UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-11919

TeleTech Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		84-1291044 (I.R.S. Employer Identification No.)

9197 South Peoria Street
Englewood, Colorado 80112
(Address of principal executive offices)

Registrant’s telephone number, including area code: (303) 397-8100

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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 þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No þ

As of April 29, 2010, there were 61,489,897 shares of the registrant’s common stock outstanding.

 

 

TELETECH HOLDINGS, INC. AND SUBSIDIARIES
MARCH 31, 2010 FORM 10-Q
TABLE OF CONTENTS

		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009			1
Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009 (unaudited)			2
Consolidated Statement of Equity as of and for the three months ended March 31, 2010 (unaudited)			3
Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (unaudited)			4
Notes to the Unaudited Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3. Quantitative and Qualitative Disclosures about Market Risk			34
Item 4. Controls and Procedures			36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 3. Defaults Upon Senior Securities			38
Item 4. Reserved			38
Item 5. Other Information			38
Item 6. Exhibits			39
SIGNATURES			40
EXHIBIT INDEX			41
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

		March 31,				December 31,
		2010				2009
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	133,898			$	109,424
Accounts receivable, net			200,120				216,614
Prepaids and other current assets			44,955				45,322
Deferred tax assets, net			2,388				5,911
Income tax receivable			25,148				25,104
Total current assets			406,509				402,375
Long-term assets
Property, plant and equipment, net			122,438				126,995
Goodwill			45,138				45,250
Contract acquisition costs, net			7,121				8,049
Deferred tax assets, net			37,736				36,527
Other long-term assets			20,487				20,971
Total long-term assets			232,920				237,792
Total assets		$	639,429			$	640,167
LIABILITIES AND EQUITY
Current liabilities
Accounts payable		$	28,689			$	17,625
Accrued employee compensation and benefits			66,393				67,106
Other accrued expenses			21,555				18,481
Income taxes payable			17,885				20,327
Deferred tax liabilities, net			4,264				3,145
Deferred revenue			4,827				13,164
Other current liabilities			4,342				6,118
Total current liabilities			147,955				145,966
Long-term liabilities
Line of credit			—				—
Negative investment in deconsolidated subsidiary			4,865				4,865
Deferred tax liabilities, net			922				—
Deferred rent			13,297				13,989
Other long-term liabilities			17,208				19,446
Total long-term liabilities			36,292				38,300
Total liabilities			184,247				184,266
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock — $0.01 par value: 10,000,000 shares authorized; zero shares outstanding as of March 31, 2010 and December 31, 2009			—				—
Common stock — $0.01 par value; 150,000,000 shares authorized; 61,488,637 and 62,218,238 shares outstanding as of March 31, 2010 and December 31, 2009, respectively			615				622
Additional paid-in capital			341,815				344,251
Treasury stock at cost: 20,565,808 and 19,836,208 shares as of March 31, 2010 and December 31, 2009, respectively			(266,914	)			(251,691	)
Accumulated other comprehensive income			14,800				10,513
Retained earnings			360,015				346,728
Non-controlling interest			4,851				5,478
Total stockholders’ equity			455,182				455,901
Total liabilities and stockholders’ equity		$	639,429			$	640,167

The accompanying notes are an integral part of these consolidated financial statements.

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

		Three Months Ended
		March 31,
		2010				2009
Revenue		$	271,526			$	304,030
Operating expenses
Cost of services (exclusive of depreciation and amortization presented separately below)			194,618				218,842
Selling, general and administrative			43,408				48,515
Depreciation and amortization			12,724				14,062
Restructuring charges, net			1,469				303
Impairment losses			—				1,967
Total operating expenses			252,219				283,689
Income from operations			19,307				20,341
Other income (expense)
Interest income			574				807
Interest expense			(817	)			(843	)
Other, net			32				762
Total other income (expense)			(211	)			726
Income before income taxes			19,096				21,067
Provision for income taxes			(5,054	)			(5,180	)
Net income			14,042				15,887
Net income attributable to non-controlling interest			(755	)			(824	)
Net income attributable to TeleTech shareholders		$	13,287			$	15,063
Weighted average shares outstanding
Basic			61,877				63,908
Diluted			63,483				64,300
Net income per share attributable to TeleTech shareholders
Basic		$	0.21			$	0.24
Diluted		$	0.21			$	0.23

The accompanying notes are an integral part of these consolidated financial statements.

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

		Stockholders’ Equity of the Company
																										Accumulated
																						Additional				Other								Non-
		Preferred Stock								Common Stock								Treasury				Paid-in				Comprehensive				Retained				controlling				Total
		Shares				Amount				Shares				Amount				Stock				Capital				Income (Loss)				Earnings				interest				Equity
Balance as of December 31, 2009			—			$	—				62,218			$	622			$	(251,691	)		$	344,251			$	10,513			$	346,728			$	5,478			$	455,901
Net income			—				—				—				—				—				—				—				13,287				755				14,042
Dividends distributed to non-controlling interest			—				—				—				—				—				—				—				—				(1,260	)			(1,260	)
Foreign currency translation adjustments			—				—				—				—				—				—				1,578				—				(122	)			1,456
Derivatives valuation, net of tax			—				—				—				—				—				—				2,962				—				—				2,962
Vesting of restricted stock units			—				—				267				3				3,398				(5,606	)			—				—				—				(2,205	)
Exercise of stock options			—				—				74				1				937				(126	)			—				—				—				812
Excess tax benefit from equity-based awards			—				—				—				—				—				108				—				—				—				108
Equity-based compensation expense			—				—				—				—				—				3,188				—				—				—				3,188
Purchases of common stock			—				—				(1,070	)			(11	)			(19,558	)			—				—				—				—				(19,569	)
Other			—				—				—				—				—				—				(253	)			—				—				(253	)
Balance as of March 31, 2010			—			$	—				61,489			$	615			$	(266,914	)		$	341,815			$	14,800			$	360,015			$	4,851			$	455,182

The accompanying notes are an integral part of these consolidated financial statements.

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

		Three Months Ended
		March 31,
		2010				2009
Cash flows from operating activities
Net income		$	14,042			$	15,887
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			12,724				14,062
Amortization of contract acquisition costs			928				769
Provision for doubtful accounts			304				304
Loss on foreign currency derivatives			60				—
(Gain) loss on disposal of assets			(49	)			556
Impairment losses			—				1,967
Deferred income taxes			1,564				(1,160	)
Excess tax benefit from equity-based awards			—				(1,746	)
Equity-based compensation expense			3,188				3,614
Other			—				(63	)
Changes in assets and liabilities:
Accounts receivable			15,016				9,775
Prepaids and other assets			5,668				3,746
Accounts payable and accrued expenses			9,242				2,934
Deferred revenue and other liabilities			(11,255	)			3,366
Net cash provided by operating activities			51,432				54,011
Cash flows from investing activities
Purchases of property, plant and equipment			(6,608	)			(8,455	)
Net cash used in investing activities			(6,608	)			(8,455	)
Cash flows from financing activities
Proceeds from line of credit			215,150				244,510
Payments on line of credit			(215,150	)			(278,010	)
Payments on capital lease obligations and equipment financing			(951	)			(25	)
Dividends distributed to non-controlling interest			(1,260	)			(900	)
Proceeds from exercise of stock options			814				206
Excess tax benefit from equity-based awards			108				—
Purchases of common stock			(19,568	)			(2,004	)
Net cash used in financing activities			(20,857	)			(36,223	)
Effect of exchange rate changes on cash and cash equivalents			507				(6,122	)
Increases in cash and cash equivalents			24,474				3,211
Cash and cash equivalents, beginning of period			109,424				87,942
Cash and cash equivalents, end of period		$	133,898			$	91,153
Supplemental disclosures
Cash paid for interest		$	802			$	424
Cash paid for income taxes		$	1,197			$	2,947
Non-cash investing and financing activities
Acquisition of equipment through installment purchase agreements		$	186			$	915

The accompanying notes are an integral part of these consolidated financial statements.

TELETECH HOLDINGS, INC. AND SUBSIDIARIES

(1) OVERVIEW AND BASIS OF PRESENTATION

Overview

TeleTech Holdings, Inc. and its subsidiaries (“TeleTech” or the “Company”) serve their clients through the primary businesses of Business Process Outsourcing (“BPO”), which provides outsourced business process, customer management and marketing services for a variety of industries via operations in the U.S., Argentina, Australia, Brazil, Canada, China, Costa Rica, Germany, Malaysia, Mexico, New Zealand, Northern Ireland, the Philippines, Scotland, South Africa and Spain.

Basis of Presentation

The Consolidated Financial Statements are comprised of the accounts of TeleTech, its wholly owned subsidiaries and its 55% equity ownership in Percepta, LLC. On December 22, 2008, as discussed in Note 2, Newgen Results Corporation, a wholly-owned subsidiary of the Company, filed a voluntary petition for liquidation under Chapter 7 in the United States Bankruptcy Court for the District of Delaware. According to the authoritative guidance, the consolidation of a majority-owned subsidiary is precluded where control does not rest with the majority owners. Accordingly, the Company deconsolidated Newgen Results Corporation as of December 22, 2008.

The accompanying unaudited Consolidated Financial Statements do not include all of the disclosures required by accounting principles generally accepted in the U.S. (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company as of March 31, 2010, and the consolidated results of operations of the Company for the three months ended March 31, 2010 and 2009, and the cash flows of the Company for the three months ended March 31, 2010 and 2009. Operating results for the three months ended March 31, 2010 include a $2.0 million reduction to revenue for disputed service delivery issues which occurred in 2009. Operating results for the three months ended March 31, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10–K for the year ended December 31, 2009.

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates including those related to derivatives and hedging activities, income taxes including the valuation allowance for deferred tax assets, valuation of long-lived assets, self-insurance reserves, litigation and restructuring reserves, and allowance for doubtful accounts. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ materially from these estimates under different assumptions or conditions.

Recently Issued Accounting Pronouncements

Effective January 1, 2010, the Company adopted a new financial accounting statement that requires additional disclosures about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to the transferred financial assets. The new statement eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. The adoption of this standard did not have a material impact on the Company’s results of operations, financial position, or cash flows.

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

Effective January 1, 2010, the Company adopted a new financial accounting statement that changes how TeleTech determines when an entity that is insufficiently capitalized or is not controlled through voting or similar rights should be consolidated. The determination of whether TeleTech is required to consolidate an entity is based on, among other things, an entity’s purpose and design and TeleTech’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The adoption of this standard did not have a material impact on the Company’s results of operations, financial position, or cash flows.

In September 2009, the FASB issued new revenue guidance that requires an entity to apply the relative selling price allocation method in order to estimate a selling price for all units of accounting, including delivered items when vendor-specific objective evidence or acceptable third-party evidence does not exist. The new guidance is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and shall be applied on a prospective basis. Earlier application is permitted. The Company expects to adopt this guidance effective January 1, 2011 and does not expect that the new guidance will have a material impact on its results of operations, financial position, or cash flows.

(2) DECONSOLIDATION OF A SUBSIDIARY

On December 22, 2008, Newgen Results Corporation, a wholly-owned subsidiary of the Company, filed a voluntary petition for liquidation under Chapter 7 in the United States Bankruptcy Court for the District of Delaware. According to the authoritative literature, a consolidation of a majority-owned subsidiary is precluded where control does not rest with the majority owners. Under these rules, legal reorganization or bankruptcy represents conditions that can preclude consolidation as control rests with the Bankruptcy Court, rather than the majority owner. Accordingly, the Company deconsolidated Newgen Results Corporation as of December 22, 2008. As a result, the Company has reflected its negative investment of $4.9 million on the Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009.

(3) SEGMENT INFORMATION

The Company serves its clients through the primary business of BPO services.

The Company’s BPO business provides outsourced business process and customer management services for a variety of industries through global delivery centers and represents 100% of total annual revenue. The Company’s North American BPO segment is comprised of sales to all clients based in North America (encompassing the U.S. and Canada), while the Company’s International BPO is comprised of sales to all clients based in countries outside of North America.

The Company allocates to each segment its portion of corporate operating expenses. All inter–company transactions between the reported segments for the periods presented have been eliminated.

The following tables present certain financial data by segment (amounts in thousands):

		Three Months Ended
		March 31,
		2010				2009
Revenue
North American BPO		$	207,942			$	228,886
International BPO			63,584				75,144
Total		$	271,526			$	304,030
Income (loss) from operations
North American BPO		$	19,788			$	25,427
International BPO			(481	)			(5,086	)
Total		$	19,307			$	20,341

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

The following table presents revenue based upon the geographic location where the services are provided (amounts in thousands):

		Three Months Ended
		March 31,
		2010				2009
Revenue
United States		$	101,105			$	100,062
Philippines			70,970				78,341
Latin America			48,002				57,064
Europe			27,137				31,411
Canada			14,779				26,244
Asia Pacific / Africa			9,533				10,908
Total		$	271,526			$	304,030

(4) SIGNIFICANT CLIENTS AND OTHER CONCENTRATIONS

The Company did not have any clients that contributed in excess of 10% of total revenue for the three months ended March 31, 2010 or 2009.

The loss of one or more of its significant clients could have a material adverse effect on the Company’s business, operating results, or financial condition. The Company does not require collateral from its clients. To limit the Company’s credit risk, management performs periodic credit evaluations of its clients and maintains allowances for uncollectible accounts. Although the Company is impacted by economic conditions in various industry segments, management does not believe significant credit risk exists as of March 31, 2010.

(5) GOODWILL

Goodwill consisted of the following (amounts in thousands):

		December 31,												Effect of Foreign				March 31,
		2009				Acquisitions				Impairments				Currency				2010
North American BPO		$	35,885			$	—			$	—			$	—			$	35,885
International BPO			9,365				—				—				(112	)			9,253
Total		$	45,250			$	—			$	—			$	(112	)		$	45,138

The Company performs a goodwill impairment test on at least an annual basis. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur and determination of the Company’s weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. The Company conducts its annual goodwill impairment test in the fourth quarter each year, or more frequently if indicators of impairment exist. During the quarter ended March 31, 2010, the Company assessed whether any such indicators of impairment exist, and concluded there were no indicators of impairment.

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

(6) DERIVATIVES

Cash Flow Hedges

The Company enters into foreign exchange forward and option contracts to reduce its exposure to foreign currency exchange rate fluctuations that are associated with forecasted revenue. Upon proper qualification, these contracts are designated as cash flow hedges. It is the Company’s policy to only enter into derivative contracts with investment grade counterparty financial institutions, and correspondingly, the fair value of derivative assets consider, among other factors the creditworthiness of these counterparties. Conversely, the fair value of derivative liabilities reflect the Company’s creditworthiness. As of March 31, 2010, the Company has not experienced, nor does it anticipate any issues related to derivative counterparty defaults. The following table summarizes the aggregate unrealized net gain or loss in Accumulated Other Comprehensive Income for the three months ended March 31, 2010 and 2009 (amounts in thousands and net of tax):

		Three Months Ended
		March 31,
		2010				2009
Aggregate unrealized net gain (loss) at beginning of year		$	4,468			$	(21,180	)
Net gain/(loss) from change in fair value of cash flow hedges			3,889				(1,724	)
Net (gain)/loss reclassified to earnings from effective hedges			(927	)			4,763
Aggregate unrealized net gain (loss) at end of period		$	7,430			$	(18,141	)

The Company’s cash flow hedging instruments as of March 31, 2010 and December 31, 2009 are summarized as follows (amounts in thousands). All hedging instruments are forward contracts, except as noted.

										% Maturing
		Local Currency				U.S. Dollar				in the Next 12				Contracts Maturing
As of March 31, 2010		Notional Amount				Notional Amount				Months				Through
Canadian Dollar			10,800			$	8,749				50.0	%		December 2011
Canadian Dollar Call Options			14,300				12,750				100.0	%		December 2010
Philippine Peso			7,183,000				149,819	(1)			69.6	%		December 2012
Argentine Peso			39,600				9,868	(2)			100.0	%		December 2010
Mexican Peso			509,500				35,877				78.6	%		December 2011
British Pound Sterling			7,956				12,541	(3)			66.1	%		December 2011
						$	229,604
		Local Currency				U.S. Dollar
As of December 31, 2009		Notional Amount				Notional Amount
Canadian Dollar			14,400			$	11,782
Canadian Dollar Call Options			19,400				17,301
Philippine Peso			4,615,000				96,354	(1)
Argentine Peso			9,000				2,454
Mexican Peso			491,500				34,880
South African Rand			23,000				2,081
British Pound Sterling			3,876				6,565	(3)
						$	171,417

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

Hedge of Net Investment

In 2008, the Company entered into a foreign exchange forward contract to hedge its net investment in a foreign operation which was settled in May 2009. Changes in fair value of the Company’s net investment hedge were recorded in the cumulative translation adjustment in Accumulated Other Comprehensive Income on the Consolidated Balance Sheets offsetting the change in the cumulative translation adjustment attributable to the hedged portion of the Company’s net investment in the foreign operation. Gains and losses from the settlements of the Company’s net investment hedge remain in Accumulated Other Comprehensive Income until partial or complete liquidation of the applicable net investment. A loss of $1.2 million from the settlements of net investment hedges is recorded in Accumulated Other Comprehensive Income as of March 31, 2010.

Fair Value Hedges

The Company enters into foreign exchange forward contracts to hedge against translation gains and losses on certain assets and liabilities of the Company’s foreign operations. Changes in the fair value of derivative instruments designated as fair value hedges, as well as the offsetting gain or loss on the hedged asset or liability, are recognized in earnings in the same line item, Other, net. As of March 31, 2010, the total notional amount of the Company’s forward contracts used as fair value hedges was $38.8 million.

Embedded Derivatives

In addition to hedging activities, the Company’s foreign subsidiary in Argentina is party to U.S. dollar denominated lease contracts which the Company has determined contain embedded derivatives. As such, the Company bifurcates the embedded derivative features of the lease contracts and values these features as foreign currency derivatives.

Derivative Valuation and Settlements

The Company’s derivatives as of March 31, 2010 and December 31, 2009 were as follows (amounts in thousands):

		March 31, 2010
		Designated as hedging
		instruments								Not designated as hedging instruments
		Foreign				Foreign				Foreign				Foreign
Derivative contracts:		Exchange				Exchange				Exchange				Exchange				Leases
										Option and
										Forward								Embedded
Derivative classification:		Cash Flow				Net Investment				Contracts				Fair Value				Derivative
Fair value and location of derivative in the Consolidated Balance Sheet:
Prepaids and other current assets		$	10,719			$	—			$	46			$	44			$	—
Other long-term assets			2,655				—				—				—				—
Other current liabilities			(530	)			—				—				(21	)			(101	)
Other long-term liabilities			(52	)			—				—				—				(160	)
Total fair value of derivatives, net		$	12,792			$	—			$	46			$	23			$	(261	)

		December 31, 2009
		Designated as hedging
		instruments								Not designated as hedging instruments
		Foreign				Foreign				Foreign				Foreign
Derivative contracts:		Exchange				Exchange				Exchange				Exchange				Leases
										Option and
										Forward								Embedded
Derivative classification:		Cash Flow				Net Investment				Contracts				Fair Value				Derivative
Fair value and location of derivative in the Consolidated Balance Sheet:
Prepaids and other current assets		$	8,022			$	—			$	42			$	29			$	—
Other long-term assets			1,996				—				—				—				—
Other current liabilities			(1,884	)			—				—				(137	)			(139	)
Other long-term liabilities			(30	)			—				—				—				(230	)
Total fair value of derivatives, net		$	8,104			$	—			$	42			$	(108	)		$	(369	)

The effect of derivative instruments on the Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009 were as follows (amounts in thousands):

		Three Months Ended March 31,
		2010								2009
		Designated as hedging instruments								Designated as hedging instruments
Derivative contracts:		Foreign Exchange								Foreign Exchange
Derivative classification:		Cash Flow				Net Investment				Cash Flow				Net Investment
Amount of gain or (loss) recognized in other comprehensive income — effective portion, net of tax:		$	3,889			$	—			$	(1,724	)		$	(50	)
Amount and location of net gain or (loss) reclassified from accumulated OCI to income — effective portion:
Revenue		$	1,520			$	—			$	(7,808	)		$	—
Amount and location of net gain or (loss) reclassified from accumulated OCI to income — ineffective portion and amount excluded from effectiveness testing:
Revenue		$	—			$	—			$	(35	)		$	—

		Three Months Ended March 31,
		2010												2009
		Not designated as hedging instruments												Not designated as hedging instruments
Derivative contracts:		Foreign Exchange								Leases				Foreign Exchange								Leases
		Option and								Embedded				Option and								Embedded
Derivative classification:		Forward Contracts				Fair Value				Derivative				Forward Contracts				Fair Value				Derivative
Amount and location of net gain or (loss) recognized in the Consolidated Statement of Operations:
Costs of services		$	—			$	—			$	107			$	—			$	—			$	261
Other, net		$	4			$	1,136			$	—			$	—			$	374			$	—

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

(7) FAIR VALUE

The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

	Level 1 —		Quoted prices in active markets for identical assets or liabilities.
	Level 2 —		Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.
	Level 3 —		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following presents information as of March 31, 2010 and December 31, 2009 of the Company’s assets and liabilities required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine their fair value.

Accounts Receivable and Payable — The amounts recorded in the accompanying balance sheets approximate fair value because of their short-term nature.

Debt — The Company’s debt is reflected in the accompanying balance sheets at amortized cost. Debt consists primarily of the Company’s Credit Facility, which permits floating-rate borrowings based upon the current Prime Rate or LIBOR plus a credit spread as determined by the Company’s leverage ratio calculation (as defined in the Credit Facility agreement). As of March 31, 2010 and December 31, 2009, the Company had no borrowings outstanding under the Company’s Credit Facility. Based upon average outstanding borrowings during the first quarter of 2010, the Company’s average borrowing rate was approximately 1.4% per annum.

Derivatives — Net derivative assets (liabilities) measured at fair value on a recurring basis included the following as of March 31, 2010 and December 31, 2009 (amounts in thousands):

As of March 31, 2010

		Fair Value Measurements Using
		Quoted Prices in								Significant
		Active Markets for				Significant Other				Unobservable
		Identical Assets				Observable Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)				At Fair Value
Cash flow hedges		$	—			$	12,792			$	—			$	12,792
Fair value hedges			—				23				—				23
Embedded derivatives			—				(261	)			—				(261	)
Option and forward contracts			—				46				—				46
Total net derivative asset (liability)		$	—			$	12,600			$	—			$	12,600

As of December 31, 2009

		Fair Value Measurements Using
		Quoted Prices in								Significant
		Active Markets for				Significant Other				Unobservable
		Identical Assets				Observable Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)				At Fair Value
Cash flow hedges		$	—			$	8,104			$	—			$	8,104
Fair value hedges			—				(108	)			—				(108	)
Embedded derivatives			—				(369	)			—				(369	)
Option and forward contracts			—				42				—				42
Total net derivative asset (liability)		$	—			$	7,669			$	—			$	7,669

The portfolio is valued using models based on market observable inputs, including both forward and spot foreign exchange rates, implied volatility, and counterparty credit risk, including the ability of each party to execute its obligations under the contract. As of March 31, 2010, credit risk did not materially change the fair value of the Company’s foreign currency forward and option contracts.

Money Market Investments — The Company invests in various well-diversified money market funds which are managed by financial institutions. These money market funds are not publicly traded, but have historically been highly liquid. The value of the money market funds is determined by the banks based upon the funds’ net asset values (“NAV”). All of the money market funds currently permit daily investments and redemptions at a $1.00 NAV.

Deferred Compensation Plan — The Company maintains a non-qualified deferred compensation plan structured as a Rabbi trust for certain eligible employees. Participants in the deferred compensation plan select from a menu of phantom investment options for their deferral dollars offered by the Company each year, which are based upon changes in value of complementary, defined market investments. The deferred compensation liability represents the combined values of market investments against which participant accounts are tracked.

The following is a summary of the Company’s fair value measurements as of March 31, 2010 and December 31, 2009 (amounts in thousands):

As of March 31, 2010

		Fair Value Measurements Using
		Quoted Prices in								Significant
		Active Markets for				Significant Other				Unobservable
		Identical Assets				Observable Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)
Assets
Money market investments		$	—			$	25,201			$	—
Derivative instruments, net			—				12,600				—
Total assets		$	—			$	37,801			$	—
Liabilities						$
Deferred compensation plan liability		$	—			$	(3,516	)		$	—
Total liabilities		$	—			$	(3,516	)		$	—

As of December 31, 2009

		Fair Value Measurements Using
		Quoted Prices in								Significant
		Active Markets for				Significant Other				Unobservable
		Identical Assets				Observable Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)
Assets
Money market investments		$	—			$	—			$	—
Derivative instruments, net			—				7,669				—
Total assets		$	—			$	7,669			$	—
Liabilities
Deferred compensation plan liability		$	—			$	(3,399	)		$	—
Total liabilities		$	—			$	(3,399	)		$	—

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

(8) INCOME TAXES

The Company accounts for income taxes in accordance with the accounting literature for income taxes, which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the Consolidated Financial Statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. When circumstances warrant, the Company assesses the likelihood that its net deferred tax assets will more likely than not be recovered from future projected taxable income.

The Company has protested one issue to the appeals branch of the Internal Revenue Service for an administrative resolution arising from a federal tax audit for which no tax benefit has been recorded. The Company is currently under audit of income taxes in the Philippines for various open tax years. Although the outcome of examinations by taxing authorities are always uncertain, it is the opinion of management that the resolution of these audits will not have a material effect on the Company’s Consolidated Financial Statements.

As of March 31, 2010, the Company had $40.1 million of deferred tax assets (after a $19.7 million valuation allowance) and net deferred tax assets (after deferred tax liabilities) of $34.9 million related to the U.S. and international tax jurisdictions whose recoverability is dependent upon future profitability.

The effective tax rate for the three months ended March 31, 2010 and 2009 was 26.5% and 24.6%, respectively.

(9) RESTRUCTURING CHARGES AND IMPAIRMENT LOSSES

Restructuring Charges

During the three months ended March 31, 2010 and 2009, the Company undertook restructuring activities primarily associated with reductions in the Company’s capacity and workforce in both the North American and International BPO segments to better align the capacity and workforce with current business needs.

A summary of the expenses recorded for the three months ended March 31, 2010 and 2009, respectively, is as follows (amounts in thousands):

		Three Months Ended March 31,
		2010				2009
North American BPO
Reduction in force		$	1,357			$	900
Facility exit charges			—				112
Revision of prior estimates			(5	)			(1,135	)
Total		$	1,352			$	(123	)

		Three Months Ended March 31,
		2010				2009
International BPO
Reduction in force		$	117			$	426
Facility exit charges			—				—
Revision of prior estimates			—				—
Total		$	117			$	426

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

During the three months ended March 31, 2009, the Company determined that $0.7 million of previously recorded restructuring expense would be reimbursed from the primary client in the delivery centers being closed, and $0.4 million previously recorded would not be paid; these amounts were reversed against restructuring charge expenses as indicated as a revision of prior estimates in the table above.

A roll-forward of the activity in the Company’s restructuring accruals is as follows (amounts in thousands):

		Closure of
		Delivery				Reduction in
		Centers				Force				Total
Balance as of December 31, 2009		$	375			$	13			$	388
Expense			—				1,474				1,474
Payments			—				(133	)			(133	)
Reversals			—				(5	)			(5	)
Balance as of March 31, 2010		$	375			$	1,349			$	1,724

Of the remaining accrued costs, $1.3 million are expected to be paid during 2010, with the remainder to be paid thereafter.

Impairment Losses

The Company had no impairment charges for the three months ended March 31, 2010.

For the three months ended March 31, 2009, the Company recognized impairment losses of $2.0 million related to the abandonment of certain leasehold improvement assets in an International BPO facility.

(10) COMMITMENTS AND CONTINGENCIES

Letters of Credit

As of March 31, 2010, outstanding letters of credit and other performance guarantees totaled approximately $5.0 million, which primarily guarantee workers’ compensation and other insurance related obligations.

Guarantees

The Company’s Credit Facility is guaranteed by a majority of the Company’s domestic subsidiaries.

On March 31, 2010, the Company sold a corporate aircraft that was financed under a synthetic operating lease. Accordingly, the Company elected to exercise its purchase option rights under the lease for a specified amount. Simultaneous with the purchase, the Company sold the aircraft to an unrelated third-party. The proceeds from the aircraft sale were used to satisfy the lease obligations and other sales-related expenses, with the Company realizing a net gain of approximately $137,000, which is recorded in Other income in the Consolidated Statements of Operations.

From time to time, we have been involved in claims and lawsuits, both as plaintiff and defendant, which arise in the ordinary course of business. Accruals for claims or lawsuits have been provided for to the extent that losses are deemed both probable and estimable. Although the ultimate outcome of these claims or lawsuits cannot be ascertained, on the basis of present information and advice received from counsel, we believe that the disposition or ultimate resolution of such claims or lawsuits will not have a material adverse effect on our financial position, cash flows or results of operations.

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

On January 25, 2008, a class action lawsuit was filed in the United States District Court for the Southern District of New York entitled Beasley v. TeleTech Holdings, Inc., et al. against TeleTech, certain current directors and officers and others alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder and Section 20(a) of the Securities Exchange Act. The complaint alleges, among other things, false and misleading statements in the Registration Statement and Prospectus in connection with (i) a March 2007 secondary offering of common stock and (ii) various disclosures made and periodic reports filed by the Company between February 8, 2007 and November 8, 2007. On February 25, 2008, a second nearly identical class action complaint, entitled Brown v. TeleTech Holdings, Inc., et al., was filed in the same court. On May 19, 2008, the actions described above were consolidated under the caption In re: TeleTech Litigation and lead plaintiff and lead counsel were approved. On October 21, 2009, the Company and the other named defendants executed a stipulation of settlement with the lead plaintiffs to settle the consolidated class action lawsuit. The United States District Court for the Southern District of New York has preliminarily approved the settlement and has set a hearing on final approval on June 11, 2010. The Company paid $225,000 of the total settlement amount, which had been included in Other accrued expenses in the Consolidated Balance Sheet at December 31, 2009, and the rest of the settlement amount will be covered by the Company’s insurance carriers.

Derivative Action

On July 28, 2008, a shareholder derivative action was filed in the Court of Chancery, State of Delaware, entitled Susan M. Gregory v. Kenneth D. Tuchman, et al., against certain of TeleTech’s former and current officers and directors alleging, among other things, that the individual defendants breached their fiduciary duties and were unjustly enriched in connection with: (i) equity grants made in excess of plan limits; and (ii) manipulating the grant dates of stock option grants from 1999 through 2008. TeleTech is named solely as a nominal defendant against whom no recovery is sought. On October 26, 2009, the Company and other defendants in the derivative action executed a stipulation of settlement with the lead plaintiffs to settle the derivative action. On January 5, 2010, the Court of Chancery, State of Delaware issued final approval of the settlement. The total amount to be paid under the approved settlement will be covered by the Company’s insurance carriers.

(11) COMPREHENSIVE INCOME

The following table sets forth comprehensive income (loss) for the periods indicated (amounts in thousands):

		Three Months Ended
		March 31,
		2010				2009
Net income		$	14,042			$	15,887
Foreign currency translation adjustment			1,456				(7,513	)
Derivatives valuation, net of tax			2,962				3,039
Other			(253	)			—
Total comprehensive income		$	18,207			$	11,413
Comprehensive income attributable to non-controlling interest			(633	)			(765	)
Comprehensive income attributable to TeleTech		$	17,574			$	10,648

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

The following table reconciles equity attributable to noncontrolling interest (amounts in thousands):

		Three Months Ended
		March 31,
		2010				2009
Noncontrolling interest, January 1		$	5,478			$	5,011
Net income attributable to noncontrolling interest			755				824
Dividends distributed to noncontrolling interest			(1,260	)			(900	)
Foreign currency translation adjustments			(122	)			(59	)
Noncontrolling interest, March 31		$	4,851			$	4,876

(12) NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted shares for the periods indicated (amounts in thousands):

		Three Months Ended
		March 31,
		2010				2009
Shares used in basic earnings per share calculation			61,877				63,908
Effect of dilutive securities:
Stock options			1,011				202
Restricted stock units			595				190
Total effects of dilutive securities			1,606				392
Shares used in dilutive earnings per share calculation			63,483				64,300

For the three months ended March 31, 2010 and 2009, options to purchase 0.2 million and 2.7 million shares of common stock, respectively, were outstanding, but not included in the computation of diluted net income per share because the effect would have been anti—dilutive. For the three months ended March 31, 2010 and 2009, restricted stock units (“RSUs”) of 0.7 million and 1.0 million, respectively, were outstanding, but not included in the computation of diluted net income per share because the effect would have been anti—dilutive.

(13) EQUITY-BASED COMPENSATION PLANS

All equity—based payments to employees are recognized in the Consolidated Statements of Operations at the fair value of the award on the grant date. The fair values of all stock options granted by the Company are estimated on the date of grant using the Black—Scholes—Merton Model.

Stock Options

As of March 31, 2010, there was approximately $0.2 million of total unrecognized compensation cost (including the impact of expected forfeitures) related to unvested option arrangements granted under the Company’s equity plans. The Company recognizes compensation expense straight—line over the vesting term of the option grant. The Company recognized compensation expense related to stock options of $0.1 million and $1.0 million for the three months ended March 31, 2010 and 2009, respectively.

Restricted Stock Unit Grants

During the three months ended March 31, 2010 and 2009, the Company granted 1,008,500 and 815,000 RSUs, respectively, to new and existing employees, which vest in equal installments over four years. The Company recognized compensation expense related to RSUs of $3.1 million and $2.6 million for the three months ended March 31, 2010 and 2009, respectively. As of March 31, 2010, there was approximately $38.8 million of total unrecognized compensation cost (including the impact of expected forfeitures) related to RSUs granted under the Company’s equity plans.

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

As of March 31, 2010 and 2009, the Company had performance-based RSUs outstanding that vest based on the Company achieving specified operating income performance targets. The Company determined that it was not probable these performance targets would be met; therefore no expense was recognized for the three months ended March 31, 2010 or 2009. The Company did not achieve the operating income performance targets in 2009, thus the performance RSUs associated with the 2009 targets, were cancelled.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis should be read in conjunction with our Annual Report on Form 10—K for the year ended December 31, 2009. Except for historical information, the discussion below contains certain forward—looking statements that involve risks and uncertainties. The projections and statements contained in these forward—looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward—looking statements.

All statements not based on historical fact are forward—looking statements that involve substantial risks and uncertainties. In accordance with the Private Securities Litigation Reform Act of 1995, the following are important factors that could cause our actual results to differ materially from those expressed or implied by such forward—looking statements, including but not limited to the following: achieving estimated revenue from new, renewed and expanded client business as volumes may not materialize as forecasted, especially due to the global economic slowdown; achieving profit improvement in our International Business Process Outsourcing (“BPO”) operations; the ability to close and ramp new business opportunities that are currently being pursued or that are in the final stages with existing and/or potential clients; our ability to execute our growth plans, including sales of new products; the possibility of lower revenue or price pressure from our clients experiencing a business downturn or merger in their business; greater than anticipated competition in the BPO services market, causing adverse pricing and more stringent contractual terms; risks associated with losing or not renewing client relationships, particularly large client agreements, or early termination of a client agreement; the risk of losing clients due to consolidation in the industries we serve; consumers’ concerns or adverse publicity regarding our clients’ products; our ability to find cost effective locations, obtain favorable lease terms and build or retrofit facilities in a timely and economic manner; risks associated with business interruption due to weather, fires, pandemic, or terrorist—related events; risks associated with attracting and retaining cost—effective labor at our delivery centers; the possibility of asset impairments and restructuring charges; risks associated with changes in foreign currency exchange rates; economic or political changes affecting the countries in which we operate; changes in accounting policies and practices promulgated by standard setting bodies; and new legislation or government regulation that adversely impacts our tax obligations, health care costs or the BPO and customer management industry.

This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this report. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business and should be read in conjunction with the more detailed cautionary statements included in our 2009 Annual Report on Form 10-K under the caption Item 1A. “Risk Factors,” in our other Securities and Exchange Commission filings and in our press releases.

Executive Summary

TeleTech is one of the largest and most geographically diverse global providers of onshore, offshore and work from home BPO services focusing on revenue generation, customer and enterprise management, and technology enabled solutions. We have a 28-year history of designing, implementing and managing critical business processes for Global 1000 companies to help them improve their customers’ experience, enhance their strategic capabilities and increase their operating efficiencies. By delivering a high-quality customer experience through the effective integration of customer-facing, front-office processes with internal back-office processes, we enable our clients to better serve, grow and retain their customer base. We have developed deep vertical industry expertise and support more than 270 BPO programs serving approximately 90 global clients in the automotive, broadband, cable, financial services, government, healthcare, logistics, media and entertainment, retail, technology, travel, wireline and wireless communication industries.

As globalization of the world’s economy continues to accelerate, businesses are increasingly competing on a large-scale basis due to rapid advances in technology and telecommunications that permit cost-effective real-time global communications and ready access to a highly skilled worldwide labor force. As a result of these developments, we believe that companies have increasingly outsourced business processes to third-party providers in an effort to enhance or maintain their competitive position while increasing shareholder value through improved productivity and profitability.

Revenue in 2010 decreased over the prior year due primarily to the global economic slowdown resulting in a decline in our current call volumes and delayed client purchasing decisions. In addition, the continued migration of several of our clients to our offshore delivery centers, along with our proactive management of underperforming business and geographies out of our portfolio has also impacted our revenue. Nevertheless, we believe that our revenue will grow over the long-term as global demand for our services is fueled by the following trends:

	•		Focus on providers who can offer fully integrated revenue generation solutions. A focus on providers who can offer fully integrated revenue generation solutions to target new markets and improve revenue and profitability through customer acquisition, retention and growth by leveraging the profitability potential of each customer.
	•		Integration of front- and back-office business processes to provide increased operating efficiencies and an enhanced customer experience especially in light of the weakening global economic environment. Companies have realized that integrated business processes reduce operating costs and allow customer needs to be met more quickly and efficiently resulting in higher customer satisfaction and brand loyalty thereby improving their competitive position. A majority of our historic revenue has been derived from providing customer-facing front-office solutions to our clients. Given that our global delivery centers are also fully capable of providing back-office solutions, we are uniquely positioned to grow our revenue by winning more back-office opportunities and providing the services during non-peak hours with minimal incremental investment. Furthermore, by spreading our fixed costs across a larger revenue base and increasing our asset utilization, we expect our profitability to improve over time.
	•		Increasing percentage of company operations being outsourced to most capable third-party providers. Having experienced success with outsourcing a portion of their business processes, companies are increasingly inclined to outsource a larger percentage of this work. We believe companies will continue to consolidate their business processes with third-party providers, such as TeleTech, who are financially stable and able to invest in their business while also demonstrating an extensive global operating history and an ability to cost effectively scale to meet their evolving needs.
	•		Increasing adoption of outsourcing across broader groups of industries. Early adopters of the business process outsourcing trend, such as the media and communications industries, are being joined by companies in other industries, including healthcare, retail and financial services. These companies are beginning to adopt outsourcing to improve their business processes and competitiveness. For example, we see increasing interest in our services for companies in the healthcare, retail and financial services industries. We believe the number of other industries that will adopt or increase their level of outsourcing will continue to grow, further enabling us to increase and diversify our revenue and client base.

•

Focus on speed-to-market by companies launching new products or entering new geographic locations. As companies broaden their product offerings and seek to enter new emerging markets, they are looking for outsourcing providers that can provide speed-to-market while reducing their capital and operating risk. To achieve these benefits, companies are seeking BPO providers with an extensive operating history, an established global footprint, the financial strength to invest in innovation to deliver more strategic capabilities and the ability to scale and meet customer demands quickly. Given our financial stability, geographic presence in 16 countries and our significant investment in standardized technology and processes, we believe that clients select TeleTech because we can quickly ramp large, complex business processes around the globe in a short period of time while assuring a high-quality experience for our clients’ customers.

Our Future Growth Goals and Strategy

Our objective is to become the world’s largest, most technologically advanced and innovative provider of onshore, offshore and work from home BPO solutions. Companies within the Global 1000 are our primary client targets due to their size, global nature, focus on outsourcing and desire for the global, scalable integrated process solutions that we offer. We have developed, and continue to invest in, a broad set of capabilities designed to serve this growing client need. These investments include our TeleTech@Home offering which allows our employees to serve clients from their homes. This capability has enhanced the flexibility of our offering allowing clients to choose our onshore, offshore or work from home employees to meet their outsourced business process needs. In addition, we have begun to offer ‘hosted services’ where clients can license any aspect of our global network and proprietary applications. While the revenue from these offerings is small relative to our consolidated revenue, we believe it will continue to grow as these services become more widely adopted by our clients. We aim to further improve our competitive position by investing in a growing suite of new and innovative business process services across our targeted industries.

Our business strategy to increase revenue, profitability and our industry position includes the following elements:

•

Capitalize on the favorable trends in the global outsourcing environment, which we believe will include more companies that want to:

	–		Adopt or increase BPO services;
	–		Consolidate outsourcing providers with those that have a solid financial position, adequate capital resources to sustain a long-term relationship and globally diverse delivery capabilities across a broad range of solutions;
	–		Modify their approach to outsourcing based on total value delivered versus the lowest priced provider;
	–		Create focused revenue generation capabilities in targeted market segments;
	–		Better integrate front- and back-office processes; and
	–		Take advantage of cost efficiencies through the adoption of cloud based technology solutions.

	•		Deepen and broaden our relationships with existing clients;
	•		Win business with new clients and focus on end-to-end offerings in targeted industries where we expect accelerating adoption of business process outsourcing;
	•		Continue to invest in innovative proprietary technology and new business offerings;
	•		Continue to diversify revenue into higher-margin offerings such as professional services, talent acquisition, learning services and our hosted TeleTech OnDemand™ capabilities;

	•		Continue to improve our operating margins through selected profit improvement initiatives and increased asset utilization of our globally diverse delivery centers; and
	•		Selectively pursue acquisitions that extend our capabilities, geographic reach and/or industry expertise.

Our First Quarter 2010 Financial Results

In 2010, our first quarter revenue decreased 10.7% to $271.5 million over the year-ago period, which included an increase of 6.7% or $20.3 million due to fluctuations in foreign currency rates. Our first quarter 2010 income from operations decreased 5.1% to $19.3 million or 7.1% of revenue from $20.3 million or 6.7% of revenue in the year-ago period. This revenue decrease was due to a decline in existing client volumes from the impact of the global recessionary economic environment and the continued migration of several of our clients to our offshore delivery centers along with our proactive management of underperforming business and geographies out of our portfolio. Income from operations for the first quarter of 2010 and 2009 included $1.5 million and $2.3 million of restructuring charges and asset impairment, respectively.

Our offshore delivery centers serve clients based both in North America and in other countries. Our offshore delivery capacity spans seven countries with approximately 24,500 workstations and currently represents 70% of our global delivery capabilities. Revenue in these offshore locations was $123.2 million and represented 45% of our total revenue for the first quarter of 2010.

Our strong financial position due to our cash flow from operations and low debt levels allowed us to finance a significant portion of our capital needs and stock repurchases through internally generated cash flows. At March 31, 2010, we had $133.9 million of cash and cash equivalents and a total debt to total capitalization ratio of 1.5%.

Business Overview

Our BPO business provides outsourced business process and customer management services for a variety of industries through global delivery centers. Our North American BPO segment is comprised of sales to all clients based in North America (encompassing the U.S. and Canada), while our International BPO is comprised of sales to all clients based in all countries outside of North America.

BPO Services

The BPO business generates revenue based primarily on the amount of time our associates devote to a client’s program. We primarily focus on large global corporations in the following industries: automotive, broadband, cable, financial services, government, healthcare, logistics, media and entertainment, retail, technology, travel and wireline and wireless telecommunications. Revenue is recognized as services are provided. The majority of our revenue is from multi—year contracts and we expect this trend to continue. However, we do provide certain client programs on a short—term basis.

We have historically experienced annual attrition of existing client programs of approximately 6% to 12% of our revenue. Attrition of existing client programs during the first three months of 2010 was 8%.

The BPO industry is highly competitive. We compete primarily with the in—house business processing operations of our current and potential clients. We also compete with certain third-party BPO providers. Our ability to sell our existing services or gain acceptance for new products or services is challenged by the competitive nature of the industry. There can be no assurance that we will be able to sell services to new clients, renew relationships with existing clients, or gain client acceptance of our new products.

Our ability to renew or enter into new multi-year contracts, particularly large complex opportunities, is dependent upon the macroeconomic environment in general and the specific industry environments in which our clients operate. A continued weakening of the U.S. or the global economy could lengthen sales cycles or cause delays in closing new business opportunities.

Our potential clients typically obtain bids from multiple vendors and evaluate many factors in selecting a service provider, including, among other factors, the scope of services offered, the service record of the vendor and price. We generally price our bids with a long—term view of profitability and, accordingly, we consider all of our fixed and variable costs in developing our bids. We believe that our competitors, at times, may bid business based upon a short—term view, as opposed to our longer—term view, resulting in a lower price bid. While we believe that our clients’ perceptions of the value we provide results in our being successful in certain competitive bid situations, there are often situations where a potential client may prefer a lower cost.

Our industry is labor intensive and the majority of our operating costs relate to wages, employee benefits and employment taxes. An improvement in the local or global economies where our delivery centers are located could lead to increased labor related costs. In addition, our industry experiences high personnel turnover, and the length of training time required to implement new programs continues to increase due to increased complexities of our clients’ businesses. This may create challenges if we obtain several significant new clients or implement several new, large scale programs and need to recruit, hire and train qualified personnel at an accelerated rate.

To some extent our profitability is influenced by the number of new client programs entered into within the period. For new programs we defer revenue related to initial training (“Training Revenue”) when training is billed as a separate component from production rates. Consequently, the corresponding training costs associated with this revenue, consisting primarily of labor and related expenses (“Training Costs”), are also deferred. In these circumstances, both the Training Revenue and Training Costs are amortized straight-line over the life of the contract. In situations where Training Revenue is not billed separately, but rather included in the production rates, there is no deferral as all revenue is recognized over the life of the contract and the associated training expenses are expensed as incurred. As of March 31, 2010, we had deferred start-up Training Revenue, net of Training Costs, of $4.6 million that will be recognized into our income from operations over the remaining life of the corresponding contracts ($3.0 million will be recognized within the next 12 months).

We may have difficulties managing the timeliness of launching new or expanded client programs and the associated internal allocation of personnel and resources. This could cause slower than anticipated revenue growth and/or higher than expected costs primarily related to hiring, training and retaining the required workforce, either of which could adversely affect our operating results.

Quarterly, we review our capacity utilization and projected demand for future capacity. In conjunction with these reviews, we may decide to consolidate or close under—performing delivery centers, including those impacted by the loss of a client program, in order to maintain or improve targeted utilization and margins. In addition, because clients may request that we serve their customers from international delivery centers with lower prevailing labor rates, in the future, we may decide to close one or more of our delivery centers, even though it is generating positive cash flow, because we believe that the future profits from conducting such work outside the current delivery center may more than compensate for the one-time charges related to closing the facility.

Our profitability is influenced by our ability to increase capacity utilization in our delivery centers. We attempt to minimize the financial impact resulting from idle capacity when planning the development and opening of new delivery centers or the expansion of existing delivery centers. As such, management considers numerous factors that affect capacity utilization, including anticipated expirations, reductions, terminations, or expansions of existing programs and the potential size and timing of new client contracts that we expect to obtain.

We continue to win new business with both new and existing clients. To respond more rapidly to changing market demands, to implement new programs and to expand existing programs, we may be required to commit to additional capacity prior to the contracting of additional business, which may result in idle capacity. This is largely due to the significant time required to negotiate and execute large, complex BPO client contracts and the difficulty of predicting specifically when new programs will launch.

We internally target capacity utilization in our delivery centers at 80% to 90% of our available workstations. As of March 31, 2010, the overall capacity utilization in our multi—client delivery centers was 68% and was lower than the prior year due to reduced existing client volumes in light of the continued weak economic environment. The table below presents workstation data for our multi—client delivery centers as of March 31, 2010 and 2009. Dedicated and managed delivery centers (3,189 and 8,565 workstations as of March 31, 2010 and 2009, respectively) are excluded from the workstation data as unused workstations in these facilities are not available for sale. Our utilization percentage is defined as the total number of utilized production workstations compared to the total number of available production workstations. We may change the designation of shared or dedicated delivery centers based on the normal changes in our business environment and client needs.

		March 31, 2010												March 31, 2009
		Total Production												Total Production
		Workstations				In Use				% In Use				Workstations				In Use				% In Use
Multi-client centers
Sites open <1 year			181				89				49	%			4,748				2,438				51	%
Sites open >1 year			31,332				21,389				68	%			24,478				18,374				75	%
Total multi-client centers			31,513				21,478				68	%			29,226				20,812				71	%

We continue to see demand from all geographic regions to utilize our offshore delivery capabilities and expect this trend to continue with our clients. In light of this trend, we plan to continue to selectively expand into new offshore markets. As we grow our offshore delivery capabilities and our exposure to foreign currency fluctuations increase, we continue to actively manage this risk via a multi-currency hedging program designed to minimize operating margin volatility.

Recently Issued Accounting Pronouncements

Refer to Note 1 to the Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of its financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. We regularly review our estimates and assumptions. These estimates and assumptions, which are based upon historical experience and on various other factors believed to be reasonable under the circumstances, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Reported amounts and disclosures may have been different had management used different estimates and assumptions or if different conditions had occurred in the periods presented. Below is a discussion of the policies that we believe may involve a high degree of judgment and complexity.

Revenue Recognition

For each client arrangement, we determine whether evidence of an arrangement exists, delivery of our service has occurred, the fee is fixed or determinable and collection is reasonably assured. If all criteria are met, we recognize revenue at the time services are performed. If any of these criteria are not met, revenue recognition is deferred until such time as all of the criteria are met.

Our BPO segments recognize revenue under three models:

Production Rate — Revenue is recognized based on the billable time or transactions of each associate, as defined in the client contract. The rate per billable time or transaction is based on a pre-determined contractual rate. This contractual rate can fluctuate based on our performance against certain pre—determined criteria related to quality and performance.

Performance—Based — Under performance—based arrangements, we are paid by our clients based on the achievement of certain levels of sales or other client—determined criteria specified in the client contract. We recognize performance—based revenue by measuring our actual results against the performance criteria specified in the contracts. Amounts collected from clients prior to the performance of services are recorded as deferred revenue, which is recorded in Other Short-Term Liabilities or Other Current Liabilities in the accompanying Consolidated Balance Sheets.

Hybrid — Hybrid models include production rate and performance-based elements. For these types of arrangements, we allocate revenue to the elements based on the relative fair value of each element. Revenue for each element is recognized based on the methods described above.

Certain client programs provide for adjustments to monthly billings based upon whether we meet or exceed certain performance criteria as set forth in the contract. Increases or decreases to monthly billings arising from such contract terms are reflected in revenue as earned or incurred.

Periodically, we make certain expenditures related to acquiring contracts or provide up-front discounts for future services to existing customers (recorded as Contract Acquisition Costs in the accompanying Consolidated Balance Sheets). Those expenditures are capitalized and amortized in proportion to the expected future revenue from the contract, which in most cases results in straight—line amortization over the life of the contract. Amortization of these costs is recorded as a reduction of revenue.

Income Taxes

We account for income taxes in accordance with the authoritative guidance for income taxes, which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the Consolidated Financial Statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. When circumstances warrant, we assess the likelihood that our net deferred tax assets will more likely than not be recovered from future projected taxable income.

We continually review the likelihood that deferred tax assets will be realized in future tax periods under the “more likely than not” criterion. In making this judgment, we consider all available evidence, both positive and negative, in determining whether, based on the weight of that evidence, a valuation allowance is required.

We follow a two-step approach to recognizing and measuring uncertain tax positions. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. We evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors including changes in facts or circumstances, changes in applicable tax law, and settlement of issues under audit.

In the future, our effective tax rate could be adversely affected by several factors, many of which are outside our control. Our effective tax rate is affected by the proportion of revenue and income before taxes in the various domestic and international jurisdictions in which we operate. Further, we are subject to changing tax laws, regulations and interpretations in multiple jurisdictions, in which we operate, as well as the requirements, pronouncements and rulings of certain tax, regulatory and accounting organizations. We estimate our annual effective tax rate each quarter based on a combination of actual and forecasted results of subsequent quarters. Consequently, significant changes in our actual quarterly or forecasted results may impact the effective tax rate for the current or future periods.

Interest and penalties relating to income taxes and uncertain tax positions are accrued net of tax in Provision for Income Taxes in our Consolidated Statements of Operations.

Allowance for Doubtful Accounts

We have established an allowance for doubtful accounts to reserve for uncollectible accounts receivable. Each quarter, management reviews the receivables on an account—by—account basis and assigns a probability of collection. Management’s judgment is used in assessing the probability of collection. Factors considered in making this judgment include, among other things, the age of the identified receivable, client financial condition, previous client payment history and any recent communications with the client.

Impairment of Long—Lived Assets

We evaluate the carrying value of property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carry amount may not be recoverable. An asset is considered to be impaired when the anticipated undiscounted future cash flows of an asset group are estimated to be less than its carrying value. The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates.

Goodwill

We perform a goodwill impairment test on at least an annual basis, or whenever events or changes in circumstances indicate goodwill may be impaired. Impairment occurs when the carrying amount of goodwill exceeds its estimated fair value. The impairment, if any, is measured based on the estimated fair value of the reporting unit. We aggregate segment components with similar economic characteristics in forming a reporting unit; aggregation can be based on types of customers, methods of distribution of services, shared operations, acquisition history, and management judgment and reporting.

We estimate fair value using discounted cash flows of the reporting units. The most significant assumptions used in these analyses are those made in estimating future cash flows. In estimating future cash flows, we use financial assumptions in our internal forecasting model such as projected capacity utilization, projected changes in the prices we charge for our services, projected labor costs, as well as contract negotiation status. The financial and credit market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine our discount rate. We use a discount rate we consider appropriate for the country where the business unit is providing services. As of December 31, 2009, the Company’s assessment of goodwill impairment indicated that the fair values of the Company’s reporting units were substantially in excess of their estimated carrying values, and therefore goodwill in the reporting units was not impaired. If actual results are less than the assumptions used in performing the impairment test, the fair value of the reporting units may be significantly lower, causing the carrying value to exceed the fair value and indicating an impairment has occurred.

Restructuring Liability

We routinely assess the profitability and utilization of our delivery centers and existing markets. In some cases, we have chosen to close under—performing delivery centers and complete reductions in workforce to enhance future profitability. We recognize certain liabilities when the severance liabilities are determined to be probable and reasonably estimable. Liabilities for costs associated with an exit or disposal activity are recognized when the liability is incurred, rather than upon commitment to a plan.

Equity—Based Compensation

Equity-based compensation expense for all share-based payment awards granted is determined based on the grant-date fair value. We recognize equity-based compensation expense net of an estimated forfeiture rate, and recognize compensation expense only for shares that are expected to vest on a straight-line basis over the requisite service period of the award, which is typically the vesting term of the share-based payment award. We estimate the forfeiture rate annually based on historical experience of forfeited awards.

Fair Value Measurement

The fair value guidance codifies a new framework for measuring fair value and expands related disclosures. The framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. We utilize market data or assumptions that we believe market participants would use in pricing the asset or liability, assumptions about counterparty credit risk, including the ability of each party to execute its obligation under the contract, and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. We are able to classify fair value balances based on the observability of those inputs.

The valuation techniques required by the new provisions establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

Level 1		Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, listed equities and U.S. government treasury securities.
Level 2		Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange-traded derivatives such as over-the-counter forwards, options and repurchase agreements.

Level 3		Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant. Level 3 instruments include those that may be more structured or otherwise tailored to customers’ needs. At each balance sheet date, we perform an analysis of all instruments subject to fair value measurements and include within Level 3 all of those whose fair value is based on significant unobservable inputs.

Derivatives

We enter into foreign exchange forward and option contracts to reduce our exposure to foreign currency exchange rate fluctuations that are associated with forecasted revenue in non-functional currencies. Upon proper qualification, these contracts are accounted for as cash flow hedges. We also entered into foreign exchange forward contracts to hedge our net investment in a foreign operation.

All derivative financial instruments are reported on the Consolidated Balance Sheets at fair value. Changes in fair value of derivative instruments designated as cash flow hedges are recorded in Accumulated Other Comprehensive Income (Loss), a component of Stockholders’ Equity, to the extent they are deemed effective. Based on the criteria established by current accounting standards, all of our cash flow hedge contracts are deemed to be highly effective. Changes in fair value of any net investment hedge are recorded in cumulative translation adjustment in Accumulated Other Comprehensive Income (Loss) on the Consolidated Balance Sheets offsetting the change in cumulative translation adjustment attributable to the hedged portion of our net investment in the foreign operation. Any realized gains or losses resulting from the cash flow hedges are recognized together with the hedged transaction within Revenue. Gains and losses from the settlements of our net investment hedge remain in Accumulated Other Comprehensive Income (Loss) until partial or complete liquidation of the applicable net investment.

We also enter into fair value derivative contracts that hedge against translation gains and losses. Changes in the fair value of derivative instruments designated as fair value hedges affect the carrying value of the asset or liability hedged, with changes in both the derivative instrument and the hedged asset or liability being recognized in earnings.

While we expect that our derivative instruments will continue to be highly effective and in compliance with applicable accounting standards, if our hedges did not qualify as highly effective or if we determine that forecasted transactions will not occur, the changes in the fair value of the derivatives used as hedges would be reflected currently in earnings.

In addition to hedging activities, we also have embedded derivatives in certain foreign lease contracts. We bifurcate and fair value the embedded derivative feature from the host contract with any changes in fair value of the embedded derivatives recognized in Cost of Services.

Contingencies

We record a liability for pending litigation and claims when losses are both probable and reasonably estimable. Each quarter, management reviews all litigation and claims on a case-by-case basis and assigns probability of loss and range of loss.

Explanation of Key Metrics and Other Items

Cost of Services

Cost of services principally include costs incurred in connection with our BPO operations and database marketing services, including direct labor, telecommunications, printing, postage, sales and use tax and certain fixed costs associated with delivery centers. In addition, cost of services includes income related to grants we may receive from local or state governments as an incentive to locate delivery centers in their jurisdictions which reduce the cost of services for those facilities.

Selling, General and Administrative

Selling, general and administrative expenses primarily include costs associated with administrative services such as sales, marketing, product development, legal settlements, legal, information systems (including core technology and telephony infrastructure) and accounting and finance. It also includes equity—based compensation expense, outside professional fees (i.e. legal and accounting services), building expense for non—delivery center facilities and other items associated with general business administration.

Restructuring Charges, Net

Restructuring charges, net primarily include costs incurred in conjunction with reductions in force or decisions to exit facilities, including termination benefits and lease liabilities, net of expected sublease rentals.

Interest Expense

Interest expense includes interest expense and amortization of debt issuance costs associated with our debts and capitalized lease obligations.

Other Income

The main components of other income are miscellaneous income not directly related to our operating activities, such as foreign exchange transaction gains.

Other Expense

The main components of other expense are expenditures not directly related to our operating activities, such as foreign exchange transaction losses.

Presentation of Non—GAAP Measurements

Free Cash Flow

Free cash flow is a non—GAAP liquidity measurement. We believe that free cash flow is useful to our investors because it measures, during a given period, the amount of cash generated that is available for debt obligations and investments other than purchases of property, plant and equipment. Free cash flow is not a measure determined by GAAP and should not be considered a substitute for “income from operations,” “net income,” “net cash provided by operating activities,” or any other measure determined in accordance with GAAP. We believe this non—GAAP liquidity measure is useful, in addition to the most directly comparable GAAP measure of “net cash provided by operating activities,” because free cash flow includes investments in operational assets. Free cash flow does not represent residual cash available for discretionary expenditures, since it includes cash required for debt service. Free cash flow also includes cash that may be necessary for acquisitions, investments and other needs that may arise.

The following table reconciles net cash provided by operating activities to free cash flow for our consolidated results (amounts in thousands):

		Three Months Ended March 31,
		2010				2009
Net cash provided by operating activities		$	51,432			$	54,011
Purchases of property, plant and equipment			6,608				8,455
Free cash flow		$	44,824			$	45,556

We discuss factors affecting free cash flow between periods in the “Liquidity and Capital Resources” section below.

Results of Operations

Three months ended March 31, 2010 as compared to three months ended March 31, 2009

Operating Review

The following table is presented to facilitate an understanding of our Management’s Discussion and Analysis of Financial Condition and Results of Operations and presents our results of operations by segment for the three months ended March 31, 2010 and 2009 (amounts in thousands). We allocate to each segment its portion of corporate operating expenses. All inter—company transactions between the reported segments for the periods presented have been eliminated.

		Three Months Ended March 31,
						% of								% of
						Segment								Segment
		2010				Revenue				2009				Revenue				$ Change				% Change
Revenue
North American BPO		$	207,942							$	228,886							$	(20,944	)			-9.2	%
International BPO			63,584								75,144								(11,560	)			-15.4	%
		$	271,526							$	304,030							$	(32,504	)			-10.7	%
Cost of services
North American BPO		$	144,777				69.6	%		$	157,693				68.9	%		$	(12,916	)			-8.2	%
International BPO			49,841				78.4	%			61,149				81.4	%			(11,308	)			-18.5	%
		$	194,618				71.7	%		$	218,842				72.0	%		$	(24,224	)			-11.1	%
Selling, general and administrative
North American BPO		$	32,075				15.4	%		$	35,699				15.6	%		$	(3,624	)			-10.2	%
International BPO			11,333				17.8	%			12,816				17.1	%			(1,483	)			-11.6	%
		$	43,408				16.0	%		$	48,515				16.0	%		$	(5,107	)			-10.5	%
Depreciation and amortization
North American BPO		$	9,950				4.8	%		$	10,190				4.5	%		$	(240	)			-2.4	%
International BPO			2,774				4.4	%			3,872				5.2	%			(1,098	)			-28.4	%
		$	12,724				4.7	%		$	14,062				4.6	%		$	(1,338	)			-9.5	%
Restructuring charges, net
North American BPO		$	1,352				0.7	%		$	(123	)			-0.1	%		$	1,475				1199.2	%
International BPO			117				0.2	%			426				0.6	%			(309	)			-72.5	%
		$	1,469				0.5	%		$	303				0.1	%		$	1,166				384.8	%
Impairment losses
North American BPO		$	—				0.0	%		$	—				0.0	%		$	—				0.0	%
International BPO			—				0.0	%			1,967				2.6	%			(1,967	)			-100.0	%
		$	—				0.0	%		$	1,967				0.6	%		$	(1,967	)			-100.0	%
Income (loss) from operations
North American BPO		$	19,788				9.5	%		$	25,427				11.1	%		$	(5,639	)			-22.2	%
International BPO			(481	)			-0.8	%			(5,086	)			-6.8	%			4,605				90.5	%
		$	19,307				7.1	%		$	20,341				6.7	%		$	(1,034	)			-5.1	%
Other income (expense), net		$	(211	)			-0.1	%		$	726				0.2	%		$	(937	)			-129.1	%
Provision for income taxes		$	(5,054	)			-1.9	%		$	(5,180	)			-1.7	%		$	126				2.4	%