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 quarterly period ended September 30, 2002. | |||
| [ ] | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from | |||
| to | ||||
| Commission File No. | 0-28274 | |||
Sykes Enterprises, Incorporated
| Florida | 56-1383460 | |
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| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
400 North Ashley Drive, Tampa, FL 33602
| Registrant’s telephone number, including area code: | (813) 274-1000 | |
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100 North Tampa Street, Suite 3900, Tampa, FL 33602
Indicate by check mark whether the 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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days.
[X] Yes [ ] No
As of November 7, 2002, there were 40,387,532 shares of common stock outstanding.
PART I
Item 1 – Financial Statements and Independent Accountants’ Report.
Sykes Enterprises, Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except per share data,)
| September 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
Assets |
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Current assets: |
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Cash and cash equivalents |
$ | 91,149 | $ | 50,002 | ||||||
Receivables |
68,030 | 93,522 | ||||||||
Prepaid expenses and other current assets |
10,529 | 11,750 | ||||||||
Total current assets |
169,708 | 155,274 | ||||||||
Property and equipment, net |
124,827 | 140,551 | ||||||||
Intangible assets, net |
6,412 | 4,816 | ||||||||
Deferred charges and other assets |
14,995 | 9,139 | ||||||||
| $ | 315,942 | $ | 309,780 | |||||||
Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Accounts payable |
$ | 11,226 | $ | 15,772 | ||||||
Accrued employee compensation and benefits |
28,118 | 29,100 | ||||||||
Other accrued expenses and current liabilities |
26,927 | 13,855 | ||||||||
Total current liabilities |
66,271 | 58,727 | ||||||||
Deferred grants |
35,798 | 39,543 | ||||||||
Deferred revenue |
16,823 | 20,298 | ||||||||
Other long-term liabilities |
31 | — | ||||||||
Total liabilities |
118,923 | 118,568 | ||||||||
Contingencies |
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Shareholders’ equity: |
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Preferred stock, $0.01 par value, 10,000 shares
authorized; no shares issued and outstanding |
— | — | ||||||||
Common stock, $0.01 par value, 200,000 shares authorized;
43,470 and 43,300 issued |
435 | 433 | ||||||||
Additional paid-in capital |
161,814 | 160,907 | ||||||||
Retained earnings |
90,112 | 90,839 | ||||||||
Accumulated other comprehensive loss |
(14,119 | ) | (20,212 | ) | ||||||
| 238,242 | 231,967 | |||||||||
Treasury stock at cost; 3,071 shares and 3,000 shares |
(41,223 | ) | (40,755 | ) | ||||||
Total shareholders’ equity |
197,019 | 191,212 | ||||||||
| $ | 315,942 | $ | 309,780 | |||||||
See accompanying notes to condensed consolidated financial statements.
2
Sykes Enterprises, Incorporated and Subsidiaries
Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2002 and September 30, 2001
(Unaudited)
(in thousands, except for per share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||
Revenues |
$ | 109,658 | $ | 112,742 | $ | 339,230 | $ | 376,415 | ||||||||||
Operating expenses: |
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Direct salaries and related costs |
69,910 | 71,323 | 212,788 | 238,448 | ||||||||||||||
General and administrative |
37,585 | 40,518 | 114,993 | 123,958 | ||||||||||||||
Total operating expenses |
107,495 | 111,841 | 327,781 | 362,406 | ||||||||||||||
Income from operations |
2,163 | 901 | 11,449 | 14,009 | ||||||||||||||
Other income (expense): |
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Litigation settlement |
(13,800 | ) | — | (13,800 | ) | — | ||||||||||||
Gain on sale of facilities, net |
1,599 | — | 1,599 | — | ||||||||||||||
Interest, net |
323 | 65 | 334 | 197 | ||||||||||||||
Other |
(391 | ) | 74 | (683 | ) | (260 | ) | |||||||||||
Total other income (expense) |
(12,269 | ) | 139 | (12,550 | ) | (63 | ) | |||||||||||
Income (loss) before provision (benefit) for
income taxes |
(10,106 | ) | 1,040 | (1,101 | ) | 13,946 | ||||||||||||
Provision (benefit) for income taxes |
(3,436 | ) | (667 | ) | (374 | ) | 4,189 | |||||||||||
Net income (loss) |
$ | (6,670 | ) | $ | 1,707 | $ | (727 | ) | $ | 9,757 | ||||||||
Net income (loss) per share: |
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Basic |
$ | (0.17 | ) | $ | 0.04 | $ | (0.02 | ) | $ | 0.24 | ||||||||
Diluted |
$ | (0.17 | ) | $ | 0.04 | $ | (0.02 | ) | $ | 0.24 | ||||||||
Weighted
average shares: |
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Basic |
40,411 | 40,175 | 40,404 | 40,162 | ||||||||||||||
Diluted |
40,411 | 40,520 | 40,404 | 40,429 | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
Sykes Enterprises, Incorporated and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity
Nine Months Ended September 30, 2001, Three Months Ended December 31, 2001 and
Nine Months Ended September 30, 2002
(Unaudited)
| Accumulated | |||||||||||||||||||||||||||||
| Common | Common | Additional | Other | ||||||||||||||||||||||||||
| Stock | Stock | Paid-in | Retained | Comprehensive | Treasury | ||||||||||||||||||||||||
| (in thousands) | Shares | Amount | Capital | Earnings | Loss | Stock | Total | ||||||||||||||||||||||
Balance at January 1, 2001 |
43,084 | $ | 431 | $ | 159,696 | $ | 90,430 | $ | (14,082 | ) | $ | (40,583 | ) | $ | 195,892 | ||||||||||||||
Issuance of common stock |
77 | 1 | 364 | — | — | — | 365 | ||||||||||||||||||||||
Purchase of treasury stock |
— | — | — | — | — | (172 | ) | (172 | ) | ||||||||||||||||||||
Comprehensive income: |
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Net income for the nine months
ended September 30, 2001 |
— | — | — | 9,757 | — | — | 9,757 | ||||||||||||||||||||||
Foreign currency translation
adjustment |
— | — | — | — | (3,577 | ) | — | (3,577 | ) | ||||||||||||||||||||
Total |
6,180 | ||||||||||||||||||||||||||||
Balance at September 30, 2001 |
43,161 | 432 | 160,060 | 100,187 | (17,659 | ) | (40,755 | ) | 202,265 | ||||||||||||||||||||
Issuance of common stock |
139 | 1 | 609 | — | — | — | 610 | ||||||||||||||||||||||
Tax-effect of exercise of
non-qualified
stock options |
— | — | 238 | — | — | — | 238 | ||||||||||||||||||||||
Comprehensive loss: |
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Net loss for the three months
ended December 31, 2001 |
— | — | — | (9,348 | ) | — | — | (9,348 | ) | ||||||||||||||||||||
Foreign currency translation
adjustment |
— | — | — | — | (2,553 | ) | — | (2,553 | ) | ||||||||||||||||||||
Total |
(11,901 | ) | |||||||||||||||||||||||||||
Balance at December 31, 2001 |
43,300 | 433 | 160,907 | 90,839 | (20,212 | ) | (40,755 | ) | 191,212 | ||||||||||||||||||||
Issuance of common stock |
170 | 2 | 907 | — | — | — | 909 | ||||||||||||||||||||||
Purchase of treasury stock |
— | — | — | — | — | (468 | ) | (468 | ) | ||||||||||||||||||||
Comprehensive income: |
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Net loss for the nine months
ended September 30, 2002 |
— | — | — | (727 | ) | — | — | (727 | ) | ||||||||||||||||||||
Foreign currency translation
adjustment |
— | — | — | — | 6,093 | — | 6,093 | ||||||||||||||||||||||
Total |
5,366 | ||||||||||||||||||||||||||||
Balance at September 30, 2002 |
43,470 | $ | 435 | $ | 161,814 | $ | 90,112 | $ | (14,119 | ) | $ | (41,223 | ) | $ | 197,019 | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
4
Sykes Enterprises, Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 2002 and September 30, 2001
(Unaudited)
| (in thousands) | 2002 | 2001 | |||||||||
Cash flows from operating activities: |
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Net income (loss) |
$ | (727 | ) | $ | 9,757 | ||||||
Depreciation and amortization |
25,082 | 26,580 | |||||||||
Deferred income tax (benefit) provision |
(4,291 | ) | 232 | ||||||||
Litigation settlement |
13,800 | — | |||||||||
Gain on sale of facilities, net |
(1,599 | ) | — | ||||||||
Loss on disposal of property and equipment |
734 | 555 | |||||||||
Changes in assets and liabilities: |
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Receivables |
20,195 | 48,391 | |||||||||