##### 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 September 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
SEPTEMBER 30, 2008 FORM 10-Q
TABLE OF CONTENTS
 Page
No.PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2008 (unaudited) and
December 31, 2007
    
    
    1Condensed Consolidated Statements of Operations and Comprehensive Income
(Loss) for the three and nine months ended September 30, 2008 and 2007 (unaudited)
    
    
    2Condensed Consolidated Statement of Stockholders Equity as of and for the
nine months ended September 30, 2008 (unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the nine months
ended September 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
    
    
    17Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    40PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    44Item 1A. Risk Factors
    
    
    44Item 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
    
    
    48EX-10.1EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 TELETECH HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share amounts)
(Unaudited)
 September 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    123,156
    
    
    $
    91,239Accounts receivable, net
    
    
    248,629
    
    
    
    270,988Prepaids and other current assets
    
    
    45,739
    
    
    
    62,344Deferred tax assets, net
    
    
    25,071
    
    
    
    8,386Income tax receivables
    
    
    25,029
    
    
    
    26,868Total current assets
    
    
    467,624
    
    
    
    459,825Long-term assetsProperty, plant and equipment, net
    
    
    172,003
    
    
    
    174,809Goodwill
    
    
    44,802
    
    
    
    45,154Contract acquisition costs, net
    
    
    6,122
    
    
    
    6,984Deferred tax assets, net
    
    
    42,422
    
    
    
    39,764Other long-term assets
    
    
    25,839
    
    
    
    33,759Total long-term assets
    
    
    291,188
    
    
    
    300,470Total assets
    
    $
    758,812
    
    
    $
    760,295LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    31,009
    
    
    $
    38,761Accrued employee compensation and benefits
    
    
    90,233
    
    
    
    87,480Other accrued expenses
    
    
    47,927
    
    
    
    28,872Income tax payables
    
    
    18,740
    
    
    
    18,552Deferred tax liabilities, net
    
    
    62
    
    
    
    88Other short-term liabilities
    
    
    10,583
    
    
    
    13,057Total current liabilities
    
    
    198,554
    
    
    
    186,810Long-term liabilitiesLine of credit
    
    
    108,700
    
    
    
    65,400Grant advances
    
    
    3,910
    
    
    
    6,741Deferred tax liabilities, net
    
    
    
    
    
    
    57Other long-term liabilities
    
    
    46,700
    
    
    
    46,531Total long-term liabilities
    
    
    159,310
    
    
    
    118,729Total liabilities
    
    
    357,864
    
    
    
    305,539Minority interest
    
    
    5,135
    
    
    
    3,555Commitments and contingencies (Note 9)Stockholders equityPreferred stock  $0.01 par value; 10,000,000 shares authorized;
zero shares outstanding as of September 30, 2008 and
December 31, 2007
    
    
    
    
    
    
    Common stock  $0.01 par value; 150,000,000 shares authorized;
65,582,279 and 69,828,671 shares outstanding
as of September 30, 2008 and December 31, 2007, respectively
    
    
    655
    
    
    
    698Treasury stock at cost: 16,472,166 and 12,077,609 shares outstanding
as of September 30, 2008 and December 31, 2007, respectively
    
    
    (213,983
    )
    
    
    (143,205
    )Additional paid-in capital
    
    
    340,665
    
    
    
    334,593Accumulated other comprehensive income
    
    
    7,602
    
    
    
    57,888Retained earnings
    
    
    260,874
    
    
    
    201,227Total stockholders equity
    
    
    395,813
    
    
    
    451,201Total liabilities and stockholders equity
    
    $
    758,812
    
    
    $
    760,295
  1




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Amounts in thousands, except per share amounts)
(Unaudited)
 Three-Months Ended
    
    
    Nine-Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue
    
    $
    349,110
    
    
    $
    335,727
    
    
    $
    1,074,162
    
    
    $
    998,075Operating expensesCost of
services (exclusive of depreciation and amortization presented separately below)
    
    
    252,666
    
    
    
    246,558
    
    
    
    788,599
    
    
    
    721,028Selling, general and administrative
    
    
    51,157
    
    
    
    46,968
    
    
    
    148,387
    
    
    
    147,675Depreciation and amortization
    
    
    14,998
    
    
    
    14,250
    
    
    
    45,782
    
    
    
    41,598Restructuring charges, net
    
    
    2,015
    
    
    
    2,588
    
    
    
    4,657
    
    
    
    2,850Impairment
    
    
    1,033
    
    
    
    2,274
    
    
    
    1,033
    
    
    
    15,789Total operating expenses
    
    
    321,869
    
    
    
    312,638
    
    
    
    988,458
    
    
    
    928,940Income from operations
    
    
    27,241
    
    
    
    23,089
    
    
    
    85,704
    
    
    
    69,135Other income (expense)Interest income
    
    
    1,327
    
    
    
    650
    
    
    
    3,801
    
    
    
    1,535Interest expense
    
    
    (1,595
    )
    
    
    (1,395
    )
    
    
    (4,649
    )
    
    
    (4,457
    )Loss on sale of business
    
    
    
    
    
    
    (6,122
    )
    
    
    
    
    
    
    (6,122
    )Other, net
    
    
    (509
    )
    
    
    41
    
    
    
    (1,520
    )
    
    
    (1,294
    )Total other expense
    
    
    (777
    )
    
    
    (6,826
    )
    
    
    (2,368
    )
    
    
    (10,338
    )Income before income taxes and minority interest
    
    
    26,464
    
    
    
    16,263
    
    
    
    83,336
    
    
    
    58,797Provision for income taxes
    
    
    (5,368
    )
    
    
    (1,082
    )
    
    
    (20,697
    )
    
    
    (16,193
    )Income before minority interest
    
    
    21,096
    
    
    
    15,181
    
    
    
    62,639
    
    
    
    42,604Minority interest
    
    
    (936
    )
    
    
    (808
    )
    
    
    (2,992
    )
    
    
    (1,750
    )Net income
    
    $
    20,160
    
    
    $
    14,373
    
    
    $
    59,647
    
    
    $
    40,854Other comprehensive income (loss)Foreign currency translation adjustments
    
    $
    (26,281
    )
    
    $
    7,710
    
    
    $
    (20,668
    )
    
    $
    19,197Derivatives valuation, net of tax
    
    
    (6,922
    )
    
    
    5,683
    
    
    
    (29,618
    )
    
    
    16,721Other
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    (66
    )Total other comprehensive income (loss)
    
    
    (33,203
    )
    
    
    13,371
    
    
    
    (50,286
    )
    
    
    35,852Comprehensive income (loss)
    
    $
    (13,043
    )
    
    $
    27,744
    
    
    $
    9,361
    
    
    $
    76,706Weighted average shares outstandingBasic
    
    
    68,217
    
    
    
    70,214
    
    
    
    69,373
    
    
    
    70,367Diluted
    
    
    69,508
    
    
    
    72,343
    
    
    
    70,922
    
    
    
    72,909Net income per shareBasic
    
    $
    0.30
    
    
    $
    0.20
    
    
    $
    0.86
    
    
    $
    0.58Diluted
    
    $
    0.29
    
    
    $
    0.20
    
    
    $
    0.84
    
    
    $
    0.56
  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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,647
    
    
    
    59,647Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,668
    )
    
    
    
    
    
    
    (20,668
    )Derivatives valuation, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,618
    )
    
    
    
    
    
    
    (29,618
    )Vesting of restricted stock units
    
    
    
    
    
    
    
    
    
    
    148
    
    
    
    2
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Exercised stock options
    
    
    
    
    
    
    
    
    
    
    335
    
    
    
    3
    
    
    
    4,124
    
    
    
    (1,194
    )
    
    
    
    
    
    
    
    
    
    
    2,933Tax shortfall from equity-based awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (997
    )
    
    
    
    
    
    
    
    
    
    
    (997
    )Equity-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,889
    
    
    
    
    
    
    
    
    
    
    
    7,889Modifications to equity-based awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    376
    
    
    
    
    
    
    
    
    
    
    
    376Purchases of common stock
    
    
    
    
    
    
    
    
    
    
    (4,818
    )
    
    
    (48
    )
    
    
    (74,902
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74,950
    )Balance as of September 30, 2008
    
    
    
    
    
    $
    
    
    
    
    65,494
    
    
    $
    655
    
    
    $
    (213,983
    )
    
    $
    340,665
    
    
    $
    7,602
    
    
    $
    260,874
    
    
    $
    395,813
  3




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
 Nine-Months EndedSeptember 30,2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    59,647
    
    
    $
    40,854Adjustment to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    45,782
    
    
    
    41,598Amortization of contract acquisition costs
    
    
    1,625
    
    
    
    2,017Provision for doubtful accounts
    
    
    780
    
    
    
    609Loss on disposal of assets
    
    
    65
    
    
    
    6,185Impairment losses
    
    
    1,033
    
    
    
    15,789Deferred income taxes
    
    
    (38
    )
    
    
    975Minority interest
    
    
    2,992
    
    
    
    1,750Tax shortfall from equity-based awards
    
    
    (997
    )
    
    
    Equity-based compensation expense
    
    
    7,889
    
    
    
    9,103Loss on foreign currency derivative
    
    
    675
    
    
    
    43Changes in assets and liabilities:Accounts receivable
    
    
    15,034
    
    
    
    (786
    )Prepaids and other assets
    
    
    (10,472
    )
    
    
    (14,751
    )Accounts payable and accrued expenses
    
    
    15,412
    
    
    
    2,001Other liabilities
    
    
    (14,128
    )
    
    
    (5,102
    )Net cash provided by operating activities
    
    
    125,299
    
    
    
    100,285Cash flows from investing activitiesPurchases of property, plant and equipment
    
    
    (51,728
    )
    
    
    (43,788
    )Proceeds from disposition of business
    
    
    
    
    
    
    3,237Payment for contract acquisition costs
    
    
    (763
    )
    
    
    Net cash used in investing activities
    
    
    (52,491
    )
    
    
    (40,551
    )Cash flows from financing activitiesProceeds from lines of credit
    
    
    779,170
    
    
    
    394,800Payments on lines of credit
    
    
    (735,870
    )
    
    
    (421,300
    )Payments on long-term debt and capital lease obligations
    
    
    (1,203
    )
    
    
    (933
    )Payments of debt refinancing fees
    
    
    (1,105
    )
    
    
    (17
    )Payments to minority shareholder
    
    
    (1,428
    )
    
    
    (2,693
    )Proceeds from exercise of stock options
    
    
    2,933
    
    
    
    15,593Excess tax benefit from exercise of stock options
    
    
    
    
    
    
    8,018Purchase of treasury stock
    
    
    (73,842
    )
    
    
    (47,021
    )Net cash used in financing activities
    
    
    (31,345
    )
    
    
    (53,553
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (9,546
    )
    
    
    6,151Increases in cash and cash equivalents
    
    
    31,917
    
    
    
    12,332Cash and cash equivalents, beginning of period
    
    
    91,239
    
    
    
    58,352Cash and cash equivalents, end of period
    
    $
    123,156
    
    
    $
    70,684Supplemental disclosuresCash paid for interest
    
    $
    3,822
    
    
    $
    4,131Cash paid for income taxes
    
    $
    19,191
    
    
    $
    15,750
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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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)
 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 
 The Fair Value Option for Financial Assets and
Financial Liabilities  including an amendment of FASB Statement No. 115
 6




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##### Table of Contents



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




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 (2) SEGMENT INFORMATION
   North American BPO
    
    International BPOUnited States
    
    ArgentinaCanada
    
    AustraliaPhilippines
    
    BrazilChinaCosta RicaEnglandGermanyMalaysiaMexicoNew ZealandNorthern IrelandScotlandSouth AfricaSpain
    8




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TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenueNorth American BPO
    
    $
    233,171
    
    
    $
    229,231
    
    
    $
    738,871
    
    
    $
    689,468International BPO
    
    
    115,939
    
    
    
    101,198
    
    
    
    335,291
    
    
    
    291,714Database Marketing and Consulting
    
    
    
    
    
    
    5,298
    
    
    
    
    
    
    
    16,893Total
    
    $
    349,110
    
    
    $
    335,727
    
    
    $
    1,074,162
    
    
    $
    998,075Income (loss) from operationsNorth American BPO
    
    $
    19,974
    
    
    $
    25,430
    
    
    $
    78,975
    
    
    $
    87,777International BPO
    
    
    7,356
    
    
    
    4,475
    
    
    
    7,213
    
    
    
    9,449Database Marketing and Consulting
    
    
    (89
    )
    
    
    (6,816
    )
    
    
    (484
    )
    
    
    (28,091
    )Total
    
    $
    27,241
    
    
    $
    23,089
    
    
    $
    85,704
    
    
    $
    69,135
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenueUnited States
    
    $
    94,688
    
    
    $
    100,286
    
    
    $
    305,474
    
    
    $
    311,660Latin America
    
    
    79,953
    
    
    
    56,957
    
    
    
    239,167
    
    
    
    167,630Philippines
    
    
    77,179
    
    
    
    58,107
    
    
    
    213,681
    
    
    
    158,990Canada
    
    
    36,206
    
    
    
    49,798
    
    
    
    123,836
    
    
    
    154,196Europe
    
    
    39,798
    
    
    
    36,059
    
    
    
    115,693
    
    
    
    109,946Asia Pacific
    
    
    21,286
    
    
    
    34,520
    
    
    
    76,311
    
    
    
    95,653Total
    
    $
    349,110
    
    
    $
    335,727
    
    
    $
    1,074,162
    
    
    $
    998,075
 (3) SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    200712.0
    %
    
    
    15.2
    %
    
    
    13.9
    %
    
    
    14.8
    %
  September 30,
    
    December 31,2008
    
    2007$
    25,895
    
    
    $
    37,347
  9




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 (4) GOODWILL
  ForeignDecember 31,
    
    
    
    
    
    
    Currency
    
    
    September 30,2007
    
    
    Impairments
    
    
    Impact
    
    
    2008North American BPO
    
    $
    35,885
    
    
    $
    
    
    
    $
    
    
    
    $
    35,885International BPO
    
    
    9,269
    
    
    
    
    
    
    
    (352
    )
    
    
    8,917Total
    
    $
    45,154
    
    
    $
    
    
    
    $
    (352
    )
    
    $
    44,802
 Goodwill and Other Intangible
Assets
 (5) DERIVATIVES
   10




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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
    
    
    107,050
    
    
    $
    97,819
    1
    
    December 2010Philippine Peso
    
    
    7,862,061
    
    
    
    179,227
    2
    
    August 2010Argentine Peso
    
    
    129,035
    
    
    
    37,207
    3
    
    May 2010Mexican Peso
    
    
    703,500
    
    
    
    62,265
    
    
    April 2010British Pound Sterling
    
    
    1,915
    
    
    
    3,379
    4
    
    March 2011$
    379,897
 
 (1)
    
    Includes options to purchase $54.6 million in Canadian dollars, which give us the right (but not
the obligation) to purchase the Canadian dollars. If the Canadian dollar depreciates relative to the
contracted exchange rate, the Company will elect to purchase the Canadian dollars at the then
beneficial market exchange rate, as opposed to the option price.(2)
    
    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 September 30, 2008.(3)
    
    Includes contracts to purchase Argentine pesos in exchange for Euros, which have been translated
into equivalent U.S. dollars on September 30, 2008.(4)
    
    Includes contracts to purchase British pound sterling in exchange for Euros, which have been
translated into equivalent U.S. dollars on September 30, 2008.    (6) FAIR VALUE
 Money Market Investments
 11




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 Deferred Compensation Plan
 Derivative Assets and Liabilities
  Fair Value Measurements at September 30, 2008 Using:Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableBalance at
    
    
    Assets
    
    
    Inputs
    
    
    InputsSeptember 30, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsMoney market investments(1)
    
    $
    38.0
    
    
    $
    
    
    
    $
    38.0
    
    
    $
    Total assets
    
    $
    38.0
    
    
    $
    
    
    
    $
    38.0
    
    
    $
    LiabilitiesForeign currency contracts(2)
    
    $
    11.0
    
    
    $
    
    
    
    $
    11.0
    
    
    $
    Deferred compensation plan liability(3)
    
    
    3.9
    
    
    
    
    
    
    
    3.9
    
    
    
    Total liabilities
    
    $
    14.9
    
    
    $
    
    
    
    $
    14.9
    
    
    $
    
 
 (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 5. Excludes option premiums paid.(3)
    
    Included in Accrued employee compensation and benefits in the accompanying Condensed
Consolidated Balance Sheet. Accounts Receivable and Payable
 Debt
  12




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 (7) INCOME TAXES
 Accounting for Income Taxes
 Accounting for Uncertainty in Income Taxes
   (8) RESTRUCTURING CHARGES AND IMPAIRMENT LOSSES
 Restructuring Charges
      13




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
   Closure ofDelivery
    
    
    Reduction inCenters
    
    
    Force
    
    
    TotalBalance as of December 31, 2007
    
    $
    4,326
    
    
    $
    348
    
    
    $
    4,674Expense
    
    
    1,475
    
    
    
    3,249
    
    
    
    4,724Payments
    
    
    (2,883
    )
    
    
    (3,502
    )
    
    
    (6,385
    )Reversals
    
    
    
    
    
    
    (67
    )
    
    
    (67
    )Balance as of September 30, 2008
    
    $
    2,918
    
    
    $
    28
    
    
    $
    2,946
 Impairment Losses
   (9) COMMITMENTS AND CONTINGENCIES
 Letters of Credit
  Guarantees
   14




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##### Table of Contents



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
 Susan M. Gregory v. Kenneth D. Tuchman, et al.
  (10) NET INCOME PER SHARE
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Shares used in basic earnings per share
calculation
    
    
    68,217
    
    
    
    70,214
    
    
    
    69,373
    
    
    
    70,367Effect of dilutive securities  Stock options
    
    
    1,289
    
    
    
    78
    
    
    
    1,549
    
    
    
    43Effect of dilutive securities  RSUs
    
    
    2
    
    
    
    2,051
    
    
    
    
    
    
    
    2,499Shares used in dilutive earnings per share
calculation
    
    
    69,508
    
    
    
    72,343
    
    
    
    70,922
    
    
    
    72,909
  15




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##### Table of Contents



TELETECH HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
 (11) EQUITY-BASED COMPENSATION PLANS
 Share-Based Payment
 Stock Options
  Restricted Stock Unit Grants
   16




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Introduction
    Executive Summary
   17




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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. A majority of our historic
revenues have been derived from providing customer-facing front-office solutions to our
clients. Given our global delivery centers are also fully capable of providing back-office
solutions, we are uniquely positioned to grow our revenue by winning more back-office
opportunities and providing the services during non-peak hours with minimal incremental
investment. Furthermore, by spreading our fixed costs across a larger revenue base and
increasing our asset utilization, we expect our profitability to improve over time.
 
    
    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. We
believe companies will continue to consolidate their business processes with third-party
providers, such as TeleTech, who are financially stable and able to invest in their
business while also demonstrating an extensive global operating history and an ability to
cost effectively scale to 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. For example, we have seen an increase in our
revenue from the healthcare, retail and financial services industries. We believe the
number of other industries that will adopt or increase their level of outsourcing will
continue to grow further enabling us to increase and diversify our revenue and client base.
 
    
    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. Given our financial stability,
geographic presence in 17 countries and our significant investment in standardized
technology and processes, clients increasingly select us because we can quickly ramp large,
complex business processes around the globe in a short period of time while assuring a
high-quality experience for their customers.
 Our Strategy
  18




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##### Table of Contents




    
    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 through increased offshore delivery; and
 
    
    Selectively pursue acquisitions that extend our capabilities, geographic reach and/or
industry expertise.
 Our Third Quarter 2008 Financial Results
    Cost of Restatement
  Securities Class Action Lawsuits
  19




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##### Table of Contents



Derivative Action
 Susan M. Gregory v. Kenneth D. Tuchman, et al.
 Regulatory Inquiries Related to Historical Equity-Based Compensation Practices
   NASDAQ Proceedings
  20




---



##### Table of Contents



Business Overview
  North American BPO
    
    International BPOUnited States
    
    ArgentinaCanada
    
    AustraliaPhilippines
    
    BrazilChinaCosta RicaEnglandGermanyMalaysiaMexicoNew ZealandNorthern IrelandScotlandSouth AfricaSpain
 BPO Services
     
    
    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;
 21




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##### Table of Contents




    
    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.
      22




---



##### Table of Contents



September 30, 2008
    
    September 30, 2007TotalProduction
    
    TotalProductionWorkstations
    
    In Use
    
    % In Use
    
    Workstations
    
    In Use
    
    % In UseNorth American BPOSites open < 1 year
    
    2,935
    
    1,252
    
    43%
    
    1,843
    
    367
    
    20%Sites open > 1 year
    
    14,289
    
    10,949
    
    77%
    
    13,946
    
    10,552
    
    76%Total North American BPO
     
    17,224
    
    12,201
    
    
    71%
    
    15,789
    
    10,919
    
    
    69%International BPOSites open < 1 year
    
    3,160
    
    1,480
    
    47%
    
    1,972
    
    273
    
    14%Sites open > 1 year
    
    10,000
    
    7,464
    
    75%
    
    9,866
    
    7,756
    
    79%Total International BPO
    
    13,160
    
    8,944
    
    68%
    
    11,838
    
    8,029
    
    68%Total
    
    30,384
    
    21,145
    
    70%
    
    27,627
    
    18,948
    
    69%
 Overall
   23




---



##### Table of Contents



Critical Accounting Policies and Estimates
  Revenue Recognition
   Production Rate 
 Performance-Based

 Hybrid 
   24




---



##### 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
   25




---



##### 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
   Contingencies
 Accounting for Contingencies
 26




---



##### Table of Contents



Explanation of Key Metrics and Other Items
 Cost of Services
  Selling, General and Administrative
  Restructuring Charges, Net
  Interest Expense
  Other Income
  Other Expenses
  Presentation
of Non-GAAP Measurements
 Free Cash Flow
  27




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Free cash flow
    
    $
    50,674
    
    
    $
    36,299
    
    
    $
    73,571
    
    
    $
    56,497Purchases of property, plant and equipment
    
    
    15,320
    
    
    
    14,768
    
    
    
    51,728
    
    
    
    43,788Net cash provided by operating activities
    
    $
    65,994
    
    
    $
    51,067
    
    
    $
    125,299
    
    
    $
    100,285
  28




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##### Table of Contents



Results of Operations
 Three Months Ended September 30, 2008 As Compared to Three Months Ended September 30, 2007
 Operating Review
  Three-Months Ended September 30,% of
    
    
    
    
    
    
    % ofSegment
    
    
    
    
    
    
    Segment2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    $ Change
    
    
    % ChangeRevenueNorth American BPO
    
    $
    233,171
    
    
    
    66.8
    %
    
    $
    229,231
    
    
    
    68.3
    %
    
    $
    3,940
    
    
    
    1.7
    %International BPO
    
    
    115,939
    
    
    
    33.2
    %
    
    
    101,198
    
    
    
    30.1
    %
    
    
    14,741
    
    
    
    14.6
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    5,298
    
    
    
    1.6
    %
    
    
    (5,298
    )
    
    
    (100.0
    )%$
    349,110
    
    
    
    100.0
    %
    
    $
    335,727
    
    
    
    100.0
    %
    
    $
    13,383
    
    
    
    4.0
    %Cost of servicesNorth American BPO
    
    $
    170,311
    
    
    
    73.0
    %
    
    $
    166,106
    
    
    
    72.5
    %
    
    $
    4,205
    
    
    
    2.5
    %International BPO
    
    
    82,339
    
    
    
    71.0
    %
    
    
    76,920
    
    
    
    76.0
    %
    
    
    5,419
    
    
    
    7.0
    %Database Marketing and Consulting
    
    
    16
    
    
    
    0.0
    %
    
    
    3,532
    
    
    
    66.7
    %
    
    
    (3,516
    )
    
    
    (99.5
    )%$
    252,666
    
    
    
    72.4
    %
    
    $
    246,558
    
    
    
    73.4
    %
    
    $
    6,108
    
    
    
    2.5
    %Selling, general and administrativeNorth American BPO
    
    $
    31,491
    
    
    
    13.5
    %
    
    $
    28,409
    
    
    
    12.4
    %
    
    $
    3,082
    
    
    
    10.8
    %International BPO
    
    
    19,593
    
    
    
    16.9
    %
    
    
    14,350
    
    
    
    14.2
    %
    
    
    5,243
    
    
    
    36.5
    %Database Marketing and Consulting
    
    
    73
    
    
    
    0.0
    %
    
    
    4,209
    
    
    
    79.4
    %
    
    
    (4,136
    )
    
    
    (98.3
    )%$
    51,157
    
    
    
    14.7
    %
    
    $
    46,968
    
    
    
    14.0
    %
    
    $
    4,189
    
    
    
    8.9
    %Depreciation and amortizationNorth American BPO
    
    $
    8,892
    
    
    
    3.8
    %
    
    $
    8,017
    
    
    
    3.5
    %
    
    $
    875
    
    
    
    10.9
    %International BPO
    
    
    6,106
    
    
    
    5.3
    %
    
    
    5,053
    
    
    
    5.0
    %
    
    
    1,053
    
    
    
    20.8
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    1,180
    
    
    
    22.3
    %
    
    
    (1,180
    )
    
    
    (100.0
    )%$
    14,998
    
    
    
    4.3
    %
    
    $
    14,250
    
    
    
    4.2
    %
    
    $
    748
    
    
    
    5.2
    %Restructuring charges, netNorth American BPO
    
    $
    1,470
    
    
    
    0.6
    %
    
    $
    1,269
    
    
    
    0.6
    %
    
    $
    201
    
    
    
    15.8
    %International BPO
    
    
    545
    
    
    
    0.5
    %
    
    
    400
    
    
    
    0.4
    %
    
    
    145
    
    
    
    36.3
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    919
    
    
    
    17.3
    %
    
    
    (919
    )
    
    
    (100.0
    )%$
    2,015
    
    
    
    0.6
    %
    
    $
    2,588
    
    
    
    0.8
    %
    
    $
    (573
    )
    
    
    (22.1
    )%Impairment lossesNorth American BPO
    
    $
    1,033
    
    
    
    0.4
    %
    
    $
    
    
    
    
    0.0
    %
    
    $
    1,033
    
    
    
    100.0
    %International BPO
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    2,274
    
    
    
    42.9
    %
    
    
    (2,274
    )
    
    
    (100.0
    )%$
    1,033
    
    
    
    0.3
    %
    
    $
    2,274
    
    
    
    0.7
    %
    
    $
    (1,241
    )
    
    
    (54.6
    )%Income (loss) from operationsNorth American BPO
    
    $
    19,974
    
    
    
    8.6
    %
    
    $
    25,430
    
    
    
    11.1
    %
    
    $
    (5,456
    )
    
    
    (21.5
    )%International BPO
    
    
    7,356
    
    
    
    6.3
    %
    
    
    4,475
    
    
    
    4.4
    %
    
    
    2,881
    
    
    
    64.4
    %Database Marketing and Consulting
    
    
    (89
    )
    
    
    0.0
    %
    
    
    (6,816
    )
    
    
    (128.7
    )%
    
    
    6,727
    
    
    
    98.7
    %$
    27,241
    
    
    
    7.8
    %
    
    $
    23,089
    
    
    
    6.9
    %
    
    $
    4,152
    
    
    
    18.0
    %Other income (expense), net
    
    $
    (777
    )
    
    
    (0.2
    )%
    
    $
    (6,826
    )
    
    
    (2.0
    )%
    
    $
    6,049
    
    
    
    88.6
    %Provision for income taxes
    
    $
    (5,368
    )
    
    
    (1.5
    )%
    
    $
    (1,082
    )
    
    
    (0.3
    )%
    
    $
    (4,286
    )
    
    
    (396.1
    )%
 29




---



##### Table of Contents



Revenue
     Cost of Services
    Selling, General and Administrative
   30




---



##### Table of Contents



Depreciation and Amortization
  Restructuring Charges
  Impairment Losses
  Other Income (Expense)
  Income Taxes
 %
 31




---



##### Table of Contents



32




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##### Table of Contents



Results of Operations
 Nine months Ended September 30, 2008 As Compared to Nine months Ended September 30, 2007
 Operating Review
  Nine-Months Ended September 30,% of
    
    
    
    
    
    
    % ofSegment
    
    
    
    
    
    
    Segment2008
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    $ Change
    
    
    % ChangeRevenueNorth American BPO
    
    $
    738,871
    
    
    
    68.8
    %
    
    $
    689,468
    
    
    
    69.1
    %
    
    $
    49,403
    
    
    
    7.2
    %International BPO
    
    
    335,291
    
    
    
    31.2
    %
    
    
    291,714
    
    
    
    29.2
    %
    
    
    43,577
    
    
    
    14.9
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    16,893
    
    
    
    1.7
    %
    
    
    (16,893
    )
    
    
    (100.0
    )%$
    1,074,162
    
    
    
    100.0
    %
    
    $
    998,075
    
    
    
    100.0
    %
    
    $
    76,087
    
    
    
    7.6
    %Cost of servicesNorth American BPO
    
    $
    537,047
    
    
    
    72.7
    %
    
    $
    488,260
    
    
    
    70.8
    %
    
    $
    48,787
    
    
    
    10.0
    %International BPO
    
    
    251,380
    
    
    
    75.0
    %
    
    
    221,574
    
    
    
    76.0
    %
    
    
    29,806
    
    
    
    13.5
    %Database Marketing and Consulting
    
    
    172
    
    
    
    0.0
    %
    
    
    11,194
    
    
    
    66.3
    %
    
    
    (11,022
    )
    
    
    (98.5
    )%$
    788,599
    
    
    
    73.4
    %
    
    $
    721,028
    
    
    
    72.2
    %
    
    $
    67,571
    
    
    
    9.4
    %Selling, general and administrativeNorth American BPO
    
    $
    92,438
    
    
    
    12.5
    %
    
    $
    88,912
    
    
    
    12.9
    %
    
    $
    3,526
    
    
    
    4.0
    %International BPO
    
    
    55,597
    
    
    
    16.6
    %
    
    
    45,433
    
    
    
    15.6
    %
    
    
    10,164
    
    
    
    22.4
    %Database Marketing and Consulting
    
    
    352
    
    
    
    0.0
    %
    
    
    13,330
    
    
    
    78.9
    %
    
    
    (12,978
    )
    
    
    (97.4
    )%$
    148,387
    
    
    
    13.8
    %
    
    $
    147,675
    
    
    
    14.8
    %
    
    $
    712
    
    
    
    0.5
    %Depreciation and amortizationNorth American BPO
    
    $
    27,816
    
    
    
    3.8
    %
    
    $
    23,096
    
    
    
    3.3
    %
    
    $
    4,720
    
    
    
    20.4
    %International BPO
    
    
    17,959
    
    
    
    5.4
    %
    
    
    14,596
    
    
    
    5.0
    %
    
    
    3,363
    
    
    
    23.0
    %Database Marketing and Consulting
    
    
    7
    
    
    
    0.0
    %
    
    
    3,906
    
    
    
    23.1
    %
    
    
    (3,899
    )
    
    
    (99.8
    )%$
    45,782
    
    
    
    4.3
    %
    
    $
    41,598
    
    
    
    4.2
    %
    
    $
    4,184
    
    
    
    10.1
    %Restructuring charges, netNorth American BPO
    
    $
    1,562
    
    
    
    0.2
    %
    
    $
    1,269
    
    
    
    0.2
    %
    
    $
    293
    
    
    
    23.1
    %International BPO
    
    
    3,142
    
    
    
    0.9
    %
    
    
    662
    
    
    
    0.2
    %
    
    
    2,480
    
    
    
    374.6
    %Database Marketing and Consulting
    
    
    (47
    )
    
    
    0.0
    %
    
    
    919
    
    
    
    5.4
    %
    
    
    (966
    )
    
    
    (105.1
    )%$
    4,657
    
    
    
    0.4
    %
    
    $
    2,850
    
    
    
    0.3
    %
    
    $
    1,807
    
    
    
    63.4
    %Impairment lossesNorth American BPO
    
    $
    1,033
    
    
    
    0.1
    %
    
    $
    154
    
    
    
    0.0
    %
    
    $
    879
    
    
    
    570.8
    %International BPO
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Database Marketing and Consulting
    
    
    
    
    
    
    0.0
    %
    
    
    15,635
    
    
    
    92.6
    %
    
    
    (15,635
    )
    
    
    (100.0
    )%$
    1,033
    
    
    
    0.1
    %
    
    $
    15,789
    
    
    
    1.6
    %
    
    $
    (14,756
    )
    
    
    (93.5
    )%Income (loss) from operationsNorth American BPO
    
    $
    78,975
    
    
    
    10.7
    %
    
    $
    87,777
    
    
    
    12.7
    %
    
    $
    (8,802
    )
    
    
    (10.0
    )%International BPO
    
    
    7,213
    
    
    
    2.2
    %
    
    
    9,449
    
    
    
    3.2
    %
    
    
    (2,236
    )
    
    
    (23.7
    )%Database Marketing and Consulting
    
    
    (484
    )
    
    
    0.0
    %
    
    
    (28,091
    )
    
    
    (166.3
    )%
    
    
    27,607
    
    
    
    98.3
    %$
    85,704
    
    
    
    8.0
    %
    
    $
    69,135
    
    
    
    6.9
    %
    
    $
    16,569
    
    
    
    24.0
    %Other income (expense), net
    
    $
    (2,368
    )
    
    
    (0.2
    )%
    
    $
    (10,338
    )
    
    
    (1.0
    )%
    
    $
    7,970
    
    
    
    77.1
    %Provision for income taxes
    
    $
    (20,697
    )
    
    
    (1.9
    )%
    
    $
    (16,193
    )
    
    
    (1.6
    )%
    
    $
    (4,504
    )
    
    
    (27.8
    )%
 33




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##### Table of Contents



Revenue
     Cost of Services
    Selling, General and Administrative
  34




---



##### Table of Contents



Depreciation and Amortization
  Restructuring Charges
  Impairment Losses
  Other Income (Expense)
  Income Taxes
  35




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##### Table of Contents



Liquidity and Capital Resources
     Cash and Cash Equivalents
  Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  36




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##### Table of Contents



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
    
    $
    
    
    
    $
    108,700
    
    
    $
    
    
    
    $
    
    
    
    $
    108,700Capital lease obligations
    
    
    1,605
    
    
    
    3,386
    
    
    
    916
    
    
    
    
    
    
    
    5,907Purchase obligations
    
    
    19,673
    
    
    
    22,679
    
    
    
    9,659
    
    
    
    7
    
    
    
    52,018Operating lease commitments
    
    
    32,558
    
    
    
    54,322
    
    
    
    31,691
    
    
    
    23,964
    
    
    
    142,535Total
    
    $
    53,836
    
    
    $
    189,087
    
    
    $
    42,266
    
    
    $
    23,971
    
    
    $
    309,160
 
    
    Contractual obligations to be paid in a foreign currency are translated at the
period end exchange rate.
 
    
    Purchase obligations primarily consist of outstanding purchase orders for goods or
services not yet received, which are not recognized as liabilities in our Condensed
Consolidated Balance Sheet until such goods and/or services are received.
 
    
    The contractual obligation table excludes our FIN 48 liabilities of $1.0 million because
we cannot reliably estimate the timing of cash payments.
 Future Capital Requirements
    37




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##### Table of Contents



Debt Instruments and Related Covenants
  Client Concentration
   Recently Issued Accounting Pronouncements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
  Foreign Currency Risk
  38




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##### Table of Contents



Nine Months EndedCurrency Pairings
    
    September 30,2008
    
    2007Canadian Dollar vs. U.S. Dollar
    
    
    (7.3
    )%
    
    
    14.5
    %Philippine Peso vs. U.S. Dollar
    
    
    (14.5
    )%
    
    
    7.9
    %Argentine Peso vs. U.S. Dollar
    
    
    0.7
    %
    
    
    (3.4
    )%Mexican Peso vs. U.S. Dollar
    
    
    (0.5
    %)
    
    
    (1.2
    )%
  Local
    
    
    
    
    
    DatesCurrency
    
    
    U.S. Dollar
    
    
    ContractsAmount
    
    
    Amount
    
    
    are ThroughCanadian Dollar
    
    
    107,050
    
    
    $
    97,819
    1
    
    December 2010Philippine Peso
    
    
    7,862,061
    
    
    
    179,227
    2
    
    August 2010Argentine Peso
    
    
    129,035
    
    
    
    37,207
    3
    
    May 2010Mexican Peso
    
    
    703,500
    
    
    
    62,265
    
    
    April 2010British Pound Sterling
    
    
    1,915
    
    
    
    3,379
    4
    
    March 2011$
    379,897
 
 (1)
    
    Includes options to purchase $54.6 million in Canadian dollars, which give us the right (but not
the obligation) to purchase the Canadian dollars. If the Canadian dollar depreciates relative to the
contracted exchange rate, we will elect to purchase the Canadian dollars at the then beneficial
market exchange rate, as opposed to the option price.(2)
    
    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 September 30, 2008.(3)
    
    Includes contracts to purchase Argentine pesos in exchange for Euros, which have been translated
into equivalent U.S. dollars on September 30, 2008.(4)
    
    Includes contracts to purchase British pound sterling in exchange for Euros, which have been
translated into equivalent U.S. dollars on September 30, 2008. 39




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##### Table of Contents



Canadian Dollar
  Philippine Peso
  Argentine Peso
  Mexican Peso
  British Pound Sterling
   Fair Value of Debt and Equity Securities
  
 ITEM 4. CONTROLS AND PROCEDURES
  40




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##### 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 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; and
 
    
    The performance of additional procedures by management designed to ensure the
reliability of our financial reporting.
  41




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##### Table of Contents



Managements Plan for Remediation
  Insufficient complement of personnel with appropriate accounting knowledge and training.
 
    
    In March 2008, we hired a Vice President and 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 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 is responsible for external/SEC
reporting, technical accounting issues (in accordance with U.S. GAAP) and Sarbanes-Oxley
compliance;
 
    
    In July 2008, we hired a Manager over equity-based compensation and lease accounting;
 
    
    In August 2008, we hired an assistant corporate controller who is responsible for the
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
 
    
    The Compensation Committee makes annual equity awards to named recipients at a set
time each year;
 
    
    The Compensation Committee makes all periodic equity awards, including new hire,
promotion and special circumstance grants, at pre-scheduled monthly meetings;
 
    
    A senior member of the Human Capital Department, supported by designated members of
the Legal, Tax and Accounting Departments, is responsible for ensuring that the
accounting treatment, recipient notification requirements, and required disclosures
have been determined for each equity award before the award is authorized by the
Compensation Committee;
 
    
    In advance of each meeting, the Compensation Committee is provided with information
on the accounting treatment and any non-standard terms of each proposed equity award;
 
    
    Other than as approved under new grant procedures, changes to grants after their
approval date are prohibited, 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); and
 
    
    Hired an Accounting Manager to oversee equity-based compensation with specific
experience in equity-based compensation accounting.
 42




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##### Table of Contents




    
    Provide training for pertinent personnel in the terms of our equity compensation plans
and improved policies and procedures;
 
    
    Implement a software system that will track all equity-based awards and automate the
equity-based compensation calculations;
 
    
    Expand internal audit procedures relating to grant approval and documentation; and
 
    
    Review 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 have established 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 have hired an Accounting Manager over leases with specific 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; and
 
    
    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.
  43




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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
 Derivative Action
 Susan M. Gregory v. Kenneth D. Tuchman, et al.
 NASDAQ Proceedings
  
 ITEM 1A. RISK FACTORS
  44




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##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity Securities
  Total Number
    
    
    Approximateof Shares
    
    
    Dollar Value ofPurchased as
    
    
    Shares that MayTotal
    
    
    Average
    
    
    Part of Publicly
    
    
    Yet Be PurchasedNumber of
    
    
    Price Paid
    
    
    Announced
    
    
    Under the PlansShares
    
    
    per Share
    
    
    Plans or
    
    
    or Programs(1)Period
    
    Purchased
    
    
    (or Unit)
    
    
    Programs
    
    
    (in thousands)July 1, 2008 - July 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    100,000August 1, 2008 - August 31, 2008
    
    
    2,972,085
    
    
    $
    15.88
    
    
    
    2,972,085
    
    
    $
    52,807September 1, 2008 - September 30, 2008
    
    
    1,846,153
    
    
    $
    15.04
    
    
    
    1,846,153
    
    
    $
    25,047Total
    
    
    4,818,238
    
    
    
    
    
    
    
    4,818,238
 
 (1)
    
    In November 2001, the Board of Directors (Board)
authorized a stock repurchase program to repurchase up to
$5 million of our common stock with the objective of
increasing stockholder returns. The Board has since
periodically authorized additional increases in the
program. The most recent Board authorization to purchase
additional common stock occurred in July 2008, whereby the
program allowance was increased by approximately $47.4
million to $100.0 million. Since inception of the program
through September 30, 2008, the Board has authorized the
repurchase of a total of shares up to a value of $262.3 million, of which
we have purchased 19.6 million shares for $237.3 million.
The remaining allowance under the program is approximately
$25.0 million. The stock repurchase program does not have
an expiration date. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    Election of directors to hold office until the next annual meeting of stockholders or
until their successors are duly elected and qualified.
 Director
    
    For
    
    WithheldKenneth D. Tuchman
    
    
    64,618,357
    
    
    
    148,328James E. Barlett
    
    
    61,650,279
    
    
    
    3,116,406William A. Linnenbringer
    
    
    63,050,727
    
    
    
    1,715,958Ruth C. Lipper
    
    
    63,068,777
    
    
    
    1,697,908Shrikant Mehta
    
    
    63,068,236
    
    
    
    1,698,449Robert M. Tarola
    
    
    64,744,969
    
    
    
    21,716Shirley Young
    
    
    63,056,627
    
    
    
    1,710,058
 2.
    
    Ratification of the appointment of PricewaterhouseCoopers LLP as our independent
registered public accounting firm for 2008.
 For
    
    Against
    
    Abstain64,740,389
    
    
    
    16,161
    
    
    
    9,620
 45




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##### Table of Contents



ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 Exhibit No.
    
    Exhibit Description10.1
    
    
    Employment Agreement dated April 6, 2004 between Gregory G. Hopkins and TeleTech31.1
    
    
    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




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##### Table of Contents



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

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

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




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit Description10.1
    
    
    Employment Agreement dated April 6, 2004 between Gregory G. Hopkins and TeleTech31.1
    
    
    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