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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
 For the quarterly period ended April 1, 2007
 or
 o
    
    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 Customer Services, Inc.
  Illinois
    
    36-2777140(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 Six Parkway North, Deerfield, Illinois 60015
 (847) 374-4980
  þ o
  o o þ
  o þ




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##### 



INDEX
 PageForward-Looking Statements and Factors That May Affect Future Results
    
    
    3Part I.
    
    Financial Information
    
    
    5Item 1.
    
    Condensed Consolidated Financial Statements (Unaudited):
    
    
    5Condensed Consolidated Balance Sheets as of April 1, 2007 and December 31, 2006
    
    
    5Condensed Consolidated Statements of Operations for the Thirteen Weeks
Ended April 1, 2007 and April 2, 2006
    
    
    6Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks
Ended April 1, 2007 and April 2, 2006
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    25Part II.
    
    Other Information
    
    
    26Item 1A.
    
    Risk Factors
    
    
    26Item 6.
    
    Exhibits
    
    
    27Amended and Restated 2005 Incentive Stock PlanForm of Non-Employee Director Stock Option Grant AgreementForm of Employee Stock Option Grant AgreementForm of Restricted Stock Award Agreement302 Certification of Chief Executive Officer302 Certification of Chief Financial OfficerSection 906 Certification of CEO and CFO
  2




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Forward-Looking Statements and Factors That May Affect Future Results
     
    
    Our revenue is generated from a limited number of clients and the loss of one or more of them, or a reduction in their
demand for our services, could materially affect our financial results.
    
    Circumstances outside our control such as typhoons, earthquakes and other acts of God, political instability, equipment
malfunction, telephone or data service interruptions, changes in the telecommunications market, war and terrorism could
seriously harm our domestic or off-shore business.
    
    Our financial results depend on our ability to effectively manage the capacity of our domestic customer care centers
and the growth of our off-shore customer care centers.
    
    Our inability to attract and retain a sufficient number of qualified employees could negatively impact our business.
    
    Our success is subject to the terms of our client contracts.
    
    Our success depends on sustaining a return to profitability.
    
    Our business operates in a highly competitive market.
    
    Our financial results may be affected by risks associated with international operations and expansion.
    
    Our business may be affected by our cash flows from operations and our ability to comply with our debt covenants.
    
    Our business and our clients businesses are subject to federal and state regulation and industry standards, including
laws and industry standards regarding consumer privacy and information security.
    
    Our success depends on key personnel.
    
    Our principal shareholder can exercise significant control over the Company.
    
    Our liquidity and ability to meet the terms of our current loan agreements could be materially affected should we not
prevail in our dispute with the Internal Revenue Service.
 3




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4




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PART I. FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements
 
 APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 April 1,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,664
    
    
    $
    1,305Accounts receivable, net
    
    
    33,622
    
    
    
    37,858Other current assets
    
    
    7,426
    
    
    
    6,717Total current assets
    
    
    42,712
    
    
    
    45,880Property and equipment, net
    
    
    24,231
    
    
    
    23,930Goodwill
    
    
    13,338
    
    
    
    13,338Other intangible assets, net
    
    
    7,474
    
    
    
    8,070Other assets
    
    
    1,540
    
    
    
    836Total assets
    
    $
    89,295
    
    
    $
    92,054LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Short-term debt
    
    $
    8,792
    
    
    $
    13,778Current portion of long-term debt
    
    
    1,600
    
    
    
    600Accounts payable
    
    
    1,190
    
    
    
    2,890Income taxes payable
    
    
    220
    
    
    
    17,800Accrued payroll and related items
    
    
    12,743
    
    
    
    14,603Accrued liabilities
    
    
    10,561
    
    
    
    12,888Total current liabilities
    
    
    35,106
    
    
    
    62,559Long-term debt
    
    
    13,400
    
    
    
    4,400Other liabilities
    
    
    1,444
    
    
    
    1,789Commitments and contingencies
    
    
    
    
    
    
    Shareholders equity:Common shares, $0.01 per share; authorized 200,000,000 shares;
50,166,628 and 50,066,628 shares issued at April 1, 2007, and December 31,
2006, respectively; 50,092,282 and 49,866,583 shares outstanding at April 1,
2007, and December 31, 2006, respectively
    
    
    503
    
    
    
    501Additional paid-in capital
    
    
    101,290
    
    
    
    101,077Accumulated deficit
    
    
    (62,634
    )
    
    
    (77,849
    )Accumulated other comprehensive income
    
    
    447
    
    
    
    280Treasury shares: 74,346 and 200,045 shares; at cost at April 1, 2007 and
December 31, 2006, respectively
    
    
    (261
    )
    
    
    (703
    )Total shareholders equity
    
    
    39,345
    
    
    
    23,306Total liabilities and shareholders equity
    
    $
    89,295
    
    
    $
    92,054
  5




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)
 Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006Net revenue
    
    $
    52,384
    
    
    $
    60,723Cost of services
    
    
    46,067
    
    
    
    53,247Gross profit
    
    
    6,317
    
    
    
    7,476Operating expenses:Selling, general and administrative expenses
    
    
    7,893
    
    
    
    7,890Reversals of restructuring and other charges
    
    
    (2
    )
    
    
    (13
    )Total operating expenses
    
    
    7,891
    
    
    
    7,877Operating loss
    
    
    (1,574
    )
    
    
    (401
    )Other income
    
    
    (47
    )
    
    
    (28
    )Interest expense
    
    
    838
    
    
    
    456Loss before income taxes
    
    
    (2,365
    )
    
    
    (829
    )Income tax benefit
    
    
    (17,580
    )
    
    
    (88
    )Net income (loss)
    
    $
    15,215
    
    
    $
    (741
    )Net income (loss) per share:Basic
    
    $
    0.31
    
    
    $
    (0.01
    )Diluted
    
    $
    0.30
    
    
    $
    (0.01
    )Weighted average number of shares outstanding:Basic
    
    
    49,534
    
    
    
    49,455Diluted
    
    
    50,993
    
    
    
    49,455
  6




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006Operating activities:Net income (loss)
    
    $
    15,215
    
    
    $
    (741
    )Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activitiesDepreciation and amortization
    
    
    3,224
    
    
    
    3,015Reversals of non-cash restructuring charges
    
    
    (2
    )
    
    
    (13
    )Deferred income taxes
    
    
    
    
    
    
    (254
    )Stock compensation expense
    
    
    396
    
    
    
    360Gain on sale of property and equipment
    
    
    (43
    )
    
    
    Income taxes payable
    
    
    (17,580
    )
    
    
    142Change in operating assets and liabilities
    
    
    (3,071
    )
    
    
    36Net cash (used in) provided by operating activities
    
    
    (1,861
    )
    
    
    2,545Investing activities:Purchases of property and equipment, net
    
    
    (3,077
    )
    
    
    (940
    )Net proceeds from sale of property and equipment
    
    
    14
    
    
    
    Net cash used in investing activities
    
    
    (3,063
    )
    
    
    (940
    )Financing activities:Borrowings on long-term debt
    
    
    10,000
    
    
    
    Payments under revolving credit facility, net
    
    
    (4,987
    )
    
    
    (1,039
    )Cash received from exercise of stock options
    
    
    261
    
    
    
    Net cash provided by (used in) financing activities
    
    
    5,274
    
    
    
    (1,039
    )Effect of exchange rate change on cash
    
    
    9
    
    
    
    (36
    )Net increase in cash and cash equivalents
    
    
    359
    
    
    
    530Cash and cash equivalents:Beginning balance
    
    
    1,305
    
    
    
    960Ending balance
    
    $
    1,664
    
    
    $
    1,490
  7




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except as otherwise indicated)
 1. Basis of Presentation and Principles of Consolidation
 http://www.sec.gov
 st  st
 2. New Accounting Pronouncements
 Accounting for
Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109 , Accounting for Income Taxes
  8




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except as otherwise indicated)
 3. Accrued Liabilities
  April 1,
    
    
    December 31,2007
    
    
    2006Deferred rent
    
    $
    2,900
    
    
    $
    3,070Accrued workers compensation
    
    
    2,579
    
    
    
    2,705Accrued restructuring charges
    
    
    1,687
    
    
    
    2,032Accrued professional fees
    
    
    1,006
    
    
    
    837Other
    
    
    2,389
    
    
    
    4,244Total
    
    $
    10,561
    
    
    $
    12,888
 4. Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
  5. Accounting for Stock-Based Compensation
    9




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except as otherwise indicated)
   Weighted AverageExercise Price Per
    
    
    AggregateNumber of Shares
    
    
    Share
    
    
    Intrinsic ValueOutstanding on December 31, 2006
    
    
    370,929
    
    
    $
    Granted
    
    
    100,000
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited/Cancelled
    
    
    
    
    
    
    Outstanding on April 1, 2007
    
    
    470,929
    
    
    
    
    
    
    $
    2,187Exercisable on April 1, 2007
    
    
    
    
    
    
    
    
    
    
    
  Weighted AverageNumber of
    
    
    Grant Price Range
    
    
    Exercise Price Per
    
    
    AggregateOptions
    
    
    Per Share
    
    
    Share
    
    
    Intrinsic ValueOutstanding on December 31, 2006
    
    
    7,261,965
    
    
    
    $0.85 - $16.75
    
    
    $
    2.15Granted
    
    
    156,708
    
    
    
    $3.71 - $4.60
    
    
    
    3.99Exercised
    
    
    (125,699
    )
    
    
    $0.86 - $3.57
    
    
    
    2.08Forfeited/Cancelled
    
    
    (36,148
    )
    
    
    $2.81 - $6.50
    
    
    
    4.22Outstanding on April 1, 2007
    
    
    7,256,826
    
    
    
    $0.85 - $16.75
    
    
    
    2.18
    
    
    $
    19,092Exercisable on April 1, 2007
    
    
    3,223,722
    
    
    
    $0.85 - $16.75
    
    
    
    2.92
    
    
    $
    6,762
 6. Comprehensive Income (Loss)
  Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006Net income (loss)
    
    $
    15,215
    
    
    $
    (741
    )Foreign currency translation gain
    
    
    167
    
    
    
    38Total comprehensive income (loss)
    
    $
    15,382
    
    
    $
    (703
    )
  10




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except as otherwise indicated)
 7. Legal Proceedings
  8. Debt
       11




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except as otherwise indicated)
       12




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except as otherwise indicated)
       13




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except as otherwise indicated)
 9. Restructuring and Other Charges
  2006 Restructuring Initiatives
  2005 Restructuring Initiatives
   December 31,
    
    
    Charges
    
    
    Cash
    
    
    April 1,2006
    
    
    (Reversals)
    
    
    Payments
    
    
    2007Restructuring initiatives prior to 2005:
    
    $
    2
    
    
    $
    (2
    )
    
    
    
    
    
    
    2005 restructuring initiatives:Lease obligations and other costs
    
    
    1,731
    
    
    
    
    
    
    $
    (578
    )
    
    $
    1,1532006 restructuring initiatives:Employee severance costs
    
    
    6
    
    
    
    
    
    
    
    (6
    )
    
    
    Lease obligations and other costs
    
    
    1,438
    
    
    
    
    
    
    
    (96
    )
    
    
    1,342Total
    
    $
    3,177
    
    
    $
    (2
    )
    
    $
    (680
    )
    
    $
    2,495
 10. Income Taxes
   14




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except as otherwise indicated)
    Accounting for Uncertainty in Income Taxes: an
interpretation of FASB Statement No. 109
 11. Earnings Per Share
 .
 Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006(In thousands, except earnings pershare)Net income (loss)
    
    $
    15,215
    
    
    $
    (741
    )Shares used in basic per share calculation
    
    
    49,534
    
    
    
    49,455Effects of dilutive securitiesStock options
    
    
    988
    
    
    
    Non-vested stock
    
    
    471
    
    
    
    Shares used in diluted per share calculation
    
    
    50,993
    
    
    
    49,455Net income (loss) per share:Basic
    
    $
    0.31
    
    
    $
    (0.01
    )Diluted
    
    $
    0.30
    
    
    $
    (0.01
    )
 15




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APAC CUSTOMER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except as otherwise indicated)
 12. Reclassification
   13. Subsequent Events
  16




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
     First-Quarter 2007
  17




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Critical Accounting Policies and Estimates
 Accounting for
Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109
 18




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Results of Operations
  Thirteen Weeks EndedApril 1,
    
    
    April 2,
    
    
    Fav (Unfav)2007
    
    
    2006
    
    
    % ChangeNet Revenue:Domestic
    
    $
    42,327
    
    
    $
    54,481
    
    
    
    (22.3
    )%Off-shore
    
    
    10,057
    
    
    
    6,242
    
    
    
    61.1Total net revenue
    
    
    52,384
    
    
    
    60,723
    
    
    
    (13.7
    )Cost of Services:Direct labor
    
    
    29,621
    
    
    
    34,873
    
    
    
    15.1Other facility expenses
    
    
    16,446
    
    
    
    18,374
    
    
    
    10.5Total cost of services
    
    
    46,067
    
    
    
    53,247
    
    
    
    13.5Percentage of revenue
    
    
    87.9
    %
    
    
    87.7
    %
    
    
    Gross profit
    
    
    6,317
    
    
    
    7,476
    
    
    
    (15.5
    )Gross profit margin
    
    
    12.1
    %
    
    
    12.3
    %
    
    
    Operating Expenses:Selling, general & administrative expenses
    
    
    7,893
    
    
    
    7,890
    
    
    
    (0.0
    )Reversals of restructuring and other charges
    
    
    (2
    )
    
    
    (13
    )
    
    
    84.6Total operating expenses
    
    
    7,891
    
    
    
    7,877
    
    
    
    (0.2
    )Operating loss
    
    
    (1,574
    )
    
    
    (401
    )
    
    
    *Other income
    
    
    (47
    )
    
    
    (28
    )
    
    
    67.9Interest expense
    
    
    838
    
    
    
    456
    
    
    
    (83.8
    )Loss before income taxes
    
    
    (2,365
    )
    
    
    (829
    )
    
    
    *Income tax benefit
    
    
    (17,580
    )
    
    
    (88
    )
    
    
    *Net income (loss)
    
    $
    15,215
    
    
    $
    (741
    )
    
    
    *
    %
 
 *
    
    Means that the percentage change is not meaningful Non-GAAP Financial Measures
   19




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Thirteen Weeks Ended (1)April 1,
    
    
    April 2,
    
    
    Fav (Unfav)2007
    
    
    2006
    
    
    % Change(Dollars in thousands exceptstatistical data and notes)EBITDA (2)
    
    $
    1,697
    
    
    $
    2,642
    
    
    
    (35.8
    )%Free cash flow (3)
    
    
    (1,380
    )
    
    
    1,702
    
    
    
    (181.1
    )Statistical information:Number of customer care centers:Domestic
    
    
    8
    
    
    
    12Off-shore (4)
    
    
    4
    
    
    
    1Total
    
    
    12
    
    
    
    13Number of workstations:Domestic
    
    
    4,600
    
    
    
    5,408Off-shore
    
    
    2,205
    
    
    
    1,219Total
    
    
    6,805
    
    
    
    6,627Annualized net weighted average revenue per workstation:Domestic
    
    $
    36,087
    
    
    $
    40,774Off-shore
    
    
    18,950
    
    
    
    20,482Total
    
    
    30,748
    
    
    
    37,006
 Notes to Non-GAAP Financial Measures
 
 (1)
    
    We operate on a thirteen-week fiscal quarter that ends on the Sunday closest to March 31.(2)
    
    We define EBITDA as net income (loss) plus the provision (benefit) for income taxes,
depreciation and amortization, and interest expense. We use EBITDA, in addition to operating
income and cash flows from operating activities, to assess our liquidity and performance, including
measuring management incentive plans. We believe that EBITDA is of interest to our investors and
analysts to be able to evaluate our financial results using the same measures we use.   Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006(Dollars in thousands)Net income (loss)
    
    $
    15,215
    
    
    $
    (741
    )Interest expense
    
    
    838
    
    
    
    456Benefit for income taxes
    
    
    (17,580
    )
    
    
    (88
    )Depreciation and amortization
    
    
    3,224
    
    
    
    3,015EBITDA
    
    $
    1,697
    
    
    $
    2,642
 20




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(3)
    
    We define free cash flow as EBITDA less capital expenditures. We use free cash flow, in
addition to net cash provided by (used in) operating activities, to assess our liquidity and
performance. We believe that free cash flow is of interest to our investors and analysts in
relation to our debt covenants as capital expenditures are a significant use of our cash and our
future performance will depend on our ability to continue to fund our growth.  Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006(Dollars in thousands)EBITDA
    
    $
    1,697
    
    
    $
    2,642Capital expenditures
    
    
    (3,077
    )
    
    
    (2,060
    )Leasehold improvements funded by landlord
    
    
    
    
    
    
    1,120Free Cash Flow
    
    $
    (1,380
    )
    
    $
    1,702
  Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006(Dollars in thousands)Net cash (used in) provided by operating activities
    
    $
    (1,861
    )
    
    $
    2,545Purchase of property and equipment
    
    
    (3,077
    )
    
    
    (940
    )Income tax benefit
    
    
    (17,580
    )
    
    
    (88
    )Interest expense
    
    
    838
    
    
    
    456Gain on sale of property and equipment
    
    
    43
    
    
    
    Income taxes payable
    
    
    17,580
    
    
    
    (142
    )Changes in operating assets and liabilities
    
    
    3,071
    
    
    
    (36
    )Increase in deferred income taxes
    
    
    
    
    
    
    254Stock compensation expense
    
    
    (396
    )
    
    
    (360
    )Reversals of non-cash restructuring charges
    
    
    2
    
    
    
    13Free Cash Flow
    
    $
    (1,380
    )
    
    $
    1,702
 
 (4)
    
    One of our off-shore centers is a temporary facility with approximately 500 seats, which
we leased to accommodate client demand while we built a 1,900 seat third facility, the first phase
of which opened in late March 2007. We are in the process of transitioning operations from the
temporary facility to our new permanent facility in the Philippines. We currently expect this
transition to be completed by June 30, 2007 at which time we will exit the temporary facility. 21




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Comparison of Results of Operations for the Quarters Ended April 1, 2007 and April 2, 2006
         22




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Liquidity and Capital Resources
 Bank Financing
    23




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##### Table of Contents



Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006(Dollars in thousands)Net cash (used in) provided by operating activities
    
    $
    (1,861
    )
    
    $
    2,545Net cash used in investing activities
    
    
    (3,063
    )
    
    
    (940
    )Net cash provided by (used in) financing activities
    
    
    5,274
    
    
    
    (1,039
    )Effect of exchange rate changes on cash
    
    
    9
    
    
    
    (36
    )Net change in cash and cash equivalents
    
    $
    359
    
    
    $
    530
 Operating Activities
  Investing Activities
  Financing Activities
  Free Cash Flow
  24




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Internal Control Over Financial Reporting
  Inherent Limitations on the Effectiveness of Controls
   25




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##### Table of Contents



Part II. Other Information
 
 Item 1A. Risk Factors
  Our business may be affected by our cash flows from operations and our ability to comply with our
debt covenants.
     26




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##### Table of Contents



Item 6. Exhibits
  27




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##### Table of Contents



SIGNATURES
  APAC Customer Services, Inc. and SubsidiariesDate: May 11, 2007
    By:
    /s/ Robert J. KellerRobert J. KellerPresident and
Chief Executive Officer
(Principal Executive Officer) Date: May 11, 2007
    By:
    /s/ George H. Hepburn IIIGeorge H. Hepburn IIISenior Vice President and
Chief Financial Officer
(Principal Financial Officer) Date: May 11, 2007
    By:
    /s/ Joseph R. DoolanJoseph R. DoolanVice President and Controller
(Principal Accounting Officer) 28




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
   Description3.1
    
    Articles of Incorporation of APAC Customer Services, Inc., incorporated by reference to
APAC Customer Services, Inc.s Annual Report on Form 10-K for the fiscal year ended
December 31, 2006.3.2    
    Certificate of Amendment of the Amended and Restated Bylaws of APAC Customer Services,
Inc. as amended March 10, 2004, incorporated by reference to APAC Customer Services,
Inc.s Quarterly Report on Form 10-Q for the quarter ended March 28, 2004.4.1
    
    Specimen Common Stock Certificate, incorporated by reference to APAC Customer Services,
Inc.s Annual Report on Form 10-K for the fiscal year ended December 29, 2002.10.1
    
    Second Amended and Restated Loan and Security Agreement, dated January 31, 2007,
incorporated by reference to APAC Customer Services, Inc.s Current Report on Form 8-K,
dated February 5, 2007.10.2
    
    Second Lien Loan and Security Agreement, dated January 31, 2007, incorporated by
reference to APAC Customer Services, Inc.s Current Report on Form 8-K, dated February 5,
2007.10.3
    
    APAC Customer Services, Inc. Amended and Restated 2005 Incentive Stock Plan, effective
April 4, 2007.10.4
    
    Form of APAC Customer Services, Inc. Non-Employee Director Stock Option Agreement
(revised 2007).10.5
    
    Form of APAC Customer Services, Inc. Employee Stock Option Agreement (revised 2007).10.6
    
    Form of APAC Customer Services, Inc. Restricted Stock Award Agreement (revised 2007).31.1
    
    Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 29