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February 8, 2000

APAC Customer Services Reports Significantly Improved Fourth Quarter And 1999 Results

COMPANY PRESS RELEASE: APAC Customer Services, Inc, a premier provider of outsourced customer relationship management solutions, today reported consolidated financial results for its fourth quarter and fiscal year end 1999.

By CBR Staff Writer

The Company reported net income of $2.8 million or $0.06 per share for the fourth quarter of 1999 on net revenue of $114.1 million. This compares to a net loss in the fourth quarter of fiscal 1998 of $84.1 million, or a loss of $(1.78) per share, on net revenue of $115.0 million. The results for the fourth quarter of fiscal 1998 included a loss of $9.8 million, or $(0.21) per share, for the Company’s Paragren software development business, which was accounted for as a discontinued operation.

For the year ended January 2, 2000, the Company reported net income of $5.7 million, or $0.12 per share, on net revenue of $427.6 million. This compares to a net loss of $79.3 million, or $(1.63) per share, on net revenue of $425.0 million for the same period in 1998. Excluding restructuring charges, asset impairment charges and discontinued operations, net income for the year ended January 2, 2000 increased $5.7 million, or $0.13 per share, over the same period in 1998.

Ted Schwartz, Chairman, said, 1999 was a very positive and rewarding year for APAC Customer Services. The results of the fourth quarter and the year reflect the progress we have made during 1999 building a strong foundation and direction for the future. We are well positioned to take advantage of the tremendous opportunities ahead.

Peter Leger, President and CEO, said, The focus on strategic initiatives undertaken by the company, such as the strategic alliances with Cisco Systems and Whittman-Hart, the creation of CustomerAssistance.com to focus on e-commerce opportunities, and the sale of Paragren Technologies to Siebel Systems, positions APAC for continued growth and expansion for the future. In addition, the recent reorganization of APAC Customer Services into four strategic business units (Service Solutions, Facilities Management, CustomerAssistance.com, and Sales Solutions) enables the company to be much more market driven and client responsive. The organizational alignment, combined with strategic alliances and partnerships, will allow us to successfully capitalize on key market trends of increased demand for outsourced traditional and e-commerce CRM solutions.

For the year ended January 2, 2000, APAC reported consolidated net revenue of $427.6 million, an increase of 1% from net revenue of $425.0 million for fiscal year 1998. Net revenue for fiscal year 1999 includes four full quarters of results of ITI Marketing Services, Inc. which was acquired May 20, 1998. For fiscal year 1999, net revenue for the Service Solutions division increased 18% to $264.9 million, as compared to $225.5 million for the same period in 1998. Net revenue for the Sales Solutions division for fiscal year 1999 was $162.7 million, down 18% from $199.6 million for the same period in 1998. Consolidated income from continuing operations for fiscal 1999 was $5.7 million, or $0.12 per share, as compared to a loss of $68.3 million, or $(1.40) per share, for fiscal year 1998. The net loss for fiscal year 1998 of $79.3 million included a loss of $11.0 million, or $(0.23) per share, on the Company’s discontinued software development business and a $71.2 million, or $(1.38) per share, asset impairment charge associated with the ITI Marketing Services, Inc. acquisition.

During fiscal year 1999, the Company recorded restructuring charges of $7.6 million in connection with the consolidation of Sales Solutions’ customer interaction centers, as compared to $9.0 million for the same period in 1998. Largely offsetting the fiscal 1999 restructuring charge as a reduction in cost of services was the reversal of $4.9 million of accrued telephone charges previously recorded in 1998. The reversals resulted from the Company’s having negotiated favorable dispositions of costs associated with certain guaranteed minimum usage telecommunications contracts.

Earnings from continuing operations before interest, taxes, depreciation and amortization were $15.8 million for fourth quarter 1999. This compares to losses of $1.6 million for the same period a year ago. For the year ended January 2, 2000, earnings from continuing operations before interest, taxes, depreciation and amortization were $57.0 million, which was an increase of $6.7 million over the same period in 1998.

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