Exhibit 99.1
FOR IMMEDIATE RELEASE
October 30, 2000
SYKES ENTERPRISES, INCORPORATED ANNOUNCES THIRD
QUARTER RESULTS AND COMPLETION OF ACCOUNTING REVIEW
- Total Revenues Increase 12% Year Over Year -
- Technical & Customer Support Revenues grew 28% -
- Company Restates Previous Financial Results -
TAMPA, FL October 30, 2000 - Sykes Enterprises, Incorporated ("Sykes" or the
"Company") (NASDAQ: SYKE), a global leader in providing vertically integrated,
technology-based business services and solutions, today announced results for
its third quarter and nine month periods ended September 30, 2000. In addition,
the Company also announced the completion of its previously announced accounting
review.
David L. Grimes, President and Chief Executive Officer of Sykes, stated, "We
continue to focus on growing our business and improving our bottom line. We are
seeing solid growth in our core technical and customer support services, both
domestically and internationally. While we are not satisfied with our third
quarter results, the consistent growth in our core business when combined with
our strong balance sheet, provides us with the platform to leverage our position
as a global competitor in the CRM marketplace, and bring value to our
shareholders."
3Q 2000 Financial Results
Third quarter 2000 revenues compared to the same period last year increased 12%
to $137.6 million, excluding SHPS, Incorporated, the healthcare services
business Sykes sold on June 30, 2000. The Company incurred a net loss of ($2.7)
million, or ($0.06) per diluted share compared to net income inclusive of SHPS
of $4.3 million, or $0.10 per diluted share for the third quarter last year. The
Company previously announced on
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September 18, 2000 that it expected to report third quarter revenues within the
range of $128 million to $134 million and a net loss of ($0.11) to ($0.08) per
diluted share.
The 12% increase in third quarter revenues, when compared to the same period
last year, comprised a growth rate of approximately 13% in Business Services and
approximately 5% in Business Solutions. The growth in Business Services was
driven primarily by organic growth in technical and customer support generated
from new and expanded contracts with technology and communications
organizations. A solid 28% growth in technical and customer support when
compared with the third quarter of last year was offset by a decline in other
non-core areas including localization, fulfillment and distribution. On a
sequential basis, a 4% increase in technical and customer support revenues over
the second quarter of 2000 was offset by declines in other business areas for a
total revenue decline of 1%, excluding SHPS.
Total revenues for the third quarter of 2000 would have been approximately 7%,
or $9.8 million, higher if foreign currency rates had remained unchanged from
the comparable quarter last year.
The Company's third quarter gross profit margin (revenues less direct costs)
improved 140 basis points to 35.8% including SHPS compared with the same period
last year. Excluding SHPS, the Company's gross profit margin improved 240 basis
points over last year. The increase was attributable to increased revenues,
better efficiencies within the Business Services group, specifically technical
and customer support, as well as higher margin consulting engagements through
the Company's Business Solutions group.
As a percentage of revenue, general and administrative ("G&A") expenses for the
third quarter of 2000 increased to 37.9% compared to 28.6% including SHPS, or
27.2% excluding SHPS, for the same period last year. The increase was
attributable to several factors including higher bad debt expense, higher
professional and legal fees, as well as lower than expected revenues primarily
in non-core areas. The third quarter G&A margin also reflects an increase in
wages from additional administrative personnel to support Sykes' global
operations and higher depreciation expense related to capital expenditures
incurred in connection with expansion of its technical and customer support
centers.
Nine Months Financial Results
Revenues for the nine months ended September 30, 2000 increased 10% to $454.7
million compared to $413.3 million for the same period last year. Excluding
SHPS, revenues for the nine months increased 16%. Net income totaled $10.7
million, or $0.25 per diluted share, before one-time items, compared to net
income of $19.5 million, or $0.45 per diluted share for nine months ended
September 30, 1999. Including one-time items recorded during the second quarter
of 2000, the Company reported net earnings of $1.40 per diluted share for the
nine months. The one-time items consisted of a gain of $84.0 million ($59.9
million net of taxes or $1.43 per diluted share) on the sale of the Company's
SHPS unit, a charge in the amount of $7.8 million ($4.8 million net of taxes or
$0.11 per diluted share) related to payouts made to SHPS' option holders, and
restructuring and other charges of $9.6 million ($6.9 million net of taxes or
$0.16 per diluted share).
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Balance Sheet & Cash Flow
The Company's balance sheet at quarter end remained strong with a cash balance
of $26.9 million, shareholders' equity of $207.3 million, and an outstanding
debt position totaling $20.2 million, or 9.8% of shareholders' equity.
During the third quarter, the Company repurchased 1.5 million shares of common
stock for approximately $22 million through open market purchases. The Company
has 500,000 shares remaining in the repurchase program previously announced in
July 2000.
Restatement of Financial Results
As previously announced, an outside accounting firm was engaged to assist in a
detailed review of Sykes' significant revenue contracts since January 1, 1998.
The Company conducted the review to ensure that its revenue recognition
accounting practices were in compliance with Generally Accepted Accounting
Principles including the AICPA's Statement of Position 97-2 "Software Revenue
Recognition". As a result of the review of approximately 120 contracts, the
Company determined with the assistance of its outside accounting advisors and
independent auditors, that the accounting for eight of its client contracts
required restatement. The revisions to the Company's revenues and net income
were primarily the result of contractual contingencies and prematurely
recognized revenues.
The effect of the restatement on the twelve-months ended December 31, 1998, was
a downward revision to reported revenues of $9.4 million and a $0.14 reduction
in diluted earnings per share. Accordingly, the restated financial results for
the year ended December 31, 1998 reflect revenues of $460.1 million and net
income of $2.4 million, or earnings per diluted share of $0.06 compared to
previously reported results of $469.5 million in revenues and net income of $8.3
million, or $0.20 per diluted share.
The restatement to the 1999 financial year, which affected revenues, gross
profit and net income, resulted in a cumulative reduction to net income of $0.1
million while the effect on the quarterly results was more significant as
indicated in the attached table. Accordingly, the restated financial results for
the year ended December 31, 1999 reflect revenues of $572.7 million, operating
income of $39.3 million and net income of $21.9 million, or $0.51 per diluted
share compared to previously reported results of $575.0 million in revenues,
operating income of $39.5 million and net income of $22.0 million, or $.51 per
diluted share.
The Company also restated its second quarter of 2000, which reflects a $0.9
million downward revision to previously reported revenues of $156.8 million. The
adjustments to the second quarter resulted in revenues of $155.9 million and net
income of $6.7 million, before one-time items, or $0.16 per diluted share, which
represents a $0.01 reduction in previously reported earnings per diluted share.
The accompanying tables to the press release provide the quarterly detail for
each of restated financial periods.
The after-tax cumulative effect of the restatements reduced shareholders' equity
as of September 30, 2000 by $6.4 million. As a result of the restatement, the
Company has deferred $1.8 million in previously recognized revenue that will be
recognized in the future when the earnings process is complete.
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John H. Sykes, Chairman of Sykes, stated, "We have reviewed all of our
significant contracts and have reflected all necessary changes in our restated
financials. We move forward with a clean slate. With this uncertainty behind us,
we want to reassure our investors, customers and strategic partners, that we
will continually review our accounting practices and that we are improving
controls to appropriately reflect the necessary revenue recognition policies as
our business model evolves. As evidenced by the growth in our core business,
Sykes' business fundamentals remain strong as we continue to focus on people,
process and technology in order to enhance shareholder value."
Business Outlook
The Company currently anticipates fourth quarter results to be within its
forecasted range of $143 million to $148 million in revenues and net income in
the range of $0.10 to $0.13 per diluted share.
The Company will conduct a conference call regarding the content of this release
today, October 30, 2000, at 5:00 p.m. Eastern Standard Time. Parties interested
in participating in this call should dial (800) 450-0788 or (612) 332-0630 five
minutes before the scheduled time. A replay will be available from 8:00 p.m. on
October 30, 2000 through 12:00 midnight on November 1, 2000 by dialing (800)
475-6701 or (320) 365-3844. The access code is 543651. The conference call will
also be webcast on the Internet. Instructions for listening to the call over the
Internet are available on the Investors page of the Sykes' website at
www.sykes.com. The replay of the webcast will be available at this location for
two weeks.
About Sykes Enterprises, Incorporated
Sykes is a global leader in providing vertically integrated, technology-based
business solutions and services. Sykes' Business Solutions group provides
professional services in e-Commerce, globalization and Customer Relationship
Management (CRM) with a focus on business strategy development, solution
implementation, web design, development and education, localization and program
management. Sykes' Business Services group provides value-added customer support
outsourcing including technical support, customer service and fulfillment. These
services are delivered through multiple communication channels encompassing web,
e-mail and telephony support. Sykes' Solutions and Services combination offers
clients value-added end-to-end solutions. Sykes, headquartered in Tampa, FL, has
approximately 14,700 employees and currently operates 39 customer interaction
centers, five e-commerce fulfillment centers and 17 branch offices throughout
the Unites States, Canada, Europe, Asia, Africa, and Central America. Visit the
Sykes web site at http://www.sykes.com.
Forward-Looking Statements
The statements contained in this press release that are not purely historical,
including statements regarding Sykes' objectives, expectations, hopes,
intentions, beliefs or strategies regarding the future, are "forward-looking"
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. It is important to note that
Sykes' actual results could differ materially from those in such
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forward-looking statements, and undue reliance should not be placed on such
statements. Among the important factors that could cause such actual results to
differ materially are (i) customer resistance to Sykes' standardized contract
for future bundled service offerings, (ii) variations in the term and the
elements of services offered under Sykes' standardized contract for future
bundled service offerings, (iii) changes in applicable accounting principles,
(iv) difficulties or delays in implementing Sykes' bundled service offerings,
(v) failure to achieve sales, marketing and other objectives to Sykes' strategic
alliances, (vi) construction delays of new call centers, (vii) difficulties in
managing growth, (viii) rapid technological change, (ix) loss of significant
customers, (x) risks inherent in conducting business abroad, (xi) currency
fluctuations, (xii) changes in legislation, (xiii) fluctuations in business
conditions and the economy, (xiv) Sykes' ability to attract and retain key
management personnel, (xv) the marketplace's continued receptivity to Sykes'
bundled service offerings, (xvi) Sykes' ability to continue the growth of its
support service revenues through additional technical & customer support
centers, (xvii) Sykes' ability to further penetrate into vertically integrated
markets, (xviii) Sykes' ability to expand its global presence through strategic
alliances and selective acquisitions, (xix) Sykes' ability to expand its
e-commerce service platform revenues, (xx) Sykes' ability to continue to
establish a competitive advantage through sophisticated technological
capabilities, (xxi) the ultimate outcome of pending class action lawsuits, and
(xxii) other risk factors listed from time to time in Sykes' registration
statements and reports as filed with the Securities and Exchange Commission. All
forward-looking statements included in this press release are made as of the
date hereof, and Sykes undertakes no obligation to update any such forward-
looking statements.
For additional information contact:
Mike Kipphut Kristin L. Wiemer
Vice President and Chief Financial Officer Director, Investor Relations
(813) 233-7151 (813) 233-7143
[email protected] [email protected]
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Sykes Enterprises Incorporated
Condensed Consolidated Statements of Operation
Nine and Three Months Ended September 30, 1999 and 2000
($'s in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 2000 1999 2000
--------------- ---------------- -------------- -----------------
(restated)
<S> <C> <C> <C> <C>
Revenues $ 413,309 $ 454,749 $ 140,967 $ 137,570
Direct costs 264,708 289,070 92,523 88,254
General and administrative 114,394 144,429 40,350 52,125
Compensation expense (1) - 7,836 - -
Restructuring and other charges (1) - 9,640 - -
--------------- ---------------- -------------- -----------------
Income (loss) from operations 34,207 3,774 8,094 (2,809)
Other expense, net (2,425) (3,632) (987) (1,435)
Gain on sale of equity interest in SHPS (1) - 84,036 - -
--------------- ---------------- -------------- -----------------
Income (loss) before provision for income taxes 31,782 84,178 7,107 (4,244)
Provision (benefit) for income taxes 12,309 25,256 2,760 (1,571)
--------------- ---------------- -------------- -----------------
Net income (loss) $ 19,473 $ 58,922 $ 4,347 $ (2,673)
=============== ================ ============== =================
Net income (loss) per diluted share $ 0.45 $ 1.40 $ 0.10 $ (0.06)
Shares outstanding - diluted 42,985 41,997 43,032 41,134
</TABLE>
(1) The nine months ended June 30, 2000 included $7.8 million in compensation
expense related to payments made to certain SHPS' option holders as part of
the Company's sale of SHPS, $9.6 million in restructuring and other charges
and an $84.0 million gain on the sale of SHPS. Excluding these one-time
items, income from operations, income before provision for income taxes,
net income and net income per diluted share as restated would have been
approximately $21.3 million, $17.6 million, $10.7 million and $0.25,
respectively.
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Sykes Enterprises, Incorporated
Condensed Consolidated Balance Sheets
($'s in thousands)
<TABLE>
<CAPTION>
Dec. 31, Dec. 31, Sept 30,
1998 1999 2000
------------------- --------------------- ------------------
(restated) (restated) (unaudited)
<S> <C> <C> <C>
Assets
Current assets $ 178,688 $ 188,135 $ 172,019
Property and equipment, net 99,177 134,756 156,895
Other noncurrent assets 86,052 96,801 35,492
------------------- --------------------- ------------------
Total assets $ 363,917 $ 419,692 $ 364,406
------------------- --------------------- ------------------
Liabilities & shareholders' equity
Current liabilities $ 91,937 $ 94,764 $ 75,961
Noncurrent liabilities 112,879 129,541 81,134
Shareholders' equity 159,101 195,387 207,311
------------------- --------------------- ------------------
Total liabilities & shareholders' equity $ 363,917 $ 419,692 $ 364,406
=================== ===================== ==================
</TABLE>
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Sykes Enterprises Incorporated
Condensed Consolidated Statements of Operation
($'s in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Three Three Nine
Months Months Months Months
Ended Ended Ended Ended
March 31, June 30, Sept. 30, Sept. 30,
2000 2000 2000 2000
------------- ---------------- ---------------- -----------------
(restated)
<S> <C> <C> <C> <C>
Revenues $ 161,312 $ 155,867 $ 137,570 $ 454,749
Direct costs 102,211 98,605 88,254 289,070
General and administrative 46,915 45,389 52,125 144,429
Compensation expense (1) - 7,836 - 7,836
Restructuring and other charges (1) - 9,640 - 9,640
------------- ---------------- ---------------- -----------------
Income (loss) from operations 12,186 (5,603) (2,809) 3,774
Other expense, net (1,237) (960) (1,435) (3,632)
Gain on sale of equity interest in SHPS (1) - 84,036 - 84,036
------------- ---------------- ---------------- -----------------
Income (loss) before provision for income taxes 10,949 77,473 (4,244) 84,178
Provision (benefit) for income taxes 4,248 22,579 (1,571) 25,256
------------- ---------------- ---------------- -----------------
Net income (loss) $ 6,701 $ 54,894 $ (2,673) $ 58,922
============= ================ ================ =================
Net income (loss) per diluted share $ 0.16 $ 1.30 $ (0.06) $ 1.40
Shares outstanding - diluted 42,902 42,098 41,134 41,997
</TABLE>
(1) The quarter ended June 30, 2000 included $7.8 million in compensation
expense related to payments made to certain SHPS' option holders as part of
the Company's sale of SHPS, $9.6 million in restructuring and other charges
and an $84.0 million gain on the sale of SHPS. Excluding these one-time
items, income from operations, income before provision for income taxes,
net income and net income per diluted share as restated would have been
approximately $11.9 million, $10.9 million, $6.7 million and $0.16,
respectively.
Excluding the one-time items referenced above, income from operations,
income before provision for income taxes, net income and net income per
diluted share for the nine months ended September 30, 2000 as restated
would have been approximately $21.3 million, $17.6 million, $10.7 million
and $0.25, respectively.
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Sykes Enterprises Incorporated
Condensed Consolidated Statements of Income
($'s in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Three Three Three Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
1999 1999 1999 1999 1999
-------------- ------------- --------------- ------------- ---------------
(restated) (restated) (restated)
<S> <C> <C> <C> <C> <C>
Revenues $ 136,378 $ 135,964 $ 140,967 $ 159,433 $ 572,742
Direct costs 83,247 88,938 92,523 105,142 369,850
General and administrative 36,277 37,767 40,350 43,250 157,644
Impairment of long-lived assets (1) - - - 5,979 5,979
-------------- ------------- --------------- ------------- ---------------
Income from operations 16,854 9,259 8,094 5,062 39,269
Other expense, net (575) (863) (987) (1,092) (3,517)
-------------- ------------- --------------- ------------- ---------------
Income before provision for income taxes 16,279 8,396 7,107 3,970 35,752
Provision for income taxes 6,300 3,249 2,760 1,541 13,850
-------------- ------------- --------------- ------------- ---------------
Net income $ 9,979 $ 5,147 $ 4,347 $ 2,429 $ 21,902
============== ============= =============== ============= ===============
Net income per diluted share $ 0.23 $ 0.12 $ 0.10 $ 0.06 $ 0.51
Shares outstanding - diluted 42,824 43,097 43,032 43,063 42,995
</TABLE>
(1) The quarter ended December 31, 1999 includes $6.0 million of charges
associated with the write-down of software and computer equipment.
Exclusive of this charge, income from operations, income before provision
for income taxes, net income and net income per diluted share as restated
would have been approximately $11.0 million, $10.0 million, $6.1 million
and $0.14, respectively.
For the twelve months ended December 31, 1999, exclusive of the $6.0
million of charges associated with the write-down of software and
income from operations, income before provision for income taxes, net
income and net income per diluted share as restated would have
been approximately $45.2 million, $41.7 million, $25.6 million and $0.59,
respectively.
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Sykes Enterprises Incorporated
Condensed Consolidated Statements of Operation
($'s in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Three Three Three Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
March 31, June 30, Sept. 30, Dec. 31, Dec. 31,
1998 1998 1998 1998 1998 (4)
-------------- ----------------- --------------- --------------- -----------------
(restated) (restated) (restated) (restated)
<S> <C> <C> <C> <C> <C>
Revenues $ 98,088 $ 100,667 $ 121,265 $ 140,082 $ 460,102
Direct costs 61,160 68,768 72,806 87,068 289,802
General and administrative (2) (3) 26,319 28,789 31,315 36,736 123,159
Acquired in-process R&D (2) - - 14,469 - 14,469
-------------- ----------------- --------------- --------------- -----------------
Income from operations 10,609 3,110 2,675 16,278 32,672
Other income (expense), net (1) (3) (3,839) 188 (504) (8,115) (12,270)
-------------- ----------------- --------------- --------------- -----------------
Income before provision for income taxes 6,770 3,298 2,171 8,163 20,402
Provision for income taxes 3,867 1,237 6,445 6,411 17,960
-------------- ----------------- --------------- --------------- -----------------
Net income (loss) $ 2,903 $ 2,061 $ (4,274) $ 1,752 $ 2,442
============== ================= =============== =============== =================
Net income (loss) per diluted share $ 0.07 $ 0.05 $ (0.10) $ 0.04 $ 0.06
Shares outstanding - diluted 42,219 42,220 41,337 42,497 42,288
</TABLE>
(1) The quarter ended March 31, 1998 includes $3.8 million of expense
associated with the write-off of acquisition related in-process R&D by a
joint venture entity. Exclusive of this charge, income before provision
for income taxes, net income and net income per diluted share would have
been approximately $10.6 million, $6.8 million and $0.16, respectively.
(2) The quarter ended September 30, 1998, includes $0.5 million of expense
associated with accrued severance costs and $14.5 million of expense
associated with the write-off of acquisition related in-process R&D costs.
Exclusive of such charges, income from operations, income before provision
for income taxes, net income and net income per diluted share as restated
would have been approximately $17.6 million, $17.1million, $10.6 million
and $0.25, respectively.
(3) The quarter ended December 31, 1998 includes $1.4 million of one-time
merger and related charges associated with acquisitions and $7.3 million in
charges associated with the write-down of marketable securities. Exclusive
of such charges, income from operations, income before provision for income
taxes, net income and net income per diluted share as restated would have
been approximately $17.7 million, $16.9 million, $10.5 million and $0.25,
respectively.
(4) Exclusive of all one-time items referenced above, income from operations,
income before provision for income taxes, net income and net income per
diluted share as restated for the twelve months ended December 31, 1998,
would have been approximately $49.0 million, $47.9 million, $30.0 million
and $0.71, respectively.
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