
aggregate value of $15.0 million. As of September 30, 1996, amounts outstanding
under this agreement were approximately$9.4 million. Under the second
agreement, the Company's borrowings are approved, and specific terms are set, on
a case-by-case basis. As of September 30, 1996, the total amount outstanding
under this agreement was approximately $2.0 million.
The Company believes that existing cash on hand together with cash from
operations and available borrowings under the line of credit and master lease
agreements, will be sufficient to finance the Company's operations, planned
capital expenditures and anticipated growth through 1997.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following document is filed as an exhibit to this report:
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended September 30, 1996.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELETECH HOLDINGS, INC.
(Registrant)
Date: November 8, 1996 /s/ KENNETH D. TUCHMAN
----------------------------- -------------------------------------
Kenneth D. Tuchman
Chairman of the Board, President and
Chief Executive Officer
Date: November 8, 1996 /s/ STEVEN B. COBURN
----------------------------- -------------------------------------
Steven B. Coburn, Chief Financial
Officer
12
5
9-MOS
DEC-31-1996
SEP-30-1996
5,972
53,301
29,265
1,316
0
89,089
32,184
9,225
117,907
26,574
0
0
0
550
80,165
117,907
106,675
106,675
63,097
93,496
(354)
0
799
12,734
5,357
7,377
0
0
0
7,377
0.13
0.13
