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Forum List » Business News and Headlines SEC Filings, Earing Reports, Press Releases  
TeleTech Holdings Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 2, 2011 06:36PM
TeleTech Holdings Inc. (TTEC) filed Quarterly Report for the period ended 2011-09-30. Highlight of Business Operations:In 2011, our third quarter revenue increased 12.3% to $304.2 million over the third quarter of 2010. This revenue increase was due to an increase in existing client volumes, new BPO programs, additional revenue generation and consultative revenue, and revenue from acquisitions. Revenue also saw an increase of $7.9 million, or 2.9%, due to fluctuations in foreign currency rates. Our third quarter 2011 income from operations increased 32.3% to $26.6 million, or 8.7% of revenue, from $20.1 million, or 7.4% of revenue, in the third quarter of 2010. In the third quarter 2011, income from operations increased due to a decrease in variable incentive compensation of $2.8 million. Income from operations for the third quarter 2011 and 2010 included an aggregate $1.6 million expense and $3.9 million expense related to restructuring charges and asset impairments, respectively.The effective tax rate for the three months ended September 30, 2011 was (1.9%) compared to an effective tax rate of 27.7% for the same period of 2010. The effective tax rate for the three months ended September 30, 2011 was influenced by a change to the accounting estimate on the mediated settlement with the IRS related to U.S. tax refund claims, earnings in international jurisdictions currently under an income tax holiday, a reduction in the incremental U.S. tax expense (versus the estimated recorded in the fourth quarter of 2010) related to the Company's 2010 repatriation of $105 million of foreign earnings and the distribution of income between the U.S. and international tax jurisdictions. Based on updated functional and economic analysis performed, the Company has adjusted the pricing terms between Australia and the Philippines for transactions recorded since January 1, 2011 consistent with the arms length principle. In doing so, the Company reported a net incremental tax benefit of $3.2 million in the third quarter (of which $2.2 million related to the first and second quarter). Without the $3.1 million benefit related to the Company's mediated settlement with the IRS, $1.4 million benefit related to the foreign earnings repatriation, the $2.2 million benefit related to Australia transfer pricing and a $0.1 million expense for other discrete items, the Company's effective tax rate for the third quarter would have been 23.4%. Cost of services for the North American BPO segment for the nine months ended September 30, 2011 as compared to the same period in 2010 was $431.5 million and $433.1 million, respectively. Cost of services as a percentage of revenue in the North American BPO segment increased slightly compared with the prior year. In absolute dollars, the decrease was due to a $6.8 million decrease in telecommunications expenses primarily associated with a short-term government program, a $3.4 million decrease for facility and occupancy expenses, a $1.8 million decrease in deferred training costs, and a $2.1 million net decrease in other expenses. This decrease was offset in part by a $6.7 million increase in technology costs primarily related to the acquisition of eLoyalty, and a $5.8 million increase in employee related expenses due to increased volumes in existing programs and the acquisition of eLoyalty offset partially by a net decrease in short-term government programs and other program completions. Selling, general and administrative expenses for the North American BPO segment for the nine months ended September 30, 2011 as compared to the same period in 2010 were $94.1 million and $90.2 million, respectively. The expenses increased in both absolute dollars and as a percentage of revenue. The increase in absolute dollars reflected an increase in employee related expenses of $7.3 million due to an increase in salaries, incentive and equity compensation expense and the acquisition of eLoyalty. This increase is offset in part by a $1.2 million decrease in insurance expenses, a $0.9 million decrease in telecommunication expenses, and a $1.3 million net decrease in other expenses. The effective tax rate for the nine months ended September 30, 2011 was 13.4% compared to an effective tax rate of 26.9% for the same period of 2010. The effective tax rate for the nine months ended September 30, 2011 was influenced by an adverse decision by the Canada Revenue Agency regarding the Company's request for relief from double taxation, a mediated settlement with the IRS related to U.S. tax refund claims, a change to the accounting estimate on the mediated settlement with the IRS related to U.S. tax refund claims, earnings in international jurisdictions currently under an income tax holiday, a reduction in the incremental U.S. tax expense (versus the estimate recorded in the fourth quarter of 2010) related to the Company's 2010 repatriation of $105 million of foreign earning and the distribution of income between the U.S. and international tax jurisdictions. Without the $9.1 million expense related to the adverse decision by the Canada Revenue Agency regarding the Company's request for relief from double taxation, the $11.8 million benefit related to the Company's mediated settlement with the IRS related to U.S. tax refund claims, the $1.4 million benefit related to the foreign earnings repatriation, and $1.1 million benefit for other discrete items recognized during the period, the Company's effective tax rate for the nine months ended September 30, 2011 would have been 20.8%. The $2.2 million tax benefit recorded in the third quarter related to intercompany transactions between the Company's operations in Australia and the Philippines occurring between January 1, 2011 and June 30, 2011 is properly reflected in the Company's year-to-date pro-forma effective tax rate of 20.8%.
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