<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of the earliest event reported) December 29, 1998
-----------------------
SYKES ENTERPRISES, INCORPORATED
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Florida
- ------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-28274 56-1383460
- --------------------------------- -------------------------------------
(Commission File Number) (IRS Employer Identification No.)
100 North Tampa Street, Suite 3900
Tampa, Florida 33602-5089
- --------------------------------- --------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(813) 274-1000
- -----------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- -----------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the Business Acquired:
June 30, 1998 Audited Financial Statements of Oracle Service
Networks Corporation are attached hereto.
(b) Pro Forma Financial Information:
December 31, 1997 and September 30, 1998 Pro Forma Consolidated
Financial Statements (Unaudited) of Sykes Enterprises,
Incorporated are attached hereto.
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Sykes Enterprises, Incorporated
Date: March 10, 1999 By: /s/ Scott J. Bendert
---------------------------------
Scott J. Bendert
Senior Vice President-Finance
Treasurer and
Chief Financial Officer
<PAGE> 3
Sykes Enterprises, Incorporated
Index to Financial Statements
June 30, 1998 Audited Financial Statements of Oracle Service Networks
Corporation
Auditors' Report
Consolidated Balance Sheet
Consolidated Statements of Income and Retained Earnings
Consolidated Statement of Changes in Financial Position
Notes to Consolidated Financial Statements
December 31, 1997 and September 30, 1998 Pro Forma Consolidated
Financial Statements (Unaudited) of Sykes Enterprises, Incorporated
Pro Forma Consolidated Balance Sheet
Pro Forma Consolidated Income Statement
Notes to Pro Forma Consolidated Financial Statements
<PAGE> 4
ORACLE SERVICE NETWORKS CORPORATION
CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1998
[PRICEWATERHOUSECOOPERS LETTERHEAD]
<PAGE> 5
JULY 31, 1998
AUDITORS' REPORT
TO THE SHAREHOLDERS OF
ORACLE SERVICE NETWORKS CORPORATION
We have audited the consolidated balance sheet of Oracle Service Networks
Corporation as at June 30, 1998 and the consolidated statements of income and
retained earnings and changes in financial position for the year then ended.
These consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at June 30, 1998
and the results of its operations and the changes in its financial position for
the year then ended in accordance with generally accepted accounting
principles.
/s/ PricewaterhouseCoopers
- ---------------------------------
CHARTERED ACCOUNTANTS
<PAGE> 6
ORACLE SERVICE NETWORKS CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30
1998 1997
---------------------------
<S> <C> <C>
ASSETS
Cash and term deposits $ 8,629,485 $ 5,008,559
Trade accounts receivable 8,497,323 5,715,865
Service materials 337,994 293,858
Prepaid expenses 323,686 199,127
Income taxes recoverable (Note 8) 4,306,000 4,306,000
Due from associated companies (Note 2) 1,103,592 2,513,661
Capital assets, net (Note 3) 9,572,970 7,884,929
Investment, at cost -- 70,680
Deferred income taxes 353,175 --
Goodwill, net of amortization of $2,359,736 (1997 - $1,838,744) 2,850,166 3,371,158
---------------------------
$35,974,391 $29,363,837
===========================
</TABLE>
1
<PAGE> 7
ORACLE SERVICE NETWORKS CORPORATION
CONSOLIDATED BALANCE SHEET...CONTINUED
<TABLE>
<CAPTION>
JUNE 30
1998 1997
--------------------------------
<S> <C> <C>
LIABILITIES
Accounts payable and accrued liabilities $ 4,795,929 $ 3,740,322
Income taxes payable 605,085 878,955
Obligations under capital leases (Note 7) 946,489 388,889
Deferred taxes payable -- 103,125
Mortgages payable (Note 4) 3,396,097 4,166,882
Convertible debenture (Note 5) -- 2,000,000
Unearned membership fees (Note 6) 19,722,700 14,579,898
--------------------------------
29,466,300 25,858,071
SHAREHOLDERS' EQUITY
STATED CAPITAL
AUTHORIZED
Unlimited common shares
ISSUED
114,942 common shares (1997 - 100,000) 1,467 1,276
Contributed surplus (Note 5) 1,999,809 --
RETAINED EARNINGS 4,506,815 3,504,490
--------------------------------
6,508,091 3,505,766
--------------------------------
$ 35,974,391 $ 29,363,837
================================
</TABLE>
Contingencies and commitments (Notes 4, 5, 6, 7, 9, 10)
Approved by the Board Director Director
-------------------- -----------------
2
<PAGE> 8
ORACLE SERVICE NETWORKS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
1998 1997
--------------------------------
<S> <C> <C>
REVENUE $ 43,039,659 $ 40,424,716
EXPENSES
Fulfilment, selling and overhead expenses 35,287,370 33,433,726
Interest expense 403,264 378,455
Goodwill amortization 520,992 260,496
Depreciation 1,116,483 855,915
Profit sharing 514,332 575,106
--------------------------------
37,842,441 35,503,698
--------------------------------
Income before undernoted items 5,197,218 4,921,018
Other income 453,063 342,888
Management fees (Note 2) 1,531,930 1,033,194
--------------------------------
Income before undernoted items 4,118,351 4,230,712
PROVISION FOR (REDUCTION IN) INCOME TAXES
Current 2,570,000 2,192,060
Deferred (456,300) (358,000)
--------------------------------
2,113,700 1,834,060
--------------------------------
NET INCOME FOR THE YEAR 2,004,651 2,396,652
RETAINED EARNINGS (DEFICIT), BEGINNING OF YEAR 3,504,490 (640,162)
PRIOR PERIOD ADJUSTMENT (NOTE 8) -- 1,748,000
DIVIDENDS PAID (1,002,326) --
--------------------------------
RETAINED EARNINGS, END OF YEAR $ 4,506,815 $ 3,504,490
================================
</TABLE>
3
<PAGE> 9
ORACLE SERVICE NETWORKS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN
FINANCIAL POSITION
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
1998 1997
--------------------------------
<S> <C> <C>
CASH PROVIDED FROM (USED IN)
OPERATIONS
Net income for the year $ 2,004,651 $ 2,396,652
Add (deduct): Non-cash items
Depreciation 1,116,483 855,915
Goodwill amortization 520,992 260,496
Deferred income tax provision (456,300) (358,000)
--------------------------------
3,185,826 3,155,063
Cash resulting from reduction (increase) in
Trade accounts receivable (2,781,458) (2,212,251)
Prepaid expenses (124,559) 175,437
Service materials (44,136) (8,039)
Accounts payable and accrued liabilities 1,134,037 701,403
Income taxes payable (273,870) (104,716)
Deferred income taxes -- 26,000
Unearned membership fees 5,142,802 1,525,206
--------------------------------
Total cash provided from operations 3,052,816 3,258,103
FINANCING
Decrease in due from affiliated companies 1,331,638 132,884
Increase (decrease) in capital lease obligations 557,600 (87,547)
Convertible debentures (2,000,000) 2,000,000
Common shares issued 2,000,000 --
Repayment of mortgages payable (770,785) (683,757)
Investment -- (70,680)
Dividends paid (1,002,326) --
--------------------------------
116,127 1,290,900
--------------------------------
INVESTING
Capital asset additions (2,804,523) (1,305,356)
Investment write-off 70,680 --
--------------------------------
(2,733,843) (1,305,356)
--------------------------------
INCREASE IN CASH FOR THE YEAR 3,620,926 3,243,647
CASH AND TERM DEPOSITS AT BEGINNING OF YEAR 5,008,559 1,764,912
--------------------------------
CASH AND TERM DEPOSITS AT END OF YEAR $ 8,629,485 $ 5,008,559
================================
</TABLE>
4
<PAGE> 10
ORACLE SERVICE NETWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the operations of Oracle
Service Networks Corporation (the "Company") and its wholly-owned
subsidiaries, 248 Pall Mall (London) Inc., Station Park Fitness Club
Inc., Health Information Company of Canada Inc., 1145575 Ontario Ltd.
and NAL Path Inc. (collectively "the companies").
UNEARNED MEMBERSHIP FEES
Membership and other fees, net of acquisition costs (including
commission and other promotional costs) are taken into income over the
term of the membership.
THIRD PARTY PRODUCTS
Revenues and related fulfillment costs and commissions for third party
products are fully recognized at the time of sale.
SERVICE MATERIALS
Service materials are valued at the lower of cost and replacement cost.
CAPITAL ASSETS AND DEPRECIATION
Capital assets are stated at cost and depreciation is provided over the
estimated useful lives of the assets as follows:
Building 4% declining balance
Furniture, fixtures and equipment 10 year straight-line
Paving 10 year straight-line
Computer systems and software are depreciated on the straight-line
method over the expected useful life of the assets which range from
three years to five years.
Leasehold improvements are amortized on the straight-line method over
the term of the lease.
LEASES
Leases that transfer substantially all of the benefits and risks
incidental to the ownership of property are capitalized. Other leases
are accounted for as operating leases. Assets recorded under capital
leases are amortized on a straight-line basis over the expected useful
life of the leased asset.
GOODWILL
Goodwill is stated at cost less accumulated amortization. Management
determines whether there is a permanent impairment in the value of the
unamortized portion of goodwill on an annual basis. Revisions to the
remaining life are performed when changes in circumstances or economic
events affect the recorded goodwill balance. Five and one half years
remain unamortized.
5
<PAGE> 11
ORACLE SERVICE NETWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
INCOME TAXES
The companies follow the deferral method of income tax allocation.
Deferred taxes arise due to timing differences in the claiming of
certain items for accounting and tax purposes, principally unearned
membership revenues, commission expenses and depreciation.
The effective tax rate on reported earnings may differ from the
statutory tax rate due to certain revenues and expenses which are
permanently non taxable.
6
<PAGE> 12
ORACLE SERVICE NETWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...CONTINUED
JUNE 30, 1998
2 DUE FROM ASSOCIATED COMPANIES
<TABLE>
<CAPTION>
JUNE 30
1998 1997
--------------------------------
<S> <C> <C>
Stilco Investments Limited $ 892,521 $ 1,252,280
Slemko Investment Corporation 211,071 600,000
Chelsey Corporation Ltd. -- 661,381
--------------------------------
$ 1,103,592 $ 2,513,661
================================
</TABLE>
The amount due from Chelsey Corporation Ltd. ("Chelsey"), an associated
company, consists of the following related party transactions:
<TABLE>
<CAPTION>
JUNE 30
1998 1997
--------------------------------
<S> <C> <C>
Opening balance $ 661,381 $ 2,646,545
Advances -- 67,080
Repayments (661,381) (226,575)
Transfers to associated companies -- (1,852,280)
Rent -- 26,611
--------------------------------
$ -- $ 661,381
================================
</TABLE>
During the year, management fees of $1,531,930 (1997 - $1,033,194) were
paid to Chelsey.
7
<PAGE> 13
ORACLE SERVICE NETWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...CONTINUED
JUNE 30, 1998
3 CAPITAL ASSETS
<TABLE>
<CAPTION>
JUNE 30, 1998 JUNE 30, 1997
---------------------------------------------------------------------
ACCUMULATED
DEPRECIATION NET BOOK NET BOOK
COST AND AMORTIZATION VALUE VALUE
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Land $ 1,110,787 $ -- $ 1,110,787 $ 1,110,787
Building 4,450,975 766,127 3,684,848 3,838,383
Paving 69,239 34,165 35,074 41,998
Furniture, fixtures and
equipment 2,718,249 733,597 1,984,652 1,164,887
Computer systems 1,389,954 779,877 610,077 351,607
Leasehold improvements 1,679,850 522,619 1,157,231 949,709
Equipment under
capital lease 2,954,416 1,964,115 990,301 427,558
---------------------------------------------------------------------
$ 14,373,470 $ 4,800,500 $ 9,572,970 $ 7,884,929
=====================================================================
</TABLE>
4 MORTGAGES PAYABLE
<TABLE>
<CAPTION>
JUNE 30,
1998 1997
--------------------------------
<S> <C> <C>
First mortgage, bearing interest at 7.875% compounded semi-
monthly payments of $34,844, maturing June 1, 1999 $ 3,396,097 $ 3,544,752
Second mortgage, bearing interest at 9.25% compounded
semi-annually, monthly payments of $12,709, matured
June 1, 1998 -- 622,130
--------------------------------
$ 3,396,097 $ 4,166,882
================================
</TABLE>
8
<PAGE> 14
ORACLE SERVICE NETWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...CONTINUED
JUNE 30, 1998
<TABLE>
Annual principal payments are as follows:
<S> <C>
1999 $ 3,396,097
2000 and thereafter --
--------------
$ 3,396,097
==============
</TABLE>
The following has been provided as security for the long-term
obligations:
(a) fixed charge against land and building of the borrower, 248 Pall Mall
(London) Inc.
(b) general assignment of rents.
(c) joint and several personal guarantees.
Letters of guarantee, as required by corporate service agreements,
totalling $750,000.
5 CONVERTIBLE DEBENTURE
On March 31, 1998, Hambro Insurance Services Group PLC ("Hambro")
exercised the conversion option on a $2 million convertible debenture to
receive 13% of the outstanding common shares of Oracle. The debenture
bore interest at the rate of 6% per annum and was payable quarterly
subject to the following:
14,942 common shares were issued for a value of $191 with the balance of
$1,999,809 charged to contributed surplus.
9
<PAGE> 15
ORACLE SERVICE NETWORKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...CONTINUED
JUNE 30, 1998
6 UNEARNED MEMBERSHIP FEES
<TABLE>
<CAPTION>
JUNE 30
1998 1997
--------------------------------
<S> <C> <C>
Deferred membership revenue $ 24,904,275 $ 19,479,178
Less: Related commission and other direct costs 5,181,575 4,899,280
--------------------------------
Unearned membership fees $ 19,722,700 $ 14,579,898
================================
</TABLE>
The balance of unearned membership and other fees of $19,722,700 as at
June 30, 1998 will be taken into income in fiscal 1999 and 2000 based on
the terms of individual memberships.
7 LEASE OBLIGATIONS
CAPITAL LEASE OBLIGATIONS
<TABLE>
<S> <C>
1999 $ 528,256
2000 363,651
2001 131,690
-------------
1,023,597
Less: Amounts representing interest at various interest rates 77,108
--------------
Total obligations under capital leases $ 946,489
==============
</TABLE>
OPERATING LEASE COMMITMENTS
The Company has entered into various operating lease contracts. The
annual obligation under these leases is estimated as follows:
<TABLE>
<S> <C>
1999 $ 423,487
2000 136,705
2001 6,031
</TABLE>
10
<PAGE> 16
8 INCOME TAXES
Revenue Canada, Taxation and the Ontario Ministry of Revenue have
reassessed the Company's prior years' income tax returns from 1991 to
1994 (Revenue Canada) and 1984 to 1992 (Ontario) for which the company
had filed notices of objection. During the current year, a settlement
was reached with Revenue Canada and the Ontario Ministry of Revenue. As
a result, the Company will recover $4,306,000 of the tax payments and
interest for the periods described above.
A prior period adjustment to retained earnings of $1,748,000 has been
recorded reflecting the recovery and a $2,558,000 credit to deferred
taxes payable associated with the settlement of deferred commissions and
purchased deferred commissions.
The company is currently subject to an Ontario tax audit. The outcome of
this audit is not determinable at this time.
A subsidiary company has available tax losses of $152,400 as at June 30,
1998. The potential tax benefit associated with these losses has been
recognized for accounting purposes.
9 CONTINGENCIES
LEGAL MATTERS
The Company is party to a number of legal claims arising in the normal
course of business. No provision has been made in these financial
statements relating to these matters. The Company does not believe the
claims have merit and is actively defending its position.
UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition,
similar problems may arise in some systems which use certain dates in
1999 to represent something other than a date. The effects of the Year
2000 Issue may be experienced before, on, or after January 1, 2000, and,
if not addressed, the impact on operations and financial reporting may
range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is
not possible to be certain that all aspects of the Year 2000 Issue
affecting the entity, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
10 MANAGEMENT AGREEMENT
The company has entered into a management contract effective May 1, 1997
with Hambro Insurance Services PLC and Chelsey Corporation Ltd. whereby
a monthly management fee of $11,003 and $106,000 is payable
respectively.
<PAGE> 17
11 SUBSEQUENT EVENT
Subsequent to year end, the Company purchased specified assets of
Lawline (Canada) Incorporated for total consideration of $325,000 plus
a royalty up to a maximum of $475,000.
12 FINANCIAL STATEMENT PRESENTATION
Certain comparative figures have been reclassified to conform with
financial statement presentation adopted in the current year.
<PAGE> 18
Sykes Enterprises, Incorporated
Pro Forma Consolidated Financial Statements
(Unaudited)
<PAGE> 19
SYKES ENTERPRISES, INCORPORATED
Pro Forma Consolidated Balance Sheet
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
As Reported As Restated
Dec 31,1997 Oracle TAS III Adjustments Dec 31,1997
------------- ----------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................ $ 70,523,067 $ 3,459,761 $1,325,677 $ -- $ 75,308,505
Receivables............................................... 68,520,471 10,180,014 487,310 -- 79,187,795
Prepaid expenses and other current assets................. 11,377,920 78,341. .. 642,157 -- 12,098,418
------------- ----------- ---------- --------- ------------
Total current assets..................................... 150,421,458 13,718,116 2,455,144 -- 166,594,718
Property and equipment, net................................ 71,282,183 6,124,595 2,059,512 -- 79,466,290
Marketable securities...................................... 7,800,002 -- -- -- 7,800,002
Investment in joint venture................................ 2,285,142 -- -- -- 2,285,142
Deferred charges and other assets.......................... 9,874,680 2,175,908 -- -- 12,050,588
------------- ----------- ---------- --------- ------------
$ 241,663,465 $22,018,619 $4,514,656 $ -- $268,196,740
============= =========== ========== ========= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long-term debt................... $ 2,989,271 $ 1,508,122 $ -- $ -- $4,497,393
Accounts
payable................................................. 19,905,671 302,460 287,660 -- 20,495,791
Income tax payable....................................... 2,725,177 324,959 301,860 -- 3,351,996
Accrued employee compensation and benefits.............. 10,035,233 227,149 416,179 -- 10,678,561
Other accrued expenses and current liabilities.......... 6,449,650 2,346,069 2,114,686 -- 10,910,405
------------- ----------- ---------- --------- ------------
Total current liabilities.............................. 42,105,002 4,708,759 3,120,385 -- 49,934,146
Long-term debt........................................... 33,312,597 2,677,138 -- -- 35,989,735
Deferred income taxes..................................... 4,374,963 -- -- -- 4,374,963
Deferred grants........................................... 14,083,691 -- -- -- 14,083,691
Other long-term liabilities.............................. -- 11,253,984 1 -- 11,253,985
------------- ----------- ---------- --------- ------------
Total liabilities...................................... 93,876,253 18,639,881 3,120,386 -- 115,636,520
------------- ----------- ---------- --------- ------------
Commitments and contingencies (Notes 8 and 12)
Shareholders' equity
Preferred stock, $0.01 par value, 10,000,000 shares
authorized; no shares issued and outstanding.......... -- -- -- -- --
Common stock, $.01 par value; 200,000,000
shares authorized;
41,119,626 and 41,451,905 issued and oustanding....... 390,576 907 32,850 (13,137) 411,196
Additional paid-in capital............................. 133,579,200 -- -- 13,137 133,592,337
Retained earnings...................................... 17,106,620 3,434,680 1,610,052 -- 22,151,352
Unrealized loss on securites, net of taxes............. (734,518) -- -- -- (734,518)
Accumulated foreign currency translation adjustment.... (2,554,666) (56,849) (248,632) -- (2,860,147)
------------- ----------- ---------- ---------- ------------
Total shareholders' equity............................ 147,787,212 3,378,738 1,394,270 -- 152,560,220
------------- ----------- ---------- ---------- ------------
$ 241,663,465 $22,018,619 $4,514,656 $ -- $268,196,740
============= =========== ========== ========== ============
</TABLE>
<PAGE> 20
SYKES ENTERPRISES, INCORPORATED
Pro Forma Consolidated Statements of Income
Year Ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
As Reported As Restated
Year Ended Year Ended
Dec 31,1997 Oracle TAS III Adjustments Dec 31,1997
------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues.................................... $ 313,184,554 $30,072,175 $ 8,336,381 $ -- $351,593,110
Operating expenses
Direct salaries and related costs.......... 195,449,373 20,104,579 4,030,598 -- 219,584,550
General and administrative................. 87,727,877 6,833,121 2,655,638 -- 97,216,636
Impairment of long-lived assets............ 10,400,000 -- -- -- 10,400,000
--------------------------------------------------------------------------------
Total operating expenses.................. 293,577,250 26,937,700 6,686,236 -- 327,201,186
--------------------------------------------------------------------------------
Income from operations...................... 19,607,304 3,134,475 1,650,145 -- 24,391,924
Other income (expense)
Interest, net.............................. 766,637 (276,944) 29,275 -- 518,968
Loss from joint venture.................... (2,828,000) -- -- -- (2,828,000)
Write-down of marketable securities
Other...................................... (922,735) 86,936 (434,651) -- (1,270,450)
--------------------------------------------------------------------------------
Total other income (expense).............. (2,984,098) (190,008) (405,376) -- (3,579,482)
--------------------------------------------------------------------------------
Income before income taxes.................. 16,623,206 2,944,467 1,244,769 -- 20,812,442
Provision for income taxes
Current.................................... 10,863,000 1,385,539 919,457 -- 13,167,996
Deferred................................... 13,000 -- -- -- 13,000
--------------------------------------------------------------------------------
Total provision for income taxes.......... 10,876,000 1,385,539 919,457 -- 13,180,996
--------------------------------------------------------------------------------
Net income.................................. 5,747,206 1,558,928 325,312 -- 7,631,446
Preferred stock dividends................... -- -- -- -- --
--------------------------------------------------------------------------------
Net income applicable to
common shareholders........................ $ 5,747,206 $ 1,558,928 $ 325,312 $ -- $ 7,631,446
================================================================================
Basic net income per share $ 0.15 $ 0.19
============= ============
Diluted net income per share $ 0.14 $ 0.18
============= ============
Shares outstanding
Basic...................................... 38,982,002 41,044,002
Diluted.................................... 40,253,046 42,315,046
</TABLE>
<PAGE> 21
SYKES ENTERPRISES, INCORPORATED
Pro Forma Consolidated Statements of Income
Year Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
As Reported As Restated
Year Ended Year Ended
Dec 31,1996 Oracle TAS III Adjustments Dec 31,1996
------------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues........................................ $218,995,751 $22,642,021 $ 7,061,657 $ -- $248,699,429
Operating expenses
Direct salaries and related costs.............. 134,235,748 15,464,649 2,512,161 -- 152,212,558
General and administrative..................... 67,823,910 4,803,160 2,248,558 - 74,875,628
----------------------------------------------------------------------------
Total operating expenses...................... 202,059,658 20,267,809 4,760,719 -- 227,088,186
----------------------------------------------------------------------------
Income from operations.......................... 16,936,093 2,374,212 2,300,938 -- 21,611,243
Other income (expense)
Interest, net.................................. (596,828) 111,404 54,707 -- (430,717)
Other.......................................... 455,215 -- 3,493 -- 458,708
----------------------------------------------------------------------------
Total other income (expense).................. (141,613) 111,404 58,200 -- 27,991
----------------------------------------------------------------------------
Income before income taxes...................... 16,794,480 2,485,616 2,359,138 -- 21,639,234
Provision for income taxes
Current........................................ 6,437,122 2,774,159 690,231 -- 9,901,512
Deferred....................................... (14,185) -- -- -- (14,185)
----------------------------------------------------------------------------
Total provision for income taxes.............. 6,422,937 2,774,159 690,231 -- 9,887,327
----------------------------------------------------------------------------
Net income...................................... 10,371,543 (288,543) 1,668,907 -- 11,751,907
Preferred stock dividends....................... (47,343) -- -- -- (47,343)
----------------------------------------------------------------------------
Net income applicable to
common shareholders............................ $ 10,324,200 $(288,543) $ 1,668,907 $ -- $ 11,704,564
===========================================================================
Pro forma income data (unaudited)
Income before income taxes...................... $ 16,794,480 $ 21,639,234
Pro forma provision for income taxes
relating to S corporation...................... 67,000 67,000
Actual provision for income taxes............... 6,422,937 9,887,327
------------ ------------
Total provision and pro forma
provision for income taxes................... 6,489,937 9,954,327
------------ ------------
Pro forma net income............................ 10,304,543 11,684,907
Preferred stock dividends....................... (47,343) (47,343)
------------
- ------------------
Pro forma net income
applicable to common shareholders.............. 10,257,200 $ 11,637,564
============ ============
Pro forma basic net income per share $ 0.30 $ 0.32
============ ============
Pro forma diluted net income per share $ 0.29 $ 0.31
============ ============
Shares outstanding
Basic........................................... 34,411,266 36,473,266
Diluted......................................... 35,954,323 38,016,323
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Sykes Enterprises, Incorporated
Notes to Pro Forma Consolidated Financial Statements
SYKES ENTERPRISES, INCORPORATED
Pro Forma Consolidated Balance Sheet
September 30, 1998 (Unaudited)
As Reported As Restated
Sept 30,1998 Oracle TAS III Adjustments Sept 30,1998
------------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................. $.21,151,355 $ 9,818,450 $ 2,980,551 $ -- $ 33,950,356
Restricted cash....................................... 10,704,871 -- -- -- 10,704,871
Receivables........................................... 109,269,666 6,097,305 1,156,334 -- 116,523,305
Prepaid expenses and other current assets............. 17,672,663 467,101 .584,855 -- 18,724,619
------------ ----------- ----------- -------- ------------
Total current assets................................. 158,798,555 16,382,856 4,721,740 -- 179,903,151
Property and equipment, net............................ 85,458,587 6,248,223 2,610,565 -- 94,317,375
Marketable securities.................................. 600,158 -- -- -- 600,158
Goodwill .............................................. 55,930,437 1,965,631 -- -- 57,896,068
Deferred charges and other assets...................... 13,641,979 -- -- -- 13,641,979
------------ ----------- ----------- -------- ------------
$314,429,716 $24,596,710 $ 7,332,305 $ -- $346,358,731
============ =========== =========== ======== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long-term debt................ $ 2,480,879 $ 93,422. $ -- $ -- $2,574,301
Accounts payable...................................... 27,665,594 300,207 318,920 -- 28,284,721
Income tax payable.................................... 8,519,402 325,568 127,523 -- 8,972,493
Accrued employee compensation and benefits............ 21,462,077 260,375 981,946 -- 22,704,398
Customer deposits..................................... 10,608,169 0 0 -- 10,608,169
Other accrued expenses and current liabilities........ 10,183,637 3,249,273 3,829,094 -- 17,262,004
------------ ----------- ----------- -------- ------------
Total current liabilities............................ 80,919,758 4,228,845 5,257,483 -- 90,406,086
Long-term debt......................................... 78,158,376 2,099,773 -- -- 80,258,149
Deferred income taxes.................................. 34,257 -- -- -- 34,257
Deferred grants........................................ 13,015,149 -- -- -- 13,015,149
Other long-term liabilities............................ 2,601,778 14,104,643 -- -- 16,706,421
------------ ----------- ----------- -------- ------------
Total liabilities.................................... 174,729,318 20,433,261 5,257,483 -- 200,420,062
------------ ----------- ----------- -------- ------------
Commitments and contingencies (Notes 8 and 12)
Shareholders' equity
Preferred stock, $0.01 par value, 10,000,000 shares
authorized; no shares issued and outstanding......... -- -- -- -- --
Common stock, $.01 par value; 200,000,000 shares
authorized; 41,119,626 and 41,451,905 issued and
oustandING........................................... 393,167 1,040 32,850 (13,137) 413,920
Additional paid-in capital............................ 134,583,670 1,397,667 -- 13,137 135,994,474
Retained earnings..................................... 12,968,220 4,067,501 1,908,026 -- 18,943,747
Unrealized loss on securites, net of taxes............ (6,934,362) -- -- -- (6,934,362)
Accumulated foreign currency translation adjustment... (1,310,297) 1,302,759) 133,946 -- (2,479,110)
------------ ----------- ----------- -------- ------------
Total shareholders' equity........................... 139,700,398 4,163,449 2,074,822 -- 145,938,669
------------ ----------- ----------- -------- ------------
$314,429,716 $24,596,710 $ 7,332,305 $ -- $346,358,731
============ =========== =========== ======== ============
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
SYKES ENTERPRISES, INCORPORATED
Pro Forma Consolidated Statements of Income
(Unaudited)
As Reported As Restated
9 Months Ended 9 Months Ended
Sept 30, 1998 Oracle TAS III Adjustments Sept 30, 1998
------------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Revenues....................................... $297,720,508 $22,942,767 $ 6,407,228 $ -- $ 327,070,503
Operating expenses
Direct salaries and related costs............. 184,266,680 14,324,310 4,143,300 -- 202,734,290
General and administrative.................... 77,666,223 7,225,145 1,531,842 -- 86,423,210
Acquired in-process research and development.. 18,618,907 -- -- -- 18,618,907
--------------------------------------------------------------------------------
Total operating expenses..................... 280,551,810 21,549,455 5,675,142 -- 307,776,407
--------------------------------------------------------------------------------
Income from operations......................... 17,168,698 1,393,312 732,086 -- 19,294,096
Other income (expense)
Interest, net................................. (78,221) (28,457) (40,670) -- (147,348)
Loss from joint venture....................... (8,097,380) -- -- -- (8,097,380)
Write-down of marketable securities........... -- -- -- -- --
Other......................................... (66,495) -- 6,353 -- (60,142)
--------------------------------------------------------------------------------
Total other income (expense)................. (8,242,096) (28,457) (34,317) -- (8,304,870)
--------------------------------------------------------------------------------
Income before income taxes..................... 8,926,602 1,364,855 697,769 -- 10,989,226
Provision for income taxes
Current....................................... 13,065,000 732,033 399,799 -- 14,196,832
Deferred...................................... -- -- -- -- --
--------------------------------------------------------------------------------
Total provision for income taxes............. 13,065,000 732,033 399,799 -- 14,196,832
--------------------------------------------------------------------------------
Net income..................................... (4,138,398) 632,822 297,970 -- (3,207,606)
Preferred stock dividends...................... -- -- -- -- --
--------------------------------------------------------------------------------
Net income applicable to
common shareholders........................... $.(4,138,398) $ 632,822 $ 297,970 $ -- $(3,207,606)
================================================================================
Basic net income per share $ (0.11) $ (0.08)
============ ===========
Diluted net income per share $ (0.11) $ (0.08)
============ ===========
Shares outstanding
Basic....................................... 39,154,989 41,216,989
Diluted...................................... 39,154,989 41,216,989
</TABLE>
<PAGE> 24
SYKES ENTERPRISES INCORPORATED
Notes to Pro Form a Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
On December 31, 1998, pursuant to a Combination Agreement dated as of
December 9, 1998 (the "Agreement"), Sykes Enterprises, Incorporated
("Sykes" or the "Company") acquired all of the issued and outstanding
stock of Oracle Service Networks Corporation ("Oracle") in exchange
for 1.475 million shares of Sykes' common stock. Under the terms of
the Agreement, the transaction was accounted for utilizing the pooling
method of accounting.
Oracle provides sophisticated call center operations including
customer support and service applications as well as care management
services for the healthcare and insurance industries. Oracle services
a client base in the financial services, telecommunications and
automotive industries and has developed integrated e-commerce
solutions in providing an end-to-end customer care model. Oracle
operates multi-lingual call centers on a seven day, twenty-four hour
basis, located in London and Toronto, Ontario, and also in Moncton,
New Brunswick.
On November 27, 1998, Sykes acquired all of the issued and outstanding
stock of TAS GmbH Nord Telemarketing und Vertriebsberatung ("TAS III")
of Hannover, Germany in exchange for 587,000 shares of Sykes' common
stock. Under the terms of the Agreement, the transaction was accounted
for utilizing the pooling method of accounting.
2. Pro Forma Adjustment
The pro forma adjustment to the consolidated statement represents the
consolidation of the equity accounts to reflect the number of shares
of common stock outstanding.
Sykes reduced by approximately $8.1 million the acquired in-process
research and development charge previously reported in its September
30, 1998 Form 10-Q. This adjustment is not reflected in the above pro
forma consolidated financial statements.
