Sykes Enterprises, Incorporated Reports Second-Quarter 2009 Financial Results

08/03/2009
Higher Revenues and Expense Control Drive Higher Operating Margins and Above-Expectation Earnings Per Share; Raising 2009 Business Outlook
TAMPA, Fla., Aug 3, 2009 (GlobeNewswire via COMTEX) -- Sykes Enterprises, Incorporated ("SYKES" or the "Company") (Nasdaq:SYKE), a global leader in providing outsourced customer contact management solutions and services in the business process outsourcing (BPO) arena, announced today second-quarter 2009 financial results.

Second quarter 2009 Highlights

 * Second quarter 2009 revenues of $208.8 million increased $1.2
   million, or 0.6%, over the comparable quarter last year, with the
   strong U.S. dollar negatively impacting revenues by $19.3 million;
   on a constant currency basis, comparable revenues were up 9.9%

 * Compared to a revenue range of $201 million to $203 million
   provided in the Company's second quarter 2009 business outlook,
   second quarter 2009 revenues of $208.8 million included $5.3
   million of currency benefit resulting from strengthening foreign
   currencies against the U.S. dollar relative to the Company's
   forecast

 * Second quarter 2009 operating margin increased to 8.2% from 8.0%
   on a comparable basis; second quarter 2009 operating margins
   include $1.6 million (0.8% of revenues) impairment loss on
   goodwill and intangibles related to the March 2005 acquisition of
   Kelly, Luttmer & Associates Limited (KLA) detailed in the Current
   Report on Form 8-K filed with the Securities and Exchange
   Commission on July 7, 2009; excluding the impairment loss, the 100
   basis points comparable operating margin increase was aided by
   revenue growth coupled with a rising capacity utilization rate
   related to on-going client ramp-ups, lower roadside assistance tow
   claims costs in Canada and lower general and administrative
   expenses, due partly to favorable translation of certain
   non-dollar denominated expenses resulting from a strong
   U.S. dollar

 * Second quarter 2009 tax rate was 8.1% versus 17.3% in the
   comparable quarter last year and versus 25% provided in the
   Company's second quarter 2009 business outlook; the decline in the
   tax rate in both cases was due to a shift in the mix of earnings,
   accompanied by the effects of valuation allowances

 * Second quarter 2009 earnings per share were $0.35 versus $0.43
   in the comparable quarter last year; the $0.08 per share comparable
   decline reflects the net impact of higher interest and other
   income partially offset by a higher tax rate in the prior year's
   second quarter results;

 * Compared to an earnings per share range of $0.27 to $0.30 provided
   in the Company's second quarter 2009 business outlook, the $0.05
   to $0.08 earnings per share outperformance was due to a
   combination of better-than-expected revenue growth and lower
   general and administrative expenses

Second Quarter 2009 Review

Americas

Revenues generated from the Company's Americas segment, including operations in North America and offshore (Latin America and the Asia Pacific region), increased 8.3% to $148.9 million, or 71.3% of total revenues, for the second quarter of 2009. Revenues for the prior year period totaled $137.5 million, or 66.2% of total revenues. The comparable revenue increase of $11.4 million included a $19.5 million increase in customer care demand offsetting a negative decline of $8.1 million related to weaker currencies within the Americas region relative to the U.S. dollar. Excluding the currency impact, revenues rose 14.2% due to increased customer care demand from a combination of new programs wins with existing clients, expansion of existing programs and some new client wins across the communications, financial services and technology verticals.

The Americas income from operations for the second quarter of 2009 increased 13.2% to $25.0 million, with an operating margin of 16.8% versus 16.1% in the comparable quarter last year. The Americas second quarter 2009 operating margin reflects the impact of an impairment loss on goodwill and intangibles related to KLA, approximately 1.1% of Americas revenues. Excluding the impairment loss, the 180 basis points comparable increase in the Americas operating margin was due to revenue growth from a rising capacity utilization rate related to on-going client ramps-ups and favorable translation of certain non-dollar denominated expenses, coupled with lower roadside assistance tow claims costs in Canada and depreciation expense.

EMEA

Revenues from the Company's Europe, Middle East and Africa (EMEA) region decreased 14.5% to $59.9 million, representing 28.7% of total revenues for the second quarter of 2009 compared to $70.1 million, or 33.8%, in the prior year's second quarter. The comparable revenue decrease of $10.2 million included an $11.2 million negative impact from the weaker Euro relative to the U.S. dollar, more than offsetting the $1.0 million increase in customer care demand. Excluding the currency impact, the 1.5% comparable increase in customer care demand was due to expansion of existing client programs and some new client wins across the financial services and communications verticals.

The EMEA income from operations for the second quarter of 2009 decreased 56.9% to $1.8 million, with an operating margin of 2.9% versus 5.8% in the comparable quarter last year. The 290 basis point comparable decrease in the EMEA operating margin was principally a result of negative operating leverage owing to a reduction in customer care demand due to macro-economic weakness without the commensurate reduction in labor costs.

Corporate G&A Expenses

Corporate costs remained essentially flat at $9.7 million, or 4.6% of revenues, in the second quarter of 2009, compared to $9.6 million, or 4.6% of revenues, in the comparable quarter last year.

Impairment Loss on Investment in SHPS

During the second quarter, the Company recorded an impairment loss on its investment in SHPS of $2.1 million, or 1.0% of revenues. The details surrounding the SHPS impairment are included in the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 7, 2009.

Interest & Other Income and Taxes

Interest and other income for the second quarter of 2009 totaled approximately $0.6 million compared to $4.9 million for the same period last year. The $4.3 million comparable decrease in interest and other income was primarily attributable to a decrease in realized and unrealized foreign currency transaction gains coupled with lower interest income resulting from lower interest rates on higher average cash balances.

The Company's second quarter 2009 effective tax rate was 8.1% versus 17.3% in the same period last year and below the 25% rate provided in the Company's second quarter 2009 business outlook. The decline in the tax rate on a comparable basis and relative to the outlook was due to a shift in the mix of earnings, accompanied by the effects of valuation allowances.

Liquidity and Capital Resources

The Company's balance sheet at June 30, 2009 remained strong with cash and cash equivalents of $238.9 million and no outstanding debt. Approximately $227.2 million of the Company's June 30th cash balance was held in international operations and would be subject to additional taxes if repatriated back to the U.S. At June 30, 2009, the Company also had $50 million of capacity available under its credit facility.

Business Outlook

The Company's third-quarter and full-year 2009 business outlook reflects the following assumptions:

 * Net new capacity additions of approximately 400 to 500 seats in
   the third quarter in addition to the net 1,050 seats added
   year-to-date through June 30, 2009. Given the demand within the
   Americas region, the Company plans to increase its net seat
   additions in 2009 on a consolidated basis to between 1,700 and
   1,900 from its original forecast of 1,200 to 1,400. Accordingly,
   some ramp-related expenses associated with the seat additions are
   expected to continue and are anticipated to be spread throughout
   the second-half of 2009;

 * Within the Americas region, the Company continues to experience
   sustained growth in customer care demand from new programs with
   some existing clients within the communications and financial
   services verticals, more than offsetting lower demand with certain
   existing clients due to macroeconomic weakness and certain client
   programs that are expiring. The EMEA region continues to experience
   softness in volumes coupled with some pricing pressure with certain
   embedded client programs primarily within the technology vertical.
   In addition, the Company continues to be impacted by the strength
   in the U.S. dollar, as highlighted in the initial 2009 business
   outlook, which is expected to negatively impact third quarter and
   full-year 2009 revenues by approximately $10.0 million and $50.0
   million, respectively, over the comparable periods last year;

 * Approximately $0.01 earnings per share impact anticipated from
   the closure of a KLA administrative facility and the associated
   severance costs;

 * Anticipated interest income of approximately $0.5 million per
   quarter, which excludes the potential impact of any foreign
   exchange gains or losses in other income; and

 * A lower estimated tax rate for the third quarter and full-year
   2009 versus the 25% previously projected due to a shift in the
   geographic mix of earnings to lower tax rate jurisdictions with
   no effects of valuation allowances.

Considering the above factors, the Company anticipates the following financial results for the three months ended September 30, 2009:

 * Revenues in the range of $210 million to $213 million
 * Tax rate in the range of 20% to 22%
 * EPS in the range of $0.31 to $0.34 per diluted share
 * Capital expenditures in the range of $7.0 million to $9.0 million

For the twelve months ended December 31, 2009, the Company anticipates the following financial results:

 * Revenues in the range of $833 million to $837 million
 * Tax rate in the range of 18% to 20%
 * EPS in the range of $1.33 to $1.39 per diluted share
 * Capital expenditures in the range of $30.0 million to $33.0 million

Conference Call

The Company will conduct a conference call regarding the content of this release tomorrow, August 4, 2009 at 10:00 a.m. Eastern Daylight Savings Time. The conference call will be carried live on the Internet. Instructions for listening to the call over the Internet are available on the Investors page of SYKES' website at www.sykes.com. A replay will be available at this location for two weeks. This press release is also posted on the SYKES website at http://investor.sykes.com/phoenix.zhtml?c=119541&p=irol-news&nyo=0.

About Sykes Enterprises, Incorporated

SYKES is a global leader in providing customer contact management solutions and services in the business process outsourcing (BPO) arena. SYKES provides an array of sophisticated customer contact management solutions to Fortune 1000 companies around the world, primarily in the communications, financial services, healthcare, technology and transportation and leisure industries. SYKES specializes in providing flexible, high quality customer support outsourcing solutions with an emphasis on inbound technical support and customer service. Headquartered in Tampa, Florida, with customer contact management centers throughout the world, SYKES provides its services through multiple communication channels encompassing phone, e-mail, web and chat. Utilizing its integrated onshore/offshore global delivery model, SYKES serves its clients through two geographic operating segments: the Americas (United States, Canada, Latin America, India and the Asia Pacific Rim) and EMEA (Europe, Middle East and Africa). SYKES also provides various enterprise support services in the Americas and fulfillment services in EMEA, which include multi-lingual sales order processing, payment processing, inventory control, product delivery and product returns handling. For additional information please visit www.sykes.com.

Forward-Looking Statements

This press release may contain "forward-looking statements," including SYKES' estimates of future business outlook, prospects or financial results, statements regarding SYKES' objectives, expectations, intentions, beliefs or strategies, or statements containing words such as "believe," "estimate," "project," "expect," "intend," "may," "anticipate," "plans," "seeks," or similar expressions. It is important to note that SYKES' actual results could differ materially from those in such 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) the impact of economic recessions in the U.S. and other parts of the world, (ii) fluctuations in global business conditions and the global economy, (iii) SYKES' ability to continue the growth of its support service revenues through additional technical and customer contact centers, (iv) currency fluctuations, (v) the timing of significant orders for SYKES' products and services, (vi) loss or addition of significant clients, (vii) the early termination of contracts by clients, (viii) SYKES' ability to recognize deferred revenue through delivery of products or satisfactory performance of services, (ix) construction delays of new or expansion of existing customer support centers, (x) difficulties or delays in implementing SYKES' bundled service offerings, (xi) failure to achieve sales, marketing and other objectives, (xii) variations in the terms and the elements of services offered under SYKES' standardized contract including those for future bundled service offerings, (xiii) changes in applicable accounting principles or interpretations of such principles, (xiv) delays in the Company's ability to develop new products and services and market acceptance of new products and services, (xv) rapid technological change, (xvi) political and country-specific risks inherent in conducting business abroad, (xvii) SYKES' ability to attract and retain key management personnel, (xviii) SYKES' ability to further penetrate into vertically integrated markets, (xix) SYKES' ability to expand its global presence through strategic alliances and selective acquisitions, (xx) SYKES' ability to continue to establish a competitive advantage through sophisticated technological capabilities, (xxi) the ultimate outcome of any lawsuits or penalties (regulatory or otherwise), (xxii) SYKES' dependence on trends toward outsourcing, (xxiii) risk of interruption of technical and customer contact management center operations due to such factors as fire, earthquakes, inclement weather and other disasters, power failures, telecommunications failures, unauthorized intrusions, computer viruses and other emergencies, (xxiv) the existence of substantial competition, (xxv) the ability to obtain and maintain grants and other incentives, including tax holidays or otherwise, and (xxvi) 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, whether as a result of new information, future events, or otherwise.

                  Sykes Enterprises, Incorporated
          Condensed Consolidated Statements of Operations
               (in thousands, except per share data)
                            (Unaudited)

                                               Three Months Ended
                                             June 30,     June 30,
                                              2009         2008
                                            ----------   ----------
 Revenues                                   $ 208,839    $ 207,629
 Direct salaries and related costs           (133,727)    (133,708)
 General and administrative                   (56,477)     (57,355)
 Canada's KLA Impairment                       (1,584)          --
                                            ----------   ----------
 Income from operations                        17,051       16,566
 Other income, net                                643        4,866
 SHPS Impairment                               (2,089)          --
                                            ----------   ----------
 Income before provision for income
  taxes                                        15,605       21,432
 Provision for income taxes                    (1,257)      (3,703)
                                            ----------   ----------
 Net income                                 $  14,348    $  17,729
                                            ==========   ==========

   Net income per basic share               $    0.35    $    0.44
   Shares outstanding, basic                   40,654       40,599

   Net income per diluted share             $    0.35    $    0.43
   Shares outstanding, diluted                 40,953       40,953



                  Sykes Enterprises, Incorporated
          Condensed Consolidated Statements of Operations
               (in thousands, except per share data)
                            (Unaudited)

                                               Six Months Ended
                                             June 30,     June 30,
                                               2009         2008
                                            ----------   ----------
 Revenues                                   $ 412,080    $ 411,350
 Direct salaries and related costs           (263,980)    (264,688)
 General and administrative                  (111,965)    (113,779)
 Canada's KLA Impairment                       (1,584)          --
                                            ----------   ----------
 Income from operations                        34,551       32,883
 Other income, net                              2,200        7,117
 SHPS Impairment                               (2,089)          --
                                            ----------   ----------
 Income before provision for income taxes      34,662       40,000
 Provision for income taxes                    (5,544)      (6,561)
                                            ----------   ----------
 Net income                                 $  29,118    $  33,439
                                            ==========   ==========

   Net income per basic share               $    0.72    $    0.82
   Shares outstanding, basic                   40,632       40,545

   Net income per diluted share             $    0.71    $    0.82
   Shares outstanding, diluted                 40,999       40,860


                     Sykes Enterprises, Incorporated
                             Segment Results
                              (in thousands)
                               (Unaudited)

                                              Three Months Ended
                                             June 30,     June 30,
                                               2009         2008
                                            ----------   ----------

  Revenues:
    Americas                                $ 148,935    $ 137,539
    EMEA                                       59,904       70,090
                                            ----------   ----------
      Total                                 $ 208,839    $ 207,629
                                            ==========   ==========

  Operating Income:
    Americas                                $  24,998    $  22,081
    EMEA                                        1,752        4,063
    Corporate G&A expenses                     (9,699)      (9,578)
                                            ----------   ----------
    Income from operations                     17,051       16,566

    SHPS Impairment                            (2,089)          --
    Other income, net                             643        4,866
    Provision for income taxes                 (1,257)      (3,703)
                                            ----------   ----------

    Net income                              $  14,348    $  17,729
                                            ==========   ==========


                                               Six Months Ended
                                             June 30,     June 30,
                                               2009         2008
                                            ----------   ----------

 Revenues:
   Americas                                 $ 291,742    $ 274,896
   EMEA                                       120,338      136,454
                                            ----------   ----------
     Total                                  $ 412,080    $ 411,350
                                            ==========   ==========

 Operating Income:
   Americas                                 $  48,376    $  43,943
   EMEA                                         6,411        8,683
   Corporate G&A expenses                     (20,236)     (19,743)
                                            ----------   ----------
   Income from operations                      34,551       32,883

   SHPS Impairment                             (2,089)          --
   Other income, net                            2,200        7,117
   Provision for income taxes                  (5,544)      (6,561)
                                            ----------   ----------

   Net income                               $  29,118    $  33,439
                                            ==========   ==========


                 Sykes Enterprises, Incorporated
               Condensed Consolidated Balance Sheets
                          (in thousands)


                                            June 30,    December 31,
                                              2009         2008
                                          ------------  ------------
                                          (Unaudited)
 Assets:
 Current assets                             $ 425,968    $ 396,518
 Property and equipment, net                   81,223       80,390
 Other noncurrent assets                       47,576       52,634
                                          ------------  ------------
   Total assets                             $ 554,767    $ 529,542
                                          ============  ============

 Liabilities & Shareholders' Equity:
 Current liabilities                        $ 114,915    $ 126,110
 Noncurrent liabilities                        21,418       19,402
 Shareholders' equity                         418,434      384,030
                                          ------------  ------------
   Total liabilities and shareholders'
    equity                                  $ 554,767    $ 529,542
                                          ============  ============


                  Sykes Enterprises, Incorporated
                         Supplementary Data

                                             Q2 2009      Q2 2008
                                            ----------   ----------

 Geographic Mix (% of Total Revenues):

   Americas (1)                                  71.3%        66.2%
   Europe, Middle East & Africa (EMEA)           28.7%        33.8%
                                            ----------   ----------
      Total:                                    100.0%       100.0%

 (1) Includes the United States, Canada, Latin America and the Asia
     Pacific (APAC) Region. Latin America and APAC are included in
     the Americas due to the nature of the business and client profile,
     which is primarily made up of U.S. based clients.


                                             Q2 2009      Q2 2008
                                            ----------   ----------

 Vertical Industry Mix (% of Total Revenues):

   Communications                                  36%          28%
   Technology / Consumer                           30%          34%
   Financial Services                              15%          14%
   Transportation & Leisure                         9%          10%
   Healthcare                                       6%           6%
   Other                                            4%           8%
                                            ----------   ----------
     Total:                                       100%         100%


                  Sykes Enterprises, Incorporated
                     Cash Flow from Operations
                          (in thousands)
                            (Unaudited)


                                               Three Months Ended
                                             June 30,     June 30,
                                               2009         2008
                                            ----------   ----------

 Cash Flow From Operating Activities:
   Net income                               $  14,348    $  17,729
   Depreciation and amortization                7,162        7,177
   Changes in assets and liabilities
    and other                                   3,933        5,011
                                            ----------   ----------
   Net cash provided by operating
    activities                              $  25,443    $  29,917
                                            ==========   ==========

 Capital expenditures                       $   7,251    $   8,185
 Cash interest paid                         $     560    $     153
 Cash taxes paid                            $   2,722    $   5,913



                                                Six Months Ended
                                             June 30,     June 30,
                                               2009         2008
                                            ----------   ----------

 Cash Flow From Operating Activities:
   Net income                               $  29,118    $  33,439
   Depreciation and amortization               13,938       14,196
   Changes in assets and liabilities
    and other                                  (9,567)     (16,682)
                                            ----------   ----------
   Net cash provided by operating
    activities                              $  33,489    $  30,953
                                            ==========   ==========

 Capital expenditures                       $  18,308    $  16,248
 Cash interest paid                         $     630    $     220
 Cash taxes paid                            $   6,274    $   9,974

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Sykes Enterprises, Inc.

Sykes Enterprises, Incorporated
Subhaash Kumar
(813) 233-7143
http://www.sykes.com