<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended June 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
For the transition period _____ to ______
Commission File Number 1-12577
SITEL CORPORATION
(Exact name of registrant as specified in its charter)
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)
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
_____ _____
As of August 6, 1997, the Company had 62,436,308 shares of Common Stock
outstanding.
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
__________________________________
PART I - FINANCIAL INFORMATION
_____________________
Item 1. Financial Statements
Consolidated Condensed Balance Sheets.................... 1
Consolidated Condensed Statements of Income.............. 2
Consolidated Condensed Statements of Cash Flows.......... 3
Notes to Consolidated Condensed Financial Statements..... 4
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition...................... 7
PART II - OTHER INFORMATION
_________________
Item 2. Changes in Securities.................................... 12
Item 4. Submission of Matters to a Vote of Security Holders....... 12
Item 6. Exhibits and Reports on Form 8-K......................... 13
Signature......................................................... 14
<PAGE>
<TABLE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 AND JUNE 30, 1997
(dollars in thousands, except share data)
ASSETS December 31, June 30,
1996 1997
___________ _________
<S> <C> <C>
Current assets: (unaudited)
Cash and cash equivalents................................. $ 25,710 $ 6,297
Trade accounts receivable (net of allowance for doubtful
accounts of $ 3,188 and $3,736,respectively)............. 65,477 95,689
Marketable securities...................................... 1,740 1,085
Prepaid expenses........................................... 3,007 5,643
Other assets............................................... 2,907 2,362
Deferred income taxes...................................... 512 1,847
___________ _________
Total current assets........................ 99,353 112,923
Property and equipment, net..................................... 59,109 95,519
Deferred income taxes........................................... 11,187 11,477
Goodwill, net................................................... 40,110 86,901
Other assets.................................................... 1,925 7,419
___________ _________
Total assets................................ $ 211,684 $ 314,239
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable-bank.......................................... $ 3,638 $ 10,750
Current portion of long-term debt.......................... 759 1,673
Current portion of capitalized lease obligations.......... 3,032 3,844
Trade accounts payable..................................... 18,775 20,733
Income taxes payable....................................... 3,815 7,166
Accrued compensation....................................... 14,812 18,891
Accrued operating expenses................................. 9,026 11,947
Deferred revenue and other................................. 8,660 6,782
Purchase price payable..................................... -- 14,588
___________ _________
Total current liabilities................... 62,517 96,374
___________ _________
Long-term debt, excluding current portion....................... 1,720 41,280
Capitalized lease obligations, excluding current portion........ 3,141 5,318
Purchase price payable.......................................... 15,928 --
Deferred compensation........................................... 1,461 1,654
Minority interest............................................... 192 168
Stockholders' equity:
Common stock, voting, $.001 par value, 200,000,000
shares authorized, 58,875,660 and 62,328,552 shares
issued and outstanding, respectively..................... 59 62
Paid-in capital............................................ 117,736 151,845
Currency exchange adjustment............................... 1,311 (2,559)
Unrealized gain on marketable securities, net of taxes..... 1,017 435
Retained earnings.......................................... 6,602 19,662
___________ ________
Total stockholders' equity.................. 126,725 169,445
___________ ________
Total liabilities and stockholders'equity... $ 211,684 $ 314,239
=========== ========
The accompanying notes are an integral part of the consolidatedcondensed financial statements.
</TABLE>
<PAGE>
<TABLE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(unaudited)
For The Three Months Ended For The Six Months Ended
June 30, 1996 June 30, 1997 June 30, 1996 June 30, 1997
_____________ _____________ _____________ _____________
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues........................................ $ 69,266 $ 125,267 $ 128,785 $ 229,527
_____________ _____________ _____________ _____________
Operating expenses:
Cost of services.......................... 36,746 67,105 68,339 123,462
Selling, general and administrative
expenses............................. 27,267 46,301 49,277 83,543
_____________ _____________ _____________ _____________
Total operating expense.... 64,013 113,406 117,616 207,005
_____________ _____________ _____________ _____________
Operating income........... 5,253 11,861 11,169 22,522
Other income (expense):
Interest income (expense), net............ 25 (1,153) 126 (1,687)
Transaction related expense............... (666) -- (666) --
Other expense............................. -- (61) -- (61)
_____________ _____________ _____________ _____________
Income before income taxes
and minority interest....................... 4,612 10,647 10,629 20,774
Income tax expense.............................. 2,271 3,995 4,482 7,638
Minority interest. ............................. 18 46 18 76
_____________ _____________ _____________ _____________
Net income...................................... $ 2,323 $ 6,606 $ 6,129 $ 13,060
============= ============= ============= =============
Per share amounts:
Earnings per common and common
equivalents share...................... $ 0.03 $ 0.10 $ 0.09 $ 0.19
============= ============= ============= =============
Weighted average common and common
equivalent shares outstanding............. 66,406 68,769 65,334 68,212
============= ============= ============= =============
The accompanying notes are an integral part of the consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
For Six Months Ended
(dollars in thousands) June 30, 1996 June 30, 1997
______________ _____________
<S> <C> <C>
Net income............................................................ $ 6,129 $ 13,060
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 4,729 12,450
Change in assets and liabilities:
Trade accounts receivable......................................... (19,208) (28,706)
Other assets...................................................... 1,722 (4,042)
Trade accounts payable............................................ 3,955 2,048
Other liabilities................................................. 7,880 8,337
______________ _____________
Net cash provided by operating activities.................... 5,207 3,147
______________ _____________
Cash flows from investing activities:
Purchases of property and equipment.............................. (10,682) (42,533)
Acquisition of businesses, net of cash acquired.................. (27,936) (28,866)
Investments in marketable securities............................. (63,793) --
Sale of marketable securities.................................... 59,537 --
Changes in other assets, net..................................... (157) (120)
______________ _____________
Net cash used in investing activities...... (43,031) (71,519)
______________ _____________
Cash flows from financing activities:
Borrowings on note payable....................................... 9,489 75,577
Repayments of note payable ...................................... (7,879) (43,763)
Borrowings on long-term debt..................................... 228 18,411
Repayment of long-term debt and capitalized lease obligations.... (143) (620)
State incentive credits received................................. -- 900
Common stock issued for option exercises and in
public offering, net of expenses.......................... 42,242 227
______________ _____________
Net cash provided by financing activities.. 43,937 50,732
______________ _____________
Effect of exchange rates on cash...................................... 88 (1,773)
______________ _____________
Net increase (decrease) in cash............ 6,201 (19,413)
Cash and cash equivalents, beginning of period........................ 4,531 25,710
______________ _____________
Cash and cash equivalents, end of period.............................. $ 10,732 $ 6,297
============== =============
Supplemental schedule of non-cash financing and investing activities:
In the first six months of 1997, the Company issued approximately 2,100,000 shares of the Company's common stock
in connection with acquisitions.
The accompanying notes are an integral part of the consolidated condensed financial statements.
</TABLE>
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATMENTS
1. BASIS OF PRESENTATION:
The consolidated condensed balance sheet of SITEL Corporation and Subsidiaries
(the "Company") at December 31, 1996 was obtained from the Company's audited
balance sheet as of that date. All other financial statements contained herein
are unaudited and, in the opinion of management, contain all adjustments
necessary for a fair presentation of the financial position, operating results,
and cash flows for the periods presented. Such adjustments consist only of
normal recurring items. The consolidated condensed financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Form 10-K for
the year ended December 31, 1996.
Where appropriate, items within the consolidated financial statements and notes
thereto have been reclassified from previous years to conform to current year
presentation.
2. EARNINGS PER SHARE:
Earnings per share attributable to common shareholders has been computed using
the weighted average number of common and common equivalent shares outstanding:
Three Months Ended Six Months Ended
6/30/96 6/30/97 6/30/96 6/30/97
_______ _______ _______ _______
(in thousands) (in thousands)
Common stock 58,290 61,520 56,868 60,644
Common stock
equivalents-
stock options 8,116 7,249 8,466 7,568
______ ______ ______ ______
66,406 68,769 65,334 68,212
====== ====== ====== ======
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 "Earnings 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 "Earnings per common and
common equivalent share," calculated in accordance with APB 15 and related
interpretations.
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATMENTS
3. ACQUISITIONS:
During the periods covered by this report the Company completed several
acquisitions. 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 acquired substantially
all of the assets of Exton Technology Group, a teleservicing technical support
company based in Madison, Wisconsin. In March 1997, the Company acquired all of
the outstanding stock of Levita Group Pty Ltd., an Australian based
teleservicing company, and all of the outstanding stock of L&R Group Limited, a
United Kingdom based teleservicing consulting firm. In May 1997, the Company
acquired all of the outstanding stock of Support Systems Developers, Inc., a
teleservices technical support company based in Vienna, Virginia.
The total cost of these acquisitions was approximately $55 million, subject to
certain adjustments and excluding transaction costs and liabilities assumed.
Included in the total cost was the issuance of approximately 2.1 million shares
of the Company's common stock valued at approximately $27 million.
In June 1996, the Company had also acquired Teleaction, S.A., a Spanish
teleservicing company.
These acquisitions have been accounted for as purchases and accordingly, the
acquired assets and liabilities have been recorded at their estimated fair
values at the dates of acquisition, and the results of operations have been
included in the accompanying consolidated condensed financial statements since
the dates of acquisition. The initial purchase price allocations for the
acquisitions are based on current estimates and the Company will make the final
purchase price allocations based upon the final values for certain assets and
liabilities. The total purchase price in excess of the fair market value of the
net assets acquired was recorded as goodwill and is being amortized on a
straight line basis over 25 years.
The following pro forma information shows the results of the Company as though
the acquisitions described earlier occurred as of the beginning of each period
presented. These results include certain adjustments consistent with the
Company's policy related to amortization of intangible assets. These results
are not necessarily indicative of the results that actually would have been
obtained if the acquisitions had been in effect at the beginning of each period
or which may be attained in the future.
Six Months Ended
(in thousands, except per share data)
6/30/96 6/30/97
__________ _________
Revenue $ 160,673 $ 236,003
Net Income $ 6,540 $ 12,425
Earnings Per Common and
Common Equivalents Share $ 0.10 $ 0.18
4. INCOME TAXES:
The difference between the Company's income tax expense as reported in the
accompanying financial statements and that which would be calculated using the
statutory Federal income tax rate of 34% on income is primarily due to non
deductible business acquisition expenses and state and local income taxes.
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
5. LONG TERM DEBT AND NOTES PAYABLE:
In July, 1997, the Company reached agreement with a syndicate of commercial
banks for a $150 million revolving credit facility. The commitment of the banks
under this facility expires in July, 2002. The facility provides for interest
at a variable rate, generally payable quarterly, and a variable commitment fee
on any unused balances.
The obligations of the Company under the facility have been guaranteed by a
substantial majority of the Company's subsidiaries and are secured by a pledge
of the Company's shares in such subsidiaries and certain indirect subsidiaries.
The facility contains certain financial covenants and certain restrictions on,
among other things, the Company's ability to incur additional debt, make
certain investments, and sell assets or merge with another company. The
facility also prohibits the payment of cash dividends on common stock without
the banks' consent. The facility becomes due and payable upon a change of
control of the Company as defined in the facility agreement.
Subsequent to June 30, 1997, the Company refunded its previous domestic
revolving credit agreement with proceeds from the facility described above and
therefore classified the amount outstanding at June 30, 1997 as long term debt.
The Company also refunded its $ 14.3 million note payable with proceeds from
this credit facility. On a pro forma basis, including unused lines of credit in
Europe, the Company had unused lines of credit totaling approximately $123
million at June 30, 1997.
6. DERIVATIVE FINANCIAL INSTRUMENTS:
The Company purchased a call option on 1.4 billion Spanish pesetas during 1997.
The option, which expires in June, 1998, is designed to manage the Company's
exposure to fluctuation in the value of pesetas related to the minimum remaining
purchase price payable for Teleaction, S.A., therefore the option has been
designated as a hedge. The cost of this option is included in other current
assets and is being amortized to operating expense over the term of the option.
Gains, if any, related to the option would be deferred, pursuant to hedge
accounting, and would be recognized as an adjustment to the purchase price
obligation.
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Results of Operation and
Financial Condition.
Overview
________
SITEL Corporation and subsidiaries (the "Company") are engaged primarily in
inbound, outbound, and interactive teleservicing activities, servicing the
insurance, financial services, telecommunication, media and entertainment,
technology, utilities, consumer, automotive, and travel industries. Operations
are primarily located in North America, Europe and the Asia Pacific region.
The following table sets forth certain financial data and the percentage of
total revenues of the Company for the periods indicated. All amounts are in
thousands.
<TABLE>
Three Months Ended June 30, Six Months Ended June 30,
1996(1) 1997 1996(1) 1997
__________________ _________________ __________________ ________________
<S> <C> <C> <C> <C>
Revenues....................... $ 69,266 100.0% $ 125,267 100% $ 128,785 100% $ 229,527 100%
Operating expenses:
Cost of services............. 36,746 53.0% 67,105 53.6% 68,339 53.1% 123,462 53.8%
Selling, general, and
administrative expenses... 27,267 39.4% 46,301 37.0% 49,277 38.2% 83,543 36.4%
__________________ _________________ _________________ __________________
Total operating expenses... 64,013 92.4% 113,406 90.5% 117,616 91.3% 207,005 90.2%
__________________ _________________ _________________ __________________
Operating income........... 5,253 7.6% 11,861 9.5% 11,169 8.7% 22,522 9.8%
Interest income (expense), net. 25 0.0% (1,153) (1.0)% 126 0.1% (1,687)
(0.8)%
Transaction related expense... (666) (0.9)% -- -- (666) 0.5)% -- --
Other expense.................. -- -- (61) 0.0% -- -- (61) 0.0%
__________________ _________________ _________________ __________________
Income before income taxes and
minority interest........... 4,612 6.7% 10,647 8.5% 10,629 8.3% 20,774 9.0%
Income tax expense............. 2,271 3.3% 3,995 3.2% 4,482 3.5% 7,638 3.3%
Minority interest.............. 18 0.0% 46 0.0% 18 0.0% 76 0.0%
__________________ _________________ _________________ __________________
Net income..................... $ 2,323 3.4% $ 6,606 5.3% $ 6,129 4.8% $ 13,060 5.7%
================= ================= ================= ==================
(1) 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, and
net income were $6,851 and $4,268 for the three months ended June 30, 1996 and
$12,767 and $8,074 for the six months ended June 30, 1996, respectively.
</TABLE>
THREE MONTHS ENDED JUNE 30, 1997 VS. THREE MONTHS ENDED JUNE 30, 1996
_____________________________________________________________________
REVENUES:
_________
Revenues increased $56.0 million, or 80.8%, to $125.3 million in the three
months ended June 30, 1997 from $69.3 million in the three months ended June 30,
1996. Of this increase, $15.3 million was attributable to services initiated
for new clients, $19.4 million was attributable to increased revenues from
existing clients and $21.3 million was attributable to revenues from businesses
acquired after the start of the second quarter of 1996 under the purchase method
of accounting. The increase in revenues from existing clients was primarily the
result of higher calling volumes rather than higher rates.
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
COST OF SERVICES:
________________
Cost of services increased $30.4 million, or 82.6%, to $67.1 million in the
three months ended June 30, 1997 from $36.7 million in the three months ended
June 30, 1996. As a percentage of revenues, cost of services increased to 53.6%
in the second fiscal quarter of 1997 from 53.0% in the second fiscal quarter of
1996. This increase was primarily attributable to the Company's Spanish
operations which implemented a new compensation plan in 1997. This plan also
has the corresponding effect of decreasing selling, general and administrative
expenses in Spain. Cost of services represents labor and telephone expenses
directly related to teleservicing activities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
_____________________________________________
Selling, general and administrative expenses increased $19.0 million, or 69.8%,
to $46.3 million in the three months ended June 30, 1997 from $27.3 million in
the three months ended June 30, 1996. This increase was primarily a result of
the Company's continued growth both internally and through acquisition. As a
percentage of revenues, selling, general and administrative expenses decreased
to 37.0% in the second fiscal quarter of 1997 from 39.4% in the second fiscal
quarter of 1996. Excluding certain non-recurring operating expenses incurred in
1996 related to an acquisition, these expenses decreased slightly as a
percentage of revenue in the 1997 period from 37.1% of revenues in the 1996
period. This decrease was primarily attributable to increased revenues without
a commensurate increase in expenses offset by an increased percentage of the
Company's revenues being generated from immature operations including new
industry groups and expansion into new countries. 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, amortization, sales and marketing
activities, and client support services.
OPERATING INCOME:
________________
Operating income increased $5.0 million, or 73.1%, to $11.9 million in the three
months ended June 30, 1997 from $6.9 million, excluding the non-recurring items
noted earlier, in the three months ended June 30, 1996. The increase is
primarily attributable to the increase in revenues noted earlier, partially
offset by the increased expenses attributable to those revenues. As a
percentage of revenues, operating income decreased to 9.5% in the second fiscal
quarter of 1997 from 9.9% in the second fiscal quarter of 1996 excluding the non
recurring expenses in 1996 described above. This decrease was primarily the
result of the Company's investment in new industry efforts and expansion into
new countries.
INTEREST INCOME (EXPENSE), NET:
_______________________________
Interest income (expense), net, decreased to $1.2 million of interest expense in
the three months ended June 30, 1997 from $0.03 million of interest income in
the three months ended June 30, 1996. This decrease is primarily due to
increased borrowings utilized to support the Company's growth, including
acquisitions.
INCOME TAX EXPENSE:
__________________
Income tax expense increased to $4.0 million in the three months ended June 30,
1997 from $2.3 million in the three months ended June 30, 1996. This increase
is primarily attributable to the increase in operating income noted earlier. The
income tax expense as a percent of income before income taxes and minority
interest decreased to 37.5% in the three months ended June 30, 1997 from 49.2%
in the three months ended June 30, 1996 primarily due to non-deductible
transaction related expenses in 1996.
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NET INCOME:
__________
Net income increased $2.3 million, or 54.8%, to $6.6 million in the three months
ended June 30, 1997 from $4.3 million, excluding the non-recurring expenses, in
the three months ended June 30, 1996. The increase is primarily due to the
increase in revenues in the second fiscal quarter of 1997 compared to the second
fiscal quarter of 1996, offset by increased operating expenses, interest expense
and income tax expense.
SIX MONTHS ENDED JUNE 30 1997 VS. SIX MONTHS ENDED JUNE 30, 1996
________________________________________________________________
REVENUES:
_________
Revenues increased $100.7 million, or 78.2%, to $229.5 million in the six months
ended June 30, 1997 from $128.8 million in the six months ended June 30, 1996.
Of this increase, $30.3 million was attributable to services initiated for new
clients, $35.6 million was attributable to increased revenues from existing
clients and $34.8 million was attributable to revenues from businesses acquired
after the start of 1996 under the purchase method of accounting. The increase
in revenues from existing clients was primarily the result of higher calling
volumes rather than higher rates.
COST OF SERVICES:
________________
Cost of services increased $55.1 million, or 80.7%, to $123.5 million in the six
months ended June 30, 1997 from $68.3 million in the six months ended June 30,
1996. As a percentage of revenues, cost of services increased to 53.8% in the
first six months of 1997 from 53.1% in the first six months of 1996. This
increase was primarily attributable to the Company's Spanish operations which
implemented a new compensation plan in 1997. This plan also has the
corresponding effect of decreasing selling, general and administrative expenses
in Spain.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
____________________________________________
Selling, general and administrative expenses increased $34.3 million, or 69.5%,
to $83.5 million in the six months ended June 30, 1997 from $49.3 million in the
six months ended June 30, 1996. This increase was primarily a result of the
Company's continued growth both internally and through acquisition. As a
percentage of revenues, selling, general and administrative expenses decreased
to 36.4% in the first six months of 1997 from 38.2% in the first six months of
1996. Excluding certain non-recurring operating expenses incurred in 1996
related to an acquisition, these expenses decreased as a percentage of revenue
in the 1997 period from 37.0% of revenues in the 1996 period. This decrease was
primarily attributable to increased revenues without a commensurate increase in
expenses, offset partially by an increased percentage of the Company's revenues
being generated from immature operations including new industry groups and
expansion into new countries.
OPERATING INCOME:
________________
Operating income increased $9.8 million, or 76.4%, to $22.5 million in the six
months ended June 30, 1997 from $12.8 million, excluding the non-recurring items
noted earlier, in the six months ended June 30, 1996. The increase is primarily
attributable to the increase in revenues noted earlier, partially offset by the
increased expenses attributable to those revenues. As a percentage of revenues,
operating income decreased slightly to 9.8% in the first six months of 1997 from
9.9% in the first six months of 1996 excluding the non-recurring expenses in
1996 described earlier. This decrease was primarily the result of the Company's
investment in new industry efforts and expansion into new countries.
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
INTEREST INCOME (EXPENSE), NET:
______________________________
Interest income (expense), net, decreased to $1.7 million of interest expense in
the six months ended June 30, 1997 from $0.1 million of interest income in the
six months ended June 30, 1996. This decrease is primarily due to increased
borrowings utilized to support the Company's growth, including acquisitions.
INCOME TAX EXPENSE:
__________________
Income tax expense increased to $7.6 million in the six months ended June 30,
1997 from $4.5 million in the six months ended June 30, 1996. This increase is
primarily attributable to the increase in operating income noted earlier. The
income tax expense as a percentage of income before taxes and minority interest
decreased to 36.8% in the six month period ended June 30, 1997 from 42.2% in the
six month period ended June 30, 1996 primarily due to non-deductible transaction
related expenses in 1996.
NET INCOME:
___________
Net income increased $5.0 million, or 61.8%, to $13.1 million in the six months
ended June 30, 1997 from $8.1 million, excluding the non-recurring expenses
noted earlier, in the six months ended June 30, 1996. The increase is primarily
due to the increase in revenues in the first six months of 1997 compared to the
first six months of 1996, offset by increased operating expenses, interest
expense and income tax expense.
LIQUIDITY AND CAPITAL RESOURCES:
_______________________________
Cash provided by operating activities was approximately $3.1 million during the
first six months of 1997. This was primarily the result of an increase in net
income, non cash charges and increases in other liabilities offset primarily by
an increase in accounts receivable. The Company anticipates that accounts
receivable will continue to grow, using working capital, as the Company
continues to grow. Cash used by investing activities in the first six months of
1997 of approximately $71.5 million was primarily related to capital
expenditures and acquisitions of businesses. Cash provided by financing
activities for the first six months of 1997 of approximately $50.7 million
primarily related to borrowings on the Company's available lines of credit and
$14.3 million of borrowing related to an acquisition.
In July, 1997, the Company reached agreement with a syndicate of commercial
banks for a $150 million revolving credit facility. The commitment of the banks
under this facility expires in July, 2002. The obligations of the Company under
the facility have been guaranteed by a substantial majority of the Company's
subsidiaries and are secured by a pledge of the Company's shares in such
subsidiaries and certain indirect subsidiaries. The facility contains certain
financial covenants and certain restrictions on, among other things, the
Company's ability to incur additional debt, make certain investments, and sell
assets or merge with another company. The facility also prohibits the payment
of cash dividends on common stock without the banks' consent. The facility
becomes due and payable upon a change of control of the Company as defined in
the facility agreement.
Subsequent to June 30, 1997, the Company refunded its previous domestic
revolving credit agreement with proceeds from the facility. The Company also
refunded its $14.3 million note payable with proceeds from this credit facility.
On a pro forma basis, including unused lines of credit in Europe, the Company
had unused lines of credit totaling approximately $123 million at June 30, 1997.
The Company believes that funds generated from operations, existing cash, and
existing lines of credit will be sufficient to finance its current operations,
planned capital expenditure requirements and internal growth. Future
acquisitions, if any, may require additional debt or equity financing. <PAGE>
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
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 the Company'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 the third quarter
due to summer holidays in Europe and, to a lesser degree, in the first quarter
due to the changeover of client marketing strategies which often occurs at the
beginning of the year
EFFECTS OF INFLATION:
____________________
Inflation has not had a significant effect on the Company's operations. However,
there can be no assurance that inflation will not have a material effect on the
Company's operations in the future.
FORWARD-LOOKING STATEMENTS:
__________________________
From time to time, in written reports and oral statements, the Company discusses
its expectations regarding future performance. These "forward-looking
statements" are based on currently available competitive, financial and economic
data and the Company's operating plans. These statements are also inherently
subject to risks and uncertainties, including without limitation the risks
described in the Company's periodic reports and other filings with the
Securities and Exchange Commission. Because of the risks and uncertainties,
events and results could turn out to be significantly different from what the
Company had expected.
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 2. Changes in Securities.
______________________
(c) On May 7, 1997, in connection with the acquisition of 100% of the
outstanding shares of Support Systems Developers, Inc. ("SSDI"), a Virginia
corporation, by an affiliated company of the registrant through a merger
with SSDI, the registrant issued 800,000 shares of its Common Stock to the
shareholders of SSDI in addition to certain cash considerations. The
shares were issued in reliance on the Regulation D and Section 4(2)
exemptions from registration under the Securities Act of 1933, as amended.
Item 4. Submission of Matters to a Vote of Security Holders.
____________________________________________________
(a) DATE AND TYPE OF MEETING. The Company held its Annual Meeting of
Stockholders on June 6, 1997.
(b) MATTERS VOTED UPON AND NUMBER OF VOTES CAST. There were 52,502,722
shares of Common Stock represented at the meeting in person or by
proxy. Five proposals were presented to the stockholders and all were
approved. The voting on the proposals was as follows:
Proposal 1 (to approve an amendment to the Amended and Restated
Bylaws to increase the size of the Board of Directors):
52,421,133 votes for
63,226 votes against
11,996 abstained
Proposal 2 (the election of two directors for a three year term and
one director for a one year term)
On the election of Kelvin C. Berens: 52,446,806 votes for
55,916 votes withheld
On the election of George J. Kubat: 52,453,191 votes for
49,531 votes withheld
On the election of Michael P. May: 52,448,691 votes for
54,031 votes withheld
Proposal 3 (to approve the Amended and Restated SITEL Corporation
1995 Non-employee Directors Stock Option Plan):
42,036,996 votes for
10,441,100 votes against
18,259 abstained
<PAGE>
Proposal 4 (to approve an amendment to the Amended and Restated SITEL
Corporation 1995 Employee Stock Option Plan):
47,182,577 votes for
5,297,195 votes against
16,583 abstained
Proposal 5 (to ratify the Board of Directors' selection of KPMG Peat
Marwick LLP as the Corporation's independent accountants
and to examine the financial statements of the Corporation
for the year ending December 31, 1997):
51,942,324 votes for
11,031 votes against
549,367 abstained
Item 6. Exhibits and Reports on Form 8-K.
_________________________________
(a) EXHIBITS:
4.2 Amended and Restated Bylaws of SITEL Corporation (conformed copy
including all amendments through June 6, 1997) (1)
27 Financial Data Schedule
_________________________
(1) Exhibit 4.2 hereto was previously filed as Exhibit 4.2 to the
Registration Statement of SITEL Corporation on Form S-3/A
(Registration No. 333-28131) and is incorporated herein by this
reference.
(b) REPORTS ON FORM 8-K. The Company filed the following reports on
Form 8-K during the quarter for which this report is filed.
1) The Company filed a Form 8-K/A on April 4, 1997 amending its
exhibit tags on its Form 8-K dated January 30, 1997.
2) The Company filed a Form 8-K on April 16, 1997, reporting under
Item9, the issuance of shares in connection with the acquisitions
of Levita Group Pty Ltd., and The L&R Group Limited.
<PAGE>
SIGNATURES
Pursuant to the requirements 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: August 13, 1997 SITEL Corporation
By: /s/ Michael P. May
___________________________________________
Michael P. May
Chief Executive Officer
By: /s/ Barry S. Major
___________________________________________
Barry S. Major
Executive Vice-President and Chief Financial
Officer
(Principal Financial Officer)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Exhibits Index:
Page
____
N/A 4.2 Amended and Restated Bylaws of SITEL Corporation (conformed copy
including all amendments through June 6, 1997) (1)
1 27 Financial Data Schedule
______________________
(1) Exhibit 4.2 hereto was previously filed as Exhibit 4.2 to the
Registration Statement of SITEL Corporation on Form S-3/A
(Registration No. 333-28131) and is incorporated herein by this
reference.
<TABLE> <S> <C>
<ARTICLE> 5
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This schedule contains summary financial information extracted from form 10Q and
is qualified in its entirety by reference to such form 10Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
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