<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the year ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _________ to_________
Commission File Number 1-12577
SITEL CORPORATION
(Exact name of registrant as specified)
MINNESOTA 47-0684333
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13215 BIRCH STREET
OMAHA, NEBRASKA 68164
(402) 963-6810
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
____________________________________________
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
Common Stock, $.001 Par Value The New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
____________________________________________
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 X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 31, 1997, was $443,551,166 based upon the closing
price of $13.375 for such stock as reported by the New York Stock Exchange on
such date. Solely for purposes of this calculation, persons holding of record
more than 5% of the Company's stock have been included as "affiliates".
As of March 31, 1997, the Company had 60,888,798 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's definitive
proxy statement for the annual meeting of stockholders to be held on June 6,
1997, are incorporated into Part III.
This 10-K consists 59 of pages. The Exhibit Index is on page 26.
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PART 1
______
ITEM 1. BUSINESS.
_________
SITEL is a global leader in providing outsourced telephone-based customer
service and sales programs on behalf of large corporations. The Company handles
calls in over 25 languages and dialects from more than 8,300 workstations in
over 60 call centers located in the United States, Canada, the United Kingdom,
Spain, Belgium, Portugal, Japan, Australia, and Singapore. SITEL communicates
directly with its clients' customers by responding to customer-initiated
telephone calls and by making Company-initiated calls. In addition, the Company
is a leader in developing customer service applications over the Internet. The
Company is currently providing services to over 400 clients, principally in the
insurance, financial services, telecommunications, media and entertainment,
technology, utilities, consumer, automotive, and travel industries. SITEL
employs approximately 14,000 people.
SITEL targets clients with large customer bases that can generate
recurring revenues because of their ongoing customer service and sales
requirements. The Company seeks to establish strategic relationships with its
clients by becoming an integral part of their customer service and customer
acquisition programs, increasingly on a multinational basis. The Company's goal
is to provide each client the appropriate teleservices solution rather than
focusing exclusively on any particular application. For the 12 months ended
December 31, 1996, approximately 56% of the Company's revenue was generated by
customer service activities. SITEL creates, manages, and implements programs on
its clients' behalf primarily through the efforts of its telephone service
representatives who typically are dedicated exclusively to, and thoroughly
trained in, a specific client's programs. The Company also makes extensive use
of sophisticated call management technology, including proprietary computer
software, automated call distributors, predictive dialers, computer integrated
telephony, and digital switches. This technology allows SITEL to handle inbound
and outbound calls, in many languages, requiring vastly differing amounts
of product and service information and to distribute call volumes and data
throughout the Company's international network of call centers. In addition,
SITEL has considerable in-house information technology expertise, which allows
it to integrate its call systems seamlessly with its clients' databases.
SITEL employs a decentralized operating structure in order to be more
flexible and responsive to each client's individual requirements, to
aggressively seek new large corporate clients in its targeted industries and to
better manage the Company's rapid growth. Each operating unit has its own
management team and sales organization with complete profit and loss
responsibility, dedicated facilities, and a full complement of information
technology, finance, and human resources professionals. The Company believes
that this operating structure is attractive to potential acquisition
candidates as SITEL generally retains key managers of an acquired business
and offers them continuing significant responsibilities for the management
and profitability of the acquired enterprise. In North America, SITEL
operates primarily through divisions specialized by industry to provide
teleservices to the insurance, financial services, telecommunications, media
and entertainment, technology, travel, and utilities industries. In Europe and
the Pacific Rim, the Company's operations are principally organized by country
or geographic region. SITEL intends to replicate its North American industry-
specialized divisional structure internationally. The Company has made
significant progress in this regard in the United Kingdom where it generates
substantial revenues and has a large number of clients. The Company believes
this industry focus creates a key competitive differentiation and fosters
greater understanding of its clients' businesses and teleservicing requirements.
Industry sources estimate that expenditures in the United States on
telephone-based customer service and sales programs were $81 billion in 1995,
and the Company estimates that expenditures worldwide were at least twice that
amount. These expenditures have grown substantially in recent years with the
proliferation of toll-free phone numbers and direct marketing, the development
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of new database, networking and communications technologies, reduced
telecommunications costs, and the development of new modes of communication,
such as the Internet. The vast majority of teleservicing activities are
performed by in-house operations, but increasingly, large corporations are
outsourcing their call center activities to focus internal resources on core
competencies while improving operating efficiencies and reducing costs.
Competition for this outsourcing business is highly fragmented. Most
independent providers of telephone-based services are small, single facility
operations that do not have the scale, expertise, or technological resources
necessary to effectively serve the sustained, and increasingly complex,
teleservicing needs of large corporations. Few of the Company's competitors
have significant international or multilingual capabilities.
SITEL believes there are significant opportunities to expand its
business by: (i) increasing revenues from existing clients, (ii) expanding its
client base within existing industry specializations, (iii) adding new industry
specializations, (iv) creating new value-added teleservicing applications, and
(v) continuing to seek strategic acquisitions domestically and internationally.
The Company believes that the trend toward the outsourcing of teleservices by
large corporations is still in its relatively early stages and will continue for
the foreseeable future. Therefore, the Company continually invests in
management talent and in start-up costs associated with new industry
specialization. Historically, most of the Company's internal growth has
resulted from existing clients and management believes this remains SITEL's
greatest growth opportunity given SITEL's large client base of Fortune 500
and Financial Times 100 Corporations. The Company seeks to increase revenues
from existing clients by capitalizing on additional outsourcing
opportunities, by providing services to additional business units worldwide,
and by developing new teleservicing applications clients can use to enhance
long-term relationships with their customers. The Company seeks to establish
new client relationships principally by leveraging its industry expertise.
The Company believes there are industries it does not yet serve that
represent attractive opportunities for SITEL, such as healthcare. The
Company also believes that strategic acquisitions represent a substantial
growth opportunity. Consistent with its past acquisitions, SITEL will continue
to seek strategic acquisitions that add new industry expertise, bring new
service capabilities, or expand the Company's international capabilities.
Importantly, SITEL is focused on acquisitions that add significant
management talent to its operations.
RECENT DEVELOPMENTS
To date in 1997, SITEL has completed four acquisitions designed to enhance
the Company's worldwide presence and expand the Company's industry expertise.
In January 1997, the Company acquired all of the outstanding capital stock
of Telebusiness Holdings ("Telebusiness"), a company that focuses on providing
systems integration services and call center consultancy. Telebusiness operates
from offices in Australia and New Zealand and had revenues for the twelve
months prior to acquisition of approximately $5 million.
In February 1997, the Company completed the acquisition of substantially
all of the assets of Exton Technology Group ("ETG"), a division of Softmart,
Inc. ETG provides telephone-based technical support on behalf of Internet
service providers, software publishers, and computer hardware manufacturers and
also provides outsourced help desk applications for client corporations. ETG
had annualized revenues, at the time of the acquisition, of approximately $13
million.
In March 1997, the Company completed the acquisition of all of the
outstanding capital stock of Levita Group Pty Ltd ("Levita") . Levita was formed
in 1979 and was one of the first teleservicing business established in
Australia. Levita had annualized revenues, at the time of the acquisition, of
approximately $9 million.
Also, in March 1997, the Company acquired L&R Group Limited. The L&R
Group is recognized as a leading independent teleservices consulting firm in the
United Kingdom with annual revenues for the twelve months prior to acquisition
of approximately $4 million. Founded in 1989, the L&R Group serves clients in a
wide variety of industries including publishing, insurance, telecommunications,
and consumer product marketing.
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BUSINESS STRATEGY
Key elements of SITEL's business strategy include:
FOCUS ON LARGE CORPORATE CLIENTS. SITEL seeks clients with large customer
bases that can generate recurring revenues because of their ongoing customer
service and sales requirements. The Company seeks to establish strategic
relationships with its clients by becoming an integral part of their customer
service and customer acquisition programs, increasingly on a multinational
basis. Establishing long-term relationships with these clients often leads to
additional business opportunities as these corporations continue to outsource
more of their teleservicing activities worldwide. By emphasizing long-term
relationships, the Company is also able to improve its profitability and service
levels by: (i) improving the predictability of its facility and labor
utilization, (ii) providing more in depth employee training on specific client
programs and industry issues, and (iii) continually developing technological
and process improvements to better serve its long-term clients.
DECENTRALIZED OPERATIONS AND INDUSTRY SPECIALIZATION. SITEL employs a
decentralized operating structure in order to be more flexible and
responsive to each client's individual requirements and to aggressively seek new
large corporate clients in its targeted industries. Each operating unit has its
own management team and sales organization with complete profit and loss
responsibility, dedicated facilities, and a full complement of information
technology, finance, and human resources professionals. In addition to shifting
decision making closer to the client, this decentralized structure enables
SITEL's senior executives to focus on setting strategic direction for the
Company as a whole. This structure also is attractive to potential acquisition
candidates as SITEL generally retains key managers of an acquired business and
offers them continuing, significant responsibilities for the management and
profitability of the acquired enterprise. International operating units are
organized along geographic lines until a critical mass of clients and revenues
are achieved in an industry specialization. SITEL operates primarily through
industry-focused divisions in North America. SITEL believes its industry
focused strategy is a competitive advantage because it permits the Company's
managers to better understand industry specific issues and vernacular and to use
that knowledge in the design of solution-oriented teleservicing programs that
provide greater value to the Company's clients. SITEL intends to replicate its
industry-focused divisional structure, as appropriate, in Europe and Asia.
WORLDWIDE PRESENCE. SITEL believes that international capabilities will
become increasingly important as its large multinational clients recognize the
benefits of outsourcing to vendors globally. SITEL believes that it has the
most extensive international teleservices capabilities when compared to its
United States-based competition and is the market leader in the United Kingdom
and Spain. The Company conducts teleservicing programs in over 25 languages and
dialects through call centers in the United States, Canada, the United Kingdom,
Spain, Belgium, Portugal, Japan, Australia, and Singapore.
CONTINUING REINVESTMENT IN THE BUSINESS. SITEL continues to reinvest
heavily in the infrastructure required to manage a larger operation and to take
advantage of future opportunities. For example, SITEL regularly hires
additional management personnel to staff its decentralized operations and to
maintain strong relationships with its clients. SITEL is investing heavily in a
global business development effort consisting of senior professionals focused on
large, global new business opportunities. SITEL is establishing operations in
new markets, such as Germany, to service recently awarded contracts, to compete
for new clients, and to provide an increasingly global solution for existing
clients. SITEL also funds efforts to incubate potential new growth opportunities
in industries not served by the Company and to introduce its industry
specialization strategy outside the United States. Additionally, SITEL incurs
significant management, travel, legal, and advisory expenses in connection with
its global acquisition efforts. Although these investments negatively affect
current operating margins, SITEL believes that they are critical to the
Company's continued growth and ability to provide teleservicing solutions to its
clients.
SOPHISTICATED CALL AND DATA MANAGEMENT TECHNOLOGY. SITEL makes extensive
use of sophisticated call management technology, including proprietary computer
software, automated call distributors, predictive dialers, computer integrated
telephony, and digital switches. This technology allows SITEL to handle inbound
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and outbound calls, in many languages, requiring vastly differing amounts
of product and service information and to distribute call volumes and data
through out the Company's international network of call centers. In addition,
the Company also has considerable in-house information technology expertise,
which allows it to integrate its call systems seamlessly with its clients'
databases.
EMPLOYEE OWNERSHIP. A fundamental tenet of SITEL's business strategy is
employee ownership. As of March 31, 1997, approximately 1,900 SITEL employees
and managers worldwide owned Common Stock or options to acquire Common Stock.
Management believes that this employee ownership and the Company's incentive
compensation plans, coupled with SITEL's decentralized operations, promotes
quality client service, increased focus on achieving growth and profitability
goals, higher employee productivity, and easier integration of acquired
businesses.
GROWTH STRATEGY
In light of the trend toward outsourcing of teleservicing activities and
increasing customer service and direct marketing expenditures by large
corporations, SITEL believes there are significant opportunities to expand its
business on a worldwide basis. The Company's growth strategy has five key
elements:
INCREASE REVENUES WORLDWIDE FROM EXISTING CLIENTS. Historically, most of
the Company's internal growth has resulted from existing clients and management
believes this remains SITEL's greatest growth opportunity, given SITEL's large
client base of Fortune 500 and Financial Times 100 Corporations. The Company
seeks to increase revenues from existing clients by earning additional
outsourcing opportunities, as they arise, by obtaining work from other business
units of clients and by developing new teleservicing applications that clients
can use to increase the value of their customer relationships.
OBTAIN NEW CLIENTS WITHIN EXISTING INDUSTRY SPECIALIZATIONS.
Through its divisional structure, the Company has developed considerable
expertise in the insurance, financial services, telecommunications, media and
entertainment, technology, utilities, consumer, automotive, and travel
industries. These industries are dominated worldwide by large, often
multinational corporations with significant customer bases which rely on
teleservicing for a substantial portion of their customer service and sales
needs. SITEL believes there is significant opportunity for each of its
divisions to grow by targeting new clients in these focus industries that are
seeking to outsource their existing or new teleservicing programs. The Company
believes it has a competitive advantage in competing for these new clients
because of its expertise and reputation for quality service to clients in these
industries.
ADD NEW INDUSTRY SPECIALIZATIONS. The Company continuously evaluates new
industries which are expected to substantially increase expenditures on
telephone-based customer service and sales applications, including those where
governmental action, or market forces, to privatize or decentralize business
activities create new opportunities and needs for clients to contact their
customers. The Company may add new industry specializations through
acquisitions, joint ventures, or internal expansion.
CREATE NEW VALUE-ADDED TELESERVICING APPLICATIONS. SITEL regularly seeks
to create new value-added services which have not historically been offered by
independent teleservice providers. Creating additional value-added services
should both increase the average account size and, more importantly, strengthen
the long-term relationships between SITEL and its clients. For example, the
Company believes it is a pioneer in providing multilingual customer service
programs using electronic mail via the Internet.
CONTINUE MAKING STRATEGIC ACQUISITIONS. SITEL intends to continue taking
advantage of the fragmented nature of the teleservicing industry by making
strategic domestic and international acquisitions. Through selected
strategic acquisitions, SITEL seeks to add new industry expertise and services
and expand its geographic coverage. The Company targets companies with strong
senior management teams and considers the addition of talented management a
major benefit of making acquisitions. Other criteria used by the Company to
evaluate potential acquisitions include service quality, industry focus,
diversification of client base, operating characteristics, and geographic
coverage.
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CLIENT SERVICE AND INDUSTRY SPECIALIZATION
SITEL targets those large corporations within its focus industries with the
potential to generate recurring revenues because of their ongoing customer
service and sales requirements. SITEL seeks to provide its clients appropriate
solutions to their teleservicing needs, including a complete range of services
from customer acquisition (sales calls, handling requests for information, and
order taking) to customer loyalty and retention programs (service, technical
support, and credit card fraud detection). The Company integrates various
services of the types listed below to create teleservicing solutions tailored to
its clients' needs:
<TABLE>
<S> <C>
CUSTOMER SERVICE ACTIVITIES SALES ACTIVITIES
____________________________________________________________ ________________________________________________
* providing technical help desk, product, or service support * consumer sales and marketing
* responding to billing and other account inquiries * business-to-business sales and marketing
* dispatching service technicians * lead generation
* activating product or service upgrades * processing and fulfilling information requests
* conducting customer satisfaction surveys * direct response marketing
* updating customer address, telephone, and other data * credit card activation
* registering warranty information
* contacting delinquent accounts
* providing after-hours customer service
* responding to electronic mail inquiries
* verifying credit card charges to detect possible fraud
</TABLE>
Descriptions of representative services provided to clients by industry
include:
INSURANCE. The Company provides outsourced policyholder support services
specifically designed to enhance the identification, servicing, and retention of
clients' insurance customers and conducts direct selling services primarily for
insurance companies focused on the direct marketing of specialty insurance
products, such as accidental death and disability, credit life, and supplemental
health insurance. The Company has also begun to support the sale of fully
underwritten insurance products.
FINANCIAL SERVICES. The Company works primarily with large credit card
issuers and other financial institutions to provide customer services such as
arranging credit card balance transfers, accepting account applications, and
providing account information as well as customer acquisition, retention and
renewal, and delinquent accounts management services.
TELECOMMUNICATIONS. SITEL works primarily with major telephone companies,
long distance carriers, cellular telephone service providers, and
telecommunications equipment suppliers. The Company's principal activities
include customer service for and the direct sale of products and services to its
clients' consumer and business customers.
MEDIA AND ENTERTAINMENT. SITEL works primarily with major magazine and
newspaper publishers, book clubs, and on-line computer service providers to sell
and renew subscriptions, book club memberships, and Internet services, cross-
sell other client products and services and reinstate expired subscriptions or
memberships.
TECHNOLOGY. The Company works primarily with Internet service providers,
computer manufacturers, and software developers to provide technical support,
pre-sale support, including the mailing of product information immediately upon
request by the clients' customers, value-added fulfillment, post-sales support,
and problem resolution. SITEL also provides help desk services to corporations.
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The Company believes it is a pioneer in providing outsourced customer service
programs on behalf of its clients on a multilingual basis, using electronic
mail via the Internet.
UTILITIES. The Company works with public utilities, which increasingly
are becoming deregulated or otherwise recognize the need to develop customer
service programs to differentiate themselves from competitors. SITEL
provides customer services such as processing change of address requests,
resolving service problems, and dispatching service technicians.
CONSUMER. SITEL works with leading retailers worldwide in responding to
customer inquiries, developing and launching new product sales campaigns,
managing product recalls, and performing quality surveys and market analysis.
AUTOMOTIVE. The Company's clients include major automobile manufacturers
for whom SITEL conducts customer surveys, provides lead generation and
qualification, and performs other customer service functions.
INFORMATION TECHNOLOGY
SITEL's decentralized business units employ leading edge call and data
management technology to meet clients' requirements, through a common set of
services worldwide. This common service set includes switch services,
predictive dialing, universal chair capability, blended call handling,
Interactive Voice Response ("IVR"), and highly customizable client reporting.
By providing a common set of services, SITEL's divisions can maintain the
freedom to explore and choose the best of any tactical technology that meets the
specialized requirements of the client's industry.
SITEL is committed to applying the latest technological advancements in
support of its common service philosophy. The advancements include
integration of automated speech with personal service to maximize
representatives' efficiency, direct connection of SITEL workstations to client
systems, databases, and networks, as well as Internet and other online
interconnections and Computer Telephony Integration ("CTI"). CTI enables the
integration of digital switches to handle vast numbers of call combinations
resulting from different languages, different information and data
requirements, as well as inbound/outbound call differences. Utilizing state of
the art technology platforms (UNIX and NT architectures) with Windows-based PC
workstations, predictive dialers, automated call distributors, and many
proprietary software systems, SITEL representatives have the tools to
effectively and efficiently initiate and receive millions of calls per month.
These activities are supported by leading edge systems in the area of operation
management services, work force management systems, call scripting, and call
control application.
GEOGRAPHIC INFORMATION
See footnote 12 to the Company's consolidated financial statements included
in this Form 10-K for summary financial information relating to its operations
by geographic area.
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ITEM 2. PROPERTIES.
__________
At December 31, 1996, the Company operated call centers in various
leased facilities and on client premises as follows:
NUMBER OF NUMBER OF
FACILITIES WORKSTATION
__________ ____________
FACILITY LOCATION:
Belgium............. 1 270
Canada.............. 4 186
Japan............... 1 110
Portugal............ 1 60
Spain............... 7 2,128
United Kingdom...... 4 1,270
United States....... 41 3,993
___________ ____________
Total.... 59 8,017
=========== ============
During 1997, the Company has opened or intends to open a number of new call
centers, including centers in Germany, Singapore, and Australia to service
recently awarded contracts in those markets.
ITEM 3. LEGAL PROCEEDINGS.
__________________
From time to time, the Company is involved in litigation incidental to its
business. In the opinion of management, no litigation to which the Company is
currently a party is likely to have a materially adverse effect on the Company's
results of operations, financial condition, or cash flows if decided adversely
to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
____________________________________________________
The Company incorporates by reference herein the information reported in
Item 4 of its Form 10-Q for the quarter ended November 30, 1996.
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* * *
EXECUTIVE OFFICERS OF THE REGISTRANT
_____________________________________
The present executive officers of SITEL are James F. Lynch (Chairman of the
Board), Henk P. Kruithof (Executive Vice Chairman), Michael P. May (Chief
Executive Officer), Phillip A. Clough (President), and Barry S. Major (Executive
Vice President-Finance, Chief Financial Officer, and Secretary). Information
concerning such executive officers appears in the following paragraphs:
Mr. Lynch, age 47, founded SITEL in 1985 and has served as Chairman and a
director since its inception. Mr. Lynch also served as Chief Executive Officer
from 1985 until January 1997. Prior to founding SITEL, he served as President
of HQ800, Inc., a subsidiary of United Technologies that provided teleservicing
services to third parties. SITEL was formed when Mr. Lynch negotiated the
purchase of the assets of HQ800 from United Technologies. From 1980 to 1984, Mr.
Lynch served as Director of Sales and Marketing for WATTS Marketing of America,
a former subsidiary of First Data Resources, a credit card processing firm.
WATTS is now part of MATRIXX Marketing Inc., a provider of teleservices.
Mr. Kruithof has served as Executive Vice Chairman and a director since
October 1996. Mr. Kruithof is also the Chairman and Chief Executive Officer
of SITEL Europe plc (formerly Mitre plc, which was acquired by SITEL in
September 1996). Mr. Kruithof co-founded Mitre plc in 1992 and its predecessor
Merit Direct Limited in 1985, and has served as their Chairman since inception.
Prior to founding Mitre plc and Merit Direct Limited, Mr. Kruithof started a
number of businesses in various industry sectors and has extensive experience
in managing international businesses. Mr. Kruithof has previously served on
the boards of several European publicly held companies, including Worcester
Group Plc and Robert Bosch Investment plc.
Mr. May, age 47, has served as Chief Executive Officer of SITEL since
January 1997. Mr. May served as President of SITEL from June 1996 until January
1997, and prior to that, served as Executive Vice President-Corporate
Development since October 1992, when SITEL acquired May Telemarketing, Inc.,
which Mr. May founded in 1985. Prior to founding May Telemarketing, he was a
director, executive officer and treasurer between 1976 and 1982 of Applied
Communications, Inc., a publicly-traded software products company, now known as
Transaction Systems Architects, Inc.
Mr. Clough, age 35, became President of SITEL in January 1997. Between
1990 and January 1997, Mr. Clough served in various investment banking positions
with Alex. Brown & Sons, Inc., most recently as Principal.
Mr. Major, age 40, has served as Executive Vice President-Finance and Chief
Financial Officer since June 1996 and prior thereto as Senior Vice President
Finance since October 1995. From 1985 to October 1995, Mr. Major served in
various executive positions with American National Corporation, a bank holding
company, most recently as President.
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PART II
_______
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
______________________________________________________________________
The Company's Common Stock was traded on the NASDAQ National Market under
the symbol "SITL" from the Company's initial public offering on June 8, 1995
until December 31, 1996, when the Common Stock began trading on the New York
Stock Exchange under the symbol "SWW". The following table sets forth, for the
quarters indicated, the high and low closing sale prices of the Common Stock as
reported by the NASDAQ National Market through December 30, 1996 and by the New
York Stock Exchange thereafter. The prices below reflect two-for-one stock
splits effective May 13, 1996 and October 21, 1996.
High Low
______ _____
1995
Second Quarter (from June 8, 1995) $4.47 $3.81
Third Quarter 6.13 4.34
Fourth Quarter 8.25 4.94
1996
First Quarter 11.44 6.44
Second Quarter 20.69 10.38
Third Quarter 23.88 14.28
Fourth Quarter 25.38 12.75
Holders of SITEL Common Stock are entitled to receive dividends out of the
funds legally available when and if declared by the Board of Directors. SITEL
has not paid dividends in the past. It is unlikely that SITEL will pay
dividends in the foreseeable future. SITEL believes that it is in the best
interest of its stockholders to use future earnings principally to support
operations and to finance the growth of the business.
As of March 31, 1997, there were 315 record holders of the registrant's
Common Stock.
During 1996, SITEL acquired two companies in combinations accounted for as
pooling of interests and involving the issuance of the Company's stock pursuant
to the Regulation D and Section 4(2) exemptions from registration under the
Securities Act of 1933, as amended. On June 28, 1996, SITEL acquired National
Action Financial Services, Inc., a Georgia corporation ("NAFS"), by issuing
2,742,452 split-adjusted shares of its Common Stock to the shareholders of NAFS
in exchange for all of the outstanding shares of capital stock of NAFS. On
September 3, 1996, SITEL acquired Mitre plc, an English public limited company
("Mitre") by issuing 18,341,106 split-adjusted shares of its Common Stock to the
shareholders of Mitre in exchange for all of the outstanding ordinary shares of
Mitre.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA.
The following selected consolidated financial and operating data of the
Company are qualified by reference to and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and with the Company's Consolidated Financial Statements and notes
thereto included elsewhere herein. The selected financial data presented below
as of and for each of the years in the five-year period ended December 31,
1996 are derived from the Company's financial statements which, for the years
ended December 31, 1994, 1995, and 1996, have been audited by KPMG Peat Marwick
LLP, independent accountants.
<TABLE>
<CAPTION>
(in thousands, except per share data)
FOR THE YEARS ENDED DECEMBER 31,
_______________________________
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: 1992 1993 1994 1995 1996
_________ _________ _________ ________ ________
Revenues .....................$49,414 $76,772 $116,757 $187,215 $312,750
Operating expenses:
Cost of services.......... 27,385 42,098 63,268 101,617 163,717
Selling, general and
administrative expenses.. 20,478 31,355 48,254 69,213 120,695
Special compensation expense.. -- -- -- 34,585 (a) --
_________ _________ _________ ________ _______
Operating income(loss).... 1,551 3,319 5,235 (18,200)(b) 28,338 (c)
Transaction related expenses.. -- -- -- -- (6,988)
Interest expense, net......... (607) (937) (834) (702) (227)
Other income.................. 485 1,922 1,443 118 32
_________ _________ _________ ________ _______
Income (loss) before
income taxes, minority
interest and cumulative
effect of accounting
changes.................. 1,429 4,304 5,844 (18,784) 21,155
Income tax expense (benefit).. 269 1,261 1,526 (6,593) 10,221
Minority interest............. -- 278 383 1,262 77
Cumulative effect of
accounting
changes (d)............... 354 -- -- -- --
_________ _________ _________ _________ ________
Net income (loss)...$ 1,514 $ 2,765 $ 3,935 $(13,453)(b)$10,857 (c)
========= ========= ========= ========= ========
Per share amounts:
Net income (loss) per common
and common equivalent share...$ 0.04 $ 0.07 $ 0.09 $ (0.29) (b)$ 0.16 (c)
========= ========= ========= ========= =========
Weighted average common and
common equivalent shares (e).. 41,666 41,666 44,770 45,952 66,011
Balance Sheet Data (at period end):
Working capital (deficit)......$ 1,618 $ (151) $ 5,110 $ 24,182 $36,836
Total assets................... 17,873 28,291 48,177 100,960 211,684
Long-term debt, net of current
portion (f).................... 5,325 3,172 8,183 4,305 20,789
Stockholders' equity.......... 3,470 8,199 12,852 65,380 126,725
</TABLE>
11
<PAGE>
(a) Represents a non-recurring, non-cash compensation expense incurred in
February 1995 resulting from the grant of stock options with an exercise
price of $.0025 per share to 265 employees of the Company to replace stock
appreciation rights previously granted under the Company's Employee Equity
Benefit Plan and previously granted stock options. See Note 9 of Notes to
Consolidated Financial Statements.
(b) Excluding the special compensation expense and a one-time forgiveness of
debt of $0.5 million owed by two stockholders, operating income, net
income, and net income per share would have been $16.9 million, $9.7
million, and $0.19, respectively, for 1995.
(c) Includes non-recurring operating expenses in connection with the
acquisitions of Mitre and NAFS. Excluding those one-time operating
expenses and the transaction related expenses, operating income, net
income, and net income per share were $30.5 million, $19.5 million, and
$0.30, respectively, for 1996.
(d) During 1992, the Company changed its method of accounting for income taxes.
(e) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of weighted average common and common equivalent
shares used in computing net income (loss) per share.
(f) Includes note payable to related party.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
_________________________________________________________________________
RESULTS OF OPERATIONS.
______________________
OVERVIEW
During 1996, SITEL completed four strategic acquisitions designed to
enhance the Company's worldwide presence and expand the Company's industry
expertise. In February 1996, the Company acquired substantially all the assets
of CTC Canadian Telephone Corporation and 2965496 Canada, Inc.(collectively
"CTC") for approximately $4.2 million. In June 1996, SITEL acquired a 69.2%
interest in Teleaction, S.A. ("Teleaction") for approximately $25 million in
cash. The Company also agreed to acquire the remaining 30.8% interest in
1998 for a purchase price of not less than $10.8 million based on Teleaction's
profitability during 1996 and 1997. In June 1996, SITEL also acquired all of
the outstanding capital stock of National Action Financial Services, Inc.
("NAFS") in exchange for approximately 2.7 million shares of the Company's
Common Stock. In September 1996, SITEL acquired all of the ordinary shares
of Mitre, plc ("Mitre") in exchange for approximately 18.3 million shares
of the Company's Common Stock.
Under the pooling of interests method of accounting, the financial
statements of Mitre and NAFS have been consolidated with SITEL on a retroactive
basis for all periods presented as if the companies had always operated on a
consolidated basis. Under the purchase method of accounting, SITEL's financial
statements include the results of operations of CTC and Teleaction since the
dates of acquisition.
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth statement of operations data as a percentage
of revenues for the periods indicated.
<TABLE>
<CAPTION>
1994 1995 1996
_____ _____ _____
<S> <C> <C> <C>
Revenues...................................................... 100.0% 100.0% 100.0%
Operating expenses:
Cost of services........................................... 54.2 54.3 52.3
Selling, general and administrative expenses............... 41.3 37.0 38.6
Special compensation expense............................... -- 18.4(a) --
_____ _____ _____
Operating income (loss)............. ................... 4.5 (9.7)(b) 9.1(c)
Transaction related expenses.................................. -- -- 2.2
Interest expense, net......................................... (0.7) (0.4) (0.1)
Other income.................................................. 1.2 0.1 --
______ _____ _____
Income (loss) before income taxes and minority interest. 5.0 (10.0) 6.8
Income tax expense (benefit) ................................. 1.3 (3.5) 3.3
Minority interest............................................. 0.3 0.7 --
______ _____ _____
Net income (loss) ...................................... 3.4% (7.2)%(b) 3.5%(c)
====== ====== ======
</TABLE>
(a) Represents a non-recurring, non-cash compensation expense incurred in
February 1995, resulting from the grant of stock options with an exercise
price of $.0025 per share to 265 employees of the Company to replace stock
appreciation rights previously granted under the Company's Employee Equity
Benefit Plan and previously granted stock options. See Note 9 of Notes
to Consolidated Financial Statements.
(b) Excluding the special compensation expense and a one-time forgiveness of
debt of 0.3% ($0.5 million) owed by two stockholders, operating income and
net income would have been 9.0% and 5.2% respectively, for 1995.
(c) Includes non-recurring operating expenses in connection with the
acquisitions of Mitre and NAFS. Excluding those one-time operating
expenses and the transaction related expenses, operating income and net
income would have been 9.8% and 6.2%, respectively, for 1996.
1996 COMPARED TO 1995
REVENUES. Revenues increased $125.6 million, or 67.1%, to $312.8 million in
1996 from $187.2 million in 1995. Of this increase, $35.4 million was
attributable to services initiated for new clients, $56.8 million to higher
revenues from existing clients and $33.4 million attributable to revenues
from businesses acquired under the purchase method of accounting. Excluding
revenues from Teleaction, revenues in 1996 increased 52.3%. Revenues from
existing clients increased 30.3% primarily as a result of higher calling
volumes.
COST OF SERVICES. Cost of services represents labor and telephone expenses
directly related to teleservicing activities. As a percentage of revenues,
cost of services decreased to 52.3% in 1996 from 54.3% in 1995. This
decrease was primarily attributable to higher capacity utilization of the
Company's call centers.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. Selling, general, and
administrative expenses represent expenses incurred to directly support and
manage the operations including costs of management, administration, facilities
expenses, depreciation and maintenance, sales and marketing activities, and
client support services. These expenses increased $51.5 million, or 74.4%, to
$120.7 million in 1996 from $69.2 million in 1995 primarily as a result of
increased expenses attributable to new Company-operated facilities, additional
staff to support the Company's higher calling volumes in 1996, and certain
13
<PAGE>
non-recurring acquisition related operating expenses. Excluding the non-
recurring expenses, as a percentage of revenues, these expenses increased to
37.9% in 1996 from 37.0% in 1995. This percentage increase was primarily
attributable to the Company's investment in new industry efforts and additional
resources being required to further develop international expansion.
SPECIAL COMPENSATION EXPENSE. In February 1995, the Company incurred a
non-recurring, non-cash compensation expense of $34.6 million. This resulted
from the grant of stock options with an exercise price of $.0025 per share to
265 employees of the Company to replace stock appreciation rights previously
granted under the Company's Employee Equity Benefit Plan and previously granted
stock options.
OPERATING INCOME (LOSS). Operating income was $28.3 million in 1996.
Primarily as a result of the non-recurring, special compensation expense, the
Company reported an operating loss of $18.2 million in 1995. Excluding
non-recurring acquisition related operating expenses, operating income would
have increased $13.6 million, or 80.5%, to $30.5 million in 1996 from $16.9
million in 1995 and, as a percentage of revenues, would have increased to 9.8%
in 1996 from 9.0% in 1995 due to the factors discussed above.
TRANSACTION RELATED EXPENSES. Transaction related expenses include legal,
accounting, and other non-recurring expenses associated with acquisitions
accounted for as poolings of interest. During 1996, the Company incurred $7.0
million of these expenses to consummate the NAFS and Mitre acquisitions.
INTEREST EXPENSE, NET. Net interest expense decreased to $(0.2) million,
or 0.1% of revenues, in 1996 from $(0.7) million, or 0.4% of revenues, in 1995
due to increased investment income.
INCOME TAX EXPENSE (BENEFIT). The income tax expense (benefit)as a
percentage of income (loss) before income taxes and minority interest increased
to 48.3% in 1996 from 35.1% in 1995. This increase is primarily due to
nondeductible transaction related expenses.
NET INCOME (LOSS). Net income was $10.9 million in 1996. Primarily as
a result of the non-cash non-recurring, special compensation expenses and the
onetime forgiveness of debt of $0.5 million owed by two stockholders, the
Company reported a net loss of $13.5 million in 1995. Excluding the
transaction related expenses and non-recurring acquisition related operating
expenses, net income would have increased $9.8 million, or 101.0%, to $19.5
million in 1996 from $9.7 million in 1995 (excluding the special compensation
expense and the amount forgiven) and, as a percentage of revenues, would have
increased to 6.2% of revenues from 5.2%.
1995 COMPARED TO 1994
REVENUES. Revenues increased $70.4 million, or 60.3%, to $187.2 million in
1995 from $116.8 million in 1994. This increase resulted from the addition of
new clients as well as increased business from existing clients.
COST OF SERVICES. As a percentage of revenues, cost of services increased
slightly to 54.3% in 1995 from 54.2% in 1994. This increase was primarily
attributable to a greater percentage of revenue being derived from customer
service applications, which generally have greater variances in call center
utilization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $21.0 million, or 43.4%, to $69.2 million in
1995 from $48.2 million in 1994. As a percentage of revenues, these expenses
decreased to 37.0% in 1995 from 41.3% in 1994. This decrease was directly
attributable to increased revenues without a commensurate increase in
administrative expenses.
SPECIAL COMPENSATION EXPENSE. In February 1995, the Company incurred a
non-recurring, non-cash compensation expense of $34.6 million. This resulted
from the grant of stock options with an exercise price of $.0025 per share to
265 employees of the Company to replace stock appreciation rights previously
granted under the Company's Employee Equity Benefit Plan and previously granted
stock options.
14
<PAGE>
OPERATING INCOME (LOSS). Excluding the non-recurring special compensation
expense and a one-time forgiveness of debt of $0.5 million owed by two
stockholders, operating income would have increased $11.7 million, or 223.1%, to
$16.9 million in 1995 from $5.2 million in 1994. As a percentage of revenues,
operating income (excluding the non-recurring special compensation expense and
the amount forgiven) would have increased to 9.0% in 1995 from 4.5% in 1994 due
to the factors discussed above.
INTEREST EXPENSE, NET. Net interest expense decreased slightly to ($0.7)
million in 1995 from ($0.8) million in 1994. This decrease was attributable to
lower outstanding balances on the Company's working capital line of credit and
to lower prevailing interest rates.
OTHER INCOME. Other income decreased to $0.1 million in 1995 from $1.4
million in 1994. This increase was primarily attributable to a one-time $1.0
million payment in 1994 from a client in connection with the client's decision
to perform its teleservicing internally.
INCOME TAX EXPENSE (BENEFIT). The income tax expense (benefit)
as a percentage of income (loss) before income taxes and minority interest
increased to 35.1% in 1995 from 26.1% in 1994. This increase is primarily due
to the effect of certain state tax credits recorded during 1994.
NET INCOME (LOSS). As a result of the non-recurring, non-cash special
compensation expense and the one-time forgiveness of debt of $0.5 million owed
by two stockholders, the Company reported a net loss of $13.5 million in 1995
compared to net income of $3.9 million in 1994. Excluding the special
compensation expense and amount forgiven, net income would have increased 148.7%
to $9.7 million, or 5.2% of revenues, in 1995 from $3.9 million, or 3.4% of
revenues, in 1994, primarily as a result of increased revenues without a
commensurate increase in administrative expenses.
QUARTERLY RESULTS AND SEASONALITY
The Company has experienced and expects to continue to experience quarterly
variations in its results of operations principally due to the timing of
clients' teleservicing campaigns and the commencement of new contracts, revenue
mix, and the timing of additional selling, general and administrative expenses
to support new business. While the effects of seasonality on SITEL's business
often are offset by the addition of new clients or new programs for existing
clients, the Company's business tends to be slower in August and December.
August is affected by reduced marketing activities in Europe and December is
affected by reduced teleservicing activities during the holiday season.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the Company's initial public offering of Common Stock in June
1995, SITEL's primary source of liquidity was cash flow from operations,
supplemented by borrowings under its revolving bank line of credit. The Company
has had two public offerings which provided an aggregate of approximately $65.5
million of net cash proceeds. The Company has secured bank commitments totaling
approximately $37.2 million as of December 31, 1996, $3.6 million of which was
outstanding as of such date.
In June 1996, the Company acquired a 69.2% interest in Teleaction for
approximately $25 million in cash and has agreed to acquire the remaining
30.8% interest in 1998 for a purchase price (not less than $10.8 million) based
on Teleaction's profitability during 1996 and 1997. The Company used proceeds
from its second public offering to make its acquisition of the majority interest
in Teleaction and expects to pay for the remaining interest in Teleaction out of
working capital or, if necessary, borrowings under its bank commitments. The
Company incurred $7.0 million of transaction related expense in connection with
the NAFS and Mitre acquisitions which it also financed from the net proceeds of
the second public offering.
Cash provided by operating activities was $35.8 million during 1996. This
was the result of $26.4 million of net income before depreciation and
amortization and other non-cash charges increased by $9.4 million of changes in
15
<PAGE>
operating assets and liabilities. Cash used by investing activities for 1996 was
$55.0 million, primarily related to the acquisition of Teleaction and the
purchase of call and data management equipment. Cash provided by financing
activities for 1996 of $39.6 million resulted primarily from a public equity
offering, net borrowings from a bank line of credit, and term debt.
Cash provided by operating activities was $15.3 million in 1995. This was
the result of $16.6 million of net income before depreciation and amortization
and other non-cash charges offset by $1.3 million of changes in operating assets
and liabilities. Cash used by investing activities for 1995 was $26.5 million,
primarily related to investments in marketable securities and the purchase of
call and data management equipment. Cash provided by financing activities of
$15.1 million resulted primarily from the Company's initial public offering
offset by principal repayments on the Company's term debt and bank line of
credit. The $34.6 million non-recurring, non-cash compensation expense
incurred in February 1995 resulted in a deferred tax benefit of $11.8 million
which will be available to reduce future income taxes.
Cash provided by operating activities was $1.2 million in 1994. This was the
result of $9.3 million of net income before depreciation and amortization and
other non-cash charges offset by $8.1 million of changes in operating assets and
liabilities. Cash used by investing activities for 1994 was $9.7 million,
primarily related to the purchase of call and data management equipment. Cash
provided by financing activities of $9.9 million resulted primarily from net
proceeds from the term debt and bank line of credit and the issuance of
redeemable preference shares.
Capital expenditures were $40.0 million, $13.3 million and $9.4 million in
1996, 1995 and 1994, respectively. The Company expects to spend approximately
$43.0 million on capital expenditures in 1997. Historically, capital
expenditures have been, and future expenditures are anticipated to be, primarily
for facilities and equipment to support expansion of the Company's operations,
additions to the Company's call and data management systems, and management
information systems. The Company intends to finance its future capital
expenditures with cash flow from operations, bank lines of credit or capital
leases.
The Company believes that funds generated from operations, together with
available credit under its revolving bank facilities, will be sufficient to
finance its current operations and planned capital expenditure requirements at
least through 1997.
INFLATION
The Company does not believe that inflation has had a material effect on its
results of operations in recent years. However, there can be no assurance that
the Company's business will not be affected by inflation in the future.
16
<PAGE>
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"). SFAS 128 revises the calculation and presentation provisions of
Accounting Principles Board Opinion No. 15 ("APB 15") and related
interpretations. SFAS 128, which will require retroactive application, is
effective for the Company's year ended December 31, 1997. While the Company has
not determined the full effect of adopting SFAS 128, it believes that the
adoption will not have a significant effect on its reported earnings per share,
except that the presentation of basic earnings per share, calculated in
accordance with SFAS 128, will be greater than the previously reported "Income
per common and common equivalent share," calculated in accordance with APB 15
and related interpretations. The Company also believes that diluted earnings
per share, calculated in accordance with SFAS 128, will be similar to the
previously reported "Income per common and common equivalent share," calculated
in accordance with APB 15 and related interpretations.
FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K, including all documents incorporated herein
by reference, contains forward-looking statements. Additional written or oral
forward-looking statements may be made by the Company from time to time in
filings with the Securities and Exchange Commission or otherwise. The words
"believe," "expect," "seek," and "intend" and similar expressions identify
forward-looking statements, which speak only as of the date the statement is
made. Such forward-looking statements are within the meaning of that term in
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements may include, but
are not limited to, projections of revenues, income or loss, capital
expenditures, acquisitions, plans for future operations, financing needs or
plans relating to services of the Company, as well as assumptions relating to
the foregoing. Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by or underlying the forward-looking statements.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
____________________________________________
The information called for by this item (other than selected quarterly
information, which is set forth below) is incorporated by reference from the
Company's Consolidated Financial Statements set forth on pages F-1 through
F-20 hereof.
The following table sets forth statement of operations data for
each of the four quarters of 1996 and 1995. This quarterly information is
unaudited but has been prepared on a basis consistent with the Company's audited
financial statements presented elsewhere herein and, in the Company's opinion,
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the information for the quarters presented.
The operating results for any quarter are not necessarily indicative of results
for any future period.
<TABLE>
<CAPTION>
(in thousands, except per share data)
FOR THE THREE MONTHS ENDED
__________________________
March 31, June 30, September 30, December 31,
1996 1996 1996 1996
________ ________ _____________ ___________
<S> <C> <C> <C> <C>
Revenues......................................... $59,519 $69,266 $85,144 $98,821
Operating expenses:
Cost of services.............................. 31,593 36,746 44,433 50,945
Selling, general and administrative
expenses.................................... 22,010 27,267 33,040 38,378
________ ________ _____________ ___________
Operating income (loss)................. 5,916 5,253(a) 7,671(b) 9,498
Transaction related expenses..................... --- 666 6,322 ---
Interest income (expense), net .................. 101 25 (130) (223)
Other income (expense), net...................... --- --- (19) 51
_________ _________ _____________ ___________
Income before income taxes and
minority interest.......................... 6,017 4,612 1,200 9,326
Income tax expense............................... 2,211 2,271 2,514 3,225
Minority Interest................................ --- 18 23 36
_________ _________ _____________ ___________
Net income (loss)................................ $3,806 $2,323(a) $(1,337)(b) $ 6,065
========= ========= ============= ===========
Net income (loss) per share...................... $ 0.06 $ 0.03(a) $ (0.02)(b) $ 0.09
========= ========= ============= ===========
Weighted average common and common
equivalent shares................................ 64,262 66,406 58,441 66,922
========= ========= ============= ===========
</TABLE>
a) Includes non-recurring operating expenses related to the acquisition of
National Action Financial services, Inc. (NAFS). Excluding those one-
time operating expenses and the transaction related expenses, operating
income, net income, and net income per share were $6.9 million, $4.3
million and $0.06 per share, respectively, for the second quarter of 1996.
b) Includes non-recurring operating expenses related to the merger with Mitre
plc and the acquisition of National Action Financial Services, Inc.
(NAFS). Excluding those one-time operating expenses and the transaction
related expenses, operating income, net income, and net income per share
were $8.2 million, $5.4 million and $.08 per share, respectively, for
the third quarter of 1996.
18
<PAGE>
<TABLE>
<CAPTION>
(in thousands, except per share data)
For The Three Months Ended
__________________________
March 31, June 30, September 30, December 31,
1995 1995 1995 1995
_________ __________ _____________ ____________
<S> <C> <C> <C> <C>
Revenues............................ $39,174 $46,201 $45,548 $56,292
Operating expenses:
Cost of services.................. 21,504 24,747 24,334 31,032
Selling, general and administrative
expenses........................... 14,565 17,273 17,265 20,110
Special compensation expense....... 34,585 (a) --- --- ---
_________ ___________ _____________ ____________
Operating income, net....... (31,480)(b) 4,181 3,949 5,150
Interest income expense, net......... (206) (358) (78) (60)
Other income (expense), net........... 90 50 29 (51)
_________ ___________ _____________ ____________
Income (loss) before income taxes
and minority interest........... (31,596) 3,873 3,900 5,039
Income tax expense (benefit).......... (11,062) 1,283 1,401 1,785
Minority interest..................... 257 320 310 375
_________ ___________ _____________ ____________
Net income (loss)..................... ($20,791)(b) $2,270 $2,189 $2,879
========= =========== ============= ============
Net income (loss) per share.......... ($0.46)(b) $0.05 $0.04 $0.05
========= =========== ============= ============
Weighted average common and common
equivalent shares................... 45,364 48,060 55,214 55,021
========= =========== ============= ============
</TABLE>
a) Represents a non-recurring, non-cash compensation expense incurred in
February 1995 resulting from the grant of stock options with an exercise
price of $.0025 per share to 265 employees of the Company to replace
stock appreciation rights previously granted under the Company's
Employee Equity Benefit Plan and previously granted stock options.
b) Excluding the special compensation expense and a one-time foregiveness
of debt of $0.5 million owed by two stockholders, operating income,
net income, and net income per share would have been $3.6 million,
$2.4 million and $0.05, respectively, for the first quarter of 1995.
19
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
___________________________________________________________ ____
FINANCIAL DISCLOSURE.
_____________________
On January 30, 1997, the Board of Directors elected to change the Company's
fiscal year end to December 31 in order to correspond with the year used by
SITEL Europe plc (formerly known as Mitre plc) ("Mitre") and National Action
Financial Services, Inc. ("NAFS"), two companies recently acquired by the
Company in business combinations accounted for as pooling of interests.
Effective January 31, 1997, upon the recommendation of its Audit Committee, the
Board of Directors of the Company rescinded its previous selection of Coopers &
Lybrand L.L.P. ("Coopers & Lybrand") as its principal independent accountants to
audit its financial statements for the year ending May 31, 1997, and selected
KPMG Peat Marwick LLP ("KPMG") to serve in such capacity for the year ending
December 31, 1996. KPMG has served for several years as the principal
independent accountants for the audit of the financial statements for Mitre.
For the years ending May 31, 1995 and May 31, 1996, Coopers & Lybrand
audited the Company's financial statements. The reports of Coopers & Lybrand
on the Company's financial statements for these years did not contain an
adverse opinion or a disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope, or accounting principles. During the years
ending May 31, 1995 and May 31, 1996 and through the January 31, 1997, date of
dismissal, there were no disagreements between the Company and Coopers & Lybrand
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, as described in Regulation S-K Item
304(a)(1)(iv), and no reportable event, as described in Regulation S-K Item
304(a)(1)(v).
During the years ending May 31, 1995 and May 31, 1996 and through the
January 31, 1997 date of engagement, the Company did not consult KPMG regarding
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, as described in Regulation S-K Item
304(a)(2)(i), or any matter that was either the subject of a disagreement, as
described in Regulation S-K Item 304(a)(1)(iv), or a reportable event, as
described in Regulation S-K Item 304(a)(1)(v), except that the Company did
consult KPMG on the matter described in the following paragraph.
In the course of the Company's preparation of restated financial
statements which would give effect to the pooling of interests combinations with
Mitre and NAFS, there were various communications between the Company, Coopers &
Lybrand, and KPMG as Mitre's auditors. During those communications, the Company
inquired of both Coopers & Lybrand and KPMG concerning the manner in which a
change by SITEL in its year end to correspond with Mitre's following a pooling
of interests should be reflected in filings with the Securities and Exchange
Commission. Coopers & Lybrand initially expressed the view that it would not be
possible to retroactively restate the Company's financial statements based on
Mitre's year end. KPMG expressed the view that the Securities and Exchange
Commission would not object to reflecting a change to Mitre's year end in the
form of retroactively restated pooled financial statements for prior years based
on Mitre's year end. After further reviewing the matter, Coopers & Lybrand
advised the Company that they concurred with the view expressed by KPMG.
The Company did not receive written views from either firm.
PART III
________
The information required by this Part III is incorporated by reference from
the registrant's definitive proxy statement for the 1997 annual meeting of the
registrant's stockholders to be held on June 6, 1997, which involves the
election of directors. The definitive proxy statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
year covered by this Form 10-K.
20
<PAGE>
PART IV
_______
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
__________________________________________________________ ______
(a) The following documents are filed as a part of this report:
1. FINANCIAL STATEMENTS. The following Consolidated Financial Statements
of SITEL Corporation and Independent Auditors' Report are included at pages
F-1 through F-20 of this Form 10-K:
- Independent Auditors' Report.
- Consolidated Balance Sheets at December 31, 1995 and 1996.
- Consolidated Statements of Income (Loss) for the years ended
December 31, 1994, 1995 and 1996.
- Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1994, 1995 and 1996.
- Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996.
- Notes to Consolidated Financial Statements.
2. FINANCIAL STATEMENT SCHEDULES. The following consolidated
financial statement schedules of SITEL Corporation for the years ended
December 31, 1994, 1995 and 1996 are included at pages S-1 through S-2 of this
Form 10-K and should be read in conjunction with the Consolidated Financial
Statements:
- Independent Auditors' Report.
- Schedule II - Valuation and Qualifying Accounts.
All other schedules of the Company for which provision is made in
the applicable accounting regulations of the Securities and Exchange Commission
are not required under the related instructions, are inapplicable or have been
disclosed in the Notes to Consolidated Financial Statements and, therefore, have
been omitted.
21
<PAGE>
3. EXHIBITS. The following Exhibits are filed as part of, or are incorporated
by reference into, this Form 10-K:
Exhibit No.
(1) 3.1 Amended and Restated Articles of Incorporation.
(2) 3.1(a) Articles of Amendment filed September 10, 1996 to the
Amended and Restated Articles of Incorporation
(1) 3.4 Amended and Restated Bylaws.
4.2 Specimen Common Stock Certificate.
(1) 9.1 Form of General Voting Agreement.
(1) 9.2 Form of Voting Agreement with World Investments, Inc.
(1) 10.1 SITEL Corporation Stock Option Plan for Replacement of
Existing Options.
10.1(a) Amendment No. 1 to SITEL Corporation Stock Option Plan for
Replacement of Existing Options.
(1) 10.2 SITEL Corporation Stock Option Plan for Replacement of EEBs.
10.2(a) Amendment No. 1 to SITEL Corporation Stock Option Plan for
Replacement of EEBs.
(3) 10.3 Amended and Restated SITEL Corporation 1995 Employee Stock
Option Plan.
10.3(a) Amendment No. 1 to Amended and Restated SITEL Corporation
1995 Employee Stock Option Plan.
(1) 10.4 SITEL Corporation 1995 Non-Employee Directors Stock Option
Plan.
10.4(a) Amendment No. 1 to SITEL Corporation Non-Employee Directors
Stock Option Plan.
(1) 10.5 SITEL Corporation Executive Wealth Accumulation Plan.
(1) 10.6 Employment Agreement with James F. Lynch.
(1) 10.7 Employment Agreement with Michael P. May.
(1) 10.8 Form of Right of First Refusal.
(4) 10.9 Form of Indemnification Agreement with Outside Directors.
(5) 10.10 Form of Indemnification Agreement with Executive Officers.
(6) 16.1 Letter from Coopers & Lybrand L.L.P. dated February 6, 1997
21 Subsidiaries.
23.1 Consent of KPMG Peat Marwick LLP
24.1 Power of Attorney (included on signature page).
27 Financial Data Schedule.
______________________________
(1) Previously filed as an exhibit to Registration Statement
of SITEL Corporation on Form S1 (Registration No. 3391092) and
incorporated herein by this reference.
(2) Incorporated by reference to the filing under exhibit
number 4.1(a) with the Company's registration statement on Form
S-3 filed October 3, 1996.
22
<PAGE>
(3) Previously filed as Exhibit B to the Company's Notice
of Annual Meeting of Stockholders and Proxy Statement dated
September 27, 1996.
(4) Previously filed as an exhibit under the same exhibit
number to the Company's Form 10-Q for the quarter ended August
31, 1995.
(5) Previously filed as an exhibit under the same exhibit
number to the Company's Registration Statement on S-8 (33-99434).
(6) Previously filed as an exhibit under the same exhibit
number to the Company's Form 8-K filed on February 6, 1997.
(b) REPORTS ON FORM 8-K. The Company filed two reports on Form 8-K or Form
8-K/A during the last quarter of the period covered by this report. A
Form 8-K/A was filed on October 1, 1996 to include in Item 7 (Financial
Statements and Exhibits) the required unaudited financial statements of
Mitre plc and unaudited pro forma and pro forma combined financial
statements. A Form 8-K/A was filed on December 4, 1996, to voluntarily
report under Item 7 certain unaudited restated combined financial
information which gave effect to the Company's acquisitions of Mitre plc
and National Action Financial Services, Inc.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: April 16, 1997 SITEL Corporation
By: /s/Michael P. May
-----------------------
Michael P.May
Chief Executive Officer
24
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I do hereby constitute and appoint
James F. Lynch and Michael P. May, and each of them individually, as my true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for me and in my name, place, and stead, in any and all
capacities, of SITEL Corporation to sign any amendments to this Annual Report on
Form 10K of SITEL Corporation for the year ended December 31, 1996, and to file
such amendments with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorneys-in-fact and agents, and each of them individually and their
substitutes, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in connection
with such Annual Report as fully to all intents and purposes as I might or could
do in person, hereby ratifying and confirming all that such attorneys-in-fact
and agents or any of them, or their or his substitutes or substitute, lawfully
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/James F. Lynch
______________________ Chairman of the Board April 16, 1997
James F. Lynch and Director
/s/ Michael P. May
______________________ Chief Executive Officer April 16, 1997
Michael P. May
/s/ Barry S. Major
______________________ Executive Vice President-Finance April 16, 1997
Barry S. Major Chief Financial Officer
(Principal Financial Officer)
/s/ Donald J. Vrana
_______________________ Corporate Controller April 16, 1997
Donald J. Vrana (Principal Accounting Officer)
/s/ Henk P. Kruithof
_______________________ Executive Vice Chairman April 16, 1997
Henk P. Kruithof and Director
/s/ Bill L. Fairfield
_______________________ Director April 16, 1997
Bill L. Fairfield
/s/ Kelvin C. Berens
_______________________ Director April 16, 1997
Kelvin C. Berens
/s/ George J. Kubat
_______________________ Director April 16, 1997
George J. Kubat
25
<PAGE>
EXHIBIT INDEX
Page Number
In Sequential
Numbering
Exhibit System
_______ _____________
(1) 3.1 Amended and Restated Articles of Incorporation. N/A
(2) 3.1(a) Articles of Amendment filed September 10, 1996 to the Amended
and Restated Articles of Incorporation N/A
(1) 3.4 Amended and Restated Bylaws. N/A
4.2 Specimen Common Stock Certificate. 50
(1) 9.1 Form of General Voting Agreement. N/A
(1) 9.2 Form of Voting Agreement with World Investments, Inc. N/A
(1) 10.1 SITEL Corporation Stock Option Plan for Replacement of
Existing Options. N/A
10.1(a) Amendment No. 1 to SITEL Corporation Stock Option Plan for
Replacement of Existing Options. 53
(1) 10.2 SITEL Corporation Stock Option Plan for Replacement of
EEBs. N/A
10.2(a) Amendment No. 1 to SITEL Corporation Stock Option Plan
for Replacement of EEBs. 54
(3) 10.3 Amended and Restated SITEL Corporation 1995 Employee
Stock Option Plan. N/A
10.3(a) Amendment No. 1 to Amended and Restated SITEL Corporation 1995
Employee Stock Option Plan. 55
(1) 10.4 SITEL Corporation 1995 Non-Employee Directors Stock
Option Plan. N/A
10.4(a) Amendment No. 1 to Amended and Restated SITEL Corporation 1995 56
Non-Employee Directors Stock Option Plan.
(1) 10.5 SITEL Corporation Executive Wealth Accumulation Plan. N/A
(1) 10.6 Employment Agreement with James F. Lynch. N/A
(1) 10.7 Employment Agreement with Michael P. May. N/A
(1) 10.8 Form of Right of First Refusal. N/A
(4) 10.9 Form of Indemnification Agreement with Outside Directors. N/A
(5) 10.10 Form of Indemnification Agreement with Executive Officers. N/A
(6) 16.1 Letter from Coopers & Lybrand L.L.P. dated February 6, 1997 N/A
21 Subsidiaries. 57
26
<PAGE>
23.1 Consent of KPMG Peat Marwick LLP 58
24.1 Power of Attorney (included on signature page). 25
27 Financial Data Schedule. 59
_________________________
(1) Previously filed as an exhibit to Registration Statement of
SITEL Corporation on Form S-1 (Registration No. 33-91092) and
incorporated herein by this reference.
(2) Incorporated by reference to the filing under exhibit number
4.1(a) with the Company's registration statement on Form S-3
filed October 3, 1996.
(3) Previously filed as Exhibit B to the Company's Notice of Annual
Meeting of Stockholders and Proxy Statement dated September 27,
1996.
(4) Previously filed as an exhibit under the same exhibit number to
the Company's Form 10-Q for the quarter ended August 31, 1995.
(5) Previously filed as an exhibit under the same exhibit number to
the Company's Registration Statement on S-8 (33-99434).
(6) Previously filed as an exhibit under the same exhibit number to
the Company's Form 8-K filed on February 6, 1997
27
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
CONSOLIDATED FINANCIAL STATMENTS
________________________________
Independent Auditors' Report.......................................... F-2
Consolidated Balance Sheets at December 31, 1995 and 1996............. F-3
Consolidated Statements of Income (Loss) For The Years Ended
December 31, 1994, 1995, and 1996..................................... F-4
Consolidated Statements of Stockholders' Equity For
The Years Ended December 31, 1994, 1995, and 1996..................... F-5
Consolidated Statements of Cash Flows For The Years Ended December 31,
1994, 1995, and 1996.................................................. F-6
Notes to Consolidated Financial Statements............................ F-7
FINANCIAL STATEMENT SCHEDULE
____________________________
Independent Auditors' Report.......................................... S-1
Schedule II - Valuation and Qualifying Accounts....................... S-2
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
____________________________
The Board of Directors
SITEL Corporation:
We have audited the accompanying consolidated balance sheets of SITEL
Corporation and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of income (loss), stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SITEL
Corporation and subsidiaries as of December 31, 1995 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
Omaha, Nebraska KPMG Peat Marwick LLP
April 4, 1997
F-2
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS Decembe 31,
_________________________
1995 1996
__________ ____________
<S> <C> <C>
Current assets:
Cash and cash equivalents............... ....... ....... ....... ............. $ 4,531 $ 25,710
Trade accounts receivable (net of allowance for doubtful accounts of
$937 and $3,188, in 1995 and 1996, respectively)........................ 31,440 65,477
Marketable securities......................................................... 13,046 1,740
Prepaid expenses........ ..................................................... 2,036 3,007
Other assets.................................................................. 753 2,907
Deferred income taxes......................................................... 445 512
__________ ____________
Total current assets........................................... 52,251 99,353
__________ ____________
Property and equipment, net.................................................... ... 25,015 59,109
Deferred income taxes ............................................................. 14,434 11,187
Goodwill, net.................................................................. ... 6,315 40,110
Other assets....................................................................... 2,945 1,925
__________ ____________
Total assets................................................... $ 100,960 $ 211,684
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.............................................................. .. $ 2,212 $ 3,638
Current portion of long-term debt ........................................... 871 759
Current portion of capitalized lease obligations.............................. 1,569 3,032
Trade accounts payable........................................................ 9,517 18,775
Income taxes payable.......................................................... 1,548 3,815
Accrued wages, salaries and bonuses........................................... 6,825 14,812
Accrued operating expenses..................................... .............. 3,690 9,026
Deferred revenue.............................................................. 1,812 7,632
Customer deposits and other................................................... 25 1,028
___________ __________
Total current liabilities...................................... 28,069 62,517
__________ __________
Long-term debt, excluding current portion.......................................... 2,882 1,720
Capitalized lease obligations, excluding current portion........................... 1,423 3,141
Purchase price payable (Note 2).................................................... --- 15,928
Deferred compensation ............................................................. 904 1,461
Redeemable preference shares ...................................................... 2,302 ---
Minority interest ........................................ ........................ --- 192
Commitments and contingencies
Stockholders' equity:
Common stock, voting, $.001 par value 200,000,000 shares authorized,
50,841,602 and 58,875,660 shares issued and outstanding in 1995
and 1996, respectively...................................................... 51 59
Paid-in capital.................................................................... 69,530 117,736
Currency exchange adjustment.................................................. 54 1,311
Unrealized gain on marketable securities, net of taxes........................ --- 1,017
Retained earnings (deficit)................................................... (4,255) 6,602
___________ ___________
Total stockholders' equity..................................... 65,380 126,725
__________ ____________
Total liabilities and stockholders' equity..................... $ 100,960 $ 211,684
========== ============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-3
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share data)
<TABLE>
<CAPTION>
For The Years Ended December 31,
_________________________________
1994 1995 1996
______________ _____________ _____________
<S> <C> <C> <C>
Revenues................................................... $ 116,757 $ 187,215 $ 312,750
______________ _____________ _____________
Operating expenses:
Cost of services...................................... 63,268 101,617 163,717
Selling, general and administrative expenses.......... 48,254 69,213 120,695
Special compensation expense.......................... --- 34,585 ---
______________ _____________ _____________
Total operating expenses............... 111,522 205,415 284,412
______________ _____________ _____________
Operating income(loss) ................. 5,235 (18,200) 28,338
______________ _____________ _____________
Other income (expense):
Transaction related expenses......................... --- --- (6,988)
Interest income....................................... 47 613 1,108
Interest expense...................................... (881) (1,315) (1,335)
Other................................................. 1,443 118 32
______________ _____________ _____________
Total other income (expense)........... 609 (584) (7,183)
______________ _____________ _____________
Income (loss) before income taxes and minority interest..... 5,844 (18,784) 21,155
Income tax expense (benefit)................................ 1,526 (6,593) 10,221
Minority interest........................................... 383 1,262 77
______________ _____________ _____________
Net income (loss) ..................... $ 3,935 $ (13,453) $ 10,857
============== ============= =============
Per share amounts:
Income (loss) per common and common equivalent share.. $ 0.09 $ (0.29) $ 0.16
============== ============= =============
Weighted average common and common
equivalent shares outstanding......................... 44,770 45,952 66,011
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For The Years Ended December 31, 1994, 1995, and 1996
(dollars in thousands)
Class A Class B Class C Options Less
Common Common Common Common Deferred
Stock Stock Stock Stock Compensation
_______ _______ ________ _______ ____________
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993............................................... $ 18 11 1 -- 27
Common stock options less deferred compensation........................ -- -- -- -- 55
Accretion of put option................................................ -- -- -- -- --
Currency exchange adjustment........................................... -- -- -- -- --
Transactions by pooled companies:
Issuance of 2,389,563 shares of common stock.......................... 2 -- -- -- --
Net income............................................................. -- -- -- -- --
_______ ______ ________ _______ ____________
Balance December 31, 1994................................................ 20 11 1 -- 82
Issuance of 100,592 shares of Class C common stock less 80,472 shares
subject to put option................................................. -- -- -- -- --
Special compensation - option issues................................... -- -- -- -- (82)
Accretion of put option................................................ -- -- -- -- --
Conversion of 20,263,458 shares of Class A, 10,660,000 shares of
Class B, and 739,652 shares of Class C common into a single
class of common stock due to reincorporation........................ (20) (11) (1) 32 --
Issuance of 7,600,000 shares of common stock, net of offering expenses. -- -- -- 8 --
Cancellation of the put option on 3,070,584 shares..................... -- -- -- 3 --
Transaction by pooled companies:
Issuance of 8,507,904 shares of common stock........................ -- -- -- 8 --
Currency exchange adjustment........................................... -- -- -- -- --
Net loss............................................................... -- -- -- -- --
_______ _______ ________ _______ ____________
Balance , December 31,1995............................................... -- -- -- 51 --
Issuance of 5,982,220 shares of common stock, net of offering expenses. -- -- -- 6 --
Issuance of 1,719,654 shares of common stock for options exercised..... -- -- -- 2 --
Tax benefit of stock options exercised................................. -- -- -- -- --
Transactions by pooled companies:
Issuance of 332,196 shares of common stock............................. -- -- -- -- --
Currency exchange adjustment........................................... -- -- -- -- --
Unrealized gain on marketable securities, net of taxes................. -- -- -- -- --
Net income............................................................. -- -- -- -- --
_______ _______ ________ _______ ____________
Balance, december 31, 1996............................................... $ -- $ -- $ -- $ 59 $ --
======= ======= ======== ======= ============
Currency Unrealized Retained Total
Paid-in Exchange Gain on Earnings Stockholders'
Capital Adjustment Marketable (Deficit) Equity
Securities
_______ _______ ________ _______ ____________
Balance , December 31, 1993.............................................. $ 2,239 $ 316 $ -- $ 5,587 $ 8,199
Common stock options less deferred compensation........................ -- -- -- -- 55
Accretion of put option................................................ -- -- -- (111) (111)
Currency exchange adjustment........................................... -- (274) -- -- (274)
Transactions by pooled companies:
Issuance of 2,389,563 shares of common stock........................ 1,046 -- -- -- 1,048
Net income............................................................. -- -- -- 3,935 3,935
_______ _______ ________ ________ ____________
Balance December 31, 1994................................................ 3,285 42 -- 9,411 12,852
Issuance of 100,592 shares of Class C common stock less 80,472 shares
subject to put option................................................ 59 -- -- -- 59
Special compensation - option issues................................... 34,707 -- -- -- 34,625
Accretion of put option................................................ -- -- -- (213) (213)
Conversion of 20,263,458 shares of Class A, 10,660,000 shares of Class
B, and 739,656 shares of Class C common into a single class of
common stock due to reincorporation.................................. -- -- -- -- --
Issuance of 7,600,000 share of common stock, net of offering expenses.. 23,163 -- -- -- 23,171
Cancellation of the put option on 3,070,584 shares..................... 2,797 -- -- -- 2,800
Transaction by pooled companies:
Issuance of 8,507,904 shares of common stock......................... 5,519 -- -- -- 5,527
Currency exchange adjustment........................................... -- 12 -- -- 12
Net loss............................................................... -- -- -- (13,453) (13,453)
______ _______ ________ _________ ___________
Balance , December 31,1995............................................... 69,530 54 -- (4,255) 65,380
Issuance of 5,982,220 shares of common stock, net of offering expenses. 42,239 -- -- -- 42,245
Issuance of 1,719,642 shares of common stock for options exercised..... 92 -- -- -- 94
Tax benefit of stock options exercised................................. 5,040 -- -- -- 5,040
Transactions by pooled companies:
Issuance of 332,196 shares of common stock........................... 835 -- -- -- 835
Currency exchange adjustment........................................... -- 1,257 -- -- 1,257
Unrealized gain on marketable securities, net of taxes................. -- -- 1,017 -- 1,017
Net income............................................................. -- -- -- 10,857 10,857
________ ________ _______ ________ ____________
Balance, December 31, 1996............................................... $117,736 $1,311 $1,017 $ 6,602 $126,725
======== ======== ======= ======== ============
The accompanying notes are an integral part of the consolidated financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
For The Years Ended December 31,
________________________________
1994 1995 1996
__________ ____________ ___________
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................. $ 3,935 $ (13,453) $ 10,857
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Special compensation expense................................. -- 34,585 --
Depreciation and amortization................................ 5,341 7,090 13,256
Provision for deferred income tax............................ (818) (12,219) 1,823
Deferred compensation........................................ 804 70 557
Loss (gain) on sale of property and equipment................ 44 53 (37)
Forgiveness of loans receivable from related parties......... -- 449 --
Change in assets and liabilities:
Trade accounts receivable................................. (9,623) (9,408) (17,083)
Other assets.............................................. (1,518) (769) 4,097
Trade accounts payable.................................... 746 4,302 6,662
Other liabilities......................................... 2,304 4,573 15,711
___________ ____________ ___________
Net cash provided by operating activities........... 1,215 15,273 35,843
__________ ____________ ___________
Cash flows from investing activities:
Purchases of property and equipment............................... (9,415) (13,279) (39,954)
Proceeds from sales of property and equipment..................... 43 126 199
Acquisition of Teleaction, net of cash acquired................... -- -- (23,720)
Acquisition of CTC, net of cash acquired.......................... -- -- (4,216)
Investments in marketable securities.............................. -- (22,196) (63,793)
Sale of marketable securities..................................... -- 9,150 76,840
Changes in other assets, net...................................... (373) (349) (380)
___________ _____________ ___________
Net cash used in investing activities............... (9,745) (26,548) (55,024)
___________ _____________ ___________
Cash flows from financing activities:
Borrowings on notes payable....................................... 60,049 21,929 17,169
Repayments of notes payable....................................... (59,043) (21,429) (16,026)
Borrowings on long-term debt...................................... 8,079 7,319 500
Repayment of long-term debt....................................... (1,764) (13,237) (2,048)
Repayment of note payable to related party........................ -- (492) --
Issuance of redeemable preference shares......................... 2,571 -- --
Repayment of redeemable preference shares........................ (230) (464) (2,075)
State incentive credits received.................................. -- 800 --
Common stock issued, net of expenses.............................. 1,048 23,171 42,339
Payments on capital lease obligations............................. (771) (2,449) (259)
___________ _____________ ____________
Net cash provided by financing activities.......... 9,939 15,148 39,600
___________ _____________ ____________
Effect of exchange rates on cash.................................. (101) (104) 760
___________ _____________ ____________
Net increase in cash................................ 1,308 3,769 21,179
Cash and cash equivalents, beginning of year......................... (546) 762 4,531
___________ _____________ ____________
Cash and cash equivalents, end of year............................... $ 762 $ 4,531 $ 25,710
=========== ============= ============
Supplemental disclosures of cash flow information:
Interest paid..................................................... $ 1,071 $ 1,212 $ 846
Income taxes...................................................... $ 2,080 $ 4,170 $ 4,311
Supplemental disclosures of non-cash investing and financing activities
In 1995, upon completion of the IPO, the put option on common stock was canceled causing a reclassification of $2,800
to stockholders' equity.
In 1996, the tax benefit of stock options exercised was $5,040.
The Company capitalized leases of $2,218, $2,960, and $2,101,in 1994, 1995 and 1996, respectively.
The Company issued stock in connection with the acquisition of businesses with a value of $28 and $5,498 in 1995
and 1996, respectively.
F-6
</TABLE>
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES:
(a) DESCRIPTION OF BUSINESS. SITEL Corporation ("SITEL") and subsidiaries
(collectively, the "Company") are engaged in inbound, outbound, and interactive
teleservicing activities, servicing the insurance, financial services,
telecommunications, media and entertainment, technology, utilities, consumer,
automotive, and travel industries. Operations are primarily located in North
America and Europe.
(b) PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the financial statements of SITEL Corporation and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
During 1996, the Company acquired all of the outstanding common stock of
National Action Financial Services, Inc. ("NAFS") by issuing 2,742,452 shares of
its common stock and all of the outstanding common stock of Mitre plc ("Mitre")
by issuing 18,341,106 shares of its common stock in two separate business
combinations accounted for using the pooling-of-interests method of accounting.
Accordingly, the consolidated financial statements for periods prior to each
business combination have been restated to include the accounts and results of
operations of NAFS and Mitre. No significant adjustments were required to
conform the accounting policies of the combining enterprises.
The results of operations previously reported by the separate enterprises
and the combined amounts presented in the accompanying consolidated financial
statements are summarized below:
(in thousands)
1994 1995 1996
________ ___________ __________
Revenues:
SITEL $86,262 $120,617 $ 196,279
NAFS 593 8,258 15,685
Mitre 29,902 58,340 100,786
________ ___________ ___________
$116,757 $187,215 $ 312,750
Combined ======== =========== ===========
Net income(loss):
SITEL $ 3,827 $ (16,349) $6,016
NAFS (236) 773 (1,132)
Mitre 344 2,123 5,973
________ ___________ ___________
Combined $ 3,935 $ (13,453) $ 10,857
======== =========== ===========
Transaction related expenses of approximately $0.7 million and $6.3 million
for the combinations with NAFS and Mitre, respectively, were expensed during
1996 at the closing of each transaction.
(c) TRANSLATION OF FOREIGN CURRENCIES. The translation of the applicable
foreign currencies into U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date.
Revenue and expense accounts are translated using average exchange rates
prevailing during the year. Gains or losses resulting from currency translation
are included in stockholders' equity.
F-7
<PAGE>
(d) REVENUE RECOGNITION. The Company recognizes revenues as services
are performed for its clients. Specific set up costs incurred in respect of
major long-term contracts to provide services to clients are carried forward
against the future contractual revenues relating to those costs.
(e) CASH EQUIVALENTS. Cash equivalents generally consist of highly
liquid debt instruments purchased with an original maturity of three months or
less.
(f) PROPERTY AND EQUIPMENT. Property and equipment are stated at cost.
Equipment under capital leases is stated at the present value of minimum lease
payments. Depreciation is calculated on the straight-line method over the
estimated useful lives of the assets which range from 3 to 20 years. Assets
recorded under capital leases are amortized on a straight-line basis over the
shorter of the lease term or estimated useful life of the asset.
(g) INVESTMENTS IN MARKETABLE SECURITIES. All marketable securities held
by the Company at December 31, 1995 and 1996, were classified as available-for
sale and recorded at fair value. Unrealized holding gains and losses, net of
the related tax effect, on available-for-sale securities are excluded from
income and are reported as a separate component of stockholders' equity until
realized. Realized gains and losses from the sale of available-for-sale
securities are determined on a specific identification basis. Fair values are
estimated based upon quoted market values.
(h) INCOME TAXES. Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances, if any, are established when
necessary to reduce deferred tax assets to the amount that is more likely than
not to be realized. Income taxes are not accrued for unremitted earnings of
international operations that have been, or are intended to be, reinvested
indefinitely.
(i) GOODWILL. Goodwill consists of the difference between the purchase
price incurred in acquisitions using the purchase method of accounting and the
fair value of net assets acquired and is being amortized using the straight-line
method over 25 years. Accumulated amortization of goodwill at December 31, 1995
and 1996 was $0.7 million and $1.4 million, respectively. The Company monitors
events and changes in circumstances which may require a review of the carrying
value of goodwill at each consolidated balance sheet date to assess
recoverability based on estimated undiscounted future operating cash flows.
Impairments would be recognized in operating results if a permanent diminution
in value were to occur based on fair value. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.
(j) INCOME (LOSS) PER SHARE. Income (loss) per share attributable to
common shareholders has been computed using the weighted average number of
common and common equivalent shares outstanding (see Note 9) and after giving
retroactive effect to the stock splits (see Note 6) and business combinations
accounted for using the pooling-of-interests method of accounting.
F-8
<PAGE>
A summary of common stock and common stock equivalents used to calculate
income (loss) per share is as follows:
(in thousands)
For The Years Ended December 31,
________________________________
1994 1995 1996
_______ _______ ________
Common stock.............. 33,906 40,565 57,746
Common stock equivalents -
stock options......... 10,864 5,387 8,265
_______ _______ ________
Total............... 44,770 45,952 66,011
======= ======= ========
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, options to purchase common stock granted with exercise prices below the
assumed initial public offering price per share during the 12 months preceding
the date of the initial public offering are included in the calculation of
common equivalent shares, using the treasury stock method, as if they were
outstanding for all periods presented.
(k) USE OF ESTIMATES. The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
(l) STOCK COMPENSATION. Prior to January 1, 1996, the Company accounted
for its stock option plan in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the underlying
stock exceeded the exercise price. On January 1, 1996, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for
Stock-Based Compensation, which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply
the provisions of APB Opinion No. 25 and provide pro forma net income (loss) and
pro forma net income (loss) per share disclosures for employee stock option
grants made in 1995 and future years as if the fair-value-based method defined
in SFAS No. 123 had been applied. The Company has elected to continue to apply
the provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123.
(m) FAIR VALUES OF FINANCIAL INSTRUMENTS. Fair values of cash and cash
equivalents, receivables, accounts payable, marketable securities, notes
payable, and redeemable preference shares are estimated to approximate carrying
values due to the short maturities of these financial instruments.
F-9
<PAGE>
2. ACQUISITIONS:
On December 21, 1995, the Company acquired all stock held by minority
stockholders in three subsidiaries of Mitre by issuing Mitre stock with a value
of approximately $5.5 million. The acquisition of the minority holdings was
accounted for using the purchase method of accounting. Accordingly, the
purchase price was allocated based on estimated fair values at the date of
acquisition. The excess of purchase price over the fair value of the net assets
acquired was approximately $4.8 million and is being amortized over a period of
25 years.
On February 9, 1996, the Company acquired the teleservicing businesses of
C.T.C. Canadian Telephone Corporation and 2965496 Canada, Inc. (collectively,
"CTC") through purchases of certain assets and the assumption of certain
liabilities of each business for a purchase price of approximately $4.2 million,
including acquisition costs. The acquisition of CTC has been accounted for as a
purchase. Accordingly, the purchase price has been allocated to the assets and
liabilities acquired based upon their fair values at the date of acquisition and
the results of operations of CTC have been included in the consolidated results
of operations since the date of acquisition. Goodwill of approximately $4.2
million was recorded for the excess of purchase price over the fair value of net
assets acquired and is being amortized over an estimated useful life of 25
years. Prior to the acquisition date, the results of operation of CTC were not
significant.
On June 12, 1996, the Company acquired all of the outstanding capital stock
of Teleaction, S.A. ("Teleaction"), a Spanish teleservicing company, for
approximately $25 million cash and an additional purchase price payable in
June 1998. The additional purchase price payable includes a minimum payment of
approximately 1.4 billion Spanish pesetas (approximately $10.8 million US at
acquisition) plus additional amounts contingent upon the attainment of specified
levels of earnings before interest, depreciation, and income taxes, as defined
in the acquisition agreement, over the course of that period. The acquisition
was accounted for using the purchase method of accounting. Accordingly, the
purchase price was allocated to assets and liabilities acquired based on their
estimated fair values at the date of acquisition and the results of operations
of Teleaction have been included in the consolidated results of operations since
the date of acquisition. The Company has recorded goodwill of approximately
$30.2 million for the excess of purchase price over net assets acquired as of
December 31, 1996, including the additional accrual of contingent purchase price
payable, which will be amortized over a period of 25 years.
The following unaudited pro forma information shows the results of the
Company as though the Teleaction acquisition occurred on January 1, 1995. These
results include certain adjustments, and do not necessarily indicate future
results, nor the results of historical operations had the acquisition actually
occurred on the assumed date.
(in thousands, except per share data)
For the Years Ended December 31,
_________________________________
1995 1996
__________ _________
(unaudited)
Revenues $ 217,731 $ 327,666
Net income (loss) $ (12,193) $ 10,862
Income (loss) per share $ (0.27) $ 0 .16
F-10
<PAGE>
In January 1997, the Company acquired all of the outstanding capital stock
of Telebusiness Holdings, a systems integration company based in Australia and
New Zealand. In February 1997, the Company completed the acquisition of
substantially all of the assets of Exton Technology Group, a teleservicing
technical support company based in Madison, Wisconsin. Additionally, in March
of 1997, the Company acquired all of the outstanding stock of Levita Group Pty
Ltd., an Australian based teleservicing company, and L&R Group Limited, a United
Kingdom based teleservicing consulting firm. The aggregate purchase price of
these acquisitions was approximately $47 million of which approximately $36
million will be recognized as goodwill.
3. INVESTMENTS IN MARKETABLE SECURITIES:
The amortized cost, gross unrealized holding gains and fair value for
available-for-sale securities by major security type at December 31, 1995 and
1996 were as follows:
(in thousands)
Gross
Unrealized
Amortized Holding Fair
Cost Gains Value
_________ ________ ________
December 31, 1995
U.S. Treasury securities $3,008 - $3,008
Municipal debt securities 7,888 - 7,888
Corporate debt securities 1,000 - 1,000
Equity securities 1,150 - 1,150
_________ _______ ________
Total $13,046 $ - $13,046
========= ======= ========
December 31, 1996
Equity securities $200 $1,540 $1,740
========= ======= ========
Proceeds from the sale of marketable securities available for sale were
$9.2 million and $76.8 million in 1995 and 1996, respectively. No gross
realized gains or losses resulted from the sale of marketable securities
available-for-sale in 1995 and 1996.
4. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 and 1996 consist of the
following:
(in thousands)
1995 1996
_________ _________
Telecommunications equipment $29,064 $57,320
Furniture and equipment 9,858 23,515
Leasehold improvements 5,882 8,675
Buildings 868 4,063
Automobiles 68 321
_________ _________
45,740 93,894
Less accumulated depreciation 20,725 34,785
_________ _________
$25,015 $59,109
========= =========
F-11
<PAGE>
5. LONG-TERM DEBT:
Long-term debt at December 31, 1995 and 1996, consisted of the following:
(in thousands)
For The Years Ended December 31,
________________________________
1995 1996
______ ______
8% note payable in monthly installments, including
interest, with final payment due May 2004; secured by
property............................................. $1,292 $1,270
Other notes payable with weighted-average interest
rates of 8.5% and 6.4% in 1995 and 1996, respectively;
secured by property and equipment.................... 2,461 1,209
______ ______
3,753 2,479
Less current portion.......................... 871 759
______ ______
Total.............................. $2,882 $1,720
====== ======
The Company has two revolving credit agreements with maximum borrowings
aggregating $22 million. The Company can borrow at .75% under the bank's
national prime lending rate. At December 31, 1996, the Company had no
borrowings under these agreements.
Additionally, several international lines of credit are available to fund
local working capital requirements. The maximum borrowings under these
facilities are approximately $15.2 million. At December 31, 1996, the total
amount of notes payable outstanding under these facilities approximated $3.6
million with a weighted-average interest rate of 7.6%.
The aggregate maturities of long-term debt for each of the five years
following December 31, 1996 are as follows:
(in thousands)
Maturities of
Year Ending December 31, Long-term Debt
________________________ _____________
1997 $759
1998 594
1999 317
2000 256
2001 and thereafter 553
Redeemable preference shares were issued by Mitre and certain subsidiaries
of Mitre prior to the acquisition by the Company. The shares were generally
redeemable at par in equal installments at the option of the holder, and paid
cumulative dividends of 7.5% to 10%. As a result of the acquisition of Mitre,
substantially all of the shares were redeemed.
F-12
<PAGE>
6. COMMON STOCK:
_____________
On May 13, 1996, the Company effected a two-for-one stock split to
shareholders of record on May 3, 1996. On October 21, 1996, the Company
effected a second two-for-one stock split to shareholders of record on October
14, 1996. Both of these stock splits have been given retroactive effect in the
accompanying consolidated financial statements.
In May 1995, the Company was reincorporated in the State of Minnesota. As
part of the reincorporation, each outstanding share of Class A, Class B, and
Class C common stock was converted automatically to 2.5 shares of new $.001 par
value common stock.
During June 1995, the Company completed an initial public offering ("IPO")
of its common stock. In that IPO, the Company issued 7,600,000 shares at a
price of $3.38 per share, as adjusted for subsequent stock splits. Net proceeds
of approximately $23.2 million were realized by the Company after deducting the
underwriting discount and offering costs.
Prior to its IPO, the Company's outstanding capital stock included
3,070,584 shares of Class C common stock that was issued with a put option in
connection with a previous acquisition of a business. The put option entitled
the shareholder to put those shares back to the Company between July 1, 1997 and
November 30, 1997 in exchange for a note payable of $4.5 million less the amount
of certain expenditures made by the stockholder relating to obligations not
assumed by the Company in that previous acquisition. The value of the put
option was being accreted by charges to retained earnings over the life of the
put option until its cancellation, which occurred concurrently with the
Company's IPO.
The Company completed an additional public offering of common stock in
February 1996. The Company sold 5,982,220 shares at a price of $7.50 per share,
as adjusted for the stock splits. Net proceeds of $42.3 million were realized
by the Company after deducting the underwriting discount and offering expenses.
7. INCOME TAXES:
_____________
For financial reporting purposes, income (loss) from continuing operations
before income taxes and minority interest includes the following components: (
(in thousands)
For The Years Ended December 31,
________________________________
1994 1995 1996
________ __________ __________
Pretax income:
United States $ 4,422 $ (23,834) $ 8,653
Foreign 1,422 5,050 12,502
________ __________ __________
Total $ 5,844 $ (18,784) $ 21,155
======== ========== ==========
F-13
<PAGE>
The components of the provision for income tax expense (benefit) consists
of:
(in thousands)
For The Years Ended December 31,
_________________________________
1994 1995 1996
_________ ___________ _________
Current:
Federal $1,560 3,804 $3,929
Foreign 719 1,681 4,529
State 65 141 (60)
_________ ___________ _________
2,344 5,626 8,398
Deferred:
Federal 325 (12,203) 1,521
Foreign (25) (16) 302
State (1,118) -- --
_________ _________ ________
(818) (12,219) 1,823
Provision for income
taxes $ 1,526 $ (6,593) $10,221
========= ========== =========
Certain of the income tax benefits related to the exercise of stock options
reduce taxes currently payable and are credited to paid-in capital. The amount
credited in 1996 was approximately $5,040.
F-14
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
(in thousands)
For The Years Ended December 31,
_________________________________
1995 1996
______ _______
Deferred tax assets:
Accrued compensation and other liabilities $ 12,345 $ 11,198
Net operating loss and other credit carryforwards 2,065 2,558
Depreciation and amortization 587 --
Deferred tax items related to international operations -- 320
Allowance for doubtful accounts 183 297
________ _______
Total deferred tax assets $ 15,180 $ 14,373
________ _______
Deferred tax liabilities:
Deferred tax items related to international operations 207 1,137
Leased assets and depreciation -- 640
Unrealized gain on marketable securities -- 523
Other 94 374
______ _______
Total deferred tax liabilities 301 2,674
______ _______
Net deferred tax asset $ 14,879 $ 11,699
====== =======
Based upon the Company's current and historical pretax earnings, adjusted
for significant deductions available from the exercise of nonqualified stock
options, management believes that it is more likely than not that the Company
will generate sufficient U.S. taxable income to fully realize the benefits of
its recorded deferred tax assets.
Undistributed earnings of international consolidated subsidiaries for which
no deferred income tax provision has been made for possible future remittances
totaled approximately $11 million at December 31, 1996. Substantially all of
this amount represents earnings reinvested as part of the Company's ongoing
business. It is not practical to estimate the amount of U.S. taxes that might
be payable on the eventual remittance of such earnings. On remittance, certain
countries impose withholding taxes that, subject to certain limitations, are
then available for use as tax credits against a U.S. tax liability, if any.
The Company estimates withholding taxes of approximately $1.0 million would be
payable upon remittance of those earnings. At December 31, 1996, the Company
had U.S. Federal net operating loss carryforwards of approximately $1.7 million
which will expire in 2004.
F-15
<PAGE>
The difference between the Company's income tax expense (benefit) as
reported in the accompanying consolidated financial statements and that which
would be calculated applying the U.S. Federal income tax rate of 34% on pretax
income, less minority interest, is as follows:
(in thousands)
For The Years Ended December 31,
________________________________
1994 1995 1996
________ ________ _______
Expected Federal income taxes $ 1,857 $(6,816) $ 7,166
State taxes, net of Federal effects (695) 93 (40)
Amortization 57 18 266
Impact of foreign operations 225 4 438
Merger related costs -- -- 2,257
Other 82 108 134
________ ________ _______
Total $ 1,526 $(6,593) $10,221
======== ======== =======
8. LEASE OBLIGATIONS:
The Company is obligated under various capital leases for property and
certain equipment that expire at various dates during the next four years.
Capitalized leased equipment included in property and equipment was
approximately $2.4 million and $7.3 million at December 31, 1995 and 1996,
respectively, net of accumulated amortization.
The Company also leases property and certain equipment under noncancelable
operating lease arrangements which expire at various dates through 2004. Rent
expense was approximately $2.9 million, $3.8 million, $6.7 million for the years
ended December 31, 1994, 1995 and 1996, respectively. Certain leases of real
property provide options to extend the lease terms.
Future minimum lease payments under noncancelable operating leases and
future minimum capital lease payments as of December 31, 1996 are as follows:
(in thousands)
CAPITAL OPERATING
LEASES LEASES
_________ _________
Year ending December 31,
1997 $ 3,168 $ 10,690
1998 2,385 9,707
1999 1,107 8,719
2000 60 6,647
2001 and thereafter - 7,621
_________ _________
6,720 $ 43,384
=========
Less amount representing interest 547
_________
Present value of net minimum
lease obligations $ 6,173
=========
F-16
<PAGE>
9. STOCK OPTION PLANS:
The Company has four stock plans, all approved by shareholders in 1995,
described as follows:
a) STOCK PLAN FOR REPLACEMENT OF EXISTING OPTIONS ("REPLACEMENT PLAN").
Under this plan, options for 4,541,780 shares were granted, with an
option price of $.0025 per share, as replacements for 3,110,000 options
outstanding at December 31,1994.
b) STOCK OPTION PLAN ("EEB REPLACEMENT PLAN"). Under this plan, options
for 7,381,720 shares were granted in 1995, with an option price of
$.0025 per share, as replacements for the Company's employee equity
benefit plan ("EEB Plan").The EEB Plan had 12,655,500 units outstanding
with base values ranging from $.85 to $1.71. With respect to both the
Replacement Plan and the EEB Replacement Plan, the following applies:
Options are exercisable in five equal annual installments from January
1996 to May 2000. The Company recorded these options at the estimated
fair value at date of grant ($2.91), with a corresponding charge to
special compensation expense totaling $34.6 million. All options
granted were vested as of the date of grant. No further options will
be granted under these plans.
c) 1995 EMPLOYEE STOCK OPTION PLAN ("1995 PLAN"). The 1995 Plan provided
for the granting of options to purchase up to an aggregate of 2,800,000
shares. Shareholders authorized an additional 7,000,000 shares in 1996.
Options granted may be either nonqualified or incentive stock options.
Vesting terms vary with each grant, and option terms may not exceed ten
years. Option prices, set by the Compensation Committee of the Board of
Directors, may not be less than the fair market value at date of grant
for incentive stock options or less than par value for nonqualified
stock options. At December 31,1996, there were approximately 3,600,000
shares available for issuance pursuant to future grants under the 1995
Plan.
d) 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN ("DIRECTORS PLAN"). The
Directors' Plan provides for automatic grants of nonqualified options to
each independent director of the Company. Each independent director
will be granted nonqualified options to purchase 4,000 shares of common
stock upon first being elected to the Board of Directors and on each
anniversary thereof. The exercise price for all Nonqualified Options
will equal the fair market value of the common stock on the date of
grant. The options vest one year after the date of grant. At December
31, 1996, there were 88,000 shares available for issuance pursuant to
future grants under the Directors' Plan.
F-17
<PAGE>
Additional information as to shares subject to options is as follows:
WEIGHTED-AVERAGE
NUMBER OF EXERCISE PRICE
OPTIONS PER OPTION
__________ __________
Balance January 1,1995 - -
Granted 12,539,500 $ .29
Exercised - -
Canceled - -
__________ ___________
Balance December 31,1995 12,539,500 $ .29
Granted 5,608,462 $15.39
Exercised (1,719,642) $ .05
Canceled ( 50,908) $15.75
___________ ____________
Balance December 31,1996 16,377,412 $ 5.44
========== ============
Exercisable at December 31,1996 809,058 $ 1.01
========== ============
The following table summarizes information about stock options outstanding
at December 31, 1996.
Options Outstanding Options Exercisable
_____________________ _______________________
Weighted-
Number Average Weighted- Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at 12/31/96 Contractual Exercise at 12/31/96 Exercise
Prices Life Price Price
___________________________________________________ _________________________
$.0025 10,209,458 3.41 $.0025 670,658 $.0025
$ 4.39 - $8.72 716,000 4.20 $ 6.28 136,000 $ 5.74
$10.75 - $19.50 5,451,954 9.02 $15.50 2,400 $15.75
The per share weighted-average fair value of stock options granted during
1995 and 1996 was $2.16 and $7.84, respectively, on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: expected dividend yield 0.0%, expected volatility factor 30%, risk
free interest rate of 5.82% and 6.48% in 1995 and 1996, respectively, and an
expected life of 5 years and 8.62 years in 1995 and 1996, respectively.
F-18
<PAGE>
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net income
(loss) would have been reduced to the pro forma amounts indicated below:
(in thousands, except per share data)
For The Years Ended December 31,
________________________________
1995 1996
_________ _______
Net income (loss): As Reported $(13,453) $10,857
Pro Forma (13,493) 10,186
Income (loss) per share: As Reported $ (0.29) $ 0.16
Pro Forma (0.29) 0.15
In June 1995, NAFS entered into an agreement with one employee whereby the
Company committed to grant options amounting to 2% of the common stock of NAFS
to the employee in connection with his initial employment contract. In May
1996, NAFS fulfilled this commitment by issuing the options and recording
compensation expense, which has been classified as selling, general, and
administrative expense, of approximately $0.6 million.
10. RELATED PARTY TRANSACTIONS:
The Company leases certain property from related parties. Total rent
payments to related parties were $0.3, $0.3, and $0.1 million in the years ended
December 31, 1994, 1995, and 1996, respectively. The Company purchased this
property in 1996 for $1.5 million.
For the year ended December 1996, the Company purchased approximately $1.0
million of computer equipment from a company of which a Director is the Chief
Executive Officer and President. In addition, the Company utilized
approximately $0.2 million of legal services from a firm of which a Director is
the managing partner.
For the period of December 1994 to June 30, 1996, a common shareholder of
NAFS held 30,000 shares of Series A redeemable preference shares in the amount
of $0.3 million and earning dividends at a rate of 10% per annum, payable
quarterly. Each share of preference stock was convertible into shares of NAFS
common stock and was converted to common stock prior to the merger of SITEL and
NAFS. The same NAFS common shareholder held an installment note payable of $0.5
million, bearing interest at 10%, and secured by the assets subordinate to the
bank debt for the period of December 1994 to June 30, 1996. The debt included
contingent warrants that allowed for the issuance of stock to purchase a
percentage of the Company's outstanding common stock contingent upon the number
of months required to repay the note payable. In connection with the merger of
SITEL and NAFS, the note payable was repaid and the contingent warrants were
canceled.
In February 1995, the Company forgave $0.5 million of loans receivable and
accrued interest from two stockholders. This charge has been included in
selling, general, and administrative expenses.
F-19
<PAGE>
11. BENEFIT PLANS:
The Company's 401(k) plan, formed in January 1994, covers substantially all
employees who are 18 years of age with 60 days or more of service. Participants
may elect to contribute 1% to 15% of compensation. The Company may elect to
make a year end contribution to the 401(k) plan. Company contributions to the
plan were $50,000 in 1996. No contributions were made in 1994 and 1995.
Effective May 15, 1994, the Company adopted a deferred compensation plan
for certain executive employees, who elect to contribute to the Plan. The
Company may voluntarily match all or a portion of the participants'
contributions. Participants are 100% vested in their contributions and the
Company's contributions vest over a 15-year period. The Company made
contributions to the plan of $0.3 million for the year ended December 31, 1994.
No contributions were made to the plan in 1995 and 1996. The Company's
contributions are recognized as expense as the benefits vest.
12. SEGMENT DATA:
The Company's operations are primarily conducted in one business segment.
A summary of the Company's operations by geographic area follows.
(in thousands)
For The Years Ended December 31,
________________________________
1994 1995 1996
________ ________ ________
REVENUE:
North America $86,855 $128,875 $184,366
Europe 29,902 58,340 128,384
________ _________ ________
$116,757 $187,215 $312,750
======== ========= ========
OPERATING INCOME (LOSS):
North America $3,581 $(23,872) $14,455
Europe 1,654 5,672 13,883
________ _________ ________
$ 5,235 $(18,200) $28,338
======== ========== ========
IDENTIFIABLE ASSETS:
North America $29,985 $69,421 $96,440
Europe 18,192 31,539 115,244
________ _________ ________
$48,177 $100,960 $211,684
======== ========= ========
13. CONTINGENCIES:
From time to time, the Copmpany is involved in litigation incidental to its
business. In the opinion of management, no litigation to which the Company is
currently a party is likely to a materially adverse effect on the Company's
results of operations, financial condition, or cash flows, if decided adversely
to the Company.
F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT ON THE
FINANCIAL STATEMENT SCHEDULE
The Board of Directors
SITEL Corporation:
The audits referred to in our report dated April 4, 1997 included the related
financial statement schedule as of December 31, 1996, and for each of the years
in the three-year period ended December 31, 1996 included herein and
incorporated by reference in the registration statement (No. 333-13403) filed on
Form S-3, registration statement (No. 033-99434) filed on Form S-8 and
registration statement (No. 333-19069) filed on Form S-8. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
Omaha, Nebraska KPMG Peat Marwick LLP
April 4, 1997
S-1
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands)
ACCOUNTS
BEGINNING BAD DEBT CHARGED TO ENDING
DESCRIPTION BALANCE EXPENSE ALLOWANCE BALANCE
___________ _________ _________ ____________ ________
Allowance for doubtful accounts
for trade receivables
Year ended December 31, 1994 $505 509 168 $846
Allowance for doubtful accounts
for trade receivables
Year ended December 31, 1995 $846 422 331 $937
Allowance for doubtful accounts
for trade receivables
Year ended December 31, 1996 $937 2,845 594 $3,188
S-2
EXHIBIT 4.2
SPECIMEN COMMON STOCK CERTIFICATE
COMMON STOCK PAR VALUE $.001 PER SHARE
SITEL(registered trademark)
INCORPORATED UNDER THELAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF MINNESOTA CUSIP 82980K 10 7
NUMBER SHARES
SITEL CORPORATION
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK
of Sitel Corporation, transferable on the books of the Corporation by the
holder hereof in person or by a duly authorized attorney, upon surrender of
this certificate properly endorsed. This certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar of the
Corporation.
In Witness Whereof, the Corporation has caused this certificate to be
signed by its duly authorized officers and a facsimile of the Corporate
Seal to be hereunto affixed.
Dated:
[SEAL]
/s/ James F. Lynch
Chairman of the Board
[PICTURE OF GODDESS BETWEEN TWO GLOBES]
COUNTERSIGNED AND REGISTERED
/s/ Barry S. Major AMERICAN STOCK TRANSFER & TRUST COMPANY
Secretary NEW YORK, NEW YORK
TRANSFER AGENT
AND REGISTRAR,
BY:
AUTHORIZED SIGNATURE
<PAGE>
SITEL CORPORATION
The Corporation will furnish to any shareholder, upon request and without
charge, a full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each authorized class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights, to the extent that the same have been fixed.
Such request may be made to the Secretary of the Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants UNIF GIFT MIN ACT - ___ Custodian ___
in common (Cust) (Minor)
TEN ENT - as tenants by
the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants Act __________________
with right of (State)
survivorship and
not as tenants UNIF TRANS MIN ACT - ___ Custodian ___
in common (Cust) (Minor)
under Uniform Transfers to Minors
Act _________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, __________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_________________________________________________________________
_________________________________________________________________
___________________________________________________________Shares
of Common Stock represented by the within certificate, and do hereby irrevocably
constitute and appoint
_________________________________________________________Attorney
to transfer the said shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated_______________________________________
X _______________________________
X _______________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By ________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION(BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS,
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
EXHIBIT 10.1(a)
AMENDMENT NO. 1
TO THE
SITEL CORPORATION STOCK OPTION PLAN
FOR REPLACEMENT OF EXISTING OPTIONS
(a/k/a the Replacement Plan)
As adopted by the Board of Directors on September 20, 1996
1. The section of the SITEL Corporation Stock Option Plan for Replacement of
Existing Options captioned "EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN" is
amended to state in its entirety as follows:
EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
_____________________________________________
9.1 CHANGE IN STOCK. If there is any change in the outstanding shares of
Stock by reason of a stock dividend or distribution, stock split-up,
recapitalization, or combination or exchange of shares, or by reason of any
merger, consolidation, spin-off, or other corporate reorganization in which
the Company is the surviving corporation, then the number of shares of Stock
available for issuance under the Plan both in the aggregate and with respect
to each outstanding Option, and the Option Exercise Price per share under
outstanding Options, shall be equitably adjusted by the Committee, whose
determination shall be final, binding, and conclusive. Unless otherwise
provided in the applicable option agreement, in the event of (i) a dissolution
or liquidation of the Corporation, (ii) merger or consolidation of the
Corporation with another corporation or other entity pursuant to which the
Corporation is not the surviving entity, (iii) sale or lease of all or
substantially all the business assets of the Corporation, or (iv) the sale of
more than 80% of the outstanding Common Stock of the Corporation in a single
transaction or series of related transactions involving the same acquiring
entity or person, unless (A) the surviving or acquiring corporation or entity
or an affiliated corporation or entity assumes the outstanding options (which
assumption may take the form of replacement of the outstanding options with
substantially equivalent options from the surviving or acquiring or affiliated
corporation or entity, and with the determination as to whether the
outstanding options have been assumed and whether the assumption involved
"substantially equivalent" options being determined by the Committee within
its complete discretion) then (B) each outstanding Option shall expire as of
the effective date of such transaction, provided that the Committee shall give
at least fifteen (15) days prior written notice of such event to any
participants having outstanding Options who shall then have the right to
exercise his or her outstanding Options, in whole or in part, prior to the
effective date of such transaction, subject to earlier expiration of such
Options pursuant to the applicable option agreement.
EXHIBIT 10.2(a)
AMENDMENT NO. 1
TO THE
SITEL CORPORATION STOCK OPTION PLAN
(a/k/a the EEB Replacement Plan)
As adopted by the Board of Directors on September 20, 1996
1. The section of the SITEL Corporation Stock Option Plan (for replacement of
EEBs) captioned "EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN" is amended to
state in its entirety as follows:
EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
_____________________________________________
9.1 CHANGE IN STOCK. If there is any change in the outstanding shares of
Stock by reason of a stock dividend or distribution, stock split-up,
recapitalization, or combination or exchange of shares, or by reason of any
merger, consolidation, spin-off, or other corporate reorganization in which
the Company is the surviving corporation, then the number of shares of Stock
available for issuance under the Plan both in the aggregate and with respect to
each outstanding Option, and the Option Exercise Price per share under
outstanding Options, shall be equitably adjusted by the Committee, whose
determination shall be final, binding, and conclusive. Unless otherwise
provided in the applicable option agreement, in the event of (i) a
dissolution or liquidation of the Corporation, (ii) merger or consolidation of
the Corporation with another corporation or other entity pursuant to which the
Corporation is not the surviving entity, (iii) sale or lease of all or
substantially all the business assets of the Corporation, or (iv) the sale of
more than 80% of the outstanding Common Stock of the Corporation in a single
transaction or series of related transactions involving the same acquiring
entity or person, unless (A) the surviving or acquiring corporation or entity or
an affiliated corporation or entity assumes the outstanding options (which
assumption may take the form of replacement of the outstanding options with
substantially equivalent options from the surviving or acquiring or affiliated
corporation or entity, and with the determination as to whether the outstanding
options have been assumed and whether the assumption involved "substantially
equivalent" options being determined by the Committee within its complete
discretion) then (B) each outstanding Option shall expire as of the effective
date of such transaction, provided that the Committee shall give at least
fifteen (15) days prior written notice of such event to any participants having
outstanding Options who shall then have the right to exercise his or her
outstanding Options, in whole or in part, prior to the effective date of such
transaction, subject to earlier expiration of such Options pursuant to the
applicable option agreement.
EXHIBIT 10.3(a)
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED SITEL CORPORATION
1995 EMPLOYEE STOCK OPTION PLAN
As adopted by the Board of Directors on December 26, 1996
1. The definition of "Fair Market Value" in Section 2(n) of the Amended and
Restated SITEL Corporation 1995 Employee Stock Option Ownership Plan
is amended to state as follows:
(n) "Fair Market Value" shall mean the value of each Share determined as of
any specified date as follows:
(i) If the Shares are traded on any recognized United States securities
exchange, the value per Share shall be the average of the high and low prices
of the Common Stock on such specified date (or, if there are no sales on that
day, the last preceding day on which there was a sale) on the principal
exchange on which the Common Stock is traded;
(ii) If the Shares are not traded on any United States securities
exchange but are traded on any formal over-the-counter quotation system in
general use in the United States, the value per Share shall be the average of
the high and low prices of the Common Stock on such specified date (or, if
there are no such quotations on that day, the last preceding day on which
there were such quotations) on the principal system on which the Common Stock
is traded; or
(iii) If neither Paragraph (i) nor (ii) applies, the value per Share
shall be determined by the Plan Administrator in good faith, based on uniform
principles consistently applied, as an estimate of the value per Share a willing
purchaser would pay a willing seller with both parties having full knowledge of
all relevant material facts. Such determination shall be conclusive and binding
on all persons.
EXHIBIT 10.4(a)
AMENDMENT NO. 1
TO THE
SITEL CORPORATION 1995 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
As adopted by the Board of Directors on September 20, 1996
1. The section of the SITEL Corporation 1995 Non-Employee Directors Stock
Option Plan captioned "Effect of Change in Stock Subject to the Plan" is
amended to state in its entirety as follows:
Effect of Change in Stock Subject to the Plan
______________________________________________
9.1 Change in Stock. If there is any change in the outstanding
shares of Stock by reason of a stock dividend or distribution, stock split-
up, recapitalization, or combination or exchange of shares, or by reason of any
merger, consolidation, spin-off, or other corporate reorganization in which the
Company is the surviving corporation, then the number of shares of Stock
available for issuance under the Plan both in the aggregate and with respect to
each outstanding Option, and the Option Exercise Price per share under
outstanding Options, shall be equitably adjusted by the Committee, whose
determination shall be final, binding, and conclusive. In the event of (i) a
dissolution or liquidation of the Corporation, (ii) merger or consolidation of
the Corporation with another corporation or other entity pursuant to which the
Corporation is not the surviving entity, (iii) sale or lease of all or
substantially all the business assets of the Corporation, or (iv) the sale of
more than 80% of the outstanding Common Stock of the Corporation in a single
transaction or series of related transactions involving the same acquiring
entity or person, unless (A) the surviving or acquiring corporation or entity
or an affiliated corporation or entity assumes the outstanding options (which
assumption may take the form of replacement of the outstanding options with
substantially equivalent options from the surviving or acquiring or affiliated
corporation or entity, and with the determination as to whether the outstanding
options have been assumed and whether the assumption involved "substantially
equivalent" options being determined by the Committee within its complete
discretion) then (B) each outstanding Option shall expire as of the effective
date of such transaction, provided that the Committee shall give at least
fifteen (15) days prior written notice of such even to any Participants having
outstanding Options who shall then have the right to exercise his or her
outstanding Options, in whole or in part, but only to the extent they are then
exercisable under the terms of the Plan, prior to the effective date of such
transaction, subject to earlier expiration of such Options pursuant to the
applicable Option Agreement.
EXHIBIT 21
SUBSIDIARIES OF SITEL CORPORATION
STATE OR OTHER
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION
SITEL Insurance Services, Inc. Nebraska
Financial Insurance Services, Inc. Nebraska
SITEL Investments, Inc. Nebraska
SITEL Software, Inc. Nebraska
SITEL International, Inc. Nebraska
National Action Financial Services, Inc. Georgia
Support Associates, Inc. California
SITEL Technical Services, Inc. Wisconsin
SITEL Teleservices Canada Inc. Canada
SITEL Hispanica, S.A. Spain
SITEL Europe plc United Kingdom
SITEL Asia Pacific Holdings Pte Ltd. Singapore
SITEL Moor Park Limited United Kingdom
The Decisions Group Limited United Kingdom
SITEL Brussels NV Belgium
Merit Direct Limited United Kingdom
Merit Direct [Services] Limited United Kingdom
Decisions [Services] Limited United Kingdom
SITEL Moor Park [Services] Limited United Kingdom
SITEL GmbH Germany
SITEL Iberica Teleservices, S.A. Spain
Tele Promotion, S.A. Spain
Action Data Base, S.A. Spain
Action Servicos de Publicidade, S.A. Portugal
B's Telemarketing Limited United Kingdom
SITEL Singapore Pte Ltd Singapore
SITEL Telebusiness New Zealand Limited New Zealand
SITEL Telebusiness Australia Pty Limited Australia
SITEL Telebusiness Singapore Pte Ltd Singapore
SITEL Levita Pty Ltd New South Wales
L & R Group Limited United Kingdom
EXHIBIT 23.1
ACCOUNTANT'S CONSENT
The Board of Directors
SITEL Corporation:
We consent to the use of our reports incorporated by reference in the
registration statement (No. 333-13403) filed on Form S-3, registration
statement (No. 033-99434) filed on Form S-8 and registration statement
(No. 333-19069) filed on Form S-8 of SITEL Corporation of our report dated
April 4, 1997, relating to the consolidated balance sheets of SITEL
Corporation and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of income (loss), stockholders' equity
and cash flows for each of the years in the three-year period ended
December 31, 1996 and the related schedule, which reports appear in the
December 31, 1996 annual report on Form 10-K of SITEL Corporation.
KPMG Peat Marwick LLP
Omaha, Nebraska
April 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON PAGES F-3 AND
F-4 OF THE COMPANY'S FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<CASH> 0 4,531 25,710
<SECURITIES> 0 0 0
<RECEIVABLES> 0 32,377 68,665
<ALLOWANCES> 0 937 3,188
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 52,251 99,353
<PP&E> 0 25,015 59,109
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 0 100,960 211,684
<CURRENT-LIABILITIES> 0 28,069 62,517
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 51 59
<OTHER-SE> 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 100,960 211,684
<SALES> 116,757 187,215 312,750
<TOTAL-REVENUES> 116,757 187,215 312,750
<CGS> 63,268 101,617 163,717
<TOTAL-COSTS> 111,522 205,415 284,412
<OTHER-EXPENSES> (1,443) (118) 6,956
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 834 702 227
<INCOME-PRETAX> 5,844 (18,784) 21,155
<INCOME-TAX> 1,526 (6,593) 10,221
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 3,935 (13,453) 10,857
<EPS-PRIMARY> .09 (.29) .16
<EPS-DILUTED> .09 (.29) .16
</TABLE>
