##### 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 March 31, 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.
  Delaware
    
    84-1291044(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 9197 South Peoria Street
Englewood, Colorado 80112
  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
MARCH 31, 2008 FORM 10-Q
TABLE OF CONTENTS
 Page No.Explanatory Note
    
    
    iiPART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of March 31, 2008 (unaudited) and
December 31, 2007
    
    
    1Condensed Consolidated Statements of Operations and Comprehensive Income
for the three months ended March 31, 2008 and 2007 (unaudited)
    
    
    2Condensed Consolidated Statement of Stockholders Equity as of and for the
three months ended March 31, 2008 (unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 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
    
    
    22Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    53Item 4. Controls and Procedures
    
    
    54PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    59Item 1A. Risk Factors
    
    
    59Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    60Item 3. Defaults Upon Senior Securities
    
    
    60Item 4. Submission of Matters to a Vote of Security Holders
    
    
    60Item 5. Other Information
    
    
    60Item 6. Exhibits
    
    
    60SIGNATURES
    
    
    61EXHIBIT INDEX
    
    
    62Certification of CEO Pursuant to Section 302Certification of Interim CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of Interim CFO Pursuant to Section 906
  i




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##### Table of Contents



EXPLANATORY NOTE
  Summary of Adjustments
  Pre-Tax Accounting Adjustments
    
    
    
    
    
    
    Provision
    
    
    TotalEquity-Based
    
    
    
    
    
    
    
    
    
    
    Total Pre-Tax
    
    
    for Income
    
    
    AccountingYear Ended December 31,
    
    Compensation
    
    
    Leases
    
    
    Other
    
    
    Adjustments
    
    
    Tax1
    
    
    Adjustments1996
    
    $
    763
    
    
    $
    132
    
    
    $
    
    
    
    $
    895
    
    
    $
    (334
    )
    
    $
    5611997
    
    
    1,776
    
    
    
    515
    
    
    
    
    
    
    
    2,291
    
    
    
    (862
    )
    
    
    1,4291998
    
    
    2,396
    
    
    
    1,552
    
    
    
    
    
    
    
    3,948
    
    
    
    (1,412
    )
    
    
    2,5361999
    
    
    12,779
    
    
    
    1,112
    
    
    
    
    
    
    
    13,891
    
    
    
    (5,022
    )
    
    
    8,8692000
    
    
    26,684
    
    
    
    3,022
    
    
    
    
    
    
    
    29,706
    
    
    
    (9,004
    )
    
    
    20,7022001
    
    
    5,648
    
    
    
    679
    
    
    
    10
    
    
    
    6,337
    
    
    
    (2,354
    )
    
    
    3,9832002
    
    
    6,105
    
    
    
    150
    
    
    
    817
    
    
    
    7,072
    
    
    
    (1,479
    )
    
    
    5,5932003
    
    
    2,214
    
    
    
    492
    
    
    
    3
    
    
    
    2,709
    
    
    
    (4,390
    )
    
    
    (1,681
    )2004
    
    
    237
    
    
    
    477
    
    
    
    (3
    )
    
    
    711
    
    
    
    (340
    )
    
    
    371Cumulative effect at
December 31, 2004
    
    
    58,602
    
    
    
    8,131
    
    
    
    827
    
    
    
    67,560
    
    
    
    (25,197
    )
    
    
    42,3632005
    
    
    965
    
    
    
    (922
    )
    
    
    392
    
    
    
    435
    
    
    
    1,437
    
    
    
    1,8722006
    
    
    611
    
    
    
    (1,437
    )
    
    
    (111
    )
    
    
    (937
    )
    
    
    1,798
    
    
    
    861First quarter 2007
    
    
    (209
    )
    
    
    (75
    )
    
    
    (863
    )
    
    
    (1,147
    )
    
    
    711
    
    
    
    (436
    )Second quarter 2007
    
    
    (272
    )
    
    
    227
    
    
    
    (559
    )
    
    
    (604
    )
    
    
    1,056
    
    
    
    452Total
    
    $
    59,697
    
    
    $
    5,924
    
    
    $
    (314
    )
    
    $
    65,307
    
    
    $
    (20,195
    )
    
    $
    45,112
 
 (1)
    
    In any given year, the Provision for Income Tax may not
directly correlate with the amount of total pre-tax
accounting adjustments. The provision as shown reflects
the tax benefits of the pre-tax accounting adjustments,
permanent tax differences, and rate differences for foreign
jurisdictions. These benefits are offset in part by
changes in deferred tax valuation allowances and other
adjustments restating the amount or period in which income
taxes were originally recorded. Equity-based Compensation Accounting
  ii




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Accounting for Stock Issued to
Employees Accounting for Stock-Based
Compensation Share-Based Payment
  Lease Accounting
 Accounting for Leases Accounting for Asset Retirement Obligations
 Other Accounting Adjustments
  Income Tax Adjustments and Income Tax Payables
  iii




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Accounting for Income Taxes
   iv




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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)
 March 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    98,167
    
    
    $
    91,239Accounts receivable, net
    
    
    272,599
    
    
    
    270,988Prepaids and other current assets
    
    
    57,034
    
    
    
    62,344Deferred tax assets, net
    
    
    13,295
    
    
    
    8,386Income tax receivables
    
    
    26,083
    
    
    
    26,868Total current assets
    
    
    467,178
    
    
    
    459,825Long-term assetsProperty, plant and equipment, net
    
    
    175,521
    
    
    
    174,809Goodwill
    
    
    45,251
    
    
    
    45,154Contract acquisition costs, net
    
    
    6,498
    
    
    
    6,984Deferred tax assets, net
    
    
    40,489
    
    
    
    39,764Other long-term assets
    
    
    29,247
    
    
    
    33,759Total long-term assets
    
    
    297,006
    
    
    
    300,470Total assets
    
    $
    764,184
    
    
    $
    760,295LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    26,220
    
    
    $
    38,761Accrued employee compensation and benefits
    
    
    92,573
    
    
    
    87,480Other accrued expenses
    
    
    28,488
    
    
    
    28,872Income tax payables
    
    
    22,117
    
    
    
    18,552Deferred tax liabilities, net
    
    
    125
    
    
    
    88Other short-term liabilities
    
    
    7,976
    
    
    
    13,057Total current liabilities
    
    
    177,499
    
    
    
    186,810Long-term liabilitiesLine of credit
    
    
    62,000
    
    
    
    65,400Grant advances
    
    
    6,199
    
    
    
    6,741Deferred tax liabilities
    
    
    14
    
    
    
    57Other long-term liabilities
    
    
    47,283
    
    
    
    46,531Total long-term liabilities
    
    
    115,496
    
    
    
    118,729Total liabilities
    
    
    292,995
    
    
    
    305,539Minority interest
    
    
    3,384
    
    
    
    3,555Commitments and contingencies (Note 10)Stockholders equityPreferred
stock - $0.01 par value; 10,000,000 shares authorized;
zero shares outstanding as of March 31, 2008 and
December 31, 2007, respectively
    
    
    
    
    
    
    Common stock
- $.01 par value; 150,000,000 shares authorized;
69,975,023 and 69,828,671 shares outstanding
as of March 31, 2008 and December 31, 2007, respectively
    
    
    700
    
    
    
    698Treasury stock at cost: 12,077,609 shares, respectively
    
    
    (143,205
    )
    
    
    (143,205
    )Additional paid-in capital
    
    
    336,267
    
    
    
    334,593Accumulated other comprehensive income
    
    
    53,691
    
    
    
    57,888Retained earnings
    
    
    220,352
    
    
    
    201,227Total stockholders equity
    
    
    467,805
    
    
    
    451,201Total liabilities and stockholders equity
    
    $
    764,184
    
    
    $
    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 EndedMarch 31,2008
    
    
    2007As RestatedRevenue
    
    $
    367,636
    
    
    $
    332,740Operating expensesCost of services (exclusive of depreciation
and amortization presented separately below)
    
    
    270,100
    
    
    
    237,242Selling, general and administrative
    
    
    51,372
    
    
    
    52,096Depreciation and amortization
    
    
    15,160
    
    
    
    13,554Restructuring charges, net
    
    
    2,202
    
    
    
    Total operating expenses
    
    
    338,834
    
    
    
    302,892Income from operations
    
    
    28,802
    
    
    
    29,848Other income (expense)Interest income
    
    
    1,086
    
    
    
    393Interest expense
    
    
    (1,565
    )
    
    
    (1,468
    )Other, net
    
    
    (569
    )
    
    
    (202
    )Total other income (expense)
    
    
    (1,048
    )
    
    
    (1,277
    )Income before income taxes and minority interest
    
    
    27,754
    
    
    
    28,571Provision for income taxes
    
    
    (7,793
    )
    
    
    (10,374
    )Income before minority interest
    
    
    19,961
    
    
    
    18,197Minority interest
    
    
    (836
    )
    
    
    (434
    )Net income
    
    $
    19,125
    
    
    $
    17,763Other comprehensive income (loss)Foreign currency translation adjustments
    
    $
    3,894
    
    
    $
    3,741Derivatives valuation, net of tax
    
    
    (8,091
    )
    
    
    2,662Other
    
    
    
    
    
    
    (21
    )Total other comprehensive income (loss)
    
    
    (4,197
    )
    
    
    6,382Comprehensive income
    
    $
    14,928
    
    
    $
    24,145Weighted average shares outstandingBasic
    
    
    69,937
    
    
    
    70,309Diluted
    
    
    71,508
    
    
    
    72,929Net income per shareBasic
    
    $
    0.27
    
    
    $
    0.25Diluted
    
    $
    0.27
    
    
    $
    0.24
  2




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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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,125
    
    
    
    19,125Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,894
    
    
    
    
    
    
    
    3,894Derivatives valuation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,091
    )
    
    
    
    
    
    
    (8,091
    )Vesting of restricted stock units
    
    
    
    
    
    
    
    
    
    
    146
    
    
    
    2

    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Tax shortfall from equity-based awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,047
    )
    
    
    
    
    
    
    
    
    
    
    (1,047
    )Equity-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,723
    
    
    
    
    
    
    
    
    
    
    
    2,723Balance as of March 31, 2008
    
    
    
    
    
    $
    
    
    
    
    69,975
    
    
    $
    700
    
    
    $
    (143,205
    )
    
    $
    336,267
    
    
    $
    53,691
    
    
    $
    220,352
    
    
    $
    467,805
  3




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
 Three-Months EndedMarch 31,2008
    
    
    2007As RestatedCash flows from operating activitiesNet income
    
    $
    19,125
    
    
    $
    17,763Adjustment to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    15,160
    
    
    
    13,554Amortization of contract acquisition costs
    
    
    486
    
    
    
    672Provision for doubtful accounts
    
    
    78
    
    
    
    266Loss on disposal of assets
    
    
    111
    
    
    
    Deferred income taxes
    
    
    (775
    )
    
    
    587Minority interest
    
    
    836
    
    
    
    434Tax shortfall from equity-based awards
    
    
    (1,047
    )
    
    
    Equity-based compensation expense
    
    
    2,723
    
    
    
    2,682Other
    
    
    78
    
    
    
    (46
    )Changes in assets and liabilities:Accounts receivable
    
    
    2,690
    
    
    
    992Prepaids and other assets
    
    
    (1,498
    )
    
    
    2,310Accounts payable and accrued expenses
    
    
    (6,595
    )
    
    
    (433
    )Other liabilities
    
    
    (5,197
    )
    
    
    (7,948
    )Net cash provided by operating activities
    
    
    26,175
    
    
    
    30,833Cash flows from investing activitiesPurchases of property, plant and equipment
    
    
    (15,185
    )
    
    
    (13,506
    )Net cash used in investing activities
    
    
    (15,185
    )
    
    
    (13,506
    )Cash flows from financing activitiesProceeds from lines of credit
    
    
    305,750
    
    
    
    113,300Payments on lines of credit
    
    
    (309,150
    )
    
    
    (139,300
    )Payments on long-term debt and capital lease obligations
    
    
    (574
    )
    
    
    (368
    )Payments of debt refinancing fees
    
    
    (6
    )
    
    
    (17
    )Payments to minority shareholder
    
    
    (1,023
    )
    
    
    (810
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    7,366Excess tax benefit from exercise of stock options
    
    
    
    
    
    
    4,384Net cash (used in) provided by financing activities
    
    
    (5,003
    )
    
    
    (15,445
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    941
    
    
    
    2,253Increases in cash and cash equivalents
    
    
    6,928
    
    
    
    4,135Cash and cash equivalents, beginning of period
    
    
    91,239
    
    
    
    58,352Cash and cash equivalents, end of period
    
    $
    98,167
    
    
    $
    62,487Supplemental disclosuresCash paid for interest
    
    $
    1,484
    
    
    $
    1,272Cash paid for income taxes
    
    $
    3,307
    
    
    $
    3,919Non-cash investing and financing activitiesLandlord incentives credited to deferred rent
    
    $
    530
    
    
    $
    963Stock options excercised in exchange for notes due to the Company
    
    $
    
    
    
    $
    602
  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
    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
  Non-controlling Interests in Condensed Consolidated
Financial Statements an amendment of Accounting Research Bulletin No. 51
 Business Combinationsa replacement of
FASB Statement No. 141
 Disclosures about Derivative Instruments and Hedging
Activities
 6




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 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
  Other Financial Instruments
  (2) RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
 Background and Scope of the Review
  7




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Summary of Findings
   Pre-Tax Accounting Adjustments
    
    
    
    
    
    
    Provision
    
    
    TotalEquity-Based
    
    
    
    
    
    
    
    
    
    
    Total Pre-Tax
    
    
    for Income
    
    
    AccountingYear Ended December 31,
    
    Compensation
    
    
    Leases
    
    
    Other
    
    
    Adjustments
    
    
    Tax1
    
    
    Adjustments1996
    
    $
    763
    
    
    $
    132
    
    
    $
    
    
    
    $
    895
    
    
    $
    (334
    )
    
    $
    5611997
    
    
    1,776
    
    
    
    515
    
    
    
    
    
    
    
    2,291
    
    
    
    (862
    )
    
    
    1,4291998
    
    
    2,396
    
    
    
    1,552
    
    
    
    
    
    
    
    3,948
    
    
    
    (1,412
    )
    
    
    2,5361999
    
    
    12,779
    
    
    
    1,112
    
    
    
    
    
    
    
    13,891
    
    
    
    (5,022
    )
    
    
    8,8692000
    
    
    26,684
    
    
    
    3,022
    
    
    
    
    
    
    
    29,706
    
    
    
    (9,004
    )
    
    
    20,7022001
    
    
    5,648
    
    
    
    679
    
    
    
    10
    
    
    
    6,337
    
    
    
    (2,354
    )
    
    
    3,9832002
    
    
    6,105
    
    
    
    150
    
    
    
    817
    
    
    
    7,072
    
    
    
    (1,479
    )
    
    
    5,5932003
    
    
    2,214
    
    
    
    492
    
    
    
    3
    
    
    
    2,709
    
    
    
    (4,390
    )
    
    
    (1,681
    )2004
    
    
    237
    
    
    
    477
    
    
    
    (3
    )
    
    
    711
    
    
    
    (340
    )
    
    
    371Cumulative effect at
December 31, 2004
    
    
    58,602
    
    
    
    8,131
    
    
    
    827
    
    
    
    67,560
    
    
    
    (25,197
    )
    
    
    42,3632005
    
    
    965
    
    
    
    (922
    )
    
    
    392
    
    
    
    435
    
    
    
    1,437
    
    
    
    1,8722006
    
    
    611
    
    
    
    (1,437
    )
    
    
    (111
    )
    
    
    (937
    )
    
    
    1,798
    
    
    
    861First quarter 2007
    
    
    (209
    )
    
    
    (75
    )
    
    
    (863
    )
    
    
    (1,147
    )
    
    
    711
    
    
    
    (436
    )Total
    
    $
    59,969
    
    
    $
    5,697
    
    
    $
    245
    
    
    $
    65,911
    
    
    $
    (21,251
    )
    
    $
    44,660
 
 (1)
    
    In any given year, the Provision for Income Tax may not
directly correlate with the amount of total pre-tax
accounting adjustments. The provision as shown reflects
the tax benefits of the pre-tax accounting adjustments,
permanent tax differences, and rate differences for foreign
jurisdictions. These benefits are offset in part by
changes in deferred tax valuation allowances and other
adjustments restating the amount or period in which income
taxes were originally recorded. 8




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Equity-Based Compensation Expense Adjustments
  Pre-Tax Equity Based Compensation ExpenseModifications
    
    
    Non-Measurement
    
    
    to Employee
    
    
    EmployeeYear Endend December 31,
    
    Date Changes
    
    
    Grants
    
    
    Grants
    
    
    Other
    
    
    Total1996
    
    $
    21
    
    
    $
    
    
    
    $
    742
    
    
    $
    
    
    
    $
    7631997
    
    
    223
    
    
    
    422
    
    
    
    1,131
    
    
    
    
    
    
    
    1,7761998
    
    
    454
    
    
    
    199
    
    
    
    1,743
    
    
    
    
    
    
    
    2,3961999
    
    
    2,714
    
    
    
    3,030
    
    
    
    6,559
    
    
    
    476
    
    
    
    12,7792000
    
    
    7,380
    
    
    
    13,411
    
    
    
    4,069
    
    
    
    1,824
    
    
    
    26,6842001
    
    
    4,921
    
    
    
    815
    
    
    
    (135
    )
    
    
    47
    
    
    
    5,6482002
    
    
    5,865
    
    
    
    76
    
    
    
    (10
    )
    
    
    174
    
    
    
    6,1052003
    
    
    499
    
    
    
    1,237
    
    
    
    231
    
    
    
    247
    
    
    
    2,2142004
    
    
    357
    
    
    
    82
    
    
    
    (425
    )
    
    
    223
    
    
    
    237Cumulative effect at
December 31, 2004
    
    
    22,434
    
    
    
    19,272
    
    
    
    13,905
    
    
    
    2,991
    
    
    
    58,6022005
    
    
    276
    
    
    
    303
    
    
    
    311
    
    
    
    75
    
    
    
    9652006
    
    
    (15
    )
    
    
    425
    
    
    
    49
    
    
    
    152
    
    
    
    611First quarter 2007
    
    
    28
    
    
    
    859
    
    
    
    (478
    )
    
    
    (618
    )
    
    
    (209
    )Total
    
    $
    22,723
    
    
    $
    20,859
    
    
    $
    13,787
    
    
    $
    2,600
    
    
    $
    59,969
 Measurement Date Changes Accounting for Stock Issued to Employees
   Modifications to Employee Grants
 
    
    Severance agreements offered to certain terminated employees that allowed for continued
vesting and the right to exercise stock options beyond the standard time period permitted
under the terms of the stock option agreement;
    
    Employment agreements that provided for the accelerated vesting of stock options;
 9




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 
    
    Continued vesting and the ability to exercise stock options for certain employees not
terminated from the Companys database in a timely manner following their departure from
TeleTech due to administrative errors; and
    
    Options granted to certain employees that were not entered into the Companys equity
tracking system until after their dates of termination, primarily due to administrative
delays in processing stock option requests and the lack of communication of employee
termination dates to the Companys third party plan administrator.
 Non-Employee Grants
 Other
 Tax
Consequences Under Internal Revenue Code
      Accounting for
Income Taxes
 10




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Lease Accounting
 Accounting for Leases
 Other Accounting Adjustments
  Income Tax Adjustments and Income Tax Payables
    11




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Three-Months Ended March 31, 2007As previouslyreported
    
    
    Adjustments
    
    
    As restatedRevenue
    
    $
    332,532
    
    
    $
    208
    
    
    $
    332,740Operating expensesCost of services (exclusive of depreciation and
amortization presented separately below)
    
    
    238,305
    
    
    
    (1,063
    )
    
    
    237,242Selling, general and administrative
    
    
    52,487
    
    
    
    (391
    )
    
    
    52,096Depreciation and amortization
    
    
    13,254
    
    
    
    300
    
    
    
    13,554Total operating expenses
    
    
    304,046
    
    
    
    (1,154
    )
    
    
    302,892Income from operations
    
    
    28,486
    
    
    
    1,362
    
    
    
    29,848Other income (expense), netInterest income
    
    
    393
    
    
    
    
    
    
    
    393Interest expense
    
    
    (1,284
    )
    
    
    (184
    )
    
    
    (1,468
    )Other, net
    
    
    (171
    )
    
    
    (31
    )
    
    
    (202
    )Total other income (expense), net
    
    
    (1,062
    )
    
    
    (215
    )
    
    
    (1,277
    )Income before income taxes and minority interest
    
    
    27,424
    
    
    
    1,147
    
    
    
    28,571Provision for income taxes
    
    
    (9,663
    )
    
    
    (711
    )
    
    
    (10,374
    )Income before minority interest
    
    
    17,761
    
    
    
    436
    
    
    
    18,197Minority interest
    
    
    (434
    )
    
    
    
    
    
    
    (434
    )Net income
    
    $
    17,327
    
    
    $
    436
    
    
    $
    17,763Other comprehensive income (loss)Foreign currency translation adjustments
    
    $
    1,915
    
    
    $
    1,826
    
    
    $
    3,741Derivatives valuation, net of tax
    
    
    1,370
    
    
    
    1,292
    
    
    
    2,662Other
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )Total other comprehensive income (loss)
    
    
    3,285
    
    
    
    3,097
    
    
    
    6,382Comprehensive income
    
    $
    20,612
    
    
    $
    3,533
    
    
    $
    24,145Weighted average shares outstandingBasic
    
    
    70,335
    
    
    
    (26
    )
    
    
    70,309Diluted
    
    
    72,880
    
    
    
    49
    
    
    
    72,929Net income per shareBasic
    
    $
    0.25
    
    
    $
    
    
    
    $
    0.25Diluted
    
    $
    0.24
    
    
    $
    
    
    
    $
    0.24
 12




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Three Months Ended March 31, 2007As previouslyreported
    
    
    Adjustments
    
    
    As restatedCash flows from operating activitiesNet cash provided by (used in):Net income
    
    $
    17,327
    
    
    $
    436
    
    
    $
    17,763Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    13,254
    
    
    
    300
    
    
    
    13,554Amortization of contract acquisition costs
    
    
    672
    
    
    
    
    
    
    
    672Provision for doubtful accounts
    
    
    266
    
    
    
    
    
    
    
    266Deferred income taxes
    
    
    137
    
    
    
    450
    
    
    
    587Minority interest
    
    
    434
    
    
    
    
    
    
    
    434Equity compensation expense
    
    
    2,892
    
    
    
    (210
    )
    
    
    2,682Other
    
    
    
    
    
    
    (46
    )
    
    
    (46
    )Changes in working capital and other assets and liabilities,
net of changes due to acquisitions:Accounts receivable
    
    
    45
    
    
    
    947
    
    
    
    992Prepaids and other assets
    
    
    (2,675
    )
    
    
    4,985
    
    
    
    2,310Accounts payable and other accrued expenses
    
    
    2,263
    
    
    
    (2,696
    )
    
    
    (433
    )Other liabilities
    
    
    (2,764
    )
    
    
    (5,184
    )
    
    
    (7,948
    )Net cash provided by operating activities
    
    
    31,851
    
    
    
    (1,018
    )
    
    
    30,833Cash flows from investing activitiesPurchases of property, plant and equipment
    
    
    (13,506
    )
    
    
    
    
    
    
    (13,506
    )Net cash used in investing activities
    
    
    (13,506
    )
    
    
    
    
    
    
    (13,506
    )Cash flows from financing activitiesProceeds from line of credit
    
    
    113,300
    
    
    
    
    
    
    
    113,300Payments on line of credit
    
    
    (139,300
    )
    
    
    
    
    
    
    (139,300
    )Payments on long-term debt and capital lease obligations
    
    
    
    
    
    
    (368
    )
    
    
    (368
    )Payments of debt issuance costs
    
    
    (17
    )
    
    
    
    
    
    
    (17
    )Payments to minority shareholder
    
    
    (810
    )
    
    
    
    
    
    
    (810
    )Proceeds from exercise of stock options
    
    
    8,369
    
    
    
    (1,003
    )
    
    
    7,366Excess tax benefit from exercise of stock options
    
    
    3,974
    
    
    
    410
    
    
    
    4,384Net cash provided by financing activities
    
    
    (14,484
    )
    
    
    (961
    )
    
    
    (15,445
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    937
    
    
    
    1,316
    
    
    
    2,253Net increase in cash and cash equivalents
    
    
    4,798
    
    
    
    (663
    )
    
    
    4,135Cash and cash equivalents at beginning of year
    
    
    60,484
    
    
    
    (2,132
    )
    
    
    58,352Cash and cash equivalents at end of year
    
    $
    65,282
    
    
    $
    (2,795
    )
    
    $
    62,487
 13




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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 IrelandScotlandSingaporeSouth AfricaSpain
    14




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Three Months EndedMarch 31,2008
    
    
    2007As restatedRevenueNorth American BPO
    
    $
    262,462
    
    
    $
    234,445International BPO
    
    
    105,174
    
    
    
    92,405Database Marketing and Consulting
    
    
    
    
    
    
    5,890Total
    
    $
    367,636
    
    
    $
    332,740Income (loss) from operationsNorth American BPO
    
    $
    32,544
    
    
    $
    33,605International BPO
    
    
    (3,256
    )
    
    
    285Database Marketing and Consulting
    
    
    (486
    )
    
    
    (4,042
    )Total
    
    $
    28,802
    
    
    $
    29,848
  Three Months EndedMarch 31,2008
    
    
    2007As restatedRevenueUnited States
    
    $
    109,769
    
    
    $
    112,209Latin America
    
    
    76,547
    
    
    
    54,885Philippines
    
    
    69,175
    
    
    
    48,732Canada
    
    
    47,649
    
    
    
    51,457Europe
    
    
    36,301
    
    
    
    36,876Asia Pacific
    
    
    28,195
    
    
    
    28,581Total
    
    $
    367,636
    
    
    $
    332,740
 (4) SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS
  Three Months EndedMarch 31,2008
    
    200715.6
    %
    
    
    14.0
    %Accounts receivable from Sprint Nextel was as follows (amounts in thousands):March 31,
    
    December 31,2008
    
    2007$
    39,233
    
    
    $
    37,347
 15




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  (5) GOODWILL
  ForeignDecember 31,
    
    
    
    
    
    
    Currency
    
    
    March 31,2007
    
    
    Impairments
    
    
    Impact
    
    
    2008North American BPO
    
    $
    35,885
    
    
    $
    
    
    
    $
    
    
    
    $
    35,885International BPO
    
    
    9,269
    
    
    
    
    
    
    
    96
    
    
    
    9,365Total
    
    $
    45,154
    
    
    $
    
    
    
    $
    96
    
    
    $
    45,250
 Goodwill and Other Intangible
Assets
 (6) DERIVATIVES
   16




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  LocalCurrency
    
    
    U.S. Dollar
    
    
    Dates Contracts areAmount
    
    
    Amount
    
    
    ThroughCanadian Dollar
    
    
    131,050
    
    
    $
    119,516
    
    
    December 2010Philippine Peso
    
    
    9,800,000
    
    
    
    222,946
    
    
    April 2010Argentine Peso
    
    
    137,253
    
    
    
    40,580
    
    
    December 2009Mexican Peso
    
    
    589,500
    
    
    
    51,326
    
    
    April 2010Malaysian Ringgit
    
    
    9,100
    
    
    
    2,874
    
    
    May 2009British Pound Sterling
    
    
    2,199
    
    
    
    4,366
    
    
    March 2011$
    441,608
    (7) FAIR VALUE
 Money Market Investments
 Deferred Compensation Plan
 Accounts Receivable and Payable
 17




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Derivative Assets and Liabilities
 Debt Obligations
  Fair Value Measurements at March 31, 2008 Using:Quoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableBalance at March 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsMoney market investments(1)
    
    $
    15.5
    
    
    $
    
    
    
    $
    15.5
    
    
    $
    Foreign currency contracts(2)
    
    
    20.4
    
    
    
    
    
    
    
    20.4
    
    
    
    Total assets
    
    $
    35.9
    
    
    $
    
    
    
    $
    35.9
    
    
    $
    LiabilitiesDeferred compensation plan liability(3)
    
    $
    4.8
    
    
    $
    
    
    
    $
    4.8
    
    
    $
    Total liabilities
    
    $
    4.8
    
    
    $
    
    
    
    $
    4.8
    
    
    $
    
 
 (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
 18




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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
    
    
    
    
    
    
    2,264
    
    
    
    2,264Payments
    
    
    
    
    
    
    (2,393
    )
    
    
    (2,393
    )Reversals
    
    
    
    
    
    
    (62
    )
    
    
    (62
    )Balance as of March 31, 2008
    
    $
    4,326
    
    
    $
    157
    
    
    $
    4,483
 (10) COMMITMENTS AND CONTINGENCIES
 Letters of Credit
  Guarantees
  19




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Legal Proceedings
 Beasley v. TeleTech Holdings, Inc., et. al. Brown v. TeleTech Holdings,
Inc., et al., In re: TeleTech Litigation
  (11) NET INCOME PER SHARE
  Three Months EndedMarch 31,2008
    
    
    2007As restatedShares used in basic earnings per share
calculation
    
    
    69,937
    
    
    
    70,309Effect of dilutive securities
    
    
    1,571
    
    
    
    2,620Shares used in dilutive earnings per share
calculation
    
    
    71,508
    
    
    
    72,929
  (12) EQUITY-BASED COMPENSATION PLANS
 Share-Based Payment
 20




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Stock Options
  Restricted Stock Grant
   21




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Introduction
 
   Executive Summary
   22




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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.
 23




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Our First Quarter 2008 Financial Results
    Restatement of Financial Statements
 Accounting for Stock Issued to Employees Accounting for Share Based Payment ,
 24




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##### Table of Contents



Pre-Tax Accounting Adjustments
    
    
    
    
    
    
    Provision
    
    
    TotalEquity-Based
    
    
    
    
    
    
    
    
    
    
    Total Pre-Tax
    
    
    for Income
    
    
    AccountingYear Ended December 31,
    
    Compensation
    
    
    Leases
    
    
    Other
    
    
    Adjustments
    
    
    Tax1
    
    
    Adjustments1996
    
    $
    763
    
    
    $
    132
    
    
    $
    
    
    
    $
    895
    
    
    $
    (334
    )
    
    $
    5611997
    
    
    1,776
    
    
    
    515
    
    
    
    
    
    
    
    2,291
    
    
    
    (862
    )
    
    
    1,4291998
    
    
    2,396
    
    
    
    1,552
    
    
    
    
    
    
    
    3,948
    
    
    
    (1,412
    )
    
    
    2,5361999
    
    
    12,779
    
    
    
    1,112
    
    
    
    
    
    
    
    13,891
    
    
    
    (5,022
    )
    
    
    8,8692000
    
    
    26,684
    
    
    
    3,022
    
    
    
    
    
    
    
    29,706
    
    
    
    (9,004
    )
    
    
    20,7022001
    
    
    5,648
    
    
    
    679
    
    
    
    10
    
    
    
    6,337
    
    
    
    (2,354
    )
    
    
    3,9832002
    
    
    6,105
    
    
    
    150
    
    
    
    817
    
    
    
    7,072
    
    
    
    (1,479
    )
    
    
    5,5932003
    
    
    2,214
    
    
    
    492
    
    
    
    3
    
    
    
    2,709
    
    
    
    (4,390
    )
    
    
    (1,681
    )2004
    
    
    237
    
    
    
    477
    
    
    
    (3
    )
    
    
    711
    
    
    
    (340
    )
    
    
    371Cumulative effect
at December 31,
2004
    
    
    58,602
    
    
    
    8,131
    
    
    
    827
    
    
    
    67,560
    
    
    
    (25,197
    )
    
    
    42,3632005
    
    
    965
    
    
    
    (922
    )
    
    
    392
    
    
    
    435
    
    
    
    1,437
    
    
    
    1,8722006
    
    
    611
    
    
    
    (1,437
    )
    
    
    (111
    )
    
    
    (937
    )
    
    
    1,798
    
    
    
    861First quarter 2007
    
    
    (209
    )
    
    
    (75
    )
    
    
    (863
    )
    
    
    (1,147
    )
    
    
    711
    
    
    
    (436
    )Second quarter 2007
    
    
    (272
    )
    
    
    227
    
    
    
    (559
    )
    
    
    (604
    )
    
    
    1,056
    
    
    
    452Total
    
    $
    59,697
    
    
    $
    5,924
    
    
    $
    (314
    )
    
    $
    65,307
    
    
    $
    (20,195
    )
    
    $
    45,112
 
 (1)
    
    In any given year, the Provision for Income Tax may not
directly correlate with the amount of total pre-tax
accounting adjustments. The provision as shown reflects
the tax benefits of the pre-tax accounting adjustments,
permanent tax differences, and rate differences for foreign
jurisdictions. These benefits are offset in part by
changes in deferred tax valuation allowances and other
adjustments restating the amount or period in which income
taxes were originally recorded. Equity-Based Compensation
 Accounting for Stock Issued to
Employees Accounting for Stock-Based
Compensation Share-Based Payment
 Background
  25




---



##### Table of Contents




    
    Reviewing hard copy and electronic files obtained from us as well as other sources that
totaled hundreds of thousands of pages of hard copy and electronic documents;
    
    Conducting interviews of 34 past and present employees, officers and directors, some of
whom were interviewed more than once;
    
    Engaging outside consultants to conduct various statistical analyses of our equity
awards;
    
    Reviewing Board and Committee minutes and related materials from 1996 through August
2007;
    
    Reviewing actions by unanimous written consent (UWCs) and other granting actions
relating to equity awards from 1996 through August 2007;
    
    Reviewing our public filings and equity compensation plans;
    
    Frequent communications by the Chairman of the Audit Committee with the Audit
Committees independent counsel and its accounting consultants; and
    
    Numerous telephonic and in-person meetings of the Audit Committee.
   Historical Equity-Based Compensation Practices
  
    
    Annual pool grants in conjunction with our annual merit review process, which generally
occurred within a few months following our year end (referred to as annual grants);
    
    Individual grants to newly hired or promoted Section 16 Officers and employees and, from
time to time, grants in recognition of performance or as incentives;
    
    Options granted or assumed in connection with acquisitions; and
    
    Options granted to non-employee directors and, from time to time, consultants.
  
    
    There was no willful misconduct in connection with our equity compensation granting
process.
    
    There was no evidence of improper conduct by the Chairman and Chief Executive Officer,
the Vice Chairman, any current member of senior management, any past or present member of
the Compensation Committee, or any other outside director.
 26




---



##### Table of Contents




    
    There was no regular or systematic practice of using hindsight to select grant dates and
no pattern of consistently hitting lows.
  
    
    Certain employees/officers involved in the administration of our stock options, none of
which are actively employed by us, did not adequately meet all of the demands of their
positions and/or did not adequately appreciate their responsibilities in the stock option
granting process, particularly in the period prior to 2002.
    
    There were control and other deficiencies in our equity compensation granting process.
    
    Our policies were not sufficient to ensure compliance with all applicable accounting and
disclosure rules relevant to equity compensation.
    
    There were episodic instances of selecting grant dates with some hindsight.
 o
    
    There was some evidence that certain employees/officers involved in selecting
grant dates, none of which are actively employed by us, had some understanding of the
accounting implications of selecting dates with hindsight. However, there was no
conclusive evidence demonstrating that those involved in selecting dates knowingly
and/or purposely violated accounting or disclosure rules.
 
    
    There were instances where we failed to appreciate that certain required granting
actions needed to be completed before a measurement date for a grant could be established
under applicable equity compensation accounting rules.
    
    Certain stock option awards were not properly recorded under applicable equity
compensation accounting rules, including in connection with:
 o
    
    modification of grants;o
    
    a recipients status as a consultant or an employee; ando
    
    treatment of performance-based vesting conditions.
 Delegation of Authority
  27




---



##### Table of Contents



Measurement Dates
   28




---



##### Table of Contents



Equity-Based Compensation Expense Adjustments
  
    
    Measurement date mistakes were made in connection with annual pool grants where the
allocation of the grants to individual recipients was not known with finality until after
the stated grant date;
    
    Measurement date mistakes were made on new hire and promotional grants to Section 16
Officers, employees and non-employee directors as a result of delayed or missing approvals
and grants made prior to the start date;
    
    Certain stock option awards were modified after the establishment of a measurement date
to accelerate the vesting of the employees stock options or to allow the exercise of stock
options beyond the standard 90-day period following termination of employment; and
    
    Certain grants previously accounted for as employee awards were determined to have been
made for non-employee consulting services and should have been accounted for under SFAS No.
123, Accounting for Stock-Based Compensation(SFAS 123).
  Pre-Tax Equity Based Compensation ExpenseModifications
    
    
    Non-Measurement
    
    
    to Employee
    
    
    EmployeeYear Ended December 31,
    
    Date Changes
    
    
    Grants
    
    
    Grants
    
    
    Other
    
    
    Total1996
    
    $
    21
    
    
    $
    
    
    
    $
    742
    
    
    $
    
    
    
    $
    7631997
    
    
    223
    
    
    
    422
    
    
    
    1,131
    
    
    
    
    
    
    
    1,7761998
    
    
    454
    
    
    
    199
    
    
    
    1,743
    
    
    
    
    
    
    
    2,3961999
    
    
    2,714
    
    
    
    3,030
    
    
    
    6,559
    
    
    
    476
    
    
    
    12,7792000
    
    
    7,380
    
    
    
    13,411
    
    
    
    4,069
    
    
    
    1,824
    
    
    
    26,6842001
    
    
    4,921
    
    
    
    815
    
    
    
    (135
    )
    
    
    47
    
    
    
    5,6482002
    
    
    5,865
    
    
    
    76
    
    
    
    (10
    )
    
    
    174
    
    
    
    6,1052003
    
    
    499
    
    
    
    1,237
    
    
    
    231
    
    
    
    247
    
    
    
    2,2142004
    
    
    357
    
    
    
    82
    
    
    
    (425
    )
    
    
    223
    
    
    
    237Cumulative effect at
December 31, 2004
    
    
    22,434
    
    
    
    19,272
    
    
    
    13,905
    
    
    
    2,991
    
    
    
    58,6022005
    
    
    276
    
    
    
    303
    
    
    
    311
    
    
    
    75
    
    
    
    9652006
    
    
    (15
    )
    
    
    425
    
    
    
    49
    
    
    
    152
    
    
    
    611First quarter 2007
    
    
    28
    
    
    
    859
    
    
    
    (478
    )
    
    
    (618
    )
    
    
    (209
    )Second quarter 2007
    
    
    62
    
    
    
    186
    
    
    
    (13
    )
    
    
    (507
    )
    
    
    (272
    )Total
    
    $
    22,785
    
    
    $
    21,045
    
    
    $
    13,774
    
    
    $
    2,093
    
    
    $
    59,697
 Measurement Date Adjustments
  29




---



##### Table of Contents




    
    Board and Committee meeting minutes and related materials;
    
    evidence relating to the dates UWCs were prepared and circulated for signature and/or
signed by Compensation Committee members;
    
    personnel files of employees who were granted options;
    
    e-mail communications and other electronic files from our computer system and in back-up
media;
    
    documentation relating to the allocation of annual grants to individual employees;
    
    information as to the respective hire dates of employees receiving the option grants,
including (if the grant was a new hire grant) the date of any offer letter;
    
    correspondence, memoranda and other documentation supporting option grants;
    
    information concerning the dates that stock options were entered into our (or our
third-party administrators) stock option tracking systems; and
    
    information obtained from current and former officers, directors, employees and outside
professionals.
 30




---



##### Table of Contents



New Hire, Promotional & Merit Grants to
    
    New Hire, Promotional & Merit Grants to Section 16Annual Pool Grants
    
    Employees
    
    OfficersTotal
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    TotalCompensation
    
    
    
    
    
    
    
    
    
    Compensation
    
    
    
    
    
    
    
    
    
    CompensationGrants Issued in
    
    Shares Granted
    
    Expense By
    
    Grants Issued in
    
    Shares Granted
    
    Expense By
    
    Grants Issued in
    
    Shares Granted
    
    Expense ByPeriod
    
    in Period
    
    Period
    
    Period
    
    in Period
    
    Period
    
    Period
    
    in Period
    
    PeriodPre-IPO through 1996
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    542
    
    
    
    5,047,544
    
    
    $
    21
    
    
    
    
    
    
    
    
    
    
    $
    1997
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    997,000
    
    
    
    511
    
    
    
    
    
    
    
    
    
    
    
    1998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    1,627,000
    
    
    
    421
    
    
    
    
    
    
    
    
    
    
    
    1999
    
    
    273
    
    
    
    1,038,953
    
    
    
    741
    
    
    
    114
    
    
    
    2,451,204
    
    
    
    4,381
    
    
    
    9
    
    
    
    1,706,749
    
    
    
    7642000
    
    
    327
    
    
    
    895,478
    
    
    
    1,167
    
    
    
    346
    
    
    
    2,485,887
    
    
    
    11,636
    
    
    
    5
    
    
    
    600,000
    
    
    
    8,6812001
    
    
    530
    
    
    
    1,339,385
    
    
    
    1,096
    
    
    
    58
    
    
    
    564,225
    
    
    
    3,817
    
    
    
    9
    
    
    
    1,160,000
    
    
    
    9222002
    
    
    569
    
    
    
    1,108,100
    
    
    
    1,250
    
    
    
    65
    
    
    
    999,300
    
    
    
    4,088
    
    
    
    8
    
    
    
    735,000
    
    
    
    6862003
    
    
    242
    
    
    
    457,100
    
    
    
    289
    
    
    
    45
    
    
    
    1,082,200
    
    
    
    634
    
    
    
    3
    
    
    
    407,300
    
    
    
    1,0362004
    
    
    256
    
    
    
    1,091,000
    
    
    
    145
    
    
    
    83
    
    
    
    1,408,000
    
    
    
    379
    
    
    
    5
    
    
    
    550,000
    
    
    
    107Cumulative
effect at December 31,
2004
    
    
    2,197
    
    
    
    5,930,016
    
    
    
    4,688
    
    
    
    1,393
    
    
    
    16,662,360
    
    
    
    25,888
    
    
    
    39
    
    
    
    5,159,049
    
    
    
    12,1962005
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    79
    
    
    
    1,002,500
    
    
    
    410
    
    
    
    4
    
    
    
    1,220,000
    
    
    
    1912006
    
    
    133
    
    
    
    591,950
    
    
    
    1,492
    
    
    
    61
    
    
    
    770,500
    
    
    
    2,464
    
    
    
    
    
    
    
    
    
    
    
    2,957First quarter 2007
    
    
    
    
    
    
    
    
    
    
    313
    
    
    
    89
    
    
    
    1,210,000
    
    
    
    1,551
    
    
    
    6
    
    
    
    635,000
    
    
    
    730Second quarter 2007
    
    
    
    
    
    
    
    
    
    
    309
    
    
    
    9
    
    
    
    232,500
    
    
    
    895
    
    
    
    1
    
    
    
    15,000
    
    
    
    819Totals
    
    
    2,330
    
    
    
    6,521,966
    
    
    $
    6,855
    
    
    
    1,631
    
    
    
    19,877,860
    
    
    $
    31,208
    
    
    
    50
    
    
    
    7,029,049
    
    
    $
    16,893
 Grants Made to Employees ofAcquired Companies
    
    Non-employee Director Grants
    
    Grants to ConsultantsTotal
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    TotalCompensation
    
    
    
    
    
    
    
    
    
    Compensation
    
    
    
    
    
    
    
    CompensationGrants Issued in
    
    Shares Granted
    
    Expense By
    
    Grants Issued in
    
    Shares Granted
    
    Expense By
    
    Grants Issued in
    
    Shares Granted
    
    Expense ByPeriod
    
    in Period
    
    Period
    
    Period
    
    in Period
    
    Period
    
    Period
    
    in Period
    
    PeriodPre-IPO through 1996
    
    
    9
    
    
    
    15,600
    
    
    $
    
    
    
    
    6
    
    
    
    262,500
    
    
    $
    
    
    
    
    3
    
    
    
    105,000
    
    
    $
    7421997
    
    
    131
    
    
    
    276,000
    
    
    
    97
    
    
    
    4
    
    
    
    75,000
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    1,1301998
    
    
    116
    
    
    
    1,547,899
    
    
    
    152
    
    
    
    7
    
    
    
    106,250
    
    
    
    80
    
    
    
    7
    
    
    
    547,744
    
    
    
    1,7431999
    
    
    177
    
    
    
    1,491,785
    
    
    
    320
    
    
    
    6
    
    
    
    133,750
    
    
    
    14
    
    
    
    1
    
    
    
    10,000
    
    
    
    6,5592000
    
    
    295
    
    
    
    848,230
    
    
    
    1,117
    
    
    
    5
    
    
    
    131,000
    
    
    
    14
    
    
    
    3
    
    
    
    40,000
    
    
    
    4,0692001
    
    
    
    
    
    
    
    
    
    
    1,203
    
    
    
    5
    
    
    
    155,000
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    (135
    )2002
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    6
    
    
    
    95,000
    
    
    
    14
    
    
    
    11
    
    
    
    55,000
    
    
    
    (10
    )2003
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    7
    
    
    
    100,000
    
    
    
    2
    
    
    
    6
    
    
    
    30,000
    
    
    
    2312004
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    6
    
    
    
    80,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34Cumulative
effect at December 31,
2004
    
    
    728
    
    
    
    4,179,514
    
    
    
    3,018
    
    
    
    52
    
    
    
    1,138,500
    
    
    
    176
    
    
    
    31
    
    
    
    787,744
    
    
    
    14,3632005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    60,000
    
    
    
    
    
    
    
    1
    
    
    
    5,000
    
    
    
    202006
    
    
    45
    
    
    
    197,000
    
    
    
    132
    
    
    
    4
    
    
    
    60,000
    
    
    
    402
    
    
    
    
    
    
    
    
    
    
    
    85First quarter 2007
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Second quarter 2007
    
    
    
    
    
    
    
    
    
    
    231
    
    
    
    4
    
    
    
    60,000
    
    
    
    678
    
    
    
    
    
    
    
    
    
    
    
    (13
    )Totals
    
    
    773
    
    
    
    4,376,514
    
    
    $
    3,467
    
    
    
    64
    
    
    
    1,318,500
    
    
    $
    1,256
    
    
    
    32
    
    
    
    792,744
    
    
    $
    14,457
 Total Equity GrantsTotal Pre-TaxEquity-Based
    
    ExpenseCompensation
    
    PreviouslyGrants Issued
    
    Shares Granted in
    
    Expense By
    
    Recorded Byin Period
    
    Period
    
    Period
    
    Period
    
    Net AdjustmentPre-IPO through 1996
    
    
    560
    
    
    
    5,430,644
    
    
    $
    763
    
    
    $
    
    
    
    $
    7631997
    
    
    185
    
    
    
    1,348,000
    
    
    
    1,776
    
    
    
    
    
    
    
    1,7761998
    
    
    220
    
    
    
    3,828,893
    
    
    
    2,396
    
    
    
    
    
    
    
    2,3961999
    
    
    580
    
    
    
    6,832,441
    
    
    
    12,779
    
    
    
    
    
    
    
    12,7792000
    
    
    981
    
    
    
    5,000,595
    
    
    
    26,684
    
    
    
    
    
    
    
    26,6842001
    
    
    602
    
    
    
    3,218,610
    
    
    
    6,917
    
    
    
    1,269
    
    
    
    5,6482002
    
    
    659
    
    
    
    2,992,400
    
    
    
    6,105
    
    
    
    
    
    
    
    6,1052003
    
    
    303
    
    
    
    2,076,600
    
    
    
    2,214
    
    
    
    
    
    
    
    2,2142004
    
    
    350
    
    
    
    3,129,000
    
    
    
    695
    
    
    
    458
    
    
    
    237Cumulative effect
at 
December 31,
2004
    
    
    4,440
    
    
    
    33,857,183
    
    
    
    60,329
    
    
    
    1,727
    
    
    
    58,6022005
    
    
    88
    
    
    
    2,287,500
    
    
    
    674
    
    
    
    (291
    )
    
    
    9652006
    
    
    243
    
    
    
    1,619,450
    
    
    
    7,532
    
    
    
    6,921
    
    
    
    611First quarter 2007
    
    
    95
    
    
    
    1,845,000
    
    
    
    2,682
    
    
    
    2,891
    
    
    
    (209
    )Second quarter 2007
    
    
    14
    
    
    
    307,500
    
    
    
    2,919
    
    
    
    3,191
    
    
    
    (272
    )Totals
    
    
    4,880
    
    
    
    39,916,633
    
    
    $
    74,136
    
    
    $
    14,439
    
    
    $
    59,697
 31




---



##### Table of Contents



Annual
Pool Grants 
 New Hire, Promotional and Merit Grants to Employees
 New Hire, Promotional and Merit Grants to Section 16 Officers 
 Grants Made to Employees of Acquired Companies
 Non-Employee Director Grants
 Grants to Consultants Accounting for Equity
Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services
 Modifications to Employee Grants
 
    
    Severance agreements offered to certain terminated employees that allowed for continued
vesting and the right to exercise stock options beyond the standard time period permitted
under the terms of the stock option agreement;
 32




---



##### Table of Contents




    
    Employment agreements that provided for the accelerated vesting of stock options;
    
    Continued vesting and the ability to exercise stock options for certain employees not
terminated from our database in a timely manner following their departure from TeleTech due
to administrative errors; and
    
    Options granted to certain employees that were not entered into our equity tracking
system until after their dates of termination, primarily due to administrative delays in
processing stock option requests and the lack of communication of employee termination
dates to our third party plan administrator.
 Impact of the Mistakes on our Financial Statements
   Pre-Tax Equity-Based
    
    
    
    
    
    
    Net ChargeCompensation
    
    
    Income
    
    
    to NetYear Ended December 31,
    
    Expense
    
    
    Taxes
    
    
    Income1996
    
    $
    763
    
    
    $
    (283
    )
    
    $
    4801997
    
    
    1,776
    
    
    
    (659
    )
    
    
    1,1171998
    
    
    2,396
    
    
    
    (888
    )
    
    
    1,5081999
    
    
    12,779
    
    
    
    (4,739
    )
    
    
    8,0402000
    
    
    26,684
    
    
    
    (9,895
    )
    
    
    16,7892001
    
    
    5,648
    
    
    
    (2,094
    )
    
    
    3,5542002
    
    
    6,105
    
    
    
    (2,264
    )
    
    
    3,8412003
    
    
    2,214
    
    
    
    (822
    )
    
    
    1,3922004
    
    
    237
    
    
    
    (235
    )
    
    
    2Cumulative effect at December 31, 2004
    
    
    58,602
    
    
    
    (21,879
    )
    
    
    36,7232005
    
    
    965
    
    
    
    (164
    )
    
    
    8012006
    
    
    611
    
    
    
    137
    
    
    
    748First quarter 2007
    
    
    (209
    )
    
    
    316
    
    
    
    107Second quarter 2007
    
    
    (272
    )
    
    
    213
    
    
    
    (59
    )Total
    
    $
    59,697
    
    
    $
    (21,377
    )
    
    $
    38,320
 Tax Consequences Under Internal Revenue
  33




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##### Table of Contents



34




---



##### Table of Contents



Accounting for Income Taxes
 Judgments
    35




---



##### Table of Contents



Pre-Tax Sensitivity Analysis (amounts in thousands)Hypothetical Equity-
    
    Hypothetical Equity-Equity-Based
    
    Equity-Based
    
    Total Equity-
    
    Based
    
    BasedCompensation
    
    Compensation
    
    Based
    
    Compensation
    
    CompensationExpense Previously
    
    Expense
    
    Compensation
    
    Expense at Lowest
    
    Expense at HighestRecorded
    
    Adjustments
    
    Expense
    
    Closing Price
    
    Closing PricePre-IPO through 1996
    
    $
    
    
    
    $
    763
    
    
    $
    763
    
    
    $
    763
    
    
    $
    7721997
    
    
    
    
    
    
    1,776
    
    
    
    1,776
    
    
    
    1,755
    
    
    
    2,0461998
    
    
    
    
    
    
    2,396
    
    
    
    2,396
    
    
    
    2,346
    
    
    
    3,1171999
    
    
    
    
    
    
    12,779
    
    
    
    12,779
    
    
    
    10,912
    
    
    
    13,5242000
    
    
    
    
    
    
    26,684
    
    
    
    26,684
    
    
    
    22,940
    
    
    
    32,6612001
    
    
    1,269
    
    
    
    5,648
    
    
    
    6,917
    
    
    
    4,776
    
    
    
    8,9452002
    
    
    
    
    
    
    6,105
    
    
    
    6,105
    
    
    
    3,075
    
    
    
    7,8342003
    
    
    
    
    
    
    2,214
    
    
    
    2,214
    
    
    
    1,972
    
    
    
    2,9982004
    
    
    458
    
    
    
    237
    
    
    
    695
    
    
    
    641
    
    
    
    1,152Cumulative effect
at 
December 31,
2004
    
    $
    1,727
    
    
    $
    58,602
    
    
    $
    60,329
    
    
    $
    49,180
    
    
    $
    73,0492005
    
    
    (291
    )
    
    
    965
    
    
    
    674
    
    
    
    584
    
    
    
    7892006
    
    
    6,921
    
    
    
    611
    
    
    
    7,532
    
    
    
    7,413
    
    
    
    7,665First quarter 2007
    
    
    2,891
    
    
    
    (209
    )
    
    
    2,682
    
    
    
    2,665
    
    
    
    2,689Second quarter 2007
    
    
    3,191
    
    
    
    (272
    )
    
    
    2,919
    
    
    
    2,901
    
    
    
    2,925Totals
    
    $
    14,439
    
    
    $
    59,697
    
    
    $
    74,136
    
    
    $
    62,743
    
    
    $
    87,117
 Lease Accounting
 Accounting for Leases Accounting for Asset Retirement Obligations
 36




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##### Table of Contents



Other Accounting Adjustments
  Income Tax Adjustments and Income Tax Payables
    Cost of Restatement
  Cost of Securities Class Action Lawsuits
  37




---



##### Table of Contents



Regulatory Inquiries Related to Historical Equity-Based Compensation Practices
  NASDAQ Delisting Proceedings
  Amendment of Credit Facility
   Business Overview
  38




---



##### Table of Contents



North American BPO
    
    International BPOUnited States
    
    ArgentinaCanada
    
    AustraliaPhilippines
    
    BrazilChinaCosta RicaEnglandGermanyMalaysiaMexicoNew ZealandNorthern IrelandScotlandSingaporeSouth AfricaSpain
    BPO Services
    39




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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; and
    
    Better 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.
    40




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##### Table of Contents



41




---



##### Table of Contents



March 31, 2008
    
    
    December 31, 2007Total
    
    
    
    
    
    
    
    
    
    
    TotalProduction
    
    
    
    
    
    
    % In
    
    
    Production
    
    
    
    
    
    
    % InWorkstations
    
    
    In Use
    
    
    Use
    
    
    Workstations
    
    
    In Use
    
    
    UseNorth American BPO
    
    
    15,632
    
    
    
    11,652
    
    
    
    75
    %
    
    
    16,097
    
    
    
    13,043
    
    
    
    81
    %International BPO
    
    
    12,288
    
    
    
    9,453
    
    
    
    77
    %
    
    
    12,248
    
    
    
    9,225
    
    
    
    75
    %Total
    
    
    27,920
    
    
    
    21,105
    
    
    
    76
    %
    
    
    28,345
    
    
    
    22,268
    
    
    
    79
    %
  Database Marketing and Consulting
  $
 Goodwill and Other Intangible Assets
 Overall
   42




---



##### Table of Contents



Critical Accounting Policies and Estimates
  Revenue Recognition
   Production Rate 
 PerformanceBased 
 Hybrid 
    43




---



##### 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
  44




---



##### 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
  45




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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
  46




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##### Table of Contents



Presentation of NonGAAP Measurements
 Free Cash Flow
   Three Months EndedMarch 31,2008
    
    
    2007As restatedFree cash flow
    
    $
    10,990
    
    
    $
    17,327Purchases of property, plant and equipment
    
    
    15,185
    
    
    
    13,506Net cash provided by operating activities
    
    $
    26,175
    
    
    $
    30,833
  47




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##### Table of Contents



Results of Operations
 Three Months Ended March 31, 2008 As Compared to Three Months Ended March 31, 2007
 Operating Review
  Three-Months Ended March 31,% of
    
    
    
    
    
    
    % ofSegment
    
    
    
    
    
    
    Segment2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    $ Change
    
    
    % ChangeRestatedRevenueNorth American BPO
    
    $
    262,462
    
    
    
    71.4
    %
    
    $
    234,445
    
    
    
    70.5
    %
    
    $
    28,017
    
    
    
    12.0
    %International BPO
    
    
    105,174
    
    
    
    28.6
    %
    
    
    92,405
    
    
    
    27.8
    %
    
    
    12,769
    
    
    
    13.8
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    5,890
    
    
    
    1.8
    %
    
    
    (5,890
    )
    
    
    -100.0
    %$
    367,636
    
    
    
    100.0
    %
    
    $
    332,740
    
    
    
    100.0
    %
    
    $
    34,896
    
    
    
    10.5
    %Cost of servicesNorth American BPO
    
    $
    188,550
    
    
    
    71.8
    %
    
    $
    161,938
    
    
    
    69.1
    %
    
    $
    26,612
    
    
    
    16.4
    %International BPO
    
    
    81,451
    
    
    
    77.4
    %
    
    
    71,341
    
    
    
    77.2
    %
    
    
    10,110
    
    
    
    14.2
    %Database Marketing and Consulting
    
    
    99
    
    
    
    0.0
    %
    
    
    3,963
    
    
    
    67.3
    %
    
    
    (3,864
    )
    
    
    -97.5
    %$
    270,100
    
    
    
    73.5
    %
    
    $
    237,242
    
    
    
    71.3
    %
    
    $
    32,858
    
    
    
    13.8
    %Selling, general and administrativeNorth American BPO
    
    $
    31,946
    
    
    
    12.2
    %
    
    $
    31,452
    
    
    
    13.4
    %
    
    $
    494
    
    
    
    1.6
    %International BPO
    
    
    18,989
    
    
    
    18.1
    %
    
    
    16,116
    
    
    
    17.4
    %
    
    
    2,873
    
    
    
    17.8
    %Database Marketing and Consulting
    
    
    437
    
    
    
    0.0
    %
    
    
    4,528
    
    
    
    76.9
    %
    
    
    (4,091
    )
    
    
    -90.3
    %$
    51,372
    
    
    
    14.0
    %
    
    $
    52,096
    
    
    
    15.7
    %
    
    $
    (724
    )
    
    
    -1.4
    %Depreciation and amortizationNorth American BPO
    
    $
    9,330
    
    
    
    3.6
    %
    
    $
    7,450
    
    
    
    3.2
    %
    
    $
    1,880
    
    
    
    25.2
    %International BPO
    
    
    5,823
    
    
    
    5.5
    %
    
    
    4,663
    
    
    
    5.0
    %
    
    
    1,160
    
    
    
    24.9
    %Database Marketing and Consulting
    
    
    7
    
    
    
    0.0
    %
    
    
    1,441
    
    
    
    24.5
    %
    
    
    (1,434
    )
    
    
    -99.5
    %$
    15,160
    
    
    
    4.1
    %
    
    $
    13,554
    
    
    
    4.1
    %
    
    $
    1,606
    
    
    
    11.8
    %Restructuring charges, netNorth American BPO
    
    $
    92
    
    
    
    0.1
    %
    
    $
    
    
    
    
    0.0
    %
    
    $
    92
    
    
    
    100.0
    %International BPO
    
    
    2,167
    
    
    
    2.1
    %
    
    
    
    
    
    
    0.0
    %
    
    
    2,167
    
    
    
    100.0
    %Database Marketing and Consulting
    
    
    (57
    )
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    (57
    )
    
    
    -100.0
    %$
    2,202
    
    
    
    0.6
    %
    
    $
    
    
    
    
    0.0
    %
    
    $
    2,202
    
    
    
    100.0
    %Impairment lossesNorth American BPO
    
    $
    
    
    
    
    0.0
    %
    
    $
    
    
    
    
    0.0
    %
    
    $
    
    
    
    
    0.0
    %International BPO
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %$
    
    
    
    
    0.0
    %
    
    $
    
    
    
    
    0.0
    %
    
    $
    
    
    
    
    0.0
    %Income (loss) from operationsNorth American BPO
    
    $
    32,544
    
    
    
    12.4
    %
    
    $
    33,605
    
    
    
    14.3
    %
    
    $
    (1,061
    )
    
    
    -3.2
    %International BPO
    
    
    (3,256
    )
    
    
    -3.1
    %
    
    
    285
    
    
    
    0.3
    %
    
    
    (3,541
    )
    
    
    -1242.5
    %Database Marketing and Consulting
    
    
    (486
    )
    
    
    0.0
    %
    
    
    (4,042
    )
    
    
    -68.6
    %
    
    
    3,556
    
    
    
    88.0
    %$
    28,802
    
    
    
    7.8
    %
    
    $
    29,848
    
    
    
    9.0
    %
    
    $
    (1,046
    )
    
    
    -3.5
    %Other income (expense), net
    
    $
    (1,048
    )
    
    
    -0.3
    %
    
    $
    (1,277
    )
    
    
    -0.4
    %
    
    $
    229
    
    
    
    17.9
    %Provision for income taxes
    
    $
    (7,793
    )
    
    
    -2.1
    %
    
    $
    (10,374
    )
    
    
    -3.1
    %
    
    $
    2,581
    
    
    
    24.9
    %
 48




---



##### Table of Contents



Revenue
    Cost of Services
    Selling, General and Administrative
    49




---



##### Table of Contents



Depreciation and Amortization
  Restructuring charges
  Other Income (Expense)
  Income Taxes
  Liquidity and Capital Resources
     50




---



##### 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
  Lessthan 1
    
    
    1 to 3
    
    
    3 to 5
    
    
    Over 5Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalLine of credit
    
    $
    
    
    
    $
    
    
    
    $
    62,000
    
    
    $
    
    
    
    $
    62,000Capital lease obligations
    
    
    1,645
    
    
    
    3,290
    
    
    
    1,580
    
    
    
    
    
    
    
    6,515Purchase obligations
    
    
    33,013
    
    
    
    36,960
    
    
    
    12,738
    
    
    
    39
    
    
    
    82,750Operating lease commitments
    
    
    33,390
    
    
    
    59,413
    
    
    
    37,297
    
    
    
    29,555
    
    
    
    159,655Total
    
    $
    68,048
    
    
    $
    99,663
    
    
    $
    113,615
    
    
    $
    29,594
    
    
    $
    310,920
 
    
    Contractual obligations to be paid in a foreign currency are translated at the period
end exchange rate.
    
    The contractual obligation table excludes our FIN48 liabilities of $1.6 million because
we cannot reliably estimate the timing of cash payments.
 Purchase Obligations
  51




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##### Table of Contents



Income Tax Obligations
  Future Capital Requirements
    Debt Instruments and Related Covenants
  Client Concentration
   Recently Issued Accounting Pronouncements
  52




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
  Foreign Currency Risk
      53




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##### Table of Contents



Fair Value of Debt and Equity Securities
  
 ITEM 4. CONTROLS AND PROCEDURES
  54




---



##### Table of Contents



Background
  Evaluation of Disclosure Controls and Procedures
    
    
    Completion of the Audit Committees Review and our own internal review of 100%, or
4,347, of the equity awards made from our IPO in 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;
    
    Our efforts to remediate the material weaknesses in internal control over financial
reporting described below; and
    
    The performance of additional procedures by management designed to ensure the
reliability of our financial reporting.
  55




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##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
  Internal Control  Integrated Framework
 Insufficient Complement of Personnel with Appropriate Accounting Knowledge and Training.
 Equity-Based Compensation Accounting
 Lease Accounting
   56




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##### Table of Contents



Remediation Plan
  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;
    
    We are actively seeking to hire two assistant corporate controllers who will report
directly to the Vice President and Controller. One will be responsible for external/SEC
reporting, technical accounting issues (in accordance with U.S. GAAP) and Sarbanes-Oxley
compliance and the other 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.
 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;
    
    We are actively seeking to hire 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.
 57




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##### Table of Contents



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 education
and experience in lease accounting.
   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.
  58




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##### Table of Contents



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
 NASDAQ Delisting Proceedings
  
 ITEM 1A. RISK FACTORS
  59




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##### Table of Contents



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
  
 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)
 60




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##### Table of Contents



SIGNATURES
  TELETECH HOLDINGS, INC.
       (Registrant)Date: July 16, 2008
    By:
    /s/Kenneth D. TuchmanKenneth D. TuchmanChairman and Chief Executive OfficerDate: July 16, 2008
    By:
    /s/John R. Troka, Jr.John R. Troka, Jr.Interim Chief Financial Officer 61




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##### 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)
 62