UNITED STATES
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, 2000
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 incorporation or organization) (I.R.S. Employer
Identification No.)
111 SOUTH CALVERT STREET - SUITE 1900
BALTIMORE, MARYLAND 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 28, 2000, the Company had 70,995,591 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
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........17
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................18
Signature.....................................................................19
1
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
DECEMBER 31, 1999 AND MARCH 31, 2000
(in thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
----------- ------------
ASSETS (UNAUDITED)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 22,305 $ 18,376
Trade accounts receivable (net of allowance for doubtful accounts of
$5,622 and $4,932 in 1999 and 2000, respectively) 164,473 161,662
Prepaid expenses 7,997 8,002
Deferred income taxes 1,950 --
Other current assets 7,825 4,943
----------- ------------
Total current assets 204,550 192,983
Property and equipment, net 118,349 110,305
Goodwill, net 85,258 82,749
Deferred income taxes 15,649 16,881
Other assets 8,440 8,798
----------- ------------
Total assets $ 432,246 $ 411,716
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ 7,337 $ 4,549
Current portion of long-term debt 2,838 2,011
Current portion of capitalized lease obligations 4,308 3,780
Trade accounts payable 37,592 33,161
Income taxes payable 7,135 6,087
Accrued wages, salaries and bonuses 19,893 28,437
Accrued operating expenses 28,922 24,392
Deferred revenue and other 9,141 10,795
Deferred income taxes -- 239
----------- ------------
Total current liabilities 117,166 113,451
Long-term debt, excluding current portion 136,077 117,556
Capitalized lease obligations, excluding current portion 12,253 11,158
Deferred compensation 1,905 2,150
Minority interest 4,147 4,508
Stockholders' equity:
Common stock, voting, $.001 par value 200,000,000 shares authorized,
68,170,828 and 69,990,780 shares issued and outstanding in 1999
and 2000, respectively 68 70
Paid-in capital 165,870 168,404
Accumulated other comprehensive income (loss) (12,757) (16,116)
Retained earnings 7,517 10,535
----------- ------------
Total stockholders' equity 160,698 162,893
----------- ------------
Total liabilities and stockholders' equity $ 432,246 $ 411,716
=========== ============
</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)
(in thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1999 2000
------------ --------------
<S> <C> <C>
Revenues $ 164,185 $ 198,611
------------ --------------
Operating expenses:
Cost of services 88,465 109,987
Selling, general and administrative expenses 74,382 79,372
------------ --------------
Total operating expenses 162,847 189,359
------------ --------------
Operating income 1,338 9,252
Other income (expense):
Interest expense, net (3,156) (3,436)
Other income, net 63 (66)
------------ --------------
Income (loss) before income taxes and minority interest (1,755) 5,750
Income tax expense (benefit) (203) 2,474
Minority interest (69) 258
------------ --------------
Net income (loss) $ (1,483) $ 3,018
============ ==============
Income (loss) per common share:
Basic $ (0.02) $ 0.04
Diluted $ (0.02) $ 0.04
Weighted average common shares outstanding:
Basic 64,842 69,161
Diluted 64,842 75,786
</TABLE>
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)
(in thousands)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1999 2000
----------- --------------
<S> <C> <C>
Net income (loss) $ (1,483) $ 3,018
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 11,095 12,178
Change in assets and liabilities:
Trade accounts receivable (12,427) 733
Other assets 723 2,853
Trade accounts payable (211) (3,949)
Other liabilities 10,161 5,987
----------- --------------
Net cash provided by operating activities 7,858 20,820
----------- --------------
Cash flows from investing activities:
Purchases of property and equipment (7,479) (5,091)
----------- --------------
Net cash used in investing activities (7,479) (5,091)
----------- --------------
Cash flows from financing activities:
Borrowings on note payable 1,501 --
Repayments of note payable (7,153) (2,632)
Borrowings on long-term debt 11,242 15,000
Repayment of long-term debt and capitalized lease obligations (5,030) (35,318)
Common stock issued, net of expenses -- 2,544
Other (18) (7)
----------- --------------
Net cash provided by (used in) financing activities 542 (20,413)
----------- --------------
Effect of exchange rates on cash 884 755
----------- --------------
Net increase (decrease) in cash 1,805 (3,929)
Cash and cash equivalents, beginning of period 14,472 22,305
----------- --------------
Cash and cash equivalents, end of period $ 16,277 $ 18,376
=========== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
4
<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, 1999 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, 1999.
2. COMPREHENSIVE INCOME (LOSS):
The Company's comprehensive income (loss) was $(6,561,000) and $(341,000) for
the three months ended March 31, 1999 and 2000, respectively. The difference
between the Company's reported net income (loss) and comprehensive income (loss)
for those three-month periods is due to the impact of the change in currency
exchange rates on the translation of the assets and liabilities of the Company's
foreign subsidiaries. The accumulated other comprehensive income (loss) included
in the Company's Consolidated Condensed Balance Sheet at December 31, 1999 and
March 31, 2000 is primarily due to the accumulated currency exchange adjustment.
3. SUBSEQUENT EVENT:
On May 4, 2000, the Company announced a strategic partnership with Bellsystem24,
Inc., Japan's largest comprehensive marketing agency. Under the terms of the
partnership, Bellsystem24 will provide services and support in Japan for the
Company's clients and the Company will provide services and support for
Bellsystem24's clients in the United States. In connection with the formation of
the partnership, the Company will restructure its operations in Japan and sell
the assets associated with its contact center in Japan to Bellsystem24. As a
result, the Company estimates that it will incur a restructuring charge of
approximately $3.5 million (approximately $2.0 million, net of taxes) in the
second quarter of 2000.
5 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
4. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION:
The Company's 9.25% Senior Subordinated Notes are guaranteed, on a full,
unconditional and joint and several basis, by substantially 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, 1999 and March 31, 2000, and for the three
months ended March 31, 1999 and 2000 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.
6 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
4. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED):
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 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 $ 7,477 $ 2,102 $ 12,726 $ -- $ 22,305
Trade accounts receivable, net 120,500 4,310 85,204 (45,541) 164,473
Prepaid expenses and other
current assets 4,024 (7) 13,755 -- 17,772
------------ ---------- ----------- ----------- ---------------
Total current assets 132,001 6,405 111,685 (45,541) 204,550
Property and equipment, net 51,231 3,793 63,325 -- 118,349
Goodwill, net 21,564 -- 63,694 -- 85,258
Deferred income taxes 8,111 -- 7,538 -- 15,649
Other assets 7,945 89 406 -- 8,440
Investments in subsidiaries 113,151 84,945 -- (198,096) --
Notes receivable, intercompany -- 20,259 -- (20,259) --
------------ ---------- ----------- ----------- ---------------
Total assets $ 334,003 $ 115,491 $ 246,648 $ (263,896) $ 432,246
============ ========== =========== =========== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ -- $ -- $ 7,337 $ -- $ 7,337
Current portion of long-term debt 695 -- 2,143 -- 2,838
Current portion of capitalized
lease obligations 1,496 48 2,764 -- 4,308
Trade accounts payable 12,143 1,085 69,905 (45,541) 37,592
Accrued expenses and other
current liabilities 22,555 1,207 41,329 -- 65,091
------------ ---------- ----------- ----------- ---------------
Total current liabilities 36,889 2,340 123,478 (45,541) 117,166
------------ ---------- ----------- ----------- ---------------
Long-term debt, excluding
current portion 130,000 -- 6,077 -- 136,077
Capitalized lease obligations,
excluding current portion 4,511 -- 7,742 -- 12,253
Notes payable, intercompany -- -- 20,259 (20,259) --
Deferred compensation 1,905 -- -- -- 1,905
Minority interest -- -- 4,147 -- 4,147
Stockholders' equity 160,698 113,151 84,945 (198,096) 160,698
------------ ---------- ----------- ----------- ---------------
Total liabilities and
stockholders'
equity $ 334,003 $ 115,491 $ 246,648 $ (263,896) $ 432,246
============ ========== =========== =========== ===============
</TABLE>
7 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
4. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED):
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
ASSETS
Current assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 1,098 $ 3,787 $ 13,491 $ -- $ 18,376
Trade accounts receivable, net 123,341 2,766 78,522 (42,967) 161,662
Prepaid expenses and other
current assets 2,671 38 10,929 (693) 12,945
------------ --------------- ---------------- -------------- ---------------
Total current assets 127,110 6,591 102,942 (43,660) 192,983
Property and equipment, net 45,946 3,390 60,969 -- 110,305
Goodwill, net 21,317 -- 61,432 -- 82,749
Deferred income taxes 10,090 -- 6,791 -- 16,881
Other assets 7,678 88 1,032 -- 8,798
Investments in subsidiaries 109,564 82,952 -- (192,516) --
Notes receivable, intercompany -- 19,758 -- (19,758) --
------------ --------------- ---------------- -------------- ---------------
Total assets $ 321,705 $ 112,779 $ 233,166 $ (255,934) $ 411,716
============ =============== ================ ============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ -- $ -- $ 4,549 $ -- $ 4,549
Current portion of long-term debt -- -- 2,011 -- 2,011
Current portion of capitalized
lease obligations 2,215 39 1,526 -- 3,780
Trade accounts payable 12,009 1,424 62,695 (42,967) 33,161
Accrued expenses and other
current liabilities 25,997 1,752 42,894 (693) 69,950
------------ --------------- ---------------- -------------- ---------------
Total current liabilities 40,221 3,215 113,675 (43,660) 113,451
------------ --------------- ---------------- -------------- ---------------
Long-term debt, excluding
current portion 112,500 -- 5,056 -- 117,556
Capitalized lease obligations,
excluding current portion 3,941 -- 7,217 -- 11,158
Notes payable, intercompany -- -- 19,758 (19,758) --
Deferred compensation 2,150 -- -- -- 2,150
Minority interest -- -- 4,508 -- 4,508
Stockholders' equity 162,893 109,564 82,952 (192,516) 162,893
------------ --------------- ---------------- -------------- ---------------
Total liabilities and
stockholders'
equity $ 321,705 $ 112,779 $ 233,166 $ (255,934) $ 411,716
============ =============== ================ ============== ===============
</TABLE>
8 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
4. 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 (losses) 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 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
4. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED):
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 97,427 $ 8,330 $ 93,222 $ (368) $ 198,611
Operating expenses:
Cost of services 52,448 4,441 53,098 -- 109,987
Selling, general and administrative
expenses 41,224 2,984 35,532 (368) 79,372
----------- ---------- ---------- ------------ ---------------
Total operating
expenses 93,672 7,425 88,630 (368) 189,359
----------- ---------- ---------- ------------
Operating income 3,755 905 4,592 -- 9,252
----------- ---------- ---------- ------------ ---------------
Other income (expense):
Equity in earnings (losses) of
subsidiaries, net of tax 2,154 1,324 -- (3,478) --
Intercompany charges -- 503 (503) -- --
Interest income (expense), net (2,964) (130) (342) -- (3,436)
Other income (expense) (6) -- (60) -- (66)
----------- ---------- ---------- ------------ ---------------
Total other income
(expense) (816) 1,697 (905) (3,478) (3,502)
----------- ---------- ---------- ------------ ---------------
Income before
income taxes and
minority interest 2,939 2,602 3,687 (3,478) 5,750
Income tax expense (benefit) (79) 448 2,105 -- 2,474
Minority interest -- -- 258 -- 258
----------- ---------- ---------- ------------ ---------------
Net income $ 3,018 $ 2,154 $ 1,324 $ (3,478) $ 3,018
=========== ========== ========== ============ ===============
</TABLE>
10 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
4. 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 (Continued)
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
4. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED):
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by
operating activities $ 3,856 $ 3,052 $ 13,912 $ -- $ 20,820
----------- ---------- ---------- ------------ ---------------
Cash flows from investing activities:
Investments in subsidiaries 1,987 676 -- (2,663) --
Purchases of property and
equipment (1,881) (56) (3,154) -- (5,091)
----------- ---------- ---------- ------------ ---------------
Net cash provided by
(used in) investing
activities 106 620 (3,154) (2,663) (5,091)
----------- ---------- ---------- ------------ ---------------
Cash flows from financing activities:
Repayments of notes payable -- -- (2,632) -- (2,632)
Borrowings on long-term debt 15,000 -- -- -- 15,000
Repayment of long-term debt
and capital lease obligations (33,055) -- (2,263) -- (35,318)
Common stock issued, net
of expenses 2,544 -- -- -- 2,544
Net borrowings and payments
on intercompany balances 5,177 -- (5,177) -- --
Net capital contribution from
parent -- (1,987) (676) 2,663 --
Other (7) -- -- -- (7)
----------- ---------- ---------- ------------ ---------------
Net cash used in
financing activities (10,341) (1,987) (10,748) 2,663 (20,413)
----------- ---------- ---------- ------------ ---------------
Effect of exchange rates on cash -- -- 755 -- 755
----------- ---------- ---------- ------------ ---------------
Net increase (decrease)
in cash (6,379) 1,685 765 -- (3,929)
Cash and cash equivalents,
beginning of period 7,477 2,102 12,726 -- 22,305
----------- ---------- ---------- ------------ ---------------
Cash and cash equivalents,
end of period $ 1,098 $ 3,787 $ 13,491 $ -- $ 18,376
=========== ========== ========== ============ ===============
</TABLE>
12
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
- --------
SITEL Corporation ("SITEL") and subsidiaries (collectively, the "Company")
provide customer relationship management services on behalf of clients in North
America, Europe, Asia Pacific and Latin America. The Company finds, acquires and
retains customers and helps organizations enhance and grow these relationships
through a variety of value-added services via electronic media, including the
telephone and the Internet, and, to a lesser extent, traditional mail. The
Company provides services to clients principally in the consumer, financial
services, insurance, telecommunications, technology and utilities sectors.
THREE MONTHS ENDED MARCH 31, 2000 VS. THREE MONTHS ENDED MARCH 31, 1999
REVENUES:
- ---------
Revenues increased $34.4 million, or 21.0%, to $198.6 million in the three
months ended March 31, 2000 from $164.2 million in the three months ended March
31, 1999. Of this increase, approximately $13.2 million was attributable to
services initiated for new clients and approximately $21.2 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 customer relationship management activities. Cost of services as a
percent of revenue can vary based on the nature of the contract, the nature of
the work and the market in which the service is provided. Implementations of
large contracts in which the implementation costs are reflected in selling,
general and administrative expenses can significantly impact cost of services as
of percent of revenue. Accordingly, cost of services as a percent of revenue can
vary, sometimes significantly, from quarter to quarter. Cost of services
increased $21.5 million, or 24.3%, to $110.0 million for the three months ended
March 31, 2000 from $88.5 million for the three months ended March 31, 1999.
Revenues include amounts in payment of certain technology costs and services
under a major contract, the costs of which are included in selling, general and
administrative expenses. These revenues were $8.4 million and $6.3 million for
the three months ended March 31, 1999 and 2000, respectively. Excluding the
impact of these revenues, cost of services as a percentage of revenues increased
to 57.2% in the first quarter of 2000 from 56.8% in the first quarter of 1999
primarily due to higher labor costs in Spain.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
- ---------------------------------------------
Selling, general and administrative expenses represent expenses incurred to
directly support and manage the business, including costs of management,
administration, technology, facilities, depreciation and amortization,
maintenance, sales and marketing, and client support services. Selling, general
and administrative expenses increased $5.0 million, or 6.7%, to $79.4 million
for the three months ended March
13
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
31, 2000 from $74.4 million for the three months ended March 31, 1999. As a
percentage of revenues, selling, general and administrative expenses decreased
to 40.0% in the first quarter of 2000 from 45.3% in the first quarter of 1999.
Excluding the technology costs associated with the major contract noted above,
selling, general and administrative expenses increased 10.7% and, as a
percentage of revenues, decreased to 38.0% in the first quarter of 2000 from
42.4% in the first quarter of 1999. This decrease was primarily attributable to
cost reduction efforts over the past 12 months and the leveraging of overhead
through revenue growth.
OPERATING INCOME:
- -----------------
Operating income increased $7.9 million, a nearly six-fold increase, to $9.3
million for the three months ended March 31, 2000 from $1.3 million for the
three months ended March 31, 1999. As a percentage of revenues, operating income
increased to 4.7% in the first quarter of 2000 from 0.8% in the first quarter of
1999. This increase was primarily due to the decrease in selling, general and
administrative expenses as a percentage of revenue as noted above.
INTEREST EXPENSE, NET:
- ----------------------
Interest expense, net of interest income, increased to $3.4 million for the
three months ended March 31, 2000 from $3.2 million for the three months ended
March 31, 1999. This increase was primarily due to higher average borrowings
utilized to support the Company's growth.
INCOME TAX EXPENSE (BENEFIT):
- -----------------------------
Income tax expense for the three months ended March 31, 2000 was $2.5 million
compared to a benefit of $0.2 million for the three months ended March 31, 1999.
Income tax expense as a percentage of income before taxes and minority interest
was 43.0% for the quarter. The difference between the Company's income tax rate
of 43.0% and the statutory U.S. Federal rate of 35% is primarily due to
non-deductible goodwill and U.S. state and local income taxes.
NET INCOME (LOSS) FROM CONTINUING OPERATIONS AND NET INCOME (LOSS):
- -------------------------------------------------------------------
For the reasons discussed above, net income (loss) from continuing operations
increased $4.5 million to $3.0 million for the three months ended March 31, 2000
from ($1.5) million for the three months ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
Cash provided by operating activities was $20.8 million during the three months
ended March 31, 2000. This was primarily the result of income before
depreciation and amortization of $15.2 million and an increase in accrued
expenses. Although accounts receivable decreased during the quarter, the Company
anticipates that accounts receivable will increase in future periods, using
working capital, as the Company continues to grow. The Company purchased $5.1
million of property and equipment in the three months ended March 31, 2000. The
Company anticipates that capital expenditures will increase in future quarters
to support the growth of its
14
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
business; however, total capital expenditures in 2000 are currently anticipated
to be less than in 1999. Cash used in financing activities was $20.4 million
primarily related to reductions of borrowings under the Company's long-term
revolving credit facility.
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 March 31, 2000, the
Company had unused lines of credit totaling $52.4 million. On April 11, 2000,
the Company secured a $75 million five-year senior secured credit facility which
provides funding in U. S. dollars, British pounds sterling and euros, thereby
allowing the Company to consolidate its U. S. and European bank lines into a
single multi-borrower, multi-currency facility. In connection with securing this
facility, the Company terminated its existing $50 million long-term credit
facility and various lines of credit which were used to fund local operations in
British pounds sterling and euros. The funds available under the new facility
are approximately equal to the total of the funds available under the facilities
which were terminated. The Company believes that funds generated from
operations, existing cash, leases of property and equipment and funds available
under its credit facilities will be sufficient to finance its current
operations, planned capital expenditures and growth for the foreseeable future.
Future acquisitions, if any, may require additional debt or equity financing.
YEAR 2000 ISSUE
- ---------------
The Company recognized the need to ensure Year 2000 software and embedded system
failures would not adversely impact its operations. Specifically, computational
errors and system failures were a known risk with respect to dates after
December 31, 1999. The Company established a central Y2K compliance office that
reported directly to the Chief Information Officer. The Company has experienced
no significant problems related to Year 2000 issues. In instances where minor
incidents were reported, contingency plans were invoked and service levels to
our clients were maintained. These minor occurrences had no impact on day-to-day
operations and were repaired with no financial impact. The Company estimates
that the cost to become Y2K compliant was approximately $11 million.
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' customer relationship management initiatives and teleservicing
campaigns, revenue mix, and the timing of additional selling, general and
administrative expenses to support new business. The Company also experiences
periodic fluctuations related to both the start-up costs associated with
expansion and the implementation of new contracts or services. 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 that often occur at the beginning of
the year.
15
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
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 Standards ("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, as amended by SFAS 137, 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 of 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. 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.
16
<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 1999 and
2000 designed to hedge foreign currency exchange risk related to short term
intercompany loans, however the amounts involved were not material.
17
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
(a) Exhibits:
10.1 Employment Agreement with Phillip A. Clough
10.2 Employment Agreement with W. Gar Richlin
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.
18
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
SIGNATURE
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 12, 2000 SITEL Corporation
By: /s/ W. Gar Richlin
----------------------------------
W. Gar Richlin
Executive Vice-President and Chief Financial
Officer (Principal Financial Officer)
19
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
10.1 Employment Agreement with Phillip A. Clough
10.2 Employment Agreement with W. Gar Richlin
27 Financial Data Schedule
20
EXHIBIT 10.1
------------
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement made effective January 1, 2000, between SITEL
CORPORATION, a Minnesota corporation ("Company") and PHILLIP A. CLOUGH
("Executive").
THE PARTIES AGREE AS FOLLOWS:
1. Employment and Duties. Company hereby employs Executive as its President
and Chief Executive Officer. The duties and responsibilities of Executive shall
include duties and responsibilities consistent with Executive's corporate
offices and positions, including those set forth in the bylaws of Company from
time to time, and such other duties and responsibilities which the Board of
Directors of Company from time to time may assign to Executive.
2. Term. The term of Executive's employment under this Agreement shall
begin as of the date hereof and continue without interruption through December
31, 2001, unless sooner terminated in accordance with this Agreement and unless
extended by written agreement of both parties ("Term").
3. Efforts on Behalf of Company and Other Activities. During the Term, to
the best of his ability and using all his skills, Executive shall devote
substantially all of his working time and efforts to the diligent and faithful
performance of his duties and responsibilities under this Agreement. However,
Executive may devote a reasonable amount of his time to civic, community, or
charitable activities.
4. Place of Employment. The Company's executive offices, including the
office of Executive, shall be located in Baltimore, Maryland during the Term.
Company shall furnish Executive with an office, secretarial and other support
services consistent with those currently provided and such other facilities and
services at such locations as may be reasonably required to permit Executive to
fulfill the duties of his employment.
5. Base Salary. For all services to be rendered by Executive pursuant to
this Agreement, Company agrees to pay Executive during the Term a base annual
salary of $500,000. The term "Base Salary" as used in this Agreement shall mean
the base annual salary established by this Section 5. The Base Salary shall be
paid in periodic installments in accordance with Company's regular payroll
practices, but in any event no less frequently than monthly.
6. Additional Compensation.
(a) Bonus. For each calendar year during the Term, Executive
shall be eligible to participate in the Company's bonus program for senior
executives on the terms established by the Compensation Committee for each such
year.
<PAGE>
(b) Stock Option Plans. Executive has previously been granted
stock options for SITEL common stock. Any further grants of stock options to
Executive shall be at the sole discretion of the Compensation Committee.
(c) Benefit Plans. During the Term, Executive (and his eligible
dependents where applicable) shall be entitled to participate in the benefit
plans offered from time to time by Company to its senior executive officers, on
terms (including Company and employee contribution percentages, waivers of
waiting periods, applicable deductibles, etc.) no less favorable than those
provided generally to other senior executive officers of the Company, including
without limitation, as may be applicable, individual or group medical, hospital,
dental, and long-term disability insurance coverages, group life insurance
coverage, 401(k), and 401(n) plans.
(d) Vacations and Holidays. During the Term, Executive shall be
entitled to paid vacation days, holidays and time off per calendar year
(pro-rated for partial calendar years of employment) as are consistent with past
practice and custom for Company's senior executive officers.
(e) Expenses. During the Term, Executive shall be entitled to
prompt reimbursement by Company of all reasonable ordinary and necessary travel,
entertainment, and other expenses incurred by Executive (in accordance with the
policies and procedures established by Company for its senior executive
officers) in the performance of his duties and responsibilities under this
Agreement; provided that Executive shall properly account for such expenses in
accordance with Company policies and procedures, which may include but are not
limited to itemized accountings.
7. Termination of Employment.
(a) Death. Executive's employment under this Agreement shall
terminate upon Executive's death. If Executive's employment terminates pursuant
to this Section 7(a), Executive or his legal representative shall be entitled to
receive the Base Salary up through the date of Executive's death; any bonus
earned by Executive pursuant to Section 6(a) for a calendar year already
completed but not yet paid; and any benefits to which Executive is entitled
pursuant to Sections 6(c) through 6(e) up through the date of Executive's death.
(b) Disability. If Executive becomes incapable by reason of
physical injury, disease, or mental illness from substantially performing his
duties under this Agreement for a continuous period of three months or for more
than 90 days in the aggregate during any 12 month period, then Company may
terminate Executive's employment under this Agreement effective upon 30 days
written notice. If Executive's employment terminates pursuant to this Section
7(b), Executive or his legal representative shall be entitled to receive: the
Base Salary up through the effective date of termination; any bonus earned by
Executive pursuant to Section 6(a) for a calendar year already completed but not
yet paid; and any benefits to which Executive is entitled pursuant to Sections
6(c) through 6(e) up through the effective date of termination.
(c) For Cause. Company also may terminate Executive's
employment under this Agreement for cause. For purposes of this Agreement, "for
cause" shall mean only (i) Executive's confession or conviction of theft, fraud,
embezzlement, any felony, or any crime involving dishonesty with regard to the
Company or any subsidiary or affiliate of the Company, (ii) Executive's
excessive absenteeism without reasonable cause (other
2
<PAGE>
than because of a disability described in Section 7(b), (iii) habitual and
material negligence by the Executive in the performance of Executive's duties
and responsibilities as described in Section 1 (other than because of a
disability described in Section 7(b)) and Executive's failure to cure such
negligence within 30 days after Executive's receipt of a written notice from the
Chairman of the Board of Directors setting forth in reasonable detail the
particulars of such negligence, or (iv) material failure by Executive to comply
with a lawful directive of the Board of Directors (other than because of a
disability described in Section 7(b)) and Executive's failure to cure such
non-compliance within 10 days after Executive's receipt of a written notice from
the Chairman of the Board of Directors setting forth in reasonable detail the
particulars of such non-compliance. Termination shall occur effective 30 days
after "for cause" is established. If Executive's employment terminates pursuant
to this Section 7(c), Executive shall be entitled to receive the Base Salary up
through the effective date of termination and any benefits to which Executive is
entitled pursuant to Sections 6(c) through 6(e) up through the effective date of
termination, but shall not be entitled to any bonus for a completed calendar
year which has not yet been paid.
(d) Voluntary Resignation. Executive may voluntarily resign
from Company's employ at any time upon at least 30 days prior written notice of
the effective date of such resignation. If Executive voluntarily resigns,
Executive shall be entitled to receive the Base Salary up through the effective
date of such resignation and any benefits to which Executive is entitled
pursuant to Sections 6(c) through 6(e) up through the effective date of such
resignation, but shall not be entitled to any bonus for a completed calendar
year which has not yet been paid.
(e) Adverse Change. Executive may terminate his employment with
the Company under this Agreement in the event of an Adverse Change in the manner
described in this Section 7(e) (provided such termination has not been preceded
or accompanied by a termination by the Company for cause as described in Section
7(c)), and for the avoidance of doubt such termination because of Adverse Change
shall in no event be considered a voluntary resignation. For purposes of this
Agreement, "Adverse Change" shall mean any of the foregoing events: (i)
Executive's base salary is decreased below the Base Salary level established by
Section 5, or (ii) Executive's title, authority, role or level of
responsibilities with the Company is decreased below that established by Section
1, or (iii) Executive is required to relocate his primary office from Baltimore,
Maryland. Executive shall be regarded as having terminated his employment with
the Company because of an Adverse Change only if he gives written notice of his
termination of employment pursuant to this Section 7(e) within two months
following the effective date of the Adverse Change (or, if later, within two
months after Executive receives notice from the Company of the Adverse Change).
If Executive's employment terminates pursuant to this Section 7(e), Executive
shall be entitled to: continue to receive the Base Salary provided for in
Section 5 for a period of 12 months after the effective date of such termination
of employment on the Company's normal payroll dates during such period; any
bonus earned by Executive pursuant to Section 6(a) for a calendar year already
completed but not yet paid; and any benefits to which Executive is entitled
pursuant to Sections 6(c) through 6(e) up through the effective date of
termination.
(f) Without Cause. The Company may terminate Executive's
employment under this Agreement without cause, which for purposes of this
Agreement shall include any termination of Executive's employment by Company
other than "for cause" as defined in Section 7(c) and other than because of
disability pursuant to Section 7(b), upon no less than 30 days prior written
notice. If the Company terminates Executive's employment without cause pursuant
to this Section 7(f), then following such termination Executive shall be
3
<PAGE>
entitled to: continue to receive the Base Salary provided for in Section 5 for a
period of 12 months after the effective date of such termination of employment
on the Company's normal payroll dates during such period; any bonus earned by
Executive pursuant to Section 6(a) for a calendar year already completed but not
yet paid; and any benefits to which Executive is entitled pursuant to Sections
6(c) through 6(e) up through the effective date of termination.
8. Notice of Termination. Any termination of Executive's employment by
Company shall be communicated in a written Termination Notice to Executive. For
purposes of this Agreement, a "Termination Notice" shall mean a notice from the
Board of Directors which shall indicate the specific termination provision in
this Agreement relied upon and, if applicable, shall set forth in reasonable
detail the facts and circumstances providing a basis for termination of
Executive's employment under the provision so indicated.
9. Successors and Assigns. This Agreement and all rights under this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective personal or legal representatives,
executors, administrators, heirs, distributees, devisees, legatees, successors,
and assigns. This Agreement is personal in nature, and neither of the parties to
this Agreement shall, without the written consent of the other, assign or
transfer this Agreement or any right or obligation under this Agreement to any
other person or entity, except that the Company may assign the Agreement to a
successor corporation.
10. Notices. For purposes of this Agreement, notices and other
communications provided for in this Agreement shall be deemed to be properly
given if delivered personally or sent by United States certified mail, return
receipt requested, postage prepaid, or sent by overnight delivery service,
addressed as follows:
If to Executive: At Executive's home address on file at the Company
If to Company: SITEL Corporation
7277 World Communications Drive
Omaha, Nebraska 68122
Attn: Chairman of the Board of Directors
or to such other address as either party may have furnished to the other party
in writing in accordance with this Section. Such notices or other communications
shall be effective when received if delivered personally or when deposited in
the U.S. mail if delivered by certified mail or when deposited with the
overnight delivery service if delivered by that method. Notices also may be
given by facsimile and in such case shall be deemed to be properly given when
sent so long as the sender uses reasonable efforts to confirm and does confirm
the receiver's receipt of the facsimile transmission.
11. Miscellaneous. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and is signed by Executive and an officer of Company so authorized by
the Board of Directors of Company. No waiver by either party to this Agreement
at any time of any breach by the other party of, or compliance by the other
party with, any condition or provision of this Agreement to be performed by the
other party shall be deemed to be a waiver of similar or dissimilar provisions
or conditions at the same or any prior or subsequent time.
4
<PAGE>
12. Validity. The invalidity or unenforceability of any provision(s) of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which other provision shall remain in full force
and effect; nor shall the invalidity or unenforceability of a portion of any
provision of this Agreement affect the validity or enforceability of the balance
of such provision.
13. Counterparts. This document may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute a single agreement.
14. Headings. The headings of the sections and subsections contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of any provision of this Agreement.
15. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal substantive laws, and not the conflicts of law
principles, of the State of Maryland.
16. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the terms of Executive's employment with the Company
and cancels and supersedes any prior agreements and understandings of the
parties with respect to such subject matter; provided, however, that this
Agreement shall not affect any noncompetition and confidentiality agreements
previously entered into by Executive with the Company each of which shall remain
in full force and effect according to their current terms. There are no
representations, warranties, terms, conditions, undertakings or collateral
agreements, express, implied or statutory, between the parties with respect to
the terms of Executive's employment other than those set forth in this
Agreement.
(Signature page follows.)
5
<PAGE>
SIGNATURE PAGE TO
EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, Company and Executive have executed this Agreement.
SITEL CORPORATION, a Minnesota
corporation
By:/s/ James F. Lynch
-------------------------------------
James F. Lynch, Chairman of the Board
/s/ Phillip A. Clough
--------------------------------------
PHILLIP A. CLOUGH
6
EXHIBIT 10.2
------------
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement made effective January 1, 2000, between SITEL
CORPORATION, a Minnesota corporation ("Company") and W. GAR RICHLIN
("Executive").
THE PARTIES AGREE AS FOLLOWS:
1. Employment and Duties. Company hereby employs Executive as its Chief
Operating Officer and Chief Financial Officer. The duties and responsibilities
of Executive shall include duties and responsibilities consistent with
Executive's corporate offices and positions, including those set forth in the
bylaws of Company from time to time, and such other duties and responsibilities
which the Board of Directors of Company from time to time may assign to
Executive.
2. Term. The term of Executive's employment under this Agreement shall
begin as of the date hereof and continue without interruption through December
31, 2001, unless sooner terminated in accordance with this Agreement and unless
extended by written agreement of both parties ("Term").
3. Efforts on Behalf of Company and Other Activities. During the Term, to
the best of his ability and using all his skills, Executive shall devote
substantially all of his working time and efforts to the diligent and faithful
performance of his duties and responsibilities under this Agreement. However,
Executive may devote a reasonable amount of his time to civic, community, or
charitable activities.
4. Place of Employment. The Company's executive offices, including the
office of Executive, shall be located in Baltimore, Maryland during the Term.
Company shall furnish Executive with an office, secretarial and other support
services consistent with those currently provided and such other facilities and
services at such locations as may be reasonably required to permit Executive to
fulfill the duties of his employment.
5. Base Salary. For all services to be rendered by Executive pursuant to
this Agreement, Company agrees to pay Executive during the Term a base annual
salary of $400,000. The term "Base Salary" as used in this Agreement shall mean
the base annual salary established by this Section 5. The Base Salary shall be
paid in periodic installments in accordance with Company's regular payroll
practices, but in any event no less frequently than monthly.
6. Additional Compensation.
(a) Bonus. For each calendar year during the Term, Executive
shall be eligible to participate in the Company's bonus program for senior
executives on the terms established by the Compensation Committee for each such
year.
<PAGE>
(b) Stock Option Plans. Executive has previously been
granted stock options for SITEL common stock. Any further grants of stock
options to Executive shall be at the sole discretion of the Compensation
Committee.
(c) Benefit Plans. During the Term, Executive (and his eligible
dependents where applicable) shall be entitled to participate in the benefit
plans offered from time to time by Company to its senior executive officers, on
terms (including Company and employee contribution percentages, waivers of
waiting periods, applicable deductibles, etc.) no less favorable than those
provided generally to other senior executive officers of the Company, including
without limitation, as may be applicable, individual or group medical, hospital,
dental, and long-term disability insurance coverages, group life insurance
coverage, 401(k), and 401(n) plans.
(d) Vacations and Holidays. During the Term, Executive shall be
entitled to paid vacation days, holidays and time off per calendar year
(pro-rated for partial calendar years of employment) as are consistent with past
practice and custom for Company's senior executive officers.
(e) Expenses. During the Term, Executive shall be entitled to
prompt reimbursement by Company of all reasonable ordinary and necessary travel,
entertainment, and other expenses incurred by Executive (in accordance with the
policies and procedures established by Company for its senior executive
officers) in the performance of his duties and responsibilities under this
Agreement; provided that Executive shall properly account for such expenses in
accordance with Company policies and procedures, which may include but are not
limited to itemized accountings.
7. Termination of Employment.
(a) Death. Executive's employment under this Agreement shall
terminate upon Executive's death. If Executive's employment terminates pursuant
to this Section 7(a), Executive or his legal representative shall be entitled to
receive the Base Salary up through the date of Executive's death; any bonus
earned by Executive pursuant to Section 6(a) for a calendar year already
completed but not yet paid; and any benefits to which Executive is entitled
pursuant to Sections 6(c) through 6(e) up through the date of Executive's death.
(b) Disability. If Executive becomes incapable by reason of
physical injury, disease, or mental illness from substantially performing his
duties under this Agreement for a continuous period of three months or for more
than 90 days in the aggregate during any 12 month period, then Company may
terminate Executive's employment under this Agreement effective upon 30 days
written notice. If Executive's employment terminates pursuant to this Section
7(b), Executive or his legal representative shall be entitled to receive: the
Base Salary up through the effective date of termination; any bonus earned by
Executive pursuant to Section 6(a) for a calendar year already completed but not
yet paid; and any benefits to which Executive is entitled pursuant to Sections
6(c) through 6(e) up through the effective date of termination.
(c) For Cause. Company also may terminate Executive's
employment under this Agreement for cause. For purposes of this Agreement, "for
cause" shall mean only (i) Executive's confession or conviction of theft, fraud,
embezzlement, any felony, or any crime involving dishonesty with regard to the
Company or any subsidiary or affiliate of the Company, (ii) Executive's
excessive absenteeism without reasonable cause (other
2
<PAGE>
than because of a disability described in Section 7(b), (iii) habitual and
material negligence by the Executive in the performance of Executive's duties
and responsibilities as described in Section 1 (other than because of a
disability described in Section 7(b)) and Executive's failure to cure such
negligence within 30 days after Executive's receipt of a written notice from the
Chairman of the Board of Directors setting forth in reasonable detail the
particulars of such negligence, or (iv) material failure by Executive to comply
with a lawful directive of the Board of Directors (other than because of a
disability described in Section 7(b)) and Executive's failure to cure such
non-compliance within 10 days after Executive's receipt of a written notice from
the Chairman of the Board of Directors setting forth in reasonable detail the
particulars of such non-compliance. Termination shall occur effective 30 days
after "for cause" is established. If Executive's employment terminates pursuant
to this Section 7(c), Executive shall be entitled to receive the Base Salary up
through the effective date of termination and any benefits to which Executive is
entitled pursuant to Sections 6(c) through 6(e) up through the effective date of
termination, but shall not be entitled to any bonus for a completed calendar
year which has not yet been paid.
(d) Voluntary Resignation. Executive may voluntarily resign
from Company's employ at any time upon at least 30 days prior written notice of
the effective date of such resignation. If Executive voluntarily resigns,
Executive shall be entitled to receive the Base Salary up through the effective
date of such resignation and any benefits to which Executive is entitled
pursuant to Sections 6(c) through 6(e) up through the effective date of such
resignation, but shall not be entitled to any bonus for a completed calendar
year which has not yet been paid.
(e) Adverse Change. Executive may terminate his employment with
the Company under this Agreement in the event of an Adverse Change in the manner
described in this Section 7(e) (provided such termination has not been preceded
or accompanied by a termination by the Company for cause as described in Section
7(c)), and for the avoidance of doubt such termination because of Adverse Change
shall in no event be considered a voluntary resignation. For purposes of this
Agreement, "Adverse Change" shall mean any of the foregoing events: (i)
Executive's base salary is decreased below the Base Salary level established by
Section 5, or (ii) Executive's title, authority, role or level of
responsibilities with the Company is decreased below that established by Section
1, or (iii) Executive is required to relocate his primary office from Baltimore,
Maryland. Executive shall be regarded as having terminated his employment with
the Company because of an Adverse Change only if he gives written notice of his
termination of employment pursuant to this Section 7(e) within two months
following the effective date of the Adverse Change (or, if later, within two
months after Executive receives notice from the Company of the Adverse Change).
If Executive's employment terminates pursuant to this Section 7(e), Executive
shall be entitled to: continue to receive the Base Salary provided for in
Section 5 for a period of 12 months after the effective date of such termination
of employment on the Company's normal payroll dates during such period; any
bonus earned by Executive pursuant to Section 6(a) for a calendar year already
completed but not yet paid; and any benefits to which Executive is entitled
pursuant to Sections 6(c) through 6(e) up through the effective date of
termination.
(f) Without Cause. The Company may terminate Executive's
employment under this Agreement without cause, which for purposes of this
Agreement shall include any termination of Executive's employment by Company
other than "for cause" as defined in Section 7(c) and other than because of
disability pursuant to Section 7(b), upon no less than 30 days prior written
notice. If the Company terminates Executive's employment without cause pursuant
to this Section 7(f), then following such termination Executive shall be
3
<PAGE>
entitled to: continue to receive the Base Salary provided for in Section 5 for a
period of 12 months after the effective date of such termination of employment
on the Company's normal payroll dates during such period; any bonus earned by
Executive pursuant to Section 6(a) for a calendar year already completed but not
yet paid; and any benefits to which Executive is entitled pursuant to Sections
6(c) through 6(e) up through the effective date of termination.
8. Notice of Termination. Any termination of Executive's employment by
Company shall be communicated in a written Termination Notice to Executive. For
purposes of this Agreement, a "Termination Notice" shall mean a notice from the
Board of Directors which shall indicate the specific termination provision in
this Agreement relied upon and, if applicable, shall set forth in reasonable
detail the facts and circumstances providing a basis for termination of
Executive's employment under the provision so indicated.
9. Successors and Assigns. This Agreement and all rights under this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective personal or legal representatives,
executors, administrators, heirs, distributees, devisees, legatees, successors,
and assigns. This Agreement is personal in nature, and neither of the parties to
this Agreement shall, without the written consent of the other, assign or
transfer this Agreement or any right or obligation under this Agreement to any
other person or entity, except that the Company may assign the Agreement to a
successor corporation.
10. Notices. For purposes of this Agreement, notices and other
communications provided for in this Agreement shall be deemed to be properly
given if delivered personally or sent by United States certified mail, return
receipt requested, postage prepaid, or sent by overnight delivery service,
addressed as follows:
If to Executive: At Executive's home address on file at the Company
If to Company: SITEL Corporation
7277 World Communications Drive
Omaha, Nebraska 68122
Attn: Chairman of the Board of Directors
or to such other address as either party may have furnished to the other party
in writing in accordance with this Section. Such notices or other communications
shall be effective when received if delivered personally or when deposited in
the U.S. mail if delivered by certified mail or when deposited with the
overnight delivery service if delivered by that method. Notices also may be
given by facsimile and in such case shall be deemed to be properly given when
sent so long as the sender uses reasonable efforts to confirm and does confirm
the receiver's receipt of the facsimile transmission.
11. Miscellaneous. No provision of this Agreement may be modified, waived,
or discharged unless such waiver, modification, or discharge is agreed to in
writing and is signed by Executive and an officer of Company so authorized by
the Board of Directors of Company. No waiver by either party to this Agreement
at any time of any breach by the other party of, or compliance by the other
party with, any condition or provision of this Agreement to be performed by the
other party shall be deemed to be a waiver of similar or dissimilar provisions
or conditions at the same or any prior or subsequent time.
4
<PAGE>
12. Validity. The invalidity or unenforceability of any provision(s) of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which other provision shall remain in full force
and effect; nor shall the invalidity or unenforceability of a portion of any
provision of this Agreement affect the validity or enforceability of the balance
of such provision.
13. Counterparts. This document may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute a single agreement.
14. Headings. The headings of the sections and subsections contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of any provision of this Agreement.
15. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal substantive laws, and not the conflicts of law
principles, of the State of Maryland.
16. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the terms of Executive's employment with the Company
and cancels and supersedes any prior agreements and understandings of the
parties with respect to such subject matter; provided, however, that this
Agreement shall not affect any noncompetition and confidentiality agreements
previously entered into by Executive with the Company each of which shall remain
in full force and effect according to their current terms. There are no
representations, warranties, terms, conditions, undertakings or collateral
agreements, express, implied or statutory, between the parties with respect to
the terms of Executive's employment other than those set forth in this
Agreement.
(Signature page follows.)
5
<PAGE>
SIGNATURE PAGE TO
EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, Company and Executive have executed this Agreement.
SITEL CORPORATION, a Minnesota
corporation
By:/s/ James F. Lynch
--------------------------------------
James F. Lynch, Chairman of the Board
/s/ W. Gar Richlin
--------------------------------------
W. GAR RICHLIN
6
<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>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 18,376
<SECURITIES> 0
<RECEIVABLES> 166,594
<ALLOWANCES> 4,932
<INVENTORY> 0
<CURRENT-ASSETS> 192,983
<PP&E> 237,449
<DEPRECIATION> 127,144
<TOTAL-ASSETS> 411,716
<CURRENT-LIABILITIES> 113,451
<BONDS> 100,000
0
0
<COMMON> 70
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 411,716
<SALES> 198,611
<TOTAL-REVENUES> 198,611
<CGS> 109,987
<TOTAL-COSTS> 189,359
<OTHER-EXPENSES> 66
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,571
<INCOME-PRETAX> 5,750
<INCOME-TAX> 2,474
<INCOME-CONTINUING> 3,018
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,018
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
