DEERFIELD, Ill.--APAC Customer Services, Inc. (Nasdaq: APAC - News), a leading provider of customer care services and solutions, today reported financial results for its first fiscal quarter ended March 30, 2008.
 
Revenue for the 2008 first quarter rose 21.3% to $63.5 million from $52.4 million in the 2007 first quarter due to solid growth in both the company’s domestic and off-shore business. Gross profit for the 2008 first quarter was $7.8 million, or 12.2%, compared to $6.3 million, or 12.1%, in the prior-year period. The company reported a net loss of $4.0 million, or $0.08 per diluted share, in the 2008 first quarter, including $2.3 million in restructuring and other charges. This compared to net income of $15.2 million, or $0.30 per diluted share, in the prior year quarter, which included a $17.6 million income tax benefit related to the favorable resolution of the company’s IRS appeal. On a sequential basis, first quarter 2008 revenue rose $1.9 million, or 3.0%, from the 2007 fourth quarter. Gross profit margin in the 2008 first quarter rose to 12.2% from 9.5% in the 2007 fourth quarter due primarily to cost cutting measures and improvements in operational efficiencies.
 
President and CEO Mike Marrow commented, “Since I joined APAC in late February, we’ve taken a series of steps to enhance our service delivery and improve our financial footing, including cutting more than $1.0 million in quarterly costs. Our focus on reducing costs and improving efficiency will continue throughout 2008. We have already identified and are acting on initiatives that we believe will produce savings equal to or more than the savings we expect to realize from our first quarter actions. These include migrating staff work to Manila, renegotiating supplier contracts, improving space utilization and reducing labor cost through improved efficiencies. I am confident that through these measures, we will return to profitability later this year. Equally important, we are focused on continuing to enhance our quality and service delivery. Improving profitability and enhancing service delivery go hand in hand. They are both indicators of a well run business.
 
“To help us get there, we have added two exceptional leaders. Art DiBari joined APAC in March as our Senior Vice President, Operations. Art is leading the charge on improving service delivery and reducing operating costs. He has 25 years of industry experience and is already making a significant difference. Mark Anderson joined APAC in April as our Senior Vice President, Sales and Marketing. Mark and his team are quickly building a pipeline of new business with both current and prospective clients. Art and Mark are both industry veterans and I am excited about the impact they are having at APAC.
 
“With the many actions we have underway, it would be premature to provide specific guidance for 2008 at this time. We hope to be in a position to do so later in the year.”
 
Debt and Liquidity
 
The company’s net debt decreased to $18.6 million at the end of the 2008 first quarter from $24.9 million at the end of fiscal year 2007 due primarily to an eight-day improvement in receivable days outstanding to 43 days. First quarter 2008 adjusted EBITDA was $2.7 million compared to $1.7 million in the 2007 first quarter, capital expenditures decreased to $1.4 million from $3.1 million, and free cash flow improved to a negative $0.4 million from a negative $1.4 million in the comparable prior year quarter. Adjusted EBITDA in the 2007 fourth quarter was $3.0 million, capital expenditures were $2.5 million, and free cash flow was positive $0.5 million.
 
On May 5, 2008, the company signed a new banking agreement with PNC Bank. The three-year, $40 million revolving credit facility will provide funding for APAC’s working capital needs and support its future growth needs.
 
First Quarter 2008 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 Tuesday, May 6, 2008. The conference call, including a visual presentation in addition to the audio, 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 and visual presentation will be accessible through the company's website for seven days following the live event. For those unable to listen to the call via the Internet, a replay of the call will be available from 1:00 CT (2:00 ET) on May 6, 2008 until 11:00 p.m. CT (12:00 ET) on May 13, 2008, by dialing (719) 457-0820. The passcode for the replay is 6283064.
 
About APAC Customer Services, Inc.
 
APAC Customer Services, Inc. (Nasdaq: APAC - News) 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 website 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 the company’s actual results to differ from historic results or those expressed or implied in the forward-looking statements: its 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 its client contracts; its ability to return to profitability; its ability to continue to reduce costs and achieve efficiencies; availability of cash flows from operations and borrowing availability under its revolving loan facility; its ability to comply with, or obtain waivers of or changes to, its debt covenants; its ability to effectively manage customer care center capacity and off-shore growth; its ability to conduct business internationally, including managing foreign currency exchange risks; its 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 historic 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 December 30, 2007. This filing is available on a website maintained by the SEC at http://www.sec.gov.
 
About Non-GAAP Financial Measures
 
To supplement our Consolidated Financial Statements presented in accordance with GAAP, we use the following measures defined as non-GAAP measures: EBITDA, adjusted EBITDA and free cash flow. The presentation of these non-GAAP measures is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP or as a measure of liquidity. The items excluded from these non-GAAP financial measures are significant components of our financial statements and must be considered in performing a comprehensive assessment of our overall financial results. 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.
 
We believe that these non-GAAP financial measures provide meaningful supplemental information and are useful in understanding our results of operations and analyzing of trends because they exclude certain charges such as interest, taxes and depreciation and amortization expenses that are not part of our ordinary business operations. We also believe that these non-GAAP financial measures are useful to investors and analysts in allowing for greater transparency with respect to the supplemental information used by us in our financial and operational decision-making. In addition, we believe investors, analysts and lenders benefit from referring to these non-GAAP measures when assessing our performance and expectations of our future performance. However, this information should not be used as a substitute for our GAAP financial information; rather it should be used in conjunction with financial statement information contained in our Consolidated Financial Statements prepared in accordance with GAAP. 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. More information on certain of these non-GAAP financial measures can be found in the company's Annual Report on Form 10-K for the year ended December 30, 2007.