<PAGE> 1
================================================================================
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 PERIOD ENDED SEPTEMBER 28, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 0-26786
APAC TELESERVICES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
ILLINOIS 36-2777140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE PARKWAY NORTH CENTER, SUITE 510 60015
DEERFIELD, ILLINOIS (Zip Code)
(Address of principal executive office)
</TABLE>
(847) 374-4980
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether 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 periods 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 _____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Shares, $0.01 par value -- 48,825,113 shares outstanding as of
November 6, 1997.
This Form 10-Q consists of 14 sequentially numbered pages. The Exhibit
Index appears on page 11.
================================================================================
<PAGE> 2
INDEX
APAC TELESERVICES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets as of September 28, 1997, and
December 29, 1996.................................................. 3
Consolidated Condensed Statements of Income for the Thirteen and
Thirty-Nine Weeks Ended September 28, 1997, and September 29,
1996............................................................... 4
Consolidated Condensed Statements of Cash Flows for the Thirty-Nine
Weeks Ended September 28, 1997, and September 29, 1996............. 5
Notes to Condensed Financial Statements............................ 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 11
SIGNATURES.............................................................. 12
EXHIBITS................................................................ 13-14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
APAC TELESERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 28, DECEMBER 29,
1997 1996
------------- ------------
(UNAUDITED) (AUDITED, NOTE 1)
(000'S OMITTED, EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
- -------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents................................. $ 151 $ 141
Accounts receivable, net.................................. 63,795 59,473
Other current assets...................................... 2,691 2,670
-------- --------
Total current assets................................... 66,637 62,284
PROPERTY AND EQUIPMENT...................................... 134,628 96,522
Less -- accumulated depreciation............................ (32,490) (18,078)
-------- --------
Property and equipment, net............................ 102,138 78,444
GOODWILL AND OTHER INTANGIBLE ASSETS........................ 41,993 --
Less -- accumulated amortization............................ (1,133) --
-------- --------
Goodwill and other intangible assets, net.............. 40,860 --
OTHER ASSETS................................................ 1,447 653
-------- --------
Total assets........................................... $211,082 $141,381
======== ========
LIABILITIES AND SHARE OWNERS' EQUITY
- -------------------------------------------------------------------------------
CURRENT LIABILITIES:
Notes payable............................................. $ 27,877 $ 16,047
Accounts payable.......................................... 9,922 17,080
Income taxes payable...................................... 386 453
Other current liabilities................................. 12,966 15,350
-------- --------
Total current liabilities.............................. 51,151 48,930
LONG-TERM DEBT, NET......................................... 1,269 1,325
DEFERRED INCOME TAXES....................................... 14,162 2,920
SHARE OWNERS' EQUITY:
Preferred shares, $0.01 par value; 50,000,000 shares
authorized; none issued and outstanding................ -- --
Common shares, $0.01 par value; 200,000,000 shares
authorized, 48,810,000 shares issued and outstanding at
September 28, 1997; 46,540,000 shares issued and
outstanding at December 29, 1996....................... 488 465
Additional paid-in capital................................ 91,184 54,017
Retained earnings......................................... 52,828 33,724
-------- --------
Total share owners' equity............................. 144,500 88,206
-------- --------
Total liabilities and share owners' equity................ $211,082 $141,381
======== ========
</TABLE>
See notes to condensed financial statements.
3
<PAGE> 4
APAC TELESERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------------ ------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
(000'S OMITTED, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenue................................ $79,841 $75,361 $261,745 $188,604
Operating expenses:
Cost of services......................... 64,000 52,372 195,399 132,547
Selling, general and administrative
expenses.............................. 11,970 8,979 34,276 22,762
------- ------- -------- --------
Total operating expenses............ 75,970 61,351 229,675 155,309
------- ------- -------- --------
Income from operations................... 3,871 14,010 32,070 33,295
Interest income (expense), net............. (349) (39) (987) 240
------- ------- -------- --------
Income before income taxes............... 3,522 13,971 31,083 33,535
Provision for income taxes................. 1,504 5,351 11,979 13,079
------- ------- -------- --------
Net income............................... $ 2,018 $ 8,620 $ 19,104 $ 20,456
======= ======= ======== ========
Net income per share....................... $ 0.04 $ 0.18 $ 0.40 $ 0.43
======= ======= ======== ========
Weighted average number of shares
outstanding.............................. 48,810 48,116 48,193 47,815
======= ======= ======== ========
</TABLE>
See notes to condensed financial statements.
4
<PAGE> 5
APAC TELESERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-----------------------------
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------- -------------
(000'S OMITTED)
<S> <C> <C>
Operating activities:
Net income................................................ $ 19,104 $ 20,456
Depreciation and amortization............................. 15,868 7,556
Deferred income taxes..................................... 1,116 (1,060)
Write-off of in-process research and development costs.... 600 --
Change in operating assets and liabilities................ (14,956) (27,427)
-------- --------
Net cash provided (used) by operations............... 21,732 (475)
Investing activities:
Acquisition costs, net of cash acquired................... (897) --
Sales of short-term investments........................... -- 26,000
Purchases of property and equipment, net.................. (36,921) (35,781)
-------- --------
Net cash used by investing activities................ (37,818) (9,781)
Financing activities:
Net borrowings from revolving credit facility............. 11,900 --
Payments on long-term debt................................ (126) (776)
Increase (decrease) in book overdraft..................... (977) 6,110
Exercise of employee stock options, including related tax
benefit................................................ 4,842 3,558
Proceeds from employee stock purchase plan................ 457 --
S corporation distributions............................... -- (2,809)
-------- --------
Net cash provided by financing activities............ 16,096 6,083
-------- --------
Net increase (decrease) in cash and cash equivalents........ $ 10 $ (4,173)
======== ========
</TABLE>
See notes to condensed financial statements.
5
<PAGE> 6
APAC TELESERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 28, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the thirteen and thirty-nine week periods
ended September 28, 1997, are not necessarily indicative of the results that may
be expected for the fiscal year ending December 28, 1997. The balance sheet at
December 29, 1996, has been derived from the audited financial statements at
that date but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. For
additional information, refer to financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended December
29, 1996.
2. SHARE OWNERS' EQUITY AND EARNINGS PER SHARE
Net income per share amounts are computed based upon the weighted average
number of common shares and common share equivalents outstanding during each of
the periods presented. In February 1997, the Financial Accounting Standards
Board issued SFAS No. 128 (Earnings per Share) which the Company is required to
adopt effective for the year ending December 28, 1997. Had the Company adopted
SFAS No. 128 for the thirteen and thirty-nine week periods ended September 28,
1997, basic and comprehensive earnings per share would be the same as earnings
per share disclosed.
3. RELATED PARTY TRANSACTIONS
In February 1996, several shareholders of the Company sold an aggregate of
6,770,000 common shares in an underwritten public offering pursuant to a
registration rights agreement which was entered into by the Company and such
shareholders prior to the Company's initial public offering. The offering costs,
totaling approximately $360,000, were paid by the Company and have been
classified under selling, general and administrative expenses for the
thirty-nine week period ended September 29, 1996. The Company did not receive
any proceeds from the sale of these common shares.
4. NOTES PAYABLE
In June 1997, the Company renegotiated its revolving credit facility (the
"credit facility") increasing borrowing capacity under the credit facility from
$40.0 million to $80.0 million. Terms and conditions of the new agreement are
essentially the same as terms and conditions of the previous agreement.
Borrowings outstanding under the credit facility amounted to $27.8 million at
September 28, 1997.
5. ACQUISITION
On August 19, 1997, the Company acquired all of the common and preferred
stock of Paragren Technologies, Inc. ("Paragren"), a specialist in
software-based marketing products that help its clients maximize their customer
relationships. Its software helps its clients analyze market, customer and sales
data on a real time basis so that they can respond more effectively to rapidly
changing opportunities and competitive challenges. Paragren's One-By-One(TM)
suite of customer intelligence software applications allows marketers to develop
strategic insights into their marketing plans and make real-time tactical
decisions. It enables users to retrieve and analyze information from multiple
sources for customer profiling and potential; marketing segmentation and
targeting; and full campaign execution and evaluation.
6
<PAGE> 7
APAC TELESERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS -- CONTINUED
SEPTEMBER 28, 1997
(UNAUDITED)
5. ACQUISITION -- CONTINUED
In addition to its software solutions, systems integration and consulting
services, Paragren designs, develops and manages consumer-panel research. This
research helps businesses learn more about their competition, customer
preferences and marketplace environment through actual purchase and behavioral
data collected over time. Panels are dedicated to specific industries, such as
telecommunications, to ensure relevance to each client's opportunities and
issues.
In consideration for the common and preferred stock of Paragren, the
Company issued to Paragren stockholders 1,991,385 shares of its common stock and
converted existing Paragren stock options into stock options for an additional
189,195 shares of the Company's common stock. The acquisition has been accounted
for using the purchase method of accounting. Accordingly, the purchase price of
$32.7 million, comprised of common stock and stock options and other direct
acquisition costs has been allocated to the assets purchased and the liabilities
assumed based upon the estimated fair values as determined by a preliminary
appraisal. The final purchase accounting allocations will be determined based on
the final appraised values which could differ from the estimates used herein.
Variations resulting from the final allocations will be recorded in the quarter
ending December 28, 1997. Such preliminary allocation resulted in $42.0 million
assigned to goodwill and other intangible assets, which include technology,
non-compete covenants, workforce and trademarks and tradenames; $9.6 million
recorded as deferred tax liabilities; and $0.6 million assigned to in-process
research and development costs. The amount assigned to in-process research and
development costs was expensed in the period ended September 28, 1997.
Additionally, Paragren had accumulated net operating loss carryforwards of
approximately $1.3 million which were not assigned value. Any realization of
future tax benefits from Paragren's net operating loss carryforwards will result
in a corresponding reduction of goodwill. The historical balance sheet of the
Company at September 28, 1997 includes the effect of the acquisition of
Paragren.
Results of operations after the acquisition date are included in the
Company's consolidated condensed statements of income for the thirteen and
thirty-nine week periods ended September 28, 1997. The following unaudited pro
forma information has been prepared as if the acquisition had occurred at the
beginning of 1996, with pro forma adjustments to give effect to amortization of
goodwill and other intangible assets valued in the acquisition, related tax
effects and adjustments relative to weighted average shares outstanding.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS FIFTY-TWO WEEKS
ENDED ENDED
SEPTEMBER 28, 1997 DECEMBER 29, 1996
------------------ -----------------
(000'S OMITTED, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Net revenue................................... $262,748 $277,610
Net income.................................... $13,124 $24,419
Net income per share.......................... $0.29 $0.49
</TABLE>
7
<PAGE> 8
APAC TELESERVICES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
APAC TeleServices, Inc. provides telephone-based sales, marketing and
customer management solutions for corporate clients operating in the
telecommunications, insurance, financial services, parcel delivery, utilities
and entertainment industries throughout the United States. The Company's client
base is comprised of large companies with growing needs for cost-effective means
of contacting and servicing current and prospective customers. The Company has
two primary service offerings. The Sales Solutions division provides outbound
sales support to consumers and businesses, database analysis and management,
market research, targeted marketing plan development and customer lead
generation, acquisition and retention. The Service Solutions division provides
inbound customer service, direct mail response, "help" line support and customer
order processing.
APAC's results of operations in any single interim period should not be
viewed as an indication of future results of operations. The Company may
experience quarterly variations in net revenue and operating income as a result
of the timing of clients' marketing campaigns and customer service programs, the
timing of additional selling, general and administrative expenses to acquire and
support such new business, and changes in the Company's revenue mix among its
various service offerings. While the effects of seasonality on APAC's business
have been obscured by its growing net revenue, the Company's business tends to
be slower in the first and third quarters of its fiscal year due to client
marketing programs which are typically slower in the post-holiday and summer
months.
The following table sets forth income statement data as a percent of net
revenue from services provided by the Company for the thirteen and thirty-nine
week periods ended September 28, 1997, and September 29, 1996.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------------ ------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenue:
Sales solutions.......................... 50.1% 51.2% 52.6% 53.4%
Service solutions........................ 49.9 48.8 47.4 46.6
----- ----- ----- -----
Total net revenue..................... 100.0 100.0 100.0 100.0
Operating expenses:
Cost of services......................... 80.2 69.5 74.6 70.3
Selling, general and administrative
expenses.............................. 15.0 11.9 13.1 12.1
----- ----- ----- -----
Total operating expenses.............. 95.2 81.4 87.7 82.4
----- ----- ----- -----
Income from operations................... 4.8 18.6 12.3 17.6
Interest income (expense), net............. (0.4) (0.1) (0.4) 0.1
----- ----- ----- -----
Income before income taxes............... 4.4 18.5 11.9 17.7
Provision for income taxes................. 1.9 7.1 4.6 6.9
----- ----- ----- -----
Net income............................... 2.5% 11.4% 7.3% 10.8%
===== ===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
Net revenue for the quarter and nine months ended September 28, 1997,
increased $4.5 million or 5.9% and $73.1 million or 38.8%, respectively,
compared to net revenue in the same periods in 1996. Net revenue for the Sales
Solutions division for the quarter and nine months ended September 28, 1997,
increased $1.5 million or 3.8% and $37.0 million or 36.7%, respectively,
compared to the same periods in 1996. The increase for the quarter and nine
month periods ended September 28, 1997, resulted from increased call volume from
new and existing clients spread equitably over the Company's primary service
industries, insurance, financial
8
<PAGE> 9
APAC TELESERVICES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
RESULTS OF OPERATIONS -- CONTINUED
services and telecommunications. The Service Solutions division's net revenue
for the quarter and nine months ended September 28, 1997, increased $3.0 million
or 8.2% and $36.1 million or 41.1%, respectively, compared to the same periods
in 1996. Revenue growth for the quarter and nine month period ended September
28, 1997, resulted from higher call volumes associated with AT&T Corporation
("AT&T") inbound call activity and a long-term contract to process customer
orders for John H. Harland Company ("Harland"), offset in the third quarter by a
reduction in United Parcel Service ("UPS") revenue resulting from improved
customer service center operating efficiencies and the effects of a three week
labor strike against UPS.
Cost of services as a percent of net revenue increased to 80.2% in the
third quarter of 1997 compared to 69.5% in the third quarter of 1996. The
Company continued to incur fixed costs to maintain its infrastructure to support
AT&T and UPS, such fixed costs increasing as a percentage of net revenue due to
price and marketing-related volume reductions at AT&T and the effects of the
labor strike at UPS. Cost of services in the third quarter also included $0.5
million of amortization of intangible assets acquired with the purchase of
Paragren Technologies, Inc. ("Paragren"). Cost of services as a percentage of
net revenue for the first nine months of 1997 was 74.6% as compared to 70.3% in
the same period in 1996. This increase reflects the mutual decision between UPS
and the Company to change the staffing requirements in the UPS customer service
facilities. UPS has the ability under its facilities management agreement with
the Company to determine service levels. During the first quarter of 1997, UPS
reduced the number of billable service representatives and support positions by
approximately 20% resulting in the Company absorbing payroll costs that
otherwise would have been billed to UPS during the first and second quarters of
the year.
Selling, general and administrative expenses as a percent of net revenue
for the quarter and nine months ended September 29, 1997, increased to 15.0% and
13.1%, respectively, compared to 11.9% and 12.1%, for the same periods in 1996.
The increases in expenses as a percent of revenue in 1997 are the results of a
slowdown in the growth of revenue in the third quarter of 1997 as discussed
above, the inclusion of Paragren selling, general and administrative expenses
for a month and a half, and $1.2 million of expense associated with the
write-off of in-process research and development costs and amortization of
intangible assets acquired with the purchase of Paragren.
The $1.3 million unfavorable change in interest from the first nine months
of 1996 to the first nine months of 1997 reflects interest income earned on
temporary investments in 1996 with cash raised in the initial public offering of
the Company's common stock, compared to interest expense incurred on outstanding
borrowings in 1997 as a result of expansion of customer contact center
operations in the fourth quarter of 1996 and the first half of 1997.
The provision for income taxes of $12.0 million for the nine months ended
September 28, 1997, is based upon the Company's estimated annual effective tax
rate of 38.0%, as adjusted for the effect of non-deductible amortization of
goodwill acquired with the purchase of Paragren. The $13.1 million provision for
income taxes for first nine months of 1996 is based upon an estimated annual
effective tax rate of 39.5%. The decrease in the effective tax rate from 1996 to
1997 is due to tax planning strategies initiated in the fourth quarter of 1996
which have reduced state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Operations provided $21.7 million of cash in the first nine months of 1997
compared to the use of $0.5 million of cash in the first nine months of 1996.
The increase in operating cash flow in 1997 was generated by higher depreciation
and related tax benefits arising from capital investment in 1996 and first nine
months of 1997. Additionally, the Company used $15.0 million of cash to fund
working capital compared to $27.4 million in the first nine months of 1996.
Capital expenditures in the first nine months of 1997 amounted to $36.9
9
<PAGE> 10
APAC TELESERVICES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- CONTINUED
LIQUIDITY AND CAPITAL RESOURCES -- CONTINUED
million. Amounts expended in conjunction with the acquisition of Paragren
amounted to $0.9 million. Funds used to expand customer contact center
operations and the Company's data management systems, as well as funds used in
the acquisition of Paragren, were provided by cash from operations, bank
borrowings of $11.9 million and proceeds from the sale of $5.3 million in common
stock to employees. Investment in customer contact center operations in 1996 of
$35.8 million was funded primarily with proceeds from the sale of $26.0 million
in short-term investments and liquidation of $4.2 million in cash and cash
equivalent balances.
In June 1997, the Company amended its revolving credit facility (the
"credit facility") increasing borrowing capacity under the credit facility from
$40.0 million to $80.0 million. The credit facility is available for general
working capital purposes and capital expenditures. As of September 28, 1997,
$27.8 million was outstanding under the credit facility. The Company expects
that cash from future operations and available borrowings will be sufficient to
meet normal operating needs as well as fund business growth for the balance of
1997.
FORWARD-LOOKING STATEMENTS
Statements contained herein regarding APAC's expected growth, prospective
business opportunities and future expansion plans are forward-looking statements
that involve substantial risks and uncertainties. In accordance with the Private
Securities Litigation Reform Act of 1995, the following are important factors
that could cause actual results to differ materially from those expressed or
implied by such forward-looking statements. There can be no assurance that the
Company will be able to maintain or accelerate its growth rate, effectively
manage its rapid growth or maintain its profitability. Changes in or events
affecting clients' businesses may have a material impact on the Company's
revenue and earnings. There also can be no assurance that the Company can
build-out facilities in a timely and economic manner. In the future, the Company
may experience excess peak period capacity when it opens a new customer contact
center or terminates or completes a large client program. The Company's
agreements with its clients generally do not assure that the Company will
generate a specific level of revenue, do not designate the Company as the
client's exclusive service provider, and are terminable by the clients on
relatively short notice. In addition, the amount of revenue the Company
generates from a particular client generally is dependent upon customers'
interest in, and use of, the client's products or services. Readers are
encouraged to review the section captioned "Information Regarding
Forward-Looking Statements" in its Annual Report on Form 10-K for the year ended
December 29, 1996, which describe other important factors that may impact the
Company's business, results of operations and financial condition.
10
<PAGE> 11
PART II. OTHER INFORMATION
APAC TELESERVICES, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are furnished as exhibits and numbered pursuant to
Item 601 of Regulation S-K: Exhibit (11) -- Statement Re: Computation of
Earnings Per Share on page 14 and Exhibit (27) -- Financial Data Schedule on
page 15.
(b) Reports on Form 8-K. The Company filed a report on Form 8-K dated August 5,
1997, which disclosed that the Company's largest client, UPS, was struck by
the International Brotherhood of Teamsters on August 4, 1997, and that an
extended strike could have a negative impact on APAC's future revenue and
earnings.
The Company filed a report on Form 8-K dated August 19, 1997, which
disclosed that the Company acquired Paragren Technologies, Inc. ("Paragren")
on August 19, 1997. The Company subsequently filed on November 3, 1997, a
current report on Form 8-K/A dated August 19, 1997, which included financial
statements of Paragren Technologies, Inc. for the period ending June 30,
1997, and unaudited pro forma condensed consolidated financial statements
for APAC TeleServices, Inc. and Subsidiaries.
The Company filed a report on Form 8-K dated September 9, 1997, which
addressed revised estimates of revenue and earnings for the third and fourth
quarters of 1997 and prospects for growth in 1998.
In addition, subsequent to the end of the quarter, the Company filed a
report on Form 8-K dated October 21, 1997, which disclosed the Company's
third quarter results of operations.
11
<PAGE> 12
PART II. OTHER INFORMATION
APAC TELESERVICES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
APAC TELESERVICES, INC.
Date: November 12, 1997 By: /s/ Theodore G. Schwartz
------------------------------------
Chairman, President and Chief
Executive Officer
Date: November 12, 1997 By: /s/ Marc S. Simon
------------------------------------
Chief Financial Officer
12
<PAGE> 13
EXHIBITS
APAC TELESERVICES, INC. AND SUBSIDIARIES
EXHIBIT (11) -- STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------------ ------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Primary shares:
Average shares outstanding............... 47,637 46,342 46,983 46,261
Net effect of dilutive stock options --
based upon the treasury stock method
using average market price............ 1,173 1,774 1,210 1,554
------- ------- ------- -------
Total shares.......................... 48,810 48,116 48,193 47,815
======= ======= ======= =======
Net income................................. $ 2,018 $ 8,620 $19,104 $20,456
======= ======= ======= =======
Net income per share....................... $ 0.04 $ 0.18 $ 0.40 $ 0.43
======= ======= ======= =======
Fully diluted shares:
Average shares outstanding............... 47,637 46,342 46,983 46,261
Net effect of dilutive stock options --
based upon the treasury stock method
using quarter-end market price........ 1,173 2,150 1,210 1,938
------- ------- ------- -------
Total shares.......................... 48,810 48,492 48,193 48,199
======= ======= ======= =======
Net income................................. $ 2,018 $ 8,620 $19,104 $20,456
======= ======= ======= =======
Net income per share....................... $ 0.04 $ 0.17 $ 0.40 $ 0.42
======= ======= ======= =======
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 151
<SECURITIES> 0
<RECEIVABLES> 63,795
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66,637
<PP&E> 134,628
<DEPRECIATION> 32,490
<TOTAL-ASSETS> 211,082
<CURRENT-LIABILITIES> 51,151
<BONDS> 1,269
0
0
<COMMON> 488
<OTHER-SE> 144,012
<TOTAL-LIABILITY-AND-EQUITY> 211,082
<SALES> 0
<TOTAL-REVENUES> 261,745
<CGS> 0
<TOTAL-COSTS> 195,399
<OTHER-EXPENSES> 34,276
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 987
<INCOME-PRETAX> 31,083
<INCOME-TAX> 11,979
<INCOME-CONTINUING> 19,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,104
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
