Message #29 From:
NewsBot Date: February 23, 2007 05:00:00 AM
APAC News APAC Customer Services Completes Turnaround Year, Positioning Company for Future Growth
DEERFIELD, Ill.--(BUSINESS WIRE)--APAC Customer Services, Inc. (Nasdaq: APAC), a leading provider of customer care services and solutions, today reported financial results for its fourth fiscal quarter and full fiscal year ended December 31, 2006.
Chief Executive Officer Bob Keller commented, “2006 was a year of accomplishment for APAC, and our operating performance in the fourth quarter begins to demonstrate the long-term potential of our business. In the fourth quarter, we generated $954,000 of income before taxes and increased our gross profit margin to 16.3% as we continued to grow our off-shore production revenue. During the period, we expanded our temporary facility in Manila because of weather-related construction delays in our third permanent facility in the Philippines. We now expect to open the first phase of the permanent facility late in the first quarter of 2007 or very early in the second quarter.
“The demand for our services in the Philippines remains strong and we have significant near-term opportunities to grow our domestic business in 2007. In spite of our expectation that Medicare Part D revenue will stabilize going forward at about half the 2006 volume of $33.0 million, given the strength of our client base, the overall demand for our services, and the improvements we have made and continue to make in our operations, we expect that we will be profitable for the 2007 full year.”
Mr. Keller added, “Based on both our recent performance and the favorable trends in our industry, we are optimistic about our future. Looking out over the next three years, our goal is to achieve low double-digit compounded revenue growth and EBITDA margins, and year-to-year improvement in earnings per share. With our strategic realignment behind us and many exciting opportunities in front of us, we expect to expand margins on a year-over-year basis as our offshore business continues to grow.”
Fourth Quarter Financial Results
Revenue for the quarter totaled $56.1 million compared to $59.7 million in the fourth quarter of 2005. Excluding revenue from the exited outbound customer acquisition business from the Company’s fourth quarter 2005 results, revenue decreased $1.5 million, or 2.7%, over the prior-year quarter. This decrease was attributable to lower domestic revenues resulting primarily from the loss of T-Mobile as a customer, which more than offset the $5.7 million, or 157%, increase in the Company’s offshore business with continuing clients. Gross profit for the 2006 fourth quarter was $9.1 million, or 16.3%, compared to $7.8 million, or 13.1%, in the prior-year period. This improvement reflected the higher contribution from the offshore revenue and a reduction in domestic call center overhead.
The Company reported a net loss of $24.0 million, or $0.49 per diluted share, for the 2006 fourth quarter compared to a net loss of $1.5 million, or $0.03 per diluted share, for the comparable 2005 period. The 2006 fourth quarter loss was driven by a $27.7 million non-cash valuation allowance related to the Company’s deferred tax assets. Consistent with generally accepted accounting practices, the recording of this allowance was necessitated as a result of historic losses and does not impair the Company’s ability to utilize these tax benefits in the future.
Income before taxes was $954,000 for the 2006 fourth quarter compared to a loss before taxes of $4.9 million in the prior-year quarter. Restructuring charges of $5.0 million were recorded in the fourth quarter of 2005, while the fourth quarter of 2006 reflects a $316,000 reversal of prior-year restructuring charges. Adjusting for these items, fourth quarter 2006 income before taxes improved by $0.6 million from the prior-year quarter.
The Company’s net debt increased to $17.5 million at year-end 2006 from $9.8 million at the end of the 2006 third quarter. This planned increase was due to an increase in capital expenditures to $4.4 million, primarily for the build-out of the Company’s new Philippines facility. Adjusted EBITDA improved to $4.6 million from $3.5 million in the prior-year quarter due to the improvement in gross profit.
Full-Year 2006 Financial Results
Revenue for the fiscal year 2006 totaled $224.3 million compared to $239.8 million in fiscal 2005. Excluding revenue from the exited outbound customer acquisition business from APAC’s 2005 and 2006 results, 2006 revenue increased$22.3 million, or 11.1%, over the prior year, reflecting continued growth in the Company’s higher margin offshore business. Gross profit for fiscal 2006 was $27.2 million, or 12.1%, compared to $22.7 million, or 9.5%, in the prior-year period. This improvement reflects the benefit of higher contribution from the offshore revenue and reductions in domestic call center overhead. For the full year 2006, the Company reported a net loss of $30.5 million, or $0.62 per diluted share, which included restructuring and other charges of $2.4 million and a deferred tax valuation allowance of $27.7 million. This compares to a full-year 2005 net loss of $22.4 million, or $0.45 per diluted share, which included $8.2 million in restructuring and other charges and $10.9 million in asset impairment charges.
Year-end net debt was up $6.5 to $17.5 million from $11.0 million at year-end 2005 due to an increase in days sales outstanding and higher capital expenditures. Capital expenditures for 2006 increased to $10.7 million (net of $3.2 million of reimbursed leasehold improvements) from $8.7 million in 2005 due to expansion and investments in operations. Adjusted EBITDA improved $6.6 million to $7.7 million for the year ended 2006, up from 2005’s $1.1 million due to the improvement in gross profits and lower selling, general and administrative expenses.
Fourth Quarter 2006 and Year-end Conference Call
APAC’s senior management will hold a conference call to discuss financial results at 10:00 a.m. CT (11:00 ET) on Friday, February 23, 2007. The conference call will be available live at the Investor Relations section of APAC Customer Services' website, http://www.apaccustomerservices.com. Please access the site at least 15 minutes prior to the scheduled start time in order to download the required audio software (RealPlayer or Windows Media Player).
A replay of the webcast will be accessible through the Company's website for 7 days following the live event. For those unable to listen to the call via the Internet, a replay of the call will be available until 11:00 p.m. CT (12:00 ET) on March 6, 2007, by dialing (888) 203-1122, (719) 457-0820 for international participants. The confirmation number for the replay is 3394990.
APAC Customer Services, Inc. (Nasdaq: APAC) is a leading provider of customer care services and solutions for market leaders in healthcare, financial services, publishing, business services, travel and entertainment, and communications. APAC partners with its clients to deliver custom solutions that enhance bottom line performance. For more information, call 1-800-OUTSOURCE. APAC’s comprehensive web site is at http://www.apaccustomerservices.com.
Forward Looking Statements
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, forward-looking statements include expressed expectations, estimates and projections of future events and financial performance and the assumptions on which these expressed expectations, estimates and projections are based. Statements that are not historical facts, including statements about the beliefs and expectations of the Company and its management are forward-looking statements. All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions about future events, and they are subject to known and unknown risks and uncertainties and other factors that can cause actual events and results to differ materially from historical results and those projected. Such statements are based upon the current beliefs and expectations of the Company's management. The Company intends its forward-looking statements to speak only as of the date on which they were made. The Company expressly undertakes no obligation to update or revise any forward-looking statements as a result of changed assumptions, new information, future events or otherwise.
The following factors, among others, could cause actual results to differ from historical results or those expressed or implied in the forward-looking statements: revenue is generated from a limited number of clients and the loss of one or more significant clients could have a material adverse effect on the Company; terms of our client contracts; availability of cash flows from operations and borrowing availability under the Company's loan agreement; ability to effectively manage customer care center capacity and offshore growth; ability to conduct business internationally, including managing foreign currency exchange risks; ability to attract and retain qualified employees; and fluctuations in revenue associated with the Company's Medicare Part D enrollment and customer care programs.
Other reasons that may cause actual results to differ from historical results or those expressed or implied in the forward-looking statements can be found in the Company's Annual Report on Form 10-K for the year ended January 1, 2006 and its subsequent filings on Form 10-Q for the fiscal quarters ended April 2, 2006, July 2, 2006 and October 1, 2006. These filings are available on a web site maintained by the SEC at http://www.sec.gov.
About Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company uses the following measures defined as non-GAAP financial measures by the SEC: EBITDA, adjusted EBITDA, free cash flow and adjusted free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. More information on these non-GAAP financial measures can be found in the Company's Annual Report on Form 10-K for the year ended January 1, 2006 and its subsequent filings on Form 10-Q for the fiscal quarters ended April 2, 2006, July 2, 2006 and October 1, 2006.
The Company expects to use consistent methods for computation of non-GAAP financial measures. Its calculations of non-GAAP financial measures may not be consistent with calculations of similar measures used by other companies. The accompanying notes to selected financial and statistical data have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
