Sykes Enterprises Inc. (SYKE) filed Quarterly Report for the period ended 2009-09-30.
Sykes Enterprises Inc. is a leader in providing vertically integrated technology-based solutions through an integrated strategy combining its information technology services with an emerging e-commerce platform. Sykes' continues to leverage its position as a leading provider of information technology services by assisting its clients in capitalizing on the growth of e-commerce over the Internet. Sykes' e-commerce service platform enables it to comprehensively continue to expand by serving as a single-source provider of Internet-based technology solutions. Sykes Enterprises Inc. has a market cap of $1.01 billion; its shares were traded at around $24.44 with a P/E ratio of 16.1 and P/S ratio of 1.2. Sykes Enterprises Inc. had an annual average earning growth of 103.4% over the past 5 years.
Highlight of Business Operations:
During the nine months ended September 30, 2009, we generated $59.8 million in cash from operating activities, received $3.5 million in cash from grant proceeds, $0.8 million from the release of restricted cash, $0.2 million from proceeds from the sale of property and equipment, $1.6 million proceeds from the issuance of common stock and $0.3 million in excess tax benefits from stock-based compensation. Further, we used $23.2 million for capital expenditures, repurchased $3.2 million of the Company’s stock and repurchased an additional $1.1 million of stock for minimum tax withholding on restricted stock resulting in a $51.6 million increase in available cash (including the favorable effects of international currency exchange rates on cash of $12.9 million).
Net cash flows provided by operating activities for the nine months ended September 30, 2009 were $59.8 million, compared to $56.4 million provided by operating activities for the comparable 2008 period. The $3.4 increase in net cash flows from operating activities was due to a $10.9 million increase in non-cash reconciling items such as impairment losses, unrealized gains on financial instruments, stock-based compensation, depreciation and amortization and deferred income taxes, offset by a $5.0 million decrease in net income and a net decrease of $2.5 million in cash flows from assets and liabilities. The $2.5 million decrease in cash flows from assets and liabilities was principally a result of a $1.4 million increase in income taxes payable and a $0.3 million increase in deferred revenue offset by a $1.8 million increase in receivables, a $1.7 million increase in other assets and a $0.7 million decrease in other liabilities.
Capital expenditures, which are generally funded by cash generated from operating activities, available cash balances and borrowings available under our credit facilities, were $23.2 million for the nine months ended September 30, 2009, compared to $25.7 million for the comparable 2008 period, a decrease of $2.5 million. During the nine months ended September 30, 2009, approximately 43% of the capital expenditures were the result of investing in new and existing customer contact management centers, primarily offshore, and 57% was expended primarily for maintenance and technology systems infrastructure. In 2009, we anticipate capital expenditures in the range of $28.0 million to $30.0 million.
On March 30, 2009, we entered into a new credit agreement with KeyBank National Association and Bank of America, N.A. (the “Credit Facility”). The Credit Facility replaces the prior credit agreement, dated March 15, 2004, with KeyBank National Association and BNP Paribas. The new Credit Facility provides us with a $50 million revolving credit facility, which amount is subject to certain borrowing limitations, and includes certain customary financial and restrictive covenants. Pursuant to the terms of the Credit Facility, the amount of $50 million may be increased up to a maximum of $100 million with the prior written consent of the lenders. The $50 million Credit Facility includes a $40 million multi-currency subfacility, a $10 million swingline subfacility and a $5 million letter of credit subfacility. The Credit Facility will terminate on March 29, 2012.
At December 31, 2008, we determined that a valuation allowance of $30.6 million was necessary to reduce U.S. deferred tax assets by $10.8 million and foreign deferred tax assets by $19.8 million, where it was more likely than not that some portion or all of such deferred tax assets will not be realized. The recoverability of the remaining net deferred tax asset of $19.4 million at December 31, 2008 is dependent upon future profitability within each tax jurisdiction. We establish a valuation allowance to reduce the deferred tax assets if, based on the weight of the available evidence, both positive and negative, for each respective tax jurisdiction, it is more likely than not that some portion or all of the deferred tax assets will be realized. In September, 2009, we determined that our profitability and expectations of future profitability of our foreign and domestic operations indicated that it was “more likely than not” that portions of the deferred tax assets would be realized. Accordingly, in the third quarter of
We have previously disclosed regulatory sanctions assessed against our Spanish subsidiary relating to the alleged inappropriate acquisition of personal information in connection with two outbound client contracts. In order to appeal these claims, we issued a bank guarantee of $0.9 million. During the year ended December 31, 2008, $0.4 million of the bank guarantee was returned to us. The remaining balance of the bank guarantee of $0.5 million is included as restricted cash in “Deferred charges and other assets” in the accompanying Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008. We will continue to vigorously defend these matters. However, due to further progression of several of these claims within the Spanish court system, and based upon opinion of legal counsel regarding the likely outcome of several of the matters before the courts, we accrued a liability in the amount of $1.3 million as of September 30, 2009 and December 31, 2008 under ASC 450 “Contingencies” because we now believe that a loss is probable and the amount of the loss can be reasonably estimated as to three of the subject claims. There are two other related claims, one of which is currently under appeal, and the other of which is in the early stages of investigation, but we have not accrued any amounts related to either of those claims because we do not currently believe a loss is probable, and it is not currently possible to reasonably estimate the amount of any loss related to those two claims.
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