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 March 31, 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, STE. 1900
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 April 30, 1999, the Company had 65,449,638 shares of Common Stock
outstanding.
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets.......................... 2
Consolidated Condensed Statements of Income (Loss)............. 3
Consolidated Condensed Statements of Cash Flows................ 4
Notes to Consolidated Condensed Financial Statements........... 5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition........................... 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 19
Signature............................................................. 20
1
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 31, 1998 AND MARCH 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, MARCH 31,
1998 1999
---- ----
Current assets: (unaudited)
<S> <C> <C>
Cash and cash equivalents............................................ $ 14,472 $ 16,277
Trade accounts receivable (net of allowance for
doubtful accounts of $ 3,970 and
$3,740, in 1998 and 1999, respectively)........................... 129,809 139,194
Prepaid expenses..................................................... 5,257 5,428
Other assets......................................................... 6,024 5,306
Deferred income taxes................................................ 1,658 2,359
----------- -----------
Total current assets.................................. 157,220 168,564
Property and equipment, net............................................... 125,615 121,420
Deferred income taxes..................................................... 15,425 15,541
Goodwill, net............................................................. 93,288 89,492
Other assets.............................................................. 14,062 13,927
----------- -----------
Total assets.......................................... $ 405,610 $ 408,944
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable......................................................... $ 30,545 $ 24,347
Current portion of long-term debt.................................... 3,671 3,184
Current portion of capitalized lease obligations.................... 3,650 2,734
Trade accounts payable............................................... 30,784 29,872
Income taxes payable................................................. 3,875 2,834
Accrued compensation................................................. 15,620 17,044
Accrued operating expenses........................................... 23,527 21,909
Deferred revenue and other........................................... 3,888 15,807
----------- -----------
Total current liabilities............................. 115,560 117,731
Long-term debt, excluding current portion................................. 107,027 114,534
Capitalized lease obligations, excluding current portion.................. 9,210 9,174
Deferred compensation..................................................... 1,591 1,693
Minority interest......................................................... 10,368 10,315
Stockholders' equity:
Common stock, voting, $.001 par value 200,000,000 shares
authorized, 64,399,645 and 65,191,718 shares issued and
outstanding in 1998 and 1999, respectively........................ 64 65
Paid-in capital...................................................... 157,892 158,094
Accumulated other comprehensive income (loss)........................ (4,428) (9,505)
Retained earnings.................................................... 8,326 6,843
----------- -----------
Total stockholders' equity............................ 161,854 155,497
----------- -----------
Total liabilities and stockholders' equity............ $ 405,610 $ 408,944
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
2
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
For The Three Months Ended
March 31, 1998 March 31, 1999
-------------- --------------
(in thousands, except per share data)
Revenues..................................... $ 137,748 $ 164,185
------------- -------------
Operating expenses:
Cost of services........................ 77,820 88,465
Selling, general and administrative
expenses........................... 54,672 74,382
------------- -------------
Total operating expenses...... 132,492 162,847
------------- -------------
Operating income......... 5,256 1,338
Other income (expense):
Interest expense, net................... (2,590) (3,156)
Other income, net....................... 135 63
------------- -------------
Income (loss) before income taxes
and minority interest..................... 2,801 (1,755)
Income tax expense (benefit)................. 1,117 (203)
Minority interest............................ (294) (69)
------------- -------------
Net income (loss) from continuing operations. 1,978 (1,483)
Extraordinary loss on refinancing of debt,
net of taxes.............................. 514 --
------------- -------------
Net income (loss)............................ $ 1,464 $ (1,483)
============= =============
Income (loss) from continuing operations per common share:
Basic........................................ $ 0.03 $ (0.02)
Diluted...................................... $ 0.03 $ (0.02)
Income (loss) per common share:
Basic........................................ $ 0.02 $ (0.02)
Diluted...................................... $ 0.02 $ (0.02)
Weighted average common shares outstanding:
Basic........................................ 63,295 64,842
Diluted...................................... 69,611 64,842
The accompanying notes are an integral part of the consolidated condensed
financial statements.
3
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For Three Months Ended
(dollars in thousands) March 31, 1998 March 31, 1999
-------------- --------------
Net income (loss) .................................. $ 1,464 $ (1,483)
Adjustments to reconcile net income (loss)
to net cash provided by (used
in) operating activities:
Depreciation and amortization ............... 9,654 11,095
Extraordinary loss on refinancing of debt ... 792 --
Gain on marketable securities ............... (208) --
Change in assets and liabilities:
Trade accounts receivable ................ (12,829) (12,427)
Other assets ............................. (4,711) 723
Trade accounts payable ................... (3,808) (211)
Other liabilities ........................ (4,552) 10,161
--------- ---------
Net cash provided by (used in)
operating activities ................ (14,198) 7,858
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment ........... (11,683) (7,479)
Proceeds from sale-leasebacks of facilities ... 9,336 --
Sale of marketable securities ................. 257 --
Changes in other assets, net .................. 55 --
--------- ---------
Net cash used in investing activities ....... (2,035) (7,479)
--------- ---------
Cash flows from financing activities:
Borrowings on note payable .................... 10,720 1,501
Repayments of note payable .................... (1,303) (7,153)
Borrowings on long-term debt .................. 125,808 11,242
Repayment of long-term debt and capitalized
lease obligations .......................... (130,354) (5,030)
Other ......................................... 76 (18)
--------- ---------
Net cash provided by financing activities ... 4,947 542
--------- ---------
Effect of exchange rates on cash ................... (681) 884
--------- ---------
Net increase (decrease) in cash ............. (11,967) 1,805
Cash and cash equivalents, beginning of period ..... 24,285 14,472
--------- ---------
Cash and cash equivalents, end of period ........... $ 12,318 $ 16,277
========= =========
The accompanying notes are an integral part of the consolidated condensed
financial statements.
4
<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, 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 is primarily due to the
impact of the change in operating results combined with non-deductible business
acquisition expenses and international, state and local income taxes.
3. COMPREHENSIVE INCOME (LOSS):
The Company's comprehensive income (loss) was $141,000 and $(6,561,000) for the
three months ended March 31, 1998 and 1999, respectively. The difference between
the Company's reported net income (loss) and comprehensive income (loss) for
those three month periods is due to the change in the currency exchange
adjustment. The accumulated other comprehensive income (loss) included in the
Company's Consolidated Condensed Balance Sheet at December 31, 1998 and March
31, 1999 is primarily the accumulated currency exchange adjustment.
4. RESTRUCTURING:
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 250 employees. The
restructuring expenses also included $0.2 million for the cost of excess leased
facilities. The amount of severance and other costs paid during 1998 and the
first quarter of 1999 was approximately $3.4 million.
5. 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 March 31, 1999, and for the three months ended March 31, 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.
5
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATMENTS
5. 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
and other ..................... -- -- 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 STATMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED):
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 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 ...........$ 3,223 $ 1,575 $ 11,479 $ -- $ 16,277
Trade accounts receivable, net....... 54,762 36,608 71,057 (23,233) 139,194
Prepaid expenses and other
current assets ................... 3,010 166 9,917 -- 13,093
--------- --------- --------- --------- ---------
Total current assets .............. 60,995 38,349 92,453 (23,233) 168,564
Property and equipment, net.......... 30,215 22,726 68,479 -- 121,420
Deferred income taxes ............... 9,390 -- 6,151 -- 15,541
Goodwill, net ....................... 1,514 20,796 67,182 -- 89,492
Other assets ........................ 10,565 146 3,216 -- 13,927
Investments in subsidiaries.......... 181,800 82,622 -- (264,422) --
Notes receivable, intercompany ...... -- 27,394 -- (27,394) --
--------- --------- --------- --------- ---------
Total assets ......................$ 294,479 $ 192,033 $ 237,481 $(315,049) $ 408,944
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable .........................$ -- $ -- $ 24,347 $ -- $ 24,347
Current portion of long-term debt...... 1,731 -- 1,453 -- 3,184
Current portion of capitalized
lease obligations ................ 247 76 2,411 -- 2,734
Trade accounts payable ................ 10,017 2,480 40,608 (23,233) 29,872
Accrued expenses and other
current liabilities............... 17,294 7,638 32,662 -- 57,594
--------- --------- --------- --------- ---------
Total current liabilities.............. 29,289 10,194 101,481 (23,233) 117,731
Long-term debt, excluding
current portion................... 108,000 -- 6,534 -- 114,534
Capitalized lease obligations,
excluding current portion......... -- 39 9,135 -- 9,174
Notes payable, intercompany and
other ............................ -- -- 27,394 (27,394) --
Deferred compensation ................. 1,693 -- -- -- 1,693
Minority interest ..................... -- -- 10,315 -- 10,315
Stockholders' equity .................. 155,497 181,800 82,622 (264,422) 155,497
--------- --------- --------- --------- ---------
Total liabilities and
stockholders' equity .............$ 294,479 $ 192,033 $ 237,481 $(315,049) $ 408,944
========= ========= ========= ========= =========
</TABLE>
7
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED):
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ........................ $ 34,072 $ 41,006 $ 62,670 $ -- $ 137,748
--------- --------- --------- --------- ---------
Operating expenses:
Cost of services .............. 17,960 23,346 36,514 -- 77,820
Selling, general and
administrative expenses..... 15,124 14,326 25,222 -- 54,672
--------- --------- --------- --------- ---------
Total operating expenses ........ 33,084 37,672 61,736 -- 132,492
--------- --------- --------- --------- ---------
Operating income ................ 988 3,334 934 -- 5,256
--------- --------- --------- --------- ---------
Other income (expense):
Equity in earnings (losses) of
subsidiaries, net of tax ... 1,781 (163) -- (1,618) --
Intercompany charges .......... 56 436 (492) -- --
Interest expense, net ......... (1,113) (780) (697) -- (2,590)
Other income .................. 135 -- -- -- 135
--------- --------- --------- --------- ---------
Total other income (expense). 859 (507) (1,189) (1,618) (2,455)
--------- --------- --------- --------- ---------
Income (loss) before income taxes
and minority interest ...... 1,847 2,827 (255) (1,618) 2,801
Income tax expense (benefit) ... (131) 1,046 202 -- 1,117
Minority interest ............... -- -- (294) -- (294)
--------- --------- --------- --------- ---------
Net income (loss) from
continuing operations....... 1,978 1,781 (163) (1,618) 1,978
Extraordinary loss on refinancing
of debt, net of taxes....... 514 -- -- -- 514
--------- --------- --------- --------- ---------
Net income (loss) ............... $ 1,464 $ 1,781 $ (163) $ (1,618) $ 1,464
========= ========= ========= ========= =========
</TABLE>
8
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED):
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ..................... $ 37,789 $ 49,871 $ 76,525 $ -- $ 164,185
--------- --------- --------- --------- ---------
Operating expenses:
Cost of services ........... 16,547 29,638 42,280 -- 88,465
Selling, general and
administrative
expenses ............... 22,648 15,471 36,263 -- 74,382
--------- --------- --------- --------- ---------
Total operating expenses.. 39,195 45,109 78,543 -- 162,847
--------- --------- --------- --------- ---------
Operating income (loss) ...... (1,406) 4,762 (2,018) -- 1,338
--------- --------- --------- --------- ---------
Other income (expense):
Equity in earnings of
subsidiaries, net of
tax ..................... 494 (2,409) -- 1,915 --
Intercompany charges ......... 50 503 (553) -- --
Interest income (expense)
net ..................... (1,718) (798) (640) -- (3,156)
Other income (expense) ....... 74 -- (11) -- 63
--------- --------- --------- --------- ---------
Total other income
(expense) ............... (1,100) (2,704) (1,204) 1,915 (3,093)
--------- --------- --------- --------- ---------
Income (loss) before income
taxes and minority
interest ................ (2,506) 2,058 (3,222) 1,915 (1,755)
Income tax expense (benefit).. (1,023) 1,564 (744) -- (203)
Minority interest ............ -- -- (69) -- (69)
--------- --------- --------- --------- ---------
Net income (loss) ............ $ (1,483) $ 494 $ (2,409) $ 1,915 $ (1,483)
========= ========= ========= ========= =========
</TABLE>
9
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED):
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 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 ........... $ (4,746) $ 1,105 $ (10,557) $ -- $ (14,198)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Investments in subsidiaries ....... (4,246) (7,781) -- 12,027 --
Dividend on common stock .......... -- 10,000 -- (10,000) --
Purchases of property and
equipment ...................... (3,532) (3,154) (4,997) -- (11,683)
Proceeds from sales of property
and equipment .................. 9,336 -- -- -- 9,336
Sale of marketable securities ..... 257 -- -- -- 257
Changes in other assets ........... -- -- 55 -- 55
--------- --------- --------- --------- ---------
Net cash provided by (used in)
investing activities ........... 1,815 (935) (4,942) 2,027 (2,035)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Borrowings on notes payable ....... -- -- 10,720 -- 10,720
Repayments of notes payable ....... -- -- (1,303) -- (1,303)
Borrowings of long-term debt ...... 124,399 -- 1,409 -- 125,808
Repayment of long-term debt and
capital lease .................. (127,422) -- (2,932) -- (130,354)
obligations
Net capital contribution from
parent ......................... -- 4,246 7,781 (12,027) --
Net borrowings and payments on
note to parent ................. -- (5,000) 5,000 -- --
Dividend on common stock .......... -- -- (10,000) 10,000 --
Other ............................. 1 -- 75 -- 76
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities ........... (3,022) (754) 10,750 (2,027) 4,947
--------- --------- --------- --------- ---------
Effect of exchange rates on cash.... -- -- (681) -- (681)
--------- --------- --------- --------- ---------
Net decrease in cash ................ (5,953) (584) (5,430) -- (11,967)
Cash and cash equivalents,
beginning of period............. 11,514 2,075 10,696 -- 24,285
--------- --------- --------- --------- ---------
Cash and cash equivalents,
end of period .................. $ 5,561 $ 1,491 $ 5,266 $ -- $ 12,318
========= ========= ========= ========= =========
</TABLE>
10
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED):
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 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 ........... $ (6,914) $ 7,699 $ 7,073 $ -- $ 7,858
-------- -------- -------- -------- --------
Cash flows from investing activities:
Investments in
subsidiaries ................... 5,450 (23) -- (5,427) --
Purchases of property and
equipment ...................... (1,640) (1,841) (3,998) -- (7,479)
-------- -------- -------- -------- --------
Net cash provided by (used
in) investing
activities ..................... 3,810 (1,864) (3,998) (5,427) (7,479)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Borrowings on notes payable ....... -- -- 1,501 -- 1,501
Repayments of notes payable ....... -- -- (7,153) -- (7,153)
Borrowings on long-term debt ...... 8,000 -- 3,242 -- 11,242
Repayment of long-term debt
and capital lease obligations .. (4,065) -- (965) -- (5,030)
Net capital contribution
from parent .................... -- (5,450) 23 5,427 --
Other ............................. (18) -- -- -- (18)
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities ........... 3,917 (5,450) (3,352) 5,427 542
-------- -------- -------- -------- --------
Effect of exchange rates on cash .... -- -- 884 -- 884
-------- -------- -------- -------- --------
Net increase in cash ................ 813 385 607 -- 1,805
Cash and cash equivalents,
beginning of period ............ 2,410 1,190 10,872 -- 14,472
-------- -------- -------- -------- --------
Cash and cash equivalents, end
of period ...................... $ 3,223 $ 1,575 $ 11,479 $ -- $ 16,277
======== ======== ======== ======== ========
</TABLE>
11
<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 March 31,
1998 1999
------------------------ -----------------------
<S> <C> <C> <C> <C>
Revenues ...................................... $ 137,748 100.0 % $ 164,185 100.0 %
----------------------- -----------------------
Operating expenses:
Cost of services ............................. 77,820 56.5 % 88,465 53.9 %
Selling, general, and administrative expenses 54,672 39.7 % 74,382 45.3 %
----------------------- -----------------------
Total operating expenses .................. 132,492 96.2 % 162,847 99.2 %
----------------------- -----------------------
Operating income .......................... 5,256 3.8 % 1,338 0.8 %
Interest expense, net ......................... (2,590) (1.9) % (3,156) (1.9) %
Other income, net ............................. 135 0.1 % 63 -- %
----------------------- -----------------------
Income (loss) before income taxes and
minority interest ........................... 2,801 2.0 % (1,755) (1.1) %
Income tax expense (benefit) .................. 1,117 0.8 % (203) (0.1) %
Minority interest ............................. (294) (0.2) % (69) -- %
----------------------- -----------------------
Net income (loss) from continuing operations .. 1,978 1.4 % (1,483) (0.9) %
Extraordinary loss on refinancing of debt, net
of taxes ................................... 514 0.3 % -- -- %
----------------------- -----------------------
Net income (loss) ............................. $ 1,464 1.1 % $ (1,483) (0.9) %
======================= =======================
</TABLE>
12
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED MARCH 31, 1999 VS. THREE MONTHS ENDED MARCH 31, 1998
REVENUES:
Revenues increased $26.4 million, or 19.2%, to $164.2 million in the three
months ended March 31, 1999 from $137.7 million in the three months ended March
31, 1998. Of this increase, approximately $16.4 million was attributable to
services initiated for new clients and approximately $10.0 million was
attributable to increased revenues from existing clients. 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 represents primarily labor and telephone expenses directly
related to teleservicing activities. Cost of services increased $10.6 million,
or 13.7%, to $88.5 million in the three months ended March 31, 1999 from $77.8
million in the three months ended March 31, 1998. The increase was primarily
attributable to the Company's continued growth. As a percentage of revenues,
cost of services decreased to 53.9% in the first quarter of 1999 from 56.5% in
the first quarter of 1998. The decrease was primarily attributable to certain
initial implementation revenues for a large client where the costs associated
with those revenues are included in selling, general and administrative
expenses. Excluding the impact of this particular implementation, cost of
services as a percentage of revenues would have increased to 57.3% for the three
months ended March 31, 1999 from 56.5% in the first quarter of 1998. The
increase as a percent of revenue was primarily attributable to the reduction in
revenue in the first half of the quarter experienced in several business units.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses represent expenses incurred to
directly support and manage the operations, and include costs of management,
administration, facilities expenses, depreciation and maintenance, amortization,
sales and marketing activities, and client support services. Selling, general
and administrative expenses increased $19.7 million, or 36.1%, to $74.4 million
in the three months ended March 31, 1999 from $54.7 million in the three months
ended March 31, 1998. Approximately half of this increase was directly
attributed to the initial implementation costs for a large client noted above.
As a percentage of revenues, selling, general and administrative expenses
increased to 45.3% in the first quarter of 1999 from 39.7% in the first quarter
of 1998. Excluding the impact of the implementation work noted above, selling,
general and administrative expense increased to 42.0% in the first quarter of
1999. This increase was primarily attributable to continued inefficiencies in
the Company's operations in the United Kingdom, start up expenses in the Asia
Pacific region and inefficiencies related to declines in certain North American
operations.
OPERATING INCOME:
Operating income decreased $3.9 million, or 74.5%, to $1.3 million in the three
months ended March 31, 1999 from $5.3 million in the three months ended March
31, 1998. As a percentage of revenues, operating income decreased to 0.8% in the
first quarter of 1999 from 3.8% in the first quarter of 1998. This decrease was
primarily due to the increase in selling, general and administrative expenses as
a percentage of revenue as noted above.
13
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
INTEREST EXPENSE, NET:
Interest expense, net of interest income, increased to $3.2 million in the three
months ended March 31, 1999 from $2.6 million in the three months ended March
31, 1998. This increase was primarily due to higher interest rates associated
with the issuance of the Company's 9.25% Senior Subordinated Notes in March,
1998, which refunded debt that had variable short term interest rates. The
increase in interest expense was also partially attributable to increased
borrowings utilized to support the Company's growth.
INCOME TAX EXPENSE (BENEFIT):
The Company recognized a tax benefit of $0.2 million in the three months ended
March 31, 1999 compared to tax expense of $1.1 million in the three months ended
March 31, 1998. This charge was primarily attributable to the change in
operating results noted earlier. The income tax (benefit) expense as a percent
of income (loss) before income taxes and minority interest decreased to 11.6% in
the three months ended March 31, 1999 from 39.9% in the three months ended March
31, 1998 primarily due to the impact of the change in operating results combined
with nondeductible expenses associated with acquisitions. .
NET INCOME (LOSS) FROM CONTINUING OPERATIONS AND NET INCOME (LOSS):
For the reasons discussed above, net income (loss) from continuing operations
decreased $3.5 million to $(1.5) million in the three months ended March 31,
1999 from $2.0 million in the three months ended March 31, 1998. After the
extraordinary loss on refinancing of debt in the three months ended March 31,
1998, net income decreased $3.0 million.
LIQUIDITY AND CAPITAL RESOURCES:
Cash provided by operating activities was approximately $7.9 million during the
three month period ended March 31, 1999. This was primarily the result of
non-cash charges and an increase in other liabilities, partially offset by
increases in accounts receivable. The Company anticipates that the accounts
receivable will continue to grow, using working capital, as the Company
continues to grow. Cash used in investing activities in the three months period
ended March 31, 1999 was $7.5 million of capital expenditures. Cash provided by
financing activities in the three month period ended March 31, 1999 of
approximately $0.5 million primarily related to borrowings on the Company's
available long term line of credit offset by repayments of notes payable.
At March 31, 1999, the Company had unused lines of credit totaling approximately
$35 million. The Company believes that funds generated from operations, existing
cash and the funds available under the credit facility will be sufficient to
finance its current operations, planned capital expenditures and internal growth
for the foreseeable future.
14
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
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 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 critical IT systems by the end
of June 1999. The functional points that are defined as critical IT issues
include internal and external computer systems for revenue generating
applications. The Company has developed a strategy for its mission critical
internal systems designed to have every functional point year 2000 compliant by
the end of June 1999. These 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 started 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 July 31, 1999. In
addition to communicating with significant clients, the Company's strategy to
deal with non-compliant external client customer data is a windowing technique
that will enable such 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
that are material to operations will be compliant by the end of June 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
15
<PAGE>
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. 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 Recognition /Awareness, Inventory, and Evaluation
process steps for all items. The Company estimates that approximately 60% 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 another 30% of all items that the
Company believes it needs to complete to be Y2K compliant are in process steps
within Phase 2 - Remediation, and a small number of items are in Phases 3 and 4.
Costs of Y2K Compliance - The Company currently estimates that the costs to
become Y2K compliant will approximate $12-16 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 less than $7 million of these costs
through March 31, 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. These are the Company's current
cost estimates and they may change, perhaps materially.
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.
The Company believes that its critical internal systems and procedures will be
ready and tested before the year 2000.
16
<PAGE>
The Company believes that its reasonably likely worst case scenarios will
revolve around external factors including vendors and clients. Although the
Company expects to focus approximately 72% of its efforts in the IT area on this
external exposure, the Company has far less control over these issues. It is
reasonably likely that not all of the Company's clients will have all of their
internal systems year 2000 compliant before January 1, 2000.
As additional verification of readiness, the Company has contracted for an
external Y2K program review. This work, which has been nearly completed,
includes an independent third party review of the program to address Y2K issues
in every region of the Company. This project is being undertaken to verify
readiness as well as identify areas of additional need. The costs of the project
and the dates on which the Company plans to complete the Y2K modifications are
based on management's best estimates, which were derived using numerous
assumptions of future events, including the continued availability of certain
resources, third party modification plans, the Company's ability to implement
compliance in certain critical areas and other factors. However, there can be no
assurance that these estimates will be achieved, and actual results could differ
materially from those plans. The severity of problems to be confronted by the
Company for partial or complete non-compliance will depend on a variety of
factors (such as the nature of the resulting problem and the speed with which it
could be corrected or an alternative implemented) which are currently unknown.
Due to the general uncertainty inherent in the Year 2000 problem, resulting in
part from the uncertainty of the Year 2000 readiness of vendors and clients, the
Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition.
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.
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, 1999. The Company anticipates adopting this accounting
pronouncement in the third quarter of 1999; however, management believes that it
will not have a significant impact on the Company's consolidated financial
statements.
17
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
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.
18
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.1 Amendment No. 1 to the Amended and Restated SITEL Corporation
1995 Non-Employee Directors Stock Option Plan
(1) 10.2 SITEL Corporation 1999 Stock Incentive Plan
(2) 10.3 Amendment No. 1 to the SITEL Corporation 1999 Stock Incentive
Plan
27 Financial Data Schedule
(b) Reports on Form 8-K. The Company did not file a Form 8-K during
the quarter for which this report is filed.
- --------------------------------------------
(1) Previously filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-8 (Registration No. 333-78241)
(2) Previously filed as Exhibit 4.2 to the Company's Registration
Statement on Form S-8 (Registration No. 333-78241)
19
<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: May 14, 1999 SITEL Corporation
By: /s/ W. Gar Richlin
-------------------------------------------
W. Gar Richlin
Executive Vice-President and Chief
Financial Officer (Principal Financial
Officer)
20
<PAGE>
EXHIBIT INDEX
10.1 Amendment No. 1 to the Amended and Restated SITEL Corporation 1995
Non-Employee Directors Stock Option Plan
(1) 10.2 SITEL Corporation 1999 Stock Incentive Plan
(2) 10.3 Amendment No. 1 to the SITEL Corporation 1999 Stock Incentive Plan
27 Financial Data Schedule
- --------------------------------------------
(1) Previously filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-8 (Registration No. 333-78241)
(2) Previously filed as Exhibit 4.2 to the Company's Registration
Statement on Form S-8 (Registration No. 333-78241)
21
EXHIBIT 10.1
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED SITEL CORPORATION
1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
As adopted by the Board of Directors on January 18, 1999
The Board hereby amends the Amended and Restated SITEL Corporation 1995
Non-Employee Directors Stock Option Plan (the "Plan") as follows:
1. Section 1.2 of the Plan is amended to state in its entirety as follows:
1.2 "COMMITTEE" shall mean the members of the Board who are not
Participants; provided, however, that in respect of grants of Options under
the Plan or determinations under Section 10.1 of the Plan, the term
"Committee" shall mean the Board to the extent necessary to meet the
requirements of Rule 16b-3 under Section 16(b) of the 1934 Act.
2. Section 3.2 of the Plan is amended to state in its entirety as follows:
3.2 AUTHORITY OF COMMITTEE. The Committee shall have the authority (i)
to exercise all of the powers granted to it under the Plan, (ii) to
construe, interpret, and implement the Plan and any Option Agreements
issued pursuant to the Plan, (iii) to prescribe, amend, and rescind rules
and regulations relating to the Plan, including rules governing its own
operations, (iv) to make all determinations necessary or advisable for the
proper administration of the Plan, and (v) to correct any defect, supply
any omission, and reconcile any inconsistency in the Plan. Furthermore, in
respect of grants of Options under Section 5.1(b) of the Plan, the
Committee shall have discretion with respect to the eligibility or
selection of Participants to receive Options under the Plan, the number of
shares of Stock subject to Options, the timing of the grant of Options
pursuant to the Plan, or the purchase price thereunder. The determination
of the Committee pursuant to powers vested in it hereunder on all matters
relating to the Plan or any Option Agreement shall be final, binding, and
conclusive.
3. Section 3.3 of the Plan is amended to state in its entirety as follows:
3.3 ACTION OF COMMITTEE. The action of the majority of the members of
the Committee present at a duly held meeting shall be the action of the
Committee. Any action may be taken by a written instrument signed by a
majority of the Committee members, and any action so taken shall be as
fully effective as if it had been taken by a vote at a meeting of the
Committee. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option
granted thereunder.
<PAGE>
4. Section 5.1 of the Plan is amended to state in its entirety as follows:
5.1 OPTION GRANT DATES. The Committee shall or may grant Options to
purchase shares of Stock to eligible Participants as follows:
(a) Options to purchase 18,000 shares of Stock (as the same may
be adjusted pursuant to Section 9.1) shall be granted to each eligible
Participant on the date that such person is first elected or appointed
to a three-year term as a member of the Board and on each succeeding
date that such person is re-elected to the Board for a three-year
term. If an eligible Participant is first elected or appointed, or
re-elected or re-appointed, to a term of less than three years,
options to purchase a prorated number of shares of Stock equal to
6,000 shares (as the same may be adjusted pursuant to Section 9.1) per
full year within such term shall be granted to such Participant on the
date that such person is elected or appointed, or re-elected or
re-appointed, to the Board for such less than three-year term. For
purposes of the foregoing sentence, (i) the term "full year" means the
time period beginning with an annual stockholders meeting and ending
immediately prior to the next scheduled annual stockholders meeting
and (ii) the initial period of such less than three-year term which
begins on the date of the election or appointment and ends with the
next scheduled annual stockholders meeting (which for this purpose
shall be considered to be scheduled for a date one year after the most
recently held annual stockholders meeting) shall constitute a "full
year" for purposes of calculating the prorated number of shares to be
covered by the Option and determining when such Option becomes
exercisable under Section 6.5(a)(ii) below if it exceeds six months.
(b) In addition to the Options provided for in Section 5.1(a),
the Committee may discretionarily grant Options from time to time to
any eligible Participant to purchase such number of shares of Stock,
and on such terms and conditions, as shall be established by the
Committee and set forth in the Option Agreement for such Options. The
eligible Participant to be granted such additional Options shall
abstain from the Committee's vote on the grant to such eligible
Participant.
5.2 OPTION EXERCISE PRICE. The Option Exercise Price per share payable
by the Participant to the Company upon exercise of an Option granted
hereunder shall be not less than the Fair Market Value of a share of Stock
on the date the Option is granted.
5. Section 6.5(a) of the Plan is amended to state in its entirety as
follows:
6.5 EXERCISE OF OPTIONS. Each Option shall be exercisable as follows:
(a) (i) Each Option granted under Section 5.1(a) to an eligible
Participant upon election or appointment, or re-election or
re-appointment, to a three-year term as a member of the Board of
Directors shall become exercisable in
<PAGE>
three (3) equal annual installments, with the first installment
becoming exercisable on the date of the first annual meeting of the
stockholders of the Company following the date on which the Option was
granted and the second and third installments becoming exercisable on
the dates of the second and third annual meetings of the stockholders
of the Company, respectively, following the date on which the Option
was granted. (ii) Each Option granted under Section 5.1(a) to an
eligible Participant upon election or appointment, or re-election or
re-appointment, to a less than three-year term as a member of the
Board shall become exercisable in that number of equal annual
installments equal to the number of full years (determined in
accordance with Section 5.1(a) for all purposes of this Section 6.5)
in such less than three-year term, with the first installment becoming
exercisable on the date of the first annual meeting of the
stockholders of the Company which is one full year after the date on
which the Option was granted and any subsequent installment(s) (as
applicable) becoming exercisable on the dates of the second and third
(as applicable) annual meetings of the stockholders of the Company
which are two and three full years, respectively, following the date
on which the Option was granted. (iii) Each Option granted under
Section 5.1(b) shall become exercisable in accordance with the terms
and conditions specified in the Option Agreement delivered to the
eligible Participant receiving such Option.
6. Section 7.1 of the Plan is amended to state in its entirety as follows:
7.1 EXERCISE OF OPTION AFTER TERMINATION OF SERVICE. If the
Participant's service as a director of the Company terminates for any
reason, then the Participant's Options which were exercisable on the date
of the Participant's termination of service as a director (the "Termination
Date") shall remain in full force and effect and the Participant may
exercise such outstanding Options in accordance with their original terms
but in no event after the expiration date of the Option. All Options which
had been granted to the Participant as of the Termination Date but which
were not yet exercisable shall automatically terminate as of the
Termination Date, except as otherwise provided in the Option Agreement for
Options granted pursuant to Section 5.1(b). The Committee in its discretion
may determine whether any leave of absence constitutes a termination of
service on the Board for purposes of the Plan and the impact, if any, of
such leave of absence on Options theretofore granted under the Plan. Such
determination of the Committee shall be final, binding, and conclusive. Any
exercise of an Option following a Participant's death shall be made only by
the deceased Participant's executor or administrator or other duly
appointed representative reasonably acceptable to the Committee, unless the
deceased Participant's will specifically devises such Option, in which case
such exercise shall be made only by the beneficiary of such specific
devise. If a deceased Participant's personal representative or the
beneficiary of a specific devise under such deceased Participant's will is
entitled to exercise any Option pursuant to the preceding sentence, then
such representative or beneficiary shall be bound by all of the terms and
provisions of the Plan and the applicable Option Agreement which would have
applied to the deceased Participant.
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 16,277
<SECURITIES> 0
<RECEIVABLES> 142,934
<ALLOWANCES> 3,740
<INVENTORY> 0
<CURRENT-ASSETS> 168,564
<PP&E> 215,927
<DEPRECIATION> 94,507
<TOTAL-ASSETS> 408,944
<CURRENT-LIABILITIES> 117,731
<BONDS> 100,000
0
0
<COMMON> 65
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 408,944
<SALES> 164,185
<TOTAL-REVENUES> 164,185
<CGS> 88,465
<TOTAL-COSTS> 162,847
<OTHER-EXPENSES> (63)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,309
<INCOME-PRETAX> (1,755)
<INCOME-TAX> (203)
<INCOME-CONTINUING> (1,483)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,483)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
