UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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 June 30, 2003. |
|
| [ ] |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from |
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| _____________________________________________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 |
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.
Yes [X] No [ ]
| Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). |
Yes [X] No [ ]
As of August 6, 2003, there were 40,410,993 outstanding shares of common stock.
1
Sykes Enterprises, Incorporated and Subsidiaries
INDEX
| Page | ||||||
| No. | ||||||
| Part I. | Financial Information | |||||
| Item 1. | Financial Statements and Independent Accountant’s Report | |||||
| Condensed
Consolidated Balance Sheets June 30, 2003 and December 31, 2002 (Unaudited) |
3 | |||||
| Condensed
Consolidated Statements of Income Three and six months ended June 30, 2003 and 2002 (Unaudited) |
4 | |||||
| Condensed
Consolidated Statements of Changes in Shareholders’ Equity Six months ended June 30, 2002, Six months ended December 31, 2002 and Six months ended June 30, 2003 (Unaudited) |
5 | |||||
| Condensed
Consolidated Statements of Cash Flows Six months ended June 30, 2003 and 2002 (Unaudited) |
6 | |||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 7 | |||||
| Independent Accountants’ Report | 22 | |||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | ||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 31 | ||||
| Item 4. | Controls and Procedures | 32 | ||||
| Part II. | Other Information | |||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 33 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 33 | ||||
| Signature | 34 | |||||
| Exhibit Index | 35 | |||||
2
PART I – FINANCIAL INFORMATION.
Item 1 – Financial Statements and Independent Accountants’ Report.
Sykes Enterprises, Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except per share data)
| June 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
Assets |
||||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 75,382 | $ | 79,480 | ||||||
Receivables |
82,256 | 74,303 | ||||||||
Prepaid expenses and other current assets |
13,506 | 9,724 | ||||||||
Total current assets |
171,144 | 163,507 | ||||||||
Property and equipment, net |
106,451 | 109,618 | ||||||||
Goodwill, net |
5,090 | 4,834 | ||||||||
Deferred charges and other assets |
17,960 | 17,585 | ||||||||
| $ | 300,645 | $ | 295,544 | |||||||
Liabilities and Shareholders’ Equity |
||||||||||
Current liabilities: |
||||||||||
Current installments of long-term debt |
$ | 39 | $ | 52 | ||||||
Accounts payable |
12,746 | 12,200 | ||||||||
Accrued employee compensation and benefits |
31,500 | 33,792 | ||||||||
Other accrued expenses and current liabilities |
14,538 | 16,348 | ||||||||
Total current liabilities |
58,823 | 62,392 | ||||||||
Deferred grants |
33,572 | 35,067 | ||||||||
Deferred revenue |
17,574 | 15,739 | ||||||||
Other long-term liabilities |
8 | 1 | ||||||||
Total liabilities |
109,977 | 113,199 | ||||||||
Contingencies |
||||||||||
Shareholders’ equity: |
||||||||||
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;
43,550 and 43,491 issued |
436 | 435 | ||||||||
Additional paid-in capital |
162,279 | 162,117 | ||||||||
Retained earnings |
74,949 | 72,208 | ||||||||
Accumulated other comprehensive loss |
(5,365 | ) | (11,101 | ) | ||||||
| 232,299 | 223,659 | |||||||||
Treasury stock at cost; 3,199 shares and 3,099 shares |
(41,631 | ) | (41,314 | ) | ||||||
Total shareholders’ equity |
190,668 | 182,345 | ||||||||
| $ | 300,645 | $ | 295,544 | |||||||
See accompanying notes to condensed consolidated financial statements.
3
Sykes Enterprises, Incorporated and Subsidiaries
Condensed Consolidated Statements of Income
Three and Six Months Ended June 30, 2003 and June 30, 2002
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| (in thousands, except for per share data) | 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Revenues |
$ | 118,949 | $ | 112,829 | $ | 236,235 | $ | 229,572 | ||||||||||
Operating expenses: |
||||||||||||||||||
Direct salaries and related costs |
76,508 | 70,156 | 153,864 | 142,878 | ||||||||||||||
General and administrative |
38,875 | 38,033 | 78,782 | 77,408 | ||||||||||||||
Total operating expenses |
115,383 | 108,189 | 232,646 | 220,286 | ||||||||||||||
Income from operations |
3,566 | 4,640 | 3,589 | 9,286 | ||||||||||||||
Other income (expense): |
||||||||||||||||||
Interest, net |
352 | (39 | ) | 637 | 11 | |||||||||||||
Other |
(51 | ) | (330 | ) | (74 | ) | (292 | ) | ||||||||||
Total other income (expense) |
301 | (369 | ) | 563 | (281 | ) | ||||||||||||
Income before provision for income taxes |
3,867 | 4,271 | 4,152 | 9,005 | ||||||||||||||
Provision for income taxes |
1,314 | 1,547 | 1,411 | 3,062 | ||||||||||||||
Net income |
$ | 2,553 | $ | 2,724 | $ | 2,741 | $ | 5,943 | ||||||||||
Net income per share: |
||||||||||||||||||
Basic |
$ | 0.06 | $ | 0.07 | $ | 0.07 | $ | 0.15 | ||||||||||
Diluted |
$ | 0.06 | $ | 0.07 | $ | 0.07 | $ | 0.15 | ||||||||||
Weighted average shares: |
||||||||||||||||||
Basic |
40,350 | 40,432 | 40,365 | 40,389 | ||||||||||||||
Diluted |
40,424 | 40,772 | 40,397 | 40,670 | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
4
Sykes Enterprises, Incorporated and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity
Six Months Ended June 30, 2002, Six Months Ended December 31, 2002 and
Six Months Ended June 30, 2003
(Unaudited)
| Accumulated | ||||||||||||||||||||||||||||||
| Common | Common | Additional | Other | |||||||||||||||||||||||||||
| Stock | Stock | Paid-in | Retained | Comprehensive | Treasury | |||||||||||||||||||||||||
| (in thousands) | Shares | Amount | Capital | Earnings | Income (Loss) | Stock | Total | |||||||||||||||||||||||
Balance at January 1, 2002 |
43,300 | $ | 433 | $ | 160,907 | $ | 90,839 | $ | (20,212 | ) | $ | (40,755 | ) | $ | 191,212 | |||||||||||||||
Issuance of common stock |
155 | 2 | 927 | — | — | — | 929 | |||||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||
Net income for the six months
ended June 30, 2002 |
— | — | — | 5,943 | — | — | 5,943 | |||||||||||||||||||||||
Foreign currency translation
adjustment |
— | — | — | — | 6,185 | — | 6,185 | |||||||||||||||||||||||
Total |
12,128 | |||||||||||||||||||||||||||||
Balance at June 30, 2002 |
43,455 | 435 | 161,834 | 96,782 | (14,027 | ) | (40,755 | ) | 204,269 | |||||||||||||||||||||
Issuance of common stock |
36 | — | 57 | — | — | — | 57 | |||||||||||||||||||||||
Purchase of treasury stock |
— | — | — | — | — | (559 | ) | (559 | ) | |||||||||||||||||||||
Tax benefit of non-qualified exercise
of stock options |
— | — | 226 | — | — | — | 226 | |||||||||||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||
Net loss for the six months
ended December 31, 2002 |
— | — | — | (24,574 | ) | — | — | (24,574 | ) | |||||||||||||||||||||
Foreign currency translation
adjustment |
— | — | — | — | 2,926 | — | 2,926 | |||||||||||||||||||||||
Total |
(21,648 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2002 |
43,491 | 435 | 162,117 | 72,208 | (11,101 | ) | (41,314 | ) | 182,345 | |||||||||||||||||||||
Issuance of common stock |
59 | 1 | 162 | — | — | — | 163 | |||||||||||||||||||||||
Purchase of treasury stock |
— | — | — | — | — | (317 | ) | (317 | ) | |||||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||||
Net income for the six months
ended June 30, 2003 |
— | — | — | 2,741 | — | — | 2,741 | |||||||||||||||||||||||
Foreign currency translation
adjustment |
— | — | — | — | 5,736 | — | 5,736 | |||||||||||||||||||||||
Total |
8,477 | |||||||||||||||||||||||||||||
Balance at June 30, 2003 |
43,550 | $ | 436 | $ | 162,279 | $ | 74,949 | $ | (5,365 | ) | $ | (41,631 | ) | $ | 190,668 | |||||||||||||||
See accompanying notes to condensed consolidated financial statements.
5
Sykes Enterprises, Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 2003 and June 30, 2002
(Unaudited)
| (in thousands) | 2003 | 2002 | |||||||||
Cash flows from operating activities: |
|||||||||||
Net income |
$ | 2,741 | $ | 5,943 | |||||||
Depreciation and amortization |
16,246 | 16,235 | |||||||||
Deferred income tax provision |
462 | 606 | |||||||||
Loss on disposal of property and equipment |
175 | 201 | |||||||||
Changes in assets and liabilities: |
|||||||||||
Receivables |
(11,112 | ) | 8,307 | ||||||||
Prepaid expenses and other current assets |
(3,606 | ) | (567 | ) | |||||||
Deferred charges and other assets |
(416 | ) | (459 | ) | |||||||
Accounts payable |
131 | (564 | ) | ||||||||
Income taxes payable |
6,614 | 4,314 | |||||||||
Accrued employee compensation and benefits |
(4,016 | ) | 527 | ||||||||
Other accrued expenses and current liabilities |
(1,751 | ) | (824 | ) | |||||||
Deferred revenue |
(1,233 | ) | (822 | ) | |||||||
Other long-term liabilities |
7 | ||||||||||