##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    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 001-11919
 
 TeleTech Holdings, Inc.
 (Exact name of Registrant as specified in its charter)
 Delaware
    
    84-1291044(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 9197 South Peoria Street
Englewood, Colorado 80112  (Address of principal executive offices)
 Registrants
telephone number, including area code:  (303) 397-8100
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
JUNE 30, 2008 FORM 10-Q
TABLE OF CONTENTS
 Page
No.PART
I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of June 30, 2008 (unaudited) and
December 31, 2007
    
    
    1Condensed Consolidated Statements of Operations and Comprehensive Income
for the three and six months ended June 30, 2008 and 2007 (unaudited)
    
    
    2Condensed Consolidated Statement of Stockholders Equity as of and for the
six months ended June 30, 2008 (unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 2008 and 2007 (unaudited)
    
    
    4Notes to the Unaudited Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    39Item 4. Controls and Procedures
    
    
    41PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    44Item 1A. Risk Factors
    
    
    45Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    45Item 3. Defaults Upon Senior Securities
    
    
    45Item 4. Submission of Matters to a Vote of Security Holders
    
    
    45Item 5. Other Information
    
    
    45Item 6. Exhibits
    
    
    46SIGNATURES
    
    
    47EXHIBIT INDEX
    
    
    48Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 TELETECH HOLDINGS, INC. AND SUBSIDIARIES
 
 Condensed Consolidated
Balance Sheets
(Amounts in thousands, except share amounts)
(Unaudited)
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    126,914
    
    
    $
    91,239Accounts receivable, net
    
    
    275,691
    
    
    
    270,988Prepaids and other current assets
    
    
    54,478
    
    
    
    62,344Deferred tax assets, net
    
    
    20,994
    
    
    
    8,386Income tax receivables
    
    
    25,878
    
    
    
    26,868Total current assets
    
    
    503,955
    
    
    
    459,825Long-term assetsProperty, plant and equipment, net
    
    
    180,979
    
    
    
    174,809Goodwill
    
    
    45,586
    
    
    
    45,154Contract acquisition costs, net
    
    
    5,931
    
    
    
    6,984Deferred tax assets, net
    
    
    41,952
    
    
    
    39,764Other long-term assets
    
    
    27,842
    
    
    
    33,759Total long-term assets
    
    
    302,290
    
    
    
    300,470Total assets
    
    $
    806,245
    
    
    $
    760,295LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    30,138
    
    
    $
    38,761Accrued employee compensation and benefits
    
    
    86,149
    
    
    
    87,480Other accrued expenses
    
    
    39,977
    
    
    
    28,872Income tax payables
    
    
    21,427
    
    
    
    18,552Deferred tax liabilities, net
    
    
    122
    
    
    
    88Other short-term liabilities
    
    
    8,910
    
    
    
    13,057Total current liabilities
    
    
    186,723
    
    
    
    186,810Long-term liabilitiesLine of credit
    
    
    78,400
    
    
    
    65,400Grant advances
    
    
    5,950
    
    
    
    6,741Deferred tax liabilities, net
    
    
    567
    
    
    
    57Other long-term liabilities
    
    
    52,874
    
    
    
    46,531Total long-term liabilities
    
    
    137,791
    
    
    
    118,729Total liabilities
    
    
    324,514
    
    
    
    305,539Minority interest
    
    
    4,514
    
    
    
    3,555Commitments and contingencies (Note 10)Stockholders equityPreferred stock  $0.01 par value; 10,000,000 shares authorized;
zero shares outstanding as of June 30, 2008 and
December 31, 2007, respectively
    
    
    
    
    
    
    Common stock  $0.01 par value; 150,000,000 shares authorized;
69,977,236 and 69,828,671 shares outstanding
as of June 30, 2008 and December 31, 2007, respectively
    
    
    700
    
    
    
    698Treasury stock at cost: 12,077,609 shares, respectively
    
    
    (143,205
    )
    
    
    (143,205
    )Additional paid-in capital
    
    
    338,200
    
    
    
    334,593Accumulated other comprehensive income
    
    
    40,808
    
    
    
    57,888Retained earnings
    
    
    240,714
    
    
    
    201,227Total stockholders equity
    
    
    477,217
    
    
    
    451,201Total liabilities and stockholders equity
    
    $
    806,245
    
    
    $
    760,295
  1




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income
(Amounts in thousands, except per share amounts)
(Unaudited)
 Three-Months Ended
    
    
    Six-Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007As Restated
    
    
    
    
    
    As RestatedRevenue
    
    $
    357,416
    
    
    $
    329,608
    
    
    $
    725,052
    
    
    $
    662,348Operating expensesCost of services (exclusive of
depreciation and amortization presented
separately below)
    
    
    265,833
    
    
    
    237,228
    
    
    
    535,933
    
    
    
    474,470Selling, general and administrative
    
    
    45,858
    
    
    
    48,611
    
    
    
    97,230
    
    
    
    100,707Depreciation and amortization
    
    
    15,624
    
    
    
    13,794
    
    
    
    30,784
    
    
    
    27,348Restructuring charges, net
    
    
    440
    
    
    
    262
    
    
    
    2,642
    
    
    
    262Impairment
    
    
    
    
    
    
    13,515
    
    
    
    
    
    
    
    13,515Total operating expenses
    
    
    327,755
    
    
    
    313,410
    
    
    
    666,589
    
    
    
    616,302Income from operations
    
    
    29,661
    
    
    
    16,198
    
    
    
    58,463
    
    
    
    46,046Other income (expense)Interest income
    
    
    1,388
    
    
    
    492
    
    
    
    2,474
    
    
    
    885Interest expense
    
    
    (1,489
    )
    
    
    (1,594
    )
    
    
    (3,054
    )
    
    
    (3,062
    )Other, net
    
    
    (442
    )
    
    
    (1,133
    )
    
    
    (1,011
    )
    
    
    (1,335
    )Total other expense
    
    
    (543
    )
    
    
    (2,235
    )
    
    
    (1,591
    )
    
    
    (3,512
    )Income before income taxes and minority
interest
    
    
    29,118
    
    
    
    13,963
    
    
    
    56,872
    
    
    
    42,534Provision for income taxes
    
    
    (7,536
    )
    
    
    (4,737
    )
    
    
    (15,329
    )
    
    
    (15,111
    )Income before minority interest
    
    
    21,582
    
    
    
    9,226
    
    
    
    41,543
    
    
    
    27,423Minority interest
    
    
    (1,220
    )
    
    
    (508
    )
    
    
    (2,056
    )
    
    
    (942
    )Net income
    
    $
    20,362
    
    
    $
    8,718
    
    
    $
    39,487
    
    
    $
    26,481Other comprehensive income (loss)Foreign currency translation adjustments
    
    $
    1,722
    
    
    $
    9,444
    
    
    $
    5,616
    
    
    $
    13,186Derivatives valuation, net of tax
    
    
    (14,605
    )
    
    
    6,678
    
    
    
    (22,696
    )
    
    
    9,340Other
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    (43
    )Total other comprehensive income (loss)
    
    
    (12,883
    )
    
    
    16,100
    
    
    
    (17,080
    )
    
    
    22,483Comprehensive income
    
    $
    7,479
    
    
    $
    24,818
    
    
    $
    22,407
    
    
    $
    48,964Weighted average shares outstandingBasic
    
    
    69,977
    
    
    
    70,580
    
    
    
    69,957
    
    
    
    70,474Diluted
    
    
    71,729
    
    
    
    73,104
    
    
    
    71,649
    
    
    
    73,182Net income per shareBasic
    
    $
    0.29
    
    
    $
    0.12
    
    
    $
    0.56
    
    
    $
    0.38Diluted
    
    $
    0.28
    
    
    $
    0.12
    
    
    $
    0.55
    
    
    $
    0.36
  2




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES  Condensed Consolidated Statement of Stockholders Equity
(Amounts in thousands)
(Unaudited)
 AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Treasury
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Stock
    
    
    Capital
    
    
    Income
    
    
    Earnings
    
    
    EquityBalance as of December 31, 2007
    
    
    
    
    
    $
    
    
    
    
    69,829
    
    
    $
    698
    
    
    $
    (143,205
    )
    
    $
    334,593
    
    
    $
    57,888
    
    
    $
    201,227
    
    
    $
    451,201Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,487
    
    
    
    39,487Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,616
    
    
    
    
    
    
    
    5,616Derivatives valuation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,696
    )
    
    
    
    
    
    
    (22,696
    )Vesting of restricted stock units
    
    
    
    
    
    
    
    
    
    
    148
    
    
    
    2
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Tax shortfall from equity-based awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,125
    )
    
    
    
    
    
    
    
    
    
    
    (1,125
    )Equity-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,734
    
    
    
    
    
    
    
    
    
    
    
    4,734Balance as of June 30, 2008
    
    
    
    
    
    $
    
    
    
    
    69,977
    
    
    $
    700
    
    
    $
    (143,205
    )
    
    $
    338,200
    
    
    $
    40,808
    
    
    $
    240,714
    
    
    $
    477,217
  3




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
 Condensed Consolidated Statements of Cash Flows
 (Amounts in thousands)
 (Unaudited)
 Six-Months EndedJune 30,2008
    
    
    2007As RestatedCash flows from operating activitiesNet income
    
    $
    39,487
    
    
    $
    26,481Adjustment
to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    30,784
    
    
    
    27,348Amortization of contract acquisition costs
    
    
    1,053
    
    
    
    1,345Provision for doubtful accounts
    
    
    502
    
    
    
    591Impairment losses
    
    
    
    
    
    
    13,515Deferred income taxes
    
    
    124
    
    
    
    (3,704
    )Minority interest
    
    
    2,056
    
    
    
    942Tax shortfall from equity-based awards
    
    
    (1,125
    )
    
    
    Equity-based compensation expense
    
    
    4,734
    
    
    
    5,601(Gain) loss on foreign currency derivative
    
    
    383
    
    
    
    (1,853
    )Changes in assets and liabilities:Accounts receivable
    
    
    651
    
    
    
    822Prepaids and other assets
    
    
    (9,323
    )
    
    
    (2,266
    )Accounts payable and accrued expenses
    
    
    (4,766
    )
    
    
    (14,422
    )Other liabilities
    
    
    (5,255
    )
    
    
    (5,182
    )Net cash provided by operating activities
    
    
    59,305
    
    
    
    49,218Cash flows from investing activitiesPurchases of property, plant and equipment
    
    
    (36,408
    )
    
    
    (29,020
    )Net cash used in investing activities
    
    
    (36,408
    )
    
    
    (29,020
    )Cash flows from financing activitiesProceeds from lines of credit
    
    
    587,250
    
    
    
    260,450Payments on lines of credit
    
    
    (574,250
    )
    
    
    (280,450
    )Payments on long-term debt and capital lease obligations
    
    
    (802
    )
    
    
    (726
    )Payments of debt refinancing fees
    
    
    (146
    )
    
    
    (17
    )Payments to minority shareholder
    
    
    (1,113
    )
    
    
    (1,409
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    12,751Excess tax benefit from exercise of stock options
    
    
    
    
    
    
    6,185Purchase of treasury stock
    
    
    
    
    
    
    (23,389
    )Net cash (used in) provided by financing activities
    
    
    10,939
    
    
    
    (26,605
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    1,839
    
    
    
    5,344Increases in cash and cash equivalents
    
    
    35,675
    
    
    
    (1,063
    )Cash and cash equivalents, beginning of period
    
    
    91,239
    
    
    
    58,352Cash and cash equivalents, end of period
    
    $
    126,914
    
    
    $
    57,289Supplemental disclosuresCash paid for interest
    
    $
    2,741
    
    
    $
    2,270Cash paid for income taxes
    
    $
    9,352
    
    
    $
    12,248
  4




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 (1) OVERVIEW AND BASIS OF PRESENTATION
 Overview
  Basis of Presentation
   Use of Estimates
  Recently Issued Accounting Pronouncements
 Fair Value Measurements
 5




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 The Fair Value Option for Financial Assets and
Financial Liabilities  including an amendment of FASB Statement No. 115
 Fair Value Hierarchy
  Level 1
    
    Quoted prices for identicalinstruments in active markets.Level 2
    
    Quoted prices for similarinstruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and model-derived
valuations in which all significant inputs and significant value drivers are observable in
active markets.Level 3
    
    Valuations derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable.
 Determination of Fair Value
    Derivative Financial Instruments
  6




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Other Financial Instruments
  Non-controlling Interests in Condensed Consolidated
Financial Statements an amendment of Accounting Research Bulletin No. 51
 Business Combinationsa replacement of
FASB Statement No. 141
 Disclosures about Derivative Instruments and Hedging
Activities
 (2) RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
  7




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Three-Months Ended June 30, 2007
    
    
    Six-Months Ended June 30, 2007As previously
    
    
    
    
    
    
    
    
    
    
    As previouslyreported
    
    
    Adjustments
    
    
    As Restated
    
    
    reported
    
    
    Adjustments
    
    
    As RestatedRevenue
    
    $
    329,832
    
    
    $
    (224
    )
    
    $
    329,608
    
    
    $
    662,364
    
    
    $
    (16
    )
    
    $
    662,348Operating expensesCost of services
    
    
    237,760
    
    
    
    (532
    )
    
    
    237,228
    
    
    
    476,065
    
    
    
    (1,595
    )
    
    
    474,470Selling, general and administrative
    
    
    49,479
    
    
    
    (868
    )
    
    
    48,611
    
    
    
    101,966
    
    
    
    (1,259
    )
    
    
    100,707Depreciation and amortization
    
    
    13,380
    
    
    
    414
    
    
    
    13,794
    
    
    
    26,634
    
    
    
    714
    
    
    
    27,348Restructuring charges, net
    
    
    262
    
    
    
    
    
    
    
    262
    
    
    
    262
    
    
    
    
    
    
    
    262Impairment
    
    
    13,515
    
    
    
    
    
    
    
    13,515
    
    
    
    13,515
    
    
    
    
    
    
    
    13,515Total operating expenses
    
    
    314,396
    
    
    
    (986
    )
    
    
    313,410
    
    
    
    618,442
    
    
    
    (2,140
    )
    
    
    616,302Income from operations
    
    
    15,436
    
    
    
    762
    
    
    
    16,198
    
    
    
    43,922
    
    
    
    2,124
    
    
    
    46,046Other income (expense)Interest income
    
    
    492
    
    
    
    
    
    
    
    492
    
    
    
    885
    
    
    
    
    
    
    
    885Interest expense
    
    
    (1,417
    )
    
    
    (177
    )
    
    
    (1,594
    )
    
    
    (2,701
    )
    
    
    (361
    )
    
    
    (3,062
    )Other, net
    
    
    (1,152
    )
    
    
    19
    
    
    
    (1,133
    )
    
    
    (1,323
    )
    
    
    (12
    )
    
    
    (1,335
    )Total other income (expense)
    
    
    (2,077
    )
    
    
    (158
    )
    
    
    (2,235
    )
    
    
    (3,139
    )
    
    
    (373
    )
    
    
    (3,512
    )Income before income taxes and minority
interest
    
    
    13,359
    
    
    
    604
    
    
    
    13,963
    
    
    
    40,783
    
    
    
    1,751
    
    
    
    42,534Provision for income taxes
    
    
    (3,681
    )
    
    
    (1,056
    )
    
    
    (4,737
    )
    
    
    (13,344
    )
    
    
    (1,767
    )
    
    
    (15,111
    )Income before minority interest
    
    
    9,678
    
    
    
    (452
    )
    
    
    9,226
    
    
    
    27,439
    
    
    
    (16
    )
    
    
    27,423Minority interest
    
    
    (508
    )
    
    
    
    
    
    
    (508
    )
    
    
    (942
    )
    
    
    
    
    
    
    (942
    )Net income
    
    $
    9,170
    
    
    $
    (452
    )
    
    $
    8,718
    
    
    $
    26,497
    
    
    $
    (16
    )
    
    $
    26,481Other comprehensive income (loss)Foreign currency translation adjustments
    
    $
    7,309
    
    
    $
    2,135
    
    
    $
    9,444
    
    
    $
    9,222
    
    
    $
    3,964
    
    
    $
    13,186Derivatives valuation, net of tax
    
    
    9,711
    
    
    
    (3,033
    )
    
    
    6,678
    
    
    
    11,082
    
    
    
    (1,742
    )
    
    
    9,340Other
    
    
    
    
    
    
    (22
    )
    
    
    (22
    )
    
    
    
    
    
    
    (43
    )
    
    
    (43
    )Total other comprehensive income (loss)
    
    
    17,020
    
    
    
    (920
    )
    
    
    16,100
    
    
    
    20,304
    
    
    
    2,179
    
    
    
    22,483Comprehensive income
    
    $
    26,190
    
    
    $
    (1,372
    )
    
    $
    24,818
    
    
    $
    46,801
    
    
    $
    2,163
    
    
    $
    48,964Weighted average shares outstandingBasic
    
    
    70,599
    
    
    
    (19
    )
    
    
    70,580
    
    
    
    70,467
    
    
    
    7
    
    
    
    70,474Diluted
    
    
    72,973
    
    
    
    131
    
    
    
    73,104
    
    
    
    72,926
    
    
    
    256
    
    
    
    73,182Net income per shareBasic
    
    $
    0.13
    
    
    $
    (0.01
    )
    
    $
    0.12
    
    
    $
    0.38
    
    
    $
    (0.00
    )
    
    $
    0.38Diluted
    
    $
    0.13
    
    
    $
    (0.01
    )
    
    $
    0.12
    
    
    $
    0.36
    
    
    $
    (0.00
    )
    
    $
    0.36
 8




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Six Months Ended June 30, 2007As previouslyreported
    
    
    Adjustments
    
    
    As restatedCash flows from operating activitiesNet cash provided by (used in):Net income
    
    $
    26,497
    
    
    $
    (16
    )
    
    $
    26,481Adjustment
to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    26,634
    
    
    
    714
    
    
    
    27,348Amortization of contract acquisition costs
    
    
    1,345
    
    
    
    
    
    
    
    1,345Provision for doubtful accounts
    
    
    591
    
    
    
    
    
    
    
    591Impairment losses
    
    
    13,515
    
    
    
    
    
    
    
    13,515Deferred income taxes
    
    
    (4,558
    )
    
    
    854
    
    
    
    (3,704
    )Minority interest
    
    
    942
    
    
    
    
    
    
    
    942Equity-based compensation expense
    
    
    6,081
    
    
    
    (480
    )
    
    
    5,601Gain on foreign currency derivative
    
    
    
    
    
    
    (1,853
    )
    
    
    (1,853
    )Changes in assets and liabilities:Accounts receivable
    
    
    (2,410
    )
    
    
    3,232
    
    
    
    822Prepaids and other assets
    
    
    (10,055
    )
    
    
    7,789
    
    
    
    (2,266
    )Accounts payable and accrued expenses
    
    
    (4,003
    )
    
    
    (10,419
    )
    
    
    (14,422
    )Other liabilities
    
    
    (3,843
    )
    
    
    (1,339
    )
    
    
    (5,182
    )Net cash provided by (used in) operating activities
    
    
    50,736
    
    
    
    (1,518
    )
    
    
    49,218Cash flows from investing activitiesPurchases of property, plant and equipment
    
    
    (29,020
    )
    
    
    
    
    
    
    (29,020
    )Net cash used in investing activities
    
    
    (29,020
    )
    
    
    
    
    
    
    (29,020
    )Cash flows from financing activitiesProceeds from lines of credit
    
    
    260,450
    
    
    
    
    
    
    
    260,450Payments on lines of credit
    
    
    (280,450
    )
    
    
    
    
    
    
    (280,450
    )Payments on long-term debt and capital lease obligations
    
    
    
    
    
    
    (726
    )
    
    
    (726
    )Payments of debt refinancing fees
    
    
    (17
    )
    
    
    
    
    
    
    (17
    )Payments to minority shareholder
    
    
    (1,409
    )
    
    
    
    
    
    
    (1,409
    )Proceeds from exercise of stock options
    
    
    12,751
    
    
    
    
    
    
    
    12,751Excess tax benefit from exercise of stock options
    
    
    7,463
    
    
    
    (1,278
    )
    
    
    6,185Purchase of treasury stock
    
    
    (23,389
    )
    
    
    
    
    
    
    (23,389
    )Net cash used in financing activities
    
    
    (24,601
    )
    
    
    (2,004
    )
    
    
    (26,605
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    2,539
    
    
    
    2,805
    
    
    
    5,344Decrease in cash and cash equivalents
    
    
    (346
    )
    
    
    (717
    )
    
    
    (1,063
    )Cash and cash equivalents, beginning of period
    
    
    60,484
    
    
    
    (2,132
    )
    
    
    58,352Cash and cash equivalents, end of period
    
    $
    60,138
    
    
    $
    (2,849
    )
    
    $
    57,289
 9




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 (3) SEGMENT INFORMATION
   North American BPO
    
    International BPOUnited States
    
    ArgentinaCanada
    
    AustraliaPhilippines
    
    BrazilChinaCosta RicaEnglandGermanyMalaysiaMexicoNew ZealandNorthern IrelandScotlandSouth AfricaSpain
    10




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007As restated
    
    
    
    
    
    As restatedRevenueNorth American BPO
    
    $
    243,238
    
    
    $
    225,792
    
    
    $
    505,700
    
    
    $
    460,237International BPO
    
    
    114,178
    
    
    
    98,111
    
    
    
    219,352
    
    
    
    190,516Database Marketing and Consulting
    
    
    
    
    
    
    5,705
    
    
    
    
    
    
    
    11,595Total
    
    $
    357,416
    
    
    $
    329,608
    
    
    $
    725,052
    
    
    $
    662,348Income (loss) from operationsNorth American BPO
    
    $
    26,457
    
    
    $
    28,742
    
    
    $
    59,001
    
    
    $
    62,347International BPO
    
    
    3,113
    
    
    
    4,689
    
    
    
    (143
    )
    
    
    4,974Database Marketing and Consulting
    
    
    91
    
    
    
    (17,233
    )
    
    
    (395
    )
    
    
    (21,275
    )Total
    
    $
    29,661
    
    
    $
    16,198
    
    
    $
    58,463
    
    
    $
    46,046
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007As restated
    
    
    
    
    
    As restatedRevenueUnited States
    
    $
    101,017
    
    
    $
    99,165
    
    
    $
    210,786
    
    
    $
    211,374Philippines
    
    
    67,327
    
    
    
    52,151
    
    
    
    136,502
    
    
    
    100,883Asia Pacific
    
    
    26,830
    
    
    
    32,552
    
    
    
    55,025
    
    
    
    61,133Canada
    
    
    39,981
    
    
    
    52,941
    
    
    
    87,630
    
    
    
    104,398Europe
    
    
    39,594
    
    
    
    37,011
    
    
    
    75,895
    
    
    
    73,887Latin America
    
    
    82,667
    
    
    
    55,788
    
    
    
    159,214
    
    
    
    110,673Total
    
    $
    357,416
    
    
    $
    329,608
    
    
    $
    725,052
    
    
    $
    662,348
 (4) SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    200714.0
    %
    
    
    15.2
    %
    
    
    14.8
    %
    
    
    14.6
    %
  June 30,
    
    December 31,2008
    
    2007$
    30,112
    
    
    $
    37,347
 11




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  (5) GOODWILL
  ForeignDecember 31,
    
    
    
    
    
    
    Currency
    
    
    June 30,2007
    
    
    Impairments
    
    
    Impact
    
    
    2008North American BPO
    
    $
    35,885
    
    
    $
    
    
    
    $
    
    
    
    $
    35,885International BPO
    
    
    9,269
    
    
    
    
    
    
    
    432
    
    
    
    9,701Total
    
    $
    45,154
    
    
    $
    
    
    
    $
    432
    
    
    $
    45,586
 Goodwill and Other Intangible
Assets
 (6) DERIVATIVES
   12




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##### Table of Contents



TELETECH
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Local
    
    
    
    
    
    
    DatesCurrency
    
    
    U.S. Dollar
    
    
    ContractsAmount
    
    
    Amount
    
    
    are ThroughCanadian Dollar
    
    
    100,300
    
    
    $
    91,160
    
    
    December 2010Philippine Peso
    
    
    8,789,660
    
    
    
    200,934
    1
    
    August 2010Argentine Peso
    
    
    102,913
    
    
    
    30,048
    
    
    December 2009Mexican Peso
    
    
    730,500
    
    
    
    64,501
    
    
    April 2010British Pound Sterling
    
    
    2,105
    
    
    
    4,157
    2
    
    March 2011$
    390,800
 
 (1)
    
    Includes contracts to purchase Philippine pesos in exchange for British pound sterling and New
Zealand dollars, which have been translated into equivalent U.S. dollars on June 30, 2008.(2)
    
    Includes contracts to purchase British pound sterling in exchange for Euros, which have been
translated into equivalent U.S. dollars on June 30, 2008.    (7) FAIR VALUE
 Money Market Investments
 Deferred Compensation Plan
 Accounts Receivable and Payable
 13




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Derivative Assets and Liabilities
 Debt
  Fair Value Measurements at June 30, 2008 Using:Quoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableBalance at June 30,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsMoney market investments(1)
    
    $
    21.6
    
    
    $
    
    
    
    $
    21.6
    
    
    $
    Total assets
    
    $
    21.6
    
    
    $
    
    
    
    $
    21.6
    
    
    $
    LiabilitiesForeign currency contracts(2)
    
    $
    0.6
    
    
    $
    
    
    
    $
    0.6
    
    
    $
    Deferred compensation plan liability(3)
    
    
    4.7
    
    
    
    
    
    
    
    4.7
    
    
    
    Total liabilities
    
    $
    5.3
    
    
    $
    
    
    
    $
    5.3
    
    
    $
    
 
 (1)
    
    Included in Cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheet.(2)
    
    Included in the accompanying Condensed Consolidated Balance Sheet, as discussed further in
Note 6. Excludes option premiums paid.(3)
    
    Included in Accrued employee compensation and benefits in the accompanying Condensed
Consolidated Balance Sheet.  (8) INCOME TAXES
 Accounting for Income Taxes
 14




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
    (9) RESTRUCTURING CHARGES AND IMPAIRMENT LOSSES
 Restructuring Charges
      Closure ofDelivery
    
    
    Reduction inCenters
    
    
    Force
    
    
    TotalBalance as of December 31, 2007
    
    $
    4,326
    
    
    $
    348
    
    
    $
    4,674Expense
    
    
    
    
    
    
    2,704
    
    
    
    2,704Payments
    
    
    (1,819
    )
    
    
    (2,741
    )
    
    
    (4,560
    )Reversals
    
    
    
    
    
    
    (62
    )
    
    
    (62
    )Balance as of June 30, 2008
    
    $
    2,507
    
    
    $
    249
    
    
    $
    2,756
 Impairment Losses
  15




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 (10) COMMITMENTS AND CONTINGENCIES
 Letters of Credit
  Guarantees
   Legal Proceedings
 Beasley v. TeleTech Holdings, Inc., et. al. Brown v. TeleTech Holdings,
Inc., et al., In re: TeleTech Litigation
 Susan M. Gregory v. Kenneth D. Tuchman, et. al.
  16




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 (11) NET INCOME PER SHARE
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007As restated
    
    
    
    
    
    As restatedShares used in basic earnings per share
calculation
    
    
    69,977
    
    
    
    70,580
    
    
    
    69,957
    
    
    
    70,474Effect of dilutive securities  Stock options
    
    
    1,729
    
    
    
    2,428
    
    
    
    1,662
    
    
    
    2,686Effect of dilutive securities  RSUs
    
    
    23
    
    
    
    96
    
    
    
    30
    
    
    
    22Shares used in dilutive earnings per share
calculation
    
    
    71,729
    
    
    
    73,104
    
    
    
    71,649
    
    
    
    73,182
  (12) EQUITY-BASED COMPENSATION PLANS
 Share-Based Payment
 Stock Options
  Restricted Stock Unit Grants
  17




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  18




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS
 Introduction
    Executive Summary
   19




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##### Table of Contents




    
    Integration of front- and back-office business processes to provide an enhanced customer
experience.Companies have realized that integrated business processes allow customer
needs to be met more quickly and efficiently resulting in higher customer satisfaction and
brand loyalty thereby improving their competitive position.
 
    
    Increasing percentage of company operations being outsourced to most capable third-party
providers.Having experienced success with outsourcing a portion of their business
processes, companies are increasingly outsourcing a larger percentage of this work. To
achieve these benefits, companies are consolidating their business processes with
third-party providers that have an extensive operating history, global reach, world-class
capabilities and an ability to scale and meet their evolving needs.
 
    
    Increasing adoption of outsourcing across broader groups of industries.Early adopters
of the business process outsourcing trend, such as the media and communications industries,
are being joined by companies in other industries, including healthcare, retailing and
financial services. These companies are beginning to adopt outsourcing to improve their
business processes and competitiveness.
 
    
    Focus on speed-to-market by companies launching new products or entering new geographic
locations.As companies broaden their product offerings and seek to enter new emerging
markets, they are looking for outsourcing providers that can provide speed-to-market while
reducing their capital and operating risk. To achieve these benefits, companies are seeking
BPO providers with an extensive operating history, an established global footprint and the
financial strength to invest in innovation to deliver more strategic capabilities and the
ability to scale and meet customer demands quickly.
 Our Strategy
   
    
    Deepen and broaden our relationships with existing clients.
 
    
    Win business with new clients and focus on targeted industries where we expect
accelerating adoption of business process outsourcing.
 
    
    Continue to invest in innovative proprietary technology and new business offerings.
 
    
    Continue to improve our operating margins.
 
    
    Selectively pursue acquisitions that extend our capabilities and/or industry expertise.
 Our Second Quarter 2008 Financial Results
  20




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##### Table of Contents



Cost of Restatement
  Cost of Securities Class Action Lawsuits
  Cost of
Derivative Action
 Susan M. Gregory v. Kenneth D. Tuchman, et. al.
 21




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##### Table of Contents



Regulatory Inquiries Related to Historical Equity-Based Compensation Practices
   NASDAQ Proceedings
  Business Overview
  North American BPO
    
    International BPOUnited States
    
    ArgentinaCanada
    
    AustraliaPhilippines
    
    BrazilChinaCosta RicaEnglandGermanyMalaysiaMexicoNew ZealandNorthern IrelandScotlandSouth AfricaSpain
 BPO Services
  22




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##### Table of Contents




    
    Capitalizing on the favorable trends in the global outsourcing environment, which we
believe will include more companies that want to:
 Adopt or increase BPO services;
 Consolidate outsourcing providers with those that have a solid financial
position, capital resources to sustain a long-term relationship and globally diverse
delivery capabilities across a broad range of solutions;
 Modify their approach to outsourcing based on total value delivered versus the
lowest priced provider; andBetter integrate front and back office processes.
 
    
    Deepening and broadening relationships with existing clients;
    
    Winning business with new clients and focusing on targeted high growth industry verticals;
 
    
    Continuing to diversify revenue into higher-margin offerings such as professional
services, talent acquisition, learning services and our hosted TeleTech OnDemand
capabilities;
 
    
    Increasing capacity utilization during peak and non-peak hours;
 
    
    Scaling our work-from-home initiative to increase operational flexibility; and
 
    
    Completing select acquisitions that extend our core BPO capabilities or vertical
expertise.
   23




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##### Table of Contents



24




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##### Table of Contents



June 30, 2008
    
    
    June 30, 2007TotalProduction
    
    
    
    
    
    
    
    
    
    
    TotalProductionWorkstations
    
    
    In Use
    
    
    % In Use
    
    
    Workstations
    
    
    In Use
    
    
    % In UseNorth American BPO
    
    
    17,332
    
    
    
    11,701
    
    
    
    68
    %
    
    
    14,014
    
    
    
    10,476
    
    
    
    75
    %International BPO
    
    
    12,267
    
    
    
    9,108
    
    
    
    74
    %
    
    
    9,876
    
    
    
    7,534
    
    
    
    76
    %Total
    
    
    29,599
    
    
    
    20,809
    
    
    
    70
    %
    
    
    23,890
    
    
    
    18,010
    
    
    
    75
    %
  Database Marketing and Consulting
  $
 Goodwill and Other Intangible Assets
 Overall
   25




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##### Table of Contents



Critical Accounting Policies and Estimates
  Revenue Recognition
   Production Rate
 Performance-Based
 Hybrid
   26




---



##### Table of Contents



Income Taxes
 Accounting for Income Taxes
   Allowance for Doubtful Accounts
  Impairment of Long-Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived Assets
   27




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##### Table of Contents



Goodwill
 Goodwill and Other Intangible
Assets
  Restructuring Liability
 Accounting for Costs
Associated with Exit or Disposal Activities
  Equity-Based Compensation
 Share-Based Payment Accounting for Stock Issued to Employees
   28




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##### Table of Contents



Contingencies
 Accounting for Contingencies
 Explanation of Key Metrics and Other Items
 Cost of Services
  Selling, General and Administrative
  Restructuring Charges, Net
  Interest Expense
  Other Income
  Other Expenses
  29




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##### Table of Contents



Presentation
of Non-GAAP Measurements
 Free Cash Flow
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007As Restated
    
    
    
    
    
    As RestatedFree cash flow
    
    $
    11,907
    
    
    $
    2,871
    
    
    $
    22,897
    
    
    $
    20,198Purchases of property, plant and equipment
    
    
    21,223
    
    
    
    15,514
    
    
    
    36,408
    
    
    
    29,020Net cash provided by operating activities
    
    $
    33,130
    
    
    $
    18,385
    
    
    $
    59,305
    
    
    $
    49,218
  30




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##### Table of Contents



Results of Operations
 Three Months Ended June 30, 2008 As Compared to Three Months Ended June 30, 2007
 Operating Review
  Three-Months Ended June 30,2008
    
    

% ofSegmentRevenue
    
    
    2007
    
    

%
ofSegmentRevenue
    
    
    $ Change
    
    
    % ChangeAs restatedRevenueNorth American BPO
    
    $
    243,238
    
    
    
    68.1
    %
    
    $
    225,792
    
    
    
    68.5
    %
    
    $
    17,446
    
    
    
    7.7
    %International BPO
    
    
    114,178
    
    
    
    31.9
    %
    
    
    98,111
    
    
    
    29.8
    %
    
    
    16,067
    
    
    
    16.4
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    5,705
    
    
    
    1.7
    %
    
    
    (5,705
    )
    
    
    (100.0
    )%$
    357,416
    
    
    
    100.0
    %
    
    $
    329,608
    
    
    
    100.0
    %
    
    $
    27,808
    
    
    
    8.4
    %Cost of servicesNorth American BPO
    
    $
    178,186
    
    
    
    73.3
    %
    
    $
    160,216
    
    
    
    71.0
    %
    
    $
    17,970
    
    
    
    11.2
    %International BPO
    
    
    87,590
    
    
    
    76.7
    %
    
    
    73,313
    
    
    
    74.7
    %
    
    
    14,277
    
    
    
    19.5
    %Database Marketing and Consulting
    
    
    57
    
    
    
    0.0
    %
    
    
    3,699
    
    
    
    64.8
    %
    
    
    (3,642
    )
    
    
    (98.5
    )%$
    265,833
    
    
    
    74.4
    %
    
    $
    237,228
    
    
    
    72.0
    %
    
    $
    28,605
    
    
    
    12.1
    %Selling, general and administrativeNorth American BPO
    
    $
    29,001
    
    
    
    11.9
    %
    
    $
    29,051
    
    
    
    12.9
    %
    
    $
    (50
    )
    
    
    (0.2
    )%International BPO
    
    
    17,015
    
    
    
    14.9
    %
    
    
    14,967
    
    
    
    15.3
    %
    
    
    2,048
    
    
    
    13.7
    %Database Marketing and Consulting
    
    
    (158
    )
    
    
    0.0
    %
    
    
    4,593
    
    
    
    80.5
    %
    
    
    (4,751
    )
    
    
    (103.4
    )%$
    45,858
    
    
    
    12.8
    %
    
    $
    48,611
    
    
    
    14.7
    %
    
    $
    (2,753
    )
    
    
    (5.7
    )%Depreciation and amortizationNorth American BPO
    
    $
    9,594
    
    
    
    3.9
    %
    
    $
    7,629
    
    
    
    3.4
    %
    
    $
    1,965
    
    
    
    25.8
    %International BPO
    
    
    6,030
    
    
    
    5.3
    %
    
    
    4,880
    
    
    
    5.0
    %
    
    
    1,150
    
    
    
    23.6
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    1,285
    
    
    
    22.5
    %
    
    
    (1,285
    )
    
    
    (100.0
    )%$
    15,624
    
    
    
    4.4
    %
    
    $
    13,794
    
    
    
    4.2
    %
    
    $
    1,830
    
    
    
    13.3
    %Restructuring charges, netNorth American BPO
    
    $
    
    
    
    
    0.0
    %
    
    $
    
    
    
    
    0.0
    %
    
    $
    
    
    
    
    0.0
    %International BPO
    
    
    430
    
    
    
    0.4
    %
    
    
    262
    
    
    
    0.3
    %
    
    
    168
    
    
    
    64.1
    %Database Marketing and Consulting
    
    
    10
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    10
    
    
    
    100.0
    %$
    440
    
    
    
    0.1
    %
    
    $
    262
    
    
    
    0.1
    %
    
    $
    178
    
    
    
    67.9
    %Impairment lossesNorth American BPO
    
    $
    
    
    
    
    0.0
    %
    
    $
    154
    
    
    
    0.1
    %
    
    $
    (154
    )
    
    
    (100.0
    )%International BPO
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    13,361
    
    
    
    234.2
    %
    
    
    (13,361
    )
    
    
    (100.0
    )%$
    
    
    
    
    0.0
    %
    
    $
    13,515
    
    
    
    4.1
    %
    
    $
    (13,515
    )
    
    
    (100.0
    )%Income (loss) from operationsNorth American BPO
    
    $
    26,457
    
    
    
    10.9
    %
    
    $
    28,742
    
    
    
    12.7
    %
    
    $
    (2,285
    )
    
    
    (8.0
    )%International BPO
    
    
    3,113
    
    
    
    2.7
    %
    
    
    4,689
    
    
    
    4.8
    %
    
    
    (1,576
    )
    
    
    (33.6
    )%Database Marketing and Consulting
    
    
    91
    
    
    
    0.0
    %
    
    
    (17,233
    )
    
    
    (302.1
    )%
    
    
    17,324
    
    
    
    100.5
    %$
    29,661
    
    
    
    8.3
    %
    
    $
    16,198
    
    
    
    4.9
    %
    
    $
    13,463
    
    
    
    83.1
    %Other income (expense), net
    
    $
    (543
    )
    
    
    (0.2
    )%
    
    $
    (2,235
    )
    
    
    (0.7
    )%
    
    $
    1,692
    
    
    
    75.7
    %Provision for income taxes
    
    $
    (7,536
    )
    
    
    (2.1
    )%
    
    $
    (4,737
    )
    
    
    (1.4
    )%
    
    $
    (2,799
    )
    
    
    (59.1
    )%
 31




---



##### Table of Contents



Revenue
    Cost of Services
    Selling, General and Administrative
    32




---



##### Table of Contents



Depreciation and Amortization
  Impairment Losses
  Other Income (Expense)
  Income Taxes
   33




---



##### Table of Contents



Results of Operations
 Six Months Ended June 30, 2008 As Compared to Six Months Ended June 30, 2007
 Operating Review
  Six-Months Ended June 30,% of
    
    
    
    
    
    
    % ofSegment
    
    
    
    
    
    
    Segment2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    $ Change
    
    
    % ChangeAs restatedRevenueNorth American BPO
    
    $
    505,700
    
    
    
    69.7
    %
    
    $
    460,237
    
    
    
    69.5
    %
    
    $
    45,463
    
    
    
    9.9
    %International BPO
    
    
    219,352
    
    
    
    30.3
    %
    
    
    190,516
    
    
    
    28.8
    %
    
    
    28,836
    
    
    
    15.1
    %Database Marketing
and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    11,595
    
    
    
    1.8
    %
    
    
    (11,595
    )
    
    
    (100.0
    )%$
    725,052
    
    
    
    100.0
    %
    
    $
    662,348
    
    
    
    100.0
    %
    
    $
    62,704
    
    
    
    9.5
    %Cost of servicesNorth American BPO
    
    $
    366,736
    
    
    
    72.5
    %
    
    $
    322,154
    
    
    
    70.0
    %
    
    $
    44,582
    
    
    
    13.8
    %International BPO
    
    
    169,041
    
    
    
    77.1
    %
    
    
    144,654
    
    
    
    75.9
    %
    
    
    24,387
    
    
    
    16.9
    %Database Marketing
and Consulting
    
    
    156
    
    
    
    0.0
    %
    
    
    7,662
    
    
    
    66.1
    %
    
    
    (7,506
    )
    
    
    (98.0
    )%$
    535,933
    
    
    
    73.9
    %
    
    $
    474,470
    
    
    
    71.6
    %
    
    $
    61,463
    
    
    
    13.0
    %Selling, general and administrativeNorth American BPO
    
    $
    60,947
    
    
    
    12.1
    %
    
    $
    60,503
    
    
    
    13.1
    %
    
    $
    444
    
    
    
    0.7
    %International BPO
    
    
    36,004
    
    
    
    16.4
    %
    
    
    31,083
    
    
    
    16.3
    %
    
    
    4,921
    
    
    
    15.8
    %Database Marketing
and Consulting
    
    
    279
    
    
    
    0.0
    %
    
    
    9,121
    
    
    
    78.7
    %
    
    
    (8,842
    )
    
    
    (96.9
    )%$
    97,230
    
    
    
    13.4
    %
    
    $
    100,707
    
    
    
    15.2
    %
    
    $
    (3,477
    )
    
    
    (3.5
    )%Depreciation and amortizationNorth American BPO
    
    $
    18,924
    
    
    
    3.7
    %
    
    $
    15,079
    
    
    
    3.3
    %
    
    $
    3,845
    
    
    
    25.5
    %International BPO
    
    
    11,853
    
    
    
    5.4
    %
    
    
    9,543
    
    
    
    5.0
    %
    
    
    2,310
    
    
    
    24.2
    %Database Marketing
and Consulting
    
    
    7
    
    
    
    0.0
    %
    
    
    2,726
    
    
    
    23.5
    %
    
    
    (2,719
    )
    
    
    (99.7
    )%$
    30,784
    
    
    
    4.2
    %
    
    $
    27,348
    
    
    
    4.1
    %
    
    $
    3,436
    
    
    
    12.6
    %Restructuring charges, netNorth American BPO
    
    $
    92
    
    
    
    0.0
    %
    
    $
    
    
    
    
    0.0
    %
    
    $
    92
    
    
    
    100.0
    %International BPO
    
    
    2,597
    
    
    
    1.2
    %
    
    
    262
    
    
    
    0.1
    %
    
    
    2,335
    
    
    
    891.2
    %Database Marketing
and Consulting
    
    
    (47
    )
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    (47
    )
    
    
    100.0
    %$
    2,642
    
    
    
    0.4
    %
    
    $
    262
    
    
    
    0.0
    %
    
    $
    2,380
    
    
    
    908.4
    %Impairment lossesNorth American BPO
    
    $
    
    
    
    
    0.0
    %
    
    $
    154
    
    
    
    0.0
    %
    
    $
    (154
    )
    
    
    (100.0
    )%International BPO
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Database Marketing
and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    13,361
    
    
    
    115.2
    %
    
    
    (13,361
    )
    
    
    (100.0
    )%$
    
    
    
    
    0.0
    %
    
    $
    13,515
    
    
    
    2.0
    %
    
    $
    (13,515
    )
    
    
    (100.0
    )%Income (loss) from operationsNorth American BPO
    
    $
    59,001
    
    
    
    11.7
    %
    
    $
    62,347
    
    
    
    13.5
    %
    
    $
    (3,346
    )
    
    
    (5.4
    )%International BPO
    
    
    (143
    )
    
    
    (0.1
    )%
    
    
    4,974
    
    
    
    2.6
    %
    
    
    (5,117
    )
    
    
    (102.9
    )%Database Marketing
and Consulting
    
    
    (395
    )
    
    
    0.0
    %
    
    
    (21,275
    )
    
    
    (183.5
    )%
    
    
    20,880
    
    
    
    98.1
    %$
    58,463
    
    
    
    8.1
    %
    
    $
    46,046
    
    
    
    7.0
    %
    
    $
    12,417
    
    
    
    27.0
    %Other income (expense), net
    
    $
    (1,591
    )
    
    
    (0.2
    )%
    
    $
    (3,512
    )
    
    
    (0.5
    )%
    
    $
    1,921
    
    
    
    54.7
    %Provision for income taxes
    
    $
    (15,329
    )
    
    
    (2.1
    )%
    
    $
    (15,111
    )
    
    
    (2.3
    )%
    
    $
    (218
    )
    
    
    (1.4
    )%
 34




---



##### Table of Contents



Revenue
    Cost of Services
    Selling, General and Administrative
    35




---



##### Table of Contents



Depreciation and Amortization
  Restructuring Charges
  Impairment Losses
  Other Income (Expense)
  Income Taxes
   Liquidity and Capital Resources
  36




---



##### Table of Contents



Cash and Cash Equivalents
  Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Free Cash Flow
  Obligations and Future Capital Requirements
  Less
than 1 Year
    
    
1 to 3 Years
    
    
    3 to 5 Years
    
    
    Over 5 Years
    
    
    TotalLine of credit
    
    $
    
    
    
    $
    
    
    
    $
    78,400
    
    
    $
    
    
    
    $
    78,400Capital lease obligations
    
    
    1,239
    
    
    
    2,934
    
    
    
    1,062
    
    
    
    
    
    
    
    5,235Purchase obligations
    
    
    33,702
    
    
    
    37,800
    
    
    
    9,819
    
    
    
    
    
    
    
    81,321Operating lease commitments
    
    
    34,369
    
    
    
    56,819
    
    
    
    34,178
    
    
    
    26,482
    
    
    
    151,848Total
    
    $
    69,310
    
    
    $
    97,553
    
    
    $
    123,459
    
    
    $
    26,482
    
    
    $
    316,804
 
    
    Contractual obligations to be paid in a foreign currency are translated at the
period end exchange rate.
 37




---



##### Table of Contents




    
    The contractual obligation table excludes our FIN48 liabilities of $1.6 million because
we cannot reliably estimate the timing of cash payments.
 Purchase Obligations
  Income Tax Obligations
  Future Capital Requirements
    Debt Instruments and Related Covenants
  Client Concentration
  38




---



##### Table of Contents



Recently Issued Accounting Pronouncements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
  Foreign Currency Risk
    39




---



##### Table of Contents



40




---



##### Table of Contents



Fair Value of Debt and Equity Securities
  
 ITEM 4. CONTROLS AND PROCEDURES
  Background
   Evaluation of Disclosure Controls and Procedures
   41




---



##### Table of Contents




    
    Completion of the Audit Committees Review and our own internal review of 100%, or
4,347, of the equity awards made awards from our IPO in August 1996 through August 2007 and
an additional 539 pre-IPO grants for subsequent modifications, cancellations, and other
accounting issues;
 
    
    Our review of 100% of real estate lease arrangements entered into since our IPO in
August 1996 to properly record asset retirement obligations and deferred rent, along with a
review of all material lease agreements to properly identify capital versus operating
leases and other accounting issues;
 
    
    Our efforts to remediate the material weaknesses in internal control over financial
reporting (as described in the section below entitled Managements Plan for Remediation);
and
 
    
    The performance of additional procedures by management designed to ensure the
reliability of our financial reporting.
  Managements Plan for Remediation
  Insufficient complement of personnel with appropriate accounting knowledge and training.
 
    
    In March 2008, we hired a new Assistant General Counsel with experience at major law
firms, a public company, the SEC and a public accounting firm, who will provide advice with
regard to the disclosures in our periodic reports and our equity-based compensation
practices;
 
    
    In May 2008, we hired a new Vice President and Controller who is a licensed CPA with
extensive experience in public accounting and public company accounting operations;
 
    
    In July 2008, we hired an assistant controller who reports directly to the Corporate
Controller and is responsible for external/SEC reporting, technical accounting issues (in
accordance with U.S. GAAP) and Sarbanes-Oxley compliance;
 
    
    We are actively seeking to hire an additional assistant corporate controller who will
oversee general ledger operations and monthly/quarterly closing processes;
 
    
    We are also actively seeking to hire additional accounting personnel with knowledge of
and technical expertise in U.S. GAAP; and
 
    
    We are implementing personnel resource plans and training designed to ensure that we
have sufficient personnel with knowledge, experience, and training in the application of
U.S. GAAP.
 42




---



##### Table of Contents



Equity-based compensation accounting
 
    
    Making annual equity awards at a set time each year and allocating annual grants to
recipients before the grant;
 
    
    Making all grants that require Compensation Committee approval, including new hire,
promotion and special circumstance grants, at a duly convened meeting, absent extraordinary
circumstances warranting action by unanimous written consent, and providing the
Compensation Committee with information on the accounting treatment and any non-standard
terms of each proposed grant;
 
    
    Designating a senior member of the Human Capital Department who, supported by designated
members of the Legal, Tax and Accounting Departments, shall be responsible for ensuring
that the accounting treatment, recipient notification requirements, and required disclosure
have been determined for each equity award before the award is authorized by the
Compensation Committee;
 
    
    Other than as approved under new grant procedures, prohibiting any changes to grants
after their approval date, other than to withdraw a grant to an individual in its entirety
because of a change in circumstances between approval and issuance of the grant (or to
correct clear clerical errors);
 
    
    Undertaking a training program for pertinent personnel in the terms of the Companys
equity compensation plans and improved policies and procedures;
 
    
    Expanding internal audit procedures relating to grant approval and documentation;
 
    
    Hiring additional accounting personnel with specific education and experience in
accounting for equity-based compensation; and
 
    
    Reviewing the new equity compensation grant practices after one year of operation.
 Lease accounting
 
    
    We have instituted additional levels of managerial review over all lease agreements and
the associated accounting;
 
    
    We are establishing processes to evaluate all new or modified leases, including the
preparation of a summary of key terms for each lease in order to ensure complete and
accurate recording of real estate lease arrangements in accordance with U.S. GAAP; and
 
    
    We are actively seeking to hire additional accounting personnel with specific experience
in lease accounting.
  43




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##### Table of Contents



Inherent Limitations of Internal Controls
  
    
    Judgments in decision-making can be faulty, and control and process breakdowns can occur
because of simple errors or mistakes.
 
    
    Controls can be circumvented by individuals, acting alone or in collusion with each
other, or by management override.
 
    
    The design of any system of controls is based in part on certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.
 
    
    Over time, controls may become inadequate because of changes in conditions or
deterioration in the degree of compliance with associated policies or procedures.
 
    
    The design of a control system must reflect the fact that resources are constrained, and
the benefits of controls must be considered relative to their costs.
  Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  Securities Class Action
 Beasley v. TeleTech Holdings, Inc., et. al. Brown v. TeleTech
Holdings, Inc., et al., In re: TeleTech Litigation
 44




---



##### Table of Contents



Derivative Action
 Susan M. Gregory v. Kenneth D. Tuchman, et. al.
 NASDAQ Proceedings
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  45




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##### Table of Contents



ITEM 6. EXHIBITS
 Exhibit No.
    
    Exhibit Description31.1
    
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)31.2
    
    
    Certification of Interim Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350)32.1
    
    
    Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)32.2
    
    
    Certification of Interim Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350)
 46




---



##### Table of Contents



SIGNATURES
  TELETECH HOLDINGS, INC.
(Registrant)Date: August 4, 2008
    
    
    By:
    /s/ Kenneth D. Tuchman

Kenneth D. Tuchman
Chairman and Chief Executive OfficerDate: August 4, 2008
    
    
    By:
    /s/ John R. Troka, Jr.

John R. Troka, Jr. 
Interim Chief Financial Officer
 47




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit Description31.1
    
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)31.2
    
    
    Certification of Interim Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350)32.1
    
    
    Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)32.2
    
    
    Certification of Interim Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
Section 1350)
 48