APAC Customer Services Announces Second Quarter 2006 Results; Substantially Improved Bottom-line Performance; Continued Progress on Strategic Direction; Strong New Business Opportunity Pipeline.DEERFIELD Deerfield, towns, United States Deerfield. 1 Village (1990 pop. 17,327), Cook and Lake counties, NE Ill., a residential suburb of Chicago; inc. 1903. The huge Sara Lee Bakery is its major industry, and there is other light manufacturing. , Ill. -- APAC Customer Services
APAC Customer Services, Inc. is a provider of customer interaction solutions to large corporations in the communications, financial services, insurance, healthcare, logistics, publishing, and hospitality , Inc. (Nasdaq: APAC APAC Australian Partnership for Advanced Computing APAC Agricultural Policy Analysis Center APAC Asia and Pacific APAC Asian Pacific American Coalition APAC Adapted Physical Activity Council (American Alliance for Health) ), a leading provider of customer care services and solutions, today reported financial results for its second fiscal quarter ended July July: see month. 2, 2006. The company reported a 2006 second quarter net loss of $0.8 million, or $0.02 per share, compared to a net loss of $5.0 million, or $0.10 per share, on revenue of $58.2 million in both the current and prior year quarters. The improved results are due to higher gross profit, reduced SG&A expenses, and lower restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , partially offset by a lower income tax benefit. Excluding revenue from the exited outbound out·bound adj. Outward bound; headed away: outbound trains. Adj. 1. outbound - that is going out or leaving; "the departing train"; "an outward journey"; "outward-bound ships" customer acquisition business from second quarter 2005 results, revenue increased $11.9 million or 26% over the prior year quarter. This increase was due to growth in business from the company's healthcare vertical, both domestically and offshore. Gross profit for the second quarter of 2006 increased dramatically to $7.3 million from the prior year's second quarter gross profit of $2.8 million. Gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. were 12.5% and 4.9% for the second quarter of 2006 and 2005, respectively. The margin improvement reflects the benefits of improved client mix and reductions in call center overhead. "During the second quarter we made solid progress against our 2006 strategic objectives of improving the operational efficiency of our domestic business and expanding our offshore capacity," said Bob Keller, Chief Executive Officer of APAC Customer Services. "In order to improve our operational efficiency, we closed one site and announced our intention to shut down three additional sites, all of which will close during the third quarter. Combined, these actions will reduce our domestic capacity by slightly more than 1,000 seats. "Last week we opened our relocated re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. Green Bay customer care center, a new facility that will serve as the model for our future domestic operations. In addition, we continue to expand our new atHOME(TM) service by launching several additional new programs. "In June June: see month. , we further expanded our offshore capacity, opening our second facility in the Philippines Philippines officially Republic of the Philippines Island country, western Pacific Ocean, on an archipelago off the southeast coast of Asia. Area: 122,121 sq mi (316,294 sq km). Population (2005 est.): 84,191,000. . This brings our total off-shore capacity to more than 1,650 seats, all of which have been committed to by customers. We are in the process of training the staff and expect to bring the second center into full production later this year. Construction recently began on our third leased facility in the Philippines, which will ultimately include an additional 2,000 seats." The Company's net debt was $13.5 million at the end of the second quarter of 2006, up from $9.4 million at the end of the first quarter due to increases in days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). (DSO See CSO. ) and capital expenditures. Capital expenditures in the second quarter were $5.9 million, consisting primarily of costs associated with the completion of the company's second site in the Philippines and the build-out Build-out is an urban planner’s estimate of the amount and location of potential development for an area. Build-out is one step of the land use planning process. Evaluation of potential development impacts begins with a build-out analysis. of its relocated Green Bay, Wisconsin Green Bay is the county seat of Brown County in the U.S. state of Wisconsin. The city is located at the head of its namesake Green Bay, a sub-basin of Lake Michigan, at the mouth of the Fox River. facility ($2.1 million of which represented reimbursable re·im·burse tr.v. re·im·bursed, re·im·burs·ing, re·im·burs·es 1. To repay (money spent); refund. 2. To pay back or compensate (another party) for money spent or losses incurred. leasehold improvements Leasehold Improvement Improvements on a leased asset that increase the value of the asset. Notes: A leasehold improvement is classified as an asset that must be depreciated over time. ). This compares to capital expenditures of $2.1 million in the first quarter ($1.1 million of which represented reimbursable leasehold improvements). Second quarter adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become improved $5.6 million to $2.4 million from a negative $3.2 million in the second quarter of 2005, and adjusted free cash flow improved $4.5 million to a negative $1.4 million from the prior year's second quarter negative $5.9 million, reflecting improvements since the company's July 2005 restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). . Mr. Keller added, "Looking ahead to the second half of the year, we remain on track to achieve $230 million in revenue for the year with a robust sales pipeline of new business opportunities, particularly in the publishing and health care sectors. The response of our clients to our offshore offering - which generates lower revenue rates but higher margins - continues to be excellent. The progress we made in the second quarter, combined with new business growth, gives us confidence that we will achieve our goal of becoming profitable for the fourth quarter of 2006." APAC's senior management will hold a conference call to discuss financial results at 10:00 a.m. CT (11:00 ET) on Thursday Thursday: see week. , July 27, 2006. About the Conference Call The conference call will be available live at the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of APAC Customer Services' website, http://www.apaccustomerservices.com. Please access the site at least 15 minutes prior to the scheduled start time in order to download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. the required audio software (RealPlayer A multimedia player from RealNetworks that plays RealAudio and RealVideo transmissions. Included is the technology (see RealJukebox) for organizing music files and creating MP3 files from audio CDs. or Windows Media Player Digital jukebox software for Windows from Microsoft that plays a variety of audio, video and streaming formats including MP3, WMA, CD audio and MIDI. Starting with Version 6.2 in 1999, the Windows Media Rights Manager was added for securing copyrighted content. ). A replay of the webcast will be accessible through the Company's website for 7 days following the live event. For those unable to listen to the call via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , a replay of the call will be available until 11:00 p.m. CT (12:00 ET) on Wednesday Wednesday: see week. , August 2, 2006, by dialing (888) 203-1112 or (719) 457-0820 for international participants. The confirmation number for the replay is 4260102. About APAC Customer Services, Inc. APAC Customer Services, Inc. (Nasdaq: APAC) is a leading provider of customer care services and solutions for market leaders in healthcare, financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. , publishing, business services, travel and entertainment, and communications. APAC partners with its clients to deliver custom solutions that enhance bottom line performance. For more information, call 1-800-OUTSOURCE. APAC's comprehensive web site is at http://www.apaccustomerservices.com. Forward Looking Statements This document contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Generally, forward-looking statements include expressed expectations, estimates and projections of future events and financial performance and the assumptions on which these expressed expectations, estimates and projections are based. Statements that are not historical facts, including statements about the beliefs and expectations of the Company and its management are forward-looking statements. All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions about future events, and they are subject to known and unknown risks and uncertainties and other factors that can cause actual events and results to differ materially from historical results and those projected. Such statements are based upon the current beliefs and expectations of the Company's management. The Company intends its forward-looking statements to speak only as of the date on which they were made. The Company expressly undertakes no obligation to update or revise any forward-looking statements as a result of changed assumptions, new information, future events or otherwise. The following factors, among others, could cause actual results to differ from historical results or those expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. in the forward-looking statements: revenue is generated from a limited number of clients; terms of our client contracts; success of the Company's business turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. ; availability of cash flows from operations and borrowing availability under the Company's loan agreement; ability to effectively manage customer care center capacity; ability to conduct business internationally, including managing foreign currency exchange risks; ability to attract and retain qualified employees; fluctuations in revenue associated with the Company's Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. Part D enrollment and customer care programs; and the closing of customer care centers and the reduction in the number of employees. Other reasons that may cause actual results to differ from historical results or those expressed or implied in the forward-looking statements can be found in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended January January: see month. 1, 2006 and its subsequent filing on Form 10-Q Form 10-Q See 10-Q. for the fiscal quarter ended April 2, 2006. These filings are available on a web site maintained by the SEC at http://www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . About Non-GAAP Financial Measures To supplement the Company's consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), the Company uses the following measures defined as non-GAAP financial measures by the SEC: EBITDA, adjusted EBITDA, adjusted operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , free cash flow and adjusted free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. More information on these non-GAAP financial measures can be found in the Company's Annual Report on Form 10-K for the year ended January 1, 2006 and its subsequent filing on Form 10-Q for the fiscal quarter ended April 2, 2006. The Company expects to use consistent methods for computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. of non-GAAP financial measures. Its calculations of non-GAAP financial measures may not be consistent with calculations of similar measures used by other companies. The accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. notes to selected financial and statistical data have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
APAC Customer Services, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except for per share data)
Unaudited
Thirteen Weeks Ended * Twenty Six Weeks Ended *
------------------------- ---------------------------
Fav Fav
July 2, July 3, (Unfav) July 2, July 3, (Unfav)
2006 2005 % 2006 2005 %
-------- -------- ------- --------- --------- -------
Net revenue $58,236 $58,159 0% $118,959 $123,833 (4%)
Cost of
services 50,950 55,335 8% 104,022 114,309 9%
-------- -------- ------- --------- --------- -------
Gross profit 7,286 2,824 158% 14,937 9,524 57%
Operating expenses:
Selling,
general and
administrative
expenses 7,907 9,111 13% 15,972 18,972 16%
Restructuring
and other
charges 384 860 55% 371 1,137 67%
Asset
impairment
charges - 124 100% - 124 100%
-------- -------- ------- --------- --------- -------
Total
operating
expenses 8,291 10,095 18% 16,343 20,233 19%
-------- -------- ------- --------- --------- -------
Operating Loss (1,005) (7,271) 86% (1,406) (10,709) 87%
Other expense
(income) 34 (22) (255%) 6 (62) (110%)
Interest
expense 442 479 8% 898 701 (28%)
-------- -------- ------- --------- --------- -------
Loss before
income taxes (1,481) (7,728) 81% (2,310) (11,348) 80%
Income tax
expense
(benefit) (688) (2,715) (75%) (776) (3,953) (80%)
-------- -------- ------- --------- --------- -------
Net loss $(793) $(5,013) 84% $(1,534) $(7,395) 79%
======== ======== ======= ========= ========= =======
Net Loss per share:
Basic $(0.02) $(0.10) 84% $(0.03) $(0.15) 79%
======== ======== ======= ========= ========= =======
Diluted $(0.02) $(0.10) 84% $(0.03) $(0.15) 79%
======== ======== ======= ========= ========= =======
Weighted average
number of shares
outstanding:
Basic 49,455 49,455 49,455 49,455
======== ======== ========= =========
Diluted 49,455 49,455 49,455 49,455
======== ======== ========= =========
* We operate on a 13 week fiscal quarter that ends on the Sunday
closest to June 30th.
APAC Customer Services, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(Dollars in thousands)
Unaudited
July 2, January 1
Assets 2006 * 2006 **
------ --------- ---------
Current Assets:
Cash and cash equivalents $516 $960
Accounts receivable 41,572 37,592
Other current assets 10,023 9,248
--------- ---------
Total current assets 52,111 47,800
Property and Equipment, net 25,409 22,233
Goodwill and Intangibles, net and Other Assets 39,169 41,017
--------- ---------
Total assets $116,689 $111,050
========= =========
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Short-term debt $13,978 $11,971
Accounts payable and other accrued liabilities 49,334 44,211
--------- ---------
Total current liabilities 63,312 56,182
--------- ---------
Other Liabilities 2,356 2,994
Commitments and contingencies - -
Total shareholders' equity 51,021 51,874
--------- ---------
Total liabilities and shareholders' equity $116,689 $111,050
========= =========
* We operate on a 13 week fiscal quarter that ends on the Sunday
closest to June 30th.
** We operate on a 52/53 week fiscal year that ends on the Sunday
closest to December 31st.
APAC Customer Services, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Dollars in thousands)
Unaudited
Twenty Six Weeks
Ended *
-----------------
July 2, July 3,
2006 2005
-------- --------
Operating activities:
Net loss $(1,534) $(7,395)
Depreciation and amortization 6,045 5,950
Non-cash restructuring 371 22
Asset impairment charges - 124
Deferred income taxes (818) (4,235)
Stock compensation expense 754 -
Changes in operating assets and liabilities (2,398) 7,237
-------- --------
Net cash provided by operating activities 2,420 1,703
Investing activities:
Purchases of property and equipment, net of
disposals (4,745) (5,307)
-------- --------
Net cash used in investing activities (4,745) (5,307)
Financing activities:
Borrowings under revolving credit facility, net 2,007 4,882
Payments on long-term debt - (207)
Financing fees - (477)
Stock option and warrant transactions 4 -
-------- --------
Net cash provided by financing activities 2,011 4,198
-------- --------
Effect of exchange rate changes on cash (130) -
Net change in cash and cash equivalents (444) 594
Cash and Cash Equivalents:
Beginning of year 960 271
-------- --------
End of year $516 $865
======== ========
Supplemental Disclosure:
Leasehold Improvements provided by landlord $3,250 $-
Cash paid during the period for income taxes $21 $6
Cash paid during the period for interest $694 $731
* We operate on a 13 week fiscal quarter that ends on the Sunday
closest to June 30th.
APAC Customer Services, Inc. and Subsidiaries
Selected Financial and Statistical Information
(Dollars in thousands, except for per share data)
Unaudited
Thirteen Weeks Ended (1) Twenty Six Weeks Ended (1)
-------------------------- ----------------------------
Fav Fav
July 2, July 3, (Unfav) July 2, July 3, (Unfav)
2006 2005 % 2006 2005 %
-------- -------- -------- --------- --------- --------
Selected
Financial
Information:
Net revenue $58,236 $58,159 0% $118,959 $123,833 (4%)
Net loss (793) (5,013) 84% (1,534) (7,395) 79%
EBITDA (2) 1,991 (4,170) 148% 4,633 (4,697) 199%
Adjusted
EBITDA (2) 2,375 (3,186) 175% 5,004 (3,436) 246%
Adjusted
Operating
Loss (3) (621) (6,287) 90% (1,035) (9,448) 89%
Free Cash
Flow (4) (1,814) (6,893) 74% (112) (10,004) 99%
Adjusted Free
Cash Flow (4) (1,430) (5,909) 76% 259 (8,743) 103%
Statistical
Information:
Number of
Customer Care
Centers 13 22 (41%) 13 22 (41%)
End of Period
No. of Seats 6,582 7,400 (11%) 6,582 7,400 (11%)
Weighted
Average No. of
Seats 6,632 6,980 (5%) 6,598 6,918 (5%)
Annualized
Revenue per
Weighted
Average No. of
Seats $35,124 $33,328 5% $36,059 $35,800 1%
See attached Notes to Selected Financial and Statistical Information
Notes to Selected Financial and Statistical Information
(1) We operate on a 13 week fiscal quarter that ends on the Sunday
closest to June 30.
(2) We define EBITDA as net income (loss) plus the provision (benefit)
for income taxes, depreciation and amortization, and interest
expense. We define adjusted EBITDA as EBITDA plus restructuring
and other charges and asset impairment charges.
EBITDA and adjusted EBITDA can be reconciled to net income (loss),
which we believe to be the most directly comparable financial
measure calculated and presented in accordance with GAAP, as
follows:
For the For the
Thirteen Weeks Twenty Six Weeks
Ended Ended
July 2, July 3, July 2, July 3,
2006 2005 2006 2005
---------------- -----------------
Net loss ($793) ($5,013) ($1,534) ($7,395)
================ =================
Interest expense 442 479 898 701
Provision (benefit) for income taxes (688) (2,715) (776) (3,953)
Depreciation and amortization 3,030 3,079 6,045 5,950
---------------- -----------------
EBITDA $1,991 ($4,170) $4,633 ($4,697)
================ =================
Restructuring and other charges
(benefits) 384 860 371 1,137
Asset impairment charges - 124 - 124
---------------- -----------------
Adjusted EBITDA $2,375 ($3,186) $5,004 ($3,436)
================ =================
(3) We define adjusted operating income (loss) as operating income
(loss) less restructuring and other charges (benefits) and asset
impairment charges.
Adjusted operating income (loss) can be reconciled to operating
income (loss), which we believe to be the most directly comparable
financial measure calculated and presented in accordance with
GAAP, as follows:
For the For the
Thirteen Weeks Twenty Six Weeks
Ended Ended
July 2, July 3, July 2, July 3,
2006 2005 2006 2005
---------------- -----------------
Operating loss ($1,005) ($7,271) ($1,406)($10,709)
================ =================
Restructuring and other charges
(benefits) 384 860 371 1,137
Asset impairment charges - 124 - 124
---------------- -----------------
Adjusted operating loss ($621) ($6,287) ($1,035) ($9,448)
================ =================
(4) We define free cash flow as EBITDA less net capital expenditures
and adjusted free cash flow as free cash flow less restructuring
and other charges (benefits) and asset impairment charges.
For the For the
Thirteen Weeks Twenty Six Weeks
Ended Ended
July 2, July 3, July 2, July 3,
2006 2005 2006 2005
---------------- -----------------
EBITDA $1,991 ($4,170) $4,633 ($4,697)
Capital expenditures (5,935) (2,723) (7,995) (5,307)
Tenant improvements provided by
landlord 2,130 - 3,250 -
---------------- -----------------
Free Cash Flow ($1,814) ($6,893) ($112) ($10,004)
================ =================
Restructuring and other charges
(benefits) 384 860 371 1,137
Asset impairment charges - 124 - 124
---------------- -----------------
Adjusted Free Cash Flow ($1,430)($5,909) $259 ($8,743)
================ =================
Free cash flow and adjusted free cash flow can be reconciled to
the net cash provided by (used in) operating activities, which we
believe to be the most directly comparable financial measure
calculated and presented in accordance with GAAP, as follows:
For the For the
Thirteen Weeks Twenty Six Weeks
Ended Ended
July 2, July 3, July 2, July 3,
2006 2005 2006 2005
---------------- -----------------
Net cash provided by (used in)
operating activities ($125) $4,478 $2,420 $1,703
================ =================
Purchase of property and equipment (3,805) (2,723) (4,745) (5,307)
Provision (benefit) for income
taxes (688) (2,715) (776) (3,953)
Interest expense 442 479 898 701
Changes in operating assets and
liabilities 2,576 (8,681) 2,398 (7,237)
Asset impairment charges - (124) - (124)
Increase in deferred income taxes 564 2,400 818 4,235
Stock compensation expense (394) - (754) -
Non-cash restructuring (384) (7) (371) (22)
---------------- -----------------
Free Cash Flow ($1,814) ($6,893) ($112) ($10,004)
================ =================
Restructuring and other charges
(benefits) 384 860 371 1,137
Asset impairment charges - 124 - 124
---------------- -----------------
Adjusted Free Cash Flow ($1,430) ($5,909) $259 ($8,743)
================ =================
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