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 27, 1998

                                       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)

              Illinois                                        36-2777140
----------------------------------------     -----------------------------------
      (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                      Identification No.)

    One Parkway North Center, Suite 510
            Deerfield, Illinois                                  60015
-----------------------------------------    -----------------------------------
  (Address of principal executive office)                       (Zip Code)

                                 (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-47,300,715  shares outstanding as of November 9,
1998.


<PAGE>


                                      INDEX

                                                                            PAGE

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements:

    Consolidated Condensed Balance Sheets as of September 27, 1998, and        3
    December 28, 1997

    Consolidated Condensed Statements of Income for the Thirteen and
    Thirty-Nine Weeks Ended September 27, 1998, and September 28, 1997         4

    Consolidated Condensed Statements of Cash Flows for the 
    Thirty-Nine Weeks Ended September 27, 1998, and 
    September 28, 1997                                                         5

    Notes to Consolidated Condensed Financial Statements as of
    September 27, 1998                                                       6-9
    

Item 2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations                                                      10-13

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                    14

Item 5.  Other Information                                                    14

Item 6.  Exhibits and Reports on Form 8-K                                     14

SIGNATURES                                                                    15

EXHIBITS


<PAGE>


                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

<TABLE>

                    APAC TELESERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>

                                                       SEPTEMBER 27,        DECEMBER 28,
                                                           1998                 1997
                      ASSETS                            (Unaudited)        (Audited, Note 1)
 -------------------------------------------------   ------------------    ----------------
                                                      (000's omitted, except share data)
<S>                                                          <C>            <C>        
 CURRENT ASSETS:
   Cash                                                      $    13,252    $       219
   Accounts receivable, net                                       85,685         73,462
   Deferred tax assets                                             5,875            200
   Other current assets                                            3,530          2,273
                                                             -----------    -----------
     Total current assets                                        108,342         76,154

 PROPERTY AND EQUIPMENT                                          155,710        136,291
 Less - accumulated depreciation                                  58,769         38,825
                                                             -----------    -----------
     Property and equipment, net                                  96,941         97,466

 GOODWILL AND OTHER INTANGIBLE ASSETS                            149,240         13,522
 Less - accumulated amortization                                   4,464            894
                                                             -----------    -----------
     Goodwill and other intangible assets, net                   144,776         12,628

 OTHER ASSETS                                                      5,136          1,497
                                                             -----------    -----------
   Total assets                                              $   355,195    $   187,745
                                                             ===========    ===========

       LIABILITIES AND SHARE OWNERS' EQUITY
--------------------------------------------------------
 CURRENT LIABILITIES:
   Notes payable                                             $    16,819    $    23,802
   Accounts payable                                                6,964         11,156
   Other current liabilities                                      57,789         20,681
                                                             -----------    -----------
     Total current liabilities                                    81,572         55,639

 LONG-TERM DEBT, NET                                             137,143          1,863

 DEFERRED INCOME TAXES                                             4,350          5,460

 OTHER LIABILITIES                                                 7,167           --

 COMMITMENTS AND CONTINGENCIES

 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, 48,881,000 shares issued 
     at September 27, 1998; 48,794,000 shares
     issued and outstanding at December 28, 1997                     489            488
   Additional paid-in capital                                     92,866         91,788
   Retained earnings                                              37,259         32,507
    Less - treasury shares, at cost; 1,609,000
     shares at September 27, 1998                                 (5,651)          --
                                                             -----------    -----------
     Total share owner equity                                    124,963        124,783
                                                             -----------    -----------
   Total liabilities and share owners' equity                $   355,195    $   187,745
                                                             ===========    ===========
See notes to consolidated condensed financial statements 

</TABLE>

<PAGE>

<TABLE>

                    APAC TELESERVICES, INC. AND SUBSIDIARIES

                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                   (UNAUDITED)
<CAPTION>

                                           THIRTEEN WEEKS ENDED              THIRTY-NINE WEEKS ENDED
                                      --------------------------------    -------------------------------
                                       SEPTEMBER 27,     SEPTEMBER 28,      SEPTEMBER 27,      SEPTEMBER 28,
                                           1998             1997              1998              1997
                                      ---------------   --------------    --------------   --------------
                                                    (000's omitted, except per share data)

<S>                                       <C>              <C>              <C>              <C>     
Net revenue                               $119,343         $ 79,841         $318,072         $261,745

Operating expenses:
  Cost of services                          94,245           64,000          251,086          195,399
  Selling, general and
     administrative expenses                15,712           11,970           43,594           34,276
  Restructuring charge                        --               --              9,000             --
                                          --------         --------         --------         --------
         Total operating expenses          109,957           75,970          303,680          229,675
                                          --------         --------         --------         --------
  Income from operations                     9,386            3,871           14,392           32,070
Interest expense, net                        2,983              349            5,140              987
                                          --------         --------         --------         --------
   Income before income taxes                6,403            3,522            9,252           31,083
Provision for income taxes                   2,980            1,504            4,500           11,979
                                          ========         ========         ========         ========
  Net income                              $  3,423         $  2,018         $  4,752         $ 19,104
                                          ========         ========         ========         ========
Net income per share:
  Basic                                   $   0.07         $   0.04         $   0.10         $   0.40
  Diluted                                 $   0.07         $   0.04         $   0.10         $   0.40
                                          ========         ========         ========         ========

Weighted average number of 
  shares outstanding:
  Basic                                     48,505           47,637           48,773           46,983
  Diluted                                   48,956           48,810           49,590           48,193
                                          ========         ========         ========         ========


See notes to consolidated condensed financial statements.


</TABLE>

<PAGE>

<TABLE>


                    APAC TELESERVICES, INC. AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<CAPTION>

                                                             THIRTY-NINE WEEKS ENDED
                                                       ------------------------------------
                                                        SEPTEMBER 27,       SEPTEMBER 28,
                                                             1998                1997
                                                       ----------------     ---------------
                                                                 (000's omitted)
<S>                                                           <C>                 <C>    
OPERATING ACTIVITIES:
  Net income                                                  $4,752              $19,104
  Depreciation and amortization                               26,701               15,868
  Deferred income taxes                                       (3,425)               1,116
  Write-off of in-process research and
    development costs                                             --                  600
  Change in operating assets and liabilities                  27,767              (14,956)
                                                       ----------------     ---------------
    Net cash provided by operations                           55,795               21,732

INVESTING ACTIVITIES:
  Payments for acquisitions, net of cash                                             
    acquired                                                (149,229)                (897)
  Purchases of property and equipment, net                    (6,805)             (36,921)
                                                       ----------------     ---------------
    Net cash used by investing activities                   (156,034)             (37,818)

FINANCING ACTIVITIES:
  Proceeds from Term Loan                                    150,000                   --
  Net borrowings (payments) under revolving
    credit facilities                                        (21,600)              11,900
  Payments on long-term debt                                  (3,689)                (126)
  Decrease in book overdraft                                  (4,679)                (977)
  Purchases of treasury shares                                (5,651)                  --
  Proceeds from employee stock transactions,
    including related tax benefits                             1,079                5,299
  Payment of debt issuance costs                              (2,188)                  --
                                                       ----------------     ---------------
    Net cash provided by financing activities                113,272               16,096
                                                       ----------------     ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS                    $13,033                  $10
                                                       ================     ===============


See notes to consolidated condensed financial statements.


</TABLE>


<PAGE>


                    APAC TELESERVICES, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 27, 1998
                                   (UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated 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 27, 1998, are not necessarily indicative of the results that may
be expected for the fiscal year ending  December 27, 1998.  The balance sheet at
December 28, 1997,  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
28, 1997.

2. BALANCE SHEET DETAIL

The  components  of  other  current  liabilities  included  in the  consolidated
condensed balance sheets as of September 27, 1998, and December 28, 1997, are as
follows:

                                                        1998            1997
                                                     ------------    -----------
                                                          (000's omitted)
                     Payroll and related items           $20,089        $14,555
                     Customer deposits                     7,213            283
                     Telecommunication costs               2,048          1,643
                     Acquisition-related                  16,416             --
                     liabilities
                     Restructuring charge                  4,856             --
                     Other                                 7,167          4,200
                                                     ============    ===========
                        Total                            $57,789        $20,681
                                                     ============    ===========

Other  noncurrent  liabilities  of $7.2  million  included  in the  consolidated
condensed  balance  sheet as of  September  27,  1998,  principally  consist  of
long-term customer deposits.

3. INCOME TAXES

A  reconciliation  of the  statutory  Federal  income  tax  rate  to the  actual
effective  income tax rate for the thirty-nine  week periods ended September 27,
1998 and September 28, 1997, is as follows:

                                                         1998           1997
                                                      -----------    -----------
                     Statutory rate                        35.0%          35.0%
                     State taxes, net of Federal
                        benefit and state credits          4.9            2.7
                     Goodwill and other intangibles        8.5            0.6
                     Work Opportunity Tax Credit          (2.1)          (1.0)
                     Other                                 2.3            1.2
                                                      ===========    ===========
                     Effective rate                        48.6%          38.5%
                                                      ===========    ===========


<PAGE>
                    APAC TELESERVICES, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 27, 1998
                                   (UNAUDITED)

3. INCOME TAXES--CONTINUED

Components of deferred tax assets of $5.9 million  included in the  consolidated
condensed  balance  sheet as of  September  27,  1998,  principally  consist  of
restructuring reserve of $1.9 million,  acquisition-related  liabilities of $2.7
million and payroll and related items of $1.3 million.

4. DEBT

On May 20,  1998,  the  Company  entered  into a $250.0  million  Senior  Credit
Facility  ("Credit  Facility") with a group of lending  institutions  and at the
same time repaid all amounts outstanding on its prior $80.0 credit facility.  On
September  8, 1998,  the Credit  Facility was  amended,  reducing the  available
borrowings to $225.0 million.  The Credit Facility  consists of a $150.0 million
Term Loan and a $75.0  million  Revolving  Facility.  The Company is required to
make quarterly principal payments on the Term Loan, ranging from $3.0 million to
$7.0  million per  quarter,  with a final  payment of $61.0  million due June 1,
2003.  Proceeds from the Term Loan were used to acquire the  outstanding  common
stock of ITI Holdings, Inc. Borrowings under the Revolving Facility will be used
to provide working  capital.  Borrowings under the Credit Facility bear interest
at a rate  based on the  Company's  choice of either  the LIBOR  index  rate for
periods of 30, 60, or 90 days plus an  applicable  margin  ranging from .875% to
1.625% depending on the Company's total debt ratio, as defined, or the base rate
as  defined in the Credit  Facility.  The base rate is the  greater of the prime
commercial lending rate of the agent bank or the Federal funds rate plus .5%. At
September 27, 1998, the Company had $2.0 million outstanding under the Revolving
Facility and $147.0 million outstanding under the Term Loan.

The Company has entered into various  interest rate  agreements  with one of the
parties to the Credit  Facility.  On May 20, 1998,  the Company  entered into an
interest rate swap agreement ("Swap") and an interest rate cap agreement ("Cap")
to hedge a portion of the interest rate risk  associated  with its floating rate
debt.  Under the terms of the Swap,  through  June 1, 2003,  the Company  pays a
fixed  interest  rate of 6.0% and receives a floating  rate payment based on the
30-day LIBOR rate. The Swap had an initial notional amount of $100.0 million and
amortizes,  pro rata, with principal  payments on the Term Loan. Under the terms
of the Cap, through June 1, 2003, the Company will receive payments any time the
30-day LIBOR rate exceeds 6.0%. The Cap had an initial  notional amount of $50.0
million and amortizes, pro rata, with principal payments on the Term Loan.

5. ACQUISITION

     On May 20,  1998,  the Company  acquired  through  merger all of the common
stock of ITI Holdings,  Inc., the sole  shareholder  of ITI Marketing  Services,
Inc.  ("ITI"),  a leading  teleservices  provider based in Omaha,  Nebraska.  In
exchange for all of the common stock of ITI, the Company paid $149.2 million net
of cash  acquired.  The initial  purchase  price was funded with proceeds from a
$150.0  million Term Loan.  ITI provides  telephone-based  sales,  marketing and
customer  management  services to  corporate  clients  that have high volumes of
incoming  and/or outgoing calls through a network of customer  contact  centers.
The  acquisition  has been  accounted  for as a purchase and,  accordingly,  the
assets and  liabilities  and results of  operations of ITI have been included in
the Company's  consolidated  condensed  financial  statements  since the date of
acquisition.


<PAGE>


                    APAC TELESERVICES, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 27, 1998
                                   (UNAUDITED)

5. ACQUISITION--CONTINUED

The excess of purchase price over the fair value of assets acquired, liabilities
assumed and additional liabilities recorded of $137.1 million has been allocated
to intangible  assets based upon their fair values.  Allocations  are subject to
valuations  as of the date of the  acquisition  based on an  appraisal  which is
subject to change.  Final allocations may be different from amounts presented as
of September 27, 1998.  Intangible  assets acquired  consist of $3.6 million for
assembled  workforce,  $36.8  million for customer  relationships  and $96.7 for
goodwill.  Intangible  assets are amortized  over their  estimated  useful lives
which range from 7 to 25 years.  In addition,  ITI had accumulated net operating
loss  carryforwards of approximately  $16.0 million which have not been assigned
value.  Any  realization  of future tax benefits from these net  operating  loss
carryforwards will result in a reduction of goodwill.

The pro forma  results of operations  below give effect to actual  results as if
the  acquisition  had  occurred on December  29,  1997,  and  December 30, 1996,
respectively,  and include  adjustments  for  unfavorable  telephone  contracts,
goodwill and intangible asset amortization, interest expense and income taxes.

                                          THIRTY-NINE        FIFTY-TWO WEEKS
                                          WEEKS ENDED             ENDED
                                          SEPTEMBER 27,        DECEMBER 28,
                                              1998                 1997
                                        -----------------    ----------------
                                          (000's omitted, except per share
                                                       data)
                                                    (Unaudited)
  Net revenue                               $380,572            $501,964
  Income (loss) before cumulative
    effect of accounting change                 4,882             (8,360)
  Net income (loss)                             4,882            (10,560)
                                        =================    ================
  Per share data:
    Basic:
      Income (loss) before
        cumulative effect of                   $0.10              ($0.17)
        accounting change
      Net income (loss)                        $0.10              ($0.22)
                                        =================    ================
    Diluted:
      Income (loss) before
        cumulative effect of                   $0.10              ($0.17)
        accounting change
      Net income (loss)                        $0.10              ($0.22)
                                        =================    ================

The pro forma  results of  operations  do not  necessarily  represent  operating
results  which  would have  occurred if the  acquisition  had taken place on the
basis assumed above, nor are they indicative of future operating  results of the
combined companies.

6. RESTRUCTURING

In connection with the acquisition of ITI, the Company identified  opportunities
to improve its operating efficiencies and reduce costs. Accordingly, on June 24,
1998, the Company adopted a restructuring  plan which included  closing customer
contact centers,  reconfiguring  certain  administrative  support facilities and
reducing the workforce by approximately 80 salaried employees. The restructuring
charge of $9.0  million  includes  $4.5  million  for  write-down  of  leasehold
improvements and equipment,  $3.3 million for employee  severance costs and $1.2
million  for lease  termination  costs.  The  restructuring  is  expected  to be
completed by the end of the first quarter of 1999. The restructuring  charge net
of applicable income taxes amounted to $5.5 million, or $0.11 per share.


<PAGE>


                    APAC TELESERVICES, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 27, 1998
                                   (UNAUDITED)

7. TREASURY STOCK REPURCHASE PROGRAM

On August 31, 1998, the Board of Directors authorized the Company to repurchase,
from time to time at  managements'  discretion,  up to 2.5 million shares of its
outstanding  common shares at market prices.  At September 27, 1998, the Company
had repurchased 1,609,000 shares at an average price of $3.50 per share.

8. LEGAL PROCEEDINGS

The Company,  certain of its officers and directors and the lead underwriters of
a public offering of the Company's  securities were named as defendants in three
purported class action lawsuits filed in federal district court for the Southern
District  of New York in December  1997 and  January  1998.  The  lawsuits  were
consolidated in April 1998 into one lawsuit.  The lawsuit alleges  violations of
the federal  securities  laws in  connection  with the  Company's  November 1996
Prospectus and other public statements which are alleged to have omitted certain
disclosures with respect to the Company's agreement with a large parcel delivery
client. The complaint as amended seeks, among other things,  unspecified damages
and an award of attorney's fees, costs and expenses.  The Company filed a motion
to dismiss the lawsuit on  September  10,  1998,  which is pending.  The Company
denies all  allegations  of  wrongdoing  and  continues  to believe  that it has
meritorious defenses.

9. NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial   Accounting  Standards  No.  130,  ("SFAS  No.  130")  "Reporting
Comprehensive   Income,"   which   established   standards   for   reporting  of
comprehensive  income.  This  pronouncement  requires that all items  recognized
under accounting standards as components of comprehensive  income, as defined in
the pronouncement,  be reported in a financial  statement that is displayed with
the same prominence as other financial statements. Comprehensive income includes
all changes in equity during a period except those resulting from investments by
share  owners  and  distributions  to  share  owners.  The  financial  statement
presentation  under SFAS No. 130 is  effective  for all fiscal  years  beginning
after  December  15,  1997,  and is  required in all  interim  period  financial
statements.  The Company adopted the provisions of SFAS No. 130 in January 1998.
As of September 27, 1998, the Company had no transactions  separately identified
as components of "other comprehensive income" under SFAS No. 130.

In June 1998, the FASB issued  Statement of Financial  Accounting  Standards No.
133  ("SFAS  No.  133")  "Accounting  for  Derivative  Instruments  and  Hedging
Activities."  SFAS  No.  133  establishes  accounting  and  reporting  standards
requiring  that  every  derivative   instrument  (including  certain  derivative
instruments  embedded in other  contacts)  be  recorded in the balance  sheet as
either an asset or  liability  measured  at its fair value.  This  pronouncement
requires that changes in the derivative's fair value be recognized  currently in
earnings unless specific hedge accounting  criteria are met. Special  accounting
for qualifying  hedges allows a derivative's  gains and losses to offset related
results on the hedged item in the income statement,  and requires that a company
must formally document,  designate, and assess the effectiveness of transactions
that  receive  hedge  accounting.  SFAS No. 133 is  effective  for fiscal  years
beginning after June 15, 1999. The Company has not yet quantified the impacts of
adopting SFAS No. 133 on its financial  statements  and has not  determined  the
timing of or method of adoption of SFAS No. 133.


<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

APAC  TeleServices,  Inc. and Subsidiaries (the "Company")  provides high volume
telephone-based sales, marketing and customer management solutions for corporate
clients  operating  in the  business and  consumer  products,  parcel  delivery,
financial  services,  insurance,  retail,  technology,   telecommunications  and
utilities industries  throughout the United States. The Company's client base is
comprised  of  large  companies  with  the  need  for  cost-effective  means  of
contacting  and servicing  current and  prospective  customers.  The Company has
three service  offerings.  The Sales Solutions  division provides outbound sales
support to consumers and businesses,  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.  In August 1997, the Company
expanded its service offerings through the acquisition of Paragren Technologies,
Inc.  ("Paragren")  which  specializes in software-based  consumer  marketing to
optimize   customer   relationships.   Paragren's   software  enables  marketing
professionals  to  perform  on-line   exploratory   analysis,   descriptive  and
predictive modeling,  promotion planning,  detailed customer  segmentation,  and
campaign  execution and  evaluation.  The results of Paragren's  operations  are
included with the results of operations of the Service  Solutions  division.  In
May 1998, the Company  increased its market presence with the acquisition of ITI
Holdings,  Inc., the sole shareholder of ITI Marketing  Services,  Inc. ("ITI").
ITI, like the Company,  provides  telephone-based  sales, marketing and customer
management  services to corporate clients. As of September 27, 1998, the Company
operated and managed  approximately  13,600  workstations in 86 customer contact
centers.

The Company'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  statement  of income  data as a percent of net
revenue from services  provided by the Company for the thirteen and  thirty-nine
week periods ended September 27, 1998, and September 28, 1997.

<TABLE>
<CAPTION>

                                          THIRTEEN WEEKS ENDED           THIRTY-NINE WEEKS ENDED
                                      -----------------------------    -----------------------------
                                       SEPTEMBER 27,   SEPTEMBER 28,    SEPTEMBER 27,   SEPTEMBER  28,
                                           1998            1997            1998             1997
<S>                                        <C>               <C>             <C>            <C>     
    Net revenue:
       Sales solutions                                                                      

       Service solutions                   47.3%             50.1%           48.7%          52.6%
                                           52.7              49.9            51.3            47.4
                                      -------------    ------------    ------------    -------------
         Total net revenue                100.0             100.0           100.0           100.0
    Operating expenses:
       Cost of services                    79.0             80.2            79.0             74.6
       Selling, general and
           administrative expenses         13.1             15.0            13.7             13.1
      Restructuring charge                   --               --             2.8               --
                                      -------------    ------------    ------------    -------------
        Total operating expenses           92.1             95.2            95.5             87.7
                                      -------------    ------------    ------------    -------------
       Income from operations               7.9              4.8             4.5             12.3
    Interest expense, net                   2.5              0.4             1.6              0.4
                                      -------------    ------------    ------------    -------------
        Income before income taxes          5.4              4.4             2.9             11.9
    Provision for income taxes              2.5              1.9             1.4              4.6
                                      =============    ============    ============    =============
      Net income                            2.9%             2.5%            1.5%             7.3%
                                      =============    ============    ============    =============

</TABLE>


<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED

RESULTS OF OPERATIONS

Net revenue for the quarter and nine months ended September 27, 1998,  increased
$39.5 million or 49.5% and $56.3 million or 21.5%, respectively, compared to the
same periods in 1997. The increases are primarily attributed to the inclusion of
the results of ITI from the  acquisition  date of May 1998.  Net revenue for the
Sales  Solutions  division for the quarter and nine months ended  September  27,
1998, increased $16.4 million or 41.0% and $17.2 million or 12.5%, respectively,
compared to last year as a result of the inclusion of revenue from ITI.  Revenue
from  financial  services  clients  declined in the third quarter of 1998 due in
part to consolidation in the financial  services  industry.  Increasing  revenue
from the Company's  largest  telecommunications  client  offset these  declines.
Sales Solutions' average selling prices in 1998 declined as compared to 1997 due
to  client  mix  and  marketplace  pricing  pressures.   The  Service  Solutions
division's net revenue for the quarter and nine months ended September 27, 1998,
increased  $23.1  million  or 58.1% and $39.1  million  or 31.5%,  respectively,
compared  to last year due to  service  initiated  for a new  telecommunications
client and the  inclusion of revenue from ITI and  Paragren.  Service  Solutions
revenue  growth during the first nine months of 1998 was  partially  offset by a
25% reduction in revenue from the Company's  large parcel  delivery  client as a
result of improved operating efficiencies in the management of client-owned call
centers.

Cost of  services as a percent of net  revenue  increased  to 79.0% in the first
nine months of 1998 compared to 74.6% in the same period in 1997.  This increase
reflects the  reduction of profit  margins due to lower selling  prices,  excess
capacity  resulting  from  reductions  in  expected  call  volumes  in the Sales
Solutions  division and higher direct wages and benefits in both  divisions.  In
the third  quarter  cost of services as percent of net  revenue  decreased  from
80.2% in 1997 to 79.0% in 1998.  The decrease was due to the net effect of lower
selling prices,  higher direct wages and benefits,  the receipt of non-recurring
cost reimbursements, during the third quarter and non-recurring costs associated
with a labor strike at a large parcel delivery client a year ago.

Selling,  general and  administrative  expenses  for the quarter and nine months
ended  September 27, 1998,  increased  $3.7 million or 31.3% and $9.3 million or
27.2%,  respectively,  compared to the same periods in 1997 due to the inclusion
of selling,  general and administrative  expenses of ITI and Paragren and to the
amortization of goodwill and other intangible assets acquired in connection with
the  acquisitions  of  both  companies.   Amortization  of  goodwill  and  other
intangible  assets for the quarter and nine months  ended  September  27,  1998,
amounted to $2.1 million and $3.9  million,  respectively.  In the third quarter
selling,  general  and  administrative  expenses  as a  percent  of net  revenue
decreased  from  15.0%  in 1997 to  13.1%  in 1998  due to  workforce  reduction
achieved through a restructuring  plan adopted in the second quarter of 1998 and
reduced payments under performance-based pay programs.

In June 1998,  the  Company  adopted a  restructuring  plan and  recorded a $9.0
million charge.  The after tax impact of the restructuring  charge in the second
quarter  amounted to $5.5 million or $0.11 per share. The  restructuring  charge
provides  for the  estimated  costs  to  close  customer  optimization  centers,
reconfigure certain  administrative  support facilities and reduce the workforce
by approximately 80 salaried employees.

Net interest  expense for the quarter and nine months ended  September 27, 1998,
increased by $2.6 million and $4.2 million,  respectively,  compared to the same
periods in 1997.  These  increases  reflect  interest and  amortization  of debt
issuance costs on the new Credit Facility used to finance the purchase of ITI on
May 20, 1998, as well as increased average borrowing levels.

The $4.5 million and $12.0 million  provisions  for income taxes  recognized for
the nine months ended September 28, 1998, and September 28, 1997,  respectively,
are based upon the Company's estimated annual


<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED

RESULTS OF OPERATIONS--CONTINUED

effective income tax rates.  The increase in the Company's  effective income tax
rate to 48.6% for the first nine  months of 1998 from 38.5% in the same period a
year  ago  was  principally  due  to  goodwill   amortization   related  to  the
acquisitions of ITI and Paragren not being deductible for income tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by  operations  during the first nine months of 1998 totaled $55.8
million.  Income  adjusted for non-cash items and deferred income taxes amounted
to $28.0 million in the first nine months of 1998.  Reflected in total cash from
operations is the receipt of customer  deposits of $10.5  million,  $6.5 million
from a  reduction  in days  sales  outstanding  resulting  from  improvement  in
collections of accounts receivable,  and a decrease in cash required for general
working  capital  purposes.  The  Company  spent $6.8  million in the first nine
months of 1998 to  standardize  and  upgrade  telecommunications  equipment  and
systems.  These  expenditures  were  funded  by cash  from  operations.  Capital
expenditures  in 1998 are lower  than in 1997 due to  increased  utilization  of
capacity placed into service in late 1996 and early 1997.

On May 20, 1998, the Company  entered into a new $250.0 million Credit  Facility
and at the same time  repaid  all  amounts  outstanding  under  its prior  $80.0
million credit facility.  On September 8, 1998, the Credit Facility was amended,
reducing  the  available  borrowings  to $225.0  million.  The  Credit  Facility
consists of a $150.0 million Term Loan and $75.0 million Revolving Facility. The
Company is required to make  quarterly  principal  payments over the next twelve
months  amounting  to $13.0  million.  In  connection  with  securing the Credit
Facility,  the Company paid fees and expenses of $2.2  million.  As of September
27, 1998,  the Company had  outstanding  borrowings  of $2.0  million  under the
Revolving Facility and $147.0 million under the Term Loan.

On May 20, 1998,  the Company  completed  the  acquisition  of all of the common
stock of ITI Holdings,  Inc. The purchase  price was $149.2  million net of cash
acquired  and was  financed  with  proceeds  from the $150.0  million  Term Loan
discussed above.

In June 1998, the Company  adopted a restructuring  plan which included  closing
customer  contact  centers,   reconfiguring   certain   administrative   support
facilities and reducing the workforce by  approximately  80 salaried  employees.
The restructuring charge of $9.0 million included $4.5 million for write-down of
leasehold improvements and equipment,  $3.3 million for employee severance costs
and $1.2  million  for  lease-termination  costs.  During the third  quarter the
Company  made  payments  of  $1.8  million  for  employee  severance  and  lease
termination costs.

On August 31, 1998, the Board of Directors  authorized the Company to repurchase
up to 2.5 million shares of its outstanding  common shares at market prices.  At
September 27, 1998, the Company had  repurchased  1,609,000  shares at a cost of
$5.6 million.

The Company  expects that cash from future  operations and available  borrowings
under the new Credit Facility will be sufficient to meet normal  operating needs
as well as fund any  additional  business  growth for the balance of fiscal year
1998.


<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED

YEAR 2000 COMPLIANCE

The Year 2000  issue,  common  to most  companies,  concerns  the  inability  of
information and non-information  systems to recognize and process date-sensitive
information  after 1999 due to the use of only the last two digits to refer to a
year. Time sensitive  computer  equipment and software with embedded  technology
may recognize a date using "00" as the year 1900 rather than the year 2000.  The
problem  could affect both computer  equipment and software and other  equipment
that relies on microprocessors.

During the last four months Senior Information  Technology  Management under the
direction  of the Audit  Committee  of the Board of  Directors  has  completed a
company-wide  evaluation  of the impact of a potential  Year 2000 problem on its
computer systems, applications and other date-sensitive equipment. Equipment and
systems  that are not Year  2000  compliant  have  been  identified  and will be
corrected  through  equipment  replacement,  remediation  of  code  in  software
programs, or migration to a Year 2000 compliant platform.  The Company estimates
that  approximately  20% of the  remediation  of code in software  programs  was
completed as of October 31, 1998. All Year 2000  compliance  issues are expected
to be corrected by July 1, 1999.  Through  September  27, 1998,  the Company has
spent approximately  $500,000 to address Year 2000 issues.  Total costs required
to correct Year 2000 issues are  currently  estimated to be  approximately  $3.0
million  and  principally  consist  of  equipment  upgrades  and  software  code
remediation.

While the Company believes that its efforts will adequately address its internal
Year 2000 concerns,  it is possible that the Company will be adversely  affected
by problems  encountered by key customers and  suppliers.  The Company is in the
process of initiating discussions with significant customers and suppliers in an
effort to determine and assess those parties' Year 2000 compliance  status.  The
Company is dependent on computer and  telecommunications  companies for computer
equipment and software and telephone systems and service. The Company expects to
complete its  evaluation of customers and suppliers by December 31, 1998.  Based
upon the  results of its  assessments  of  customers  and  suppliers  compliance
status,  the Company will develop  appropriate  contingency  plans.  The Company
expects  contingency plans will be in place by May 1, 1999. The Company would be
unable to perform its work without access to outbound  and/or inbound  telephony
capabilities,  resulting in the loss of revenue,  the extent and  materiality of
which would depend on the length of the time required to restore access.

FORWARD-LOOKING STATEMENTS

Statements contained herein regarding the Company'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  its growth rate and  effectively  manage its
profitability.  Changes in or events  affecting  clients'  businesses may have a
material  impact on the Company's net revenue and earnings.  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. The Company's net revenue and profitability may also be
affected by changes in clients'  use of  telemarketing  programs as a method for
customer  acquisition  and available  telemarketing  capacity from the Company's
competitors.  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 28, 1997,  which describe
other  important  factors  that may impact the  Company's  business,  results of
operations and financial condition.


<PAGE>


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company,  certain of its officers and directors and the lead underwriters of
certain public offerings of the Company's securities were named as defendants in
three purported  class action  lawsuits filed in federal  district court for the
Southern  District of New York in December 1997 and January  1998.  The lawsuits
were consolidated in April 1998 into one lawsuit. The lawsuit alleges violations
of the federal  securities laws in connection  with the Company's  November 1996
Prospectus and other public statements which are alleged to have omitted certain
disclosures with respect to the Company's agreement with a large parcel delivery
client. The complaint as amended seeks, among other things,  unspecified damages
and an award of attorney's fees, costs and expenses.  The Company filed a motion
to dismiss the lawsuit on  September  10,  1998,  which is pending.  The Company
denies all  allegations  of  wrongdoing  and  continues  to believe  that it has
meritorious defenses.  The lawsuits were first disclosed in the Company's annual
report on Form 10-K for the fiscal year ended  December 28, 1997, and there have
been no other disclosures in the Company's filings.

ITEM 5.  OTHER INFORMATION

The Company's By-Laws provide that share owners seeking to bring nominations and
other  business  before the annual  meeting of share  owners  must give  written
notice not later than the close of  business on the 90th day,  nor earlier  than
the close of business on the 120th day,  prior to the first  anniversary  of the
preceding  year's annual meeting of share owners.  Such notice must be delivered
or mailed by first class United States mail,  postage prepaid,  to the Secretary
of the  Company  at the  principal  executive  offices of the  Company  and must
include certain information  regarding any proposed nominee or proposed business
and the share owner  giving the notice.  In order for a notice to be timely with
respect to matters to be brought  before the  Company's  1999 annual  meeting of
share owners, pursuant to the Company's By-Laws, such notice must be received by
the  Secretary  of the Company not earlier than the close of business on January
19,  1999,  nor later than the close of  business on February  18,  1999.  These
requirements are separate from and in addition to the requirements a share owner
must meet to have a proposal  included in the  Company's  proxy  statement.  Any
share owner desiring a copy of the Company's  By-Laws will be furnished one upon
written request to the Secretary of the Company.

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

          Number                         Description

       -------------    ----------------------------------------------
           3.2          By-Laws as amended through October 21, 1998
            10          Amended and Restated Credit Agreement and
                           First Amendment to Agreement
            11          State Re: Computation of Earnings Per Share
            27          Financial Data Schedule

(b) Reports on Form 8-K. On July 20,  1998,  the Company  filed a report on Form
8-K which disclosed its second quarter results of operations. On August 3, 1998,
the Company  filed a report on Form 8-K/A  dated May 20,  1998,  which  included
audited  financial  statements  for ITI Holdings,  Inc. as of December 31, 1997,
1996  and  1995,  and  unaudited  pro  forma  consolidated  condensed  financial
statements for APAC TeleServices and Subsidiaries  consisting of a balance sheet
as of March 28, 1998,  statement of  operations  for the  fifty-two  weeks ended
December 28, 1997,  and  statement of income for the thirteen  weeks ended March
29, 1998.  On August 31, 1998,  the Company  filed a current  report on Form 8-K
which  announced the repurchase of up to 2.5 million  shares of its  outstanding
common shares.  Subsequent to the end of the quarter, the Company filed a report
on Form 8-K dated October 19, 1998, which disclosed its third quarter results of
operations.


<PAGE>


                                   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, 1998                By:        /s/ Marc S. Simon
                                              ------------------------------
                                                      President and
                                                 Chief Operating Officer

Date:    November 12, 1998               By:       /s/ Philip B. Wade
                                              ------------------------------
                                              Vice President and Controller