APAC Customer Services Completes Turnaround Year, Positioning Company for Future Growth.* Achieves full-year revenue of $224 million * Grows off-shore revenue from continuing clients 157% quarter-over-quarter and year-over-year * Strong quarter-over-quarter and year-over-year margin improvement * Fourth quarter profitable before deferred tax asset valuation allowance DEERFIELD, 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 fourth fiscal quarter and full fiscal year ended December 31, 2006. Chief Executive Officer Bob Keller commented, "2006 was a year of accomplishment for APAC, and our operating performance in the fourth quarter begins to demonstrate the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. potential of our business. In the fourth quarter, we generated $954,000 of income before taxes and increased our gross profit margin 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. to 16.3% as we continued to grow our off-shore production revenue. During the period, we expanded our temporary facility in Manila Manila (mənĭl`ə), city (1990 pop. 1,601,234), capital of the Philippines, SW Luzon, on Manila Bay. Manila is the center of the country's largest metropolitan area, its chief port, and the focus of all governmental, commercial, industrial, because of weather-related construction delays in our third permanent facility in the Philippines. We now expect to open the first phase of the permanent facility late in the first quarter of 2007 or very early in the second quarter. "The demand for our services in the Philippines remains strong and we have significant near-term opportunities to grow our domestic business in 2007. In spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite our expectation that Medicare Part D revenue will stabilize stabilize See peg. going forward at about half the 2006 volume of $33.0 million, given the strength of our client base, the overall demand for our services, and the improvements we have made and continue to make in our operations, we expect that we will be profitable for the 2007 full year." Mr. Keller added, "Based on both our recent performance and the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. trends in our industry, we are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about our future. Looking out over the next three years, our goal is to achieve low double-digit compounded revenue growth and 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 margins, and year-to-year improvement in earnings per share. With our strategic realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. behind us and many exciting opportunities in front of us, we expect to expand margins on a year-over-year basis as our offshore business continues to grow." Fourth Quarter Financial Results Revenue for the quarter totaled $56.1 million compared to $59.7 million in the fourth quarter of 2005. 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 the Company's fourth quarter 2005 results, revenue decreased $1.5 million, or 2.7%, over the prior-year quarter. This decrease was attributable to lower domestic revenues resulting primarily from the loss of T-Mobile as a customer, which more than offset the $5.7 million, or 157%, increase in the Company's offshore business with continuing clients. Gross profit for the 2006 fourth quarter was $9.1 million, or 16.3%, compared to $7.8 million, or 13.1%, in the prior-year period. This improvement reflected the higher contribution from the offshore revenue and a reduction in domestic call center overhead. The Company reported a net loss of $24.0 million, or $0.49 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the 2006 fourth quarter compared to a net loss of $1.5 million, or $0.03 per diluted share, for the comparable 2005 period. The 2006 fourth quarter loss was driven by a $27.7 million non-cash valuation allowance related to the Company's deferred tax assets. Consistent with generally accepted accounting practices, the recording of this allowance was necessitated as a result of historic losses and does not impair im·pair tr.v. im·paired, im·pair·ing, im·pairs To cause to diminish, as in strength, value, or quality: an injury that impaired my hearing; a severe storm impairing communications. the Company's ability to utilize these tax benefits in the future. Income before taxes was $954,000 for the 2006 fourth quarter compared to a loss before taxes of $4.9 million in the prior-year quarter. 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. of $5.0 million were recorded in the fourth quarter of 2005, while the fourth quarter of 2006 reflects a $316,000 reversal of prior-year restructuring charges. Adjusting for these items, fourth quarter 2006 income before taxes improved by $0.6 million from the prior-year quarter. The Company's net debt increased to $17.5 million at year-end 2006 from $9.8 million at the end of the 2006 third quarter. This planned increase was due to an increase in capital expenditures to $4.4 million, primarily for the build-out of the Company's new Philippines facility. Adjusted EBITDA improved to $4.6 million from $3.5 million in the prior-year quarter due to the improvement in gross profit. Full-Year 2006 Financial Results Revenue for the fiscal year 2006 totaled $224.3 million compared to $239.8 million in fiscal 2005. Excluding revenue from the exited outbound customer acquisition business from APAC's 2005 and 2006 results, 2006 revenue increased $22.3 million, or 11.1%, over the prior year, reflecting continued growth in the Company's higher margin offshore business. Gross profit for fiscal 2006 was $27.2 million, or 12.1%, compared to $22.7 million, or 9.5%, in the prior-year period. This improvement reflects the benefit of higher contribution from the offshore revenue and reductions in domestic call center overhead. For the full year 2006, the Company reported a net loss of $30.5 million, or $0.62 per diluted share, which included 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). and other charges of $2.4 million and a deferred tax valuation allowance of $27.7 million. This compares to a full-year 2005 net loss of $22.4 million, or $0.45 per diluted share, which included $8.2 million in restructuring and other charges and $10.9 million in asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges. Year-end net debt was up $6.5 to $17.5 million from $11.0 million at year-end 2005 due to an increase 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). and higher capital expenditures. Capital expenditures for 2006 increased to $10.7 million (net of $3.2 million of reimbursed 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. ) from $8.7 million in 2005 due to expansion and investments in operations. Adjusted EBITDA improved $6.6 million to $7.7 million for the year ended 2006, up from 2005's $1.1 million due to the improvement in gross profits and lower selling, general and administrative expenses. Fourth Quarter 2006 and Year-end Conference Call APAC's senior management will hold a conference call to discuss financial results at 10:00 a.m. CT (11:00 ET) on Friday, February 23, 2007. 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 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, a replay of the call will be available until 11:00 p.m. CT (12:00 ET) on March 6, 2007, by dialing (888) 203-1122, (719) 457-0820 for international participants. The confirmation number for the replay is 3394990. 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 in the forward-looking statements: revenue is generated from a limited number of clients and the loss of one or more significant clients could have a material adverse effect on the Company; terms of our client contracts; availability of cash flows from operations and borrowing availability under the Company's loan agreement; ability to effectively manage customer care center capacity and offshore growth; ability to conduct business internationally, including managing foreign currency exchange risks; ability to attract and retain qualified employees; and fluctuations in revenue associated with the Company's Medicare Part D enrollment and customer care programs. 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 1, 2006 and its subsequent filings on Form 10-Q Form 10-Q See 10-Q. for the fiscal quarters ended April 2, 2006, July 2, 2006 and October 1, 2006. These filings are available on a web site maintained by the SEC at http://www.sec.gov. 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, 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 filings on Form 10-Q for the fiscal quarters ended April 2, 2006, July 2, 2006 and October 1, 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 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] Notes to Selected Financial and Statistical Information
(1) We operate on a thirteen week fiscal quarter that ends on the
Sunday closest to December 31st and a 52 week fiscal year that
ends on the Sunday closest to December 31st.
(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 adjusted for
restructuring and other charges and asset impairment charges. We
use EBITDA and adjusted EBITDA, in addition to operating income
and cash flows from operating activities, to assess our liquidity
and performance and believe that EBITDA and adjusted EBITDA are of
interest to our investors to be able to evaluate our financial
results using the same measures we use.
EBITDA and adjusted EBITDA do not represent funds available for
our discretionary use and are not intended to represent or to be
used as a substitute for net income (loss) or cash flow from
operations data as measured in accordance with GAAP. The items
excluded from EBITDA and adjusted EBITDA are significant
components of our statements of operations and must be considered
in performing a comprehensive assessment of our overall financial
results.
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:
[TABLE OMITTED]
(3) We define free cash flow as EBITDA less net capital expenditures
and adjusted free cash flow as free cash flow adjusted for
restructuring and other charges and asset impairment charges. We
use free cash flow and adjusted free cash flow, in addition to net
cash flow provided by (used in) operating activities, to assess
our liquidity and performance and believe that free cash flow and
adjusted free cash flow are of interest to our investors in
relation to our debt covenants as capital expenditures are a
significant use of our cash.
Free cash flow and adjusted free cash flow do not represent funds
available for our discretionary use and are not intended to
represent or to be used as a substitute for cash flow from
operating activities as measured in accordance with GAAP. The
items excluded from free cash flow and adjusted free cash flow are
significant components of our statements of operations and
statements of cash flows and must be considered in performing a
comprehensive assessment of our overall financial results.
[TABLE OMITTED]
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:
[TABLE OMITTED]
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