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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): June 30, 2000
Sykes Enterprises, Incorporated
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(Exact name of registrant as specified in its charter)
Florida 0-28274 56-1383460
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
100 N. Tampa Street, Suite 3900, Tampa, Florida 33602
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(Address of principal executive offices, including zip code)
(813) 274-1000
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(Registrant's telephone number)
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Item 2. Acquisition or Disposition of Assets
On June 30, 2000 (the "Closing Date"), Sykes Enterprises,
Incorporated, (the "Registrant") sold a 93.5% interest in SHPS, Incorporated
("SHPS"), a wholly owned subsidiary who is a provider of outsourced employee
benefit and care management services to customers that include large
corporations, public sector employers, administrative service providers,
managed-care companies and health insurance carriers.
Pursuant to a Merger Agreement dated June 9, 2000 (the "Merger
Agreement"), among the Registrant, SHPS, Welsh Carson Anderson and Stowe, VIII,
LP ("WCAS") and Slugger Acquisition Corp., the Registrant and certain holders
of options to purchase SHPS' common stock were paid an aggregate purchase price
of $165.5 million in cash in exchange for 93.5% of the Registrant's ownership
interest in SHPS and all of the option holders' interest in SHPS. Sykes
retained a 6.5% interest in SHPS. The purchase price, which was paid on the
Closing Date, was determined through arm's length negotiation between the
parties.
The Merger Agreement is filed as an exhibit to this Current Report on
Form 8-K and is incorporated herein by reference. The brief summary of the
material provisions of the Merger Agreement set forth above is qualified in its
entirety by reference to the Merger Agreement filed as an exhibit hereto.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements - None.
(b) Pro Forma Financial Information.
The foregoing unaudited pro forma consolidated financial information
illustrates the effect of the Registrant's disposition of a 93.5% equity
interest in SHPS, Incorporated ("SHPS"). The Unaudited Pro Forma Consolidated
Balance Sheet of the Registrant at March 31, 2000 shows the financial position
of the Company after giving effect to the disposition of SHPS as if it had
occurred on March 31, 2000. The Unaudited Pro Forma Consolidated Statement of
Income for the three months ended March 31, 2000 and the year ended December
31, 1999, give retrospective effect to the disposition as if it had occurred at
the beginning of the earliest period presented.
The pro forma consolidated financial statements should be read in
conjunction with the historical consolidated financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1999. The pro forma information may not necessarily be
indicative of what the Registrant's results of operations or financial position
would have been had the transaction been in effect as of and for the periods
presented, nor is such information necessarily indicative of the Registrant's
results of operations or financial position for any future period or date.
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SYKES ENTERPRISES, INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (IN THOUSANDS)
MARCH 31, 2000
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------
PRO FORMA
HISTORICAL ELIMINATION OF ENTRIES PRO
RESULTS SHPS(a) (b)(c)(d) FORMA
---------- -------------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 27,532 $ (4,264) $ 67,279 $ 90,547
Restricted cash 19,799 (19,799) -- --
Receivables 150,097 (18,325) -- 131,772
Prepaid expenses and other current assets 16,429 (1,347) -- 15,082
--------- -------- --------- ---------
Total current assets 213,857 (43,735) 67,279 237,401
Property and equipment, net 146,370 (6,795) -- 139,575
Investment in subsidiary -- 12,511 (12,511) --
Investment, at cost -- -- 2,112 2,112
Intangible assets, net 74,802 (47,061) (14,843) 12,898
Deferred charges and other assets 22,029 (3,292) 1,902 20,639
--------- -------- --------- ---------
$ 457,058 $(88,372) $ 43,939 $ 412,625
========= ======== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long-term debt $ 4,529 $ -- $ -- $ 4,529
Accounts payable 30,607 (2,631) 3,250 31,226
Income tax payable 978 -- 21,668 22,646
Accrued employee compensation and benefits 25,318 (1,922) -- 23,396
Customer deposits 22,484 (22,484) -- --
Other accrued expenses and current liabilities 20,016 (3,974) -- 16,042
--------- -------- --------- ---------
Total current liabilities 103,932 (31,011) 24,918 97,839
Long-term debt 91,755 -- (90,000) 1,755
Intercompany debt -- (49,352) 49,352 --
Deferred grants 23,218 -- -- 23,218
Deferred revenue 45,392 (518) -- 44,874
Other long-term liabilities 2,684 (2,944) -- (260)
--------- -------- --------- ---------
Total liabilities 266,981 (83,825) (15,730) 167,426
Shareholders' equity
Common stock 430 -- -- 430
Additional paid in capital 157,218 -- -- 157,218
Retained earnings 58,463 (4,547) 59,669 113,585
Accumulated other comprehensive income (9,835) -- -- (9,835)
--------- -------- --------- ---------
206,276 (4,547) 59,669 261,398
Treasury stock at cost (16,199) -- -- (16,199)
--------- -------- --------- ---------
Total shareholders' equity 190,077 (4,547) 59,669 245,199
--------- -------- --------- ---------
$ 457,058 $(88,372) $ 43,939 $ 412,625
========= ======== ========= =========
</TABLE>
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SYKES ENTERPRISES, INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------
HISTORICAL ELIMINATION PRO FORMA PRO
RESULTS OF SHPS(a) ENTRIES(b) FORMA
--------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 161,312 $(18,145) $ -- $ 143,167
OPERATING EXPENSES:
Direct salaries and related costs 102,211 (11,854) -- 90,357
General and administrative 46,915 (5,591) (157) 41,167
--------- -------- ----- ---------
TOTAL OPERATING EXPENSES 149,126 (17,445) (157) 131,524
--------- -------- ----- ---------
Income from operations 12,186 (700) 157 11,643
OTHER INCOME (EXPENSE):
Interest, net (1,236) 677 -- (559)
Other (1) 2 -- 1
--------- -------- ----- ---------
TOTAL OTHER INCOME (EXPENSE) (1,237) 679 -- (558)
--------- -------- ----- ---------
INCOME BEFORE INCOME TAXES 10,949 (21) 157 11,085
PROVISION FOR INCOME TAXES 4,248 (8) -- 4,240
--------- -------- ----- ---------
NET INCOME $ 6,701 $ (13) $ 157 $ 6,845
========= ======== ===== =========
NET INCOME PER SHARE
Basic $ 0.16 $ 0.16
========= =========
Diluted $ 0.16 $ 0.16
========= =========
SHARES OUTSTANDING
Basic 42,606 42,606
Diluted 42,902 42,902
</TABLE>
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SYKES ENTERPRISES, INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------
HISTORICAL ELIMINATION PRO FORMA PRO
RESULTS OF SHPS(a) ENTRIES(b) FORMA
--------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 575,040 $(72,860) $ -- $ 502,180
OPERATING EXPENSES:
Direct salaries and related costs 371,935 (44,727) -- 327,208
General and administrative 163,621 (22,808) (626) 140,187
--------- -------- ----- ---------
TOTAL OPERATING EXPENSES 535,556 (67,535) (626) 467,395
--------- -------- ----- ---------
Income from operations 39,484 (5,325) 626 34,785
OTHER INCOME (EXPENSE):
Interest (3,669) 1,912 -- (1,757)
Other 151 (1) -- 150
--------- -------- ----- ---------
TOTAL OTHER INCOME (EXPENSE) (3,518) 1,911 -- (1,607)
--------- -------- ----- ---------
INCOME BEFORE INCOME TAXES 35,966 (3,414) 626 33,178
PROVISION FOR INCOME TAXES 13,935 (1,325) -- 12,610
--------- -------- ----- ---------
NET INCOME $ 22,031 $ (2,089) $ 626 $ 20,568
========= ======== ===== =========
NET INCOME PER SHARE
Basic $ 0.52 $ 0.49
========= =========
Diluted $ 0.51 $ 0.48
========= =========
SHARES OUTSTANDING
Basic 42,045 42,045
Diluted 42,995 42,995
</TABLE>
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Sykes Enterprises, Incorporated
Notes to Unaudited Pro Forma Consolidated Financial Statements
(In Thousands)
Note 1 Pro Forma Balance Sheet Adjustments
(a) The disposition of the company's interest in the assets and
liabilities of SHPS.
(b) The exercise of SHPS stock options and the associated tax
benefit. The estimated compensation expense, net of
applicable income taxes, related to the exercise of the SHPS
stock options is included in pro forma retained earnings as
of March 31, 2000, but has been excluded from the pro forma
consolidated statement of income for the three months ended
March 31, 2000 and for the year ended December 31, 1999.
(c) The recognition of a 6.5% equity interest in SHPS to be held
as an investment on a going forward basis.
(d) The recognition of the estimated gain on the sale and its
related tax liability, application of the proceeds of the
sale, the write-off of intangible assets and the recognition
of certain liabilities associated with completing the
transaction. The proceeds received were used to reduce the
line of credit balance in accordance with the Company's
policy of using excess cash to reduce outstanding debt. The
estimated gain, net of applicable income taxes, is included
in pro forma retained earnings as of March 31, 2000, but has
been excluded from the pro forma consolidated statement of
income for the three months ended March 31, 2000 and for the
year ended December 31, 1999.
The amount of the estimated gain will be adjusted based on
SHPS' operating results for June 2000. These operating
results for June 2000 are not available as of the date of
this report.
Note 2 Pro Forma Income Statement Adjustments
(a) The elimination of the operating results of SHPS for the
respective periods.
(b) The reduction in amortization expense of $157 and $626 for
the three months ended March 31, 2000 and for the year ended
December 31, 1999, respectively.
(c) Exhibits - The following documents are filed as an Exhibit to this
Report:
2.1 Merger Agreement, dated as of June 9, 2000, among SHPS, Inc.,
Sykes Enterprises, Incorporated, Slugger Acquisition, Corp.,
and Welsh Carson Anderson & Stowe VIII, LP
2.2 First Amendment to Merger Agreement
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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 hereunto duly authorized.
SYKES ENTERPRISES, INCORPORATED
Date: July 14, 2000 By: /s/ W. Michael Kipphut
------------------------------------
W. Michael Kipphut
Vice President and Chief
Financial Officer
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SYKES ENTERPRISES, INCORPORATED
Exhibit Index to Current Report on Form 8-K
Dated July 14, 2000
Exhibit
Number Description
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2.1 Merger Agreement, dated as of June 9, 2000, among SHPS, Inc.,
Sykes Enterprises, Incorporated, Slugger Acquisition, Corp., and Welsh
Carson Anderson & Stowe VIII, LP
2.2 First Amendment to Merger Agreement
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