##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

|               |  |                                                                                                                                                              
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(Mark One)
[x] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the Quarterly Period ended March 31, 2001                         
|              
|              
|              
|              
|               |  | or                                                                                                                                                           
|              
|              
|              
|              
|[ ]            |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ________________ to
__________________

Commission File No. 0-21107

TeleSpectrum Worldwide Inc.
(Exact name of registrant as specified in its charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 23-2845501                          
|                                                              
|                                                              
|                                                              
|                                                              
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer
Identification Number)
|                                                              
|                                                              
|                                                              
|                                                              
|443
South Gulph Road
King of Prussia, Pennsylvania             |  | 19406                               
|                                                              
|                                                              
|                                                              
|                                                              
|(Address of principal executive offices)                       |  | (ZIP Code)                          

610-878-7400
(Registrants telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [x]    No [ ]





The number of outstanding shares of the Registrants Common Stock, par value
$.01 per share, on May 14, 2001 was 33,076,073.





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TABLE OF CONTENTS



|                                |                                                                                                                      |  |  |  |  |  |  | 
|------------------------------- | -------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION
|                                | Item 1.      Financial Statements (unaudited):                                                                      
|                                | Condensed Consolidated Statements of Operations
                 For the Three Months Ended March 31, 2001 and 2000 
|                                | Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000                                    
|                                | Condensed Consolidated Statements of Cash Flows
                 For the Three Months Ended March 31, 2001 and  2000
|                                | Notes to Condensed Consolidated Financial Statements                                                                
|                                | Item 2.  Management's Discussion and Analysis of Results of Operations and
         Financial Condition             
|                                | Item 3.      Quantitative and Qualitative Disclosures About Market Risk                                             
|PART II - OTHER INFORMATION    
|                                | Items 1 to 5                                                                                                        
|                                | Item 6.       Exhibits and Reports on Form 8-K                                                                      



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##### Table of Contents



Table of Contents

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|------- |  | -------------------------------------------------------------------------------------------------- |  | ---- | ----- | 
|        |  |                                                                                                    |  | Page |      
|        |  |                                                                                                    |  |      |      
|        |  | PART I FINANCIAL INFORMATION                                                                     
|       
|       
|       
|       
|Item 1. |  | Financial Statements (unaudited):                                                                 
|       
|       
|       
|       
|        |  | Condensed Consolidated Statements of Operations
For the Three Months Ended March 31, 2001 and 2000 |  |      | 3     | 
|       
|       
|       
|       
|        |  | Condensed Consolidated Balance Sheets as of
March 31, 2001 and December 31, 2000                   |  |      | 4     | 
|       
|       
|       
|       
|        |  | Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2001 and 2000 |  |      | 5     | 
|       
|       
|       
|       
|        |  | Notes to Condensed Consolidated Financial Statements                                               |  |      | 6-11  | 
|       
|       
|       
|       
|Item 2. |  | Managements Discussion and Analysis of Results of Operations
and Financial Condition              |  |      | 12-17 | 
|       
|       
|       
|       
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                         |  |      | 18    | 
|       
|       
|       
|       
|        |  | PART II  OTHER INFORMATION                                                                       
|       
|       
|       
|       
|        |  | Items 1 to 5                                                                                       |  |      | 19    | 
|       
|       
|       
|       
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                   |  |      | 19    | 

2



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TeleSpectrum Worldwide Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands Except Per Share Amounts)

|                                               |                                     |                          |         |                    |        |   |           |        |        |  
|---------------------------------------------- | ----------------------------------- | ------------------------ | ------- | ------------------ | ------ | - | --------- | ------ | ------ | -
|                                               |                                     |                          |         | Three Months Ended |       
|                                               |                                     |                          |         |                    |       
|                                               |                                     |                          |         | March 31,          |        |   | March 31, |       
|                                               |                                     |                          |         | 2001               |        |   | 2000      |       
|                                               |                                     |                          |         |                    |        |   |           |       
|REVENUES                                       |                                     | $                        | 62,818  |                    |        | $ | 78,680    |       
|                                               |                                     |                          |         |                    |        |  
|OPERATING EXPENSES:                           
|                                              
|                                              
|                                              
|                                              
|                                               | Cost of services                    |                          |         | 48,320             |        |   |           | 61,538 |       
|                                              
|                                              
|                                              
|                                              
|                                               | Selling, general and administrative |                          |         | 14,472             |        |   |           | 15,875 |       
|                                              
|                                              
|                                              
|                                              
|                                               | Restructuring charge and other      |                          |         | 3,350              |        |   |           |       |       
|                                              
|                                              
|                                              
|                                              
|                                               | Goodwill amortization               |                          |         | 289                |        |   |           | 1,998  |       
|                                               |                                     |                          |         |                    |        |  
|                                               |                                     | Total operating expenses |         |                    | 66,431 |   |           |        | 79,411 |  
|                                               |                                     |                          |         |                    |        |  
|                                               |                                     | Operating loss           |         |                    | (3,613 | ) |           |        | (731   | )
|                                              
|                                              
|                                              
|                                              
|INTEREST EXPENSE, net                          |                                     |                          | (6,473  | )                  |        |   | (3,487    | )     
|                                               |                                     |                          |         |                    |        |  
|LOSS BEFORE INCOME TAXES AND MINORITY INTEREST |                                     |                          | (10,086 | )                  |        |   | (4,218    | )     
|                                              
|                                              
|                                              
|                                              
|MINORITY INTEREST                              |                                     |                          |        |                    |        |   | 309       |       
|                                              
|                                              
|                                              
|                                              
|INCOME TAXES                                   |                                     |                          |        |                    |        |   |          |       
|                                               |                                     |                          |         |                    |        |  
|NET LOSS                                       |                                     | $                        | (10,086 | )                  |        | $ | (3,909    | )     
|                                               |                                     |                          |         |                    |        |  
|BASIC LOSS PER SHARE                           |                                     | $                        | (0.32   | )                  |        | $ | (0.12     | )     
|                                               |                                     |                          |         |                    |        |  
|DILUTED LOSS PER SHARE                         |                                     | $                        | (0.32   | )                  |        | $ | (0.12     | )     
|                                               |                                     |                          |         |                    |        |  
|WEIGHTED-AVERAGE SHARES OUTSTANDING BASIC     |                                     |                          | 31,795  |                    |        |   | 31,453    |       
|                                               |                                     |                          |         |                    |        |  
|WEIGHTED-AVERAGE SHARES OUTSTANDING DILUTED   |                                     |                          | 31,795  |                    |        |   | 31,453    |       
|                                               |                                     |                          |         |                    |        |  

See Notes to Condensed Consolidated Financial
Statements

3



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TeleSpectrum Worldwide Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
(In Thousands Except Per Share Amounts)

|                                           |                                                                                               |                                                                                                                |                           |                                       |     |           |          |         |              |        |         | 
|------------------------------------------ | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------------------- | ------------------------------------- | --- | --------- | -------- | ------- | ------------ | ------ | ------- | 
|                                           |                                                                                               |                                                                                                                |                           |                                       |     | March 31, |          |         | December 31, |       
|                                           |                                                                                               |                                                                                                                |                           |                                       |     | 2001      |          |         | 2000         |       
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |           |          |         |              |       
|                                           |                                                                                               |                                                                                                                |                           | ASSETS                               
|                                          
|                                          
|                                          
|                                          
|CURRENT ASSETS:                           
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                                                                     |                                                                                                                | $                         | 3,618                                 |     |           | $        | 5,258   |             
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts receivable, net                                                                      |                                                                                                                |                           | 50,332                                |     |           |          | 54,745  |             
|                                          
|                                          
|                                          
|                                          
|                                           | Prepaid expenses and other                                                                    |                                                                                                                |                           | 4,969                                 |     |           |          | 6,173   |             
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |          
|                                           |                                                                                               |                                                                                                                |                           | Total current assets                  |     |           | 58,919   |         |              |        | 66,176  | 
|                                          
|                                          
|                                          
|                                          
|PROPERTY AND EQUIPMENT, net                |                                                                                               |                                                                                                                | 35,492                    |                                       |     |           | 39,967   |        
|                                          
|                                          
|                                          
|                                          
|GOODWILL AND OTHER INTANGIBLES, net        |                                                                                               |                                                                                                                | 14,714                    |                                       |     |           | 15,003   |        
|                                          
|                                          
|                                          
|                                          
|OTHER NONCURRENT ASSETS                    |                                                                                               |                                                                                                                | 3,433                     |                                       |     |           | 3,721    |        
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |          
|                                           |                                                                                               |                                                                                                                |                           | Total assets                          |     | $         | 112,558  |         |              | $      | 124,867 | 
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |          
|                                           |                                                                                               |                                                                                                                |                           | LIABILITIES AND STOCKHOLDERS' DEFICIT
|                                          
|                                          
|                                          
|                                          
|CURRENT LIABILITIES:                      
|                                          
|                                          
|                                          
|                                          
|                                           | Current maturities of long-term debt                                                          |                                                                                                                | $                         | 1,649                                 |     |           | $        | 3,844   |             
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                                              |                                                                                                                |                           | 14,378                                |     |           |          | 15,457  |             
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued expenses                                                                              |                                                                                                                |                           | 31,841                                |     |           |          | 34,339  |             
|                                          
|                                          
|                                          
|                                          
|                                           | Other current liabilities                                                                     |                                                                                                                |                           | 722                                   |     |           |          | 1,086   |             
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |          
|                                           |                                                                                               |                                                                                                                | Total current liabilities |                                       |     | 48,590    |          |         |              | 54,726 |        
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |          
|LONG-TERM DEBT                             |                                                                                               |                                                                                                                | 134,222                   |                                       |     |           | 132,413  |        
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |          
|OTHER NONCURRENT LIABILITIES               |                                                                                               |                                                                                                                | 4,335                     |                                       |     |           | 2,001    |        
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |          
|STOCKHOLDERS' DEFICIT:                    
|                                          
|                                          
|                                          
|                                          
|                                           | Preferred
stock, $.01 par value, 5,000,000 shares authorized,
no shares issued or outstanding |                                                                                                                |                           |                                      |     |           |          |        |             
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                               | Common stock, $.01 par value, 200,000,000 shares                                                               |                           |                                       | 400 |           |          |         | 400          |       
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                               | authorized, 40,022,656 shares issued and 33,076,073
shares outstanding at March 31, 2001 and December 31, 2000
|                                          
|                                          
|                                          
|                                          
|Additional paid-in capital                 |                                                                                               |                                                                                                                | 339,099                   |                                       |     |           | 339,099  |        
|                                          
|                                          
|                                          
|                                          
|Common stock purchase warrants             |                                                                                               |                                                                                                                | 7,840                     |                                       |     |           | 7,840    |        
|                                          
|                                          
|                                          
|                                          
|Treasury stock, 6,946,583 shares at cost   |                                                                                               |                                                                                                                | (48,810                   | )                                     |     |           | (48,810  | )      
|                                          
|                                          
|                                          
|                                          
|Accumulated deficit                        |                                                                                               |                                                                                                                | (370,610                  | )                                     |     |           | (360,524 | )      
|                                          
|                                          
|                                          
|                                          
|Due from stockholders                      |                                                                                               |                                                                                                                | (952                      | )                                     |     |           | (952     | )      
|                                          
|                                          
|                                          
|                                          
|Cumulative currency translation adjustment |                                                                                               |                                                                                                                | (1,556                    | )                                     |     |           | (1,326   | )      
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |          
|                                           | Total stockholders' deficit                                                                   |                                                                                                                |                           | (74,589                               | )   |           |          | (64,273 | )           
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |          
|                                           | Total liabilities and stockholders' deficit                                                   |                                                                                                                | $                         | 112,558                               |     |           | $        | 124,867 |             
|                                           |                                                                                               |                                                                                                                |                           |                                       |     |          

See Notes to Condensed Consolidated Financial
Statements

4



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TeleSpectrum Worldwide Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
(Dollars in Thousands)

|                                               |                                                                                |                                                                  |                                                     |         |                    |        |       |           |       |        |  
|---------------------------------------------- | ------------------------------------------------------------------------------ | ---------------------------------------------------------------- | --------------------------------------------------- | ------- | ------------------ | ------ | ----- | --------- | ----- | ------ | -
|                                               |                                                                                |                                                                  |                                                     |         | Three Months Ended |       
|                                               |                                                                                |                                                                  |                                                     |         |                    |       
|                                               |                                                                                |                                                                  |                                                     |         | March 31,          |        |       | March 31, |      
|                                               |                                                                                |                                                                  |                                                     |         | 2001               |        |       | 2000      |      
|                                               |                                                                                |                                                                  |                                                     |         |                    |        |       |           |      
|Cash Flows From Operating Activities:         
|                                              
|                                              
|                                              
|                                              
|                                               | Net loss                                                                       |                                                                  | $                                                   | (10,086 | )                  |        | $     | (3,909    | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Adjustments to reconcile net loss to net cash
flows from operating activities:
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                | Depreciation and amortization                                    |                                                     |         | 4,030              |        |       |           | 4,087 |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                | Goodwill amortization                                            |                                                     |         | 289                |        |       |           | 1,998 |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                | Provision for bad debts                                          |                                                     |         | 707                |        |       |           | 742   |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                | Restructuring charge and other                                   |                                                     |         | 3,117              |        |       |           |      |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                | Non-cash compensation                                            |                                                     |         |                   |        |       |           | 25    |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                | Changes in operating assets and liabilities net of acquisitions:
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                |                                                                  | Accounts receivable                                 |         |                    | 3,706  |       |           |       | 3,089  |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                |                                                                  | Prepaid expenses and other                          |         |                    | 1,050  |       |           |       | (1,134 | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                |                                                                  | Accounts payable                                    |         |                    | (1,079 | )     |           |       | 561    |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                |                                                                  | Accrued and other liabilities                       |         |                    | (2,687 | )     |           |       | (5,853 | )
|                                               |                                                                                |                                                                  |                                                     |         |                    |       
|                                               |                                                                                |                                                                  | Net cash used in operating activities               |         |                    | (953   | )     |           |       | (394   | )
|                                               |                                                                                |                                                                  |                                                     |         |                    |       
|Cash Flows From Investing Activities:         
|                                              
|                                              
|                                              
|                                              
|                                               | Purchases of property and equipment                                            |                                                                  |                                                     | (301    | )                  |        |       | (6,266    | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Net cash acquired in acquisition                                               |                                                                  |                                                     |        |                    |        |       | 71        |      
|                                               |                                                                                |                                                                  |                                                     |         |                    |       
|                                               |                                                                                |                                                                  | Net cash used in investing activities               |         |                    | (301   | )     |           |       | (6,195 | )
|                                               |                                                                                |                                                                  |                                                     |         |                    |       
|Cash Flows From Financing Activities:         
|                                              
|                                              
|                                              
|                                              
|                                               | Exercise of stock options and sale of common stock                             |                                                                  |                                                     |        |                    |        |       | 606       |      
|                                              
|                                              
|                                              
|                                              
|                                               | Borrowings on long-term debt                                                   |                                                                  |                                                     | 8,854   |                    |        |       | 8,500     |      
|                                              
|                                              
|                                              
|                                              
|                                               | Payments on long-term debt                                                     |                                                                  |                                                     | (9,006  | )                  |        |       | (2,309    | )    
|                                              
|                                              
|                                              
|                                              
|                                               | Net payments of capital lease obligations                                      |                                                                  |                                                     | (234    | )                  |        |       | (208      | )    
|                                               |                                                                                |                                                                  |                                                     |         |                    |       
|                                               |                                                                                |                                                                  | Net cash (used in) provided by financing activities |         |                    | (386   | )     |           |       | 6,589  |  
|                                               |                                                                                |                                                                  |                                                     |         |                    |       
|Net decrease in cash and cash equivalents      |                                                                                |                                                                  | (1,640                                              | )       |                    |        |      |          
|                                              
|                                              
|                                              
|                                              
|Cash and cash equivalents, beginning of period |                                                                                |                                                                  | 5,258                                               |         |                    |        |      |          
|                                               |                                                                                |                                                                  |                                                     |         |                    |       
|Cash and cash equivalents, end of period       |                                                                                | $                                                                | 3,618                                               |         |                    | $      |      |          
|                                               |                                                                                |                                                                  |                                                     |         |                    |       
|SUPPLEMENTAL CASH FLOW INFORMATION:           
|                                              
|                                              
|                                              
|                                              
|Interest paid during the period                |                                                                                | $                                                                | 3,563                                               |         |                    | $      | 3,000 |          
|                                               |                                                                                |                                                                  |                                                     |         |                    |       
|Income taxes paid during the period            |                                                                                | $                                                                |                                                    |         |                    | $      |      |          
|                                               |                                                                                |                                                                  |                                                     |         |                    |       

See Notes to Condensed Consolidated Financial
Statements

5



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TeleSpectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

1. BASIS OF PRESENTATION:

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
(GAAP) for interim financial information and the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all the
information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation have been
reflected in these condensed consolidated financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Annual Report on Form 10-K for the year ended December
31, 2000.

These condensed consolidated financial statements include the accounts of
TeleSpectrum Worldwide Inc. and its subsidiaries (the Company). All material
intercompany balances and transactions have been eliminated. Certain prior
period amounts have been reclassified to conform to the current period
presentation.

The Condensed Consolidated Financial Statements of the Company have been
prepared on the basis of accounting principles applicable to a going concern,
which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. At March 31, 2001, the Company
had a stockholders deficit of $74.6 million, and incurred a net loss of
approximately $10.1 million during the three-month period then ended. The
Company has been unable to meet required debt service payments with its
lenders, requiring a number of amendments to its loan agreements, financial
covenant waivers and deferral of scheduled payments. During the fourth quarter
of 2000, the Company initiated a cost reduction program designed to reduce
costs by $15.0 million annually, through closing under utilized customer
contact centers, reducing overhead, and reducing telecommunications costs, of
which $10.0 million is expected to be realized during 2001. During the first
quarter of 2001, a new management team was put in place, which, upon reviewing
operations, expanded upon that initiative by identifying opportunities to
reduce costs by another $5.0 million, through further closure/consolidation of
customer contact centers and lowering overhead. Approximately $2.0 to $3.0
million of that is expected to be realized during 2001. During the first
quarter of 2001, management estimates that $3.5 million of savings were
realized in connection with these initiatives.

On April 16, 2001, the Company signed an amended and restated credit agreement
with its bank group (the Amended Agreement), which matures on July 1, 2002
and replaces the former agreement, dated June 30, 1999 (see Note 5). The
Amended Agreement requires compliance with stipulated covenants, including
revenue, EBITDA and interest coverage targets based on the Companys business
plan for 2001. If the Company fails to maintain compliance with such
covenants, or otherwise experiences an event of default, all amounts
outstanding would be due and payable upon demand.

EBITDA represents earnings from continuing operations, without regard to income
taxes, interest income and expense, depreciation, amortization and charges for
nonrecurring items.

The factors noted above raise substantial doubt concerning the ability of the
Company to continue as a going concern. The condensed consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying values or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern. Management believes that the working capital needs of the
Company through July 1, 2002 will be provided by the cash generated from
ongoing operations and the Amended Agreement. However, there can be no
assurance that the Company will be able to comply with the amended covenants
through July 1, 2002 or refinance the Amended Agreement by that date.

Based on the terms of the Amended Agreement, the Company has classified amounts
related to such credit facilities as long-term liabilities in the accompanying
condensed consolidated balance sheets.

2. NEW ACCOUNTING PRONOUNCEMENTS:

6



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##### Table of Contents



TeleSpectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS 133), as amended, which requires that all derivative
instruments be reported on the balance sheet at fair value and establishes
criteria for designation and effectiveness of hedging relationships. The
effect of adopting SFAS 133 as of January 1, 2001 was not material to the
Companys financial statements.

3. LOSS PER SHARE:

Basic loss per share assumes no dilution and is computed by dividing net loss
by the weighted average number of shares of common stock outstanding for the
period. 1,280,676 shares of common stock have been excluded from the basic
loss per share calculation because they are held in escrow. Diluted loss per
share reflects the effects of common shares issuable upon the exercise of stock
options and warrants, but only if the effect is dilutive.

4. RESTRUCTURING CHARGES AND OTHER:

During the fourth quarter of 2000, as part of its continuing analysis of the
Companys operational strategies, the Board of Directors of the Company
approved a restructuring plan designed to streamline operations, enhance
results of operations and improve cash flow, by closing underutilized customer
contact centers and reducing overhead costs. As a result, the Company recorded
a pre-tax charge of $10.3 million in 2000 for costs associated with exiting
certain facilities, terminating employees and recognizing related asset
impairments. During the three months ended March 31, 2001, the Companys new
management team expanded the restructuring plan to include the closure or
consolidation of additional facilities and identification of additional
employees for separation. As a result, the Company recorded a similar pre-tax
charge of $3.4 million during that period. The following summarizes the costs
and liabilities associated with the Companys restructuring plan through March
31, 2001 (in thousands):

|                                                     |  |               |       |  |            |   |       |          |  |   |        |           |               |   |       | 
|---------------------------------------------------- |  | ------------- | ----- |  | ---------- | - | ----- | -------- |  | - | ------ | --------- | ------------- | - | ----- | 
|                                                     |  | Balance as of |       |  |            |   |       |          |  |   |        |           | Balance as of |  
|                                                     |  | December 31,  |       |  | Additional |   |       |          |  |   |        | March 31, |              
|                                                     |  | 2000          |       |  | Charge     |   |       | Payments |  |   | 2001   |          
|                                                     |  |               |       |  |            |   |       |          |  |   |        |          
|Obligations assumed on
closed leased facilities, net |  | $             | 5,659 |  |            | $ | 1,043 |          |  | $ | (259   | )         |               | $ | 6,443 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Severance and employee
related costs                 |  |               | 1,670 |  |            |   | 1,377 |          |  |   | (543   | )         |               |   | 2,504 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Other                                                |  |               | 125   |  |            |   | 128   |          |  |   | (253   | )         |               |   |      | 
|                                                     |  |               |       |  |            |   |       |          |  |   |        |          
|Total Restructuring Accrual                          |  | $             | 7,454 |  |            | $ | 2,548 | (1)      |  | $ | (1,055 | )         |               | $ | 8,947 | 
|                                                     |  |               |       |  |            |   |       |          |  |   |        |          



---

|(1) |  | Excludes $802 of impairment for fixed assets idled as a result of the call center closures,
including owned production equipment, computers and leasehold improvements. No cash
payments will be made in connection with these charges.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7



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TeleSpectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Accrued liabilities for closed facilities of $6.4 million as of March 31, 2001
relate to leased customer contact center locations that have been or will be
closed in connection with the Companys restructuring plan. The amount is
computed as the remaining contractual obligations in each closed center, net of
estimated income from subletting.

Employee separation costs relate to both administrative personnel at the closed
customer contact centers and corporate personnel, affecting all functional
areas. Approximately 210 employees have been identified and separated as part
of the Companys restructuring plan through March 31, 2001. The accrual of
$2.5 million as of March 31, 2001 relates to ongoing severance payments in
accordance with the severance obligations for these employees.

The restructuring charge during the three months ended March 31, 2001 impacted
our Acquisition Services and ChannelCare segments by $1.1 million each, with
the balance affecting the Companys general corporate operations.

5. CREDIT FACILITIES:

Borrowings from Senior Bank Group

On April 16, 2001, the Company signed an amended and restated credit agreement
(the Amended Agreement) with its bank group whereby all amounts outstanding
under the former agreements term notes (Notes A, B and C), $35.0 million of
the working capital revolver, and accrued incremental interest and waiver fees
were converted into one term loan, totaling $120.6 million. The term loan
bears interest at a base rate plus an applicable margin, as defined, (9.54% at
April 16, 2001) and matures July 1, 2002. The remaining $10.0 million
commitment under the former agreements working capital revolver carries
forward to the Amended Agreement; however, borrowings cannot exceed 65% of
eligible receivables, as defined. As of April 16, 2001, the Company had $1.4
million available under this revolver.

Borrowings under the Amended Agreement are collateralized by substantially all
of the assets of the Company. The Amended Agreement contains covenants that
require the maintenance of an interest coverage ratio, impose minimum revenue
and EBITDA targets, restrict future indebtedness, limit capital expenditures
and prohibit cash dividends.

The Amended Agreement allowed the Company to convert 50% of the $2.7 million in
accrued interest at April 16, 2001 into a deferred interest note, which bears
the same interest rate and maturity date as the term loan. Future interest
payments under the Amended Agreement are due monthly; however, at the
discretion of the Company, 25% of the monthly interest payments through
December 31, 2001 may be deferred and converted into deferred interest notes. To the
extent that interest is deferred, a like amount will be paid and
applied against the working capital revolver, and this portion of the
revolver can only be used to pay down trade payables, as defined.

Under certain circumstances, the Company may be required to make mandatory
principal payments, as defined. In general, mandatory prepayments are required
upon certain triggering events, such as the sale of assets, issuance of debt or
equity securities, or the receipt of insurance proceeds or similar events. In
addition, when the Company generates excess cash flow, as defined, such
amounts, exceeding certain thresholds, must be used to repay amounts
outstanding under the Amended Agreement.

The Amended Agreement requires that the Company pay certain fees periodically
through maturity or termination of the agreement. The unused portion of the
working capital revolver is subject to an annual commitment fee of 25 basis
points payable quarterly. An agents fee of 25 basis points of the aggregate
amount of the facilities was incurred upon signing the Amended Agreement, will
be incurred annually thereafter, payable at maturity or termination of the
agreement. The Company is also being charged a restructuring fee of 15% of the
aggregate advances made and commitments available on April 16, 2001, payable at
maturity or termination of the agreement. In the event the Company repays in
full all obligations due under the Amended Agreement prior to maturity, the
restructuring fee will be reduced to 5.0%, 10.0%, and 12.5% if the early payoff
is prior to June 30, 2001, September 30, 2001, or December 31, 2001,
respectively. Such fees will be amortized using the effective interest method
over the life of the Amended Agreement.

8



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##### Table of Contents



TeleSpectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

As a result of the Amended Agreement, $2.5 million of unamortized debt issuance
costs related to the former agreement will be written off during the second
quarter of 2001.

Note Payable to Stockholder

On April 16, 2001, the Company amended its $4.9 million term note payable to
the former majority stockholders of an acquired business. The amended note
matures June 30, 2004, bears interest at 10% for the year ending December 31,
2001, 15% for the two years ending December 31, 2003 and 20% for the six months
ending June 30, 2004. The agreement requires prepayment in the event more than
90% of the Companys common stock is acquired or substantially all of the
assets are sold. Under certain circumstances, as defined in the agreement, if
prior to December 31, 2002, the Company issues debt or equity securities of
$10.0 million or more, the holders have the right to purchase a pro-rata share,
as defined, of the securities issued with up to one half of the total amount
due such holders under similar terms.

e-Satisfy Debt

On April 9, 2001, the Company amended its $2.2 million non-interest bearing
note payable to the former principals of TARP. The amended notes bear interest
at 10% from June 30, 2000 and require principal payments of $50,000 per month
through March 2002 and $40,000 per month through August 2002, at which time the
remaining balance of $1.5 million is payable in full.

6. COMPREHENSIVE LOSS:

The Companys comprehensive loss includes net loss and unrealized losses from
foreign currency translation. Total comprehensive loss for the three months
ended March 31, 2001 and 2000 was $(10.3) million and $(3.9) million,
respectively.

7. SEGMENTS:

The Company classifies its continuing operations into three segments:
Acquisition Services, ChannelCare and e-Satisfy. The operating segments were
managed separately because each operating segment represents a strategic
business unit that offers different services. The business segments are
described in further detail below. Segment assets include amounts
specifically identified with the Acquisition Services, ChannelCare and
e-Satisfy segments. Corporate assets consist primarily of property and
equipment and the goodwill and other intangibles related to business
combinations.

The Acquisition Services Segment provides both business-to-consumer and
business-to-business telemarketing servicesprimarily direct sales initiated
by the Company on behalf of its clients.

The ChannelCare Segment provides customer service expertise to its clients.
The Companys customer service expertise includes the more traditional inbound
services of customer care support, typically through toll-free telephone
numbers, for activities such as responses to clients customer service
inquiries, catalogue sales and electronic order processing and consulting
services to a wide range of clients.

The e-Satisfy segment performs baseline and tracking customer satisfaction
surveys for both internet and traditional companies.

Corporate operations include the selling, general and administrative functions
of the Company.

9



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TeleSpectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Business segment information is as follows (in thousands):

|                         |                      |       |   |                    |        |   |      |         |        |  
|------------------------ | -------------------- | ----- | - | ------------------ | ------ | - | ---- | ------- | ------ | -
|                         |                      |       |   | Three Months Ended |       
|                         |                      |       |   | March 31,          |       
|                         |                      |       |   |                    |       
|                         |                      |       |   | 2001               |        |   | 2000 |        
|                         |                      |       |   |                    |        |   |      |        
|Revenues:               
|                        
|                        
|                        
|                        
|                         | Acquisition Services |       | $ | 38,670             |        |   | $    | 51,014  |       
|                        
|                        
|                        
|                        
|                         | ChannelCare          |       |   | 22,537             |        |   |      | 26,081  |       
|                        
|                        
|                        
|                        
|                         | e-Satisfy            |       |   | 1,611              |        |   |      | 1,585   |       
|                         |                      |       |   |                    |        |  
|                         |                      | Total |   | $                  | 62,818 |   |      | $       | 78,680 |  
|                         |                      |       |   |                    |        |  
|Operating income (loss):
|                        
|                        
|                        
|                        
|                         | Acquisition Services |       | $ | 7,101              |        |   | $    | 10,903  |       
|                        
|                        
|                        
|                        
|                         | ChannelCare          |       |   | 3,575              |        |   |      | 5,439   |       
|                        
|                        
|                        
|                        
|                         | e-Satisfy            |       |   | 1,132              |        |   |      | 454     |       
|                        
|                        
|                        
|                        
|                         | Corporate            |       |   | (15,421            | )      |   |      | (17,527 | )     
|                         |                      |       |   |                    |        |  
|                         |                      | Total |   | $                  | (3,613 | ) |      | $       | (731   | )
|                         |                      |       |   |                    |        |  

|              |                      |       |   |           |         |  |              |        |         | 
|------------- | -------------------- | ----- | - | --------- | ------- |  | ------------ | ------ | ------- | 
|              |                      |       |   | March 31, |         |  | December 31, |       
|              |                      |       |   | 2001      |         |  | 2000         |       
|              |                      |       |   |           |         |  |              |       
|Total assets:
|             
|             
|             
|             
|              | Acquisition Services |       | $ | 62,649    |         |  | $            | 70,269 |        
|             
|             
|             
|             
|              | ChannelCare          |       |   | 33,047    |         |  |              | 39,217 |        
|             
|             
|             
|             
|              | e-Satisfy            |       |   | 4,011     |         |  |              | 5,216  |        
|             
|             
|             
|             
|              | Corporate            |       |   | 12,851    |         |  |              | 10,165 |        
|              |                      |       |   |           |         | 
|              |                      | Total |   | $         | 112,558 |  |              | $      | 124,867 | 
|              |                      |       |   |           |         | 

10



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##### Table of Contents



TeleSpectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Information About Major Customers

The following table summarizes those customers with revenues in excess of 10%
of total revenue for the three months ended March 31, 2001 and 2000:

|           |  |                    |      |   |      |  |      |  
|---------- |  | ------------------ | ---- | - | ---- |  | ---- | -
|           |  | Three Months Ended |     
|           |  | March 31,          |     
|           |  |                    |     
|           |  | 2001               |      |   | 2000 | 
|           |  |                    |      |   |      | 
|Customer 1 |  |                    |     |   |      |  | 11.6 | %
|          
|          
|          
|          
|Customer 2 |  |                    | 13.1 | % |      |  | 10.1 | %
|          
|          
|          
|          
|Customer 3 |  |                    | 10.0 | % |      |  |     |  

8. SUBSEQUENT EVENT:

On April 16, 2001, the Company signed an amended and restated credit agreement
with its bank group, which matures on July 1, 2002 and replaces the former
agreement, dated June 30, 1999 (see Note 5).

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TeleSpectrum Worldwide Inc. and Subsidiaries







Item 2.  Management's Discussion and Analysis of
Results of Operations and Financial Condition

This Managements Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Quarterly Report contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements address, among other things, the Companys business
strategy, including its use of cash and cash equivalents; reliance on certain
customers; projected capital expenditures; liquidity; increased sales in future
periods; the continuation of fluctuations in results of operations, as well as
information contained elsewhere in this report where statements are preceded
by, followed by or include the words such as believes, expects,
anticipates, plans or similar expressions. These statements are based on a
number of assumptions concerning future events, and are subject to a number of
uncertainties and other factors, many of which are outside the Companys
control, that could cause actual results to differ materially from such
statements. The Company undertakes no obligation to update or revise
forward-looking statements, whether as a result of new information, future
events or otherwise.

Basis of Presentation

The Condensed Consolidated Financial Statements of the Company have been
prepared on the basis of accounting principles applicable to a going concern,
which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. At March 31, 2001, the Company
had a stockholders deficit of $74.6 million, and incurred a net loss of
approximately $10.1 million during the three month period then ended. The
Company has been unable to meet required debt service payments with its
lenders, requiring a number of amendments to its loan agreements, financial
covenant waivers and deferral of scheduled payments. During the fourth quarter
of 2000, the Company initiated a cost reduction program designed to reduce
costs by $15.0 million annually, through closing under utilized customer
contact centers, reducing overhead, and reducing telecommunications costs, of
which $10.0 million is expected to be realized during 2001. During the first
quarter of 2001, a new management team was put in place, which, upon reviewing
operations, expanded upon that initiative by identifying opportunities to
reduce costs by another $5.0 million, through further closure/consolidation of
customer contact centers and lowering overhead. Approximately $2.0 to $3.0
million is expected to be realized during 2001. During the first quarter of
2001, management estimates that approximately $3.5 million of savings were
realized in connection with these initiatives.

On April 16, 2001, the Company signed an amended and restated credit agreement
with its bank group (the Amended Agreement), which matures on July 1, 2002
and replaces the former agreement, dated June 30, 1999 (see Note 5 to the
Condensed Consolidated Financial Statements included elsewhere in this report).
The Amended Agreement requires compliance with stipulated covenants, including
revenue, EBITDA and interest coverage targets based on the Companys business
plan for 2001. If the Company fails to maintain compliance with such
covenants, or otherwise experiences an event of default, all amounts
outstanding would be due and payable upon demand.

EBITDA represents earnings from continuing operations, without regard to income
taxes, interest income and expense, depreciation, amortization and charges for
nonrecurring items.

The factors noted above raise substantial doubt concerning the ability of the
Company to continue as a going concern. The condensed consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying values or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern. Management believes that the working capital needs of the
Company through July 1, 2002 will be provided by the cash generated from
ongoing operations and the Amended Agreement. However, there can be no
assurance that the Company will be able to comply with the amended covenants
through July 1, 2002 or refinance the Amended Agreement by that date.

12



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TeleSpectrum Worldwide Inc. and Subsidiaries

Recent Developments and Overview

New Management

On January 3, 2001, the Company announced that J. Peter Pierce had joined the
Company as Chairman and Chief Executive Officer. Mr. Pierce was formerly the
President and Chief Operating Officer of Iron Mountain, Inc. following its
merger in February 2000 with Pierce Leahy Corp, where he had held the position
of President and CEO. Also joining the Company at that time were Christopher
J. Williams as Chief Operating Officer and Joseph A. Nezi as Executive Vice
President of Business Development. Both were former members of Iron Mountains
and Pierce Leahys senior management teams where they held similar positions.

Restructuring Program

During the fourth quarter of 2000, as part of its continuing analysis of the
Companys operational strategies, the Board of Directors of the Company
approved a restructuring plan designed to streamline operations, enhance
results of operations and improve cash flow, by closing underutilized customer
contact centers and reducing overhead costs. As a result, the Company recorded
a pre-tax charge of $10.3 million in 2000 for costs associated with exiting
certain facilities, terminating employees and recognizing related asset
impairments. During the three months ended March 31, 2001, the Companys new
management team expanded the restructuring plan to include the closure or
consolidation of additional facilities and identification of additional
employees for separation. As a result, the Company recorded a similar pre-tax
charge of $3.4 million during that period. Management believes these
initiatives, along with the signing of the Amended Agreement on April 16, 2001,
will help stabilize the business and provide the changes needed to position the
Company for long-term success. (See Note 4 to the Condensed Consolidated
Financial Statements included elsewhere in this report.)

Amended and Restated Credit Facilities

On April 16, 2001, the Company signed an amended and restated credit agreement
(the Amended Agreement) with its bank group whereby all amounts outstanding
under the former agreements term notes (Notes A, B and C), $35.0 million of
the working capital revolver, and accrued incremental interest and waiver fees
were converted into one term loan, totaling $120.6 million. The term loan
bears interest at a base rate plus an applicable margin, as defined, (9.54% at
April 16, 2001) and matures July 1, 2002. The remaining $10.0 million
commitment under the former agreements working capital revolver carries
forward to the Amended Agreement; however, borrowings cannot exceed 65% of
eligible receivables, as defined. As of April 16, 2001, the Company had $1.4
million available under this revolver.

Borrowings under the Amended Agreement are collateralized by substantially all
of the assets of the Company. The Amended Agreement contains covenants that
require the maintenance of an interest coverage ratio, impose minimum revenue
and EBITDA targets, restrict future indebtedness, limit capital expenditures
and prohibit cash dividends.

The Amended Agreement allowed the Company to convert 50% of the $2.7 million in
accrued interest at April 16, 2001 into a deferred interest note, which bears
the same interest rate and maturity date as the term loan. Future interest
payments under the Amended Agreement are due monthly; however, at the
discretion of the Company, 25% of the monthly interest payments through
December 31, 2001 may be deferred and converted into deferred
interest notes.  To the
extent that interest is deferred, a like amount will be paid and
applied against the working capital revolver, and this portion of the
revolver can only be used to pay down trade payables, as defined.

Under certain circumstances, the Company may be required to make mandatory
principal payments, as defined. In general, mandatory prepayments are required
upon certain triggering events, such as the sale of assets, issuance of debt or
equity securities, or the receipt of insurance proceeds or similar events. In
addition, when the Company generates excess cash flow, as defined, such
amounts, exceeding certain thresholds, must be used to repay amounts
outstanding under the Amended Agreement.

The Amended Agreement requires that the Company pay certain fees periodically
through maturity or termination of the agreement. The unused portion of the
working capital revolver is subject to an annual commitment fee of 25 basis

13



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TeleSpectrum Worldwide Inc. and Subsidiaries

points payable quarterly. An agents fee of 25 basis points of the aggregate
amount of the facilities was incurred upon signing the Amended Agreement, will
be incurred annually thereafter, payable at maturity or termination of the
agreement. The Company is also being charged a restructuring fee of 15% of the
aggregate advances made and commitments available on April 16, 2001, payable at
maturity or termination of the agreement. In the event the Company repays in
full all obligations due under the Amended Agreement prior to maturity, the
restructuring fee will be reduced to 5.0%, 10.0%, and 12.5% if the early payoff
is prior to June 30, 2001, September 30, 2001, or December 31, 2001,
respectively. Such fees will be amortized using the effective interest method
over the life of the Amended Agreement.

Results of Operations

The following discussions should be read in connection with the Condensed
Consolidated Financial Statements contained elsewhere within this report A
comparison of the results of operations for the three months ended March 31,
2001 to the three months ended March 31, 2000 follows:

|                                    |                      |   |              |      |  |            |                       |      |              |   |      |            |  |  |       |      |  
|----------------------------------- | -------------------- | - | ------------ | ---- |  | ---------- | --------------------- | ---- | ------------ | - | ---- | ---------- |  |  | ----- | ---- | -
|                                    |                      |   |              |      |  |            | Results of Operations |     
|                                    |                      |   |              |      |  |            | (Dollars in Millions) |     
|                                    |                      |   | Three Months |      |  | As a       |                       |      | Three Months |   |      | As a       | 
|                                    |                      |   | Ended        |      |  | Percentage |                       |      | Ended        |   |      | Percentage | 
|                                    |                      |   | March 31,    |      |  | of         |                       |      | March 31,    |   |      | of         | 
|                                    |                      |   | 2001         |      |  | Revenues   |                       |      | 2000         |   |      | Revenues   | 
|                                    |                      |   |              |      |  |            |                       |      |              |   |      |            | 
|Revenues:                          
|                                   
|                                   
|                                   
|                                   
|                                    | Acquisition Services |   | $            | 38.7 |  |            |                       | 61.6 | %            |   | $    | 51.0       |  |  |       | 64.8 | %
|                                   
|                                   
|                                   
|                                   
|                                    | ChannelCare          |   |              | 22.5 |  |            |                       | 35.8 | %            |   |      | 26.1       |  |  |       | 33.2 | %
|                                   
|                                   
|                                   
|                                   
|                                    | e-Satisfy.com        |   |              | 1.6  |  |            |                       | 2.6  | %            |   |      | 1.6        |  |  |       | 2.0  | %
|                                    |                      |   |              |      |  |            |                       |      |              |   |      |           
|Total revenue                       |                      |   | 62.8         |      |  |            | 100.0                 | %    |              |   | 78.7 |            |  |  | 100.0 | %   
|                                   
|                                   
|                                   
|                                   
|Cost of services:                  
|                                   
|                                   
|                                   
|                                   
|                                    | Acquisition Services |   |              | 30.0 |  |            |                       | 77.5 | %            |   |      | 40.1       |  |  |       | 78.6 | %
|                                   
|                                   
|                                   
|                                   
|                                    | ChannelCare          |   |              | 17.8 |  |            |                       | 79.1 | %            |   |      | 20.5       |  |  |       | 78.5 | %
|                                   
|                                   
|                                   
|                                   
|                                    | e-Satisfy.com        |   |              | 0.5  |  |            |                       | 31.3 | %            |   |      | 0.6        |  |  |       | 37.5 | %
|                                    |                      |   |              |      |  |            |                       |      |              |   |      |           
|Total cost of services              |                      |   | 48.3         |      |  |            | 76.9                  | %    |              |   | 61.2 |            |  |  | 77.8  | %   
|                                   
|                                   
|                                   
|                                   
|Selling, general and administrative |                      |   | 14.4         |      |  |            | 22.9                  | %    |              |   | 15.9 |            |  |  | 20.2  | %   
|                                   
|                                   
|                                   
|                                   
|Restructuring charge                |                      |   | 3.4          |      |  |            | 5.4                   | %    |              |   |     |            |  |  | 0.0   | %   
|                                   
|                                   
|                                   
|                                   
|Goodwill amortization               |                      |   | 0.3          |      |  |            | 0.0                   | %    |              |   | 2.0  |            |  |  | 2.5   | %   
|                                    |                      |   |              |      |  |            |                       |      |              |   |      |           
|Total operating expenses            |                      |   | 66.4         |      |  |            | 105.3                 | %    |              |   | 79.1 |            |  |  | 100.5 | %   
|                                    |                      |   |              |      |  |            |                       |      |              |   |      |           
|Operating loss                      |                      |   | (3.6         | )    |  |            | (5.7                  | )%   |              |   | (0.4 | )          |  |  | (0.5  | )%  
|                                   
|                                   
|                                   
|                                   
|Interest expense                    |                      |   | (6.5         | )    |  |            | (10.4                 | )%   |              |   | (3.5 | )          |  |  | (4.4  | )%  
|                                    |                      |   |              |      |  |            |                       |      |              |   |      |           
|Loss before taxes                   |                      |   | (10.1        | )    |  |            | (16.1                 | )%   |              |   | (3.9 | )          |  |  | (5.0  | )%  
|                                    |                      |   |              |      |  |            |                       |      |              |   |      |           
|Income taxes                        |                      |   |             |      |  |            | 0.0                   | %    |              |   |     |            |  |  | 0.0   | %   
|                                    |                      |   |              |      |  |            |                       |      |              |   |      |           
|Net loss                            |                      | $ | (10.1        | )    |  |            | (16.1                 | )%   |              | $ | (3.9 | )          |  |  | (5.0  | )%  
|                                    |                      |   |              |      |  |            |                       |      |              |   |      |           

14



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TeleSpectrum Worldwide Inc. and Subsidiaries

Total revenues for the three months ended March 31, 2001 were $62.8 million,
representing a $15.9 million or 20.2% decline in comparison to the prior year
total of $78.7 million. The decrease resulted from several factors, including
management turnover, a 15% reduction in overall production volumes, a slight
decline in average revenues per hour and lower revenues from the fulfillment
operations.

Acquisition Services Segment

Acquisition Services revenues for the three months ended March 31, 2001 were
$38.7 million, representing a $12.3 million or 24.1% decline in comparison to
the prior year total of $51.0 million. Excluding the $4.8 million decline in
revenues related to the fulfillment operations, Acquisition Services revenues
decreased 16.5% during the three months ended March 31, 2001 in comparison to
the same period in 2000. That decrease is primarily the result of a 17%
reduction in production volumes, caused by customer in-sourcing, the end of
certain customer programs, and the Companys focus on profitable accounts,
offset slightly by a 1.5% increase in revenues per hour.

ChannelCare Segment

ChannelCare revenues for the three months ended March 31, 2001 were $22.5
million, representing a $3.6 million or 13.8% decline in comparison to the
prior year total of $26.1 million. That decrease is the result of a 11%
decline in production volumes, similar to that experienced by the Acquisition
Services segment. In addition, this segment also experienced a reduction in
revenues per hour of approximately 6% due to pricing pressures.

e-Satisfy Segment

e-Satisfy revenues for the three months ended March 31, 2001 were $1.6 million,
which represents no change from the three months ended March 31, 2000.

COST OF SERVICES

Cost of services for the three months ended March 31, 2001 were $48.3 million,
representing a $12.9 million or 21.1% decline in comparison to the prior year
total of $61.2 million. As a percentage of total revenues, cost of services
improved slightly from 77.8% during the first quarter of 2000 to 76.9% during
the first quarter of 2001. This reflects the initial effects of the Companys
cost reduction plan, including reductions in both variable production costs and
fixed customer contact center costs offset by the effects of lower volume.

Acquisition Services Segment

Acquisition Services cost of services for the three months ended March 31, 2001
were $30.0 million, representing a $10.1 million or 25.2% decline in comparison
to the prior year total of $40.1 million. Despite the drop in revenues and
production volumes, total cost of services in this segment improved slightly
from 78.6% to 77.5% of revenues, due to the initial effects of the Companys
cost reduction plan. The Company realized $1.8 million in cost reductions
during the first quarter of 2001 as compared to the same period last year,
resulting from lower telecommunications rates and lower fixed center costs, due
to the closures of customer contact centers this year. Those savings, however,
were offset by the effects of the lower revenue base, leaving fixed customer
contact center costs constant for both periods, as a percentage of revenues.

ChannelCare Segment

ChannelCare cost of services for the three months ended March 31, 2001 were
$17.8 million, representing a $2.7 million or 13.2% decline in comparison to
the prior year total of $20.5 million. Again, despite the drop in revenues and
production volumes, total cost of services in this segment increased only
slightly, from 78.5% to 79.1% of revenues. Similar to Acquisition Services,
the Company realized $1.0 million in cost reductions during the first quarter
of 2001 as compared to the same period last year, resulting from lower fixed
center costs, due to the closures of customer contact centers this year. Those
savings, however, were likewise offset by the effects of the lower revenue
base.

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TeleSpectrum Worldwide Inc. and Subsidiaries

e-Satisfy Segment

e-Satisfy cost of services were constant as a percentage of revenues during the
two periods.

Selling, General and Administrative

Selling, general and administrative expenses were $14.4 million for the three
months ended March 31, 2001, representing a $1.5 million or 9.4% decrease from
the $15.9 million total recorded during the same period last year. While a
portion of the decline is attributed to the drop in sales volumes, resulting in
lower commission expense, the majority of the reduction reflects the initial
effects of the Companys cost savings plan. During the first quarter of 2001,
the Company realized $1.5 million in savings as compared to the first quarter
of 2000 from lower payroll related costs due to the reduction in overhead
personnel, as well as reductions in discretionary spending areas such as
consulting, recruiting, and travel expenses.

Restructuring Charge

During the three months ended March 31, 2001, the Companys new management team
expanded the restructuring program initiated in the fourth quarter of
2001 to
include the closure or consolidation of additional facilities and
identification of additional employees for separation. As a result, the
Company recorded a pre-tax charge of $3.4 million during the first quarter.
(See Note 4 to the Condensed Consolidated Financial Statements included
elsewhere in this report.)

Goodwill Amortization

The reduction in goodwill amortization in comparison to the three months ended
March 31, 2000 reflects the write-off of goodwill recorded in the fourth
quarter of 2000.

Interest Expense, net

The Company incurred net interest expense of $6.5 million for the three months
ended March 31, 2001, an increase of $3.0 million in comparison to interest
expense during the same period last year. That increase is due primarily to
default and waiver fees charged by the Companys senior lenders during the
current quarter.

Liquidity and Capital Resources

Cash flows provided by (used in) (dollars in thousands):

|                     |  |                    |      |   |      |   |        |  
|-------------------- |  | ------------------ | ---- | - | ---- | - | ------ | -
|                     |  | Three Months Ended |     
|                     |  | March 31,          |     
|                     |  |                    |     
|                     |  | 2001               |      |   | 2000 |  
|                     |  |                    |      |   |      |  
|Operating activities |  | $                  | (953 | ) |      | $ | (394   | )
|                    
|                    
|                    
|                    
|Investing activities |  | $                  | (301 | ) |      | $ | (6,195 | )
|                    
|                    
|                    
|                    
|Financing activities |  | $                  | (386 | ) |      | $ | 6,589  |  

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TeleSpectrum Worldwide Inc. and Subsidiaries

Three Months Ended March 31, 2001

The Companys cash flows from operations resulted in a $1.0 million use of
cash, reflecting a $2.0 million loss for the period before $8.1 million in
non-cash charges for depreciation and amortization, the restructuring charge,
and the provision for bad debts. Working capital during the period remained
fairly constant, resulting in a $1.0 million reduction, representing the net effect of the changes in current assets and
liabilities.

Cash used in investing activities reflects capital expenditures for property
and equipment, primarily technology related.

Cash used in financing activities reflects the Companys net borrowings under
its credit facilities, used to fund operations and capital expenditures.

On April 16, 2001, the Company signed an amended and restated credit agreement
with its bank group, which matures on July 1, 2002 and replaces the former
agreement, dated June 30, 1999 (see Note 5 to the Condensed Consolidated
Financial Statements included elsewhere in this report). Based on the terms of
that agreement, the Company has classified related amounts outstanding as
long-term liabilities in the accompanying condensed consolidated balance
sheets. In addition, during the fourth quarter of 2000, the Company initiated
a cost reduction program designed to reduce costs by $15.0 million annually,
through closing under utilized customer contact centers, reducing overhead, and
reducing telecommunications costs, of which $10.0 million is expected to be
realized during 2001. During the first quarter of 2001, the new management
team expanded upon that initiative by identifying another $5.0 million in
annual savings through further closure/consolidation of customer contact
centers and overhead reductions, of which $2.0 to $3.0 million is expected to
be realized in 2001. During the first quarter of 2001, management estimates
that approximately $3.5 million of savings were realized in connection with
these initiatives.

As a result, management believes that the working capital needs of the Company
through July 1, 2002 will be provided by the cash generated from ongoing
operations and the Amended Agreement. However, there can be no assurance that
the Company will be able to comply with the amended covenants through July 1,
2002 or refinance the Amended Agreement by that date.

Three Months Ended March 31, 2000

The $0.4 million of cash used by operating activities consisted of a $3.9
million net loss offset by non cash items including depreciation and
amortization of $6.1 million and $0.7 million for bad debts. Working capital
requirements which positively effected cash flow included a decrease in
accounts receivable of $3.1 million offset by a $2.6 million decrease in
accrued expenses and a $3.3 million decrease in other liabilities.

The $6.2 million of cash used in investing activities primarily consisted of
property and equipment purchases attributable to maintaining and enhancing our
technology platforms particularly as it relates to ChannelCare.

The $6.6 million of net cash provided by financing activities consisted
primarily of $6.2 million of net borrowings related to long-term debt.

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TeleSpectrum Worldwide Inc. and Subsidiaries

Item 3. Quantitative and Qualitative Disclosures
About Market Risk







Interest Rate Risk

As of March 31, 2001, the Company had approximately $125 million outstanding
under term and working capital advances with its senior bank group. Interest
on those facilities was based on a floating interest rate, either the prime
rate or LIBOR. Based on the outstanding balance under the facilities at March
31, 2001, the Company would be required to pay an additional $1.2 million in
interest annually for every 1.0% increase in the average prime rate or LIBOR.
To reduce the risk associated with a large increase in interest rates, the
Company has placed two derivative financial instruments known as interest rate
caps each with notional amounts of $25.1 million as of March 31, 2001. Under
the terms of the interest rate cap agreements, the Company would receive
quarterly cash payments when the 3-month LIBOR rate at the end of any quarter
exceeded 7.5%. The payment would be determined by multiplying the difference
between the actual LIBOR rate and 7.5% by the notional amounts. The interest
rate cap agreements expire on September 30, 2002. These interest rate caps
were required under the terms of the former credit facilities. The three-month
LIBOR interest rate was approximately 4.9% at March 31, 2001. (See Note 5 of
the Condensed Consolidated Financial Statements included elsewhere in this
report.)

The Amended Agreement bears interest at a base rate that varies (8.0% at April
16, 2001), plus a margin of 1.54%. As defined in the Amended Agreement, the
base rate is the higher of the banks prime rate or 50 basis points above the
Federal Funds Rate.

Foreign Currency Risk

The Company has subsidiaries in Canada and the United Kingdom, which are
subject to foreign currency fluctuations. As currency rates change,
translation of income statements of these subsidiaries from local currencies to
US dollars affects year-over-year comparability of our operating results.
Gains and losses on translation are recorded as a separate component of
stockholders equity.

Approximately $6.4 million has been loaned to our Canadian subsidiary. The
loan proceeds have been converted to Canadian dollars. Under the terms of the
amended and restated credit agreement, large principal payments due in 2002 may
require conversion of all or a portion of our Canadian dollar loan to US
dollars. An unfavorable change in the Canadian dollar exchange rate at the
time of the conversion could cause a foreign currency exchange loss. At this
time, the Company does not believe that such a conversion would be required.
The other foreign subsidiaries are limited in their operations and the level of
investment by the parent company so that risk of foreign currency fluctuations
is not expected to be material.

PART II - OTHER INFORMATION







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TeleSpectrum Worldwide Inc. and Subsidiaries













|        |  |                                                                                                             |  |  |  | 
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|Item 1. |  | Legal Proceedings                                                                                          
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|        |  | None                                                                                                       
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|Item 2. |  | Changes in Securities                                                                                      
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|        |  | None                                                                                                       
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|Item 3. |  | Defaults Upon Senior Securities                                                                            
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|        |  | See Note 1 and Note 5 of the Condensed Consolidated Financial
Statements included elsewhere in this report.
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|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                        
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|        |  | None                                                                                                       
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|Item 5. |  | Other Information                                                                                          
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|        |  | None                                                                                                       
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|Item 6. |  | Exhibits and Reports on Form 8-K                                                                           
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|        |  | (a) Exhibits                                                                                               
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|        |  | None                                                                                                       
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|        |  | (b) Form 8-K                                                                                               



| |  |  | On January 23, 2001, the Company reported on Form 8-K with regards to
Item 5 announcing the approval of a restructuring plan.                                 
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On February 15, 2001, the Company reported on Form 8-K with regards
to Item 5 and Item 7 upon entering into a Limited Consent & Waiver
with its banking group.
|
| |  |  | On February 22, 2001, the Company reported on Form 8-K with regards
to Item 5 announcing management changes.                                                  

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                    |  |                                                                                
|------------------- |  | -------------------------------------------------------------------------------
|                    |  | TeleSpectrum Worldwide Inc.                                                    
|                    |  |                                                                                
|                    |  | (Registrant)                                                                   
|                   
|Date:  May 14, 2001 |  | /s/  J. Peter Pierce                                                           
|                    |  |                                                                                
|                    |  | J. Peter Pierce
TeleSpectrum Worldwide Inc.
President & Chief Executive Officer
|                   
|Date: May 14, 2001  |  | /s/  Kurt Dinkelacker                                                          
|                    |  |                                                                                
|                    |  | Kurt Dinkelacker
TeleSpectrum Worldwide Inc.
Chief Financial Officer           

20