APAC Customer Services 8-K APAC Customer Services Announces Third Quarter 2010 Results

Exhibit 99.1

APAC Customer Services Announces Third Quarter 2010 Results

• 3Q revenue increases 12.5%

• 3Q net income of $0.08 per diluted share

• Ends 3Q with $49.7 million in cash and no outstanding borrowings

BANNOCKBURN, Ill.--(BUSINESS WIRE)--November 9, 2010--APAC Customer Services, Inc. (Nasdaq: APAC), a leader in global outsourced services and solutions, today reported financial results for its third fiscal quarter ended October 3, 2010.

Revenue for the 2010 third quarter rose 12.5% to $76.9 million from $68.4 million in the 2009 third quarter. Gross profit for the 2010 third quarter was $14.8 million, or 19.3%, compared to $14.2 million, or 20.7%, in the prior-year period. The Company reported net income of $4.6 million, or $0.08 per diluted share, compared to net income of $6.6 million, or $0.12 per diluted share, in the prior-year quarter. The third quarter included charges related to CEO transition. Results for the quarter include $2.3 million in income tax expense versus $0.1 million in the 2009 period, when the Company did not record any federal income tax due to its net operating loss carryforward and other tax credits. Third quarter 2010 adjusted EBITDA was $10.7 million compared to $9.6 million in the 2009 third quarter.

President and CEO Kevin Keleghan commented, “I am pleased to report that APAC posted another quarter of solid growth, strong earnings, and positive cash flow. Our strong growth is a result of our ongoing pursuit of two simple principles: client focus and operational excellence. We continue to make great progress on a number of opportunities with both existing clients and new prospects.”

Senior Vice President and CFO Andrew Szafran added, “We incurred $1.5 million in unanticipated charges related to the transition of our CEO, which had an impact of $0.02 on our EPS and, chiefly due to this impact, we are modifying our expected full year EPS to be $0.41. We are also expecting full year revenue to be at the lower end of the range of our original guidance of $320 million to $330 million.”

Debt and Liquidity

As of the end of the 2010 third quarter, the Company had $49.7 million in cash and no outstanding borrowings. Net capital expenditures, including capital leases, during the 2010 third quarter were $1.6 million compared to $2.5 million in the prior-year third quarter and were primarily associated with new business and enhancements to the Company’s IT infrastructure.

Third Quarter 2010 Conference Call

Management of APAC Customer Services will hold a conference call, including a visual presentation on the Company’s website, to discuss financial results on Wednesday, November 10, 2010 at 10:00 a.m. Central Time (11:00 am ET). To participate in the live call by telephone, please dial 678-735-7977 or 877-303-5922 and reference APAC’s earnings call. No pass code is required.

The conference call, including the visual presentation, will be available live in the Investor Relations section of APAC Customer Services’ web site at 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). Information regarding the reconciliation of our non-GAAP measures to our GAAP results will be posted on our website at http://www.apaccustomerservices.com.

A replay of the webcast and visual presentation will be accessible through the Company's website for 30 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. Central Time (midnight ET) on Sunday, November 14, 2010, by dialing 706-645-9291. The pass code for the replay is #18426392.

About APAC Customer Services, Inc.

APAC Customer Services, Inc. (NASDAQ: APAC) is a leading provider of customer care services and solutions to market leaders in healthcare, business services, communications, media & publishing, travel & entertainment, financial services and technology industries. 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 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 or reduction in demand for services could have a material adverse effect on the Company; the performance of its clients and general economic conditions; its financial results depend on the ability to effectively manage production capacity and workforce; the terms of its client contracts; its ability to sustain profitability; its availability of cash flows from operations and compliance with debt covenants and funding requirements under the Company’s credit facility; its ability to conduct business internationally, including managing foreign currency exchange risks; its principal shareholder can exercise significant control over the Company; and its ability to attract and retain qualified employees.

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 fiscal year ended January 3, 2010 and its subsequent filing on Form 10-Q for the fiscal quarters ended April 4, 2010 and July 4, 2010. Our filings are available under the investor relations section of our website at http://www.apaccustomerservices.com and on a website maintained by the SEC at http://www.sec.gov.

About Non-GAAP Financial Information

To supplement our unaudited condensed consolidated financial statements presented in accordance with U.S. GAAP (“GAAP”), we use certain non-GAAP financial information when describing our financial performance. This "non-GAAP financial information" is defined as a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations, balance sheets or statements of cash flows of a company.

We present EBITDA and Adjusted EBITDA, which are defined as non-GAAP financial measures. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. The items excluded from this non-GAAP financial information are significant components of our financial statements and must be considered in performing a comprehensive analysis of our overall financial results.

We believe that this non-GAAP financial information provides meaningful supplemental information and is useful in understanding our results of operations and analyzing of trends because they exclude certain charges. We also believe that non-GAAP financial information is 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 non-GAAP information 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 unaudited condensed consolidated financial statements prepared in accordance with GAAP.

Pursuant to the requirements of Regulation G, we have provided a reconciliation of all non-GAAP financial information to the most directly comparable GAAP financial measure in the accompanying notes to selected financial and statistical data. More information on certain of this non-GAAP financial information can be found in the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 2010 and its subsequent filing on Form 10-Q for the fiscal quarters ended April 4, 2010 and July 4, 2010.

APAC Customer Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
	Thirteen Weeks Ended *								Thirty-Nine Weeks Ended *
	October 3,			September 27,			Fav (Unfav)		October 3,			September 27,			Fav (Unfav)
	2010			2009			%		2010			2009			%
Net revenue	$	76,878		$	68,360		12	%	$	239,518		$	207,648		15	%
Cost of services		62,032			54,195		(14	)		187,849			159,529		(18	)
Gross profit		14,846			14,165		5			51,669			48,119		7
Operating expenses:
Selling, general and administrative
expenses		7,430			7,489		1			23,692			22,813		(4	)
Legal settlement		(556	)		-		N/M			1,851			4		N/M
Severance and other charges		1,268			20		N/M			1,256			(7	)	N/M
Total operating expenses		8,142			7,509		(8	)		26,799			22,810		(17	)
Operating income		6,704			6,656		1			24,870			25,309		(2	)
Other (income) expense, net		(247	)		(15	)	N/M			(217	)		(45	)	382
Interest (income) expense, net		(24	)		(60	)	(60	)		(39	)		(18	)	117
Income before income taxes		6,975			6,731		4			25,126			25,372		(1	)
Income tax expense		2,331			143		N/M			8,593			429		N/M
Net income	$	4,644		$	6,588		(30	%)	$	16,533		$	24,943		(34	%)
Net income per share:
Basic	$	0.09		$	0.13				$	0.32		$	0.49
Diluted	$	0.08		$	0.12				$	0.30		$	0.46
Weighted average number of
shares outstanding:
Basic		52,571			51,835					52,452			51,352
Diluted		54,744			55,199					54,807			53,962
* The Company operates on a 13 week fiscal quarter that ends on the Sunday closest to September 30
N/M - Percentage change is not meaningful

APAC Customer Services, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
	October 3,		January 3
Assets	2010 *		2010 **
	(Unaudited)
Current Assets:
Cash and cash equivalents	$	49,743	$	20,557
Accounts receivable, net		41,164		45,358
Deferred tax assets, current		6,567		14,593
Other current assets		8,864		6,323
Total current assets		106,338		86,831
Property and equipment, net		24,318		25,653
Goodwill and intangibles, net		13,568		14,366
Deferred tax assets, non-current		10,170		10,170
Other assets		2,043		1,585
Total assets	$	156,437	$	138,605
Liabilities and Shareholders' Equity
Current Liabilities:
Capital Leases - current portion	$	670	$	397
Accounts payable		2,580		2,770
Income taxes payable		-		365
Accrued payroll and related items		20,232		21,964
Accrued liabilities		13,906		9,190
Total current liabilities		37,388		34,686
Other non-current liabilities		3,585		4,171
Commitments and contingencies		-		-
Total shareholders' equity		115,464		99,748
Total liabilities and shareholders' equity	$	156,437	$	138,605
* The Company operates on a 13 week fiscal quarter that ends on the Sunday closest to September 30
**The Company operates on a 52/53 week fiscal year that ends on the Sunday closest to December 31

APAC Customer Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
	Thirty-Nine Weeks Ended *
	October 3,			September 27,
	2010			2009
Operating activities:
Net income	$	16,533		$	24,943
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		8,840			8,711
Deferred income taxes		8,026			-
Stock compensation expense		1,856			509
Amortized gain on sale leaseback		(93	)		(70	)
(Gain) loss on sale of property and equipment		(1	)		7
Income taxes payable		(365	)		370
Changes in operating assets and liabilities		167			(8,180	)
Net cash provided by operating activities		34,963			26,290
Investing activities:
Purchases of property and equipment, net		(5,325	)		(7,965	)
Net proceeds from sale of property and equipment		1			1
Net cash used in investing activities		(5,324	)		(7,964	)
Financing activities:
Net payments under revolving credit facility		-			(6,100	)
Payment of capital lease obligations		(445	)		(59	)
Stock option transactions, including related excess income tax benefits		533			2,264
Purchase of treasury stock		(799	)		-
Net cash used in financing activities		(711	)		(3,895	)
Effect of exchange rate changes on cash		258			1,127
Net increase in cash and cash equivalents		29,186			15,558
Cash and cash equivalents:
Beginning balance		20,557			618
Ending balance	$	49,743		$	16,176
* The Company operates on a 13 week fiscal quarter that ends on the Sunday closest to September 30

Selected Financial and Statistical Information
(Dollars in thousands, except per share data)
(Unaudited)
	Thirteen Weeks Ended (1)						Thirty-Nine Weeks Ended (1)
	October 3,		September 27,				October 3,		September 27,
		2010		2009	Fav (Unfav)			2010		2009	Fav (Unfav)
Selected Financial Information:
Revenue	$	76,878	$	68,360	12	%	$	239,518	$	207,648	15	%
Net income		4,644		6,588	(30	%)		16,533		24,943	(34	%)
EBITDA (2)		9,720		9,600	1	%		33,927		34,065	(0	%)
Adjusted EBITDA (2)		10,694		9,620	11	%		37,602		34,062	10	%
Statistical Information:
Number of customer care centers		15		13	2			15		13	2
End of period number of seats:
Domestic		6,288		5,391	897			6,288		5,391	897
International		4,279		3,879	400			4,279		3,879	400
Total		10,567		9,270	1,297			10,567		9,270	1,297
See attached Notes to Selected Financial and Statistical Information

Notes to Selected Financial and Statistical Information

(1) The Company operates on a 13 week fiscal quarter that ends on the Sunday closest to September 30.

(2) The Company defines EBITDA as net income plus income tax expense (benefit), depreciation and amortization, and interest expense. It defines adjusted EBITDA as EBITDA adjusted for legal settlement expense, severance and other charges and the acceleration of certain stock compensation expense.

EBITDA and adjusted EBITDA are measures used by the Company’s lenders, investors and analysts to evaluate its financial performance and its ability to pay interest and repay debt. These measures are also indicative of the Company’s ability to fund the capital investments necessary for its continued growth. The Company uses these measures, together with its GAAP financial metrics, to assess its financial performance, allocate resources, measure its performance against debt covenants and evaluate its overall progress towards meeting its long-term financial objectives.

EBITDA and adjusted EBITDA are not intended to be considered in isolation or used as a substitute for net income or cash flow from operations data presented in accordance with GAAP or as a measure of liquidity. The items excluded from EBITDA and adjusted EBITDA are significant components of the Company’s statements of operations and must be considered in performing a comprehensive assessment of its overall financial results.

EBITDA and adjusted EBITDA can be reconciled to net income, which the Company believes to be the most directly comparable financial measure calculated and presented in accordance with GAAP, as follows:

	For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended
	October 3, 2010			September 27, 2009			October 3, 2010			September 27, 2009
Net income	$	4,644		$	6,588		$	16,533		$	24,943
Interest (income) expense, net		(24	)		(60	)		(39	)		(18	)
Income tax expense		2,331			143			8,593			429
Depreciation and amortization		2,769			2,929			8,840			8,711
EBITDA	$	9,720		$	9,600		$	33,927		$	34,065
Legal settlement	$	(556	)	$	-		$	1,851		$	4
Severance and other charges		1,268			20			1,256			(7	)
Accelerated stock compensation expense		262			-			568			-
Adjusted EBITDA	$	10,694		$	9,620		$	37,602		$	34,062

CONTACT:
Company:
APAC Customer Services, Inc.
Andrew B. Szafran, 847-374-1949
Senior Vice President and Chief Financial Officer
ABSzafran@APACMail.com
or
Investor Relations:
Lippert/Heilshorn & Associates
Harriet Fried / Jody Burfening
212-838-3777
HFried@lhai.com