SITEL Corporation (NYSE:SWW), a leading global provider of
outsourced customer support services, announced today preliminary
financial results for the fourth quarter and year ended December
31, 2005. On March 3, 2006, the Company announced that a
restatement for the fiscal years 2000 through 2004 and potentially
for the first three quarters of 2005 will be required to correct
accounting errors at one of the Company's international
subsidiaries. The results discussed in this earnings release are
subject to the completion of the restatement and therefore are
considered preliminary. The preliminary results and historic
comparables included in today's announcement reflect the effect of
the restatement portion currently identified by the Company as part
of its ongoing review. Please refer to the end of this release for
a comparison of the restated preliminary results to those
originally reported. Summary of preliminary results: -- Revenue of
$290.8 million in the fourth quarter of 2005 increased 19.8% over
the fourth quarter of 2004. -- Revenue for the total year 2005 of
$1.04 billion increased 8.5% over 2004 revenue of $956.4 million.
-- Fourth quarter GAAP operating margin of 2.7%, or a 4.3%
operating margin when excluding asset impairment and restructuring,
improved from a negative 7.3% in the fourth quarter of last year.
(see attached table for all GAAP reconciliations) -- Fourth quarter
GAAP net income of $2.2 million or $0.03 per share compared to a
net loss of $32.5 million or a loss $0.44 per share in the fourth
quarter of 2004. Excluding asset impairment and restructuring,
fourth quarter 2005 net income of $6.9 million or $0.09 per share
compared to a net loss of $15.5 million or a loss of $0.21 per
share in the fourth quarter of 2004. (see attached table for all
GAAP reconciliations) -- Full year 2005 GAAP net income of $5.0
million or $0.07 per share for the full year 2005 compared to a net
loss of $27.7 million or a net loss of $0.38 per share for the full
year 2004. In 2005, excluding asset impairment and restructuring,
net income of $11.6 million or $0.16 per share compared to a net
loss of $10.7 million or a loss of $0.15 per share for the full
year 2004. (see attached table for all GAAP reconciliations) -- The
fourth quarter and total year 2005 included an asset impairment and
restructuring charge of $4.6 million and $6.6 million,
respectively. Commenting on the fourth quarter results, Jim Lynch,
Chairman and Chief Executive Officer of SITEL Corporation, stated,
"We are pleased with our performance in the fourth quarter. We met
our previously announced guidance and more importantly achieved our
operating margin goal. 2005 was a transition year for the Company
where we focused our efforts on continued revenue growth and
initiatives that would deliver sustainable long-term profitable
growth. Through this process our entire team has been diligently
working to identify and fix previous problem areas and reduce our
cost structure mainly in Europe. With the bulk of these efforts
complete, we expect to fully realize the benefits throughout 2006.
In addition, we expect those previously under-performing business
units to continue their turnaround, and for the first time in many
years contribute positively to our profitability going forward.
These changes combined with many new client wins and very strong
momentum in our sales pipeline continue to re-affirm my conviction
in our business model." Highlights for the fourth quarter of 2005
North America delivered in the fourth quarter of 2005 a revenue
increase of $37.2 million or 31% to $155.9 million from $118.7
million in the fourth quarter of 2004. Revenue was higher in all
vertical market business units in North America, with Consumer
growing the fastest due, in large part, to a government contract's
peak volumes and the Financial Services business units growing
revenue by double-digit percentage. Partially offsetting this
growth was lower revenue in the Collections business compared to
last year. Increased workstation utilization from the increased
revenue and a larger mix of higher margin offshore revenue helped
many business units in North America improve their operating
margins in the fourth quarter of 2005 compared to the year earlier
period. North America vertical market business unit operating
margins improved significantly over the fourth quarter 2004,
reflecting the government contract in the Consumer business unit,
volume increases in the Telecom and Financial Services business
units, and a significant operating margin improvement in the
Insurance business unit from a loss in the fourth quarter 2004 to
profitability on new client expansion into existing capacity. In
addition, North America offshore operations continue to expand and
diversify the client base. For business units in Europe, revenue in
the fourth quarter of 2005 increased to $109.2 million from revenue
of $105.1 million in the fourth quarter of last year. The Company
continues to grow operations from multi-national clients including
Mobistar in Belgium, Page Jaunes in France, Iberia Airlines, BenQ
Mobile, Cisco Linksys, and LG Electronics across a number of
European markets as well as the continued development of a
successful relationship with Vodafone in Spain. These new contracts
highlight the diversity of the revenue base. Increased revenue in
the Spain, Germany, France, Netherlands, and Portugal business
units were partially offset by lower revenue in UK, Belgium and the
Nordics. The fourth quarter 2005 results of Europe include over $2
million related to severance expense, software depreciation expense
acceleration and other costs related to transitioning clients as
part of the restructuring efforts. These costs are reflected in
direct labor and telecommunication expense and in operating,
selling and administrative expense. Excluding these expenses,
operating margins in Europe improved between the fourth quarter of
2004 and the current quarter. The turnaround in margin performance
reflects the successful efforts of the company's restructuring,
which began in the fourth quarter 2004 and continues to gain
traction with both the additional restructurings in the third and
fourth quarters of 2005 and continued strength in the current
pipeline. The Company believes its long-term strategy to be the
largest and most integrated global provider for clients is
validated by its ability to realign European operations, while
expanding the network infrastructure in a more cost effective
manner and hence be successful in the decision to remain in Europe
when many competitors have exited. Between France, the UK, and the
Nordics businesses, operating income improved over $10 million
annualized between fourth quarter of 2004 and fourth quarter of
2005. The Company expects continued improvement in these same three
businesses in 2006 as the second half of 2005 restructurings take
hold and the pipeline of both onshore and offshore continues to
build. The larger business units in Spain and Germany continue to
lead the industry in market share gains and offshore initiatives.
In Spain we continue to be the leading outsource provider and are
now the industry innovator in offshore solutions. For the
Singapore, Australia and New Zealand business units, revenue in the
fourth quarter of 2005 increased by 8.7% to $13.1 million from
$12.1 million in fourth quarter of 2004. Operating margins also
improved primarily due to the turnaround efforts in our Singapore
business unit with several new wins and the continued strength of
our Business Process Outsourcing relationships in Asia. In the
fourth quarter of 2005 the Australian business unit commenced
operations of its first offshore client by providing services from
the Philippines. The new offering demonstrates the increased value
of SITEL's real-time global platform to multinational clients and
our ability to leverage our offshore assets utilizing time zone
effectiveness with our footprint and extensive client relationship
presence across the globe. Revenue in the fourth quarter of 2005
from business units in Latin America, excluding unconsolidated
joint ventures, increased $5.7 million or 83% to $12.7 million from
$6.9 million in the fourth quarter of 2004. Our unconsolidated
joint ventures also continue to expand with notable performances in
Colombia where we have grown to 22 clients, doubling in size over
last year. The Mexico joint venture was awarded a contract from a
large U.S. client for U.S. Hispanic customer support and has
positioned itself as a strong player in the near shore marketplace
for the U.S. Hispanic market. Total seats in our Colombia and
Mexico unconsolidated joint venture rose to over 2650 in the fourth
quarter. The Panama business unit continues its strong revenue and
profitable growth. Panama grew its business by 100% in the fourth
quarter of 2005 compared to the year earlier period in part due to
offshore opportunities from the Spain business unit and the
continued strength of U.S. demand. With its Latin American
footprint combined with its market leader position in Spain, SITEL
is well placed to benefit from the growing trend towards Offshoring
to Latin America. The Company recently started business in
Argentina and is planning on opening a site in Chile as part of the
Spain offshore strategy. In response to client demands for
continued innovation and a growing interest in new customer
oriented solutions, SITEL repositioned itself to address these
demands. The core delivery business continues to be SITEL Services.
The other two business groups are SITEL Systems and SITEL
Solutions, which are also focused on leading the industry. SITEL
Systems will continue to provide technology, networking
infrastructure and IT services to the core business as well as
selling its specialist contact center IT solutions and know-how to
third parties, and SITEL Solutions will bring new solutions and
transformational thinking to existing and new client relationships.
Mr. Lynch further commented, "Industry conditions have been
improving as excess capacity is being rationalized from a
combination of added demand and the reduction of workstations in
home country markets. SITEL is benefiting from improved industry
conditions and continues to expand its core business with value
added services derived from unbundling services and selling them as
products. The SITEL Solutions group, which is a global team of
expert employees focused on enhancing value and cross selling
transformational solutions and additional services to our global
clients, are harvesting the best practices and applying them to
solutions designs and process management. By continuing to service
clients with our SITEL Services core business, providing
sophistication through our Solutions group and leveraging our IT
infrastructure and offerings through our SITEL Systems group, I am
confident our strategies will lead the industry and realize
stronger profitable growth in 2006 and beyond." Outlook For the
first quarter of 2006, the Company expects revenue to be within a
range of $260 million to $270 million and earnings from $0.03 per
share to $0.05 per share. The earnings per share outlook for the
first quarter of 2006 compares favorably to last year's first
quarter EPS of $0.02 and the first quarter of 2006 revenue is up
from last year's first quarter revenue of $251.2 million, despite
the end of the Company's largest contract with General Motors. The
first quarter of 2006 revenue and EPS outlook is down sequentially
from the fourth quarter as a result of the planned expiration of
the General Motors contract at the end of 2005 and reduced volumes
from a government contract in North America. These decreases are
expected to be partly offset by a strong pipeline, by benefits
realized from profit improvement initiatives in North America and
Europe, and from improvements in the Collections business unit. The
Company expects capital expenditures to be between $6 million and
$9 million in the first quarter of 2006. For the full year 2006,
the Company expects revenue to be in a range of $1 billion to $1.1
billion and earnings from $0.30 per share to $0.33 per share. The
significant improvement in earnings per share is mainly the result
of several factors which among others include the turnaround of
underperforming business units in Europe, the improvement of the
Collections business, higher utilization in North America lead by
the Insurance business unit, rapid expansion offshore from new
business in Spain, France and English speaking countries, higher
client retention and higher margins from our SITEL Solutions group,
and the focus on the SMB (small medium business) market. In
addition, continued incremental benefits are expected from various
profit improvement initiatives, which began in 2005 that include IT
consolidation, a telecom on-demand usage model and various back
office initiatives. The above comments are based on current
expectations and exclude any non-recurring items. Mr. Lynch
commented, "Even with our stepping away from servicing the large
General Motors contract, we project revenue for 2006 to be higher
than revenue in 2005. Our pipeline is stronger than it has been in
the last three years and our continued focus on the quality of
service we are delivering to our clients is driving expanded
business from existing customers and new client wins." The
preliminary results and historic comparables included in today's
announcement reflect the effect of the restatement portion
currently identified by the Company as part of its ongoing review.
Current estimates of the restatements required may need to be
adjusted, perhaps materially, when the restated financial
statements are filed. While the results reported today are
unaudited, SITEL believes that these results accurately reflect, in
all material respects, the results based on current information and
on the portion of the restated adjustments that have been
identified to date. Effects of the preliminary restatement Although
the review is not complete, the preliminary results and historical
comparables included in today's announcement reflect the effect of
the restatement portion currently identified by the Company as part
of its ongoing review. Because the restatement is not yet
completed, the expected impact of the restatement contained herein
is preliminary and subject to a final review by management and the
audit committee of the Board of Directors and an audit by our
independent registered public accountants. Three months ended
December 31, 2004: The effects of the adjustments identified to
date, will reduce earnings in the fourth quarter of 2004 by $0.3
million. These adjustments reflect an increase in operating,
selling and administrative expenses of $0.2 million (from the
previously reported $81.3 million to the restated $81.5 million)
resulting primarily from additional depreciation as well as
penalties from the failure to remit certain municipal taxes and an
increase in interest expenses of $0.2 million (from the previously
reported $3.3 million to the restated $3.5 million) resulting
primarily from the failure to remit certain municipal taxes. Twelve
months ended December 31, 2004: The effects of the adjustments
identified to date, will reduce earnings for the year ended
December 31, 2004 by $1.1 million. These adjustments reflect an
increase in operating, selling and administrative expenses of $0.6
million (from the previously reported $312.9 million to the
restated $313.5 million) resulting primarily from additional
depreciation as well as penalties from the failure to remit certain
municipal taxes and an increase in interest expenses of $0.5
million (from the previously reported $12.7 million to the restated
$13.2 million) resulting primarily from the failure to remit
certain municipal taxes. Nine months ended September 30, 2005: The
effects of the adjustments identified to date, will reduce earnings
for the first nine months of 2005 by $0.8 million. These
adjustments reflect an increase in operating, selling and
administrative expenses of $0.4 million (from the previously
reported $241.1 million to the restated $241.5 million) resulting
primarily from additional depreciation as well as penalties from
the failure to remit certain municipal taxes and an increase in
interest expenses of $0.4 million (from the previously reported
$9.2 million to the restated $9.6 million) resulting primarily from
the failure to remit certain municipal taxes. As a result of the
ongoing reviews, the Company will be required to delay the filing
of its 2005 Annual Report on Form 10-K, which is due March 16,
2006, in order to allow for the Company and Audit Committee's
evaluation of these issues, to be concluded and for its external
auditors to complete an audit of the Company's financial
statements. Conference Call SITEL executive management will host a
conference call to discuss fourth quarter 2005 financial results
tomorrow, March 15, 2006 at 8:30 a.m. ET. To participate, for
domestic callers, please dial 1-888-276-0010 and for international
callers, please dial 1-612-332-0630. Replay of the conference call
will be available in the U.S. by dialing 800-475-6701 and
International by dialing 320-365-3844 (Access Code) 819347,
starting at 12:00 p.m. ET on March 15, 2006 and will play for seven
days. The conference call will be simulcast live on the Internet
via SITEL's web site at www.sitel.com. Replay will be available for
seven days. About SITEL SITEL, a leading global provider of contact
center services, empowers companies to grow by optimizing contact
center performance and unlocking customer potential. SITEL designs,
builds and manages multi-channel contact centers to enhance company
performance and growth. SITEL manages nearly 2 million customer
contacts per day via the telephone, web, e-mail, fax and
traditional mail. SITEL employees operate contact centers in 26
countries, offering services in 32 languages and dialects. Please
visit SITEL's website at www.sitel.com for further information.
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. The words "expects," "anticipates," "will," and
similar expressions in this news release identify forward-looking
statements, which speak only as of the date the statement is made.
SITEL assumes no obligation to update any such forward-looking
statement. Although SITEL 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 SITEL's expectations may include, but are
not limited to the following, many of which are outside SITEL's
control: results of the continuing review into the irregularities,
client budgets and plans, effectiveness of cost control
initiatives, effectiveness of revenue enhancement initiatives,
delays in approving new contact center initiatives or in moving
forward with previously approved initiatives, terms of final
contracts to be completed with clients, ability to negotiate
contracts on acceptable terms, contract termination provisions,
delays in ramp up of services, customer demand for client products
and services, the demand for off-shore services, delays in securing
necessary regulatory approvals, licenses, leases, personnel,
services and equipment for new facilities, competitive pressures in
SITEL's and its clients' industries and in local markets, reliance
on major clients, subcontractors and strategic partners, mergers
and restructurings involving clients or prospective clients,
industry regulation, reliance on telecommunications and computer
technology, unanticipated labor, contract or technical
difficulties, general and local economic trends and conditions, the
effects of leverage, currency translation, uncertainties of
litigation, risks associated with operating a global business, and
dependence on credit availability and credit market conditions.
SITEL's Form 10-K, 10-Q and 8-K reports filed with the Securities
and Exchange Commission describe other important factors that may
impact SITEL'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. -0- *T SITEL CORPORATION AND SUBSIDIARIES CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS (PRELIMINARY AND UNAUDITED) (in
thousands, except per share data) Three Months Ended Twelve Months
Ended December 31, December 31, -----------------------
------------------------- 2005 2004 2005 2004 ---------- ----------
----------- ----------- As restated As restated As restated Revenue
$ 290,849 $ 242,866 $ 1,037,815 $ 956,443 --------------------
---------- ---------- ----------- ----------- Operating expenses:
Direct labor and telecommunications expenses 175,787 149,520
629,317 574,910 Subcontracted and other services expenses 13,841
12,488 51,649 50,726 Operating, selling and administrative expenses
88,817 81,506 330,227 313,539 Asset impairment and restructuring
expenses 4,610 16,993 6,617 16,993 -------------------- ----------
---------- ----------- ----------- Total operating expenses 283,055
260,507 1,017,810 956,168 -------------------- ----------
---------- ----------- ----------- Operating income (loss) 7,794
(17,641) 20,005 275 -------------------- ---------- ----------
----------- ----------- Other income (expense): Interest expense
(3,269) (3,464) (12,885) (13,196) Interest income 155 197 559 591
Equity in earnings (loss) of affiliates 407 313 722 681 Other
income (expense), net (555) (192) (533) (654) --------------------
---------- ---------- ----------- ----------- Total other expense,
net (3,262) (3,146) (12,137) (12,578) --------------------
---------- ---------- ----------- ----------- Income (loss) before
income taxes and minority interest 4,532 (20,787) 7,868 (12,303)
Income tax expense (benefit) 1,583 11,429 592 14,679 Minority
interest 704 278 2,248 734 -------------------- -----------
----------- ------------ ------------ Net income (loss) $ 2,245 $
(32,494) $ 5,028 $ (27,716) -------------------- ----------
---------- ----------- ----------- Weighted average common shares
outstanding: Basic 74,586 73,720 74,137 73,684 Diluted 74,989
73,720 74,466 73,684 Earnings per share: Basic $ 0.03 $ (0.44) $
0.07 $ (0.38) Diluted $ 0.03 $ (0.44) $ 0.07 $ (0.38) SITEL
Corporation Revenue Statistics - Fourth Quarter 2005 Earnings
Release (Unaudited) % of Total Revenue 2004 Q1 05 Q2 05 Q3 05 Q4 05
2005 ------ ------ ------ ------ ------ ------ Customer Acquisition
20.3% 17.4% 16.1% 15.1% 14.4% 15.7% Customer Care 54.7% 57.1% 60.4%
61.7% 65.1% 61.2% Technical Support 16.4% 18.0% 17.6% 16.9% 15.1%
16.9% Risk Management 6.6% 6.3% 5.5% 5.4% 4.6% 5.4% Other 2.1% 1.3%
0.5% 0.9% 0.8% 0.8% ------ ------ ------ ------ ------ ------ Total
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% ------ ------ ------
------ ------ ------ Geographic Mix % of Total Revenue 2004 Q1 05
Q2 05 Q3 05 Q4 05 2005 ------ ------ ------ ------ ------ ------
North America 51.1% 48.9% 47.7% 49.4% 53.7% 50.1% Europe 41.4%
42.9% 42.2% 39.1% 37.5% 40.3% Asia Pacific 4.5% 4.9% 5.7% 6.1% 4.5%
5.3% Latin America 3.0% 3.2% 4.4% 5.4% 4.3% 4.3% ------ ------
------ ------ ------ ------ Total 100.0% 100.0% 100.0% 100.0%
100.0% 100.0% ------ ------ ------ ------ ------ ------ Industry
Mix % of Total Revenue 2004 Q1 05 Q2 05 Q3 05 Q4 05 2005 ------
------ ------ ------ ------ ------ Insurance 6.6% 6.1% 5.9% 5.9%
5.7% 5.9% Financial Services 16.6% 17.2% 17.1% 17.8% 16.0% 17.0%
Consumer Products 21.7% 19.7% 21.4% 21.1% 19.7% 20.5% Technology
26.9% 26.3% 25.8% 24.1% 22.0% 24.4% Energy and Utilities 7.7% 7.5%
7.5% 7.6% 7.2% 7.4% Telecommunications, ISP, and Cable 15.1% 18.6%
19.9% 20.1% 18.8% 19.3% Other 5.5% 4.6% 2.3% 3.4% 10.6% 5.5% ------
------ ------ ------ ------ ------ Total 100.0% 100.0% 100.0%
100.0% 100.0% 100.0% ------ ------ ------ ------ ------ ------
SITEL CORPORATION AND SUBSIDIARIES Reconciliation of Operating
Results as Adjusted Preliminary and Unaudited (In thousands) Three
Months Ended Twelve Months Ended December 31, December 31,
------------------- ------------------- 2005 2004 2005 2004
-------- -------- -------- -------- As As As restated restated
restated Operating Income (Loss) Results as reported under U.S.
GAAP $ 7,794 $(17,641) $ 20,005 $ 275 Less: Reconciling items (a)
(4,610) (16,993) (6,617) (16,993) ----------------------------
-------- -------- -------- -------- Operating income (loss) as
adjusted (a non-GAAP measure) $ 12,404 $ (648) $ 26,622 $ 17,268
============================ ======== ======== ======== ========
Net Income (Loss) Results as reported under U.S. GAAP $ 2,245
$(32,494) $ 5,028 $(27,716) Less: Reconciling items (a) (4,610)
(16,993) (6,617) (16,993) ---------------------------- --------
-------- -------- -------- Net income (loss) as adjusted (a
non-GAAP measure) $ 6,855 $(15,501) $ 11,645 $(10,723)
============================ ======== ======== ======== ========
Weighted averages common shares outstanding: Basic 74,586 73,720
74,137 73,684 Diluted 74,989 73,720 74,466 73,684 Earnings (loss)
per common share As reported: Basic $ 0.03 $ (0.44) $ 0.07 $ (0.38)
Diluted $ 0.03 $ (0.44) $ 0.07 $ (0.38) As adjusted: Basic $ 0.09 $
(0.21) $ 0.16 $ (0.15) Diluted $ 0.09 $ (0.21) $ 0.16 $ (0.15) The
schedule above provides a reconciliation of the Company's results
of operations, as reported under U.S. Generally Accepted Accounting
Principles (U.S. GAAP), to the results of operations, as adjusted
(non-U.S. GAAP). (a) Three months and twelve months ended December
31, 2005, reflects the restructuring charges of $4.6 million and
$6.6 million, respectively. Three months and twelve months ended
December 31, 2004, reflects the restructuring charges of $9.3
million and the goodwill impairment of $7.7 million. Non-GAAP
Measures: The amounts shown above in the Operating Income (Loss) As
Adjusted, Net Income (Loss) As Adjusted and Earnings (Loss) per
Common Share As Adjusted are non-GAAP financial measures within the
meaning of Regulation G promulgated by the Securities and Exchange
Commission. Because of the nature of restructuring and asset
impairment charges, the Company believes that the supplemental
non-GAAP financial measures presented above may help investors and
other users of the Company's financial information to understand
aspects of the Company's operating income (loss) and net income
(loss) that may not be apparent from the reported GAAP results. The
non-GAAP financial measures presented above are not a substitute
for the Company's reported GAAP information. *T
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