SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended September 30, 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 (I.R.S. Employer
incorporation or organization) Identification No.)
111 SOUTH CALVERT STREET
BALTIMORE, MD 21202
(410) 246-1505
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
As of October 31,2000, the Company had 72,002,505 shares of Common Stock
outstanding.
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets ............................ 1
Consolidated Condensed Statements of Income (Loss) ............... 2
Consolidated Condensed Statements of Cash Flows .................. 3
Notes to Consolidated Condensed Financial Statements ............. 4
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition........................... 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk.......... 19
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................... 20
Signature.................................................................... 21
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, DECEMBER 31,
2000 1999
---- ----
Current assets: (unaudited)
<S> <C> <C>
Cash and cash equivalents ............................................................ $ 18,300 $ 22,305
Trade accounts receivable (net of allowance for doubtful accounts of $5,253 and
$5,622 in 2000 and 1999, respectively) .............................................. 150,974 164,473
Prepaid expenses ..................................................................... 7,354 7,997
Deferred income taxes ................................................................ -- 1,950
Other current assets ................................................................. 7,248 7,825
--------- ---------
Total current assets .................................................. 183,876 204,550
--------- ---------
Property and equipment, net ............................................................... 94,902 118,349
Goodwill, net ............................................................................. 78,101 85,258
Deferred income taxes ..................................................................... 12,520 15,649
Other assets .............................................................................. 8,019 8,440
--------- ---------
Total assets .......................................................... $ 377,418 $ 432,246
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ........................................................................ $ 738 $ 7,337
Current portion of long-term debt .................................................... 890 2,838
Current portion of capitalized lease obligations ..................................... 3,189 4,308
Trade accounts payable ............................................................... 26,584 37,592
Income taxes payable ................................................................. 2,618 7,135
Accrued wages, salaries and bonuses .................................................. 28,802 19,893
Accrued operating expenses ........................................................... 26,049 28,922
Deferred revenue and other ........................................................... 5,871 9,141
Deferred income taxes ................................................................ 284 --
--------- ---------
Total current liabilities ............................................. 95,025 117,166
Long-term debt, excluding current portion ................................................. 101,942 136,077
Capitalized lease obligations, excluding current portion .................................. 9,165 12,253
Deferred compensation ..................................................................... 2,375 1,905
Minority interest ......................................................................... 6,047 4,147
Stockholders' equity:
Common stock, voting, $.001 par value, 200,000,000 shares authorized, 71,863,714 and
68,170,828 shares issued and outstanding in 2000 and 1999, respectively .......... 72 68
Paid-in capital ...................................................................... 168,636 165,870
Accumulated other comprehensive loss ................................................. (22,461) (12,757)
Retained earnings .................................................................... 16,617 7,517
--------- ---------
Total stockholders' equity ............................................ 162,864 160,698
--------- ---------
Total liabilities and stockholders' equity ............................ $ 377,418 $ 432,246
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
1
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues ................................... $ 185,289 $ 189,597 $ 577,705 $ 531,778
--------- --------- --------- ---------
Operating expenses:
Direct labor and
telecommunications expenses ........ 97,586 96,322 301,294 267,166
Subcontracted and other
services expenses .................. 12,009 11,920 39,962 41,743
Operating, selling and
administrative expenses ............ 65,498 71,385 205,575 206,897
Asset impairment and
restructuring expenses ............. -- 9,596 3,520 9,596
--------- --------- --------- ---------
Total operating expenses 175,093 189,223 550,351 525,402
--------- --------- --------- ---------
Operating income ........ 10,196 374 27,354 6,376
Other income (expense):
Interest expense, net ................. (2,895) (3,203) (9,497) (9,353)
Other income (expense), net ........... (233) (69) (431) 51
--------- --------- --------- ---------
Income (loss) before income taxes
and minority interest ................. 7,068 (2,898) 17,426 (2,926)
Income tax expense ......................... 3,039 1,762 7,494 2,645
Minority interest .......................... 374 58 833 122
--------- --------- --------- ---------
Net income (loss) .......................... $ 3,655 $ (4,718) $ 9,099 $ (5,693)
========= ========= ========= =========
Income (loss) per common share:
Basic .................................... $ 0.05 $ (0.07) $ 0.13 $ (0.09)
Diluted .................................. $ 0.05 $ (0.07) $ 0.12 $ (0.09)
Weighted average common shares outstanding:
Basic .................................... 71,793 67,544 70,743 66,111
Diluted .................................. 75,323 67,544 75,506 66,111
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
2
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
FOR THE NINE MONTHS ENDED
(dollars in thousands) SEPTEMBER 30, SEPTEMBER 30,
2000 1999
---- ----
<S> <C> <C>
Net income (loss) ................................................ $ 9,099 $ (5,693)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Depreciation and amortization .................................... 33,479 34,266
Restructuring provision and asset impairment expenses ............ 3,520 9,596
Change in assets and liabilities:
Trade accounts receivable .................................... 6,001 (37,647)
Other assets ................................................. 5,004 (214)
Trade accounts payable ....................................... (9,499) (202)
Other liabilities ............................................ 756 23,002
-------- --------
Net cash provided by operating activities ............... 48,360 23,108
-------- --------
Cash flows from investing activities:
Purchases of property and equipment ......................... (18,566) (31,679)
Proceeds from sales of property and equipment ............... 4,555 555
-------- --------
Net cash used in investing activities ................... (14,011) (31,124)
-------- --------
Cash flows from financing activities:
Borrowings on notes payable ................................. -- 3,296
Repayments of notes payable ................................. (10,002) (24,900)
Borrowings on long-term debt ................................ 1,546 44,024
Repayment of long-term debt and capitalized lease obligations (36,678) (17,534)
Common stock issued, net of expenses ........................ 2,735 --
Other ....................................................... (41) (21)
-------- --------
Net cash provided by (used in) financing activities ..... (42,440) 4,865
-------- --------
Effect of exchange rates on cash ................................. 4,086 845
-------- --------
Net decrease in cash .................................... (4,005) (2,306)
Cash and cash equivalents, beginning of period ................... 22,305 14,472
-------- --------
Cash and cash equivalents, end of period ......................... $ 18,300 $ 12,166
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
3
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The consolidated condensed balance sheet of SITEL Corporation and Subsidiaries
(the "Company") at December 31, 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. Certain amounts previously reported have been
reclassified to conform with the 2000 presentation. 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 ($376,000) and ($1,841,000) for
the three month periods ended September 30, 2000 and 1999, respectively, and
($605,000) and ($11,015,000) for the nine month periods ended September 30, 2000
and 1999, respectively. The difference between the Company's reported net income
(loss) and comprehensive income (loss) for those periods is due to the change in
the foreign currency translation adjustment. The accumulated other comprehensive
loss included in the Company's Consolidated Condensed Balance Sheet at September
30, 2000 and December 31, 1999 represents the accumulated foreign translation
adjustments.
3. ASSET IMPAIRMENT AND RESTRUCTURING:
In May 2000, the Company formed a strategic partnership with Bellsystem24, Inc.,
Japan's largest comprehensive marketing agency. Under the terms of the
partnership, Bellsystem24 will provide services and support for the Company's
clients in Japan 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 restructured its operations in Japan and
transferred its existing Japanese business to Bellsystem24. In the second
quarter, the Company recorded a $3.5 million asset impairment and restructuring
charge, or $2.0 million net of tax, related to the transaction with
Bellsystem24. The restructuring charge included a $3.3 million loss on the sale
of the assets and the transfer of its business and estimated severance of $0.2
million for 12 employees.
In the third quarter of 1999, the Company recorded a $9.6 million expense
primarily related to the write down of capitalized software and related
technology assets. During the quarter, the Company reviewed its capitalized
software and related technology assets for impairment in connection with the
change in its technology strategy as it related to the adoption of a new
platform for its Customer Relationship Management software applications. As a
result, the Company wrote down certain capitalized software and related
technology assets to estimated fair value.
4. MULTI-CURRENCY REVOLVING CREDIT FACILITY:
On April 11, 2000, the Company secured a $75 million five-year senior secured
credit facility with lender pre-approval to increase the size of the facility to
$100 million. Under the terms of this agreement, the Company may borrow 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 obtaining 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. At
September 30, 2000, the unused line of credit relating to this facility was
$73.1 million.
4
<PAGE>
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 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 September 30, 2000
and December 31, 1999, and for the three and nine months ended September 30,
2000 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 STATEMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 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 ....... $ 1,353 $ 2,886 $ 14,061 $ -- $ 18,300
Trade accounts receivable, net .. 105,318 3,069 71,875 (29,288) 150,974
Prepaid expenses and other
current assets ................ 2,429 66 12,755 (648) 14,602
--------- --------- --------- --------- ---------
Total current assets ............ 109,100 6,021 98,691 (29,936) 183,876
Property and equipment, net ....... 42,573 2,863 49,466 -- 94,902
Goodwill, net ..................... 20,819 -- 57,282 -- 78,101
Deferred income taxes ............. 5,864 -- 6,656 -- 12,520
Other assets ...................... 7,656 79 284 8,019
Investments in subsidiaries ....... 122,918 108,281 -- (231,199) --
Notes receivable, intercompany .... -- 8,987 -- (8,987) --
--------- --------- --------- --------- ---------
Total assets .................. $ 308,930 126,231 212,379 $(270,122) $ 377,418
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable ................... $ -- $ -- $ 738 $ -- $ 738
Current portion
of long-term debt ............. -- -- 890 -- 890
Current portion of capitalized
lease obligations ............. 2,300 -- 889 -- 3,189
Trade accounts payable .......... 10,148 1,301 44,423 (29,288) 26,584
Accrued expenses and other
current liabilities ........... 28,471 2,012 33,789 (648) 63,624
--------- --------- --------- --------- ---------
Total current liabilities ....... 40,919 3,313 80,729 (29,936) 95,025
Long-term debt, excluding
current portion .................. 100,000 -- 1,942 -- 101,942
Capitalized lease obligations,
excluding current portion ........ 2,772 -- 6,393 -- 9,165
Notes payable, intercompany ........ -- -- 8,987 (8,987) --
Deferred compensation .............. 2,375 -- -- -- 2,375
Minority interest .................. -- -- 6,047 -- 6,047
Stockholders' equity ............... 162,864 122,918 108,281 (231,199) 162,864
--------- --------- --------- --------- ---------
Total liabilities and
stockholders' equity ............. $ 308,930 $ 126,231 $ 212,379 $(270,122) $ 377,418
========= ========= ========= ========= =========
</TABLE>
6
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5. 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
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues .......................... $ 101,757 $ 8,349 $ 75,529 $ (346) $ 185,289
--------- --------- --------- --------- ---------
Operating expenses:
Cost of operations .............. 94,363 7,609 73,467 (346) 175,093
Asset impairment and
restructuring expenses ............ -- -- -- -- --
--------- --------- --------- --------- ---------
94,363 7,609 73,467 (346) 175,093
Total operating expenses
--------- --------- --------- --------- ---------
Operating income ............. 7,394 740 2,062 -- 10,196
--------- --------- --------- --------- ---------
Other income (expense):
Equity in earnings (losses) of
subsidiaries, net of tax ... 1,275 538 -- (1,813) --
Intercompany charges ......... -- 388 (388) -- --
Interest expense, net ........ (2,702) 7 (200) -- (2,895)
Other income (expense), net .. (115) -- (118) -- (233)
--------- --------- --------- --------- ---------
Total other income
(expense) ................ (1,542) 933 (706) (1,813) (3,128)
--------- --------- --------- --------- ---------
Income (loss) before income taxes
and minority interest ........ 5,852 1,673 1,356 (1,813) 7,068
Income tax expense ................ 2,197 398 444 -- 3,039
Minority interest ................. -- -- 374 -- 374
--------- --------- --------- --------- ---------
Net income (loss) ................. $ 3,655 $ 1,275 $ 538 $ (1,813) $ 3,655
========= ========= ========= ========= =========
</TABLE>
8
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ............................ $ 77,930 $ 21,813 $ 89,854 $ -- $ 189,597
--------- --------- --------- --------- ---------
Operating expenses:
Cost of operations ............... 72,702 19,948 86,977 -- 179,627
Asset impairment
and restructuring expenses ..... 3,585 -- 6,011 -- 9,596
--------- --------- --------- --------- ---------
76,287 19,948 92,988 -- 189,223
Total operating expenses
--------- --------- --------- --------- ---------
Operating income ................. 1,643 1,865 (3,134) -- 374
--------- --------- --------- --------- ---------
Other income (expense):
Equity in earnings (losses) of
subsidiaries, net of tax ....... (3,844) (5,315) -- 9,159 --
Intercompany charges ............. -- 398 (398) -- --
Interest expense, net ............ (2,684) -- (519) -- (3,203)
Other income (expense), net ...... (4) -- (65) -- (69)
--------- --------- --------- --------- ---------
Total other income (expense) ........ (6,532) (4,917) (982) 9,159 (3,272)
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
minority interest ................. (4,889) (3,052) (4,116) 9,159 (2,898)
Income tax expense (benefit) ........ (171) 792 1,141 -- 1,762
Minority interest ................... -- -- 58 -- 58
--------- --------- --------- --------- ---------
Net income (loss) ................... $ (4,718) $ (3,844) $ (5,315) $ 9,159 $ (4,718)
========= ========= ========= ========= =========
</TABLE>
9
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ........................ $ 298,974 $ 25,212 $ 254,558 $ (1,039) $ 577,705
--------- --------- --------- --------- ---------
Operating expenses:
Cost of operations ........... 282,571 22,284 243,015 (1,039) 546,831
Asset impairment and
restructuring expenses .. 2,019 -- 1,501 -- 3,520
--------- --------- --------- --------- ---------
284,590 22,284 244,516 (1,039) 550,351
Total operating expenses
--------- --------- --------- --------- ---------
Operating income (loss) ......... 14,384 2,928 10,042 -- 27,354
--------- --------- --------- --------- ---------
Other income (expense):
Equity in earnings (losses) of
subsidiaries, net of tax ... 5,994 3,217 -- (9,211) --
Intercompany charges ............ -- 1,459 (1,459) -- --
Interest expense, net ........... (8,517) (114) (866) -- (9,497)
Other income (expense), net ..... (191) -- (240) -- (431)
--------- --------- --------- --------- ---------
Total other income (expense) .... (2,714) 4,562 (2,565) (9,211) (9,928)
--------- --------- --------- --------- ---------
Income (loss) before income taxes
and minority interest ...... 11,670 7,490 7,477 (9,211) 17,426
Income tax expense .............. 2,571 1,496 3,427 -- 7,494
Minority interest ............... -- -- 833 -- 833
--------- --------- --------- --------- ---------
Net income (loss) ............... $ 9,099 $ 5,994 $ 3,217 $ (9,211) $ 9,099
========= ========= ========= ========= =========
</TABLE>
10
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ........................ $ 156,803 $ 122,652 $ 252,323 $ -- $ 531,778
--------- --------- --------- --------- ---------
Operating expenses:
Cost of services ............. 152,740 110,757 252,309 -- 515,806
Asset impairment and
restructuring expenses ..... 3,585 6,011 -- 9,596
--------- --------- --------- --------- ---------
Total operating expenses 156,325 110,757 258,320 -- 525,402
--------- --------- --------- --------- ---------
Operating income (loss) ......... 478 11,895 (5,997) -- 6,376
--------- --------- --------- --------- ---------
Other income (expense):
Equity in earnings (losses) of
subsidiaries, net of tax ... (1,351) (9,424) -- 10,775 --
Intercompany charges ............ 98 1,339 (1,437) -- --
Interest expense, net ........... (6,908) (814) (1,631) -- (9,353)
Other income (expense), net ..... 163 -- (112) -- 51
--------- --------- --------- --------- ---------
Total other income (expense) .... (7,998) (8,899) (3,180) 10,775 (9,302)
--------- --------- --------- --------- ---------
Income (loss) before income taxes
and minority interest....... (7,520) 2,996 (9,177) 10,775 (2,926)
Income tax expense (benefit) .... (1,827) 4,347 125 -- 2,645
Minority interest ............... -- -- 122 -- 122
--------- --------- --------- --------- ---------
Net income (loss) ............... $ (5,693) $ (1,351) $ (9,424) $ 10,775 $ (5,693)
========= ========= ========= ========= =========
</TABLE>
11
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
Net cash provided by
<S> <C> <C> <C> <C> <C>
operating activities ............. $ 23,749 $ 7,386 $ 17,225 $ -- $ 48,360
-------- -------- -------- -------- --------
Cash flows from investing activities:
Investments in subsidiaries ..... 5,210 (1,167) -- (4,043) --
Purchases of property and
equipment ..................... (7,932) (225) (10,409) -- (18,566)
Proceeds from sales of property
and equipment ................. 10 -- 4,545 -- 4,555
-------- -------- -------- -------- --------
Net cash provided by (used in)
investing activities .......... (2,712) (1,392) (5,864) (4,043) (14,011)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Repayments of notes payable ..... -- -- (10,002) -- (10,002)
Borrowings on long-term debt .... -- -- 1,546 -- 1,546
Repayment of long-term debt
and capital lease obligations . (31,678) -- (5,000) -- (36,678)
Common stock issued, net of
expenses ...................... 2,735 -- -- -- 2,735
Net borrowings and payments
on intercompany balances ...... 1,823 -- (1,823) -- --
Net capital contribution
from parent ................... -- (5,210) 1,167 4,043 --
Other ........................... (41) -- -- -- (41)
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities .......... (27,161) (5,210) (14,112) 4,043 (42,440)
-------- -------- -------- -------- --------
Effect of exchange
rates on cash ................. -- -- 4,086 -- 4,086
-------- -------- -------- -------- --------
Net increase (decrease) in cash ...... (6,124) 784 1,335 -- (4,005)
Cash and cash equivalents,
beginning of period ............. 7,477 2,102 12,726 -- 22,305
-------- -------- -------- -------- --------
Cash and cash
equivalents, end
of period ....................... $ 1,353 $ 2,886 $ 14,061 $ -- $ 18,300
======== ======== ======== ======== ========
</TABLE>
12
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (Continued):
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
<S> <C> <C> <C> <C> <C>
operating activities .............. $ 20,199 $ 3,771 $ (862) $ -- $ 23,108
-------- -------- -------- -------- --------
Cash flows from investing activities:
Investments in subsidiaries ......... 5,256 3,923 -- (9,179) --
Purchases of property and
equipment ......................... (14,947) (2,195) (14,537) (31,679)
Proceeds from sales of property and
equipment ......................... 14 -- 541 -- 555
-------- -------- -------- -------- --------
Net cash provided by (used in)
investing activities .............. (9,677) 1,728 (13,996) (9,179) (31,124)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Borrowings on notes payable ......... -- -- 3,296 -- 3,296
Repayments of notes payable ......... -- -- (24,900) -- (24,900)
Borrowings on long-term debt ........ 38,000 -- 6,024 -- 44,024
Repayment of long-term debt and
capital lease obligations ......... (13,582) -- (3,952) -- (17,534)
Net borrowings and payments on
intercompany balances ............. (37,329) -- 37,329 -- --
Net capital contribution
from parent ....................... -- (5,256) (3,923) 9,179 --
Other ............................... (21) -- -- -- (21)
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities ........... (12,932) (5,256) 13,874 9,179 4,865
-------- -------- -------- -------- --------
Effect of exchange rates on cash ... -- -- 845 -- 845
-------- -------- -------- -------- --------
Net increase (decrease) in cash ..... (2,410) 243 (139) -- (2,306)
Cash and cash equivalents, beginning
of period ...................... 2,410 1,190 10,872 -- 14,472
-------- -------- -------- -------- --------
Cash and cash
equivalents, end of
period ......................... $ -- $ 1,433 $ 10,733 $ -- $ 12,166
======== ======== ======== ======== ========
</TABLE>
13
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
-----------------------------------------------------------------------
OVERVIEW
--------
SITEL Corporation ("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.
The following table sets forth certain financial data and the percentage of
total revenues of the Company for the periods indicated. All dollar amounts are
in thousands.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
2000 1999 2000 1999
----------------- -------------------- -------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ......................... $ 185,289 100.0% $ 189,597 100.0% $ 577,705 100.0% $ 531,778 100.0%
----------------- -------------------- -------------------- ------------------
Operating expenses:
Direct labor and
telecommunications expenses 97,586 52.7% 96,322 50.8% 301,294 52.1% 267,166 50.3%
Subcontracted and
other services
expenses..................... 12,009 6.5% 11,920 6.3% 39,962 6.9% 41,743 7.8%
Operating, selling
and administrative expenses.. 65,498 35.3% 71,385 37.6% 205,575 35.6% 206,897 38.9%
Asset impairment and
restructuring expenses ...... - - % 9,596 5.1% 3,520 0.7% 9,596 1.8%
----------------- -------------------- -------------------- -------------------
Total operating expenses.. 175,093 94.5% 189,223 99.8% 550,351 95.3% 525,402 98.8%
----------------- -------------------- -------------------- -------------------
Operating income ......... 10,196 5.5% 374 0.2% 27,354 4.7% 6,376 1.2%
Other Income (expense):
Interest expense, net ....... (2,895) (1.6)% (3,203) (1.7)% (9,497) (1.7)% (9,353) (1.8)%
Other income (expense), net (233) (0.1)% (69) (0.0)% (431) (0.0)% 51 (0.0)%
----------------- -------------------- -------------------- -------------------
Income (loss) before income
taxes and minority interest .... 7,068 3.8% (2,898) (1.5)% 17,426 3.0% (2,926) (0.6)%
Income tax expense ............... 3,039 1.6% 1,762 1.0% 7,494 1.3% 2,645 0.5%
Minority interest ................ 374 0.2% 58 0.0% 833 0.1% 122 0.0%
----------------- -------------------- -------------------- -------------------
Net income (loss) ................ $ 3,655 2.0% $ (4,718) (2.5)% $ 9,099 1.6% $ (5,693) (1.1)%
================= ==================== ==================== ===================
</TABLE>
14
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED SEPTEMBER 30, 2000 VS. THREE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------------------------------------------------
REVENUES
Revenues decreased $4.3 million, or 2.3%, to $185.3 million in the three months
ended September 30, 2000 from $189.6 million in the three months ended September
30, 1999. The decrease was primarily attributable to decreases in revenues in
Europe and the Asia Pacific region of $11.9 million and $5.7 million,
respectively, partially offset by increases in revenues in the United States and
Latin America of $10.3 million and $3.4 million, respectively. The increase in
the value of the U.S. dollar versus the British pound and Euro reduced the
reported revenues from the Company's European operations by approximately $7.0
million in the third quarter of 2000 compared to the third quarter of 1999.
DIRECT LABOR AND TELECOMMUNICATIONS EXPENSES
Direct labor and telecommunications expenses include the compensation of our
customer service professionals and their first line supervisors and telephone
usage expenses directly related to customer relationship management activities.
Direct labor and telecommunications expenses as a percentage of revenues can
vary based on the nature of the contract, the nature of the work and the market
in which the services are provided. Accordingly, direct labor and
telecommunications expenses as a percentage of revenues can vary, sometimes
significantly, from quarter to quarter. Direct labor and telecommunications
expenses increased $1.3 million, or 1.3%, to $97.6 million in the three months
ended September 30, 2000, from $96.3 million in the three months ended September
30, 1999. As a percentage of revenues, direct labor and telecommunications
expenses increased to 52.7% in the third quarter of 2000 from 50.8% in the third
quarter of 1999 due to higher labor costs, as a percentage of revenues, which
were partially offset by a decline in telecommunications costs.
SUBCONTRACTED AND OTHER SERVICES EXPENSES
Subcontracted and other services expenses include reimbursable expenses and
services provided to clients through subcontractors. Subcontracted and other
services expenses increased from $11.9 million in the third quarter of 1999 to
$12.0 million in the third quarter of 2000.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, selling 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. Operating,
selling and administrative expenses decreased $5.9 million, or 8.2%, to $65.5
million in the three months ended September 30, 2000 from $71.4 million in the
three months ended September 30, 1999. As a percentage of revenues, operating,
selling and administrative expenses decreased to 35.3% in the third quarter of
2000 from 37.6% in the third quarter of 1999 due to improved expense controls.
ASSET IMPAIRMENT AND RESTRUCTURING EXPENSES
In the third quarter of 1999, the Company recorded an asset impairment expense
of $9.6 million primarily related to the write down of capitalized software and
related technology assets.
OPERATING INCOME
Operating income increased $9.8 million to $10.2 million for the three months
ended September 30, 2000 from $0.4 million for the three months ended September
30, 1999. Excluding the asset impairment and restructuring expenses in the third
quarter of 1999, operating income increased $0.2 million in the third quarter of
2000 compared to the third quarter of 1999. As a percentage of revenues,
operating income increased to 5.5% in the third quarter of 2000 from 5.3% in the
third quarter 1999 excluding the asset impairment and restructuring
expenses.
INTEREST EXPENSE, NET
Interest expense, net of interest income, decreased to $2.9 million in the three
months ended September 30, 2000 from $3.2 million in the three months ended
September 30, 1999 due to lower outstanding debt which was partially offset by
higher interest rates.
INCOME TAX EXPENSE
Income tax expense for the three months ended September 30, 2000 was $3.0
million compared to $1.8 million for the three months ended September 30, 1999.
Income tax expense as a percentage of income before taxes and minority interest
was 43.0% for the quarter.
15
<PAGE>
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)
For the reasons discussed above, net income increased to $3.7 million for the
three months ended September 30, 2000 from a loss of $4.7 million for the three
months ended September 30, 1999. Excluding the asset impairment and
restructuring expenses in the third quarter of 1999, and the related tax effect,
net income increased from $3.6 million in the third quarter of 1999 to $3.7
million in the third quarter of 2000.
NINE MONTHS ENDED SEPTEMBER 30, 2000 VS. NINE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------------
REVENUES
Revenues increased $45.9 million, or 8.6%, to $577.7 million in the nine months
ended September 30, 2000 from $531.8 million in the nine months ended September
30, 1999. The increase was primarily attributable to an increase in revenues of
$44.6 million in the United States and $10.2 million in Latin America, partially
offset by a decrease in revenues of $8.0 million in Europe.
DIRECT LABOR AND TELECOMMUNICATIONS EXPENSES
Direct labor and telecommunications expenses increased $34.1 million, or 12.8%,
to $301.3 million in the nine months ended September 30, 2000, from $267.2
million in the nine months ended September 30, 1999. As a percentage of
revenues, direct labor and telecommunications expenses increased to 52.1% in the
first nine months of 2000 from 50.3% in the first nine months of 1999 due to
higher labor costs, as a percentage of revenues, which were partially offset by
a decline in telecommunications costs.
SUBCONTRACTED AND OTHER SERVICES EXPENSES
Subcontracted and other services expenses decreased 4.3% from $41.7 million in
the third quarter of 1999 to $40.0 million in the third quarter of 2000
primarily related to a reduction in customer acquisition services subcontracted
to third parties.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, selling and administrative expenses decreased $1.3 million, or 0.6%,
to $205.6 million in the nine months ended September 30, 2000 from $206.9
million in the nine months ended September 30, 1999. As a percentage of
revenues, operating, selling and administrative expenses decreased to 35.6% in
the first nine months of 2000 from 38.9% in the first nine months of 1999. This
decrease reflects the increased leveraging of overhead through revenue growth,
improved expense controls, and expenses in the second quarter of 1999 related to
re-engineering costs in the Company's United Kingdom operations and severance
and consolidation costs in the Asia Pacific region.
ASSET IMPAIRMENT AND RESTRUCTURING EXPENSES
In May 2000, the Company formed a strategic partnership with Bellsystem24, Inc.,
Japan's largest comprehensive marketing agency. Under the terms of the
partnership, Bellsystem24 will provide services and support for the Company's
clients in Japan, 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 restructured its operations in Japan and
transferred its existing Japanese business to Bellsystem24. In the second
quarter, the Company recorded a $3.5 million asset impairment and restructuring
charge, or $2.0 million net of tax, related to the transaction with
Bellsystem24.
In the third quarter of 1999, the Company recorded an asset impairment expense
of $9.6 million primarily related to the write down of capitalized software and
related technology assets.
OPERATING INCOME
Operating income increased 329.0% to $27.4 million in the nine months ended
September 30, 2000 from $6.4 million in the nine months ended September 30,
1999. Excluding the aforementioned asset impairment and restructuring expenses
in the second quarter of 2000 and third quarter of 1999, operating income
increased 93.3% to $30.9 million in the nine months ended September 30, 2000 and
operating margin increased from 3.0% in the nine months ended September 30, 1999
to 5.4% in the nine months ended September 30, 2000.
INTEREST EXPENSE, NET
Interest expense, net of interest income, increased to $9.5 million in the nine
months ended September 30, 2000 from $9.4 million in the nine months ended
September 30, 1999. This increase was primarily due to higher interest rates.
16
<PAGE>
INCOME TAX EXPENSE Income tax expense for the nine months ended September 30,
2000 was $7.5 million compared to $2.6 million for the nine months ended
September 30, 1999. Income tax expense as a percentage of income before taxes
and minority interest was 43.0% for the nine months ended September 30, 2000.
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, net
operating losses in certain foreign subsidiaries for which no tax benefit is
recognized and U.S. state and local income taxes.
NET INCOME (LOSS)
For the reasons discussed above, net income increased to $9.1 million in the
nine months ended September 30, 2000 from a loss of $5.7 million in the nine
months ended September 30, 1999. Excluding the asset impairment and
restructuring expenses recorded in the second quarter of 2000 and the third
quarter of 1999, and the related tax effect, net income increased $8.5 million
to $11.1 million for the nine months ended September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES:
--------------------------------
Cash provided by operating activities was $48.4 million during the nine-month
period ended September 30, 2000. This was primarily the result of income before
depreciation, amortization and asset impairment and restructuring expenses of
$46.1 million and a decrease of $11.0 million in trade accounts receivable and
other assets, which was partially offset by a decrease in trade accounts payable
of $9.5 million. Although accounts receivable decreased during the period, as
the Company continues to grow it anticipates that accounts receivable will
increase in future periods, requiring increased working capital. The Company
purchased $18.6 million of property and equipment in the nine months ended
September 30, 2000. The Company anticipates that capital expenditures will
increase in the fourth quarter to support the growth of its business; however,
total capital expenditures in 2000 are currently anticipated to be less than in
1999. The Company used $45.2 million to repay debt in the nine months ended
September 30, 2000.
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. 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. The new facility includes lender
pre-approval to increase the size of the facility to $100 million. 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 obligations of the Company
under the new facility have been guaranteed by the Company's domestic
subsidiaries and certain foreign subsidiaries and are secured by liens on
substantially all of the assets of SITEL Corporation and such subsidiaries,
including a pledge of the Company's shares in such subsidiaries and certain
other foreign subsidiaries. The facility contains certain financial covenants
and certain restrictions on, among other things, the Company's ability to incur
additional debt, pay dividends or make certain other restricted payments, make
certain investments, and sell assets or merge with another company. The facility
becomes due and payable upon a change of control of the Company as defined in
the credit agreement. At September 30, 2000, the unused line of credit relating
to this facility was $73.1 million. The Company believes that funds generated
from operations, exiting 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.
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 operating, selling 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.
17
<PAGE>
EFFECTS OF INFLATION
--------------------
Inflation has not had a significant effect on the Company's operations. However,
there can be no assurance that inflation will not have a material effect on the
Company's operations in the future.
ACCOUNTING PRONOUNCEMENTS
-------------------------
Statement of Financial Accounting Standards ("SFAS") No. 138, Accounting for
Certain Derivative Investments and Certain Hedging Activities, was issued in
June 2000. The standard amends certain provisions of SFAS No. 133, Accounting
for Derivative Investments and Hedging Activities, which was issued in June 1998
to establish accounting standards for derivative instruments and for hedging
activities. These standards are effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The Company anticipates adopting these
accounting pronouncements in the first quarter 2001; however, management
believes they will not have a significant impact on the Company's consolidated
financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements. This
pronouncement is effective, as amended by SAB Nos. 101A and 101B, no later than
the quarter beginning October 1, 2000. The Company is in the process of
evaluating the guidance for revenue recognition provided by SAB No. 101 and will
report the impact of adoption, if any, as a cumulative effect of a change in
accounting.
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. All statements
other than statements of historical facts included in this Form 10-Q, including
without limitation those regarding the Company's financial position, business
strategy, projected costs and plans and objectives of management for future
operations, are forward-looking statements. The words "believe", "expect",
"seek", "intend", "should", "will", "plan", "anticipate" and similar expressions
in this Form 10-Q identify forward-looking statements. Such forward-looking
statements so identified include, without limitation, statements as to the
Company's expectations regarding quarterly variations and periodic fluctuations
in results of operations, growth in accounts receivable and associated working
capital needs, increased capital expenditures to support growth of the business,
and anticipated timing for adoption of accounting pronouncements and associated
impact on the financial statements. All forward-looking statements in this Form
10-Q speak only as of the date the statement is made. The Company assumes no
obligation to update any such forward-looking statement. 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,
future events and actual results could differ materially from those set forth
in, contemplated by or underlying the forward-looking statements. Important
factors that could cause actual results to differ materially from the Company's
expectations may include, but are not limited to, the following, many of which
are outside the Company's control: reliance on major clients, conditions
affecting clients' industries, clients' budgets and plans, unanticipated labor,
contract or technical difficulties, delays in ramp up of services under
contracts, reliance on major subcontractors and strategic partners, risks
associated with managing a global business, fluctuations in operating results,
reliance on telecommunications and computer technology, dependence on labor
force, risks associated with the Company's acquisition strategy, industry
regulation, general and local economic conditions, competitive pressures in the
Company's industry, foreign currency risks, the effects of leverage,
restrictions imposed by the terms of indebtedness, and dependence on key
personnel and control by management. The Company's Form 10-K, 10-Q and 8-K
reports filed with the Securities and Exchange Commission describe other
important factors that may impact the Company's business, results of operation
and financial condition and cause actual results to differ materially from those
set forth in, contemplated by or underlying the forward-looking statements. 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.
18
<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; however, the amounts
involved were not material.
19
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
---------
10.1 Consulting Agreement with DreamField Partners, Inc.
10.2 Amendment No. 2 to 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.
20
<PAGE>
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: November 14, 2000 SITEL Corporation
By: /s/ W. Gar Richlin
-------------------------------------
W. Gar Richlin
Executive Vice-President and Chief
Financial Officer
(Principal Financial Officer)
21
<PAGE>
SITEL CORPORATION AND SUBSIDIARIES
EXHIBITS INDEX:
10.1 Consulting Agreement with DreamField Partners, Inc.
10.2 Amendment No. 2 to SITEL Corporation 1999 Stock Incentive Plan
27 Financial Data Schedule
22
