PROSPECTUS
983,332 Shares
SYKES
Real People. Real Solutions.
Common Stock
The selling shareholders identified in this prospectus are offering
983,332 shares. Sykes will not receive any of the proceeds of the sale of shares
by the selling shareholders.
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Sykes' common stock is traded on the Nasdaq National Market under the
Symbol "SYKE." On May 19, 1999, the last reported sale price for the common
stock on the Nasdaq National Market was $28.125 per share.
____________________
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 3.
____________________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
____________________
Prospectus dated May 19, 1999
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SYKES
We are a global leader in providing vertically integrated
technology-based solutions through an integrated strategy combining our
information technology ("IT") services with an emerging global e-commerce
platform. We continue to leverage our position as a leading provider of
information technology services by assisting our clients in capitalizing on the
growth of e-commerce over the Internet. Our e-commerce service platform enables
us to comprehensively continue to expand by serving as a single-source provider
of Internet-based technology solutions throughout the life cycle of a customer's
e-commerce needs. Through our 29 IT call centers and other offices and
e-commerce distribution centers located in the United States, Canada, Europe,
Africa, and The Philippines, we provide services to leading computer hardware
and software companies by providing technical support to end users of their
products and to major companies by providing corporate help desk and additional
business services. Through SHPS, Incorporated, a wholly-owned subsidiary, we
also provide on-line clinical managed care services, medical protocol products,
and employee benefit administration and support services. The integration of our
existing technology services with our emerging global e-commerce platform
enables our customers to take full advantage of increasing customer loyalty,
business expansion and effectiveness, all while lowering their total costs.
Sykes' customers include Adobe Systems, Apple Computer, Compaq, Compuserve,
Gateway, Hewlett Packard, IBM, Intel, Microsoft, and Motorola.
We have built 11 of our 14 domestic IT call centers. Each of these IT
call centers, and an additional IT call center currently under construction, is
a stand-alone facility modeled after the same prototype, which enables us to
construct new IT call centers rapidly and cost effectively. Our strategy of
locating domestic IT call centers in smaller communities, typically near a
college or university, has enabled us to benefit from a relatively lower cost
structure and a technically proficient, stable work force.
SHPS, a wholly-owned subsidiary of Sykes, is a single-source provider
of care management services and employee benefits administration services
through technology solutions and call center-based operations. SHPS' customers
include large corporations, healthcare providers, payors, and insurance
companies. SHPS' care management services are designed to enhance the quality of
an individual's overall healthcare by carefully evaluating clinically-based
solutions to help patients, physicians, and healthcare providers and payors
select appropriate and efficient medical treatment while providing the
opportunity to reduce overall medical expenditures. SHPS' employee benefits
administration services enable customers to outsource the administration of
their employee benefit programs.
We believe that our ability to work in partnership with our customers
during the life cycle of their information technology products gives us a
competitive advantage to become a preferred provider of outsourced IT services
to its customers. These life-cycle services, integrated with our e-commerce
service platform, include software design, integration, and implementation,
technical documentation, electronic and physical product distribution, foreign
language translation, end-user technical product support, and our comprehensive
suite of e-commerce services.
We believe that outsourcing by information technology companies and
companies with information technology needs will continue to grow as businesses
focus on their core competencies rather than nonrevenue producing activities.
Additionally, rapid technological changes, significant growth in conducting
business over the Internet, continual capital requirements for state-of-the-art
technology, and the need to integrate and update complex information technology
systems spanning multiple generations of hardware and software components make
it increasingly difficult for businesses to maintain cost-effective, quality
information technology services in-house. Our strategy includes the following
key elements:
* Continue the significant growth of our support service revenues
through additional IT call centers on a global basis;
* Rapidly expand our e-commerce service platform revenues by serving
as a single-source provider of solutions throughout the life cycle
of a customer's e-commerce needs;
* Market our array of services to existing customers to position
Sykes as a preferred vendor;
* Establish a competitive advantage through our sophisticated
technological capabilities; and
* Further penetration into vertically integrated markets; and
* Expand our global presence through strategic alliances and
selective acquisitions.
We were founded in 1977 in North Carolina and moved its headquarters to
Florida in 1993. In March 1996, we changed our state of incorporation from North
Carolina to Florida. Our headquarters are located at 100 North Tampa Street,
Suite 3900, Tampa, Florida 33602, and our phone number is (813) 274-1000.
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RISK FACTORS
An investment in the common stock involves certain risks. Before
investing in the shares, you should carefully consider the risks described below
and the other information included in or incorporated by reference into this
prospectus. The risks and uncertainties described below are not the only ones
facing Sykes. Additional risks and uncertainties not currently known to us or
that we currently do not believe are material also may affect us. If any of
these risks actually occur, our business, financial condition, and results of
operation could be harmed. This could cause the trading price of our common
stock to decline, and you may lose part or all of your investment.
This prospectus and documents incorporated by reference into this
prospectus contain forward-looking statements that involve risks and
uncertainties. The words "intend," "anticipate," "believe," "seeks," "estimate,"
"plan," and "expect" and similar expressions identify these forward-looking
statements. These forward-looking statements are not guaranties of future
performance and are subject to a number of risks and uncertainties, including
those discussed below and elsewhere in this prospectus and the documents
incorporated by reference into this prospectus. Our actual results could differ
materially from those forward-looking statements.
Potential Difficulties in Integrating Recent Acquisitions and Identifying,
Consummating and Integrating Future Acquisitions
Sykes has completed nine acquisitions since January 1, 1997, with three
acquisitions completed during 1998. In addition, SHPS completed three
acquisitions in 1998. A key element of Sykes' strategy is to expand its customer
base through strategic alliances and selective acquisitions. To date, Sykes has
not experienced significant unforeseen difficulties in integrating any of these
acquisitions. Nevertheless, each of these acquisitions has resulted in a
diversion of management's attention to the integration of the acquired business.
There can be no assurance that Sykes will be able to successfully integrate the
operations and management of recent acquisitions and future acquisitions.
Acquisitions involve significant risks that could have a material
adverse effect on Sykes. These risks generally apply to any company that
recently has completed acquisitions and include the following:
* the diversion of management's attention to the integration of the
businesses to be acquired;
* the risk that the acquired businesses will fail to maintain the
quality of services that Sykes has historically provided;
* the need to implement financial and other systems and add manage-
ment resources;
* the risk that key employees of the acquired business will leave
after the acquisition;
* potential liabilities of the acquired business;
* unforeseen difficulties in the acquired operations;
* adverse short-term effects on Sykes' operating results;
* lack of success in assimilating or integrating the operations of
acquired businesses with those of Sykes;
* the dilutive effect of the issuance of additional equity
securities;
* the incurrence of additional debt; and
* the amortization of goodwill and other intangible assets involved
in any acquisitions that are accounted for using the purchase
method of accounting.
Sykes future growth may depend to some extent on its ability to
successfully complete strategic acquisitions to expand or complement its
existing operations. Therefore, Sykes intends to continue to pursue
acquisitions. Sykes may not be able to identify, consummate, or successfully
integrate future acquisitions.
Thus, Sykes might not be able to successfully implement its acquisition
strategy. Furthermore, there can be no assurance acquired entities will achieve
levels of revenue and profitability or otherwise perform as expected, or be
consummated on acceptable terms to enhance shareholder value. Sykes continues to
monitor acquisition opportunities.
Growth Places Significant Demand on Sykes' Management and Other Resources
Sykes has rapidly expanded its operations since it began providing
information technology support services through its IT call centers in 1994 and
anticipates continued growth to be driven by industry trends toward outsourcing
of such services. There can not be any assurance that Sykes will be able to
effectively manage its expanding operations or maintain its profitability. This
growth has placed, and is expected to continue to place, significant demands on
Sykes' management, information and processing systems, and internal controls.
These resources could be further strained from the opening of new IT call
centers and the necessity to successfully attract and retain qualified
management personnel to manage the growth and operations of Sykes' business to
meet such demands. Sykes intends to continue to hire new employees and develop
further its financial and managerial controls and reporting systems and
procedures to accommodate any future growth. Failure to expand any of the areas
mentioned in an efficient manner could have a material adverse effect on Sykes'
business, financial condition, and results of operation.
Rapid Technological Change
The market for information technology services is characterized by
rapid technological advances, frequent new product introductions and
enhancements, and changes in customer requirements. Sykes' future success will
depend in large part on its ability to service new products, platforms, and
rapidly changing technology. These factors will require Sykes to provide
adequately trained personnel to address the increasingly sophisticated, complex
and evolving needs of its customers. In addition, Sykes ability to capitalize on
its acquisitions will depend on its ability to continually enhance software and
services and adapt such software to new hardware and operating system
requirements. Any failure by Sykes to anticipate or respond rapidly to
technological advances, new products and enhancements, or changes in customer
requirements could have a material adverse effect on Sykes' business, financial
condition and results of operations.
Dependence on Key Customers
Sykes derives a substantial portion of its revenues from a few clients.
Sykes' largest ten customers accounted for approximately 42%, 40%, and 41% of
its consolidated revenue for the years ended December 31, 1996, 1997, and 1998,
respectively. Revenue from a single customer comprised 12% and 10% of Sykes'
consolidated revenues for the years ended December 31, 1996 and 1997,
respectively. No single customer accounted for 10% of revenues for the year
ended December 31, 1998. Sykes' loss of, or the failure to retain a significant
amount of business with, any of its key customers could have a material adverse
effect on Sykes' business, financial condition and results of operations.
Generally, Sykes' contracts with its customers are cancelable by the customer at
any time or on short-term notice, and customers may unilaterally reduce their
use of Sykes' services under such contracts without penalty. Thus, Sykes'
contracts with its customers do not ensure that Sykes will generate a minimum
level of revenues.
Inability to Attract and Retain Experienced Personnel May Adversely Impact
Sykes' Business
Sykes' business is labor intensive and places significant importance on
its ability to recruit, train, and retain qualified technical and professional
personnel. Sykes generally experiences high turnover of its personnel and is
continuously required to recruit and train replacement personnel as a result of
a changing and expanding work force. Additionally, demand for qualified
professionals conversant with certain technologies is intense and may outstrip
supply as new and additional skills are required to keep pace with evolving
computer technology. Sykes' ability to locate and train employees is critical to
Sykes' achieving its growth objective. Sykes' inability to attract and retain
qualified personnel or an increase in wages or other costs of attracting,
training, or retaining qualified personnel could have a material adverse effect
on Sykes' business, financial condition and results of operations.
Reliance on Technology and Computer Systems
Sykes has invested significantly in sophisticated and specialized
telecommunications and computer technology and has focused on the application of
this technology to meet its clients' needs. Sykes anticipates that it will be
necessary to continue to invest in and develop new and enhanced technology on a
timely basis to maintain its competitiveness. Significant capital expenditures
may be required to keep Sykes' technology up-to-date. There can be no assurance
that any of Sykes' information systems will be adequate to meet its future needs
or that Sykes will be able to incorporate new technology to enhance and develop
its existing services. Moreover, investments in technology, including future
investments in upgrades and enhancements to software, may not necessarily
maintain Sykes' competitiveness. Sykes' future success will also depend in part
on its ability to anticipate and develop information technology solutions which
keep pace with evolving industry standards and changing client demands.
Year 2000 Risks
Date sensitive computer applications that currently record years in
two-digit, rather than four-digit, format may be unable to properly categorize
and process dates occurring after December 31, 1999. This is known as the "Year
2000 Problem." To the extent Sykes' software applications contain source codes
that are unable to appropriately interpret the calendar year 2000, some level of
modification or even possibly replacement of such applications may be necessary.
Sykes has made a preliminary determination that it should not incur significant
costs to make its software programs and operating systems Year 2000 compliant.
If Year 2000 related failures were to occur in Sykes' computer and operating
systems, however, Sykes could incur significant, unanticipated liabilities and
expenses.
Sykes has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to remediate
their own Year 2000 issues. In the event any third parties cannot timely provide
the Company with contents, products, services or systems that are Year 2000
compliant, Sykes' services could be materially adversely affected.
Although Sykes expects its systems to be Year 2000 compliant on or
before December 31, 1999, it cannot predict the outcome or the success of its
efforts to become Year 2000 compliant, or that third party systems are or will
be Year 2000 compliant, or that the costs required to address the Year 2000
problem, or that the impact of a failure to achieve substantial Year 2000
compliance, will not have a material adverse effect on the Company's business,
financial condition or results of operations.
Dependence on Trend Toward Outsourcing
Sykes' business and growth depend in large part on the industry trend
toward outsourcing information technology services. Outsourcing means that a
company contract with a third-party, such as Sykes, to provide support services
rather than perform such services in house. There can be no assurance that this
trend will continue, as organizations may elect to perform such services
themselves. A significant change in this trend could have a material adverse
effect on Sykes' business, financial condition and results of operations.
Additionally, there can be no assurance that Sykes' cross-selling efforts will
cause its customers to purchase additional services from Sykes or adopt a
single-source outsourcing approach.
Risk of Emergency Interruption of IT Call Center Operations
Sykes' operations are dependent upon its ability to protect its IT call
centers and its information databases against damages that may be caused by fire
and other disasters, power failure, telecommunications failures, unauthorized
intrusion, computer viruses and other emergencies. The temporary or permanent
loss of such systems could have a material adverse effect on Sykes' business,
financial condition, and results of operations.
Sykes has taken precautions to protect itself and its customers from
events that could interrupt delivery of its services. These precautions include
off-site storage of backup data, fire protection and physical security systems,
rerouting of telephone calls to one or more of its other IT call centers in the
event of an emergency, backup power generators and a disaster recovery plan.
Sykes also maintains business interruption insurance in amounts it considers
adequate. Notwithstanding such precautions, there can be no assurance that a
fire, natural disaster, human error, equipment malfunction or inadequacy, or
other event would not result in a prolonged interruption in Sykes' ability to
provide support services to its customers. Such an event could have a material
adverse effect on Sykes' business, financial condition and results of
operations.
Risks Associated with International Operations and Expansion
At December 31, 1998, Sykes' international operations were conducted
from twelve IT call centers located in Sweden, The Netherlands, France, Germany,
South Africa, Scotland, Ireland, and The Philippines. Revenues from foreign
operations for the years ended December 31, 1996, 1997, and 1998, were 38.4%,
36.3% and 35.1% of consolidated revenues, respectively. Sykes intends to
continue its international expansion. International operations are subject to
certain risks common to international activities, such as changes in foreign
governmental regulations, tariffs and taxes, import/export license requirements,
the imposition of trade barriers, difficulties in staffing and managing foreign
operations, political uncertainties, longer payment cycles, foreign exchange
restrictions that could limit the repatriation of earnings, possible greater
difficulties in accounts receivable collection, potentially adverse tax
consequences, and economic instability.
Sykes conducts business in various foreign currencies and is therefore
subject to the transaction exposures that arise from foreign exchange rate
movements between the dates that foreign currency transactions are committed and
the date that they are consummated. Sykes is also subject to certain exposures
arising from the translation and consolidation of the financial results of its
foreign subsidiaries. Sykes has from time to time taken limited actions to
attempt to mitigate Sykes' foreign transaction exposure. However, there can be
no assurance that actions taken to manage such exposure will be successful or
that future changes in currency exchange rates will not have a material impact
on Sykes' future operating results. Sykes does not hedge either its translation
risk or its economic risk.
There can be no assurance that one or more of such factors or other
factors relating to international operations will not have a material adverse
effect on Sykes' business, results of operations or financial condition.
Existence of Substantial Competition
The markets for Sykes' services are highly competitive, subject to
rapid change, and highly fragmented. While many companies provide information
technology services, Sykes believes no one company is dominant. There are
numerous and varied providers of such services, including firms specializing in
call center operations, temporary staffing and personnel placement companies,
general management consulting firms, divisions of large hardware and software
companies and niche providers of information technology services, many of whom
compete in only certain markets. Sykes' competitors include many companies who
may possess substantially greater resources, greater name recognition and a more
established customer base than it does. In addition to Sykes' competitors, the
services offered by Sykes are often provided by in-house personnel. Increased
competition, the failure of Sykes to compete successfully, pricing pressures,
loss of market share and loss of clients could have a material adverse effect on
Sykes' business, financial condition, and results of operation.
Many of Sykes' large customers purchase information technology services
primarily from a limited number of preferred vendors. Sykes has experienced and
continues to anticipate significant pricing pressure from these customers in
order to remain a preferred vendor. These companies also require vendors to be
able to provide services in multiple locations. Although Sykes believes it can
effectively meet its customers' demands, there can be no assurance that it will
be able to compete effectively with other information technology services
companies. Sykes believes that the most significant competitive factors in the
sale of its services include quality, reliability of services, flexibility in
tailoring services to client needs, experience, reputation, comprehensive
services, integrated services and price.
Dependence on Senior Management
The success of Sykes is largely dependent upon the efforts, direction
and guidance of its senior management. Sykes' continued growth and success also
depend in part on its ability to attract and retain skilled employees and
managers and on the ability of its executive officers and key employees to
manage its operations successfully. Sykes has entered into employment and
non-competition agreements with its executive officers. The loss of any of
Sykes' senior management or key personnel, and, in particular, John H. Sykes,
Chairman of the Board and Chief Executive Officer, or its inability to attract,
retain or replace key management personnel in the future, could have a material
adverse effect on Sykes' business, financial condition and results of
operations.
Control by Principal Shareholder and Anti-Takeover Considerations
As of the date of this Prospectus, John H. Sykes, Sykes' Chairman of
the Board and Chief Executive Officer, beneficially owned approximately 43.6% of
Sykes' outstanding common stock. As a result, Mr. Sykes will be able to elect
the Company's directors and determine the outcome of other matters requiring
shareholder approval.
Sykes' Board of Directors is divided into three classes serving
staggered three-year terms. The staggered Board of Directors and the
anti-takeover effects of certain provisions contained in the Florida Business
Corporation Act and in Sykes' Articles of Incorporation and Bylaws, including
the ability of the Board of Directors of Sykes to issue shares of preferred
stock and to fix the rights and preferences of those shares without shareholder
approval, may have the effect of delaying, deferring or preventing an
unsolicited change in the control of Sykes. This may adversely affect the market
price of Sykes common stock or the ability of shareholders to participate in a
transaction in which they might otherwise receive a premium for their shares.
Volatility of Stock Price May Result in Loss of Investment
Sykes common stock has experienced significant volatility since Sykes'
initial public offering in April 1996. Sykes believes that market prices of
information technology stocks in general have experienced volatility, which
could affect the market price of Sykes' common stock regardless of Sykes'
financial results or performance. Sykes further believes that various factors
such as general economic conditions, changes or volatility in the financial
markets, changing market conditions in the information technology industry, and
quarterly or annual variations in Sykes' financial results, could cause the
market price of the common stock to fluctuate substantially in the future.
Future Payment of Dividends Is Highly Unlikely
Sykes has never declared or paid any cash dividends on its common
stock. Sykes currently anticipates that all of its earnings will be retained for
development and expansion of its business and does not anticipate paying any
cash dividends in the foreseeable future. Any payments of future dividends and
the amounts thereof will be dependent upon Sykes' earnings, financial
requirements and other factors deemed relevant by the Board of Directors.
Risks Associated with SHPS' Care Management Services and Employee
Benefits Services
SHPS, a wholly-owned subsidiary of Sykes, is a provider of care
management services and products and employee benefits administration and
support services. In addition to the risks described above, SHPS is subject to
the following specific risks:
Potential Risks of Care Management Contracts
Some of SHPS' care management contracts contain "shared risk"
provisions under which SHPS may be required to bear a portion of any loss in
connection with such provisions. To the extent healthcare participants covered
by such contracts require more frequent or extensive care than anticipated, SHPS
would incur unexpected costs not offset by additional revenue, which would
reduce operating margins. In the worst case, the revenue derived from such
contracts may be insufficient to cover the cost of the services provided. Any
such reduction or elimination of earnings could have a material adverse effect
on SHPS' business, financial condition and results of operations.
Potential Legal Liability for Care Management
Participants in the healthcare industry have become subject to an
increasing number of lawsuits alleging malpractice, product liability, bad
faith, ERISA liability and other legal theories, including negligence in
credentialing and utilization management, many of which involve large claims and
significant legal costs. SHPS, through its utilization review services, makes
recommendations concerning the appropriateness of providers' proposed medical
treatment of patients and, as a result, it could be subject to liability arising
from any adverse medical consequences. SHPS does not grant or deny claims for
payment of benefits, and SHPS does not believe that it engages in the practice
of medicine or the delivery of medical services. There can be no assurance,
however, that SHPS will not be subject to claims or litigation related to
granting or denying claims for payment of benefits or allegations that SHPS
engages in the practice of medicine or the delivery of medical services. When a
patient requires guidance in retaining physician services in their area, SHPS
assists them in identifying appropriate providers. To the extent that those
providers are deemed to be agents of SHPS, SHPS could be subject to liability
regarding adverse medical consequences or inappropriate provider selection.
Additionally, due to the nature of its business, SHPS could become involved in
litigation regarding the information provided telephonically by its clinical
service staff, particularly in light of the emerging laws relating to
telemedicine, which is the practice of performing medical diagnoses and
treatment via telecommunications devices. See "-- Risks Relating to
Telemedicine."
Additionally, to the extent that SHPS' clinical service staff could be
deemed a provider of medical or clinical services, SHPS could be subject to
claims of licensure violations, which could result in fines, suspension or loss
of the right to do business in a particular state. In Arizona, the state court
of appeals held that the state board of medicine, as the entity with authority
to regulate the practice of medicine in Arizona, had jurisdiction to investigate
complaints against a physician arising from his decisions authorizing or denying
pre-certification of medical procedures as a medical director of a health plan.
As a result of its investigation, the Arizona state board of medicine issued a
"letter of concern." Unlike the physician in the Arizona case, the physicians
and nurses employed by SHPS do not make final decisions regarding the
authorization or denial of medical treatment. However, to the extent that their
duties could be viewed as comparable, the physicians and nurses employed by SHPS
could be deemed to be engaged in the corporate practice of medicine and subject
to discipline by the state boards of medicine and nursing through which they are
licensed, which could result in substantial penalties to SHPS, including
administrative penalties such as fines, reprimands, criminal penalties, or an
order to cease doing business, any of which could have a material adverse effect
on SHPS.
SHPS also could incur liability as a fiduciary in respect of certain of
the disability management services it provides. To reduce its exposure, SHPS
maintains general liability insurance coverage up to $2.0 million in the
aggregate, product liability insurance coverage up to $1.0 million in the
aggregate, umbrella liability insurance coverage up to $10.0 million in the
aggregate, primary occurrence errors and omissions insurance coverage up to $5.0
million in the aggregate and excess occurrence errors and omissions insurance
coverage up to $5.0 million in the aggregate. There can be no assurance,
however, that such insurance will be sufficient or available at a reasonable
cost to protect SHPS from liability. To the extent that such insurance is
insufficient or unavailable to cover the costs associated with these potential
liabilities, SHPS' business or results of operations could be materially
adversely affected.
Potential Legal Liability as a Benefits Administrator
As an administrator of benefits, SHPS provides services to employers
that are subject to the requirements of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), which may prevent the imposition of liability
in state law claims such as malpractice or bad faith. The possibility exists
that SHPS could be subject to state law claims for services provided to plans
not covered by ERISA and liability for these claims could be substantial.
Additionally, there can be no assurance that ERISA will not be further eroded by
legal precedent or amended to modify or repeal the current limitations on
liability.
As a provider of COBRA compliance and administration services, SHPS is
subject to excise taxes for noncompliance with certain provisions of COBRA.
Under current federal laws, the maximum amount of such taxes that may be imposed
on SHPS in any year for unintentional violations of COBRA is $2.0 million. In
addition to the excise tax liability that may be imposed on SHPS, substantial
excise taxes may be imposed on SHPS' customers under COBRA. Under many of SHPS'
service agreements, SHPS assumes financial responsibility for the payment of
such taxes or penalties assessed against a customer arising out of SHPS' failure
to comply with COBRA, unless such taxes or penalties are attributable to the
customer's failure to comply with the terms of its agreement with SHPS. In
addition to liability for excise taxes for noncompliance with COBRA, SHPS
accepts financial responsibility for certain civil and other liabilities
incurred by its customers that are attributable to SHPS' failure to fulfill its
obligations to its customers under its agreements. These liabilities could, in
certain cases, be substantial. There can be no assurance that SHPS will not
incur material liability for noncompliance with COBRA or for its failure to
comply with its agreement with any customer in the future. Although SHPS
maintains errors and omissions insurance coverage and such other coverages as
SHPS believes are reasonable, the imposition of such liability on SHPS in excess
of any available insurance coverage, or its insurer's interpretation that such
liability is not covered under SHPS' insurance policy, could have a material
adverse effect on SHPS.
Governmental Regulation
The healthcare and employee benefit industries are subject to extensive
and evolving regulation, both at the federal and state levels. The benefit plans
administered by SHPS and its Care Management programs are subject to a variety
of laws and regulations, including ERISA, COBRA, the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA"), federal and state
confidentiality laws, Medicare as secondary payor laws and regulations,
telemedicine laws, the Public Health Service Act, a number of state third party
administrative laws, and state laws involving the provision of healthcare
services. These laws and regulations are administered by numerous agencies,
including the Department of Labor, the Department of Commerce, the Department of
Health and Human Services, the Internal Revenue Service (the "IRS") and state
insurance and health regulation departments.
Where a patient requires a second opinion, one of SHPS' physician
medical directors provides the patient with the names of physicians in the
patient's area. The patient selects a physician and SHPS makes an appointment
for the patient with the physician, and this physician evaluates the
appropriateness of the care being recommended by the patient's attending
physician. In doing so, the physician may order designated healthcare services
which in turn must be a covered service approved by SHPS for payment. Whether
such services are covered benefits is determined by the terms of the customer's
benefit plan, not by SHPS. SHPS reviews the terms of its customers' benefit
plans, each of which includes a process to determine which healthcare services
are covered. If the ordered designated healthcare services are covered under the
Medicare or Medicaid programs, the provision of the list of names of physicians
or the making of a patient appointment by the medical director could be deemed a
referral subject to the prohibitions against referrals to entities performing
designated healthcare services in which the referring physician has a financial
interest as defined in the Stark I and Stark II statutes, resulting in fines or
criminal penalties, which could have a material adverse effect on SHPS.
SHPS' customers, and not SHPS, generally pay the physicians who perform
the second opinion and related services, including designated healthcare
services. SHPS does not believe that under these circumstances it has a
financial relationship in any entity that provides designated healthcare
services which are reimbursed under the Medicare or Medicaid programs.
Therefore, SHPS does not believe that the Stark II statute impacts referrals
made by SHPS' medical directors in these instances.
Occasionally, SHPS may advance payments to physicians, laboratories and
x-ray facilities, which may include payment for designated healthcare services,
on behalf of SHPS' customers. SHPS' customers reimburse SHPS in total for these
advances. These advances may constitute a financial interest as that term is
defined in Stark I and in the proposed regulations to the Stark II laws.
However, SHPS believes that the advance payments to physicians do not violate
the Stark I and Stark II prohibition against referrals, as the advance payments
meet the proposed exception for physician services under the proposed Stark II
regulations. SHPS also believes that these payments, which are authorized by
SHPS' medical director, to laboratories and x-ray facilities do not violate
Stark I and the Stark II proposed regulations as these advance payments meet the
proposed exception for payments by physicians for items and services under the
proposed Stark II regulations. However, there are, to date, no final regulations
promulgated under the Stark II statute. To the extent that these actions by the
medical directors could later be found to be subject to and in violation of the
Stark II statute, the medical directors and SHPS could be subject to fines or
criminal penalties, which could have a material adverse effect on SHPS.
Many of these statutes and regulations impact the development of
healthcare information services and interstate transmission of medical
information and services. Some of the statutes and regulations governing the
provision of healthcare services as well as laws relating to telemedicine and
corporate practice of medicine doctrines could be construed by regulatory
authorities to apply to certain of SHPS' activities. See "-- Risks Relating to
Laws Governing Corporate Practice of Medicine." To the extent these statutes and
regulations could be deemed applicable to SHPS, SHPS and its employees could be
required to obtain additional licenses or registrations or to modify or curtail
SHPS' activities, or SHPS could be subject to revocation or suspension of
existing licenses or registrations or civil or criminal penalties or fines,
currently as high as $10,000, any of which could have a material adverse effect
on SHPS.
Currently, 34 states require licensure or registration of entities
deemed to be private utilization review agents. Frequently, these states exempt
entities providing services to ERISA plans. SHPS' current clients for these
services are primarily but not exclusively ERISA plans. To the extent that SHPS
provides services only to ERISA plans in any given state, SHPS may be exempt
from these licensure requirements. Although SHPS has voluntarily achieved
licensure in the states in which SHPS has determined licensure is required,
penalties for failure to achieve licensure in additional states could result in
the loss of SHPS' licenses or substantial penalties to SHPS, which could have a
material adverse effect on SHPS.
Risks Relating to Laws Governing Corporate Practice of Medicine
The laws of certain states in which SHPS operates or may operate in the
future do not permit business corporations to practice medicine or exercise
control over physicians who practice medicine. Currently, Arkansas, California,
Illinois, Iowa, Kansas, Louisiana, Massachusetts, Michigan, New Mexico, Texas,
Virginia, Washington and West Virginia have some form of prohibition against the
corporate practice of medicine. Although SHPS does not believe that the services
it provides constitute the corporate practice of medicine, a finding that SHPS
is engaged in the corporate practice of medicine in any of the foregoing states
could result in loss of licensing, the need to develop relationships with
physicians licensed in the states having corporate practice of medicine
statutes, and civil and criminal fines, which currently range as high as
$10,000, any of which could require SHPS to modify its techniques of doing
business, withdraw from certain states or otherwise curtail its activities, and
could have a material adverse effect on SHPS.
Risks Relating to Telemedicine
Telemedicine is the practice of performing medial diagnosis and
treatment via telecommunications devices. These technologies range from
providing clinical advice over the telephone, the transmission of high
resolution images (e.g., x-rays, sonograms) and the remote performance of
clinical evaluations using interactive teleconferencing. As advanced
telecommunications technology has become more widely available, the legal issues
associated with telemedicine have become the subject of new legislation. In the
past three years, legislation has been introduced to amend licensure laws
related to the out of state practice of medicine and consultation. To date, 23
states have introduced or passed bills related to telemedicine, primarily
regarding the licensure of out-of-state physicians and the coverage of
telemedicine procedures by third party payor plans. Those states are Alabama,
Arkansas, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Maryland,
Mississippi, Montana, Nebraska, New Hampshire, New Mexico, North Carolina, North
Dakota, Ohio, Oregon, Rhode Island, Utah, Virginia, Washington and West
Virginia.
Although SHPS does not believe that these laws currently impact SHPS'
operations because it does not believe it engages in medical diagnosis or
treatment via telecommunication devices, to the extent SHPS' services could be
deemed to be telemedicine, SHPS could be subject to liability for licensure
violations, violations of third party payor requirements or violations of the
laws relating to the confidentiality of patient medical records, any of which
could have a material adverse effect on SHPS.
Possible Adverse Effect of National and State Healthcare Reform Proposals
The extent and type of government support for and oversight of the
delivery of healthcare services, as well as the extent and type of health
insurance benefits that employers are required to provide employees, have been
the subject of close scrutiny and debate in recent years, both at the national
and state levels, resulting in such legislation as HIPAA. Additional changes in
the government programs and regulations, including requirements governing the
manner by which services are delivered, and the premiums for services, the
reimbursement of fees, benefits packages, parity for particular health
conditions, access to particular types of healthcare providers, or the
development of a modified healthcare purchasing system could have a material
adverse effect on SHPS.
Reliance on Information Processing Systems and Proprietary Technology
SHPS' business is dependent on its ability to store, retrieve, process
and manage significant databases, and to periodically expand and upgrade its
information processing capabilities. To facilitate the planned expansion of
SHPS' existing services to accommodate its customers' needs and future
regulatory requirements, SHPS intends to develop additional proprietary
applications software and databases and to use commercially available database
management software and computer hardware that are not currently being used by
SHPS. Currently, the information processing systems and services of SHSB are
provided to SHPS by The Prudential Insurance Company of America ("Prudential")
pursuant to a transitional systems support services agreement. Pursuant to this
agreement, Prudential is to provide such services through March 31, 1999. SHPS
is currently in the process of migrating its information systems from the
mainframe platform provided under this agreement to a proprietary, client server
platform.
SHPS currently estimates that the cost to migrate from a mainframe
platform to a client server platform and to make its computer systems Year 2000
compliant will be approximately $5.5 million. However, any additional costs
incurred in connection with such migration, delay in such migration or in
becoming Year 2000 compliant, or the failure of the new systems to adequately
support SHPS' operations, could materially adversely affect SHPS' business and
financial results. In addition, there can be no assurance that SHPS will be able
to incorporate new technology to enhance and develop its existing services.
SHPS' computer equipment and software systems are maintained at SHPS'
Arizona, Kentucky, Massachusetts, Nevada and Ohio locations. Interruption or
loss of SHPS' information processing capabilities through loss of stored data,
breakdown or malfunction of computer equipment and software systems,
telecommunications failure or damage to SHPS' systems or the Arizona, Kentucky,
Massachusetts, Nevada or Ohio locations caused by fire, hurricane, tornado,
flood, lightning, electrical power outage or other disruption could have a
material adverse effect on SHPS.
SHPS' business is dependent on its continued use of proprietary
software, databases and processing techniques. SHPS attempts to protect its
trade secrets and other proprietary information through agreements with
customers, employees and consultants. There can be no assurance that these
precautions will be adequate to deter misappropriation of SHPS' proprietary
software and healthcare information processing techniques.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares.
<PAGE>
SELLING SHAREHOLDERS
On December 29, 1998, Sykes issued 1,474,998 shares of common stock to
the holders of all of the outstanding stock of Oracle Service Networks
Corporation ("Oracle") of London, Ontario, Canada. Oracle provides call center
operations, including customer support and service applications, primarily to
the financial services, telecommunications, and automotive industries, as well
as care management services to the healthcare insurance industry. In connection
with the business combination between Oracle and Sykes pursuant to a Combination
Agreement dated December 9, 1998, the former shareholders of Oracle received
1,474,998 exchangeable shares of Oracle, which are exchangeable for 1,474,998
shares of common stock of Sykes (the "Exchangeable Shares"). The former
shareholders of Oracle have exchanged 983,332 exchangeable shares into the
shares of common stock that will be sold pursuant to this prospectus. Under the
terms of the Registration Rights Agreement dated December 29, 1998 entered into
in connection with the business combination between Oracle and Sykes, Sykes
agreed to file a registration statement under the Securities Act of 1933 to
register the sale of up to 983,332 shares of Sykes common stock issuable to the
former Oracle shareholders, and to keep such registration statement effective
until December 29, 1999, or, if earlier, until all of the shares covered by this
prospectus have been sold. Accordingly, 983,332 shares of common stock covered
by this prospectus are being offered for sale by the former Oracle shareholders.
The following table sets forth certain information concerning the
selling shareholders:
<TABLE>
<CAPTION>
Shares Beneficially Maximum Shares Beneficially
Owned Prior Number of Owned After
to the Offering Shares Being the Offering(1)
Number Percent Offered Number Percent
---------------- ------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Slemko Investment Corporation(1)........... 513,302 * 342,201 171,101 *
Stilco Investments Limited................. 474,804 * 316,536 158,268 *
Lindsey Morden Limited..................... 486,892 * 324,595 324,595 *
------------ ------------
Total Shares Offered..... 983,332
============
</TABLE>
- ------------------
*Less than 1.0%
(1) The selling shareholders may sell from time to time all or a portion of
the shares being offered. The amounts shown assume the sale of all the
shares being offered by each selling shareholder.
(2) Gerald Slemko, the sole shareholder of Slemko Investment Corporation,
serves as the Chief Executive Officer of Oracle.
PLAN OF DISTRIBUTION
The shares offered by this prospectus may be sold from time to time by
the selling shareholders until December 29, 1999. Such sales may be made in the
over-the-counter market, on the NASDAQ National Market or one or more exchanges,
or otherwise at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions, or to one or more
underwriters for resale to the public. The shares sold may be sold in one or
more of the following ways:
* a block trade in which the broker or dealer so engaged will attempt
to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction;
* purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
* an exchange distribution in accordance with the rules of such
exchange;
* ordinary brokerage transactions and transactions in which the
broker solicits purchasers; or
* an underwritten public offering.
In effecting sales, brokers or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Brokers or
dealers will receive commissions or discounts from the selling shareholders in
amounts to be negotiated immediately prior to the sale. Such broker or dealers
and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with such sales. Brokers or dealers may be entitled to indemnification by Sykes
and the selling shareholders against certain liabilities, including liabilities
under the Securities Act of 1933.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be
passed upon for Sykes by Foley & Lardner, Tampa, Florida. Martin A. Traber, a
partner of Foley & Lardner, owns 2,250 shares of Sykes common stock.
EXPERTS
The consolidated financial statements of Sykes Enterprises,
Incorporated (Sykes) at December 31, 1998, and for the year then ended,
incorporated by reference in the Sykes Annual Report (Form 10-K) for the year
ended December 31, 1998, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference therein
and incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Sykes Enterprises,
Incorporated at December 31, 1996 and 1997, and for each of the two years in the
period ended December 31, 1997, incorporated by reference in Sykes Form 10-K for
the year ended December 31, 1998, in this registration statement, have been
audited by PricewaterhouseCoopers LLP, independent auditors, as set forth in
their report thereon incorporated by reference therein. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the
SEC relating to the shares of common stock offered by this prospectus. This
prospectus does not contain all of the information described in the registration
statement. For further information, you should refer to the registration
statement.
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference room. Our SEC filings are also available to
the public from the SEC's Website at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC automatically will update and supercede this information. We
incorporate by reference the documents listed below that we have filed with the
SEC and any future filings we will make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus and before the termination of the offering of the common stock:
1. Annual Report on Form 10-K for the year ended December 31, 1998;
2. Current Report on Form 8-K filed January 12, 1999;
3. Current Report on Form 8-K filed January 21, 1999;
4. Current Report on Form 8-K filed February 3, 1999;
5. Current Report on Form 8-K/A filed March 12, 1999;
6. Proxy Statement dated April 1, 1999, for the 1999 Annual Meeting of
Shareholders; and
7. The description of the common stock set forth in the Registration
Statement of Form 8-A dated April 19, 1996.
We will provide any of these filings to each person, including any
beneficial owner, to whom a prospectus is delivered. You may request these
filings at no cost by writing us at 100 N. Tampa Street, Suite 3900, Tampa,
Florida 33602, attention Chief Financial Officer, or by telephone at (813)
274-1000.
You should rely only on the information provided in this prospectus or
incorporated in this prospectus by reference. We have not authorized anyone else
to provide you with different information. This prospectus only may be used
where it is legal to sell these securities. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of this prospectus.
<PAGE>
<TABLE>
<CAPTION>
============================================================ =========================================================
<S> <C>
No dealer, salesperson or any other person has been
authorized to give any information or to make any
representation other than those contained in this
Prospectus in connection with the offer made by this 983,332 Shares
Prospectus and, if given or made, such information or
representation must not be relied upon as having been
authorized by the Company, the Selling Shareholders or SYKES
any underwriter. This Prospectus does not constitute Real People. Real Solutions.
an offer to sell, or a solicitation of any offer to buy,
any securities other than the shares of Common Stock
offered by this Prospectus, nor does it constitute an Common Stock
offer to sell or a solicitation of an offer to buy such
shares of Common Stock in any circumstances in which such
offer or solicitation is unlawful. Neither the delivery
of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there
has been no change in the affairs of the Company since
the date hereof or that the information contained herein
is correct as of any time subsequent to the date hereof.
---------------------------------
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TABLE OF CONTENTS
_________________________________ PROSPECTUS
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Page
Sykes..................................................1
Risk Factors...........................................3
Use of Proceeds.......................................12
Selling Shareholders..................................13
Plan of Distribution..................................13
Legal Matters.........................................14
Experts...............................................14
Where We Can Find More Information....................14
May 19, 1999
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</TABLE>
