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 September 30, 1999
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.)
111 SOUTH CALVERT STREET
BALTIMORE, MD 21202
(410) 246-1505
(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 October 31,1999, the Company had 67,649,623 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 (Loss).............. 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.............................. 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk........ 21
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................. 22
Signature.................................................................. 23
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, SEPTEMBER 30,
1998 1999
----------- ------------
Current assets: (unaudited)
<S> <C> <C>
Cash and cash equivalents ...................................................... $ 14,472 $ 12,166
Trade accounts receivable (net of allowance for doubtful accounts of $3,970 and
$4,667, respectively) ......................................................... 129,809 165,685
Prepaid expenses ............................................................... 5,257 7,549
Other assets ................................................................... 6,024 4,383
Deferred income taxes .......................................................... 1,658 2,360
---------- ----------
Total current assets ............................................ 157,220 192,143
Property and equipment, net ......................................................... 125,615 110,740
Deferred income taxes ............................................................... 15,425 14,208
Goodwill, net ....................................................................... 93,288 88,017
Other assets ........................................................................ 14,062 15,707
---------- ----------
Total assets .................................................... $ 405,610 $ 420,815
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable .................................................................. $ 30,545 $ 8,357
Current portion of long-term debt .............................................. 3,671 1,985
Current portion of capitalized lease obligations ............................... 3,650 2,020
Trade accounts payable ......................................................... 30,784 30,206
Income taxes payable ........................................................... 3,875 2,481
Accrued compensation ........................................................... 15,620 26,891
Accrued operating expenses ..................................................... 23,527 25,161
Deferred revenue and other ..................................................... 3,888 13,979
---------- ----------
Total current liabilities ....................................... 115,560 111,080
Long-term debt, excluding current portion ........................................... 107,027 137,130
Capitalized lease obligations, excluding current portion ............................ 9,210 9,162
Deferred compensation ............................................................... 1,591 1,799
Minority interest ................................................................... 10,368 3,965
Stockholders' equity:
Common stock, voting, $.001 par value 200,000,000 shares authorized, 64,399,645,
and 67,619,469 shares issued and outstanding, in 1998 and 1999, respectively 64 68
Paid-in capital ................................................................ 157,892 164,728
Accumulated other comprehensive (loss) ......................................... (4,428) (9,750)
Retained earnings .............................................................. 8,326 2,633
---------- ----------
Total stockholders' equity ...................................... 161,854 157,679
---------- ----------
Total liabilities and stockholders' equity ...................... $ 405,610 $ 420,815
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
1
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months Ended For The Nine Months Ended
September 30, September 30, September 30, September 30,
1998 1999 1998 1999
---------------- ------------- ------------- -------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues .................................................$ 146,755 $ 189,597 $ 431,810 $ 531,778
------------ ------------ ----------- -----------
Operating expenses:
Cost of services .................................... 82,636 100,446 243,041 284,254
Selling, general and administrative
expenses ....................................... 59,045 79,181 174,813 231,552
Asset impairment and restructuring expenses.......... -- 9,596 6,607 9,596
------------ ------------ ----------- -----------
Total operating expense .............. 141,681 189,223 424,461 525,402
------------ ------------ ----------- -----------
Operating income ...................... 5,074 374 7,349 6,376
Other income (expense):
Interest expense, net ............................... (3,457) (3,203) (9,422) (9,353)
Other income (expense), net ......................... 19 (69) 188 51
------------ ------------ ----------- -----------
Income (loss) before income taxes
and minority interest ............................... 1,636 (2,898) (1,885) (2,926)
Income tax expense ....................................... 836 1,762 75 2,645
Minority interest ........................................ 13 58 (250) 122
------------ ------------ ----------- -----------
Net income (loss) from continuing operations ............. 787 (4,718) (1,710) (5,693)
Extraordinary loss on refinancing of debt, net
of taxes ............................................... -- -- 514 --
------------ ------------ ----------- -----------
Net income (loss) ........................................$ 787 $ (4,718) $ (2,224) $ (5,693)
============ ============ =========== ===========
Income (loss) from continuing operations per common share:
Basic ..................................................$ 0.01 $ (0.07) $ (0.03) $ (0.09)
Diluted ................................................$ 0.01 $ (0.07) $ (0.03) $ (0.09)
Income (loss) per common share:
Basic ..................................................$ 0.01 $ (0.07) $ (0.03) $ (0.09)
Diluted ................................................$ 0.01 $ (0.07) $ (0.03) $ (0.09)
Weighted average common shares outstanding:
Basic .................................................. 64,081 67,544 63,752 66,111
Diluted ................................................ 70,640 67,544 63,752 66,111
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
2
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Nine Months Ended
(dollars in thousands) September 30, September 30,
1998 1999
------------ ---------------
<S> <C> <C>
Net income (loss) ................................................ $ (2,224) $ (5,693)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization .................................. 29,261 34,266
Extraordinary loss on refinancing of debt ...................... 792 --
Gain on marketable securities .................................. (208) --
Restructuring provision and asset impairment expenses .......... 5,029 9,596
Change in assets and liabilities:
Trade accounts receivable .................................... (9,843) (37,647)
Other assets ................................................. (4,037) (214)
Trade accounts payable ....................................... (6,424) (202)
Other liabilities ............................................ 1,364 23,002
--------- ---------
Net cash provided by operating activities ............... 13,710 23,108
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment ......................... (32,456) (31,679)
Proceeds from sale-leasebacks of facilities ................. 9,397 --
Proceeds from sales of property and equipment ............... -- 555
Acquisition of businesses, net of cash acquired ............. (2,406) --
Acquisition of minority interest ............................ (628) --
Sale of marketable securities ............................... 257 --
Changes in other assets, net ................................ (438) --
--------- ---------
Net cash used in investing activities ................... (26,274) (31,124)
--------- ---------
Cash flows from financing activities:
Borrowings on notes payable ................................. 15,504 3,296
Repayments of notes payable ................................. (2,866) (24,900)
Borrowings on long-term debt ................................ 126,533 44,024
Repayment of long-term debt and capitalized lease obligations (135,797) (17,534)
Capital contribution from subsidiary shareholder ............ 1,400 --
Sale of stock of subsidiaries ............................... 6,541 --
Other ....................................................... (7) (21)
--------- ---------
Net cash provided by financing activities ............... 11,308 4,865
--------- ---------
Effect of exchange rates on cash ................................. (544) 845
--------- ---------
Net decrease in cash .................................... (1,800) (2,306)
Cash and cash equivalents, beginning of period ................... 24,285 14,472
--------- ---------
Cash and cash equivalents, end of period ......................... $ 22,485 $ 12,166
========= =========
</TABLE>
Supplemental schedule of non-cash financing and investing activities:
- --------------------------------------------------------------------
The Company issued approximately 41,000 and 2,205,333 shares of the Company's
common stock in connection with acquisitions in the first nine months of 1998
and 1999, respectively.
The accompanying notes are an integral part of the consolidated condensed
financial statements.
3
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The consolidated condensed balance sheet of SITEL Corporation and Subsidiaries
(the "Company") at December 31, 1998 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, 1998.
2. 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 before tax is primarily due
to net operating losses in certain subsidiaries for which no benefit is
recognized, non-deductible goodwill amortization, higher international tax rates
in certain jurisdictions and state and local income taxes.
3. COMPREHENSIVE INCOME (LOSS):
The Company's comprehensive income (loss) was $3,871,000 and ($1,841,000) for
the three month periods ended September 30, 1998 and 1999, respectively, and
($158,000) and ($11,015,000) for the nine month periods ended September 30, 1998
and 1999, respectively. The difference between the Company's reported net income
(loss) and comprehensive income (loss) for those periods is due to the change in
the currency exchange adjustment. The accumulated other comprehensive loss
included in the Company's Consolidated Condensed Balance Sheet at December 31,
1998 and September 30, 1999 represents the accumulated currency exchange
adjustment.
4. ASSET IMPAIRMENT AND RESTRUCTURING:
In the third quarter of 1999, the Company recorded a $9.6 million expense
primarily related to the write down of capitalized software and related
technology assets. During the quarter, the Company reviewed its capitalized
software and related technology assets for impairment in connection with the
change in its technology strategy as it related to the adoption of a new
platform for its Customer Relationship Management software applications. As a
result, the Company wrote down certain capitalized software and related
technology assets to estimated fair value.
In the second quarter of 1998, the Company recorded a $6.6 million charge for
restructuring expenses primarily related to its European operations. Included in
that charge were severance and other costs of $6.4 million related to statutory
or contractual severance and other costs for approximately 270 employees. The
restructuring expenses also included $0.2 million for the cost of excess leased
facilities. The Company substantially completed its restructuring plan and
recorded a reversal of approximately $459,000 to the restructuring accrual
during the third quarter of 1999.
5. ACQUISITION OF MINORITY INTEREST:
In June 1999, the Company acquired minority interests of certain of its
Asia-Pacific subsidiaries by issuing approximately 2.2 million shares of the
Company's common stock to Lend Lease Securities and Investments Pty Limited and
Lend Lease International Pty Limited (collectively "Lend Lease"). Additionally,
Lend Lease purchased approximately 1.5 million shares of the Company's common
stock for approximately $4.5 million in cash from two SITEL Corporation
shareholders in a related transaction. The shares issued by the Company were
valued at approximately $6.6 million, based on quoted market prices of the
Company's stock. There was no goodwill recorded on the acquisition of the
minority interests as the carrying value of the minority interests approximated
the fair value of consideration issued in the transaction.
4
<PAGE>
6. STOCK OPTION PLANS:
On May 6, 1999, the Company's stockholders approved the 1999 Stock Incentive
Plan, as amended (the "1999 Plan"). Under the 1999 Plan, the Company is
authorized to grant incentive and nonqualified stock options, stock appreciation
rights, restricted stock awards, performance unit awards, stock bonus awards and
other stock-based awards to eligible employees, consultants and directors. The
1999 Plan limits the aggregate number of shares of common stock which may be
issued under the Plan's various forms of stock awards to 7,000,000 shares.
Through September 30, 1999, the Company had granted options to purchase 688,000
shares of common stock under the 1999 Plan, at exercise prices equal to the
quoted market price of the Company's common stock on the date of the grant. No
other types of awards have been made under the Plan through September 30, 1999.
On June 3, 1999, the Company's board of directors amended the Company's Stock
Option Plan (for replacement of EEBs) and Stock Option Plan for Replacement of
Existing Options (collectively, the "Plans") and the Compensation Committee
amended the terms of approximately 6.3 million outstanding and fully-vested
stock options issued under the Plans. The amended options were held by persons
currently employed or serving as consultant to the Company. The amendment to the
Plans permitted the Company to extend the expiration date of the options to up
to ten years after the original grant date. The amendment to the certain options
extended their expiration date from May 29, 2000 to May 29, 2001. All other
contractual terms of the options were unchanged. The quoted market price of the
Company's common stock on the date of the modification was less than the sum of
the exercise price of the options and previously recognized compensation expense
recorded upon the initial grant of the options. Consequently, no compensation
expense was recorded for the amendment of the options.
7. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION:
The Company's 9.25% Senior Subordinated Notes are guaranteed, on a full,
unconditional and joint and several basis, by all wholly-owned domestic
subsidiaries of the Company. Separate financial statements of the guarantor
subsidiaries are not presented because management has determined that they would
not be material to investors. However, the following condensed consolidating
information presents:
(1) Condensed consolidating financial statements as of December 31, 1998
and September 30, 1999, and for the three and nine months ended September 30,
1998 and 1999 of (a) SITEL Corporation, the parent, (b) the guarantor
subsidiaries, (c) the nonguarantor subsidiaries and (d) SITEL Corporation on a
consolidated basis,
(2) SITEL Corporation, the parent, with the investments in all subsidiaries
accounted for on the equity method, and the guarantor subsidiaries with the
nonguarantor subsidiaries accounted for on the equity method (one of the
guarantor subsidiaries is the parent of the nonguarantor subsidiaries), and
(3) Elimination entries necessary to consolidate SITEL Corporation, the
parent, with all subsidiaries.
Effective August 1, 1999, the Company merged certain guarantor subsidiaries into
SITEL Corporation and transferred the operations of certain other guarantor
subsidiaries to SITEL Corporation. Accordingly, from and after August 1, 1999,
the financial information of such guarantor subsidiaries is reported under SITEL
Corporation, the parent, in the condensed consolidating financial statements.
The total revenues and total assets represented by such guarantor subsidiaries
as of July 31, 1999, were $97.5 million and $71.1 million, respectively.
5
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
7. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
ASSETS
Current assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents ........ $ 2,410 $ 1,190 $ 10,872 $ -- $ 14,472
Trade accounts receivable, net ... 33,676 33,179 75,540 (12,586) 129,809
Prepaid expenses and other current
assets ........................... 2,956 241 9,742 -- 12,939
--------- --------- --------- --------- ---------
Total current assets ............. 39,042 34,610 96,154 (12,586) 157,220
Property and equipment, net ............ 31,302 22,523 71,790 -- 125,615
Deferred income taxes .................. 9,390 -- 6,035 -- 15,425
Goodwill, net .......................... 1,537 21,021 70,730 -- 93,288
Other assets ........................... 10,805 126 3,131 -- 14,062
Investments in subsidiaries ............ 188,690 88,293 -- (276,983) --
Notes receivable, intercompany ......... -- 28,833 -- (28,833) --
--------- --------- --------- --------- ---------
Total assets ..................... $ 280,766 $ 195,406 $ 247,840 $(318,402) $ 405,610
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable ...................... $ -- $ -- $ 30,545 $ -- $ 30,545
Current portion of long-term
debt ............................... 2,136 -- 1,535 -- 3,671
Current portion of capitalized lease
obligations ........................ 328 81 3,241 -- 3,650
Trade accounts payable ............. 1,338 1,655 40,377 (12,586) 30,784
Accrued expenses and other current
liabilities ........................ 9,963 4,922 32,025 -- 46,910
--------- --------- --------- --------- ---------
Total current liabilities .... 13,765 6,658 107,723 (12,586) 115,560
Long-term debt, excluding current
portion ............................ 103,556 -- 3,471 -- 107,027
Capitalized lease obligations,
excluding current portion .......... -- 58 9,152 -- 9,210
Notes payable, intercompany ........ -- -- 28,833 (28,833) --
Deferred compensation .............. 1,591 -- -- -- 1,591
Minority interest .................. -- -- 10,368 -- 10,368
Stockholders' equity ............... 161,854 188,690 88,293 (276,983) 161,854
--------- --------- --------- --------- ---------
Total liabilities and
stockholders' equity ............... $ 280,766 $ 195,406 $ 247,840 $(318,402) $ 405,610
========= ========= ========= ========= =========
</TABLE>
6
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
7. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
ASSETS
Current assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents ........... $ -- $ 1,433 $ 10,733 $ -- $ 12,166
Trade accounts receivable, net....... 120,042 5,236 90,322 (49,915) 165,685
Prepaid expenses and other
current assets..................... 2,608 38 11,646 -- 14,292
---------- ---------- ----------- ----------- -----------
Total current assets ................ 122,650 6,707 112,701 (49,915) 192,143
Property and equipment, net ............ 41,849 4,093 64,798 -- 110,740
Deferred income taxes .................. 7,709 -- 6,499 -- 14,208
Goodwill, net .......................... 21,813 -- 66,204 -- 88,017
Other assets ........................... 15,315 34 358 15,707
Investments in subsidiaries ............ 114,190 85,361 -- (199,551) --
Notes receivable, intercompany ......... -- 20,502 -- (20,502) --
---------- ---------- ----------- ----------- -----------
Total assets ........................ $ 323,526 $ 116,697 $ 250,560 $ (269,968) $ 420,815
========== ========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable ....................... $ -- $ -- $ 8,357 $ -- $ 8,357
Current portion of long-term debt.... 407 -- 1,578 -- 1,985
Current portion of capitalized lease
obligations........................ 93 76 1,851 -- 2,020
Trade accounts payable .............. 8,057 953 71,111 (49,915) 30,206
Accrued expenses and other current
liabilities........................ 25,491 1,478 41,543 -- 68,512
---------- ---------- ----------- ----------- -----------
Total current liabilities ...... 34,048 2,507 124,440 (49,915) 111,080
Long-term debt, excluding current
portion............................ 130,000 -- 7,130 -- 137,130
Capitalized lease obligations, excluding
current portion ................... -- -- 9,162 -- 9,162
Notes payable, intercompany ....... -- -- 20,502 (20,502) --
Deferred compensation ............. 1,799 -- -- -- 1,799
Minority interest ................. -- -- 3,965 -- 3,965
Stockholders' equity .............. 157,679 114,190 85,361 (199,551) 157,679
---------- ---------- ----------- ----------- -----------
Total liabilities and stockholders'
equity .......................... $ 323,526 $ 116,697 $ 250,560 $ (269,968) $ 420,815
========== ========== =========== =========== ===========
</TABLE>
7
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
7. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 32,921 $ 46,295 $ 67,539 $ -- $ 146,755
---------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of services .................. 17,793 25,306 39,537 -- 82,636
Selling, general and
administrative expenses ........... 16,656 15,281 27,108 -- 59,045
---------- ---------- ---------- ---------- ----------
Total operating expenses .......... 34,449 40,587 66,645 -- 141,681
---------- ---------- ---------- ---------- ----------
Operating income .................. (1,528) 5,708 894 -- 5,074
---------- ---------- ---------- ---------- ----------
Other income (expense):
Equity in earnings (losses) of
subsidiaries, net of tax........... 3,255 (704) -- (2,551) --
Intercompany charges .............. 82 503 (585) -- --
Interest expense, net ............. (2,362) (120) (975) -- (3,457)
Other income (expense) ............ (173) 1 191 -- 19
---------- ---------- ---------- ---------- ----------
Total other income (expense) .... 802 (320) (1,369) (2,551) (3,438)
---------- ---------- ---------- ---------- ----------
Income (loss) before income
taxes and minority interest ....... (726) 5,388 (475) (2,551) 1,636
Income tax expense (benefit) .......... (1,513) 2,133 216 -- 836
Minority interest ...................... -- -- 13 -- 13
---------- ---------- ---------- ---------- ----------
Net income (loss) ...................... $ 787 $ 3,255 $ (704) $ (2,551) $ 787
========== ========== ========== ========== ==========
</TABLE>
8
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
7. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ............................... $ 77,930 $ 21,813 $ 89,854 $ -- $ 189,597
---------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of services .................... 37,159 13,033 50,254 -- 100,446
Selling, general and
administrative expenses ........... 35,543 6,915 36,723 -- 79,181
Asset impairment expense ............ 3,585 -- 6,011 -- 9,596
---------- ---------- ---------- ---------- ----------
Total operating expenses............. 76,287 19,948 92,988 -- 189,223
---------- ---------- ---------- ---------- ----------
Operating income .................... 1,643 1,865 (3,134) -- 374
---------- ---------- ---------- ---------- ----------
Other income (expense):
Equity in earnings
(losses) of subsidiaries,
net of tax ....................... (3,844) (5,315) -- 9,159 --
Intercompany charges ................ -- 398 (398) -- --
Interest expense, net ............... (2,684) -- (519) -- (3,203)
Other income (expense) .............. (4) -- (65) -- (69)
---------- ---------- ---------- ---------- ----------
Total other income (expense) ........... (6,532) (4,917) (982) 9,159 (3,272)
---------- ---------- ---------- ---------- ----------
Income (loss) before income
taxes and minority interest ............ (4,889) (3,052) (4,116) 9,159 (2,898)
Income tax expense (benefit)............ (171) 792 1,141 -- 1,762
Minority interest ...................... -- -- 58 -- 58
---------- ---------- ---------- ---------- ----------
Net income (loss) ...................... $ (4,718) $ (3,844) $ (5,315) $ 9,159 $ (4,718)
========== ========== ========== ========== ==========
</TABLE>
9
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
7. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ............................... $ 103,252 $ 133,111 $ 195,447 $ -- $ 431,810
---------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of services .................... 54,685 73,653 114,703 -- 243,041
Selling, general and
administrative expenses ........... 48,978 45,337 80,498 -- 174,813
Restructuring expenses .............. -- -- 6,607 -- 6,607
---------- ---------- ---------- ---------- ----------
Total operating expenses ............ 103,663 118,990 201,808 -- 424,461
---------- ---------- ---------- ---------- ----------
Operating income (loss) ................ (411) 14,121 (6,361) -- 7,349
---------- ---------- ---------- ---------- ----------
Other income (expense):
Equity in earnings (losses) of
subsidiaries, net of tax .......... 1,925 (7,578) -- 5,653 --
Intercompany charges ................... 203 1,379 (1,582) -- --
Interest expense, net .................. (5,942) (880) (2,600) -- (9,422)
Other income (expense) ................. (5) -- 193 -- 188
---------- ---------- ---------- ---------- ----------
Total other income (expense) ........... (3,819) (7,079) (3,989) 5,653 (9,234)
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes
and minority interest ............. (4,230) 7,042 (10,350) 5,653 (1,885)
Income tax expense (benefit) ........... (2,520) 5,117 (2,522) -- 75
Minority interest ...................... -- -- (250) -- (250)
---------- ---------- ---------- ---------- ----------
Net income (loss) from continuing
operations ........................ (1,710) 1,925 (7,578) 5,653 (1,710)
Extraordinary loss on refinancing
of debt, net of taxes ............. 514 -- -- -- 514
---------- ---------- ---------- ---------- ----------
Net income (loss) ...................... $ (2,224) $ 1,925 $ (7,578) $ 5,653 $ (2,224)
========== ========== ========== ========== ==========
</TABLE>
10
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
7. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ............................... $ 156,803 $ 122,652 $ 252,323 $ -- $ 531,778
---------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of services .................... 71,281 72,512 140,461 -- 284,254
Selling, general and
administrative expenses ........... 81,459 38,245 111,848 -- 231,552
Asset impairment expense ............ 3,585 -- 6,011 -- 9,596
---------- ---------- ---------- ---------- ----------
Total operating expenses ........... 156,325 110,757 258,320 -- 525,402
---------- ---------- ---------- ---------- ----------
Operating income (loss) ................ 478 11,895 (5,997) -- 6,376
---------- ---------- ---------- ---------- ----------
Other income (expense):
Equity in earnings (losses)
of subsidiaries, net of tax ....... (1,351) (9,424) -- 10,775 --
Intercompany charges ................... 98 1,339 (1,437) -- --
Interest expense, net .................. (6,908) (814) (1,631) -- (9,353)
Other income (expense) ................. 163 -- (112) -- 51
---------- ---------- ---------- ---------- ----------
Total other income (expense) ........... (7,998) (8,899) (3,180) 10,775 (9,302)
---------- ---------- ---------- ---------- ----------
Income (loss) before income
taxes and minority
interest .......................... (7,520) 2,996 (9,177) 10,775 (2,926)
Income tax expense (benefit) ........... (1,827) 4,347 125 -- 2,645
Minority interest ...................... -- -- 122 -- 122
---------- ---------- ---------- ---------- ----------
Net income (loss) ...................... $ (5,693) $ (1,351) $ (9,424) $ 10,775 $ (5,693)
========== ========== ========== ========== ==========
</TABLE>
11
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
7. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities ................... $ (7,627) $ 18,205 $ 3,132 $ -- $ 13,710
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Investments in subsidiaries ....... 6,692 (6,637) -- (55) --
Dividend on common stock .......... -- 10,000 -- (10,000) --
Purchases of property and
equipment ......................... (9,302) (6,489) (16,665) -- (32,456)
Proceeds from sale-lease
backs of facilities ............... 9,397 -- -- -- 9,397
Acquisition of subsidiary ......... -- -- (2,406) -- (2,406)
Acquisition of minority interest .. -- -- (628) -- (628)
Sale of marketable securities ..... 257 -- -- -- 257
Changes in other assets ........... -- -- (438) -- (438)
---------- ---------- ---------- ---------- ----------
Net cash provided by
(used in) investing activities .... 7,044 (3,126) (20,137) (10,055) (26,274)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Borrowings on notes payable ....... -- -- 15,504 -- 15,504
Repayments of notes payable ....... -- -- (2,866) -- (2,866)
Borrowings on long-term debt ...... 124,383 -- 2,150 -- 126,533
Repayment of long-term debt and
capital lease obligations ......... (128,906) -- (6,891) -- (135,797)
Net capital contribution
from parent ....................... -- (6,692) 6,637 55 --
Net borrowings and
payments on note to parent ........ -- (7,297) 7,297 -- --
Dividend on common stock .......... -- -- (10,000) 10,000 --
Capital contribution
from subsidiary shareholder ..... -- -- 1,400 -- 1,400
Sale of stock of subsidiaries ..... -- -- 6,541 -- 6,541
Common stock issued
for option exercises and other .. (7) -- -- -- (7)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities .............. (4,530) (13,989) 19,772 10,055 11,308
---------- ---------- ---------- ---------- ----------
Effect of exchange rates on cash .. -- -- (544) -- (544)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash ........ (5,113) 1,090 2,223 -- (1,800)
Cash and cash equivalents,
beginning of period .................... 11,514 2,075 10,696 -- 24,285
---------- ---------- ---------- ---------- ----------
Cash and equivalents, end of period .... $ 6,401 $ 3,165 $ 12,919 $ -- $ 22,485
========== ========== ========== ========== ==========
</TABLE>
12
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
7. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities .............. $ 20,199 $ 3,771 $ (862) $ -- $ 23,108
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Investments in subsidiaries .......... 5,256 3,923 -- (9,179) --
Purchases of property and equipment .. (14,947) (2,195) (14,537) -- (31,679)
Proceeds from sales of
property and equipment ............. 14 -- 541 -- 555
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
investing activities .............. (9,677) 1,728 (13,996) (9,179) (31,124)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Borrowings on notes payable .......... -- -- 3,296 -- 3,296
Repayments of notes payable .......... -- -- (24,900) -- (24,900)
Borrowings on long-term debt ......... 38,000 -- 6,024 -- 44,024
Repayment of long-term debt and capital
lease obligations .................. (13,582) -- (3,952) -- (17,534)
Net capital contribution from parent . -- (5,256) (3,923) 9,179 --
Net borrowings and payments
on intercompany balances ........... (37,329) -- 37,329 -- --
Other ................................ (21) -- -- -- (21)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities .............. (12,932) (5,256) 13,874 9,179 4,865
---------- ---------- ---------- ---------- ----------
Effect of exchange rates on cash ....... -- -- 845 -- 845
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash ........ (2,410) 243 (139) -- (2,306)
Cash and cash equivalents,
beginning of period ............... 2,410 1,190 10,872 -- 14,472
---------- ---------- ---------- ---------- ----------
Cash and equivalents, end of period .... $ -- $ 1,433 $ 10,733 $ -- $ 12,166
========== ========== ========== ========== ==========
</TABLE>
13
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
OVERVIEW
SITEL Corporation and subsidiaries (the "Company") provide customer relationship
management services on behalf of clients principally in the financial services,
insurance, telecommunications, technology, utilities, consumer, media,
government and travel sectors located in North America, Europe, the Asia Pacific
region, and Latin America.
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>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
1998 1999 (2) 1998 (1) 1999 (2)
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ....................... $ 146,755 100% $ 189,597 100% $ 431,810 100% $ 531,778 100%
--------------------- --------------------- --------------------- ---------------------
Operating expenses:
Cost of services ............ 82,636 56.3% 100,446 53.0% 243,041 56.3% 284,254 53.5%
Selling, general, and
administrative expenses ..... 59,045 40.2% 79,181 41.8% 174,813 40.5% 231,552 43.5%
Asset impairment and
restructuring expenses ... -- 0.0% 9,596 5.0% 6,607 1.5% 9,596 1.8%
--------------------- --------------------- --------------------- ---------------------
Total operating expenses 141,681 96.5% 189,223 99.8% 424,461 98.3% 525,402 98.8%
--------------------- --------------------- --------------------- ---------------------
Operating income ....... 5,074 3.5% 374 0.2% 7,349 1.7% 6,376 1.2%
Interest income (expense), net . (3,457) (2.4%) (3,203) (1.7%) (9,422) (2.2%) (9,353) (1.8%)
Other income (expense) ......... 19 0.0% (69) 0.0% 188 0.0% 51 0.0%
--------------------- --------------------- --------------------- ---------------------
Income (loss) before income
taxes and minority interest .... 1,636 1.1% (2,898) (1.5%) (1,885) (0.4%) (2,926) (0.6%)
Income tax expense ............. 836 0.6% 1,762 1.0% 75 0.0% 2,645 0.5%
Minority interest
(income) ....................... 13 0.0% 58 0.0% (250) (0.1%) 122 0.0%
--------------------- --------------------- --------------------- ---------------------
Net income (loss) from
continuing operations .......... 787 0.5% (4,718) (2.5%) (1,710) (0.4%) (5,693) (1.1%)
Extraordinary loss on
refinancing of debt, net of
taxes .......................... -- 0.0% -- 0.0% 514 0.1% -- 0.0%
--------------------- --------------------- --------------------- ---------------------
Net income (loss) .............. $ 787 0.5% $ (4,718) (2.5%) $ (2,224) (0.5%) $ (5,693) (1.1%)
===================== ===================== ===================== =====================
</TABLE>
(1) Includes restructuring expenses. Excluding those expenses and related tax
effect, operating income, net income, basic income per share and diluted
income per share were $14.0 million, $2.3 million, $0.04 and $0.03,
respectively, for the nine month period ended September 30, 1998.
(2) Includes asset impairment expense. Excluding the charge and related tax
effect, operating income, net income, basic income per share and diluted
income per share were $10.0 million, $3.6 million, $0.05 and $0.05,
respectively, for the three month period ended September 30, 1999 and
$16.0 million, $2.6 million, $0.04 and $0.04, respectively, for the nine
month period ended September 30, 1999.
14
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED SEPTEMBER 30, 1999 VS. THREE MONTHS ENDED SEPTEMBER 30, 1998
REVENUES:
Revenues increased $42.8 million, or 29.2%, to $189.6 million in the three
months ended September 30, 1999 from $146.8 million in the three months ended
September 30, 1998. Of this increase, $25.3 million was attributable to services
initiated for new clients and approximately $17.5 million was attributable to
increased revenues from existing clients.
COST OF SERVICES:
Cost of services represents primarily labor and telephone expenses directly
related to teleservicing activities. Cost of services increased $17.8 million,
or 21.6%, to $100.4 million in the three months ended September 30, 1999 from
$82.6 million in the three months ended September 30, 1998. As a percentage of
revenues, cost of services decreased to 53.0% in the third quarter of 1999 from
56.3% in the third quarter of 1998. The decrease in cost of services as a
percentage of revenues was primarily attributable to lower costs of services
associated with certain revenues relating to the implementation phase of a
significant contract. In addition, the contract includes certain technology
revenues for which the associated costs are included in selling, general and
administrative expenses. Excluding the impact of this contract, costs of
services as a percentage of revenues would have been 57.5% in the third quarter
of 1999.
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, technology, facilities, depreciation and amortization,
maintenance, sales and marketing, and client support services. Selling, general
and administrative expenses increased $20.1 million, or 34.1%, to $79.2 million
in the three months ended September 30, 1999 from $59.0 million in the three
months ended September 30, 1998. As a percentage of revenues, selling, general
and administrative expenses increased to 41.8% in the third quarter of 1999 from
40.2% in the third quarter of 1998. Approximately $7.7 million of this increase
was directly attributed to the technology costs for a large contract noted
above. Excluding the impact of these technology costs, selling, general and
administrative expense decreased to 39.3% for the third quarter of 1999.
RESTRUCTURING AND ASSET IMPAIRMENT EXPENSES:
In the third quarter of 1999, the Company recorded an asset impairment expense
of $9.6 million primarily related to the write down of capitalized software and
related technology assets. During the second quarter of 1999, the Company
announced a strategic alliance with Siebel Systems Inc. pursuant to which SITEL
was stipulated as Siebel's preferred partner for outsourced call centers, and
Siebel was named as SITEL's preferred partner for its Customer Relationship
Management call center software applications. During the third quarter, the
Company completed its first implementations of the Siebel platform and reviewed
its capitalized software and related technology assets for impairment in
connection with the change in its technology strategy as it related to the
adoption of the Siebel platform. As a result, the Company wrote down certain
capitalized software and related technology assets to estimated fair value.
OPERATING INCOME (LOSS):
Operating income (loss) decreased to $374,000 in the three months ended
September 30, 1999 from $5.1 million in the three months ended September 30,
1998. As a percentage of revenues, operating income decreased to 0.2% in the
third quarter of 1999 from 3.5% in the third quarter 1998. Excluding the asset
impairment expense, operating income increased $4.9 million to $10.0 million for
the three months ended September 30, 1999. This increase was primarily due to
the revenue from the implementation and production ramp up associated with a
significant new contract and growth in the U.S. technology business offset by
declines in the U.S. financial services and telecommunications sectors.
15
<PAGE>
INTEREST EXPENSE, NET:
Interest expense, net of interest income, decreased to $3.2 million in the three
months ended September 30, 1999 from $3.5 million in the three months ended
September 30, 1998. This decrease was primarily due to lower outstanding
borrowings during the period.
INCOME TAX EXPENSE (BENEFIT):
Income tax expense for the three months ended September 30, 1999 was $1.8
million compared to an expense of $0.8 million in the three months ended
September 30, 1998. Income tax expense as a percentage of income before income
taxes and minority interest, excluding the asset impairment expense, decreased
to 45.6% in the three months ended September 30, 1999 from 51.1% in the three
months ended September 30, 1998. The difference between the Company's income tax
rate of 45.6%, excluding the impact of the asset impairment expense, and the
statutory Federal income tax rate of 34% is primarily due to non-deductible
goodwill, higher international tax rates in certain jurisdictions and U.S. state
and local income taxes. The tax benefit associated with the asset impairment
expense was $1.3 million. The difference between this benefit and the benefit
based on the statutory Federal rate is primarily due to the impairment expense
occurring in certain jurisdictions with net operating losses for which no
benefit was recognized.
NET INCOME (LOSS):
For the reasons discussed above, net income (loss) decreased to $4.7 million
loss in the three months ended September 30, 1999 from $0.8 million of income in
the three months ended September 30, 1998. Excluding the asset impairment
expense and the related tax effects, net income was $3.6 million in the third
quarter of 1999.
NINE MONTHS ENDED SEPTEMBER 30, 1999 VS. NINE MONTHS ENDED SEPTEMBER 30, 1998
REVENUES:
Revenues increased $100.0 million, or 23.2%, to $531.8 million in the nine
months ended September 30, 1999 from $431.8 million in the nine months ended
September 30, 1998. Of this increase, $60.4 million was attributable to services
initiated for new clients and approximately $39.6 million was attributable to
increased revenue from existing clients.
COST OF SERVICES:
Cost of services increased $41.2 million, or 17.0%, to $284.3 million in the
nine months ended September 30, 1999 from $243.0 million in the nine months
ended September 30, 1998. As a percentage of revenues, cost of services
decreased to 53.5% in the first nine months of 1999 from 56.3% in the first nine
months of 1998. The decrease was primarily attributable to lower costs of
services associated with certain revenues relating to the implementation of a
significant contract. In addition, the contract includes certain technology
revenues for which the associated costs are included in selling, general and
administrative expenses. Excluding the impact of this contract, cost of services
as a percentage of revenues would have been 57.3% for the nine months ended
September 30, 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses increased $56.7 million, or 32.5%,
to $231.6 million in the nine months ended September 30, 1999 from $174.8
million in the nine months ended September 30, 1998. This increase was primarily
a result of the Company's continued growth internally. As a percentage of
revenues, selling, general and administrative expenses increased to 43.5% in the
first nine months of 1999 from 40.5% in the first nine months of 1998.
Approximately $23.1 million of this increase was directly attributed to the
technology costs for a large contract noted above. Excluding the impact of these
technology costs, selling, general and administrative expenses increased to
41.0% in the first nine months of 1999. This increase was primarily attributable
to re-engineering costs in the United Kingdom and severance and consolidation
costs incurred in the Asia Pacific region in the first six months of 1999 offset
by the leveraging of overhead costs through revenue growth in the third quarter
of 1999.
OPERATING INCOME:
Operating income decreased to $6.4 million in the nine months ended September
30, 1999 from $7.3 million in the nine months ended September 30, 1998. This
decrease was primarily due to the asset impairment expense noted above.
Excluding the asset impairment expense in 1999 and restructuring expenses in
1998, operating income increased to $16.0 million for the nine months ended
September 30, 1999 from $14.0 million for the comparable period in 1998. This
increase was primarily due to the revenues from the implementation
16
<PAGE>
and production ramp up associated with a significant new contract and growth in
the U.S. technology business offset by declines in the U.S. financial services
and telecommunications sectors and re-engineering costs in the United Kingdom.
INTEREST EXPENSE, NET:
Interest expense, net of interest income, was $9.4 million in the nine months
ended September 30, 1999 and September 30, 1998.
INCOME TAX EXPENSE:
Income tax expense for the nine months ended September 30, 1999 was $2.6 million
compared to $0.1 million in the nine months ended September 30, 1998. Income tax
expense as a percentage of income before income taxes and minority interest,
excluding the asset impairment expense, was 59.1% in the nine months ended
September 30, 1999. The difference between this rate and the statutory Federal
income tax rate of 34% is primarily due to non-deductible goodwill, net
operating losses in Asia Pacific subsidiaries for which no benefit is
recognized, higher international tax rates in certain jurisdictions and U.S.
state and local income taxes.
NET INCOME (LOSS) FROM CONTINUING OPERATIONS AND NET INCOME (LOSS):
For the reasons discussed above, net loss from continuing operations increased
to $5.7 million in the nine months ended September 30, 1999 from $1.7 million in
the nine months ended September 30, 1998. After the extraordinary loss on
refinancing of debt, net loss increased $3.5 million from a $2.2 million loss in
the nine months ended September 30, 1998. Excluding the asset impairment expense
in 1999 and restructuring expenses in 1998, and the related tax effects, net
income from continuing operations decreased from $2.8 million for the nine
months ended September 30, 1998 to $2.6 million for the nine months ended
September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES:
Cash provided by operating activities was $23.1 million during the nine month
period ended September 30, 1999. This was primarily the result of income before
depreciation and amortization and an increase in accrued expenses and deferred
revenue which was partially offset by an increase in accounts receivable. The
Company anticipates that the accounts receivable will continue to grow, using
working capital, as the Company continues to grow. The Company purchased $31.1
million of property and equipment in the nine months ended September 30, 1999.
While the Company will continue to invest in property and equipment to support
the growth of its business, it anticipates that capital expenditures over the
next 12 months will be less than the previous 12 months.
The Company has historically used equity capital, funds generated from
operations, leases of property and equipment, senior subordinated notes and
borrowings under credit facilities with banks to finance business acquisitions,
capital expenditures and working capital requirements. At September 30, 1999,
the Company had available unused lines of credit totaling $13.1 million. In
light of the Company's expectations with respect to its operating results for
the third quarter, the Company sought and obtained certain modifications to its
long term revolving credit facility to permit continued availability of
borrowing under such facility. The Company believes that funds generated from
operations, existing cash, leases of property and equipment and funds available
under existing credit facilities will be sufficient to finance its current
operations, planned capital expenditures and internal growth for the foreseeable
future.
YEAR 2000 ISSUE
The Year 2000 statement which follows is a Year 2000 Readiness Disclosure,
pursuant to the Year 2000 Information and Readiness Disclosure Act, Public Law
No. 105-271.
The Company recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 software and embedded system failures. Specifically,
computational errors and system failures are a known risk with respect to dates
after December 31, 1999. The Company has established a central Y2K compliance
office that reports directly to the Chief Information Officer. Each of the
Company's operating units have also designated information technology (IT)
personnel to address the issues that the unit faces and to report to the central
Y2K compliance office. The Company has implemented a system which allows it to
track all IT and non-IT systems and facility functions for compliance with
industry Y2K standards. This tracking system allows the Company to monitor and
track each functional point as a single item grouped by how critical the item is
in the Company's ability to perform its daily functions. Based on the output
from this data and an analysis of the system reports, the Company believes that
all functional points which are critical to the Company's functions have been
identified and assessed. Further, the Company has developed a remediation plan
for
17
<PAGE>
each item in this critical list. Part of the Company's remediation strategy is
in concert with its efforts to acquire or develop new and innovative systems for
its internal operations.
IT issues - The Company is moving all of its IT systems into a state of
readiness for the year 2000. The Company believes that it is making satisfactory
progress to ensure that it will be ready with all IT systems by the end of
December 1999. Internal systems represent approximately 28% of the overall
effort in the IT applications area. The remaining 72% of the overall effort in
the IT area is in the interface and integration of external client and vendor
application systems. The Company has implemented a three-step process of
contacting significant vendors and clients to request information about the
status of their Y2K compliance efforts. In addition to communicating with
significant vendors, the Company is testing certain critical vendor application
systems for Y2K compliance. The Company has an initiative that will identify
mitigation and contingency plans at both the business and technical IT levels.
This initiative is scheduled to be completed by November 30, 1999. In addition
to communicating with significant clients, the Company has a strategy to deal
with non-compliant external client customer data by enabling data to be used by
the Company's systems.
Non IT issues (facilities) - Non-IT issues, with few exceptions, have been
classified into a non-critical category. The few exceptions include dial tone
for the Company's telephony and power from the Company's energy providers. The
Company has included these functional points in the critical category for
purposes of scheduling. Based on communications with providers of these
services, the Company believes that these services will not be interrupted by
Year 2000 failures. The Company's contingency plan for the loss of power
includes generator systems in the Company's major facilities. The Company's
contingency plan for loss of dial tone includes the distribution of network
services across several providers. This will allow the Company to minimally
maintain its service levels in the event of a failure. The Company believes that
it is making satisfactory progress to ensure that all facility related issues
will be compliant by the end of December 1999.
Phases - The Company is employing a four-phase, nine-process step Project
Methodology that covers each aspect of Y2K compliance. The four phases are:
Phase 1 Assessment
Phase 2 Remediation
Phase 3 Verification and Testing
Phase 4 Implementation
Each process step is necessary within the framework and provides clear
management checkpoints for gauging the progress of activity during execution of
the project plan. The following table outlines the phases and process steps:
<TABLE>
<CAPTION>
Phase 1 Phase 2 Phase 3 Phase 4
Verification/
Process Steps Assessment Remediation Testing Implementation
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Recognition/Awareness X X X X
2. Inventory X
3. Evaluation X
4. Determination X
5. Remediation X
6. Re-engineering X
7. Multi-level testing X X X X
8. Implementation X
9. Post-implementation X
</TABLE>
The Company has clearly defined each of the process steps in the Project
Methodology. The Recognition/Awareness step included communication of the Y2K
issues and their importance throughout the Company. The Inventory step included
the identification and cataloging of each item that must be verified for
compliance with Y2K processing. The Evaluation step involved the evaluation and
categorization of the critical nature of each item based on established
criteria. The Determination step includes making informed management decisions
regarding the strategy to be taken for each individual item. The Remediation
step involves repair of all components of a process that could improperly
process dates. The Re-engineering step consists of rewriting and/or replacing
whole units of software code. The Multi-level testing step involves the
development of detailed testing criteria and the implementation of those testing
plans. The Implementation step involves the coordination of the release of
applications/systems into the live systems environment.
18
<PAGE>
The Post-implementation step will include the on-going monitoring of
applications/systems that have been repaired and placed into the live systems
environment.
The Company has completed the Assessment Phase for all items. The Company
estimates that approximately 92% of all items are entirely completed. Completed
items are either compliant, will be retired prior to 2000, or are low priority
items that do not affect business and will be addressed at a later time (work
around processes will be implemented). In addition, the Company estimates that
Phase 2 - Remediation is 96% complete, Phase 3 - Verification and Testing is 94%
complete and Phase 4 - Implementation is 93% complete.
Contingency Plans - The Company is developing Year 2000 Business Contingency
Plans for conducting its business operations in the event of crises. This effort
is not limited to the risks posed by the potential Year 2000 failures of the
Company's internal information systems or infrastructures, but also includes the
potential secondary impact on the Company of Year 2000 failures, including
potential systems failures of business partners and infrastructure service
providers. Completion of these contingency plans is scheduled for November 30,
1999.
Costs of Y2K Compliance - The Company currently estimates that the costs to
become Y2K compliant will approximate $11 million. The Company currently
anticipates that approximately 50% of these costs will be for hardware and
software and the remainder will be primarily internal personnel costs. The
Company estimates that it has incurred approximately $10 million of these costs
through September 30, 1999. The estimated hardware and software costs are
included in the Company's definition of Y2K costs in cases where such
expenditures have been accelerated in order to address Y2K issues.
Risks - There are many risks associated with the Year 2000 issue, including
without limitation the possibility that the Company will be unable to receive
client phone calls or that the Company will be unable to initiate phone calls on
behalf of its clients. Such possibilities could have a material adverse effect
on the Company depending on the nature of the cause and the speed with which it
could be corrected or an alternative implemented. If the Company's service
providers are unable to provide network switching capability, the Company will
be unable to perform its revenue-producing activities. If the Company's client
customer data does not have Year 2000 compliant dates, additional processing
will be required before revenue-producing activities using these data can be
performed. If internal systems or vendor application systems fail, the Company
will be unable to perform revenue-producing activities until such time as the
problem can be isolated and repaired.
As with other teleservices providers, there exists a worst case scenario
possibility that a failure to correct a Year 2000 program in one or more of the
Company's mission critical systems or IT applications could cause a significant
disruption of or interruption in certain of the Company's normal business
functions. Based on assessments and work to date, management believes that any
such material disruption to its operations due to failure of an internal system
is unlikely. However, due to the uncertainty inherent in Year 2000 issues
generally and those that are beyond the Company's control in particular (e.g.
the final Year 2000 readiness of our clients, suppliers, electric, gas and other
public utilities, telecommunications carriers, and joint venture and foreign
investment interests), there can be no assurance that one or more such failures
would not have a material impact on the Company's results of operations,
liquidity or financial condition.
The Company contracted for an external review of its Y2K compliance program by
an independent third party in order to review and validate its program, assess
its readiness, and identify areas of additional need on a worldwide basis. The
external review has been completed, generally validated the Company's Y2K
compliance program and concluded that the Company was proceeding in due course
to become Y2K ready. The Company has addressed areas of additional need
identified by the external review.
The above information is based on the Company's current best estimates, which
were derived using numerous assumptions of future events, including the
continued availability and future costs of certain technological and other
resources, third party modification actions, and other factors. Given the
complexity of these issues and possible unidentified risks, actual results may
vary materially from those anticipated and discussed above. Specific factors
that might cause such differences include, among others, the availability and
cost of personnel trained in this area, the ability to locate and correct all
affected computer code, the timing and success of Year 2000 remedial efforts of
our clients, suppliers and business partners, and similar uncertainties.
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. The Company experiences periodic fluctuations related
to both the start-up costs associated with expansion into a new region and the
implementation of clients' teleservicing activities. In addition, 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.
19
<PAGE>
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.
ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standard ("SFAS") 133, Accounting for
Derivative Investments and Hedging Activities, was issued in June 1998. SFAS 133
establishes accounting standards for derivative instruments and for hedging
activities. The standard is effective for all fiscal quarters of fiscal years
beginning after June 15, 2001. The Company anticipates adopting this accounting
pronouncement in the third quarter 2001; however, management believes that it
will not have a significant impact on the Company's consolidated financial
statements.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Such statements
are identified by the use of forward-looking words or phrases which may include
but are not limited to, "intended," "will be positioned," "expects," "expected,"
"anticipates," "anticipated," "believes" and similar expressions. The
forward-looking statements are based on the Company's current expectations. All
statements other than statements of historical facts included in this Form 10-Q,
including those regarding the Company's financial position, business strategy,
projected costs and plans and objectives of management for future operations,
are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, there
can be no assurance that such expectations will prove to be correct. Because
forward-looking statements involve risks and uncertainties, the Company's actual
results could differ materially. Important factors that could cause actual
results to differ materially from the Company's expectations may include, but
are not limited to, the effects of leverage, restrictions imposed by the terms
of indebtedness, reliance on major clients, risks associated with managing a
global business, fluctuations in operating results, reliance on
telecommunications and computer technology, risks associated with the Company's
acquisition strategy, the dependence on telephone service, the competitive
industry, dependence on labor force, foreign currency risks, the effects of
business regulation, dependence on key personnel and control by management, and
risks associated with Year 2000 failures (see discussion above under the caption
"Year 2000 Issue"). All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on behalf of the Company are
expressly qualified in their entirety by this paragraph. The Company disclaims,
however, any intent or obligation to update its forward-looking statements.
20
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risks associated primarily with changes in
foreign currency exchange rates. The Company has operations in many parts of the
world however, both revenues and expenses of those operations are typically
denominated in the currency of the country of operations, providing a natural
hedge. The Company entered into certain hedging transactions during the first
nine months of 1999, designed to hedge foreign currency exchange risk related to
short term intercompany loans, however the amounts involved were not material.
21
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits
--------
(a) Exhibits:
--------
10.1 Third Amendment dated September 30, 1999 to Amended
Credit Agreement
27 Financial Data Schedule
22
<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: November 15, 1999 SITEL Corporation
By: /s/ W. Gar Richlin
-----------------------------------
W. Gar Richlin
Executive Vice-President and
Chief Financial Officer
(Principal Financial Officer)
23
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
EXHIBITS INDEX:
- --------------
10.1 Third Amendment dated September 30, 1999 to Amended Credit Agreement
27 Financial Data Schedule
24
THIRD AMENDMENT
THIRD AMENDMENT (this "Amendment"), dated as of September 30, 1999, among
SITEL CORPORATION, a Minnesota corporation (the "Borrower"), the lenders party
to the Credit Agreement referred to below (the "Banks"), and BANKERS TRUST
COMPANY, as agent (in such capacity, the "Agent"). All capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
provided such terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks, the Documentation Agent, the Syndication
Agent and the Agent are parties to a Credit Agreement, dated as of July 24, 1997
and amended and restated as of March 10, 1998 (as amended, modified or
supplemented through, but not including, the date hereof, the "Credit
Agreement"); and
WHEREAS, the Borrower has requested, and the Banks have agreed, to the
amendments to the Credit Agreement provided for herein, in each case on the
terms and conditions set forth herein;
NOW, THEREFORE, it is agreed:
1. Section 3.01(a) of the Credit Agreement is hereby amended by deleting
the text "1/4 of 1%" appearing therein and inserting the text "1/2 of 1%" in
lieu thereof.
2. Section 3.01 of the Credit Agreement is hereby further amended by
inserting the following new clause (g) at the end thereof:
"(g) The Borrower agrees to pay to the Agent for distribution
to each Bank (based on each such Bank's respective RL Percentage) the
following fees:
(i) in the event that the Termination Date has not
occurred by April 13, 2000, a fee equal to 1/4 of 1% of the
Total Revolving Loan Commitment on April 13, 2000 (or, if the
Total Revolving Loan Commitment has been terminated, 1/4 of 1%
of the sum of the aggregate principal amount of all
outstanding Loans on such date plus the aggregate amount of
all Letter of Credit Outstandings on such date), which fee
shall be due and payable on April 13, 2000; and
(ii) in the event that the Termination Date has not
occurred by October 13, 2000, an additional fee equal to 1/2
of 1% of the Total Revolving Loan Commitment on October 13,
2000 (or, if the Total Revolving Loan Commitment has been
terminated, 1/2 of 1% of the sum of the aggregate principal
amount of all outstanding Loans on such date plus the
aggregate amount of all Letter of Credit Outstandings on such
date), which fee shall be due and payable on October 13,
2000."
25
<PAGE>
3. Clause (xii) of Section 9.01 of the Credit Agreement is hereby deleted
in its entirety and the following new clause (xii) is inserted in lieu thereof:
"(xii) Liens placed upon any of the assets of a
Foreign Subsidiary of the Borrower to secure any Foreign
Subsidiary Third Party Borrowings incurred pursuant to Section
9.04(v), provided that in all events the Lien encumbering such
assets does not encumber any asset of the Borrower or any
Domestic Subsidiary thereof;".
4. Clause (v) of Section 9.04 of the Credit Agreement is hereby deleted in
its entirety and the following new clause (v) is inserted in lieu thereof:
"(v) Indebtedness of any Foreign Subsidiary of the
Borrower under lines of credit extended by third Persons to
such Foreign Subsidiary the proceeds of which Indebtedness are
used for any Foreign Subsidiary's working capital and general
corporate purposes, provided that the aggregate principal
amount of all such Indebtedness incurred pursuant to this
clause (v), together with the aggregate principal amount of
all Existing Indebtedness under such lines of credit, shall
not exceed $100,000,000 (or the Dollar Equivalent thereof in
the case of Indebtedness incurred in a currency other than
Dollars) at any time outstanding (the "Foreign Subsidiary
Third Party Borrowings");".
5. Clause (vi) of Section 9.04 of the Credit Agreement is hereby deleted in
its entirety and the following new clause (vi) is inserted in lieu thereof:
"(vi) intercompany Indebtedness among the Borrower
and its Subsidiaries to the extent permitted by Sections
9.05(ix), (xiii), (xiv), (xv) and (xvii);".
6. Section 9.05 of the Credit Agreement is hereby amended by (i) deleting
the word "and" appearing at the end of clause (xv) thereof, (ii) deleting the
period appearing at the end of clause (xvi) thereof and inserting ";and" in lieu
thereof, (iii) inserting the following new clause (xvii) immediately after such
clause (xvi):
"(xvii) Wholly-Owned Foreign Subsidiaries of the
Borrower may make Intercompany Loans and/or cash equity
contributions among one another."
and (iv) inserting the following new sentence at the end thereof:
"To the extent that the Borrower or a Subsidiary
thereof has an Intercompany Loan outstanding to a Foreign
Subsidiary of the Borrower as permitted by clauses (xiii),
(xiv), (xv) and (xvii) of this Section 9.05, the Borrower or
the Subsidiary which has made such Intercompany Loan may
convert the same into an equity contribution to the Foreign
Subsidiary which is the obligor of such Intercompany Loan and
such conversion shall not constitute an additional Investment
for purposes of clause (xv) of this Section 9.05."
7. The table appearing in Section 9.10 of the Credit Agreement is hereby
deleted in its entirety and the following new table is inserted in lieu thereof:
26
<PAGE>
"First Quarter Ending Amount
--------------------- ------
September 30, 1999 $62,300,000
December 31, 1999 $63,500,000
March 31, 2000 $70,000,000
June 30, 2000 $70,000,000
September 30, 2000 and the last day of each
fiscal quarter of the
Borrower thereafter $75,000,000".
8. The definition of "Applicable Base Rate Margin" appearing in Section
11.01 of the Credit Agreement is hereby deleted in its entirety and the
following new definition of "Applicable Base Rate Margin" is inserted in lieu
thereof:
"Applicable Base Rate Margin" shall mean (i) for periods prior
to October 13, 1999, 1/4 of 1% less the then applicable Interest
Reduction Discount, if any, and (ii) for periods from and after October
13, 1999, 1% plus the Additional Margin, if any, then in effect.
9. The definition of "Applicable Eurodollar Rate Margin" appearing in
Section 11.01 of the Credit Agreement is hereby deleted in its entirety and the
following new definition of "Applicable Eurodollar Rate Margin" is inserted in
lieu thereof:
"Applicable Eurodollar Rate Margin" shall mean (i) for periods
prior to October 13, 1999, 1-1/4% less the then applicable Interest
Reduction Discount, if any, and (ii) for periods from and after October
13, 1999, 2% plus the Additional Margin, if any, then in effect.
10. The definition of "Consolidated EBITDA" appearing in Section 11.01 of
the Credit Agreement is hereby deleted in its entirety and the following new
definition of "Consolidated EBITDA" is inserted in lieu thereof:
"Consolidated EBITDA" shall mean, for any period, Consolidated
EBIT for such period, adjusted by adding thereto the amount of all
amortization of intangibles and depreciation that were deducted in
arriving at Consolidated EBIT for such period (including deferred
financing, legal and accounting costs associated with the Original
Credit Agreement, this Agreement and the Senior Subordinated Notes),
but determined without giving effect to (x) any non-cash charges of up
to $8,500,000 in the aggregate which is taken by the Borrower on or
prior to December 31, 1998 in connection with the revaluation of the
businesses of Sitel Telebusiness New Zealand Limited, SITEL
Telebusiness Australia Pty Limited and/or SITEL Telebusiness Singapore
Pte Ltd., (y) any cash restructuring charges of up to $7,000,000 in the
aggregate in connection with severance costs incurred by Subsidiaries
of the Borrower on or prior to December 1998, and (z) any non-cash
charges of up to $10,000,000 in the aggregate which are taken by the
Borrower on or prior to December 31, 1999 in connection with the
write-off of capitalized
27
<PAGE>
costs with respect to certain of the Borrower's software platforms,
software investments and other intangible assets.
11. Section 11.01 of the Credit Agreement is hereby further amended by
inserting the following new definitions in the appropriate alphabetical order:
"Additional Margin" shall mean (i) for the period from October
13, 1999 through April 12, 2000, 0, (ii) for the period from April 13,
2000 through October 12, 2000, .25%, and (iii) for the period
thereafter, .50%.
"Termination Date" shall mean that date upon which the Total
Revolving Loan Commitment has been terminated, all Loans have been
repaid in full, all Letters of Credit have been terminated and all
other Obligations then outstanding have been paid in full.
12. The Banks hereby waive any Event of Default that has arisen under the
Credit Agreement solely as a result of the Borrower failing to be in compliance
with Section 9.10 of the Credit Agreement (before giving effect to this
Amendment) for the Test Period ended on September 30, 1999.
13. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
14. This Amendment may be executed in any number of counterparts (including
by way of facsimile) and by the different parties hereto on separate
counterparts, each of which counterparts when executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A complete set of counterparts shall be lodged with the Borrower and
the Agent.
15. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
16. This Amendment shall become effective as of September 30, 1999 on the
date (the "Third Amendment Effective Date") when the Borrower and the Required
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Agent at the Notice Office.
17. In order to induce the Banks to enter into this Amendment, the Borrower
hereby agrees to pay to each Bank which executes and delivers to the Agent a
counterpart of this Amendment on or before 5:00 p.m. (New York time) on October
12, 1999, a fee equal to 1/5 of 1% of such Bank's Revolving Loan Commitment on
the Third Amendment Effective Date, with such fee to be earned on the Third
Amendment Effective Date and payable on the Business Day immediately thereafter.
18. In order to further induce the Banks to enter into this Amendment, the
Borrower hereby represents and warrants that (i) no Default or Event of Default
exists as of the Third Amendment Effective Date, after giving effect to this
Amendment, and (ii) on the Third Amendment Effective Date, after giving effect
to this Amendment, all representations and warranties contained in the Credit
Agreement and in the other Credit Documents are true and correct in all material
respects (it being understood and agreed that any representation or warranty
which by its terms is made as of a specified date shall be true and correct in
all material respects only as of such specified date).
28
<PAGE>
19. From and after the Third Amendment Effective Date, all references in
the Credit Agreement and each of the Credit Documents to the Credit Agreement
shall be deemed to be references to the Credit Agreement as amended hereby.
* * *
29
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment to be duly executed and delivered as of the date first above
written.
SITEL CORPORATION
By: /s/
-----------------------------------
Title:
BANKERS TRUST COMPANY,
Individually and as Agent
By: /s/
-----------------------------------
Title:
U.S. BANK NATIONAL ASSOCIATION
By: /s/
-----------------------------------
Title:
FIRST UNION NATIONAL BANK
By: /s/
-----------------------------------
Title:
THE BANK OF NEW YORK
By: /s/
-----------------------------------
Title:
30
<PAGE>
BANK ONE, N.A.
By: /s/
-----------------------------------
Title:
COMERICA BANK
By: /s/
-----------------------------------
Title:
CREDIT AGRICOLE INDOSUEZ
By: /s/
-----------------------------------
Title:
THE BANK OF NOVA SCOTIA
By: /s/
-----------------------------------
Title:
WACHOVIA BANK
By: /s/
-----------------------------------
Title:
31
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from form
10Q and is qualified in its entirety by reference to such form 10Q.
</LEGEND>
<CIK> 0000943820
<NAME> Sitel Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 12,166
<SECURITIES> 0
<RECEIVABLES> 170,352
<ALLOWANCES> 4,667
<INVENTORY> 0
<CURRENT-ASSETS> 190,329
<PP&E> 226,290
<DEPRECIATION> 115,550
<TOTAL-ASSETS> 420,815
<CURRENT-LIABILITIES> 111,080
<BONDS> 100,000
0
0
<COMMON> 68
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<TOTAL-LIABILITY-AND-EQUITY> 420,815
<SALES> 531,778
<TOTAL-REVENUES> 531,778
<CGS> 284,254
<TOTAL-COSTS> 525,402
<OTHER-EXPENSES> (51)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,353
<INCOME-PRETAX> (2,926)
<INCOME-TAX> 2,645
<INCOME-CONTINUING> (5,693)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,693)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
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