SEC Info  
    Home      Search      My Interests      Help      Sign In      Please Sign In

Sykes Enterprises Inc – ‘10-K’ for 12/31/14

On:  Thursday, 2/19/15, at 4:40pm ET   ·   For:  12/31/14   ·   Accession #:  1193125-15-54298   ·   File #:  0-28274

Previous ‘10-K’:  ‘10-K’ on 2/20/14 for 12/31/13   ·   Next:  ‘10-K’ on 2/29/16 for 12/31/15   ·   Latest:  ‘10-K’ on 2/26/21 for 12/31/20   ·   1 Reference:  By:  Sykes Enterprises Inc. – Latest ‘10-K’ on 2/26/21 for 12/31/20

Find Words in Filings emoji
 
  in    Show  and   Hints

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/19/15  Sykes Enterprises Inc             10-K       12/31/14  172:19M                                    Donnelley … Solutions/FA

Annual Report   —   Form 10-K   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   1.74M 
 2: EX-10.35    Material Contract                                   HTML    105K 
 3: EX-10.37    Material Contract                                   HTML    199K 
 4: EX-21.1     Subsidiaries List                                   HTML     62K 
 5: EX-23.1     Consent of Experts or Counsel                       HTML     50K 
 6: EX-31.1     Certification -- §302 - SOA'02                      HTML     55K 
 7: EX-31.2     Certification -- §302 - SOA'02                      HTML     55K 
 8: EX-32.1     Certification -- §906 - SOA'02                      HTML     51K 
 9: EX-32.2     Certification -- §906 - SOA'02                      HTML     51K 
118: R1          Document and Entity Information                     HTML     82K  
85: R2          Consolidated Balance Sheets                         HTML    165K 
109: R3          Consolidated Balance Sheets (Parenthetical)         HTML     74K  
123: R4          Consolidated Statements of Operations               HTML    156K  
157: R5          Consolidated Statements of Comprehensive Income     HTML     83K  
                (Loss)                                                           
90: R6          Consolidated Statements of Changes in Shareholders  HTML    129K 
                Equity                                                           
108: R7          Consolidated Statements of Cash Flows               HTML    220K  
78: R8          Overview and Summary of Significant Accounting      HTML    115K 
                Policies                                                         
63: R9          Acquisition of Alpine Access, Inc.                  HTML    105K 
159: R10         Discontinued Operations                             HTML     67K  
125: R11         Costs Associated with Exit or Disposal Activities   HTML    141K  
124: R12         Fair Value                                          HTML    120K  
134: R13         Goodwill and Intangible Assets                      HTML    105K  
135: R14         Concentrations of Credit Risk                       HTML     55K  
130: R15         Receivables, Net                                    HTML     63K  
137: R16         Prepaid Expenses                                    HTML     58K  
110: R17         Other Current Assets                                HTML     59K  
120: R18         Value Added Tax Receivables                         HTML     61K  
128: R19         Financial Derivatives                               HTML    141K  
171: R20         Investments Held in Rabbi Trust                     HTML     70K  
149: R21         Property and Equipment                              HTML     69K  
100: R22         Deferred Charges and Other Assets                   HTML     60K  
127: R23         Accrued Employee Compensation and Benefits          HTML     59K  
104: R24         Deferred Revenue                                    HTML     58K  
49: R25         Other Accrued Expenses and Current Liabilities      HTML     63K 
151: R26         Deferred Grants                                     HTML     61K  
164: R27         Borrowings                                          HTML     64K  
72: R28         Accumulated Other Comprehensive Income (Loss)       HTML    117K 
71: R29         Income Taxes                                        HTML    151K 
76: R30         Earnings Per Share                                  HTML     73K 
77: R31         Commitments and Loss Contingency                    HTML     73K 
79: R32         Defined Benefit Pension Plan and Postretirement     HTML     94K 
                Benefits                                                         
30: R33         Stock-Based Compensation                            HTML    154K 
146: R34         Segments and Geographic Information                 HTML    204K  
96: R35         Other Income (Expense)                              HTML     61K 
101: R36         Related Party Transactions                          HTML     57K  
55: R37         Schedule II - Valuation and Qualifying Accounts     HTML     73K 
170: R38         Overview and Summary of Significant Accounting      HTML    196K  
                Policies (Policies)                                              
16: R39         Acquisition of Alpine Access, Inc. (Tables)         HTML     98K 
82: R40         Discontinued Operations (Tables)                    HTML     60K 
155: R41         Costs Associated with Exit or Disposal Activities   HTML    145K  
                (Tables)                                                         
52: R42         Fair Value (Tables)                                 HTML    119K 
70: R43         Goodwill and Intangible Assets (Tables)             HTML    106K 
75: R44         Receivables, Net (Tables)                           HTML     61K 
86: R45         Prepaid Expenses (Tables)                           HTML     58K 
29: R46         Other Current Assets (Tables)                       HTML     59K 
62: R47         Value Added Tax Receivables (Tables)                HTML     63K 
21: R48         Financial Derivatives (Tables)                      HTML    136K 
153: R49         Investments Held in Rabbi Trust (Tables)            HTML     71K  
51: R50         Property and Equipment (Tables)                     HTML     69K 
148: R51         Deferred Charges and Other Assets (Tables)          HTML     61K  
56: R52         Accrued Employee Compensation and Benefits          HTML     59K 
                (Tables)                                                         
83: R53         Deferred Revenue (Tables)                           HTML     57K 
19: R54         Other Accrued Expenses and Current Liabilities      HTML     63K 
                (Tables)                                                         
26: R55         Deferred Grants (Tables)                            HTML     61K 
74: R56         Borrowings (Tables)                                 HTML     56K 
37: R57         Accumulated Other Comprehensive Income (Loss)       HTML    115K 
                (Tables)                                                         
160: R58         Income Taxes (Tables)                               HTML    158K  
94: R59         Earnings Per Share (Tables)                         HTML     74K 
132: R60         Commitments and Loss Contingency (Tables)           HTML     71K  
60: R61         Defined Benefit Pension Plan and Postretirement     HTML    101K 
                Benefits (Tables)                                                
66: R62         Stock-Based Compensation (Tables)                   HTML    154K 
143: R63         Segments and Geographic Information (Tables)        HTML    204K  
138: R64         Other Income (Expense) (Tables)                     HTML     61K  
99: R65         Overview and Summary of Significant Accounting      HTML    103K 
                Policies - Additional Information (Detail)                       
141: R66         Acquisition of Alpine Access, Inc - Additional      HTML     89K  
                Information (Detail)                                             
57: R67         Acquisition of Alpine Access, Inc - Summary of      HTML    108K 
                Final Purchase Price Allocation of Fair Values of                
                Assets Acquired and Liabilities Assumed (Detail)                 
105: R68         Acquisition of Alpine Access, Inc - Summary of      HTML     79K  
                Purchased Intangible Assets (Detail)                             
163: R69         Acquisition of Alpine Access, Inc - Revenues and    HTML     59K  
                Earnings of Acquired Entity Since Acquisition Date               
                (Detail)                                                         
24: R70         Acquisition of Alpine Access, Inc - Combined Pro    HTML     65K 
                Forma of Revenues and Net Earnings (Detail)                      
48: R71         Acquisition of Alpine Access, Inc - Merger and      HTML     72K 
                Integration Costs (Detail)                                       
84: R72         Discontinued Operations - Additional Information    HTML     63K 
                (Detail)                                                         
35: R73         Discontinued Operations - Results of Discontinued   HTML     68K 
                Operations (Detail)                                              
169: R74         Costs Associated with Exit or Disposal Activities   HTML     71K  
                - Additional Information (Detail)                                
53: R75         Costs Associated with Exit or Disposal Activities   HTML     94K 
                - Cumulative Costs Expected and Incurred as a                    
                Result of Exit Plans (Detail)                                    
40: R76         Costs Associated with Exit or Disposal Activities   HTML     77K 
                - Restructuring Charges in Company's Consolidated                
                Statements of Operations (Detail)                                
47: R77         Costs Associated with Exit or Disposal Activities   HTML     90K 
                - Summary of Accrued Liability Associated with                   
                Exit Plans' Exit or Disposal Activities and                      
                Related Charges (Detail)                                         
27: R78         Costs Associated with Exit or Disposal Activities   HTML     81K 
                - Summary of Accrued Liability Associated with                   
                Company's Exit Plans (Detail)                                    
31: R79         Fair Value - Assets and Liabilities Measured at     HTML    121K 
                Fair Value on a Recurring Basis (Detail)                         
121: R80         Fair Value - Impairment Losses Related to           HTML     62K  
                Nonrecurring Fair Value Measurements of Certain                  
                Assets, Primarily Long-Lived Assets Company                      
                Determined were No Longer Being Used and were                    
                Disposed (Detail)                                                
45: R81         Goodwill and Intangible Assets - Company's          HTML     89K 
                Purchased Intangible Assets (Detail)                             
161: R82         Goodwill and Intangible Assets - Estimated Future   HTML     67K  
                Amortization Expense (Detail)                                    
80: R83         Goodwill and Intangible Assets - Changes in         HTML     74K 
                Goodwill (Detail)                                                
129: R84         Receivable, Net - Receivable, Net (Detail)          HTML     71K  
140: R85         Prepaid Expenses - Prepaid Expenses, Net (Detail)   HTML     67K  
42: R86         Other Current Assets - Other Current Assets, Net    HTML     70K 
                (Detail)                                                         
46: R87         Value Added Tax Receivables - Value Added Tax       HTML     59K 
                Receivables, Net (Detail)                                        
158: R88         Value Added Tax Receivables - Write- Down of Value  HTML     53K  
                Added Tax Receivables (Detail)                                   
36: R89         Financial Derivatives - Deferred Gains (Losses)     HTML     61K 
                and Related Taxes on Cash Flow Hedges (Detail)                   
122: R90         Financial Derivatives - Additional Information      HTML     64K  
                (Detail)                                                         
113: R91         Financial Derivatives - Outstanding Foreign         HTML     75K  
                Currency Forward Contracts and Options (Detail)                  
144: R92         Financial Derivatives - Derivative Instruments      HTML     83K  
                Fair Value (Detail)                                              
112: R93         Financial Derivatives - Effect of Company's         HTML     83K  
                Derivative Instruments (Detail)                                  
91: R94         Investments Held in Rabbi Trust - Investments Held  HTML     59K 
                in Rabbi Trust, Classified as Trading (Detail)                   
152: R95         Investments Held in Rabbi Trust - Additional        HTML     56K  
                Information (Detail)                                             
87: R96         Investments Held in Rabbi Trust - Components of     HTML     69K 
                Investment Income (Losses), Included in Other                    
                Income (Expense) in Accompanying Consolidated                    
                Statements of Operations (Detail)                                
54: R97         Property and Equipment - Property and Equipment     HTML     79K 
                (Detail)                                                         
102: R98         Property and Equipment - Capitalized Internally     HTML     57K  
                Developed Software, Net of Depreciation (Detail)                 
95: R99         Property and Equipment - Additional Information     HTML     71K 
                (Detail)                                                         
73: R100        Deferred Charges and Other Assets - Components of   HTML     75K 
                Deferred Charges and Other Assets (Detail)                       
172: R101        Accrued Employee Compensation and Benefits -        HTML     73K  
                Components of Accrued Employee Compensation and                  
                Benefits (Detail)                                                
142: R102        Deferred Revenue - Components of Deferred Revenue   HTML     59K  
                (Detail)                                                         
111: R103        Other Accrued Expenses and Current Liabilities -    HTML     93K  
                Other Accrued Expenses and Current Liabilities                   
                (Detail)                                                         
28: R104        Deferred Grants - Schedule of Deferred Grants       HTML     63K 
                (Detail)                                                         
154: R105        Borrowings - Additional Information (Detail)        HTML    102K  
162: R106        Borrowings - Components of Borrowings (Detail)      HTML     63K  
156: R107        Accumulated Other Comprehensive Income (Loss) -     HTML    125K  
                Components of Accumulated Other Comprehensive                    
                Income (Loss) (Detail)                                           
106: R108        Accumulated Other Comprehensive Income (Loss) -     HTML     90K  
                Amounts Reclassified to Net Income from                          
                Accumulated Other Comprehensive Income (Loss)                    
                (Detail)                                                         
38: R109        Income Taxes - Income from Continuing Operations    HTML     61K 
                before Income Taxes (Detail)                                     
133: R110        Income Taxes - Significant Components of Income     HTML     92K  
                Tax Provision (Detail)                                           
58: R111        Income Taxes - Significant Portions of Deferred     HTML     75K 
                Income Tax Provision (Benefit) Due to Temporary                  
                Differences (Detail)                                             
18: R112        Income Taxes - Reconciliation of Income Tax         HTML     91K 
                Provision (Detail)                                               
89: R113        Income Taxes - Additional Information (Detail)      HTML    122K 
81: R114        Income Taxes - Significant Portions of Deferred     HTML     91K 
                Tax Assets and Liabilities Due to Temporary                      
                Differences (Detail)                                             
150: R115        Income Taxes - Schedule of Deferred Tax Assets and  HTML     69K  
                Liabilities Classifications (Detail)                             
65: R116        Income Taxes - Reconciliation of Amounts of         HTML     66K 
                Unrecognized Net Tax Benefits (Detail)                           
166: R117        Income Taxes - Summary of Significant Tax           HTML     55K  
                Jurisdictions Currently under Audit (Detail)                     
32: R118        Income Taxes - Summary of Tax Jurisdictions and     HTML     57K 
                Open Tax Years (Detail)                                          
117: R119        Earnings Per Share - Numbers of Shares Used in      HTML     67K  
                Earnings Per Share Computation (Detail)                          
139: R120        Earnings Per Share - Additional Information         HTML     60K  
                (Detail)                                                         
22: R121        Earnings Per Share - Shares Repurchased (Detail)    HTML     65K 
114: R122        Commitments and Loss Contingency - Additional       HTML     59K  
                Information (Detail)                                             
103: R123        Commitments and Loss Contingency - Rental Expense   HTML     54K  
                under Operating Leases (Detail)                                  
25: R124        Commitments and Loss Contingency - Schedule of      HTML     72K 
                Future Minimum Rental Payments under Operating                   
                Leases (Detail)                                                  
119: R125        Commitments and Loss Contingency - Schedule of      HTML     70K  
                Future Minimum Purchases Remaining under                         
                Agreements (Detail)                                              
168: R126        Defined Benefit Pension Plan and Postretirement     HTML     62K  
                Benefits - Additional Information (Detail)                       
33: R127        Defined Benefit Pension Plan and Postretirement     HTML     76K 
                Benefits - Reconciliation of Change in Benefit                   
                Obligation (Detail)                                              
67: R128        Defined Benefit Pension Plan and Postretirement     HTML     63K 
                Benefits - Benefit Obligations and Net Periodic                  
                Benefit Cost for Pension Plans (Detail)                          
145: R129        Defined Benefit Pension Plan and Postretirement     HTML     73K  
                Benefits - Net Periodic Benefit Cost and Other                   
                Accumulated Comprehensive Income for Pension Plans               
                (Detail)                                                         
167: R130        Defined Benefit Pension Plan and Postretirement     HTML     67K  
                Benefits - Estimated Future Benefit Payments for                 
                Expected Future Service (Detail)                                 
98: R131        Defined Benefit Pension Plan and Postretirement     HTML     54K 
                Benefits - Company's Contributions to Employee                   
                Retirement Savings Plans (Detail)                                
115: R132        Defined Benefit Pension Plan and Postretirement     HTML     59K  
                Benefits - Post-Retirement Benefit Obligation and                
                Unrealized Gain (Losses) (Detail)                                
34: R133        Stock-Based Compensation - Stock-Based              HTML     69K 
                Compensation Expense, Income Tax Benefits Related                
                to Stock-Based Compensation and Excess Tax                       
                Benefits (Provision) Recorded by Company (Detail)                
39: R134        Stock-Based Compensation - Additional Information   HTML    163K 
                (Detail)                                                         
88: R135        Stock-Based Compensation - Summary of Assumptions   HTML     71K 
                Used to Estimate Fair Value (Detail)                             
69: R136        Stock-Based Compensation - Summary of Stock         HTML    101K 
                Appreciation Rights Activity (Detail)                            
136: R137        Stock-Based Compensation - Weighted Average Grant   HTML     68K  
                Date of SARs Granted and Total Intrinsic Value of                
                SARs Exercised (Detail)                                          
92: R138        Stock-Based Compensation - Summary of Nonvested     HTML     78K 
                Stock Appreciation Rights (Detail)                               
64: R139        Stock-Based Compensation - Summary of Nonvested     HTML     87K 
                Restricted Shares and Restricted Stock Units                     
                (Detail)                                                         
93: R140        Stock-Based Compensation - Summary of Weighted      HTML     67K 
                Average Grant-Date Fair Value Granted and Total                  
                Fair Value of Restricted Shares and Restricted                   
                Stock Units Vested (Detail)                                      
50: R141        Stock-Based Compensation - Summary of Nonvested     HTML     83K 
                Common Stock Units and Share Awards (Detail)                     
17: R142        Stock-Based Compensation - Summary of Weighted      HTML     64K 
                Average Grant-Date Fair Value of Common Stock                    
                Units and Share Awards Granted and Total Fair                    
                Value of Common Stock Units and Share Awards                     
                Vested (Detail)                                                  
147: R143        Stock-Based Compensation - Summary of Nonvested     HTML     82K  
                Common Stock (Detail)                                            
126: R144        Stock-Based Compensation - Summary of Weighted      HTML     68K  
                Average Grant-Date Fair Value of Common Stock                    
                Awarded and Cash Used to Settle Company's                        
                Obligation under Deferred Compensation (Detail)                  
43: R145        Segments and Geographic Information - Additional    HTML     64K 
                Information (Detail)                                             
116: R146        Segments and Geographic Information - Company's     HTML    128K  
                Reportable Segments (Detail)                                     
97: R147        Segments and Geographic Information - Revenues by   HTML     81K 
                Segment from Major Customers (Detail)                            
41: R148        Segments and Geographic Information - Total         HTML     79K 
                Revenue from Company's Next Largest Client                       
                (Detail)                                                         
44: R149        Segments and Geographic Information - Operations    HTML    127K 
                by Geographic Location (Detail)                                  
131: R150        Segments and Geographic Information - Revenues for  HTML     64K  
                the Company's Products and Services (Detail)                     
59: R151        Other (Expense) - Schedule of Other (Expense)       HTML     68K 
                (Detail)                                                         
20: R152        Related Party Transactions - Additional             HTML     55K 
                Information (Detail)                                             
107: R153        Schedule II - Valuation and Qualifying Accounts     HTML     82K  
                (Detail)                                                         
165: XML         IDEA XML File -- Filing Summary                      XML    284K  
23: EXCEL       IDEA Workbook of Financial Reports                  XLSX    444K 
68: EXCEL       IDEA Workbook of Financial Reports (.xls)            XLS   2.74M 
10: EX-101.INS  XBRL Instance -- syke-20141231                       XML   4.33M 
12: EX-101.CAL  XBRL Calculations -- syke-20141231_cal               XML    485K 
13: EX-101.DEF  XBRL Definitions -- syke-20141231_def                XML   1.25M 
14: EX-101.LAB  XBRL Labels -- syke-20141231_lab                     XML   2.48M 
15: EX-101.PRE  XBRL Presentations -- syke-20141231_pre              XML   1.99M 
11: EX-101.SCH  XBRL Schema -- syke-20141231                         XSD    423K 
61: ZIP         XBRL Zipped Folder -- 0001193125-15-054298-xbrl      Zip    379K 


‘10-K’   —   Annual Report
Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Table of Contents
"Part I
"Business
"Risk Factors
"Unresolved Staff Comments
"Properties
"Legal Proceedings
"Mine Safety Disclosures
"Part Ii
"Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
"Selected Financial Data
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Quantitative and Qualitative Disclosures About Market Risk
"Financial Statements and Supplementary Data
"Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
"Controls and Procedures
"Other Information
"Part Iii
"Directors, Executive Officers and Corporate Governance
"Executive Compensation
"Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
"Certain Relationships and Related Transactions, and Director Independence
"Principal Accountant Fees and Services
"Part Iv
"Exhibits and Financial Statement Schedules
"Report of Independent Registered Public Accounting Firm
"Consolidated Balance Sheets as of December 31, 2014 and 2013
"Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013 and 2012
"Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2014, 2013 and 2012
"Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2014, 2013 and 2012
"Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 2012
"Notes to Consolidated Financial Statements

This is an HTML Document rendered as filed.  [ Alternative Formats ]



  10-K  
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

 

x

Annual Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For the fiscal year ended December 31, 2014

Or

 

¨

Transition Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For The Transition Period From                      To                     

Commission File Number 0-28274

Sykes Enterprises, Incorporated

(Exact name of registrant as specified in its charter)

 

Florida   56-1383460

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

400 N. Ashley Drive, Suite 2800, Tampa, Florida   33602
(Address of principal executive offices)   (Zip Code)

(813) 274-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of each exchange on which registered

Common Stock $.01 Par Value   NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

Non-accelerated filer

 

¨  

  

Smaller reporting company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the shares of voting common stock held by non-affiliates of the Registrant computed by reference to the closing sales price of such shares on the NASDAQ Global Select Market on June 30, 2014, the last business day of the Registrant’s most recently completed second fiscal quarter, was $920,160,566.

As of February 6, 2015, there were 43,291,264 outstanding shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE:

 

Documents

  

Form 10-K Reference

Portions of the Proxy Statement for the year 2015 Annual Meeting of Shareholders

  

Part III Items 10–14


Table of Contents

TABLE OF CONTENTS

 

         Page  
PART I   

Item 1

 

Business

     3   

Item 1A

 

Risk Factors

     10   

Item 1B

 

Unresolved Staff Comments

     17   

Item 2

 

Properties

     18   

Item 3

 

Legal Proceedings

     19   

Item 4

 

Mine Safety Disclosures

     19   
PART II   

Item 5

 

Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

     20   

Item 6

 

Selected Financial Data

     22   

Item 7

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     23   

Item 7A

 

Quantitative and Qualitative Disclosures About Market Risk

     42   

Item 8

 

Financial Statements and Supplementary Data

     43   

Item 9

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     43   

Item 9A

 

Controls and Procedures

     44   

Item 9B

 

Other Information

     46   
PART III   

Item 10

 

Directors, Executive Officers and Corporate Governance

     46   

Item 11

 

Executive Compensation

     46   

Item 12

 

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

     46   

Item 13

 

Certain Relationships and Related Transactions, and Director Independence

     46   

Item 14

 

Principal Accountant Fees and Services

     46   
PART IV   

Item 15

 

Exhibits and Financial Statement Schedules

     47   

 

2


Table of Contents

PART I

Item 1. Business

General

Sykes Enterprises, Incorporated and consolidated subsidiaries (“SYKES,” “our,” “us” or “we”) is a global leader in providing comprehensive outsourced customer contact management solutions and services in the business process outsourcing (“BPO”) arena. We provide an array of sophisticated customer contact management solutions to a wide range of clients including Fortune 1000 companies, medium-sized businesses and public institutions around the world, primarily in the communications, financial services, technology/consumer, transportation and leisure, healthcare and other industry verticals. We serve our clients through two geographic operating regions: the Americas (United States, Canada, Latin America, Australia and the Asia Pacific Rim) and EMEA (Europe, the Middle East and Africa). Our Americas and EMEA groups primarily provide customer contact management services (with an emphasis on inbound technical support and customer service), which includes customer assistance, healthcare and roadside assistance, technical support and product sales to our clients’ customers. These services are delivered through multiple communication channels including phone, e-mail, social media, text messaging and chat. We also provide various enterprise support services in the United States that include services for our clients’ internal support operations, from technical staffing services to outsourced corporate help desk services. In Europe, we also provide fulfillment services including order processing via the Internet and phone, inventory control, product delivery and product returns handling. (See Note 27, Segments and Geographic Information, of the accompanying “Notes to Consolidated Financial Statements” for further information on our segments.) Our complete service offering helps our clients acquire, retain and increase the lifetime value of their customer relationships. We have developed an extensive global reach with customer contact management centers across six continents, including North America, South America, Europe, Asia, Australia and Africa. We deliver cost-effective solutions that enhance the customer service experience, promote stronger brand loyalty, and bring about high levels of performance and profitability.

SYKES was founded in 1977 in North Carolina and we moved our headquarters to Florida in 1993. In March 1996, we changed our state of incorporation from North Carolina to Florida. Our headquarters are located at 400 North Ashley Drive, Suite 2800, Tampa, Florida 33602, and our telephone number is (813) 274-1000.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, as well as our proxy statements and other materials which are filed with, or furnished to, the Securities and Exchange Commission (“SEC”) are made available, free of charge, on or through our Internet website at www.sykes.com (click on “Company” then “Investor Relations” and then “SEC Filings” under the heading “Financial Reports and Filings”) as soon as reasonably practicable after they are filed with, or furnished to, the SEC.

Industry Overview

The customer contact management industry is highly fragmented and significant in size. According to Ovum, an industry research firm, the total number of individuals, or agent positions, working in the customer contact management industry worldwide was estimated at roughly 9.6 million in 2014. With approximately 80% of the customer contact work done by in-house contact centers, the number of agent positions working for outsourcers such as SYKES, was estimated at 2.0 million in 2014. Both the outsourced and total agent positions are forecasted by Ovum to grow at compound annual growth rate of 5.1% and 2.9%, respectively, from 2014 to 2018. It is estimated that no single outsourcer has more than five percent of the total agent positions worldwide. Measured in dollar terms, the size of the outsourced portion of the customer contact management industry worldwide was estimated at approximately $64 billion in 2014, according to International Data Corporation (“IDC”), an industry research firm. IDC also estimates that the outsourced portion of the customer contact industry is expected to grow to approximately $81 billion by 2018, a compound annual growth rate of 6.1% from 2014 to 2018.

We believe that growth for outsourced customer contact management solutions and services will be fueled by the trend of global Fortune 1000 companies and medium-sized businesses utilizing outsourcers. In today’s marketplace, companies require innovative customer contact management solutions that allow them to enhance the end user’s experience with their products and services, strengthen and enhance their company brands, maximize the lifetime value of their customers, efficiently and effectively deliver human interaction when customers value it most, and deploy best-in-class customer management strategies, processes and technologies. However, a myriad of factors, among them intense global competition, pricing pressures, softness in the global economy and rapid changes in technology, continue to make it difficult for companies to cost-effectively maintain the in-house personnel necessary to handle all of their customer contact management needs.

 

3


Table of Contents

To address these needs, we offer comprehensive global customer contact management solutions that leverage both brick-and-mortar and virtual at-home agent delivery infrastructure. We provide consistent high-value support for our clients’ customers across the globe in a multitude of languages, leveraging our dynamic, secure communications infrastructure and our global footprint that reaches across 21 countries. This global footprint includes established brick-and-mortar operations in both onshore and offshore geographies where companies have access to high-quality customer contact management solutions at lower costs compared to other markets. We further complement our brick-and-mortar global delivery model with a highly differentiated and ready-made best-in-class virtual at-home agent delivery model, which we acquired through the Alpine Access, Inc. (“Alpine”) acquisition in August of 2012. By working in partnership with outsourcers, companies can ensure that the crucial task of retaining and growing their customer base is addressed while creating operating flexibility, enabling focus on their core competencies, ensuring service excellence and execution, achieving cost savings through a variable cost structure, leveraging scale, entering niche markets speedily, and efficiently allocating capital within their organizations.

Business Strategy

Broadly speaking, our value proposition to our clients is that of a trusted partner, which provides proven customer service solutions to Fortune 1000 companies that drive differentiation, brand loyalty and increased lifetime value of end customer relationships. By outsourcing their customer service solutions to us, clients are able to achieve designs of exceptional customer experience and drive tangible business impact with enhanced operational flexibility, lower operating costs and faster speed to market, all of which are at the center of our value proposition. At a tactical level, we deliver on this value proposition through consistent delivery of operational and client excellence. Our business strategy is to leverage this value proposition in order to capitalize on and increase our share of the large and underpenetrated addressable market opportunity for customer contact management services worldwide. We believe through successful execution of our business strategy, we could generate a healthy level of revenue growth and drive targeted long-term operating margins. To deliver on our long-term growth potential and operating margin objectives, we need to manage the key levers of our business strategy, the principles of which include the following:

Build Long-Term Client Relationships Through Customer Service Excellence. We believe that providing high-value, high-quality service is critical in our clients’ decisions to outsource and in building long-term relationships with our clients. To ensure service excellence and consistency across each of our centers globally, we leverage a portfolio of techniques, including SYKES Science of Service®. This standard is a compilation of more than 30 years of experience and best practices. Every customer contact management center strives to meet or exceed the standard, which addresses leadership, hiring and training, performance management down to the agent level, forecasting and scheduling, and the client relationship including continuous improvement, disaster recovery plans and feedback.

Increasing Share of Seats Within Existing Clients and Winning New Clients. We provide customer contact management support to numerous multinational companies. With this client list, we have the opportunity to grow our client base. We strive to achieve this by winning a greater share of our clients’ in-house seats as well as gaining share from our competitors by providing consistently high-quality service as clients continue to consolidate their vendor base. In addition, as we further leverage our highly differentiated virtual at-home agent delivery capability internationally, using our knowledge of verticals and business lines, we plan to win new clients as a way to broaden our base of growth.

Diversifying Verticals and Expanding Service Lines. To mitigate the impact of any negative economic and product cycles on our growth rate, we continue to seek ways to diversify into verticals and service lines that have countercyclical features and healthy growth rates. We are targeting the following verticals for growth: communications, financial services, technology/consumer, healthcare and retail. These verticals cover various business lines, including wireless services, broadband, retail banking, credit card/consumer fraud protection, content moderation, telemedicine and soft and hard good retailers.

Maximizing Capacity Utilization Rates and Strategically Adding Seat Capacity. Revenues and profitability growth are driven by increasing the capacity utilization rate in conjunction with seat capacity additions. We plan to sustain our focus on increasing the capacity utilization rate by further penetrating existing clients, adding new clients and rationalizing underutilized seat capacity as deemed necessary. With greater operating flexibility resulting from the Alpine acquisition, we can rationalize underutilized capacity more efficiently and drive capacity utilization rates.

 

4


Table of Contents

Broadening At-Home Agent and Brick-and-Mortar Global Delivery Footprint. Just as increased capacity utilization rates and increased seat capacity are key drivers of our revenues and profitability growth, where we deploy both the seat capacity and the virtual at-home agent delivery platform geographically is also important. By broadening and continuously strengthening our brick-and-mortar global delivery footprint and our virtual at-home agent delivery platform, we are able to meet both our existing and new clients’ customer contact management needs globally as they enter new markets. At the end of 2014, our global delivery brick-and-mortar footprint spanned 21 countries while our virtual at-home agent delivery platform spanned 40 states and eight provinces within the U.S. and Canada, respectively.

Creating Value-Added Service Enhancements. To improve both revenue and margin expansion, we will continue to introduce new service offerings and add-on enhancements. Multilingual customer support, sales and marketing, and back office services are examples of horizontal service offerings, while data analytics and process improvement products are examples of add-on enhancements. Additionally, with the rapid emergence of on-line communities, such as Facebook and Twitter, we continue to make on-going investments in our social media service offerings, which can be leveraged across both our brick-and-mortar and virtual at-home agent delivery platforms.

Continue to Grow Our Business Organically and through Acquisitions. We have grown our customer contact management outsourcing operations utilizing a strategy of both internal organic growth and external acquisitions. Our organic growth and acquisition strategy is to target markets, clients, verticals, delivery geographies and service mix that will expand our addressable market opportunity, and thus drive our organic growth. Entry into The Philippines, El Salvador, Romania and, recently, Colombia are examples of how we leveraged these delivery geographies to further penetrate our base of both existing and new clients, verticals and service mix in order to drive organic growth. While the Alpine acquisition is an example of how we used an acquisition to augment and differentiate our delivery model, the ICT Group, Inc. (“ICT”) acquisition is an example of how we used an acquisition to gain overall size and critical mass in key verticals, clients and geographies.

Continuing to Focus on Expanding the Addressable Market Opportunities. As part of our growth strategy, we continually seek to expand the number of markets we serve. The United States, Canada and Germany, for instance, are markets which are served by in-country centers, centers in offshore regions or a combination thereof. We continually seek ways to broaden the addressable market for our customer contact management services. We currently operate in 15 markets.

Services

We specialize in providing inbound outsourced customer contact management solutions in the BPO arena on a global basis. Our customer contact management services are provided through two reportable segments — the Americas and EMEA. The Americas region, representing 80.7% of consolidated revenues in 2014, includes the United States, Canada, Latin America, Australia and the Asia Pacific Rim. The sites within Latin America and the Asia Pacific Rim are included in the Americas region as they provide a significant service delivery vehicle for U.S.-based companies that are utilizing our customer contact management solutions in these locations to support their customer care needs. In addition, the Americas region also includes revenues from our virtual at-home agent delivery solution, which serves markets in both the U.S. and Canada. The EMEA region, representing 19.3% of consolidated revenues in 2014, includes Europe, the Middle East and Africa. See Note 27, Segments and Geographic Information, of the accompanying “Notes to Consolidated Financial Statements” for further information on our segments. The following is a description of our customer contact management solutions:

Outsourced Customer Contact Management Services. Our outsourced customer contact management services represented approximately 98.2% of total 2014 consolidated revenues. Each year, we handle over 250 million customer contacts including phone, e-mail, social media, text messaging and chat throughout the Americas and EMEA regions. We provide these services utilizing our advanced technology infrastructure, human resource management skills and industry experience. These services include:

 

   

Customer care — Customer care contacts primarily include product information requests, describing product features, activating customer accounts, resolving complaints, cross-selling/up-selling, handling billing inquiries, changing addresses, claims handling, ordering/reservations, prequalification and warranty management, providing health information and roadside assistance;

 

   

Technical support — Technical support contacts primarily include handling inquiries regarding hardware, software, communications services, communications equipment, Internet access technology and Internet portal usage; and

 

5


Table of Contents
   

Customer acquisition — Our customer acquisition services are primarily focused on inbound and outbound up-selling of our clients’ products and services.

We provide these services, primarily inbound customer calls, through our extensive global network of customer contact management centers in many languages. Our technology infrastructure and managed service solutions allow for effective distribution of calls to one or more centers. These technology offerings provide our clients and us with the leading edge tools needed to maximize quality and customer satisfaction while controlling and minimizing costs.

Fulfillment Services. In Europe, we offer fulfillment services that are integrated with our customer care and technical support services. Our fulfillment solutions include order processing via the Internet and phone, inventory control, product delivery and product returns handling.

Enterprise Support Services. In the United States, we provide a range of enterprise support services including technical staffing services and outsourced corporate help desk solutions.

Operations

Customer Contact Management Centers. We operate across 21 countries in 67 customer contact management centers, which breakdown as follows: 18 centers across Europe and Egypt, 21 centers in the United States, six centers in Canada, four centers in Australia and 18 centers offshore, including the People’s Republic of China, The Philippines, Costa Rica, El Salvador, India, Mexico and Brazil. In addition to our customer contact management centers, we employ approximately 8,700 at-home customer contact agents across 40 states in the U.S. and across eight provinces in Canada.

We utilize a sophisticated workforce management system to provide efficient scheduling of personnel. Our internally developed digital private communications network complements our workforce by allowing for effective call volume management and disaster recovery backup. Through this network and our dynamic intelligent call routing capabilities, we can rapidly respond to changes in client call volumes and move call volume traffic based on agent availability and skill throughout our network of centers, improving the responsiveness and productivity of our agents. We also can offer cost competitive solutions for taking calls to our offshore locations.

Our data warehouse captures and downloads customer contact information for reporting on a daily, real-time and historical basis. This data provides our clients with direct visibility into the services that we are providing for them. The data warehouse supplies information for our performance management systems such as our agent scorecarding application, which provides us with the information required for effective management of our operations.

Our customer contact management centers are protected by a fire extinguishing system, backup generators with significant capacity and 24 hour refueling contracts and short-term battery backups in the event of a power outage, reduced voltage or a power surge. Rerouting of call volumes to other customer contact management centers is also available in the event of a telecommunications failure, natural disaster or other emergency. Security measures are imposed to prevent unauthorized physical access. Software and related data files are backed up daily and stored off site at multiple locations. We carry business interruption insurance covering interruptions that might occur as a result of certain types of damage to our business.

Fulfillment Centers. We currently have two fulfillment centers located in Europe. We provide our fulfillment services primarily to certain clients operating in Europe who desire this complementary service in connection with outsourced customer contact management services.

Enterprise Support Services Office. Our enterprise support services office, located in a metropolitan area in the United States, provides recruitment services for high-end knowledge workers, a local presence to service major accounts, and outsourced corporate help desk solutions.

Sales and Marketing

Our sales and marketing objective is to leverage our vertical expertise and global presence to develop long-term relationships with existing and future clients. Our customer contact management solutions have been developed to help our clients acquire, retain and increase the value of their customer relationships. Our plans for increasing our visibility and impacting the market include participation in market-specific industry associations, trade shows and seminars, content marketing to industry leading corporations, and consultative personal visits and solution designs.

 

6


Table of Contents

We research and publish thought provoking perspectives on key industry issues, and use forums speaking engagements, articles and white papers, as well as our website and digital presence to establish our leadership position in the market.

Our sales force is composed of business development managers who pursue new business opportunities and strategic account managers who manage and grow relationships with existing accounts. We emphasize account development to strengthen relationships with existing clients. Business development management and strategic account managers are assigned to markets in their area of expertise in order to develop a complete understanding of each client’s particular needs, to form strong client relationships and encourage cross-selling of our other service offerings. We have inside customer sales representatives who receive customer inquiries and who provide pre-sales relationship development for the business development managers. We use a methodical approach to collecting client feedback through quarterly business reviews, annual strategic reviews, and through our bi-annual Voice of the Client program, which enables us to react to early warning signs, and quickly identify and remedy challenges. It also is used to highlight our most loyal clients, who we then work with to provide references, testimonials and joint speaking engagements at industry conferences.

As part of our marketing efforts, we invite existing and potential clients to experience our customer contact management centers and virtual at-home agent delivery operations, where we can demonstrate the expertise of our skilled staff in partnering to deliver new ways of growing clients’ customer satisfaction and retention rates, and thus profit, through timely, insightful and proven solutions. This forum allows us to demonstrate our capabilities to design, launch and scale programs. It also allows us to illustrate our best innovations in talent management, analytics, and digital channels, and how they can be best integrated into a program’s design.

Clients

We provide service to clients from our locations in the United States, Canada, Latin America, Australia, the Asia Pacific Rim, Europe and Africa. These clients are Fortune 1000 corporations, medium-sized businesses and public institutions, which span the communications, financial services, technology/consumer, transportation and leisure, healthcare and other industries. Revenue by industry vertical for 2014, as a percentage of our consolidated revenues, was 38% for communications, 24% for financial services, 17% for technology/consumer, 8% for transportation and leisure, 5% for healthcare, 2% for retail and 6% for all other verticals, including government and utilities. We believe our globally recognized client base presents opportunities for further cross marketing of our services.

Total revenues by segment from AT&T Corporation, a major provider of communication services for which we provide various customer support services, were as follows (in thousands):

 

     Years Ended December 31,  
   2014     2013     2012  
   Amount      % of Revenues     Amount      % of Revenues     Amount      % of Revenues  

Americas

   $ 212,607         19.9   $ 162,888         15.5   $ 130,072         13.7

EMEA

     3,519         1.4     3,513         1.7     3,018         1.7
  

 

 

      

 

 

      

 

 

    
   $ 216,126         16.3   $ 166,401         13.2   $ 133,090         11.8
  

 

 

      

 

 

      

 

 

    

We have multiple distinct contracts with AT&T spread across multiple lines of businesses, which expire at varying dates between 2015 and 2017. We have historically renewed most of these contracts. However, there is no assurance that these contracts will be renewed, or if renewed, will be on terms as favorable as the existing contracts. Each line of business is governed by separate business terms, conditions and metrics. Each line of business also has a separate decision maker such that a loss of one line of business would not necessarily impact our relationship with the client and decision makers on other lines of business. The loss of (or the failure to retain a significant amount of business with) any of our key clients, including AT&T, could have a material adverse effect on our performance. Many of our contracts contain penalty provisions for failure to meet minimum service levels and are cancelable by the client at any time or on short notice. Also, clients may unilaterally reduce their use of our services under our contracts without penalty.

 

7


Table of Contents

Total revenues by segment from our next largest client, which was in the financial services vertical in each of the years, were as follows (in thousands):

 

     Years Ended December 31,  
   2014     2013     2012  
   Amount      % of Revenues     Amount      % of Revenues     Amount      % of Revenues  

Americas

   $ 70,255         6.6   $ 73,226         7.0   $ 70,311         7.4

EMEA

     —           0.0     —           0.0     —           0.0
  

 

 

      

 

 

      

 

 

    
   $ 70,255         5.3   $ 73,226         5.8   $ 70,311         6.2
  

 

 

      

 

 

      

 

 

    

Other than AT&T, total revenues by segment of our clients that each individually represent 10% or greater of that segment’s revenues in each of the years were as follows (in thousands):

 

     Years Ended December 31,  
   2014     2013     2012  
   Amount      % of Revenues     Amount      % of Revenues     Amount      % of Revenues  

Americas

   $ —           0.0   $ —           0.0   $ —           0.0

EMEA

     79,811         31.1     55,123         25.9     33,063         18.3
  

 

 

      

 

 

      

 

 

    
   $ 79,811         6.0   $ 55,123         4.4   $ 33,063         2.9
  

 

 

      

 

 

      

 

 

    

Our top ten clients accounted for approximately 46.8%, 45.9% and 47.8% of our consolidated revenues during the years ended December 31, 2014, 2013 and 2012, respectively.

Competition

The industry in which we operate is global and, therefore, highly fragmented and extremely competitive. While many companies provide customer contact management solutions and services, we believe no one company is dominant in the industry.

In most cases, our principal competition stems from our existing and potential clients’ in-house customer contact management operations. When it is not the in-house operations of a client or potential client, our public and private direct competition includes 24/7 Customer, Alorica, Arise, Atento, Concentrix, Convergys, Expert Global Solutions, iQor, LiveOps, Sitel, StarTek, Sutherland, Teleperformance, TeleTech, Transcom and Working Solutions, as well as the customer care arm of such companies as Accenture, Infosys, Mahindra Satyam, Wipro and Xerox, among others. There are other numerous and varied providers of such services, including firms specializing in various CRM consulting, other customer management solutions providers, niche or large market companies, as well as product distribution companies that provide fulfillment services. Some of these companies possess substantially greater resources, greater name recognition and a more established customer base than we do.

We believe that the most significant competitive factors in the sale of outsourced customer contact management services include service quality, tailored value-added service offerings, industry experience, advanced technological capabilities, global coverage, reliability, scalability, security, price and financial strength. As a result of intense competition, outsourced customer contact management solutions and services frequently are subject to pricing pressure. Clients also require outsourcers to be able to provide services in multiple locations. Competition for contracts for many of our services takes the form of competitive bidding in response to requests for proposal.

Intellectual Property

The success of our business depends, in part, on our proprietary technology and intellectual property. We rely on a combination of intellectual property laws and contractual arrangements to protect our intellectual property. We and our subsidiaries have registered various trademarks and service marks in the U.S. and/or other countries, including SYKES®, REAL PEOPLE. REAL SOLUTIONS®, SYKES HOME®, SYKES HOME POWERED BY ALPINE ACCESS®, SCIENCE OF SERVICE® and ALPINE ACCESS®. The duration of trademark and service mark registrations varies from country to country but may generally be renewed indefinitely as long as the marks are in use and their registrations are properly maintained. Our subsidiary, Alpine, was issued U.S. Patent No. 8,565,413 in 2013 which relates to a system and method for establishment and management of a remote agent call center. Alpine has several additional pending U.S. patent applications.

 

8


Table of Contents

Employees

As of January 31, 2015, we had approximately 50,450 employees worldwide, including 37,800 customer contact agents handling technical and customer support inquiries at our centers, 8,700 at-home customer contact agents handling technical and customer support inquiries, 3,800 in management, administration, information technology, finance, sales and marketing roles, 30 in enterprise support services and 120 in fulfillment services. Our employees, with the exception of approximately 700 employees in Brazil and various European countries, are not union members and we have never suffered a material interruption of business as a result of a labor dispute. We consider our relations with our employees worldwide to be satisfactory.

We employ personnel through a continually updated recruiting network. This network includes a seasoned team of recruiters, competency-based selection standards and the sharing of global best practices in order to advertise and source qualified candidates through proven recruiting techniques. Nonetheless, demand for qualified professionals with the required language and technical skills may still exceed supply at times as new skills are needed to keep pace with the requirements of customer engagements. As such, competition for such personnel is intense. Additionally, employee turnover in our industry is high.

Executive Officers

The following table provides the names and ages of our executive officers, and the positions and offices currently held by each of them:

 

Name

    

Age

    

Principal Position

Charles E. Sykes

       52       President and Chief Executive Officer and Director

John Chapman

       48       Executive Vice President and Chief Financial Officer

Lawrence R. Zingale

       58       Executive Vice President, General Manager of Major Markets

Andrew J. Blanchard

       57       Executive Vice President, Financial Services, Healthcare and Retail

Jenna R. Nelson

       51       Executive Vice President, Human Resources

David L. Pearson

       56       Executive Vice President and Chief Information Officer

James T. Holder

       56       Executive Vice President, General Counsel and Corporate Secretary

William N. Rocktoff

       52       Global Vice President and Corporate Controller

Charles E. Sykes joined SYKES in 1986 and was named President and Chief Executive Officer and Director in August 2004. From July 2003 to August 2004, Mr. Sykes was the Chief Operating Officer. From March 2000 to June 2001, Mr. Sykes was Senior Vice President, Marketing, and in June 2001, he was appointed to the position of General Manager, Senior Vice President — the Americas. From December 1996 to March 2000, he served as Vice President, Sales, and held the position of Regional Manager of the Midwest Region for Professional Services from 1992 until 1996.

John Chapman, F.C.C.A, joined SYKES in September 2002 as Vice President, Finance, managing the EMEA finance function and was named Senior Vice President, EMEA Global Region in January 2012, adding operational responsibility. In April 2014, he was named Executive Vice President and Chief Financial Officer. Prior to joining SYKES, Mr. Chapman served as financial controller for seven years for Raytheon UK.

Lawrence R. Zingale joined SYKES in January 2006 as Senior Vice President, Global Sales and Client Management. In May 2010, he was named Executive Vice President, Global Sales and Client Management and in September 2012, he was named Executive Vice President and General Manager of Major Markets. Prior to joining SYKES, Mr. Zingale served as Executive Vice President and Chief Operating Officer of StarTek, Inc. since 2002. From December 1999 until November 2001, Mr. Zingale served as President of the Americas at Stonehenge Telecom, Inc. From May 1997 until November 1999, Mr. Zingale served as President and Chief Operating Officer of International Community Marketing. From February 1980 until May 1997, Mr. Zingale held various senior level positions at AT&T.

 

9


Table of Contents

Andrew J. Blanchard joined SYKES in November 2014 as Executive Vice President, Financial Services, Healthcare and Retail. From 2013 until his joining SYKES, Mr. Blanchard served as Managing Partner at Avasant, a globally ranked third-party advisory and consulting firm. Prior to 2013, Mr. Blanchard had a 30-year career at Accenture, formerly Andersen Consulting, working across the organization in various leadership roles; subsequently being named Managing Director of a new division, which focused on the global customer contact management industry.

Jenna R. Nelson joined SYKES in August 1993 and was named Senior Vice President, Human Resources, in July 2001. In May 2010, she was named Executive Vice President, Global Human Resources. From January 2001 until July 2001, Ms. Nelson held the position of Vice President, Human Resources. In August 1998, Ms. Nelson was appointed Vice President, Human Resources, and held the position of Director, Human Resources and Administration, from August 1996 to July 1998. From August 1993 until July 1996, Ms. Nelson served in various management positions within SYKES, including Director of Administration.

David L. Pearson joined SYKES in February 1997 as Vice President, Engineering, and was named Vice President, Technology Systems Management, in 2000 and Senior Vice President and Chief Information Officer in August 2004. In May 2010, he was named Executive Vice President and Chief Information Officer. Prior to SYKES, Mr. Pearson held various engineering and technical management roles over a fifteen year period, including eight years at Compaq Computer Corporation and five years at Texas Instruments.

James T. Holder, J.D., joined SYKES in December 2000 as General Counsel and was named Corporate Secretary in January 2001, Vice President in January 2004 and Senior Vice President in December 2006. In May 2010, he was named Executive Vice President. From November 1999 until November 2000, Mr. Holder served in a consulting capacity as Special Counsel to Checkers Drive-In Restaurants, Inc., a publicly held restaurant operator and franchisor. From November 1993 until November 1999, Mr. Holder served in various capacities at Checkers including Corporate Secretary, Chief Financial Officer and Senior Vice President and General Counsel.

William N. Rocktoff, C.P.A., joined SYKES in August 1997 as Corporate Controller and was named Treasurer and Corporate Controller in December 1999 and Vice President and Corporate Controller in March 2002. In January 2011, he was named Global Vice President and Corporate Controller. From November 1989 to August 1997, Mr. Rocktoff held various financial positions, including Corporate Controller, at Kimmins Corporation, a publicly-held contracting company.

Item 1A. Risk Factors

Factors Influencing Future Results and Accuracy of Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates, forecasts, and projections about us, our beliefs, and assumptions made by us. In addition, we may make other written or oral statements, which constitute forward-looking statements, from time to time. Words such as “may,” “expects,” “projects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. Similarly, statements that describe our future plans, objectives or goals also are forward-looking statements. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties, including those discussed below and elsewhere in this Annual Report on Form 10-K. Our actual results may differ materially from what is expressed or forecasted in such forward-looking statements, and undue reliance should not be placed on such statements. All forward-looking statements are made as of the date hereof, and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Factors that could cause actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to: the marketplace’s continued receptivity to our terms and elements of services offered under our standardized contract for future bundled service offerings; our ability to continue the growth of our service revenues through additional customer contact management centers; our ability to further penetrate into vertically integrated markets; our ability to expand revenues within the global markets; our ability to continue to establish a competitive advantage through sophisticated technological capabilities, and the following risk factors:

 

10


Table of Contents

Risks Related to Our Business and Industry

Unfavorable general economic conditions could negatively impact our operating results and financial condition.

Unfavorable general economic conditions could negatively affect our business. While it is often difficult to predict the impact of general economic conditions on our business, these conditions could adversely affect the demand for some of our clients’ products and services and, in turn, could cause a decline in the demand for our services. Also, our clients may not be able to obtain adequate access to credit, which could affect their ability to make timely payments to us. If that were to occur, we could be required to increase our allowance for doubtful accounts, and the number of days outstanding for our accounts receivable could increase. In addition, we may not be able to renew our revolving credit facility at terms that are as favorable as those terms available under our current credit facility. Also, the group of lenders under our credit facility may not be able to fulfill their funding obligations, which could adversely impact our liquidity. For these reasons, among others, if unfavorable economic conditions persist or decline, this could adversely affect our revenues, operating results and financial condition, as well as our ability to access debt under comparable terms and conditions.

Our business is dependent on key clients, and the loss of a key client could adversely affect our business and results of operations.

We derive a substantial portion of our revenues from a few key clients. Our top ten clients accounted for approximately 46.8% of our consolidated revenues in 2014. The loss of (or the failure to retain a significant amount of business with) any of our key clients could have a material adverse effect on our business, financial condition and results of operations. Many of our contracts contain penalty provisions for failure to meet minimum service levels and are cancelable by the client at any time or on short-term notice. Also, clients may unilaterally reduce their use of our services under these contracts without penalty. Thus, our contracts with our clients do not ensure that we will generate a minimum level of revenues.

Cyber-attacks as well as improper disclosure or control of personal information could result in liability and harm our reputation, which could adversely affect our business and results of operations.

Our business is heavily dependent upon our computer and voice technologies, systems and platforms. Internal or external attacks on any of those could disrupt the normal operations of our call centers and impede our ability to provide critical services to our clients, thereby subjecting us to liability under our contracts. Additionally, our business involves the use, storage and transmission of information about our employees, our clients and customers of our clients. While we take measures to protect the security of, and unauthorized access to our systems, as well as the privacy of personal and proprietary information, it is possible that our security controls over our systems, as well as other security practices we follow, may not prevent the improper access to or disclosure of personally identifiable or proprietary information. Such disclosure could harm our reputation and subject us to liability under our contracts and laws that protect personal data, resulting in increased costs or loss of revenue. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we provide services. Our failure to adhere to or successfully implement processes in response to changing regulatory requirements in this area could result in legal liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business, financial condition and results of operations.

Our business is subject to substantial competition.

The markets for many of our services operate on a commoditized basis and are highly competitive and subject to rapid change. While many companies provide outsourced customer contact management services, we believe no one company is dominant in the industry. There are numerous and varied providers of our services, including firms specializing in call center operations, temporary staffing and personnel placement, consulting and integration firms, and niche providers of outsourced customer contact management services, many of whom compete in only certain markets. Our competitors include both companies who possess greater resources and name recognition than we do, as well as small niche providers that have few assets and regionalized (local) name recognition instead of global name recognition. In addition to our competitors, many companies who might utilize our services or the services of one of our competitors may utilize in-house personnel to perform such services. Increased competition, our failure to compete successfully, pricing pressures, loss of market share and loss of clients could have a material adverse effect on our business, financial condition and results of operations.

 

11


Table of Contents

Many of our large clients purchase outsourced customer contact management services from multiple preferred vendors. We have experienced and continue to anticipate significant pricing pressure from these clients in order to remain a preferred vendor. These companies also require vendors to be able to provide services in multiple locations. Although we believe we can effectively meet our clients’ demands, there can be no assurance that we will be able to compete effectively with other outsourced customer contact management services companies on price. We believe that the most significant competitive factors in the sale of our core services include the standard requirements of service quality, tailored value-added service offerings, industry experience, advanced technological capabilities, global coverage, reliability, scalability, security, price and financial strength.

The concentration of customer support centers in certain geographies poses risks to our operations which could adversely affect our financial condition.

Although we have call centers in many locations throughout the world, we have a concentration of centers in certain geographies outside of the U.S. and Canada, specifically The Philippines and Latin America. Our concentration of operations in those geographies is a result of our ability to access significant numbers of employees with certain language and other skills at costs that are advantageous. However, the concentration of business activities in any geographical area creates risks which could harm operations and our financial condition. Certain risks, such as natural disasters, armed conflict and military or civil unrest, political instability and disease transmission, as well as the risk of interruption to our delivery systems, is magnified when the realization of these, or any other risks, would effect a large portion of our business at once, which may result in a disproportionate increase in operating costs.

Our business is dependent on the trend toward outsourcing.

Our business and growth depend in large part on the industry trend toward outsourced customer contact management services. Outsourcing means that an entity contracts with a third party, such as us, to provide customer contact services rather than perform such services in-house. There can be no assurance that this trend will continue, as organizations may elect to perform such services themselves. A significant change in this trend could have a material adverse effect on our business, financial condition and results of operations. Additionally, there can be no assurance that our cross-selling efforts will cause clients to purchase additional services from us or adopt a single-source outsourcing approach.

We are subject to various uncertainties relating to future litigation.

We cannot predict whether any material suits, claims, or investigations may arise in the future. Regardless of the outcome of any future actions, claims, or investigations, we may incur substantial defense costs and such actions may cause a diversion of management time and attention. Also, it is possible that we may be required to pay substantial damages or settlement costs which could have a material adverse effect on our financial condition and results of operations.

Our industry is subject to rapid technological change which could affect our business and results of operations.

Rapid technological advances, frequent new product introductions and enhancements, and changes in client requirements characterize the market for outsourced customer contact management services. Technological advancements in voice recognition software, as well as self-provisioning and self-help software, along with call avoidance technologies, have the potential to adversely impact call volume growth and, therefore, revenues. Our future success will depend in large part on our ability to service new products, platforms and rapidly changing technology. These factors will require us to provide adequately trained personnel to address the increasingly sophisticated, complex and evolving needs of our clients. In addition, our ability to capitalize on our acquisitions will depend on our ability to continually enhance software and services and adapt such software to new hardware and operating system requirements. Any failure by us to anticipate or respond rapidly to technological advances, new products and enhancements, or changes in client requirements could have a material adverse effect on our business, financial condition and results of operations.

Our business relies heavily on technology and computer systems, which subjects us to various uncertainties.

We have invested significantly in sophisticated and specialized communications and computer technology and have focused on the application of this technology to meet our clients’ needs. We anticipate that it will be necessary to continue to invest in and develop new and enhanced technology on a timely basis to maintain our competitiveness. Significant capital expenditures may be required to keep our technology up-to-date. There can be no assurance that

 

12


Table of Contents

any of our information systems will be adequate to meet our future needs or that we will be able to incorporate new technology to enhance and develop our existing services. Moreover, investments in technology, including future investments in upgrades and enhancements to software, may not necessarily maintain our competitiveness. Our future success will also depend in part on our ability to anticipate and develop information technology solutions that keep pace with evolving industry standards and changing client demands.

Emergency interruption of customer contact management center operations could affect our business and results of operations.

Our operations are dependent upon our ability to protect our customer contact management centers and our information databases against damage that may be caused by fire, earthquakes, severe weather and other disasters, power failure, telecommunications failures, unauthorized intrusion, computer viruses and other emergencies. The temporary or permanent loss of such systems could have a material adverse effect on our business, financial condition and results of operations. Notwithstanding precautions taken to protect us and our clients from events that could interrupt delivery of services, there can be no assurance that a fire, natural disaster, human error, equipment malfunction or inadequacy, or other event would not result in a prolonged interruption in our ability to provide services to our clients. Such an event could have a material adverse effect on our business, financial condition and results of operations.

Our operating results will be adversely affected if we are unable to maximize our facility capacity utilization.

Our profitability is significantly influenced by our ability to effectively manage our contact center capacity utilization. The majority of our business involves technical support and customer care services initiated by our clients’ customers and, as a result, our capacity utilization varies and demands on our capacity are, to some degree, beyond our control. In order to create the additional capacity necessary to accommodate new or expanded outsourcing projects, we may need to open new contact centers. The opening or expansion of a contact center may result, at least in the short term, in idle capacity until we fully implement the new or expanded program. Additionally, the occasional need to open customer contact centers fully, or primarily, dedicated to a single client, instead of spreading the work among existing facilities with idle capacity, negatively affects capacity utilization. We periodically assess the expected long-term capacity utilization of our contact centers. As a result, we may, if deemed necessary, consolidate, close or partially close under-performing contact centers to maintain or improve targeted utilization and margins. There can be no guarantee that we will be able to achieve or maintain optimal utilization of our contact center capacity.

As part of our effort to consolidate our facilities, we may seek to sell or sublease a portion of our surplus contact center space, if any, and recover certain costs associated with it. Failure to sell or sublease such surplus space will negatively impact results of operations.

Increases in the cost of telephone and data services or significant interruptions in such services could adversely affect our business.

Our business is significantly dependent on telephone and data service provided by various local and long distance telephone companies. Accordingly, any disruption of these services could adversely affect our business. We have taken steps to mitigate our exposure to service disruptions by investing in redundant circuits, although there is no assurance that the redundant circuits would not also suffer disruption. Any inability to obtain telephone or data services at favorable rates could negatively affect our business results. Where possible, we have entered into long-term contracts with various providers to mitigate short term rate increases and fluctuations. There is no obligation, however, for the vendors to renew their contracts with us, or to offer the same or lower rates in the future, and such contracts are subject to termination or modification for various reasons outside of our control. A significant increase in the cost of telephone services that is not recoverable through an increase in the price of our services could adversely affect our business.

Our profitability may be adversely affected if we are unable to maintain and find new locations for customer contact centers in countries with stable wage rates.

Our business is labor-intensive and therefore wages, employee benefits and employment taxes constitute the largest component of our operating expenses. As a result, expansion of our business is dependent upon our ability to find cost-effective locations in which to operate, both domestically and internationally. Some of our customer contact management centers are located in countries that have experienced inflation and rising standards of living, which

 

13


Table of Contents

requires us to increase employee wages. In addition, collective bargaining is being utilized in an increasing number of countries in which we currently, or may in the future, desire to operate. Collective bargaining may result in material wage and benefit increases. If wage rates and benefits increase significantly in a country where we maintain customer contact management centers, we may not be able to pass those increased labor costs on to our clients, requiring us to search for other cost effective delivery locations. Additionally, some of our customer contact management centers are located in jurisdictions subject to minimum wage regulations, which may result in increased wages in the future. There is no assurance that we will be able to find such cost-effective locations, and even if we do, the costs of closing delivery locations and opening new customer contact management centers can adversely affect our financial results.

The adoption and implementation of new statutory and regulatory requirements for derivative transactions could have an adverse impact on our ability to hedge risks associated with our business.

We enter into forward and option contracts to hedge against the effect of foreign currency exchange rate fluctuations. The United States Congress has passed, and the President has signed into law, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The Dodd-Frank Act provides for new statutory and regulatory requirements for derivative transactions, including foreign currency and interest rate hedging transactions. The Dodd-Frank Act requires the Commodities Futures and Trading Commission to promulgate rules relating to the Dodd-Frank Act. Until the rules relating to the Dodd-Frank Act are established, we cannot know how these regulations will affect us. The rules adopted by the Commodities Futures and Trading Commission may in the future impact our flexibility to execute strategic hedges to reduce foreign exchange and interest rate uncertainty and thus protect cash flows. In addition, the banks and other derivatives dealers who are our contractual counterparties will be required to comply with the Dodd-Frank Act’s new requirements. It is possible that the costs of such compliance will be passed on to customers such as us.

Risks Related to Our International Operations

Our international operations and expansion involve various risks.

We intend to continue to pursue growth opportunities in markets outside the United States. At December 31, 2014, our international operations were conducted from 32 customer contact management centers located in Sweden, Finland, Germany, Egypt, Scotland, Denmark, Norway, Hungary, Romania, Slovakia, The Philippines, the People’s Republic of China, India and Australia. Revenues from these international operations for the years ended December 31, 2014, 2013, and 2012, were 39.9%, 38.7%, and 40.2% of consolidated revenues, respectively. We also conduct business from 14 customer contact management centers located in Canada, Colombia, Costa Rica, El Salvador, Mexico and Brazil. International operations are subject to certain risks common to international activities, such as changes in foreign governmental regulations, tariffs and taxes, import/export license requirements, the imposition of trade barriers, difficulties in staffing and managing international operations, political uncertainties, longer payment cycles, possible greater difficulties in accounts receivable collection, economic instability as well as political and country-specific risks.

Additionally, we have been granted tax holidays in The Philippines, Colombia, Costa Rica and El Salvador which expire at varying dates from 2015 through 2028. In some cases, the tax holidays expire without possibility of renewal. In other cases, we expect to renew these tax holidays, but there are no assurances from the respective foreign governments that they will renew them. This could potentially result in adverse tax consequences, the impact of which is not practicable to estimate due to the inherent complexity of estimating critical variables such as long-term future profitability, tax regulations and rates in the multi-national tax environment in which we operate. Any one or more of these factors could have an adverse effect on our international operations and, consequently, on our business, financial condition and results of operations. The tax holidays decreased the provision for income taxes by $2.7 million, $4.7 million and $6.5 million for the years ended December 31, 2014, 2013 and 2012, respectively.

As of December 31, 2014, we had cash balances of approximately $194.4 million held in international operations, most of which would be subject to additional taxes if repatriated to the United States. Determination of any unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries that are essentially permanent in duration is not practicable due to the inherent complexity of the multi-national tax environment in which we operate.

 

14


Table of Contents

We conduct business in various foreign currencies and are therefore exposed to market risk from changes in foreign currency exchange rates and interest rates, which could impact our results of operations and financial condition. We are also subject to certain exposures arising from the translation and consolidation of the financial results of our foreign subsidiaries. We enter into foreign currency forward and option contracts to hedge against the effect of certain foreign currency exchange exposures. However, there can be no assurance that we can take actions to mitigate such exposure in the future, and if taken, that such actions will be successful or that future changes in currency exchange rates will not have a material adverse impact on our future operating results. A significant change in the value of the U.S. Dollar against the currency of one or more countries where we operate may have a material adverse effect on our financial condition and results of operations. Additionally, our hedging exposure to counterparty credit risks is not secured by any collateral. Although each of the counterparty financial institutions with which we place hedging contracts are investment grade rated by the national rating agencies as of the time of the placement, we can provide no assurances as to the financial stability of any of our counterparties. If a counterparty to one or more of our hedge transactions were to become insolvent, we would be an unsecured creditor and our exposure at the time would depend on foreign exchange rate movements relative to the contracted foreign exchange rate and whether any gains result that are not realized due to a counterparty default.

The fundamental shift in our industry toward global service delivery markets presents various risks to our business.

Clients continue to require blended delivery models using a combination of onshore and offshore support. Our offshore delivery locations include The Philippines, the People’s Republic of China, India, Costa Rica, El Salvador, Mexico and Brazil, and while we have operated in global delivery markets since 1996, there can be no assurance that we will be able to successfully conduct and expand such operations, and a failure to do so could have a material adverse effect on our business, financial condition, and results of operations. The success of our offshore operations will be subject to numerous factors, some of which are beyond our control, including general and regional economic conditions, prices for our services, competition, changes in regulation and other risks. In addition, as with all of our operations outside of the United States, we are subject to various additional political, economic and market uncertainties (see “Our international operations and expansion involve various risks”). Additionally, a change in the political environment in the United States or the adoption and enforcement of legislation and regulations curbing the use of offshore customer contact management solutions and services could have a material adverse effect on our business, financial condition and results of operations.

Our global operations expose us to numerous legal and regulatory requirements.

We provide services to our clients’ customers in 21 countries around the world. Accordingly, we are subject to numerous legal regimes on matters such as taxation, government sanctions, content requirements, licensing, tariffs, government affairs, data privacy and immigration as well as internal and disclosure control obligations. In the U.S., as well as several of the other countries in which we operate, some of our services must comply with various laws and regulations regarding the method and timing of placing outbound telephone calls. Violations of these various laws and regulations could result in liability for monetary damages, fines and/or criminal prosecution and unfavorable publicity. Changes in U.S. federal, state and international laws and regulations, specifically those relating to the outsourcing of jobs to foreign countries as well as recently enacted statutory and regulatory requirements related to derivative transactions, may adversely affect our ability to perform our services at our overseas facilities or could result in additional taxes on such services, or impact our flexibility to execute strategic hedges, thereby threatening or limiting our ability or the financial benefit to continue to serve certain markets at offshore locations, or the risks associated therewith.

Risks Related to Our Employees

Our operations are substantially dependent on our senior management.

Our success is largely dependent upon the efforts, direction and guidance of our senior management. Our growth and success also depend in part on our ability to attract and retain skilled employees and managers and on the ability of our executive officers and key employees to manage our operations successfully. We have entered into employment and non-competition agreements with our executive officers. The loss of any of our senior management or key personnel, or the inability to attract, retain or replace key management personnel in the future, could have a material adverse effect on our business, financial condition and results of operations.

 

15


Table of Contents

Our inability to attract and retain experienced personnel may adversely impact our business.

Our business is labor intensive and places significant importance on our ability to recruit, train, and retain qualified technical and consultative professional personnel. We generally experience high turnover of our personnel and are continuously required to recruit and train replacement personnel as a result of a changing and expanding work force. Additionally, demand for qualified technical professionals conversant in multiple languages, including English, and/or certain technologies may exceed supply, as new and additional skills are required to keep pace with evolving computer technology. Our ability to locate and train employees is critical to achieving our growth objective. Our inability to attract and retain qualified personnel or an increase in wages or other costs of attracting, training, or retaining qualified personnel could have a material adverse effect on our business, financial condition and results of operations.

Health epidemics could disrupt our business and adversely affect our financial results.

Our customer contact centers typically seat hundreds of employees in one location. Accordingly, an outbreak of a contagious infection in one or more of the markets in which we do business may result in significant worker absenteeism, lower asset utilization rates, voluntary or mandatory closure of our offices and delivery centers, travel restrictions on our employees, and other disruptions to our business. Any prolonged or widespread health epidemic could severely disrupt our business operations and have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Business Strategy

Our strategy of growing through selective acquisitions and mergers involves potential risks.

We evaluate opportunities to expand the scope of our services through acquisitions and mergers. We may be unable to identify companies that complement our strategies, and even if we identify a company that complements our strategies, we may be unable to acquire or merge with the company. Also, a decrease in the price of our common stock could hinder our growth strategy by limiting growth through acquisitions funded with SYKES’ stock.

The actual integration of the company may result in additional and unforeseen expenses, and the full amount of anticipated benefits of the integration plan may not be realized. If we are not able to adequately address these challenges, we may be unable to fully integrate the acquired operations into our own, or to realize the full amount of anticipated benefits of the integration of the companies.

Our acquisition strategy involves other potential risks. These risks include:

 

   

the inability to obtain the capital required to finance potential acquisitions on satisfactory terms;

 

   

the diversion of our attention to the integration of the businesses to be acquired;

 

   

the risk that the acquired businesses will fail to maintain the quality of services that we have historically provided;

 

   

the need to implement financial and other systems and add management resources;

 

   

the risk that key employees of the acquired business will leave after the acquisition;

 

   

potential liabilities of the acquired business;

 

   

unforeseen difficulties in the acquired operations;

 

   

adverse short-term effects on our operating results;

 

   

lack of success in assimilating or integrating the operations of acquired businesses within our business;

 

   

the dilutive effect of the issuance of additional equity securities;

 

   

the impairment of goodwill and other intangible assets involved in any acquisitions;

 

   

the businesses we acquire not proving profitable; and

 

   

incurring additional indebtedness.

We may incur significant cash and non-cash costs in connection with the continued rationalization of assets resulting from acquisitions.

We may incur a number of non-recurring cash and non-cash costs associated with the continued rationalization of assets resulting from acquisitions relating to the closing of facilities and disposition of assets.

 

16


Table of Contents

We have substantial goodwill and if it becomes impaired, then our profits would be significantly reduced or eliminated and shareholders’ equity would be reduced.

We recorded goodwill as a result of the ICT and Alpine acquisitions. On at least an annual basis, we assess whether there has been an impairment in the value of goodwill. If the carrying value of goodwill exceeds its estimated fair value, impairment is deemed to have occurred and the carrying value of goodwill is written down to fair value. This would result in a charge to our operating earnings.

Risks Related to Our Common Stock

Our organizational documents contain provisions that could impede a change in control.

Our Board of Directors is divided into three classes serving staggered three-year terms. The staggered Board of Directors and the anti-takeover effects of certain provisions contained in the Florida Business Corporation Act and in our Articles of Incorporation and Bylaws, including the ability of the Board of Directors to issue shares of preferred stock and to fix the rights and preferences of those shares without shareholder approval, may have the effect of delaying, deferring or preventing an unsolicited change in control. This may adversely affect the market price of our common stock or the ability of shareholders to participate in a transaction in which they might otherwise receive a premium for their shares.

The volatility of our stock price may result in loss of investment.

The trading price of our common stock has been and may continue to be subject to wide fluctuations over short and long periods of time. We believe that market prices of outsourced customer contact management services stocks in general have experienced volatility, which could affect the market price of our common stock regardless of our financial results or performance. We further believe that various factors such as general economic conditions, changes or volatility in the financial markets, changing market conditions in the outsourced customer contact management services industry, quarterly variations in our financial results, the announcement of acquisitions, strategic partnerships, or new product offerings, and changes in financial estimates and recommendations by securities analysts could cause the market price of our common stock to fluctuate substantially in the future.

Failure to adhere to laws, rules and regulations applicable to public companies operating in the U.S. may have an adverse effect on our stock price.

Because we are a publicly traded company, we are subject to certain evolving and expensive federal, state and other rules and regulations relating to, among other things, assessment and maintenance of internal controls and corporate governance. Section 404 of the Sarbanes-Oxley Act of 2002, together with rules and regulations issued by the Securities and Exchange Commission (“SEC”) require us to furnish, on an annual basis, a report by our management (included elsewhere in this Annual Report on Form 10-K) regarding the effectiveness of our internal control over financial reporting. The report includes, among other things, an assessment of the effectiveness of our internal controls over financial reporting as of the end of our fiscal year and a statement as to whether or not our internal controls over financial reporting are effective. We must include a disclosure of any material weaknesses in our internal control over financial reporting identified by management during the annual assessment. We have in the past discovered, and may potentially in the future discover, areas of internal control over financial reporting which may require improvement. If at any time we are unable to assert that our internal controls over financial reporting are effective, or if our auditors are unable to express an opinion on the effectiveness of our internal controls, our investors could lose confidence in the accuracy and/or completeness of our financial reports, which could have an adverse effect on our stock price.

Additionally, the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in 2010 subjects us to significant additional executive compensation and corporate governance requirements and disclosures, some of which have yet to be implemented by the SEC. Compliance with these requirements may be costly and adversely affect our business.

Item 1B. Unresolved Staff Comments

There are no material unresolved written comments that were received from the SEC staff 180 days or more before the year ended December 31, 2014 relating to our periodic or current reports filed under the Securities Exchange Act of 1934.

 

17


Table of Contents

Item 2. Properties

Our principal executive offices are located in Tampa, Florida, which consists of approximately 68,000 square feet of leased office space. This facility currently serves as the headquarters for senior management and the financial, information technology and administrative departments. In addition to our headquarters and the customer contact management centers (“centers”) used by our Americas and EMEA segments discussed below, we also have offices in several countries around the world which support our Americas and EMEA segments.

As of December 31, 2014, excluding centers we have exited, we operated 70 centers that are classified as follows:

 

   

Multi-Client Centers — We own or lease space for these centers and serve multiple clients in each facility;

 

   

Managed Centers — These facilities are owned or leased by our clients and we staff and manage these sites on behalf of our clients in accordance with facility management contracts; and

 

   

Fulfillment Centers — We own or lease space for these centers and serve multiple clients in each facility.

As of December 31, 2014, our centers were located in the following countries:

 

     Multi-Client
Centers
     Managed
Centers
     Fulfillment
Centers
     Total Number  of
Centers
 

Americas

           

Australia

     4         —           —           4   

Brazil

     1         —           —           1   

Canada

     6         —           —           6   

Colombia

     1         —           —           1   

Costa Rica

     4         —           —           4   

El Salvador

     1         —           —           1   

India

     1         —           —           1   

Mexico

     1         —           —           1   

People’s Republic of China

     3         —           —           3   

The Philippines

     6         —           —           6   

United States of America

     21         —           —           21   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Americas centers

     49         —           —           49   
  

 

 

    

 

 

    

 

 

    

 

 

 

EMEA

           

Denmark

     1         —           —           1   

Egypt

     1         —           —           1   

Finland

     1         —           —           1   

Germany

     4         —           —           4   

Hungary

     1         —           —           1   

Netherlands

     —           1         —           1   

Norway

     1         —           —           1   

Romania

     1         —           —           1   

Scotland

     3         —           1         4   

Slovakia

     1         —           —           1   

Sweden

     4         —           1         5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total EMEA centers

     18         1         2         21   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total centers

     67         1         2         70   
  

 

 

    

 

 

    

 

 

    

 

 

 

The leases for our centers have remaining terms ranging from one to twenty years and generally contain renewal options. We believe our existing facilities are suitable and adequate to meet current requirements, and that suitable additional or substitute space will be available as needed to accommodate any physical expansion or any space required due to expiring leases not renewed. We operate from time to time in temporary facilities to accommodate growth before new centers are available. At December 31, 2014, our centers, taken as a whole, were utilized at average capacities of approximately 79% and were capable of supporting a higher level of market demand.

 

18


Table of Contents

Item 3. Legal Proceedings

From time to time, we are involved in legal actions arising in the ordinary course of business. With respect to these matters, we believe that we have adequate legal defenses and/or when possible and appropriate, have provided adequate accruals related to those matters such that the ultimate outcome will not have a material adverse effect on our future financial position or results of operations.

Item 4. Mine Safety Disclosures

Not Applicable.

 

19


Table of Contents

PART II

Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Securities

Our common stock is quoted on the NASDAQ Global Select Market under the symbol SYKE. The following table sets forth, for the periods indicated, certain information as to the high and low intraday sale prices per share of our common stock as quoted on the NASDAQ Global Select Market.

 

     High      Low  

Year Ended December 31, 2014:

     

Fourth Quarter

   $ 24.71       $ 19.47   

Third Quarter

     22.37         19.01   

Second Quarter

     21.79         19.05   

First Quarter

     21.79         18.60   

Year Ended December 31, 2013:

     

Fourth Quarter

   $ 23.29       $ 17.08   

Third Quarter

     18.27         15.59   

Second Quarter

     16.58         13.95   

First Quarter

     16.48         14.45   

Holders of our common stock are entitled to receive dividends out of the funds legally available when and if declared by the Board of Directors. We have not declared or paid any cash dividends on our common stock in the past and do not anticipate paying any cash dividends in the foreseeable future.

As of February 10, 2015, there were 860 holders of record of the common stock. We estimate there were approximately 8,900 beneficial owners of our common stock.

Below is a summary of stock repurchases for the quarter ended December 31, 2014 (in thousands, except average price per share).

 

Period

   Total Number
of Shares
Purchased (1)
     Average Price
Paid Per Share
     Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
     Maximum Number
of Shares That May
Yet Be Purchased
Under Plans or
Programs
 

October 1, 2014October 31, 2014

     362       $ 19.92         362         999   

November 1, 2014November 30, 2014

     —         $ —           —           999   

December 1, 2014December 31, 2014

     —         $ —           —           999   
  

 

 

       

 

 

    

 

 

 

Total

     362            362         999   
  

 

 

       

 

 

    

 

 

 

 

(1) 

All shares purchased as part of the repurchase plan publicly announced on August 18, 2011. Total number of shares approved for repurchase under the 2011 Share Repurchase Plan was 5.0 million with no expiration date.

 

20


Table of Contents

Five-Year Stock Performance Graph

The following graph presents a comparison of the cumulative shareholder return on the common stock with the cumulative total return on the NASDAQ Computer and Data Processing Services Index, the NASDAQ Telecommunications Index, the Russell 2000 Index, the S&P Small Cap 600 and the SYKES Peer Group (as defined below). The SYKES Peer Group is comprised of publicly traded companies that derive a substantial portion of their revenues from call center, customer care business, have similar business models to SYKES, and are those most commonly compared to SYKES by industry analysts following SYKES. This graph assumes that $100 was invested on December 31, 2009 in SYKES common stock, the NASDAQ Computer and Data Processing Services Index, the NASDAQ Telecommunications Index, the Russell 2000 Index, the S&P Small Cap 600 and SYKES Peer Group, including reinvestment of dividends.

Comparison of Five-Year Cumulative Total Return (in dollars)

 

LOGO

 

SYKES Peer Group

   Exchange & Ticker Symbol

Convergys Corp.

   NYSE: CVG

StarTek, Inc.

   NYSE: SRT

TeleTech Holdings, Inc.

   NASDAQ: TTEC

Teleperformance

   NYSE Euronext: RCF

There can be no assurance that SYKES’ stock performance will continue into the future with the same or similar trends depicted in the graph above. SYKES does not make or endorse any predictions as to the future stock performance.

The information contained in the Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Exchange Act of 1934.

 

21


Table of Contents

Item 6. Selected Financial Data

Selected Financial Data

The following selected financial data has been derived from our consolidated financial statements.

We sold our operations in Spain during 2012 and our operations in Argentina in 2010. Accordingly, we have reclassified the selected financial data for all periods presented to reflect these results as discontinued operations in accordance with Accounting Standards Codification 205-20 “Discontinued Operations”.

The information below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the accompanying Consolidated Financial Statements and related notes thereto.

 

    Years Ended December 31,  
(in thousands, except per share data)   2014     2013     2012     2011     2010  

Income Statement Data: (1)

         

Revenues

  $ 1,327,523      $ 1,263,460      $ 1,127,698      $ 1,169,267      $ 1,121,911   

Income from continuing operations (2,3,4,5,6,9,10)

    79,555        53,527        47,779        65,535        37,981   

Income from continuing operations, net of taxes (2,3,4,5,6,9,10)

    57,791        37,260        39,950        52,314        26,115   

(Loss) from discontinued operations, net of taxes (7) 

    —          —          (820     (4,532     (12,893

Gain (loss) on sale of discontinued operations, net of taxes (8)

    —          —          (10,707     559        (23,495

Net income (loss)

    57,791        37,260        28,423        48,341        (10,273

Net Income (Loss) Per Common Share: (1)

         

Basic:

         

Continuing operations (2,3,4,5,6,9,10)

  $ 1.36      $ 0.87      $ 0.93      $ 1.15      $ 0.57   

Discontinued operations (7,8)

    —          —          (0.27     (0.09     (0.79
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share

  $ 1.36      $ 0.87      $ 0.66      $ 1.06      $ (0.22
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted:

         

Continuing operations (2,3,4,5,6,9,10)

  $ 1.35      $ 0.87      $ 0.93      $ 1.15      $ 0.57   

Discontinued operations (7,8)

    —          —          (0.27     (0.09     (0.79
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share

  $ 1.35      $ 0.87      $ 0.66      $ 1.06      $ (0.22
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Common Shares: (1)

         

Basic

    42,609        42,877        43,105        45,506        46,030   

Diluted

    42,814        42,925        43,148        45,607        46,133   

Balance Sheet Data: (1,11)

         

Total assets

  $ 944,500      $ 950,261      $ 908,689      $ 769,130      $ 794,600   

Long-term debt

    75,000        98,000        91,000        —          —     

Shareholders’ equity

    658,218        635,704        606,264        573,566        583,195   

 

(1)

The amounts for 2014, 2013 and 2012 include the Alpine acquisition completed on August 20, 2012. See Note 2, Acquisition of Alpine Access, Inc., for further information. The amounts for all periods presented include the ICT acquisition completed on February 2, 2010.

 

(2)

The amounts for 2014 include a $2.0 million net gain on disposal of property and equipment and a $0.1 million impairment of long-lived assets.

 

(3)

The amounts for 2013 include $2.1 million in Alpine acquisition-related costs and a $0.2 million net loss on disposal of property and equipment.

 

(4) 

The amounts for 2012 include $4.8 million in Alpine acquisition-related costs, a $0.4 million net loss on the disposal of property and equipment, a $0.1 million gain on insurance settlement and a $0.4 million impairment of long-lived assets.

 

(5) 

The amounts for 2011 include $11.8 million in ICT acquisition-related costs, a $3.7 million net gain on the sale of the land and building in Minot, North Dakota, a $0.5 million net gain on insurance settlement and a $1.7 million impairment of long-lived assets.

 

(6) 

The amounts for 2014, 2013, 2012, 2011 and 2010 include $(0.3) million, $0.3 million, $1.8 million, $5.3 million and $11.0 million, respectively, related to the Exit Plans. See Note 4, Costs Associated with Exit or Disposal Activities, for further information.

 

(7) 

The amounts for all periods presented include the operations in Spain and Argentina, which were sold in 2012 and 2010, respectively. See Note 3, Discontinued Operations, for futher information on the sale of the Spanish operations.

 

(8) 

The amounts include the gain (loss) on sale of the operations in Spain in 2012 and Argentina in 2011 and 2010. See Note 3, Discontinued Operations, for futher information for futher information on the sale of the Spanish operations.

 

(9) 

The amounts for 2011 and 2010 each include a $0.4 million recovery of regulatory penalties.

 

(10) 

The amounts for 2010 include $46.3 million in ICT acquisition-related costs, a $3.3 million impairment of long-lived assets, a $2.0 million net gain on insurance settlement and a $0.4 million impairment of goodwill and intangibles.

 

(11) 

The Company has not declared cash dividends per common share for any of the five years presented.

 

22


Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with the accompanying Consolidated Financial Statements and the notes thereto that appear elsewhere in this Annual Report on Form 10-K. The following discussion and analysis compares the year ended December 31, 2014 (“2014”) to the year ended December 31, 2013 (“2013”), and 2013 to the year ended December 31, 2012 (“2012”).

The following discussion and analysis and other sections of this document contain forward-looking statements that involve risks and uncertainties. Words such as “may,” “expects,” “projects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. Similarly, statements that describe our future plans, objectives, or goals also are forward-looking statements. Future events and actual results could differ materially from the results reflected in these forward-looking statements, as a result of certain of the factors set forth below and elsewhere in this analysis and in this Annual Report on Form 10-K for the year ended December 31, 2014 in Item 1.A., “Risk Factors.”

Executive Summary

We provide comprehensive customer contact management solutions and services to a wide range of clients including Fortune 1000 companies, medium-sized businesses and public institutions around the world, primarily in the communications, financial services, technology/consumer, transportation and leisure and healthcare industries. We serve our clients through two geographic operating regions: the Americas (United States, Canada, Latin America, Australia and the Asia Pacific Rim) and EMEA (Europe, the Middle East and Africa). Our Americas and EMEA groups primarily provide customer contact management services (with an emphasis on inbound technical support and customer service), which include customer assistance, healthcare and roadside assistance, technical support and product sales to our clients’ customers. These services, which represented 98.2% of consolidated revenues in 2014, are delivered through multiple communication channels encompassing phone, e-mail, social media, text messaging and chat. We also provide various enterprise support services in the United States (“U.S.”) that include services for our clients’ internal support operations, from technical staffing services to outsourced corporate help desk services. In Europe, we also provide fulfillment services including order processing via the Internet and phone, inventory control, product delivery, and product returns handling. Our complete service offering helps our clients acquire, retain and increase the lifetime value of their customer relationships. We have developed an extensive global reach with customer contact management centers throughout the United States, Canada, Europe, Latin America, Australia, the Asia Pacific Rim and Africa.

Revenues from these services is recognized as the services are performed, which is based on either a per minute, per hour, per call, per transaction or per time and material basis, under a fully executed contractual agreement, and we record reductions to revenues for contractual penalties and holdbacks for a failure to meet specified minimum service levels and other performance based contingencies. Revenue recognition is limited to the amount that is not contingent upon delivery of any future product or service or meeting other specified performance conditions. Product sales, accounted for within our fulfillment services, are recognized upon shipment to the customer and satisfaction of all obligations.

Direct salaries and related costs include direct personnel compensation, severance, statutory and other benefits associated with such personnel and other direct costs associated with providing services to customers.

General and administrative costs include administrative, sales and marketing, occupancy and other costs.

Depreciation, net represents depreciation on property and equipment, net of the amortization of deferred property grants.

Amortization of intangibles represents amortization of finite-lived intangible assets.

The net gain (loss) on disposal of property and equipment represents the difference between the amount of proceeds received, if any, and the carrying value of the asset.

The impairment of long-lived assets represents the amount by which the carrying value of the asset exceeds the estimated fair value.

 

23


Table of Contents

Interest income primarily relates to interest earned on cash and cash equivalents.

Interest (expense) includes interest on outstanding borrowings and commitment fees charged on the unused portion of our revolving credit facility, as more fully described in this Item 7, under “Liquidity and Capital Resources.”

Other (expense) includes gains and losses on foreign currency derivative instruments not designated as hedges, foreign currency transaction gains and losses, gains and losses on the liquidation of foreign subsidiaries and other miscellaneous income (expense).

Our effective tax rate for the periods presented includes the effects of state income taxes, net of federal tax benefit, tax holidays, valuation allowance changes, foreign rate differentials, foreign withholding and other taxes, and permanent differences.

Acquisition of Alpine Access, Inc.

On August 20, 2012, we completed the acquisition of Alpine Access, Inc. (“Alpine”), a Delaware corporation and an industry leader in the virtual at-home agent space – recruiting, training, managing and delivering award-winning customer contact management services through a secured and proprietary virtual call center environment with its operations located in the United States and Canada. We refer to such acquisition herein as the “Alpine acquisition.”

We acquired Alpine to: create significant competitive differentiation for quality, speed to market, scalability and flexibility driven by proprietary, internally-developed software, systems, processes and other intellectual property which uniquely overcome the challenges of the virtual at-home agent delivery model; strengthen our current service portfolio and go-to-market offering while expanding the breadth of clients with minimal client overlap; broaden the addressable market opportunity within existing and new verticals as well as clients; expand the addressable pool of skilled labor; leverage operational best practices across our global platform, with the potential to convert more of its fixed cost to variable cost; and further enhance the growth and margin profile to drive shareholder value. This resulted in our paying a substantial premium for Alpine resulting in the recognition of goodwill.

The total purchase price of $149.0 million was funded by $41.0 million in cash on hand and borrowings of $108.0 million under our credit agreement with KeyBank National Association (“KeyBank”), dated May 3, 2012. See “Liquidity & Capital Resources” later in this Item 7 and Note 20, Borrowings, of “Notes to Consolidated Financial Statements” for further information.

The results of operations of Alpine have been reflected in the accompanying Consolidated Statements of Operations since August 20, 2012.

Discontinued Operations

In March 2012, we sold our operations in Spain (the “Spanish operations”), pursuant to an asset purchase agreement dated March 29, 2012 and a stock purchase agreement dated March 30, 2012. We have reflected the operating results related to the operations in Spain as discontinued operations in the accompanying Consolidated Statement of Operations for the year ended December 31, 2012. This business was historically reported as part of the EMEA segment.

See “Results of Operations — Discontinued Operations” later in this Item 7 for more information. Unless otherwise noted, discussions below pertain only to our continuing operations.

 

24


Table of Contents

Results of Operations

The following table sets forth, for the years indicated, the amounts reflected in the accompanying Consolidated Statements of Operations as well as the changes between the respective years:

 

     Years Ended December 31,  
                 2014           2013  
(in thousands)    2014     2013     $ Change     2012     $ Change  

Revenues

   $ 1,327,523      $ 1,263,460      $ 64,063      $ 1,127,698      $ 135,762   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Direct salaries and related costs

     892,110        855,266        36,844        737,952        117,314   

General and administrative

     298,040        297,519        521        290,373        7,146   

Depreciation, net

     45,363        42,084        3,279        40,369        1,715   

Amortization of intangibles

     14,396        14,863        (467     10,479        4,384   

Net (gain) loss on disposal of property and equipment

     (2,030     201        (2,231     391        (190

Impairment of long-lived assets

     89        —          89        355        (355
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     1,247,968        1,209,933        38,035        1,079,919        130,014   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     79,555        53,527        26,028        47,779        5,748   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

          

Interest income

     958        866        92        1,458        (592

Interest (expense)

     (2,011     (2,307     296        (1,547     (760

Other (expense)

     (1,343     (761     (582     (2,533     1,772   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (2,396     (2,202     (194     (2,622     420   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     77,159        51,325        25,834        45,157        6,168   

Income taxes

     19,368        14,065        5,303        5,207        8,858   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations, net of taxes

     57,791        37,260        20,531        39,950        (2,690

(Loss) from discontinued operations, net of taxes

     —          —          —          (820     820   

(Loss) on sale of discontinued operations, net of taxes

     —          —          —          (10,707     10,707   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 57,791      $ 37,260      $ 20,531      $ 28,423      $ 8,837   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table sets forth, for the years indicated, the amounts presented in the accompanying Consolidated Statements of Operations as a percentage of revenues:

 

     Years Ended December 31,  
           2014                 2013                 2012        

Percentage of Revenue:

      

Revenues

     100.0     100.0     100.0

Direct salaries and related costs

     67.2        67.7        65.4   

General and administrative

     22.5        23.5        25.8   

Depreciation, net

     3.4        3.3        3.6   

Amortization of intangibles

     1.1        1.2        0.9   

Net (gain) loss on disposal of property and equipment

     (0.2     0.0        0.0   

Impairment of long-lived assets

     0.0        —          0.0   
  

 

 

   

 

 

   

 

 

 

Income from continuing operations

     6.0        4.3        4.3   

Interest income

     0.1        0.1        0.1   

Interest (expense)

     (0.2     (0.2     (0.1

Other (expense)

     (0.1     (0.1     (0.2
  

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     5.8        4.1        4.1   

Income taxes

     1.5        1.1        0.5   
  

 

 

   

 

 

   

 

 

 

Income from continuing operations, net of taxes

     4.3        3.0        3.6   

(Loss) from discontinued operations, net of taxes

     —          —          (0.1

(Loss) on sale of discontinued operations, net of taxes

     —          —          (0.9
  

 

 

   

 

 

   

 

 

 

Net income

     4.3     3.0     2.6
  

 

 

   

 

 

   

 

 

 

 

25


Table of Contents

2014 Compared to 2013

Revenues

 

     Years Ended December 31,        
     2014     2013        
            % of            % of        
(in thousands)    Amount      Revenues     Amount      Revenues     $ Change  

Americas

   $ 1,070,824         80.7   $ 1,050,813         83.2   $ 20,011   

EMEA

     256,699         19.3     212,647         16.8     44,052   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Consolidated

   $ 1,327,523         100.0   $ 1,263,460         100.0   $ 64,063   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Consolidated revenues increased $64.1 million, or 5.1%, in 2014 from 2013.

The increase in Americas’ revenues was primarily due to new contract sales of $91.6 million and higher volumes from existing contracts of $2.6 million, partially offset by end-of-life client programs of $50.4 million and the negative foreign currency impact of $23.8 million. Revenues from our offshore operations represented 38.9% of Americas’ revenues, compared to 39.5% in 2013.

The increase in EMEA’s revenues was primarily due to higher volumes from existing contracts of $30.6 million and new contract sales of $21.2 million, partially offset by end-of-life client programs of $4.6 million and the negative foreign currency impact of $3.1 million.

On a consolidated basis, we had 41,000 brick-and-mortar seats as of December 31, 2014, a decrease of 1,200 seats from 2013. The capacity utilization rate on a combined basis was 79% compared to 73% in 2013. This increase was due to seat rationalization in the Americas and growth within new and existing clients.

On a geographic segment basis, 34,500 seats were located in the Americas, a decrease of 1,600 seats from 2013, and 6,500 seats were located in EMEA, an increase of 400 seats from 2013. The capacity utilization rate for the Americas as of December 31, 2014 was 77%, compared to 70% as of December 31, 2013, up primarily due to seat rationalization and growth within new and existing clients. The capacity utilization rate for EMEA as of December 31, 2014 was 90%, compared to 87% as of December 31, 2013, up primarily due to growth within new and existing clients. We strive to attain an 85% capacity utilization metric at each of our locations.

We plan to add approximately 1,700 seats on a gross basis in 2015. More than three-quarters of the new seat count is expected to be added in the first half of 2015. Total seat count on a net basis for the full year, however, is expected to remain unchanged relative to 2014 as we plan to rationalize approximately 1,700 seats.

Direct Salaries and Related Costs

 

     Years Ended December 31,               
     2014     2013               
            % of            % of            Change in % of  
(in thousands)    Amount      Revenues     Amount      Revenues     $ Change      Revenues  

Americas

   $ 707,181         66.0   $ 699,797         66.6   $ 7,384         -0.6

EMEA

     184,929         72.0     155,469         73.1     29,460         -1.1
  

 

 

      

 

 

      

 

 

    

Consolidated

   $ 892,110         67.2   $ 855,266         67.7   $ 36,844         -0.5
  

 

 

      

 

 

      

 

 

    

The increase of $36.8 million in direct salaries and related costs included a positive foreign currency impact of $23.1 million in the Americas and a positive foreign currency impact of $2.1 million in EMEA.

The decrease in Americas’ direct salaries and related costs, as a percentage of revenues, was primarily attributable to lower auto tow claim costs of 0.3%, lower compensation costs of 0.2% and lower other costs of 0.1%.

The decrease in EMEA’s direct salaries and related costs, as a percentage of revenues, was primarily attributable to lower compensation costs of 1.6% driven by the increase in new client program ramp up costs in the prior period in the communications vertical as well as new client program growth within the technology vertical, and lower billable supply costs of 0.2%, partially offset by higher communications costs of 0.3%, higher fulfillment materials costs of 0.3% and higher other costs of 0.1%.

 

26


Table of Contents

General and Administrative

 

     Years Ended December 31,              
     2014     2013              
            % of            % of           Change in % of  
(in thousands)    Amount      Revenues     Amount      Revenues     $ Change     Revenues  

Americas

   $ 197,079         18.4   $ 204,321         19.4   $ (7,242     -1.0

EMEA

     50,759         19.8     46,667         21.9     4,092        -2.1

Corporate

     50,202         —          46,531         —          3,671        —     
  

 

 

      

 

 

      

 

 

   

Consolidated

   $ 298,040         22.5   $ 297,519         23.5   $ 521        -1.0
  

 

 

      

 

 

      

 

 

   

The increase of $0.5 million in general and administrative expenses included a positive foreign currency impact of $5.5 million in the Americas and a positive foreign currency impact of $0.4 million in EMEA.

The decrease in Americas’ general and administrative expenses, as a percentage of revenues, was primarily attributable to lower facility-related costs of 0.6%, lower merger and integration costs of 0.1% and lower other costs of 0.3%.

The decrease in EMEA’s general and administrative expenses, as a percentage of revenues, was primarily attributable to lower facility-related costs of 0.9%, lower compensation costs of 0.5%, lower travel costs of 0.3%, lower communications costs of 0.2% and lower other costs of 0.2%.

The increase of $3.7 million in Corporate’s general and administrative expenses was primarily attributable to higher compensation costs of $1.9 million, higher charitable contributions of $1.4 million, higher legal and professional fees of $0.7 million, higher consulting costs of $0.5 million, higher facility-related costs of $0.2 million and higher insurance costs of $0.2 million, partially offset by lower merger and integration costs of $0.6 million, lower software maintenance costs of $0.4 million and lower other costs of $0.2 million.

Depreciation and Amortization

 

     Years Ended December 31,              
     2014     2013              
            % of            % of           Change in % of  
(in thousands)    Amount      Revenues     Amount      Revenues     $ Change     Revenues  

Depreciation, net:

              

Americas

   $ 40,557         3.8   $ 37,818         3.6   $ 2,739        0.2

EMEA

     4,806         1.9     4,266         2.0     540        -0.1
  

 

 

      

 

 

      

 

 

   

Consolidated

   $ 45,363         3.4   $ 42,084         3.3   $ 3,279        0.1
  

 

 

      

 

 

      

 

 

   

Amortization of intangibles:

              

Americas

   $ 14,396         1.3   $ 14,863         1.4   $ (467     -0.1

EMEA

     —           0.0     —           0.0     —          0.0
  

 

 

      

 

 

      

 

 

   

Consolidated

   $ 14,396         1.1   $ 14,863         1.2   $ (467     -0.1
  

 

 

      

 

 

      

 

 

   

The increase in depreciation was primarily due to net fixed asset additions.

The decrease in amortization was primarily due to certain fully amortized intangible assets.

 

27


Table of Contents

Net (Gain) Loss on Disposal of Property and Equipment and Impairment of Long-Lived Assets

 

     Years Ended December 31,              
     2014     2013              
           % of            % of           Change in % of  
(in thousands)    Amount     Revenues     Amount      Revenues     $ Change     Revenues  

Net (gain) loss on disposal of property and equipment:

             

Americas

   $ (2,026     -0.2   $ 8         0.0   $ (2,034     -0.2

EMEA

     (4     0.0     193         0.1     (197     -0.1
  

 

 

     

 

 

      

 

 

   

Consolidated

   $ (2,030     -0.2   $ 201         0.0   $ (2,231     -0.2
  

 

 

     

 

 

      

 

 

   

Impairment of long-lived assets:

             

Americas

   $ 89        0.0   $ —           0.0   $ 89        0.0

EMEA

     —          0.0     —           0.0     —          0.0
  

 

 

     

 

 

      

 

 

   

Consolidated

   $ 89        0.0   $ —           0.0   $ 89        0.0
  

 

 

     

 

 

      

 

 

   

The net (gain) on disposal of property and equipment in 2014 primarily related to the sale of land, a building and fixed assets located in Bismarck, North Dakota. See Note 14, Property and Equipment, of the “Notes to Consolidated Financial Statements” for further information.

See Note 5, Fair Value, of the “Notes to Consolidated Financial Statements” for further information regarding the impairment of long-lived assets.

Other Income (Expense)

 

     Years Ended December 31,        
(in thousands)          2014                 2013                 $ Change        

Interest income

   $ 958      $ 866      $ 92   
  

 

 

   

 

 

   

 

 

 

Interest (expense)

   $ (2,011   $ (2,307   $ 296   
  

 

 

   

 

 

   

 

 

 

Other income (expense):

      

Foreign currency transaction gains (losses)

   $ (1,740   $ (5,962   $ 4,222   

Gains (losses) on foreign currency derivative instruments not designated as hedges

     (44     4,216        (4,260

Gains (losses) on liquidation of foreign subsidiaries

     —          —          —     

Other miscellaneous income (expense)

     441        985        (544
  

 

 

   

 

 

   

 

 

 

Total other income (expense)

   $ (1,343   $ (761   $ (582
  

 

 

   

 

 

   

 

 

 

The increase in interest income was primarily due to an increase in the amount of average invested funds in 2014 compared to 2013.

The decrease in interest (expense) was primarily due to a decrease in the amount of average outstanding borrowings in 2014 compared to 2013.

Other (expense) excludes the cumulative translation effects and unrealized gains (losses) on financial derivatives that are included in “Accumulated other comprehensive income” in shareholders’ equity in the accompanying Consolidated Balance Sheets.

Income Taxes

 

     Years Ended December 31,        
(in thousands)    2014     2013     $ Change  

Income from continuing operations before income taxes

   $ 77,159      $ 51,325      $ 25,834   

Income taxes

   $ 19,368      $ 14,065      $ 5,303   
                 % Change  

Effective tax rate

     25.1     27.4     -2.3

The increase in income taxes in 2014 compared to 2013 is primarily due to a $23.0 million increase in income in a high tax rate jurisdiction which increased the tax provision by $6.3 million. This increase was partially offset by a decrease of $2.3 million in foreign withholding taxes recognized in 2014. The remaining change is due to several factors, including fluctuations in earnings among the various other jurisdictions in which we operate, none of which are individually material.

 

28


Table of Contents

2013 Compared to 2012

Revenues

 

     Years Ended December 31,        
     2013     2012        
            % of            % of        
(in thousands)    Amount      Revenues     Amount      Revenues     $ Change  

Americas

   $ 1,050,813         83.2   $ 947,147         84.0   $ 103,666   

EMEA

     212,647         16.8     180,551         16.0     32,096   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Consolidated

   $ 1,263,460         100.0   $ 1,127,698         100.0   $ 135,762   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Consolidated revenues increased $135.8 million, or 12.0%, in 2013 from 2012.

The increase in Americas’ revenues was primarily due to new contract sales of $80.3 million and Alpine acquisition revenues of $68.6 million, partially offset by end-of-life client programs of $25.4 million, lower volumes from existing contracts of $5.9 million and the negative foreign currency impact of $13.9 million. Revenues from our offshore operations represented 39.5% of Americas’ revenues, compared to 44.5% in 2012.

The increase in EMEA’s revenues was primarily due to new contract sales of $28.0 million, higher volumes from existing contracts of $6.3 million and the positive foreign currency impact of $4.5 million, partially offset by end-of-life client programs of $6.7 million.

Direct Salaries and Related Costs

 

     Years Ended December 31,               
     2013     2012               
            % of            % of            Change in % of  
(in thousands)    Amount      Revenues     Amount      Revenues     $ Change      Revenues  

Americas

   $ 699,797         66.6   $ 609,836         64.4   $ 89,961         2.2

EMEA

     155,469         73.1     128,116         71.0     27,353         2.1
  

 

 

      

 

 

      

 

 

    

Consolidated

   $ 855,266         67.7   $ 737,952         65.4   $ 117,314         2.3
  

 

 

      

 

 

      

 

 

    

The increase of $117.3 million in direct salaries and related costs included a positive foreign currency impact of $6.4 million in the Americas and a negative foreign currency impact of $3.3 million in EMEA.

The increase in Americas’ direct salaries and related costs, as a percentage of revenues, was primarily attributable to higher compensation costs of 1.9% driven by the ramp up for new and existing client programs principally in the communications vertical, partially offset by lower demand within the financial services and healthcare verticals without a commensurate reduction in labor costs, higher auto tow claim costs of 0.1% due to an increase in the average length of tows without a commensurate increase in fees at our Canadian roadside assistance operations and higher other costs of 0.2%.

The increase in EMEA’s direct salaries and related costs, as a percentage of revenues, was primarily attributable to higher compensation costs of 4.4% driven by the ramp up for new and existing client programs principally in the communications vertical, partially offset by lower fulfillment materials costs of 0.7%, lower billable supply costs of 0.5%, lower severance-related costs of 0.4% due to the closure of certain sites in connection with the Fourth Quarter 2011 Exit Plan, lower recruiting costs of 0.2%, lower communications costs of 0.2%, lower travel costs of 0.2% and lower other costs of 0.1%.

 

 

29


Table of Contents

General and Administrative

 

     Years Ended December 31,              
     2013     2012              
            % of            % of           Change in % of  
(in thousands)    Amount      Revenues     Amount      Revenues     $ Change     Revenues  

Americas

   $ 204,321         19.4   $ 196,080         20.7   $ 8,241        -1.3

EMEA

     46,667         21.9     43,004         23.8     3,663        -1.9

Corporate

     46,531         —          51,289         —          (4,758     —     
  

 

 

      

 

 

      

 

 

   

Consolidated

   $ 297,519         23.5   $ 290,373         25.8   $ 7,146        -2.3
  

 

 

      

 

 

      

 

 

   

The increase of $7.1 million in general and administrative expenses included a positive foreign currency impact of $1.5 million in the Americas and a negative foreign currency impact of $0.8 million in EMEA.

The decrease in Americas’ general and administrative expenses, as a percentage of revenues, was primarily attributable to lower compensation costs of 0.6%, lower facility-related costs of 0.4% due to rationalization of facilities, lower equipment and maintenance costs of 0.2% and lower other costs of 0.1%.

The decrease in EMEA’s general and administrative expenses, as a percentage of revenues, was primarily attributable to lower compensation costs of 0.9%, lower facility-related costs of 0.3%, lower communications costs of 0.3%, lower severance-related costs of 0.2% principally all due to the closure of certain sites in connection with the Fourth Quarter 2011 Exit Plan and lower other costs of 0.2%.

The decrease of $4.8 million in Corporate’s general and administrative expenses was primarily attributable to lower merger and integration costs of $3.5 million, lower consulting costs of $1.7 million, lower legal and professional fees of $1.0 million, lower travel costs of $0.3 million, lower equipment and maintenance costs of $0.3 million, lower communications costs of $0.2 million, lower training costs of $0.2 million and lower other costs of $0.3 million, partially offset by higher compensation costs of $2.1 million and higher facility-related costs of $0.6 million.

Depreciation and Amortization

 

     Years Ended December 31,               
     2013     2012               
            % of            % of            Change in % of  
(in thousands)    Amount      Revenues     Amount      Revenues     $ Change      Revenues  

Depreciation, net:

               

Americas

   $ 37,818         3.6   $ 36,494         3.9   $ 1,324         -0.3

EMEA

     4,266         2.0     3,875         2.1     391         -0.1
  

 

 

      

 

 

      

 

 

    

Consolidated

   $ 42,084         3.3   $ 40,369         3.6   $ 1,715         -0.3
  

 

 

      

 

 

      

 

 

    

Amortization of intangibles:

               

Americas

   $ 14,863         1.4   $ 10,479         1.1   $ 4,384         0.3

EMEA

     —           0.0     —           0.0     —           0.0
  

 

 

      

 

 

      

 

 

    

Consolidated

   $ 14,863         1.2   $ 10,479         0.9   $ 4,384         0.3
  

 

 

      

 

 

      

 

 

    

The increase in depreciation was primarily due to net fixed asset additions.

The increase in amortization was primarily due to the August 2012 Alpine acquisition.

 

30


Table of Contents

Net (Gain) Loss on Disposal of Property and Equipment and Impairment of Long-Lived Assets

 

     Years Ended December 31,              
     2013     2012              
            % of            % of           Change in % of  
(in thousands)    Amount      Revenues     Amount      Revenues     $ Change     Revenues  

Net (gain) loss on disposal of property and equipment:

              

Americas

   $ 8         0.0   $ 323         0.0   $ (315     0.0

EMEA

     193         0.1     68         0.0     125        0.1
  

 

 

      

 

 

      

 

 

   

Consolidated

   $ 201         0.0   $ 391         0.0   $ (190     0.0
  

 

 

      

 

 

      

 

 

   

Impairment of long-lived assets:

              

Americas

   $ —           0.0   $ 355         0.0   $ (355     0.0

EMEA

     —           0.0     —           0.0     —          0.0
  

 

 

      

 

 

      

 

 

   

Consolidated

   $ —           0.0   $ 355         0.0   $ (355     0.0
  

 

 

      

 

 

      

 

 

   

See Note 5, Fair Value, of the “Notes to Consolidated Financial Statements” for further information regarding the impairment of long-lived assets.

Other Income (Expense)

 

     Years Ended December 31,        
(in thousands)          2013                 2012           $ Change  

Interest income

   $ 866      $ 1,458      $ (592
  

 

 

   

 

 

   

 

 

 

Interest (expense)

   $ (2,307   $ (1,547   $ (760
  

 

 

   

 

 

   

 

 

 

Other income (expense):

      

Foreign currency transaction gains (losses)

   $ (5,962   $ (2,856   $ (3,106

Gains (losses) on foreign currency derivative instruments not designated as hedges

     4,216        (295     4,511   

Gains (losses) on liquidation of foreign subsidiaries

     —          (582     582   

Other miscellaneous income (expense)

     985        1,200        (215
  

 

 

   

 

 

   

 

 

 

Total other income (expense)

   $ (761   $ (2,533   $ 1,772   
  

 

 

   

 

 

   

 

 

 

The decrease in interest income reflects lower average invested balances of interest bearing investments in cash and cash equivalents in 2013 compared to 2012.

The increase in interest (expense) reflects higher average outstanding borrowings primarily related to the August 2012 Alpine acquisition.

Other (expense) excludes the cumulative translation effects and unrealized gains (losses) on financial derivatives that are included in “Accumulated other comprehensive income” in shareholders’ equity in the accompanying Consolidated Balance Sheets.

Income Taxes

 

     Years Ended December 31,        
(in thousands)    2013     2012     $ Change  

Income from continuing operations before income taxes

   $ 51,325      $ 45,157      $ 6,168   

Income taxes

   $ 14,065      $ 5,207      $ 8,858   
                 % Change  

Effective tax rate

     27.4     11.5     15.9

The increase in income taxes in 2013 compared to 2012 is primarily due to withholding taxes on offshore cash movements of $3.5 million to take advantage of The American Taxpayer Relief Act of 2012 enacted on January 2, 2013, with retroactive application to January 1, 2012, U.S. taxation of offshore gains on derivatives and foreign exchange of $1.8 million and tax benefits recognized in 2012 related to merger and integration costs as a result of the Alpine acquisition of $1.1 million. The remaining change is due to several factors, including fluctuations in earnings among the various jurisdictions in which we operate, none of which are individually material.

 

31


Table of Contents

(Loss) from Discontinued Operations

 

     Years Ended December 31,               
     2013     2012               
            % of           % of            Change in % of  
(in thousands)    Amount      Revenues     Amount     Revenues     $ Change      Revenues  

(Loss) from discontinued operations, net of taxes

              

Americas

   $ —           0.0   $ —          0.0   $ —           0.0

EMEA

     —           0.0     (820     -0.5     820         0.5
  

 

 

      

 

 

     

 

 

    

Consolidated

   $ —           0.0   $ (820     -0.1   $ 820         0.1
  

 

 

      

 

 

     

 

 

    

(Loss) on sale of discontinued operations, net of taxes

              

Americas

   $ —           0.0   $ (10,707     -1.1   $ 10,707         1.1

EMEA

     —           0.0     —          0.0     —           0.0
  

 

 

      

 

 

     

 

 

    

Consolidated

   $ —           0.0   $ (10,707     -0.9   $ 10,707         0.9
  

 

 

      

 

 

     

 

 

    

In 2012, the (loss) from discontinued operations and the (loss) on sale of discontinued operations related to the sale of our operations in Spain in March 2012. There was no tax impact on either the (loss) from discontinued operations or the (loss) on sale of discontinued operations.

 

32


Table of Contents

Quarterly Results

The following information presents our unaudited quarterly operating results from continuing operations for 2014 and 2013. The data has been prepared on a basis consistent with the accompanying Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, and includes all adjustments, consisting of normal recurring accruals, that we consider necessary for a fair presentation thereof.

 

(in thousands, except per share data)   12/31/2014     9/30/2014     6/30/2014     3/31/2014     12/31/2013     9/30/2013     6/30/2013     3/31/2013  

Revenues

  $ 349,925      $ 332,671      $ 320,498      $ 324,429      $ 335,338      $ 322,143      $ 304,735      $ 301,244   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

               

Direct salaries and related
costs
(1)

    227,802        221,598        221,085        221,625        226,418        215,001        210,141        203,706   

General and administrative (2,3)

    77,074        73,651        73,990        73,325        74,612        73,910        75,273        73,724   

Depreciation, net

    11,227        11,516        11,322        11,298        11,221        10,677        10,017        10,169   

Amortization of intangibles

    3,489        3,597        3,659        3,651        3,692        3,699        3,713        3,759   

Net (gain) loss on disposal of property and equipment (4)

    (2,225     136        11        48        141        77        (26     9   

Impairment of long-lived assets

    —          81        4        4        —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    317,367        310,579        310,071        309,951        316,084        303,364        299,118        291,367   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

    32,558        22,092        10,427        14,478        19,254        18,779        5,617        9,877   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

               

Interest income

    241        249        237        231        218        216        208        224   

Interest (expense)

    (496     (464     (552     (499     (591     (630     (578     (508

Other income (expense)

    (1,201     (406     (399     663        (903     356        (339     125   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

    (1,456     (621     (714     395        (1,276     (58     (709     (159
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    31,102        21,471        9,713        14,873        17,978        18,721        4,908        9,718   

Income taxes

    8,599        4,833        1,376        4,560        6,978        4,575        (688     3,200   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 22,503      $ 16,638      $ 8,337      $ 10,313      $ 11,000      $ 14,146      $ 5,596      $ 6,518   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share (5) :

               

Basic

  $ 0.53      $ 0.39      $ 0.20      $ 0.24      $ 0.26      $ 0.33      $ 0.13      $ 0.15   

Diluted

  $ 0.53      $ 0.39      $ 0.19      $ 0.24      $ 0.26      $ 0.33      $ 0.13      $ 0.15   

Weighted average shares:

               

Basic

    42,280        42,704        42,711        42,739        42,759        42,785        42,936        43,036   

Diluted

    42,533        42,837        42,810        42,837        42,880        42,836        42,954        43,052   

 

(1) 

The quarter ended June 30, 2013 includes $0.5 million in Alpine acquisition-related costs.

 

(2) 

The quarters ended September 30, 2014June 30, 2014December 31, 2013 and September 30, 2013 include $(0.1) million, $(0.2) million, $0.3 million and $(0.1) million, respectively, related to the Exit Plans. See Note 4, Costs Associated with Exit or Disposal Activities, for further information.

 

(3) 

The quarters ended September 30, 2013June 30, 2013March 31, 2013, include $0.1 million, $0.8 million and $0.7 million, respectively, in Alpine acquisition-related costs.

 

(4) 

The quarter ended December 31, 2014 includes a $2.6 million (gain) on the sale of fixed assets, land and building located in Bismarck, North Dakota. See Note 14, Property and Equipment, for further information.

 

(5) 

Net income (loss) per basic and diluted common share is computed independently for each of the quarters presented and, therefore, may not sum to the total for the year.

 

33


Table of Contents

Business Outlook

For the three months ended March 31, 2015, we anticipate the following financial results:

 

   

Revenues in the range of $315.0 million to $320.0 million;

 

   

Effective tax rate of approximately 27%;

 

   

Fully diluted share count of approximately 42.5 million;

 

   

Diluted earnings per share in the range of $0.27 to $0.30; and

 

   

Capital expenditures in the range of $14.0 million to $16.0 million

For the twelve months ended December 31, 2015, we anticipate the following financial results:

 

   

Revenues in the range of $1,300.0 million to $1,320.0 million;

 

   

Effective tax rate of approximately 26%;

 

   

Fully diluted share count of approximately 42.9 million;

 

   

Diluted earnings per share in the range of $1.34 to $1.46; and

 

   

Capital expenditures in the range of $55.0 million to $60.0 million

We continue to experience healthy demand from clients within the communications and technology verticals. In addition, based on early indications, we anticipate some firming of demand within the financial services vertical. As in prior years, with fewer work days in the second quarter, coupled with the timing of seat additions and ramps related to program wins, we expect consolidated second-half 2015 revenues to be greater than the first-half. Furthermore, based on foreign exchange rates as of February 2015, our full-year business outlook reflects the anticipation of approximately $50.0 million in negative impact to revenues due to unfavorable foreign currency movements relative to 2014. In addition, we have already eliminated certain sub-profitable programs, which are expected to incrementally impact 2015 revenues by approximately $25.0 million.

Despite the foreign exchange impact to 2015 revenues, we expect expansion of operating margins. Operating margins as well as diluted earnings per share are expected to be higher in the second half of 2015 relative to the first-half due to timing of the resetting of payroll tax withholdings for the new year, coupled with the impact of inclement weather on our Canadian roadside assistance business.

Our revenues and earnings per share assumptions for the first quarter and full year 2015 are based on foreign exchange rates as of February 2015. Therefore, the continued volatility in foreign exchange rates between the U.S. dollar and the functional currencies of the markets we serve could have a further impact, positive or negative, on revenues and earnings per share relative to the business outlook for the first quarter and full-year as discussed above.

We anticipate a slightly higher effective tax rate for full-year 2015 versus 2014 with the effective tax rate differential driven chiefly by a shift in the geographic mix of earnings to higher tax rate jurisdictions.

Not included in this guidance is the impact of any future acquisitions, share repurchase activities or a potential sale of previously exited customer contact management centers.

Liquidity and Capital Resources

Our primary sources of liquidity are generally cash flows generated by operating activities and from available borrowings under our revolving credit facility. We utilize these capital resources to make capital expenditures associated primarily with our customer contact management services, invest in technology applications and tools to further develop our service offerings and for working capital and other general corporate purposes, including repurchase of our common stock in the open market and to fund acquisitions. In future periods, we intend similar uses of these funds.

On August 18, 2011, the Board authorized us to purchase up to 5.0 million shares of our outstanding common stock (the “2011 Share Repurchase Program”). A total of 4.0 million shares have been repurchased under the 2011 Share Repurchase Program since inception. The shares are purchased, from time to time, through open market purchases or in negotiated private transactions, and the purchases are based on factors, including but not limited to, the stock price, management discretion and general market conditions. The 2011 Share Repurchase Program has no expiration date.

 

34


Table of Contents

The shares repurchased under our share repurchase programs were as follows (in thousands, except per share amounts):

 

    

Total Number

of Shares

     Range of Prices Paid Per Share     

Total Cost of

Shares

 

For the Years Ended

   Repurchased      Low      High      Repurchased  

December 31, 2014

     630       $ 19.80       $ 20.00       $ 12,581   

December 31, 2013

     341       $ 15.61       $ 16.99       $ 5,479   

December 31, 2012

     537       $ 13.85       $ 15.00       $ 7,908   

During 2014, cash increased $94.3 million from operating activities, $3.6 million from the proceeds from sale of property and equipment, $0.2 million from the release of restricted cash and $0.3 million from the proceeds from grants. Further, we used $44.7 million for capital expenditures, $23.0 million to repay long-term debt, $12.6 million to repurchase our stock and $0.4 million to repurchase stock for minimum tax withholding on equity awards, resulting in a $3.2 million increase in available cash (including the unfavorable effects of foreign currency exchange rates on cash of $14.5 million).

Net cash flows provided by operating activities for 2014 were $94.3 million, compared to $86.2 million in 2013. The $8.1 million increase in net cash flows from operating activities was due to a $20.5 million increase in net income and a $2.0 million increase in non-cash reconciling items such as depreciation and amortization, (gain) loss on the sale of discontinued operations, net (gain) loss on disposal of property and equipment, impairment losses and unrealized foreign currency transaction (gains) losses, net, partially offset by a net decrease of $14.4 million in cash flows from assets and liabilities. The $14.4 million decrease in cash flows from assets and liabilities was principally a result of an $18.2 million increase in accounts receivable, a $2.4 million decrease in other liabilities and a $0.7 million decrease in deferred revenue, partially offset by a $5.1 million decrease in other assets and a $1.8 million increase in taxes payable. The $18.2 million increase in the change in accounts receivable is primarily due to additional receivables’ billings related to higher volumes within certain clients as well as the timing of receivables’ billings and collections in 2014 over 2013.

We sold our operations in Spain (the “Spanish operations”) in 2012. Cash flows from discontinued operations, which are included in the accompanying Consolidated Statement of Cash Flows, were as follows (in thousands):

 

     Year Ended
December 31,  2012
 

Cash (used for) operating activities of discontinued operations

   $ (4,530

Cash (used for) investing activities of discontinued operations

   $ (8,887

Cash (used for) operating activities of discontinued operations represents the cash used by the Spanish operations in 2012 (none in 2014 and 2013). Cash (used for) investing activities of discontinued operations for 2012 primarily represents the cash divested upon the sale of the Spanish operations. The sale of the Spanish operations resulted in a loss of $10.7 million. We do not expect the absence of the cash flows from our discontinued operations in Spain to materially affect our future liquidity and capital resources.

Capital expenditures, which are generally funded by cash generated from operating activities, available cash balances and borrowings available under our credit facilities, were $44.7 million for 2014, compared to $59.2 million for 2013, a decrease of $14.5 million. In 2015, we anticipate capital expenditures in the range of $55.0 million to $60.0 million, primarily for new seat additions, Enterprise Resource Planning upgrades, facility upgrades, maintenance and systems infrastructure.

On May 3, 2012, we entered into a $245 million revolving credit facility (the “2012 Credit Agreement”) with a group of lenders and KeyBank National Association, as Lead Arranger, Sole Book Runner and Administrative Agent (“KeyBank”). The 2012 Credit Agreement replaced our previous $75 million revolving credit facility dated February 2, 2010, as amended, which agreement was terminated simultaneous with entering into the 2012 Credit Agreement. The 2012 Credit Agreement is subject to certain borrowing limitations and includes certain customary financial and restrictive covenants. At December 31, 2014, we were in compliance with all loan requirements of the 2012 Credit Agreement and had $75.0 million and $98.0 million of outstanding borrowings as of December 31, 2014 and 2013, respectively, with an average daily utilization of $85.9 million and $102.5 million during 2014 and 2013, respectively, and $96.8 million for the outstanding period during 2012. During the years ended December 31,

 

35


Table of Contents

2014, 2013 and 2012, the related interest expense, excluding amortization of deferred loan fees, under our credit agreements was $1.1 million, $1.5 million and $0.5 million, respectively, which represented weighted average interest rates of 1.3%, 1.5% and 1.5%, respectively.

The 2012 Credit Agreement includes a $184 million alternate-currency sub-facility, a $10 million swingline sub-facility and a $35 million letter of credit sub-facility, and may be used for general corporate purposes including acquisitions, share repurchases, working capital support and letters of credit, subject to certain limitations. We are not currently aware of any inability of our lenders to provide access to the full commitment of funds that exist under the 2012 Credit Agreement, if necessary. However, there can be no assurance that such facility will be available to us, even though it is a binding commitment of the financial institutions. The 2012 Credit Agreement will mature on May 2, 2017.

Borrowings under the 2012 Credit Agreement will bear interest at the rates set forth in the Credit Agreement. In addition, we are required to pay certain customary fees, including a commitment fee of 0.175%, which is due quarterly in arrears and calculated on the average unused amount of the 2012 Credit Agreement.

The 2012 Credit Agreement is guaranteed by all of our existing and future direct and indirect material U.S. subsidiaries and secured by a pledge of 100% of the non-voting and 65% of the voting capital stock of all of our direct foreign subsidiaries and those of the guarantors.

We are currently under audit in several tax jurisdictions. We received assessments for the Canadian 2003-2009 audit. Requests for Competent Authority Assistance were filed with both the Canadian Revenue Agency and the U.S. Internal Revenue Service and we paid mandatory security deposits to Canada as part of this process. The total amount of deposits, net of fluctuations in the foreign exchange rate, are $15.9 million and $17.3 million as of December 31, 2014 and 2013, respectively, and are included in “Deferred charges and other assets” in the accompanying Consolidated Balance Sheets. Although the outcome of examinations by taxing authorities is always uncertain, we believe we are adequately reserved for these audits and that resolution is not expected to have a material impact on our financial condition and results of operations.

On August 20, 2012, we completed the acquisition of Alpine, a Delaware corporation, pursuant to the Agreement and Plan of Merger, dated July 27, 2012. The purchase price of $149.0 million was funded through cash on hand of $41.0 million and borrowings of $108.0 million under our 2012 Credit Agreement, dated May 3, 2012.

As of December 31, 2014, we had $215.1 million in cash and cash equivalents, of which approximately 90.3% or $194.4 million, was held in international operations and is deemed to be indefinitely reinvested offshore. These funds may be subject to additional taxes if repatriated to the United States, including withholding tax applied by the country of origin and an incremental U.S. income tax, net of allowable foreign tax credits. There are circumstances where we may be unable to repatriate some of the cash and cash equivalents held by our international operations due to country restrictions. We do not intend nor currently foresee a need to repatriate these funds. We expect our current domestic cash levels and cash flows from operations to be adequate to meet our domestic anticipated working capital needs, including investment activities such as capital expenditures and debt repayment for the next twelve months and the foreseeable future. However, from time to time, we may borrow funds under our 2012 Credit Agreement as a result of the timing of our working capital needs, including capital expenditures. Additionally, we expect our current foreign cash levels and cash flows from foreign operations to be adequate to meet our foreign anticipated working capital needs, including investment activities such as capital expenditures for the next twelve months and the foreseeable future.

If we should require more cash in the U.S. than is provided by our domestic operations for significant discretionary unforeseen activities such as acquisitions of businesses and share repurchases, we could elect to repatriate future foreign earnings and/or raise capital in the U.S through additional borrowings or debt/equity issuances. These alternatives could result in higher effective tax rates, interest expense and/or dilution of earnings. We have borrowed funds domestically and continue to have the ability to borrow additional funds domestically at reasonable interest rates.

Our cash resources could also be affected by various risks and uncertainties, including but not limited to, the risks detailed in Item 1A, Risk Factors.

 

36


Table of Contents

Off-Balance Sheet Arrangements and Other

At December 31, 2014, we did not have any material commercial commitments, including guarantees or standby repurchase obligations, or any relationships with unconsolidated entities or financial partnerships, including entities often referred to as structured finance or special purpose entities or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

From time to time, during the normal course of business, we may make certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These include, but are not limited to: (i) indemnities to clients, vendors and service providers pertaining to claims based on negligence or willful misconduct and (ii) indemnities involving breach of contract, the accuracy of representations and warranties, or other liabilities assumed by us in certain contracts. In addition, we have agreements whereby we will indemnify certain officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that limits our exposure and enables us to recover a portion of any future amounts paid. We believe the applicable insurance coverage is generally adequate to cover any estimated potential liability under these indemnification agreements. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential for future payments we could be obligated to make. We have not recorded any liability for these indemnities, commitments and other guarantees in the accompanying Consolidated Balance Sheets. In addition, we have some client contracts that do not contain contractual provisions for the limitation of liability, and other client contracts that contain agreed upon exceptions to limitation of liability. We have not recorded any liability in the accompanying Consolidated Balance Sheets with respect to any client contracts under which we have or may have unlimited liability.

 

37


Table of Contents

Contractual Obligations

The following table summarizes our contractual cash obligations at December 31, 2014, and the effect these obligations are expected to have on liquidity and cash flow in future periods (in thousands):

 

     Payments Due By Period  
     Total      Less Than
1 Year
     1 - 3 Years      3 - 5 Years      After 5
Years
     Other  

Operating leases(1)

   $ 151,523       $ 33,287       $ 46,493       $ 35,942       $ 35,801       $ —     

Purchase obligations(2)

     69,080         33,039         31,473         2,968         1,600         —     

Accounts payable (3) 

     25,523         25,523         —           —           —           —     

Accrued employee compensation and benefits (3) 

     82,062         82,062         —           —           —           —     

Income taxes payable (4) 

     3,662         3,662         —           —           —           —     

Other accrued expenses and current liabilities (5) 

     22,009         22,009         —           —           —           —     

Long-term debt (6) 

     75,000         —           75,000         —           —           —     

Long-term tax liabilities (7) 

     7,431         —           —           —           —           7,431   

Other long-term liabilities (8) 

     4,136         —           1,240         361         2,535         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     $440,426       $ 199,582       $ 154,206       $ 39,271       $ 39,936       $ 7,431   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

Amounts represent the expected cash payments under our operating leases.

 

(2) 

Amounts represent the expected cash payments under our purchase obligations, which include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty.

 

(3) 

Accounts payable and accrued employee compensation and benefits, which represent amounts due vendors and employees payable within one year.

 

(4) 

Income taxes payable, which represents amounts due taxing authorities payable within one year.

 

(5) 

Other accrued expenses and current liabilties, which exclude deferred grants, include amounts primarily related to restructuring costs, legal and professional fees, telephone charges, rent, derivative contracts and other accruals.

 

(6) 

Amount represents total outstanding borrowings. See Note 20, Borrowings, to the accompanying Consolidated Financial Statements.

 

(7) 

Long-term tax liabilities include uncertain tax positions and related penalties and interest as discussed in Note 22, Income Taxes, to the accompanying Consolidated Financial Statements, of which $4.7 million is included in “Long-term income tax liabilities” and $2.7 million is netted within “Deferred charges and other assets” in the accompanying Consolidated Balance Sheet. The amount in the table has been reduced by Canadian mandatory security deposits of $15.9 million, which are included in “Deferred charges and other assets” in the accompanying Consolidated Balance Sheet. We cannot make reasonably reliable estimates of the cash settlement of $7.4 million of the long-term liabilities with the taxing authority; therefore, amounts have been excluded from payments due by period.

 

(8) 

Other long-term liabilities, which exclude deferred income taxes and other non-cash long-term liabilities, represent the expected cash payments due under restructuring accruals (primarily lease obligations) and pension obligations. See Notes 4, Costs Associated with Exit or Disposal Activities, and 25, Defined Benefit Pension Plan and Postretirement Benefits, to the accompanying Consolidated Financial Statements.

Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires estimations and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.

We believe the following accounting policies are the most critical since these policies require significant judgment or involve complex estimations that are important to the portrayal of our financial condition and operating results. Unless we need to clarify a point to readers, we will refrain from citing specific section references when discussing the application of accounting principles or addressing new or pending accounting rule changes.

 

38


Table of Contents

Recognition of Revenue

We recognize revenue in accordance with ASC 605 “Revenue Recognition”. We primarily recognize revenues from services as the services are performed, which is based on either a per minute, per call, per transaction or per time and material basis, under a fully executed contractual agreement and record reductions to revenues for contractual penalties and holdbacks for failure to meet specified minimum service levels and other performance based contingencies. Revenue recognition is limited to the amount that is not contingent upon delivery of any future product or service or meeting other specified performance conditions. Product sales, accounted for within our fulfillment services, are recognized upon shipment to the customer and satisfaction of all obligations.

Revenues from fulfillment services account for 1.4%, 1.3% and 1.5% of total consolidated revenues for the years ended December 31, 2014, 2013 and 2012, respectively, some of which contain multiple-deliverables. The service offerings for these fulfillment service contracts typically include pick-pack-and-ship, warehousing, process management, finished goods assembly and pass-through costs. In accordance with ASC 605-25 “Revenue Recognition — Multiple-Element Arrangements” (“ASC 605-25”) (as amended by Accounting Standards Update (“ASU”) 2009-13 “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force”) (“ASU 2009-13”), we determine if the services provided under these contracts with multiple-deliverables represent separate units of accounting. A deliverable constitutes a separate unit of accounting when it has standalone value, and where return rights exist, delivery or performance of the undelivered items is considered probable and substantially within our control. If those deliverables are determined to be separate units of accounting, revenues from these services are recognized as the services are performed under a fully executed contractual agreement. If those deliverables are not determined to be separate units of accounting, revenue for the delivered services are bundled into a single unit of accounting and recognized on the proportional performance method using the straight-line basis over the contract period, or the actual number of operational seats used to serve the client, as appropriate.

We allocate revenue to each of the deliverables based on a selling price hierarchy of vendor specific objective evidence (“VSOE”), third-party evidence, and then estimated selling price. VSOE is based on the price charged when the deliverable is sold separately. Third-party evidence is based on largely interchangeable competitor services in standalone sales to similarly situated customers. Estimated selling price is based on our best estimate of what the selling prices of deliverables would be if they were sold regularly on a standalone basis. Estimated selling price is established considering multiple factors including, but not limited to, pricing practices in different geographies, service offerings, and customer classifications. Once we allocate revenue to each deliverable, we recognize revenue when all revenue recognition criteria are met. As of December 31, 2014, our fulfillment contracts with multiple-deliverables met the separation criteria as outlined in ASC 605-25 and the revenue was accounted for accordingly. Other than these fulfillment contracts, we have no other contracts that contain multiple-deliverables as of December 31, 2014.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts, $4.7 million as of December 31, 2014, or 1.6% of trade account receivables, for estimated losses arising from the inability of our customers to make required payments. Our estimate is based on qualitative and quantitative analyses, including credit risk measurement tools and methodologies using the publicly available credit and capital market information, a review of the current status of our trade accounts receivable and historical collection experience of our clients. It is reasonably possible that our estimate of the allowance for doubtful accounts will change if the financial condition of our customers were to deteriorate, resulting in a reduced ability to make payments.

Income Taxes

We reduce deferred tax assets by a valuation allowance if, based on the weight of available evidence, both positive and negative, for each respective tax jurisdiction, it is more likely than not that some portion or all of such deferred tax assets will not be realized. The valuation allowance for a particular tax jurisdiction is allocated between current and noncurrent deferred tax assets for that jurisdiction on a pro rata basis. Available evidence which is considered in determining the amount of valuation allowance required includes, but is not limited to, our estimate of future taxable income and any applicable tax-planning strategies. Establishment or reversal of certain valuation allowances may have a significant impact on both current and future results.

 

39


Table of Contents

As of December 31, 2014, we determined that a total valuation allowance of $34.1 million was necessary to reduce U.S. deferred tax assets by $0.5 million and foreign deferred tax assets by $33.6 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 $10.5 million as of December 31, 2014 is dependent upon future profitability within each tax jurisdiction. As of December 31, 2014, based on our estimates of future taxable income and any applicable tax-planning strategies within various tax jurisdictions, we believe that it is more likely than not that the remaining net deferred tax assets will be realized.

A provision for income taxes has not been made for the undistributed earnings of foreign subsidiaries of approximately $380.8 million as of December 31, 2014, as the earnings are indefinitely reinvested in foreign business operations. If these earnings are repatriated or otherwise become taxable in the U.S, we would be subject to an incremental U.S. tax expense net of any allowable foreign tax credits, in addition to any applicable foreign withholding tax expense. Determination of any unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries that are essentially permanent in duration is not practicable due to the inherent complexity of the multi-national tax environment in which we operate.

We evaluate tax positions that have been taken or are expected to be taken in our tax returns, and record a liability for uncertain tax positions in accordance with ASC 740. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. ASC 740 contains a two-step approach to recognizing and measuring uncertain tax positions. First, tax positions are recognized if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination, including resolution of related appeals or litigation processes, if any. Second, the tax position is measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.

As of December 31, 2014, we had $13.3 million of unrecognized tax benefits, a net decrease of $1.7 million from $15.0 million as of December 31, 2013. Had we recognized these tax benefits, approximately $13.3 million and $15.0 million and the related interest and penalties would favorably impact the effective tax rate in 2014 and 2013, respectively. We anticipate that approximately $2.2 million of the unrecognized tax benefits will be recognized in the next twelve months due to a lapse in the applicable statute of limitations.

Our provision for income taxes is subject to volatility and is impacted by the distribution of earnings in the various domestic and international jurisdictions in which we operate. Our effective tax rate could be impacted by earnings being either proportionally lower or higher in foreign countries where we have tax rates lower than the U.S. tax rates. In addition, we have been granted tax holidays in several foreign tax jurisdictions, which have various expiration dates ranging from 2015 through 2028. If we are unable to renew a tax holiday in any of these jurisdictions, our effective tax rate could be adversely impacted. In some cases, the tax holidays expire without possibility of renewal. In other cases, we expect to renew these tax holidays, but there are no assurances from the respective foreign governments that they will permit a renewal. The tax holidays decreased the provision for income taxes by $2.7 million, $4.7 million and $6.5 million for the years ended December 31, 2014, 2013 and 2012, respectively. Our effective tax rate could also be affected by several additional factors, including changes in the valuation of our deferred tax assets or liabilities, changing legislation, regulations, and court interpretations that impact tax law in multiple tax jurisdictions in which we operate, as well as new requirements, pronouncements and rulings of certain tax, regulatory and accounting organizations.

Impairment of Long-Lived Assets

We evaluate the carrying value of property and equipment and definite-lived intangible assets, which had a carrying value of $170.5 million as of December 31, 2014, for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset is considered to be impaired when the forecasted undiscounted cash flows of an asset group are estimated to be less than its carrying value. The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates. Future adverse changes in market conditions or poor operating results of the underlying investment could result in losses or an inability to recover the carrying value of the investment and, therefore, might require an impairment charge in the future. See Note 5, Fair Value, of the accompanying “Notes to Consolidated Financial Statements” for details of impairment losses related to nonrecurring fair value measurements.

 

40


Table of Contents

Impairment of Goodwill

We evaluate goodwill, which had a carrying value of $193.8 million as of December 31, 2014, for impairment at least annually, during the third quarter of each year, or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. To assess the realizability of goodwill, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We may elect to forgo this option and proceed to the annual two-step goodwill impairment test.

If we elect to perform the qualitative assessment and it indicates that a significant decline to fair value of a reporting unit is more likely than not, or if a reporting unit’s fair value has historically been closer to its carrying value, or we elect to forgo this qualitative assessment, we will proceed to Step 1 testing where we calculate the fair value of a reporting unit based on discounted future probability-weighted cash flows. If Step 1 indicates that the carrying value of a reporting unit is in excess of its fair value, we will proceed to Step 2 where the fair value of the reporting unit will be allocated to assets and liabilities as it would in a business combination. Impairment occurs when the carrying amount of goodwill exceeds its estimated fair value calculated in Step 2.

We estimate fair value using discounted cash flows of the reporting units. The most significant assumptions used in these analyses are those made in estimating future cash flows. In estimating future cash flows, we use financial assumptions in our internal forecasting model such as projected capacity utilization, projected changes in the prices we charge for our services, projected labor costs, as well as contract negotiation status. The financial and credit market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine our discount rate. We use a discount rate we consider appropriate for the country where the services are being provided. As of July 31, 2014, our assessment of goodwill impairment indicated that the fair values of our reporting units were substantially in excess of their estimated carrying values, and therefore goodwill in these reporting units was not impaired. If actual results differ substantially from the assumptions used in performing the impairment test, the fair value of the reporting units may be significantly lower, causing the carrying value to exceed the fair value and indicating an impairment has occurred.

Contingencies

We record a liability for pending litigation and claims where losses are both probable and reasonably estimable. Each quarter, management reviews all litigation and claims on a case-by-case basis and assigns probability of loss and range of loss.

Other

We have made certain other estimates that, while not involving the same degree of judgment, are important to understanding our financial statements. These estimates are in the areas of measuring our obligations related to our defined benefit plans and self-insurance accruals.

New Accounting Standards Not Yet Adopted

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) – Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). The amendments in ASU 2014-08 indicate that only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results will be reported as discontinued operations in the financial statements. Currently, a component of an entity that is a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group is eligible for discontinued operations presentation. The amendments should be applied to all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. The adoption of ASU 2014-08 on January 1, 2015 did not have a material impact on our financial condition, results of operations and cash flows.

 

41


Table of Contents

In May 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The amendments in ASU 2014-09 outline a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and indicate that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this, an entity should identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. The amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. We are currently evaluating the impact that the adoption of ASU 2014-09 may have on our financial condition, results of operations and cash flows.

In June 2014, the FASB issued ASU 2014-12 Compensation – Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification Topic 718, “Compensation — Stock Compensation” (“ASC 718”), as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. We do not expect the adoption of ASU 2014-12 to materially impact our financial condition, results of operations and cash flows.

In January 2015, the FASB issued ASU 2015-01 Income Statement – Extraordinary and Unusual Items (Subtopic 225-20) Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU 2015-01”). This amendment eliminates from U.S. GAAP the concept of extraordinary items as part of the FASB’s initiative to reduce complexity in accounting standards. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not expect the adoption of ASU 2015-01 to materially impact our financial condition, results of operations and cash flows.

U.S. Healthcare Reform Acts

In March 2010, the President of the United States signed into law comprehensive healthcare reform legislation under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (the “Acts”). The Acts contain provisions that could materially impact our healthcare costs in the future, thus adversely affecting our profitability. However, based on our evaluation of the potential impact of the Acts, the cost to provide health benefits to employees in compliance with the Acts is not expected to have a material impact on our financial condition, results of operations and cash flows in 2015.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

Our earnings and cash flows are subject to fluctuations due to changes in currency exchange rates. We are exposed to foreign currency exchange rate fluctuations when subsidiaries with functional currencies other than the U.S. Dollar (“USD”) are translated into our USD consolidated financial statements. As exchange rates vary, those results, when translated, may vary from expectations and adversely impact profitability. The cumulative translation effects for subsidiaries using functional currencies other than USD are included in “Accumulated other comprehensive income (loss)” in shareholders’ equity. Movements in non-USD currency exchange rates may negatively or positively affect our competitive position, as exchange rate changes may affect business practices and/or pricing strategies of non-U.S. based competitors.

We employ a foreign currency risk management program that periodically utilizes derivative instruments to protect against unanticipated fluctuations in certain earnings and cash flows caused by volatility in foreign currency exchange (“FX”) rates. We also utilize derivative contracts to hedge intercompany receivables and payables that are denominated in a foreign currency and to hedge net investments in foreign operations.

We serve a number of U.S.-based clients using customer contact management center capacity in The Philippines and Costa Rica, which are within our Americas segment. Although the contracts with these clients are priced in USDs, a substantial portion of the costs incurred to render services under these contracts are denominated in Philippine Pesos (“PHP”) and Costa Rican Colones (“CRC”), which represent FX exposures. Additionally, our EMEA segment services clients in Hungary and Romania where the contracts are priced in Euros (“EUR”), with a substantial portion of the costs incurred to render services under these contracts denominated in Hungarian Forints (“HUF”) and Romanian Leis (“RON”).

 

42


Table of Contents

In order to hedge a portion of our anticipated cash flow requirements denominated in PHP, CRC, HUF and RON we had outstanding forward contracts and options as of December 31, 2014 with counterparties through December 2015 with notional amounts totaling $144.0 million. As of December 31, 2014, we had net total derivative assets associated with these contracts with a fair value of $0.6 million, which will settle within the next 12 months. If the USD was to weaken against the PHP and CRC and the EUR was to weaken against the HUF and RON by 10% from current period-end levels, we would incur a loss of approximately $12.7 million on the underlying exposures of the derivative instruments. However, this loss would be mitigated by corresponding gains on the underlying exposures.

We entered into forward exchange contracts with notional amounts totaling $51.6 million to hedge net investments in our foreign operations. The purpose of these derivative instruments is to protect against the risk that the net assets of certain foreign subsidiaries will be adversely affected by changes in exchange rates and economic exposures related to our foreign currency-based investments in these subsidiaries. As of December 31, 2014, the fair value of these derivatives was a net asset of $4.1 million. The potential loss in fair value at December 31, 2014, for these contracts resulting from a hypothetical 10% adverse change in the foreign currency exchange rates is approximately $4.7 million. However, this loss would be mitigated by corresponding gains on the underlying exposures.

We also entered into forward exchange contracts with notional amounts totaling $64.5 million that are not designated as hedges. The purpose of these derivative instruments is to protect against FX volatility pertaining to intercompany receivables and payables, and other assets and liabilities that are denominated in currencies other than our subsidiaries’ functional currencies. As of December 31, 2014, the fair value of these derivatives was a net liability of $0.3 million. The potential loss in fair value at December 31, 2014, for these contracts resulting from a hypothetical 10% adverse change in the foreign currency exchange rates is approximately $5.1 million. However, this loss would be mitigated by corresponding gains on the underlying exposures.

We evaluate the credit quality of potential counterparties to derivative transactions and only enter into contracts with those considered to have minimal credit risk. We periodically monitor changes to counterparty credit quality as well as our concentration of credit exposure to individual counterparties.

We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that entirely offsets the effects of changes in foreign exchange rates.

As a general rule, we do not use financial instruments to hedge local currency denominated operating expenses in countries where a natural hedge exists. For example, in many countries, revenue from the local currency services substantially offsets the local currency denominated operating expenses.

Interest Rate Risk

Our exposure to interest rate risk results from variable debt outstanding under our revolving credit facility. We pay interest on outstanding borrowings at interest rates that fluctuate based upon changes in various base rates. As of December 31, 2014, we had $75.0 million in borrowings outstanding under the revolving credit facility. Based on our level of variable rate debt outstanding during the year ended December 31, 2014, a one-point increase in the weighted average interest rate, which generally equals the LIBOR rate plus an applicable margin, would have had a $0.9 million impact on our results of operations.

We have not historically used derivative instruments to manage exposure to changes in interest rates.

Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data required by this item are located beginning on page 53 and page 33 of this report, respectively.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

 

43


Table of Contents

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of December 31, 2014. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2014.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, we used the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, management believes that, as of December 31, 2014, our internal control over financial reporting was effective.

Attestation Report of Independent Registered Public Accounting Firm

Our independent registered public accounting firm has issued an attestation report on our internal control over financial reporting. This report appears on page 45.

Changes to Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

44


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Sykes Enterprises, Incorporated

Tampa, Florida

We have audited the internal control over financial reporting of Sykes Enterprises, Incorporated and subsidiaries (the “Company”) as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2014 of the Company and our report dated February 19, 2015 expressed an unqualified opinion on those financial statements and financial statement schedules.

/s/ Deloitte & Touche LLP

Certified Public Accountants

Tampa, Florida

February 19, 2015

 

45


Table of Contents

Item 9B. Other Information

None.

PART III

Items 10. through 14.

All information required by Items 10 through 14, with the exception of information on Executive Officers which appears in this report in Item 1 under the caption “Executive Officers”, is incorporated by reference to SYKES’ Proxy Statement for the 2015 Annual Meeting of Shareholders.

 

46


Table of Contents

PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as part of this report:

Consolidated Financial Statements

The Index to Consolidated Financial Statements is set forth on page 53 of this report.

Financial Statements Schedule

Schedule II — Valuation and Qualifying Accounts is set forth on page 105 of this report.

Other schedules have been omitted because they are not required or applicable or the information is included in the Consolidated Financial Statements or notes thereto.

Exhibits:

 

Exhibit

Number

  

Exhibit Description

  2.1

   Articles of Merger between Sykes Enterprises, Incorporated, a North Carolina Corporation, and Sykes Enterprises, Incorporated, a Florida Corporation, dated March 1, 1996. (1)

  2.2

   Agreement and Plan of Merger, dated as of October 5, 2009, among ICT Group, Inc., Sykes Enterprises, Incorporated, SH Merger Subsidiary I, Inc., and SH Merger Subsidiary II, LLC (15)

  2.3

   Agreement and Plan of Merger, dated as of July 27, 2012, by and among Sykes Enterprises, Incorporated, Sykes Acquisition Subsidiary II, Inc., Alpine Access, Inc., and Shareholder Representative Services LLC. (24)

  3.1

   Articles of Incorporation of Sykes Enterprises, Incorporated, as amended. (2)

  3.2

   Articles of Amendment to Articles of Incorporation of Sykes Enterprises, Incorporated, as amended. (3)

  3.3

   Bylaws of Sykes Enterprises, Incorporated, as amended. (7)

  3.4

   Amendment to Bylaws of Sykes Enterprises, Incorporated. (26)

  4.1

   Specimen certificate for the Common Stock of Sykes Enterprises, Incorporated. (1)

  10.1

   2004 Non-Employee Directors’ Fee Plan. (5)*

  10.2

   First Amended and Restated 2004 Non-Employee Director’s Fee Plan. (12)*

  10.3

   Second Amended and Restated 2004 Non-Employee Director’s Fee Plan. (14)*

  10.4

   Third Amended and Restated 2004 Non-Employee Director’s Fee Plan. (16)*

  10.5

   Fourth Amended and Restated 2004 Non-Employee Director Fee Plan. (20)*

  10.6

   Fifth Amended and Restated 2004 Non-Employee Director Fee Plan. (28)*

  10.7

   Form of Split Dollar Plan Documents. (1)*

  10.8

   Form of Split Dollar Agreement. (1)*

 

47


Table of Contents

Exhibit

Number

  

Exhibit Description

  10.9

   Form of Indemnity Agreement between Sykes Enterprises, Incorporated and directors & executive officers. (1)

  10.10

   2001 Equity Incentive Plan. (4)*

  10.11

   Form of Restricted Share And Stock Appreciation Right Award Agreement dated as of March 29, 2006. (8)*

  10.12

   Form of Restricted Share And Bonus Award Agreement dated as of March 29, 2006. (8)*

  10.13

   Form of Restricted Share Award Agreement dated as of May 24, 2006. (9)*

  10.14

   Form of Restricted Share And Stock Appreciation Right Award Agreement dated as of January 2, 2007. (10)*

  10.15

   Form of Restricted Share Award Agreement dated as of January 2, 2007. (10)*

  10.16

   Form of Restricted Share and Stock Appreciation Right Award Agreement dated as of January 2, 2008. (11)*

  10.17

   2011 Equity Incentive Plan. (21)*

  10.18

   Founder’s Retirement and Consulting Agreement dated December 10, 2004 between Sykes Enterprises, Incorporated and John H. Sykes. (6)*

  10.19

   Amended and Restated Employment Agreement dated as of December 30, 2008 between Sykes Enterprises, Incorporated and Charles E. Sykes. (17)*

  10.20

   Amended and Restated Employment Agreement dated as of December 30, 2008 between Sykes Enterprises, Incorporated and W. Michael Kipphut. (17)*

  10.21

   Amended and Restated Employment Agreement dated as of December 29, 2008 between Sykes Enterprises, Incorporated and Jenna R. Nelson. (17)*

  10.22

   Amended and Restated Employment Agreement dated as of December 29, 2008 between Sykes Enterprises, Incorporated and James T. Holder. (17)*

  10.23

   Amended and Restated Employment Agreement dated as of December 29, 2008 between Sykes Enterprises, Incorporated and William N. Rocktoff. (17)*

  10.24

   Amended and Restated Employment Agreement dated as of December 29, 2008 between Sykes Enterprises, Incorporated and James Hobby, Jr. (17)*

  10.25

   Amended and Restated Employment Agreement dated as of December 29, 2008 between Sykes Enterprises, Incorporated and Daniel L. Hernandez. (17)*

  10.26

   Amended and Restated Employment Agreement dated as of December 29, 2008 between Sykes Enterprises, Incorporated and David L. Pearson. (17)*

  10.27

   Lease Agreement, dated January 25, 2008, Lease Amendment Number One and Lease Amendment Number Two dated February 12, 2008 and May 28, 2008 respectively, between Sykes Enterprises, Incorporated and Kingstree Office One, LLC. (13)

  10.28

   Stock Purchase Agreement between Sykes Enterprises, Incorporated (not as a Seller), SEI International Services S.a.r.l. (as Seller), Sykes Enterprises Incorporated Holdings, BV (as Seller) and Antonio Marcelo Cid, Humberto Daniel Sahade as Buyers, dated December 13, 2010. (18)

 

48


Table of Contents

Exhibit

Number

  

Exhibit Description

  10.29

   Stock Purchase Agreement between Sykes Enterprises, Incorporated (not as a Seller), ICT Group Netherlands B.V. (as Seller), ICT Group Netherlands Holdings, B.V. (as Seller) and Carolina Gaito, Claudio Martin, Fernando A. Berrondo, Gustavo Rosetti as Buyers, dated December 24, 2010. (19)

  10.30

   Credit Agreement, dated May 3, 2012, between Sykes Enterprises, Incorporated, the lenders party thereto and KeyBank National Association, as Lead Arranger, Sole Book Runner and Administrative Agent. (22)

  10.31

   Business Sale and Purchase Agreement, dated as of March 29, 2012, between Sykes Enterprises, Incorporated and Iberphone, S.A.U. (23)

  10.32

   Stock Purchase Agreement, dated as of March 30, 2012, by and among Sykes Enterprises, Incorporated (not as a Seller), SEI International Services S.a.r.l. (as Seller) and Eugenio Arceu Garcia as Buyer. (23)

  10.33

   Employment Agreement, dated as of September 13, 2012, between Sykes Enterprises, Incorporated and Lawrence R. Zingale. (25)*

  10.34

   Employment Agreement, dated as of September 13, 2012, between Sykes Enterprises, Incorporated and Christopher Carrington. (25)*

  10.35

   Sykes Enterprises, Incorporated Deferred Compensation Plan Amended and Restated as of January 1, 2014.*

  10.36

   Employment Agreement, dated as of April 15, 2014, between Sykes Enterprises, Incorporated and John Chapman. (27)*

  10.37

   Employment Agreement, dated as of October 29, 2014, between Sykes Enterprises, Incorporated and Andrew Blanchard.*

  14.1

   Code of Ethics. (29)

  21.1

   List of subsidiaries of Sykes Enterprises, Incorporated.

  23.1

   Consent of Independent Registered Public Accounting Firm.

  24.1

   Power of Attorney relating to subsequent amendments (included on the signature page of this report).

  31.1

   Certification of Chief Executive Officer, pursuant to Rule 13a-14(a).

  31.2

   Certification of Chief Financial Officer, pursuant to Rule 13a-14(a).

  32.1

   Certification of Chief Executive Officer, pursuant to Section 1350.

  32.2

   Certification of Chief Financial Officer, pursuant to Section 1350.

101.INS

   XBRL Instance Document

101.SCH

   XBRL Taxonomy Extension Schema Document

101.CAL

   XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

   XBRL Taxonomy Extension Label Linkbase Document

101.PRE

   XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

   XBRL Taxonomy Extension Definition Linkbase Document

 

*

Indicates management contract or compensatory plan or arrangement.

 

49


Table of Contents
(1)

Filed as an Exhibit to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-2324) and incorporated herein by reference.

 

(2)

Filed as Exhibit 3.1 to the Registrant’s Registration Statement on Form S-3 filed with the Commission on October 23, 1997, and incorporated herein by reference.

 

(3)

Filed as Exhibit 3.2 to the Registrant’s Form 10-K filed with the Commission on March 29, 1999, and incorporated herein by reference.

 

(4)

Filed as Exhibit 10.32 to Registrant’s Form 10-Q filed with the Commission on May 7, 2001, and incorporated herein by reference.

 

(5)

Filed as an Exhibit to Registrant’s Form 10-Q filed with the Commission on August 9, 2004, and incorporated herein by reference.

 

(6)

Filed as an Exhibit to Registrant’s Current Report on Form 8-K filed with the Commission on December 16, 2004, and incorporated herein by reference.

 

(7)

Filed as an Exhibit to Registrant’s Form 10-K filed with the Commission on March 22, 2005, and incorporated herein by reference.

 

(8)

Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on April 4, 2006, and incorporated herein by reference.

 

(9)

Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on May 31, 2006, and incorporated herein by reference.

 

(10)

Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on December 28, 2006, and incorporated herein by reference.

 

(11)

Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on January 8, 2008, and incorporated herein by reference.

 

(12)

Filed as an Exhibit to the Registrant’s Form 10-Q filed with the Commission on May 7, 2008, and incorporated herein by reference.

 

(13)

Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on May 29, 2008, and incorporated herein by reference.

 

(14)

Filed as an Exhibit to the Registrant’s Form 10-Q filed with the Commission on November 5, 2008, and incorporated herein by reference.

 

(15)

Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on October 9, 2009, and incorporated herein by reference.

 

(16)

Filed as an Exhibit to the Registrant’s Proxy Statement for the 2009 annual meeting of shareholders filed with the Commission on April 22, 2009, and incorporated herein by reference.

 

(17)

Filed as an Exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 10, 2009, and incorporated herein by reference.

 

(18)

Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on December 22, 2010, and incorporated herein by reference.

 

(19)

Filed as an Exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on December 30, 2010, and incorporated herein by reference.

 

(20)

Filed as an Exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2011, and incorporated herein by reference.

 

(21)

Filed as an Exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 8, 2011, and incorporated herein by reference.

 

(22)

Filed as an Exhibit to the Registrant’s Form 8-K filed with the Commission on May 7, 2012, and incorporated herein by reference.

 

(23)

Filed as an Exhibit to the Registrant’s Form 8-K filed with the Commission on April 4, 2012, and incorporated herein by reference.

 

(24)

Filed as an Exhibit to the Registrant’s Form 8-K filed with the Commission on July 30, 2012, and incorporated herein by reference.

 

(25)

Filed as an Exhibit to the Registrant’s Form 8-K filed with the Commission on September 19, 2012, and incorporated herein by reference.

 

(26)

Filed as an Exhibit to the Registrant’s Form 8-K filed with the Commission on March 24, 2014, and incorporated herein by reference.

 

(27)

Filed as an Exhibit to the Registrant’s Form 8-K filed with the Commission on April 15, 2014, and incorporated herein by reference.

 

50


Table of Contents
(28)

Filed as an Exhibit to the Registrant’s Proxy Statement for the 2012 annual meeting of shareholders filed with the Commission on April 14, 2012, and incorporated herein by reference.

 

(29)

Available on the Registrant’s website at www.sykes.com, by clicking on “Investor Relations” and then “Corporate Governance” under the heading “Corporate Governance.”

 

51


Table of Contents

Signatures

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Tampa, and State of Florida, on this 19th day of February 2015.

 

SYKES ENTERPRISES, INCORPORATED
(Registrant)
By:     /s/ John Chapman
  John Chapman
 

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person whose signature appears below constitutes and appoints John Chapman his true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or should do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be done by virtue hereof.

 

Signature

  

Title

 

Date

/s/ Paul L. Whiting

Paul L. Whiting

   Chairman of the Board   February 19, 2015

/s/ Charles E. Sykes

Charles E. Sykes

   President and Chief Executive Officer and Director (Principal Executive Officer)   February 19, 2015

/s/ Lt. Gen. Michael P. Delong (Ret.)

Lt. Gen. Michael P. Delong (Ret.)

   Director   February 19, 2015

/s/ Lorraine L. Lutton

Lorraine L. Lutton

   Director   February 19, 2015

/s/ Iain A. Macdonald

Iain A. Macdonald

   Director   February 19, 2015

/s/ James S. MacLeod

James S. MacLeod

   Director   February 19, 2015

/s/ William J. Meurer

William J. Meurer

   Director   February 19, 2015

/s/ William D. Muir, Jr.

William D. Muir, Jr.

   Director   February 19, 2015

/s/ James K. Murray, Jr.

James K. Murray, Jr.

   Director   February 19, 2015

/s/ John Chapman

John Chapman

   Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)   February 19, 2015

 

52


Table of Contents

Table of Contents

 

     Page No.  

Report of Independent Registered Public Accounting Firm

     54   

Consolidated Balance Sheets as of December 31, 2014 and 2013

     55   

Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013 and 2012

     56   

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December  31, 2014, 2013 and 2012

     57   

Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December  31, 2014, 2013 and 2012

     58   

Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 2012

     59   

Notes to Consolidated Financial Statements

     61   

 

53


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Sykes Enterprises, Incorporated

Tampa, Florida

We have audited the accompanying consolidated balance sheets of Sykes Enterprises, Incorporated and subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Sykes Enterprises, Incorporated and subsidiaries as of December 31, 2014 and 2013 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 19, 2015 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Certified Public Accountants

Tampa, Florida

February 19, 2015

 

54


Table of Contents

SYKES ENTERPRISES, INCORPORATED AND SUBSIDIARIES

Consolidated Balance Sheets

 

(in thousands, except per share data)    December 31, 2014     December 31, 2013  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 215,137      $ 211,985   

Receivables, net

     290,397        264,916   

Prepaid expenses

     14,896        15,710   

Other current assets

     29,656        20,672   
  

 

 

   

 

 

 

Total current assets

     550,086        513,283   

Property and equipment, net

     109,880        117,549   

Goodwill, net

     193,831        199,802   

Intangibles, net

     60,620        76,055   

Deferred charges and other assets

     30,083        43,572   
  

 

 

   

 

 

 
   $ 944,500      $ 950,261   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Current liabilities:

    

Accounts payable

   $ 25,523      $ 25,540   

Accrued employee compensation and benefits

     82,072        81,064   

Current deferred income tax liabilities

     144        84   

Income taxes payable

     3,662        1,274   

Deferred revenue

     34,245        35,025   

Other accrued expenses and current liabilities

     22,216        30,393   
  

 

 

   

 

 

 

Total current liabilities

     167,862        173,380   

Deferred grants

     5,110        6,637   

Long-term debt

     75,000        98,000   

Long-term income tax liabilities

     20,630        24,647   

Other long-term liabilities

     17,680        11,893   
  

 

 

   

 

 

 

Total liabilities

     286,282        314,557   
  

 

 

   

 

 

 

Commitments and loss contingency (Note 24)

    

Shareholders’ equity:

    

Preferred stock, $0.01 par value, 10,000 shares authorized; no shares issued and outstanding

     —          —     

Common stock, $0.01 par value, 200,000 shares authorized;

    

43,291 and 43,997 shares issued, respectively

     433        440   

Additional paid-in capital

     279,288        279,513   

Retained earnings

     400,514        349,366   

Accumulated other comprehensive income (loss)

     (20,561     7,997   

Treasury stock at cost: 132 and 122 shares, respectively

     (1,456     (1,612
  

 

 

   

 

 

 

Total shareholders’ equity

     658,218        635,704   
  

 

 

   

 

 

 
   $ 944,500      $ 950,261   
  

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

55


Table of Contents

SYKES ENTERPRISES, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Operations

 

     Years Ended December 31,  
(in thousands, except per share data)    2014     2013     2012  

Revenues

   $ 1,327,523      $ 1,263,460      $ 1,127,698   
  

 

 

   

 

 

   

 

 

 

Operating expenses:

      

Direct salaries and related costs

     892,110        855,266        737,952   

General and administrative

     298,040        297,519        290,373   

Depreciation, net

     45,363        42,084        40,369   

Amortization of intangibles

     14,396        14,863        10,479   

Net (gain) loss on disposal of property and equipment

     (2,030     201        391   

Impairment of long-lived assets

     89        —          355   
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     1,247,968        1,209,933        1,079,919   
  

 

 

   

 

 

   

 

 

 

Income from continuing operations

     79,555        53,527        47,779   
  

 

 

   

 

 

   

 

 

 

Other income (expense):

      

Interest income

     958        866        1,458   

Interest (expense)

     (2,011     (2,307     (1,547

Other income (expense)

     (1,343     (761     (2,533
  

 

 

   

 

 

   

 

 

 

Total other income (expense)

     (2,396     (2,202     (2,622
  

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     77,159        51,325        45,157   

Income taxes

     19,368        14,065        5,207   
  

 

 

   

 

 

   

 

 

 

Income from continuing operations, net of taxes

     57,791        37,260        39,950   

(Loss) from discontinued operations, net of taxes

     —          —          (820

(Loss) on sale of discontinued operations, net of taxes

     —          —          (10,707
  

 

 

   

 

 

   

 

 

 

Net income

   $ 57,791      $ 37,260      $ 28,423   
  

 

 

   

 

 

   

 

 

 

Net income (loss) per common share:

      

Basic:

      

Continuing operations

   $ 1.36      $ 0.87      $ 0.93   

Discontinued operations

     —          —          (0.27
  

 

 

   

 

 

   

 

 

 

Net income (loss) per common share

   $ 1.36      $ 0.87      $ 0.66   
  

 

 

   

 

 

   

 

 

 

Diluted:

      

Continuing operations

   $ 1.35      $ 0.87      $ 0.93   

Discontinued operations

     —          —          (0.27
  

 

 

   

 

 

   

 

 

 

Net income (loss) per common share

   $ 1.35      $ 0.87      $ 0.66   
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding:

      

Basic

     42,609        42,877        43,105   

Diluted

     42,814        42,925        43,148   

See accompanying Notes to Consolidated Financial Statements.

 

56


Table of Contents

SYKES ENTERPRISES, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

 

                                      
     Years Ended December 31,  
(in thousands)    2014     2013     2012  

Net income

   $ 57,791      $ 37,260      $ 28,423   
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of taxes:

      

Foreign currency translation gain (loss), net of taxes

     (34,827     (3,332     10,088   

Unrealized gain (loss) on net investment hedges, net of taxes

     3,959        (1,118     —     

Unrealized actuarial gain (loss) related to pension liability, net of taxes

     (142     (263     428   

Unrealized gain (loss) on cash flow hedging instruments, net of taxes

     2,424        (1,965     (132

Unrealized gain (loss) on postretirement obligation, net of taxes

     28        (181     36   
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of taxes

     (28,558     (6,859     10,420   
  

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 29,233      $ 30,401      $ 38,843   
  

 

 

   

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

57


Table of Contents

SYKES ENTERPRISES, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders’ Equity

 

     Common Stock     Additional
Paid-in

Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive

Income (Loss)
    Treasury
Stock
    Total  
(in thousands)    Shares
Issued
    Amount            

Balance at January 1, 2012

     44,306      $ 443      $ 281,157      $ 291,803      $ 4,436      $ (4,273   $ 573,566   

Stock-based compensation expense

     —          —          3,467        —          —          —          3,467   

Excess tax benefit (deficiency) from stock-based compensation

     —          —          (292     —          —          —          (292

Net vesting (forfeitures) of common stock and restricted stock under equity award plans

     229        3        (1,195     —          —          (220     (1,412

Repurchase of common stock

     —          —          —          —          —          (7,908     (7,908

Retirement of treasury stock

     (745     (8     (5,945     (5,039     —          10,992        —     

Comprehensive income (loss)

     —          —          —          28,423        10,420        —          38,843   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2012

     43,790        438        277,192        315,187        14,856        (1,409     606,264   

Issuance of common stock

     10        —          59        —          —          —          59   

Stock-based compensation expense

     —          —          4,873        —          —          —          4,873   

Excess tax benefit (deficiency) from stock-based compensation

     —          —          (187     —          —          —          (187

Net vesting (forfeitures) of common stock and restricted stock under equity award plans

     538        5        (29     —          —          (203     (227

Repurchase of common stock

     —          —          —          —          —          (5,479     (5,479

Retirement of treasury stock

     (341     (3     (2,395     (3,081     —          5,479        —     

Comprehensive income (loss)

     —          —          —          37,260        (6,859     —          30,401   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2013

     43,997        440        279,513        349,366        7,997        (1,612     635,704   

Stock-based compensation expense

     —          —          6,381        —          —          —          6,381   

Excess tax benefit (deficiency) from stock-based compensation

     —          —          (82     —          —          —          (82

Net vesting (forfeitures) of common stock and restricted stock under equity award plans

     (76     (1     (592     —          —          156        (437

Repurchase of common stock

     —          —          —          —          —          (12,581     (12,581

Retirement of treasury stock

     (630     (6     (5,932     (6,643     —          12,581        —     

Comprehensive income (loss)

     —          —          —          57,791        (28,558     —          29,233   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2014

     43,291      $ 433      $ 279,288      $ 400,514      $ (20,561   $ (1,456   $ 658,218   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying Notes to Consolidated Financial Statements.

 

58


Table of Contents

SYKES ENTERPRISES, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

 

     Years Ended December 31,  
(in thousands)    2014     2013     2012  

Cash flows from operating activities:

      

Net income

   $ 57,791      $ 37,260      $ 28,423   

Adjustments to reconcile net income to net cash provided by operating activities:

      

Depreciation

     46,255        43,094        41,570   

Amortization of intangibles

     14,396        14,863        10,479   

Amortization of deferred grants

     (1,348     (1,148     (1,201

Impairment losses

     89        —          355   

Unrealized foreign currency transaction (gains) losses, net

     119        6,302        2,131   

Stock-based compensation expense

     6,381        4,873        3,467   

Deferred income tax provision (benefit)

     4,865        (362     (4,867

Net (gain) loss on disposal of property and equipment

     (2,030     201        391   

Bad debt expense (reversals)

     (181     483        1,115   

Unrealized (gains) losses on financial instruments, net

     2,352        (15     (1,361

Amortization of deferred loan fees

     259        259        368   

Loss on sale of discontinued operations

     —          —          10,707   

Other

     (624     (56     294   

Changes in assets and liabilities, net of acquisition:

      

Receivables

     (40,276     (22,062     (6,771

Prepaid expenses

     336        (3,931     694   

Other current assets

     (6,673     (1,177     1,705   

Deferred charges and other assets

     3,545        (2,754     (18,388

Accounts payable

     2,029        (1,282     (1,589

Income taxes receivable / payable

     2,609        804        1,555   

Accrued employee compensation and benefits

     5,179        9,140        4,872   

Other accrued expenses and current liabilities

     (5,026     (2,025     11,476   

Deferred revenue

     2,147        2,826        (163

Other long-term liabilities

     2,070        925        1,252   
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     94,264        86,218        86,514   
  

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

      

Capital expenditures

     (44,683     (59,193     (38,647

Cash paid for business acquisition, net of cash acquired

     —          —          (147,094

Proceeds from sale of property and equipment

     3,639        388        240   

Investment in restricted cash

     (7     (562     (67

Release of restricted cash

     160        —          356   

Cash divested on sale of discontinued operations

     —          —          (9,100

Proceeds from insurance settlement

     —          —          228   
  

 

 

   

 

 

   

 

 

 

Net cash (used for) investing activities

     (40,891 )      (59,367     (194,084
  

 

 

   

 

 

   

 

 

 

 

59


Table of Contents

SYKES ENTERPRISES, INCORPORATED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Continued)

 

     Years Ended December 31,  
(in thousands)    2014     2013     2012  

Cash flows from financing activities:

      

Payments of long-term debt

     (23,000     (25,000     (22,000

Proceeds from issuance of long-term debt

     —          32,000        113,000   

Proceeds from issuance of common stock

     —          59        —     

Cash paid for repurchase of common stock

     (12,581     (5,479     (7,908

Proceeds from grants

     256        201        88   

Shares repurchased for minimum tax withholding on equity awards

     (437     (227     (1,412

Cash paid for loan fees related to long-term debt

     —          —          (857
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     (35,762     1,554        80,911   
  

 

 

   

 

 

   

 

 

 

Effects of exchange rates on cash and cash equivalents

     (14,459     (3,742     2,859   
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     3,152        24,663        (23,800

Cash and cash equivalents — beginning

     211,985        187,322        211,122   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents — ending

   $ 215,137      $ 211,985      $ 187,322   
  

 

 

   

 

 

   

 

 

 

Supplemental disclosures of cash flow information:

      

Cash paid during period for interest

   $ 1,716      $ 2,149      $ 2,239   

Cash paid during period for income taxes

   $ 16,560      $ 16,889      $ 28,822   

Non-cash transactions:

      

Property and equipment additions in accounts payable

   $ 5,512      $ 6,002      $ 3,782   

Unrealized gain (loss) on postretirement obligation in accumulated other comprehensive income (loss)

   $ 28      $ (181   $ 36   

See accompanying Notes to Consolidated Financial Statements.

 

60


Table of Contents

SYKES ENTERPRISES, INCORPORATED AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1. Overview and Summary of Significant Accounting Policies

Business Sykes Enterprises, Incorporated and consolidated subsidiaries (“SYKES” or the “Company”) provides comprehensive outsourced customer contact management solutions and services in the business process outsourcing arena to companies, primarily within the communications, financial services, technology/consumer, transportation and leisure, and healthcare industries. SYKES provides flexible, high-quality outsourced customer contact management services (with an emphasis on inbound technical support and customer service), which includes customer assistance, healthcare and roadside assistance, technical support and product sales to its clients’ customers. Utilizing SYKES’ integrated onshore/offshore global delivery model, SYKES provides its services through multiple communication channels encompassing phone, e-mail, social media, text messaging and chat. SYKES complements its outsourced customer contact management services with various enterprise support services in the United States that encompass services for a company’s internal support operations, from technical staffing services to outsourced corporate help desk services. In Europe, SYKES also provides fulfillment services including order processing, payment processing, inventory control, product delivery and product returns handling. The Company has operations in two reportable segments entitled (1) the Americas, which includes the United States, Canada, Latin America, Australia and the Asia Pacific Rim, in which the client base is primarily companies in the United States that are using the Company’s services to support their customer management needs; and (2) EMEA, which includes Europe, the Middle East and Africa.

AcquisitionIn August 2012, the Company completed the acquisition of Alpine Access, Inc. (“Alpine”), a Delaware corporation, pursuant to the Agreement and Plan of Merger, dated July 27, 2012. The Company has reflected the operating results in the Consolidated Statements of Operations since August 20, 2012. See Note 2, Acquisition of Alpine Access, Inc., for additional information on the acquisition of this business.

Discontinued OperationsIn March 2012, the Company sold its operations in Spain (the “Spanish operations”), pursuant to an asset purchase agreement dated March 29, 2012 and a stock purchase agreement dated March 30, 2012. The Company reflected the operating results related to the Spanish operations as discontinued operations in the Consolidated Statement of Operations for the year ended December 31, 2012. Cash flows from discontinued operations are included in the Consolidated Statement of Cash Flows for the year ended December 31, 2012. See Note 3, Discontinued Operations, for additional information on the sale of the Spanish operations.

Principles of Consolidation The consolidated financial statements include the accounts of SYKES and its wholly-owned subsidiaries and controlled majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“generally accepted accounting principles” or “U.S. GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Subsequent Events — Subsequent events or transactions have been evaluated through the date and time of issuance of the consolidated financial statements. There were no material subsequent events that required recognition or disclosure in the accompanying consolidated financial statements.

Recognition of Revenue The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 605 “Revenue Recognition” (“ASC 605”). The Company primarily recognizes revenues from services as the services are performed, which is based on either a per minute, per call, per transaction or per time and material basis, under a fully executed contractual agreement and record reductions to revenues for contractual penalties and holdbacks for failure to meet specified minimum service levels and other performance based contingencies. Revenue recognition is limited to the amount that is not contingent upon delivery of any future product or service or meeting other specified performance conditions. Product sales, accounted for within our fulfillment services, are recognized upon shipment to the customer and satisfaction of all obligations.

 

61


Table of Contents

Revenues from fulfillment services account for 1.4%, 1.3% and 1.5% of total consolidated revenues for the years ended December 31, 2014, 2013 and 2012, respectively, some of which contain multiple-deliverables. The service offerings for these fulfillment service contracts typically include pick-pack-and-ship, warehousing, process management, finished goods assembly and pass-through costs. In accordance with ASC 605-25 “Revenue Recognition — Multiple-Element Arrangements” (“ASC 605-25”) [as amended by Accounting Standards Update (“ASU”) 2009-13 “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements — a consensus of the FASB Emerging Issues Task Force” (“ASU 2009-13”)], the Company determines if the services provided under these contracts with multiple-deliverables represent separate units of accounting. A deliverable constitutes a separate unit of accounting when it has standalone value, and where return rights exist, delivery or performance of the undelivered items is considered probable and substantially within our control. If those deliverables are determined to be separate units of accounting, revenues from these services are recognized as the services are performed under a fully executed contractual agreement. If those deliverables are not determined to be separate units of accounting, revenue for the delivered services are bundled into a single unit of accounting and recognized on the proportional performance method using the straight-line basis over the contract period, or the actual number of operational seats used to serve the client, as appropriate.

The Company allocates revenue to each of the deliverables based on a selling price hierarchy of vendor specific objective evidence (“VSOE”), third-party evidence, and then estimated selling price. VSOE is based on the price charged when the deliverable is sold separately. Third-party evidence is based on largely interchangeable competitor services in standalone sales to similarly situated customers. Estimated selling price is based on the Company’s best estimate of what the selling prices of deliverables would be if they were sold regularly on a standalone basis. Estimated selling price is established considering multiple factors including, but not limited to, pricing practices in different geographies, service offerings, and customer classifications. Once the Company allocates revenue to each deliverable, the Company recognizes revenue when all revenue recognition criteria are met. As of December 31, 2014, the Company’s fulfillment contracts with multiple-deliverables met the separation criteria as outlined in ASC 605-25 and the revenue was accounted for accordingly. Other than these fulfillment contracts, the Company had no other contracts that contain multiple-deliverables as of December 31, 2014.

Cash and Cash Equivalents — Cash and cash equivalents consist of cash and highly liquid short-term investments. Cash in the amount of $215.1 million and $212.0 million at December 31, 2014 and 2013, respectively, was primarily held in interest bearing investments, which have original maturities of less than 90 days. Cash and cash equivalents of $194.4 million and $195.0 million at December 31, 2014 and 2013, respectively, were held in international operations and may be subject to additional taxes if repatriated to the United States (“U.S.”).

Restricted Cash Restricted cash includes cash whereby the Company’s ability to use the funds at any time is contractually limited or is generally designated for specific purposes arising out of certain contractual or other obligations. Restricted cash is included in “Other current assets” and “Deferred charges and other assets” in the accompanying Consolidated Balance Sheets.

Allowance for Doubtful AccountsThe Company maintains allowances for doubtful accounts on trade account receivables for estimated losses arising from the inability of its customers to make required payments. The Company’s estimate is based on qualitative and quantitative analyses, including credit risk measurement tools and methodologies using the publicly available credit and capital market information, a review of the current status of the Company’s trade accounts receivable and historical collection experience of the Company’s clients. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change if the financial condition of the Company’s customers were to deteriorate, resulting in a reduced ability to make payments.

Property and Equipment Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets. Improvements to leased premises are amortized over the shorter of the related lease term or the estimated useful lives of the improvements. Cost and related accumulated depreciation on assets retired or disposed of are removed from the accounts and any resulting gains or losses are credited or charged to income. The Company capitalizes certain costs incurred, if any, to internally develop software upon the establishment of technological feasibility. Costs incurred prior to the establishment of technological feasibility are expensed as incurred.

The carrying value of property and equipment to be held and used is evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with ASC 360 “Property, Plant and Equipment.” For purposes of recognition and measurement of an impairment loss, assets are grouped at the lowest levels for which there are identifiable cash flows (the “reporting unit”). An asset is considered

 

62


Table of Contents

to be impaired when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition does not exceed its carrying amount. The amount of the impairment loss, if any, is measured as the amount by which the carrying value of the asset exceeds its estimated fair value, which is generally determined based on appraisals or sales prices of comparable assets or independent third party offers. Occasionally, the Company redeploys property and equipment from under-utilized centers to other locations to improve capacity utilization if it is determined that the related undiscounted future cash flows in the under-utilized centers would not be sufficient to recover the carrying amount of these assets. Except as discussed in Note 5, Fair Value, the Company determined that its property and equipment were not impaired as of December 31, 2014.

Rent Expense The Company has entered into operating lease agreements, some of which contain provisions for future rent increases, rent free periods, or periods in which rent payments are reduced. The total amount of the rental payments due over the lease term is being charged to rent expense on the straight-line method over the term of the lease in accordance with ASC 840 “Leases.

Goodwill The Company accounts for goodwill and other intangible assets under ASC 350 Intangibles — Goodwill and Other” (“ASC 350”). The Company expects to receive future benefits from previously acquired goodwill over an indefinite period of time. For goodwill and other intangible assets with indefinite lives not subject to amortization, the Company reviews goodwill and intangible assets for impairment at least annually in the third quarter, and more frequently in the presence of certain circumstances. The Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, then the Company is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss, if any.

The Company elected to forgo the option to first assess qualitative factors and completed its annual two-step goodwill impairment test during the three months ended September 30, 2014. Under ASC 350, the carrying value of assets is calculated at the reporting unit level. The quantitative assessment of goodwill includes comparing a reporting unit’s calculated fair value to its carrying value. The calculation of fair value requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth, the useful life over which cash flows will occur and determination of the Company’s weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. If the fair value of the reporting unit is less than its carrying value, goodwill is considered impaired and an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than its carrying value. As of July 31, 2014, the Company concluded that the fair value of each reporting unit was substantially in excess of its carrying value and goodwill was not impaired.

Intangible Assets — Intangible assets, primarily customer relationships and trade names, are amortized using the straight-line method over their estimated useful lives which approximate the pattern in which the economic benefits of the assets are consumed. The Company periodically evaluates the recoverability of intangible assets and takes into account events or changes in circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. Fair value for intangible assets is based on discounted cash flows, market multiples and/or appraised values, as appropriate.

Value Added Tax Receivables — The Philippine operations are subject to value added tax (“VAT”) which is usually applied to all goods and services purchased throughout The Philippines. Upon validation and certification of the VAT receivables by the Philippine government, the resulting value added tax certificates (“certificates”) can be either used to offset current tax obligations or offered for sale to the Philippine government. The VAT receivables balance is recorded at its net realizable value.

 

63


Table of Contents

Income Taxes The Company accounts for income taxes under ASC 740 “Income Taxes” (“ASC 740”) which requires recognition of deferred tax assets and liabilities to reflect tax consequences of differences between the tax bases of assets and liabilities and their reported amounts in the accompanying consolidated financial statements. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, both positive and negative, for each respective tax jurisdiction, it is more likely than not that the deferred tax assets will not be realized in accordance with the criteria of ASC 740. Valuation allowances are established against deferred tax assets due to an uncertainty of realization. Valuation allowances are reviewed each period on a tax jurisdiction by tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence, in accordance with criteria of ASC 740, to support a change in judgment about the ability to realize the related deferred tax assets. Uncertainties regarding expected future income in certain jurisdictions could affect the realization of deferred tax assets in those jurisdictions.

The Company evaluates tax positions that have been taken or are expected to be taken in its tax returns, and records a liability for uncertain tax positions in accordance with ASC 740. ASC 740 contains a two-step approach to recognizing and measuring uncertain tax positions. First, tax positions are recognized if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon examination, including resolution of related appeals or litigation processes, if any. Second, the tax position is measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes in the accompanying consolidated financial statements.

Self-Insurance Programs The Company self-insures for certain levels of workers’ compensation and self-funds the medical, prescription drug and dental benefit plans in the United States. Estimated costs are accrued at the projected settlements for known and anticipated claims. Amounts related to these self-insurance programs are included in “Accrued employee compensation and benefits” and “Other long-term liabilities” in the accompanying Consolidated Balance Sheets.

Deferred Grants Recognition of income associated with grants for land and the acquisition of property, buildings and equipment (together, “property grants”) is deferred until after the completion and occupancy of the building and title has passed to the Company, and the funds have been released from escrow. The deferred amounts for both land and building are amortized and recognized as a reduction of depreciation expense over the corresponding useful lives of the related assets. Amounts received in excess of the cost of the building are allocated to the cost of equipment and, only after the grants are released from escrow, recognized as a reduction of depreciation expense over the weighted average useful life of the related equipment, which approximates five years. Upon sale of the related facilities, any deferred grant balance is recognized in full and is included in the gain on sale of property and equipment.

The Company receives government employment grants as an incentive to create and maintain permanent employment positions for a specified time period. The grants are repayable, under certain terms and conditions, if the Company’s relevant employment levels do not meet or exceed the employment levels set forth in the grant agreements. Accordingly, grant monies received are deferred and amortized primarily as a reduction to “Direct salaries and related costs” using the proportionate performance model over the required employment period.

Deferred Revenue The Company receives up-front fees in connection with certain contracts. The deferred revenue is earned over the service periods of the respective contracts, which range from 30 days to seven years. Deferred revenue included in current liabilities in the accompanying Consolidated Balance Sheets includes the up-front fees associated with services to be provided over the next ensuing twelve month period and the up-front fees associated with services to be provided over multiple years in connection with contracts that contain cancellation and refund provisions, whereby the manufacturers or customers can terminate the contracts and demand pro-rata refunds of the up-front fees with short notice. Deferred revenue included in current liabilities in the accompanying Consolidated Balance Sheets also includes estimated penalties and holdbacks for failure to meet specified minimum service levels in certain contracts and other performance based contingencies.

 

64


Table of Contents

Stock-Based Compensation The Company has three stock-based compensation plans: the 2011 Equity Incentive Plan (for employees and certain non-employees), the 2004 Non-Employee Director Fee Plan (for non-employee directors), both approved by the shareholders, and the Deferred Compensation Plan (for certain eligible employees). All of these plans are discussed more fully in Note 26, Stock-Based Compensation. Stock-based awards under these plans may consist of common stock, stock options, cash-settled or stock-settled stock appreciation rights, restricted stock and other stock-based awards. The Company issues common stock and uses treasury stock to satisfy stock option exercises or vesting of stock awards.

In accordance with ASC 718 “Compensation — Stock Compensation” (“ASC 718”), the Company recognizes in its accompanying Consolidated Statements of Operations the grant-date fair value of stock options and other equity-based compensation issued to employees and directors. Compensation expense for equity-based awards is recognized over the requisite service period, usually the vesting period, while compensation expense for liability-based awards (those usually settled in cash rather than stock) is re-measured to fair value at each balance sheet date until the awards are settled.

Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

 

   

Cash, Short-Term and Other Investments, Investments Held in Rabbi Trust and Accounts Payable The carrying values for cash, short-term and other investments, investments held in rabbi trust and accounts payable approximate their fair values.

 

   

Foreign Currency Forward Contracts and Options Foreign currency forward contracts and options, including premiums paid on options, are recognized at fair value based on quoted market prices of comparable instruments or, if none are available, on pricing models or formulas using current market and model assumptions, including adjustments for credit risk.

 

   

Long-Term Debt The carrying value of long-term debt approximates its estimated fair value as it re-prices at varying interest rates.

Fair Value Measurements ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820-10-20 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

ASC 825 Financial Instruments” (“ASC 825”) permits an entity to measure certain financial assets and financial liabilities at fair value with changes in fair value recognized in earnings each period. The Company has not elected to use the fair value option permitted under ASC 825 for any of its financial assets and financial liabilities that are not already recorded at fair value.

A description of the Company’s policies regarding fair value measurement is summarized below.

Fair Value Hierarchy ASC 820-10-35 requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair value hierarchy:

 

   

Level 1 Quoted prices for identical instruments in active markets.

 

   

Level 2 Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

 

   

Level 3 — Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

65


Table of Contents

Determination of Fair Value The Company generally uses quoted market prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access to determine fair value, and classifies such items in Level 1. Fair values determined by Level 2 inputs utilize inputs other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted market prices in active markets for similar assets or liabilities, and inputs other than quoted market prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest rates, currency rates, etc. Assets or liabilities valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.

The following section describes the valuation methodologies used by the Company to measure assets and liabilities at fair value on a recurring basis, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

Money Market and Open-End Mutual Funds The Company uses quoted market prices in active markets to determine the fair value of money market and open-end mutual funds, which are classified in Level 1 of the fair value hierarchy.

Foreign Currency Forward Contracts and Options The Company enters into foreign currency forward contracts and options over the counter and values such contracts using quoted market prices of comparable instruments or, if none are available, on pricing models or formulas using current market and model assumptions, including adjustments for credit risk. The key inputs include forward or option foreign currency exchange rates and interest rates. These items are classified in Level 2 of the fair value hierarchy.

Investments Held in Rabbi Trust The investment assets of the rabbi trust are valued using quoted market prices in active markets, which are classified in Level 1 of the fair value hierarchy. For additional information about the deferred compensation plan, refer to Note 13, Investments Held in Rabbi Trust, and Note 26, Stock-Based Compensation.

Guaranteed Investment Certificates Guaranteed investment certificates, with variable interest rates linked to the prime rate, approximate fair value due to the automatic ability to re-price with changes in the market; such items are classified in Level 2 of the fair value hierarchy.

Foreign Currency Translation The assets and liabilities of the Company’s foreign subsidiaries, whose functional currency is other than the U.S. Dollar, are translated at the exchange rates in effect on the reporting date, and income and expenses are translated at the weighted average exchange rate during the period. The net effect of translation gains and losses is not included in determining net income, but is included in “Accumulated other comprehensive income (loss)” (“AOCI”), which is reflected as a separate component of shareholders’ equity until the sale or until the complete or substantially complete liquidation of the net investment in the foreign subsidiary. Foreign currency transactional gains and losses are included in “Other income (expense)” in the accompanying Consolidated Statements of Operations.

Foreign Currency and Derivative Instruments The Company accounts for financial derivative instruments under ASC 815 “Derivatives and Hedging” (“ASC 815”). The Company generally utilizes non-deliverable forward contracts and options expiring within one to 24 months to reduce its foreign currency exposure due to exchange rate fluctuations on forecasted cash flows denominated in non-functional foreign currencies and net investments in foreign operations. In using derivative financial instruments to hedge exposures to changes in exchange rates, the Company exposes itself to counterparty credit risk.

The Company designates derivatives as either (1) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge); (2) a hedge of a net investment in a foreign operation; or (3) a derivative that does not qualify for hedge accounting. To qualify for hedge accounting treatment, a derivative must be highly effective in mitigating the designated risk of the hedged item. Effectiveness of the hedge is formally assessed at inception and throughout the life of the hedging relationship. Even if a derivative qualifies for hedge accounting treatment, there may be an element of ineffectiveness of the hedge.

 

66


Table of Contents

Changes in the fair value of derivatives that are highly effective and designated as cash flow hedges are recorded in AOCI, until the forecasted underlying transactions occur. Any realized gains or losses resulting from the cash flow hedges are recognized together with the hedged transaction within “Revenues”. Changes in the fair value of derivatives that are highly effective and designated as a net investment hedge are recorded in cumulative translation adjustment in AOCI, offsetting the change in cumulative translation adjustment attributable to the hedged portion of the Company’s net investment in the foreign operation. Any realized gains and losses from settlements of the net investment hedge remain in AOCI until partial or complete liquidation of the net investment. Ineffectiveness is measured based on the change in fair value of the forward contracts and options and the fair value of the hypothetical derivatives with terms that match the critical terms of the risk being hedged. Hedge ineffectiveness is recognized within “Revenues” for cash flow hedges and within “Other income (expense)” for net investment hedges. Cash flows from the derivative contracts are classified within the operating section in the accompanying Consolidated Statements of Cash Flows.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedging activities. This process includes linking all derivatives that are designated as cash flow hedges to forecasted transactions. Hedges of a net investment in a foreign operation are linked to the specific foreign operation. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective on a prospective and retrospective basis. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge or if a forecasted hedge is no longer probable of occurring, or if the Company de-designates a derivative as a hedge, the Company discontinues hedge accounting prospectively. At December 31, 2014 and 2013, all hedges were determined to be highly effective.

The Company also periodically enters into forward contracts that are not designated as hedges as defined under ASC 815. The purpose of these derivative instruments is to reduce the effects from fluctuations caused by volatility in currency exchange rates on the Company’s operating results and cash flows. All changes in the fair value of the derivative instruments are included in “Other income (expense)”. See Note 12, Financial Derivatives, for further information on financial derivative instruments.

Reclassifications — Certain balances in prior years have been reclassified to conform to current year presentation.

New Accounting Standards Not Yet Adopted

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) – Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). The amendments in ASU 2014-08 indicate that only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results will be reported as discontinued operations in the financial statements. Currently, a component of an entity that is a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group is eligible for discontinued operations presentation. The amendments should be applied to all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. The adoption of ASU 2014-08 on January 1, 2015 did not have a material impact on the financial condition, results of operations and cash flows of the Company.

In May 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The amendments in ASU 2014-09 outline a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and indicate that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this, an entity should identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. The amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact that the adoption of ASU 2014-09 may have on its financial condition, results of operations and cash flows.

 

67


Table of Contents

In June 2014, the FASB issued ASU 2014-12 Compensation – Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification Topic 718, “Compensation — Stock Compensation” (“ASC 718”), as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The Company does not expect the adoption of ASU 2014-12 to materially impact its financial condition, results of operations and cash flows.

In January 2015, the FASB issued ASU 2015-01 Income Statement – Extraordinary and Unusual Items (Subtopic 225-20) Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU 2015-01”). This amendment eliminates from U.S. GAAP the concept of extraordinary items as part of the FASB’s initiative to reduce complexity in accounting standards. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The Company does not expect the adoption of ASU 2015-01 to materially impact its financial condition, results of operations and cash flows.

New Accounting Standards Recently Adopted

In March 2013, the FASB issued ASU 2013-05 Foreign Currency Matters (Topic 830) – Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (“ASU 2013-05”). The amendments in ASU 2013-05 indicate that a cumulative translation adjustment (“CTA”) is attached to the parent’s investment in a foreign entity and should be released in a manner consistent with the derecognition guidance on investments in entities. Thus, the entire amount of the CTA associated with the foreign entity would be released when there has been a sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity, a loss of a controlling financial interest in an investment in a foreign entity (i.e., the foreign entity is deconsolidated), or a step acquisition for a foreign entity (i.e., when an entity has changed from applying the equity method for an investment in a foreign entity to consolidating the foreign entity). ASU 2013-05 does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. The amendments in ASU 2013-05 are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. The adoption of ASU 2013-05 on January 1, 2014 did not have a material impact on the financial condition, results of operations and cash flows of the Company.

In July 2013, the FASB issued ASU 2013-11 Income Taxes (Topic 740) – Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”). The amendments in ASU 2013-11 indicate that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of ASU 2013-11 on January 1, 2014 resulted in a $3.1 million reclassification of a portion of the Company’s unrecognized tax benefits from “Long-term income tax liabilities” to “Deferred charges and other assets.” See Note 22, Income Taxes, for further information.

 

68


Table of Contents

Note 2. Acquisition of Alpine Access, Inc.

On August 20, 2012, the Company acquired 100% of the outstanding common shares and voting interest of Alpine, pursuant to the terms of the merger agreement. Alpine, an industry leader in the virtual at-home agent space, provides award-winning customer contact management services through a secured and proprietary virtual call center environment with its operations located in the United States and Canada. The results of Alpine’s operations have been included in the Company’s consolidated financial statements since its acquisition on August 20, 2012. The Company acquired Alpine to: create significant competitive differentiation for quality, speed to market, scalability and flexibility driven by proprietary, internally-developed software, systems, processes and other intellectual property, which uniquely overcome the challenges of the virtual at-home agent delivery model; strengthen the Company’s current service portfolio and go-to-market offering while expanding the breadth of clients with minimal client overlap; broaden the addressable market opportunity within existing and new verticals as well as clients; expand the addressable pool of skilled labor; leverage operational best practices across the Company’s global platform, with the potential to convert more of its fixed costs to variable costs; and further enhance the growth and margin profile of the Company to drive shareholder value. This resulted in the Company paying a substantial premium for Alpine resulting in the recognition of goodwill.

The acquisition date fair value of the consideration transferred totaled $149.0 million, which was funded through cash on hand of $41.0 million and borrowings of $108.0 million under the Company’s credit agreement, dated May 3, 2012. See Note 20, Borrowings, for further information.

The Company accounted for the acquisition in accordance with ASC 805 “Business Combinations”, whereby the purchase price paid was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed from Alpine based on their estimated fair values as of the closing date. During the three months ended December 31, 2012, the final working capital adjustment was approved by the authorized representative of Alpine’s shareholders. The Company finalized its purchase price allocation during the three months ended December 31, 2012, resulting in no changes from the estimated acquisition date fair values previously reported.

The following table summarizes the final purchase price allocation of the fair values of the assets acquired and liabilities assumed, all included in the Americas segment (in thousands):

 

     Amount  

Cash and cash equivalents

   $ 1,859   

Receivables

     11,831   

Prepaid expenses

     617   
  

 

 

 

Total current assets

     14,307   

Property and equipment

     11,326   

Goodwill

     80,766   

Intangibles

     57,720   

Deferred charges and other assets

     916   

Accounts payable

     (880

Accrued employee compensation and benefits

     (3,774

Income taxes payable

     (141

Deferred revenue

     (94

Other accrued expenses and current liabilities

     (601
  

 

 

 

Total current liabilities

     (5,490

Other long-term liabilities (1) 

     (10,592
  

 

 

 
   $ 148,953   
  

 

 

 

 

(1) 

Primarily includes long-term deferred tax liabilities.

Fair values were based on management’s estimates and assumptions including variations of the income approach, the cost approach and the market approach.

 

69


Table of Contents

The following table presents the Company’s purchased intangibles assets as of August 20, 2012, the acquisition date (in thousands):

 

     Amount
Assigned
     Weighted
Average
Amortization
Period (years)
 

Customer relationships

   $ 46,000         8   

Trade names

     10,600         8   

Non-compete agreements

     670         2   

Favorable lease agreement

     450         2   
  

 

 

    
   $ 57,720         8   
  

 

 

    

The $80.8 million of goodwill was assigned to the Company’s Americas operating segment. Pursuant to Federal income tax regulations, no amount of intangibles or goodwill from this acquisition will be deductible for tax purposes.

The fair value of receivables purchased was $11.8 million, with the gross contractual amount of $11.8 million.

The amount of Alpine’s revenues and net loss since the August 20, 2012 acquisition date, included in the Company’s accompanying Consolidated Statement of Operations for the year ended December 31, 2012 was as follows (in thousands):

 

     From
August 20,
2012
 Through
December 31,
2012
 

Revenues

   $ 40,635   

(Loss) from continuing operations before income taxes

   $ (3,201

(Loss) from continuing operations, net of taxes

   $ (2,166

The loss from continuing operations before income taxes of $3.2 million includes $3.6 million in severance costs, depreciation resulting from the adjustment to fair value of the acquired property and equipment, and amortization of the fair values of the acquired intangibles.

The following table presents the unaudited pro forma combined revenues and net earnings as if Alpine had been included in the consolidated results of the Company for the entire year for the year ended December 31, 2012. The pro forma financial information is not indicative of the results of operations that would have been achieved if the acquisition and related borrowings had taken place on January 1, 2012 (in thousands):

 

     Year Ended
December 31, 2012
 

Revenues

   $ 1,190,150   

Income from continuing operations, net of taxes

   $ 37,352   

Income from continuing operations per common share:

  

Basic

   $ 0.87   

Diluted

   $ 0.87   

These amounts have been calculated to reflect the additional depreciation, amortization and interest expense that would have been incurred assuming the fair value adjustments and borrowings occurred on January 1, 2012, together with the consequential tax effects. In addition, these amounts exclude costs incurred which are directly attributable to the acquisition, and which do not have a continuing impact on the combined companies’ operating results. Included in these costs are severance, advisory and legal costs, net of the tax effects.

 

70


Table of Contents

Merger and integration costs associated with Alpine were as follows (none in 2014) (in thousands):

 

     Years Ended December 31,  
     2013      2012  

Severance costs included in “Direct salaries and related costs”: (1)

     

Americas

   $ 526       $ —     
  

 

 

    

 

 

 
     526         —     

Severance costs included in “General and administrative”: (1)

     

Americas

     985         591   

Corporate

     159         377   
  

 

 

    

 

 

 
     1,144         968   

Transaction and integration costs included in “General and administrative”: (1)

     

Corporate

     444         3,793   
  

 

 

    

 

 

 
     444         3,793   
  

 

 

    

 

 

 

Total merger and integration costs

   $ 2,114       $ 4,761   
  

 

 

    

 

 

 

 

(1)

In the accompanying Consolidated Statements of Operations.

Note 3. Discontinued Operations

In November 2011, the Finance Committee of the Board of Directors (the “Board”) of the Company approved a plan to sell its Spanish operations, which were operated through its Spanish subsidiary, Sykes Enterprises, Incorporated S.L. (“Sykes Spain”). Sykes Spain operated customer contact management centers, providing contact center services through a total of three customer contact management centers in Spain to clients in Spain. The decision to sell the Spanish operations was made in 2011 after management completed a strategic review of the Spanish market and determined the operations were no longer consistent with the Company’s strategic direction.

On March 29, 2012, Sykes Spain entered into the asset purchase agreement, by and between Sykes Spain and Iberphone, S.A.U., and pursuant thereto, on March 29, 2012, Sykes Spain sold the fixed assets located in Ponferrada, Spain, which were previously written down to zero, cash of $4.1 million, and certain contracts and licenses relating to the business of Sykes Spain, to Iberphone, S.A.U. Under the asset purchase agreement, Ponferrada, Spain employees were transferred to Iberphone S.A.U. which assumed certain payroll liabilities in the approximate amount of $1.7 million, and paid a nominal purchase price for the assets.

On March 30, 2012, the Company entered into a stock purchase agreement with a former member of Sykes Spain’s management, and pursuant thereto, on March 30, 2012, the Company sold all of the shares of capital stock of Sykes Spain to the purchaser for a nominal price. Pursuant to the stock purchase agreement, immediately prior to closing, the Company made a cash capital contribution of $8.6 million to Sykes Spain to cover a portion of Sykes Spain’s liabilities and to fund the $4.1 million of cash transferred and sold pursuant to the asset purchase agreement with Iberphone, S.A.U. discussed above. As this was a stock transaction, the Company anticipates no future obligation with regard to Sykes Spain and there were no material post-closing obligations.

The Company reflected the operating results related to the Spanish operations as discontinued operations in the accompanying Consolidated Statement of Operations for the year ended December 31, 2012. Cash flows from discontinued operations are included in the accompanying Consolidated Statement of Cash Flows for the year ended December 31, 2012. This business was historically reported by the Company as part of the EMEA segment.

 

71


Table of Contents

The results of discontinued operations were as follows (none in 2014 and 2013) (in thousands):

 

     Year Ended
December 31,  2012
 

Revenues

   $ 10,102   
  

 

 

 

(Loss) from discontinued operations before income taxes

   $ (820

Income taxes (1) 

     —     
  

 

 

 

(Loss) from discontinued operations, net of taxes

   $ (820
  

 

 

 

(Loss) on sale of discontinued operations before income taxes

   $ (10,707

Income taxes (1) 

     —     
  

 

 

 

(Loss) on sale of discontinued operations, net of taxes

   $ (10,707
  

 

 

 

 

(1)

There were no income taxes as any tax benefit from the losses would be offset by a valuation allowance.

Note 4. Costs Associated with Exit or Disposal Activities

During 2011 and 2010, the Company announced several initiatives to streamline excess capacity through targeted seat reductions (the “Exit Plans”) in an on-going effort to manage and optimize capacity utilization. These Exit Plans included, but were not limited to, closing customer contact management centers in The Philippines, the United Kingdom, Ireland and South Africa and consolidating leased space in various locations in the U.S. and the Netherlands. These Exit Plans impacted approximately 800 employees. The Company has paid $14.5 million in cash through December 31, 2014 under these Exit Plans.

The cumulative costs expected and incurred as a result of the Exit Plans were as follows as of December 31, 2014 (in thousands):

 

     Americas
Fourth
Quarter 2011
Exit Plan
     EMEA
Fourth
Quarter 2011
Exit Plan
     EMEA
Fourth
Quarter 2010
Exit Plan
     Americas
Third
Quarter 2010
Exit Plan
     Total  

Lease obligations and facility exit costs

   $ 1,365       $ 19       $ 1,914       $ 6,729       $ 10,027   

Severance and related costs

     —           5,857         185         —           6,042   

Legal-related costs

     —           110         —           —           110   

Non-cash impairment charges

     480         474         159         3,847         4,960   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,845       $ 6,460       $ 2,258       $ 10,576       $ 21,139   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

72


Table of Contents

Restructuring charges in the Company’s Consolidated Statements of Operations are summarized as follows (in thousands):

 

     Years Ended December 31,  
     2014     2013     2012  

By Type:

      

Lease obligations and facility exit costs

   $ (185   $ 318      $ 858   

Severance and related costs

     (129     (56     857   

Legal-related costs

     —           —          89   
  

 

 

   

 

 

   

 

 

 

Total

   $ (314   $ 262      $ 1,804   
  

 

 

   

 

 

   

 

 

 
     Years Ended December 31,  
     2014     2013     2012  

By Statements of Operations Caption:

      

Direct salaries and related costs

   $ —        $ —        $ 715   

General and administrative

     (314     262        1,089   
  

 

 

   

 

 

   

 

 

 

Total

   $ (314   $ 262      $ 1,804   
  

 

 

   

 

 

   

 

 

 
     Years Ended December 31,  
     2014     2013     2012  

By Segment:

      

Americas

   $ —        $ —        $ 1,426   

EMEA

     (314     262        378   
  

 

 

   

 

 

   

 

 

 

Total

   $ (314   $ 262      $ 1,804   
  

 

 

   

 

 

   

 

 

 

The following table summarizes the accrued liability associated with the Exit Plans’ exit or disposal activities and related charges for the years ended December 31, 2014, 2013 and 2012 (in thousands):

 

     Lease Obligation
and Facility Exit
Costs
    Severance and
Related Costs
    Legal-Related
Costs
    Total  

Balance at January 1, 2012

   $ 4,839      $ 4,470      $ 13      $ 9,322   

Charges (reversals) (1) 

     858        857        89        1,804   

Cash payments

     (1,926     (5,134     (91     (7,151

Other non-cash changes (4)

     1        (6     (1     (6
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2012

     3,772        187        10        3,969   

Charges (reversals) (2) 

     318        (56     —          262   

Cash payments

     (1,264     (8     (10     (1,282

Other non-cash changes (4)

     17        8        —          25   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2013

     2,843        131        —          2,974   

Charges (reversals) (3) 

     (185     (129     —          (314

Cash payments

     (1,095     —          —          (1,095

Other non-cash changes (4)

     (5     (2     —          (7
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2014

   $ 1,558      $ —        $ —        $ 1,558   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

During 2012, the Company recorded lease obligations and facility exit costs due to the initiation of one of the Exit Plans, recorded additional severance and related costs and legal-related costs due to a change in estimates and recorded additional lease obligations due to an unanticipated lease termination penalty, all of which were included in “General and administrative” costs in the accompanying Consolidated Statement of Operations. Also, during 2012, the Company reversed accruals related to the final settlement of lease obligations and facility exit costs for one of the Ireland sites, which reduced “General and administrative” costs in the accompanying Consolidated Statement of Operations.

 

(2)

During 2013, the Company recorded additional lease obligations and facility exit costs for one of the Ireland site’s lease restoration. Also during 2013, the Company reversed accruals related to the final settlement of severance and related costs for the Netherlands site, which reduced “General and administrative” costs in the accompanying Consolidated Statement of Operations.

 

(3)

During 2014, the Company reversed accruals related to the final settlement of lease obligations and facility exit costs as well as severance and related costs for the Ireland sites, which reduced “General and administrative” costs in the accompanying Consolidated Statement of Operations.

 

(4)

Effect of foreign currency translation.

The charges (reversals) for the lease obligations and facility exit costs of $0.9 million for the year ended December 31, 2012 is net of a reversal of $0.6 million as described in (1) to the table above.

 

73


Table of Contents

Restructuring Liability Classification

The following table summarizes the Company’s short-term and long-term accrued liabilities associated with its exit and disposal activities, by plan, as of December 31, 2014 and 2013 (in thousands):

 

    Americas
Fourth
Quarter 2011
Exit Plan
    EMEA
Fourth
Quarter 2011
Exit Plan
    EMEA
Fourth
Quarter 2010
Exit Plan
    Americas
Third
Quarter
2010 Exit
Plan
    Total  

December 31, 2014

         

Short-term accrued restructuring liability (1)

  $ 109      $ —        $ —        $ 521      $ 630   

Long-term accrued restructuring liability (2)

    203        —          —          725        928   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending accrual at December 31, 2014

  $ 312      $ —        $ —        $ 1,246      $ 1,558   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2013

         

Short-term accrued restructuring liability (1)

  $ 136      $ 131      $ 538      $ 440      $ 1,245   

Long-term accrued restructuring liability (2)

    376        —          —          1,353        1,729   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending accrual at December 31, 2013

  $ 512      $ 131      $ 538      $ 1,793      $ 2,974   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Included in “Other accrued expenses and current liabilities” in the accompanying Consolidated Balance Sheets.

 

(2) 

Included in “Other long-term liabilities” in the accompanying Consolidated Balance Sheets.

The remaining restructuring liability relates to future rent obligations to be paid through the remainder of the lease terms, the last of which ends in February 2017.

 

74


Table of Contents

Note 5. Fair Value

The Company’s assets and liabilities measured at fair value on a recurring basis subject to the requirements of ASC 820 consist of the following (in thousands):

 

          Fair Value Measurements at December 31, 2014 Using:  
    Balance at     Quoted Prices
in  Active
Markets For
Identical Assets
    Significant
Other
Observable
Inputs
    Significant
Unobservable
Inputs
 
    December 31, 2014     Level (1)     Level (2)     Level (3)  

Assets:

       

Money market funds and open-end mutual funds included in “Cash and cash equivalents” (1)

  $ 100,915      $ 100,915      $ —        $ —     

Money market funds and open-end mutual funds included in “Deferred charges and other assets” (1)

    10        10        —          —     

Foreign currency forward and option contracts included in “Other current assets” (2)

    1,489        —          1,489        —     

Foreign currency forward contracts included in “Deferred charges and other assets” (2)

    4,060        —          4,060        —     

Equity investments held in a rabbi trust for the Deferred Compensation Plan (3)

    5,589        5,589        —          —     

Debt investments held in a rabbi trust for the Deferred Compensation Plan (3)

    1,363        1,363        —          —     

Guaranteed investment certificates (4)

    79        —          79        —     
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 113,505      $ 107,877      $ 5,628      $ —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

       

Long-term debt (5)

  $ 75,000      $ —        $ 75,000      $ —     

Foreign currency forward and option contracts included in “Other accrued expenses and current liabilities” (2)

    1,261        —          1,261        —     
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 76,261      $ —        $ 76,261      $ —     
 

 

 

   

 

 

   

 

 

   

 

 

 

 

          Fair Value Measurements at December 31, 2013 Using:  
    Balance at     Quoted Prices
in  Active
Markets For
Identical Assets
    Significant
Other
Observable
Inputs
    Significant
Unobservable
Inputs
 
    December 31, 2013     Level (1)     Level (2)     Level (3)  

Assets:

       

Money market funds and open-end mutual funds included in “Cash and cash equivalents” (1)

  $ 50,627      $ 50,627      $ —        $ —     

Money market funds and open-end mutual funds included in “Deferred charges and other assets” (1)

    11        11        —          —     

Foreign currency forward and option contracts included in “Other current assets” (2)

    2,240        —          2,240        —     

Equity investments held in a rabbi trust for the Deferred Compensation Plan (3)

    5,251        5,251        —          —     

Debt investments held in a rabbi trust for the Deferred Compensation Plan (3)

    1,170        1,170        —          —     

Guaranteed investment certificates (4)

    80        —          80        —     
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 59,379      $ 57,059      $ 2,320      $ —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities:

       

Long-term debt (5)

  $ 98,000      $ —        $ 98,000      $ —     

Foreign currency forward and option contracts included in “Other accrued expenses and current liabilities” (2)

    5,063        —          5,063        —     
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 103,063      $ —        $ 103,063      $ —     
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

In the accompanying Consolidated Balance Sheet.

 

(2) 

In the accompanying Consolidated Balance Sheet. See Note 12, Financial Derivatives.

 

(3) 

Included in “Other current assets” in the accompanying Consolidated Balance Sheet. See Note 13, Investments Held in Rabbi Trust.

 

(4) 

Included in “Deferred charges and other assets” in the accompanying Consolidated Balance Sheet.

 

(5) 

The carrying value of long-term debt approximates its estimated fair value as it re-prices at varying interest rates. See Note 20, Borrowings.

 

 

75


Table of Contents

Certain assets, under certain conditions, are measured at fair value on a nonrecurring basis utilizing Level 3 inputs as described in Note 1, Overview and Summary of Significant Accounting Policies, like those associated with acquired businesses, including goodwill, other intangible assets and other long-lived assets. For these assets, measurement at fair value in periods subsequent to their initial recognition would be applicable if these assets were determined to be impaired. The adjusted carrying values for assets measured at fair value on a nonrecurring basis (no liabilities) subject to the requirements of ASC 820 were not material at December 31, 2014 and 2013.

The table below summarizes impairment losses resulting from nonrecurring fair value measurements of certain assets (no liabilities), primarily long-lived assets that the Company determined were no longer being used and were disposed of, as follows (in thousands):

 

      Total Impairment (Loss)  
     Years Ended December 31,  
     2014     2013      2012  

Americas:

       

Property and equipment, net (1)

   $ (89   $  —         $ (355

EMEA:

       

Property and equipment, net (1)

     —          —           —     
  

 

 

   

 

 

    

 

 

 
   $ (89   $ —         $ (355
  

 

 

   

 

 

    

 

 

 

 

(1)

See Note 1, Overview and Summary of Significant Accounting Policies, for additional information regarding the fair value measurement as outlined in Property and Equipment.

Note 6. Goodwill and Intangible Assets

The following table presents the Company’s purchased intangible assets as of December 31, 2014 (in thousands):

 

     Gross Intangibles      Accumulated
Amortization
    Net Intangibles      Weighted  Average
Amortization
Period (years)
 

Customer relationships

   $ 100,719       $ (47,571   $ 53,148         8   

Trade name

     11,600         (4,128     7,472         8   

Non-compete agreements

     1,209         (1,209     —           2   

Proprietary software

     850         (850     —           2   

Favorable lease agreement

     449         (449     —           2   
  

 

 

    

 

 

   

 

 

    
   $ 114,827       $ (54,207   $ 60,620         8   
  

 

 

    

 

 

   

 

 

    

The following table presents the Company’s purchased intangible assets as of December 31, 2013 (in thousands):

 

     Gross Intangibles      Accumulated
Amortization
    Net Intangibles      Weighted  Average
Amortization
Period (years)
 

Customer relationships

   $ 102,774       $ (35,873   $ 66,901         8   

Trade name

     11,600         (2,803     8,797         8   

Non-compete agreements

     1,220         (1,009     211         2   

Proprietary software

     850         (847     3         2   

Favorable lease agreement

     449         (306     143         2   
  

 

 

    

 

 

   

 

 

    
   $ 116,893       $ (40,838   $ 76,055         8   
  

 

 

    

 

 

   

 

 

    

 

76


Table of Contents

The Company’s estimated future amortization expense for the succeeding years relating to the purchased intangible assets resulting from acquisitions completed prior to December 31, 2014, is as follows (in thousands):

 

Years Ending December 31,

   Amount  

2015

   $ 13,884   

2016

     13,884   

2017

     13,884   

2018

     7,565   

2019

     6,961   

2020 and thereafter

     4,442   

Changes in goodwill for the year ended December 31, 2014 consist of the following (in thousands):

 

     January 1, 2014      Acquisitions      Impairments      Effect of Foreign
Currency
    December 31,
2014
 

Americas

   $ 199,802       $ —         $ —         $ (5,971   $ 193,831   

EMEA

     —           —           —           —          —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 199,802       $ —         $ —         $ (5,971   $ 193,831   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Changes in goodwill for the year ended December 31, 2013 consist of the following (in thousands):

 

     January 1, 2013      Acquisitions      Impairments      Effect of Foreign
Currency
    December 31,
2013
 

Americas

   $ 204,231       $ —         $ —         $ (4,429   $ 199,802   

EMEA

     —           —           —           —          —     
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 204,231       $ —         $ —         $ (4,429   $ 199,802   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Note 7. Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. The Company’s credit concentrations are limited due to the wide variety of customers and markets in which the Company’s services are sold. See Note 12, Financial Derivatives, for a discussion of the Company’s credit risk relating to financial derivative instruments, and Note 27, Segments and Geographic Information, for a discussion of the Company’s customer concentration.

Note 8. Receivables, Net

Receivables, net consist of the following (in thousands):

 

     December 31,  
     2014     2013  

Trade accounts receivable

   $ 290,711      $ 266,048   

Income taxes receivable

     993        1,377   

Other

     3,354        2,478   
  

 

 

   

 

 

 
     295,058        269,903   

Less: Allowance for doubtful accounts

     4,661        4,987   
  

 

 

   

 

 

 
   $ 290,397      $ 264,916   
  

 

 

   

 

 

 

Allowance for doubtful accounts as a percent of trade receivables

     1.6     1.9
  

 

 

   

 

 

 

 

77


Table of Contents

Note 9. Prepaid Expenses

Prepaid expenses consist of the following (in thousands):

 

     December 31,  
     2014      2013  

Prepaid maintenance

   $ 5,315       $ 5,852   

Prepaid rent

     3,147         3,009   

Prepaid insurance

     3,112         2,631   

Prepaid other

     3,322         4,218   
  

 

 

    

 

 

 
   $ 14,896       $ 15,710   
  

 

 

    

 

 

 

Note 10. Other Current Assets

Other current assets consist of the following (in thousands):

 

     December 31,  
     2014      2013  

Deferred tax assets (Note 22)

   $ 13,703       $ 7,961   

Financial derivatives (Note 12)

     1,489         2,240   

Investments held in rabbi trust (Note 13)

     6,952         6,421   

Value added tax certificates (Note 11)

     6,303         2,066   

Other current assets

     1,209         1,984   
  

 

 

    

 

 

 
   $ 29,656       $ 20,672   
  

 

 

    

 

 

 

Note 11. Value Added Tax Receivables

The VAT receivables balances, and the respective locations in the accompanying Consolidated Balance Sheets, are presented below (in thousands):

 

     December 31,  
     2014      2013  

VAT included in:

     

Other current assets (Note 10)

   $ 6,303       $ 2,066   

Deferred charges and other assets (Note 15)

     856         5,406   
  

 

 

    

 

 

 
   $ 7,159       $ 7,472   
  

 

 

    

 

 

 

During the years ended December 31, 2014, 2013 and 2012, the Company wrote down the VAT receivables balances by the following amounts, which are reflected in the accompanying Consolidated Statements of Operations (in thousands):

 

     Years Ended December 31,  
     2014     2013      2012  

Write-downs (recoveries) of value added tax receivables

   $ (638   $ 143       $ 546   
  

 

 

   

 

 

    

 

 

 

 

78


Table of Contents

Note 12. Financial Derivatives

Cash Flow HedgesThe Company has derivative assets and liabilities relating to outstanding forward contracts and options, designated as cash flow hedges, as defined under ASC 815 “Derivatives and Hedging” (“ASC 815”), consisting of Philippine Peso, Costa Rican Colon, Hungarian Forint and Romanian Leu contracts. These contracts are entered into to protect against the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates.

The deferred gains (losses) and related taxes on the Company’s cash flow hedges recorded in “Accumulated other comprehensive income (loss)” in the accompanying Consolidated Balance Sheets are as follows (in thousands):

 

      December 31,  
     2014     2013  

Deferred gains (losses) in AOCI

   $ (157   $ (2,704

Tax on deferred gains (losses) in AOCI

     46        169   
  

 

 

   

 

 

 

Deferred gains (losses) in AOCI, net of taxes

   $ (111   $ (2,535
  

 

 

   

 

 

 

Deferred gains (losses) expected to be reclassified to “Revenues” from AOCI during the next twelve months

   $ (157  
  

 

 

   

Deferred gains (losses) and other future reclassifications from AOCI will fluctuate with movements in the underlying market price of the forward contracts and options.

Net Investment Hedge — During 2014 and 2013, the Company entered into foreign exchange forward contracts to hedge its net investment in a foreign operation, as defined under ASC 815. The Company did not hedge net investments in foreign operations during 2012. The purpose of these derivative instruments is to protect the Company’s interests against the risk that the net assets of certain foreign subsidiaries will be adversely affected by changes in exchange rates and economic exposures related to the Company’s foreign currency-based investments in these subsidiaries.

Non-Designated HedgesThe Company also periodically enters into foreign currency hedge contracts that are not designated as hedges as defined under ASC 815. The purpose of these derivative instruments is to protect the Company’s interests against adverse foreign currency moves pertaining to intercompany receivables and payables, and other assets and liabilities that are denominated in currencies other than the Company’s subsidiaries’ functional currencies. These contracts generally do not exceed 180 days in duration.

 

79


Table of Contents

The Company had the following outstanding foreign currency forward contracts and options (in thousands):

 

     As of December 31, 2014      As of December 31, 2013  

Contract Type

   Notional
Amount in
USD
     Settle Through
Date
     Notional
Amount in
USD
     Settle Through
Date
 

Cash flow hedges: (1)

           

Options:

           

Philippine Pesos

   $ 73,000         December 2015       $ 59,000         December 2014   

Forwards:

           

Philippine Pesos

     9,000         March 2015         63,300         July 2014   

Costa Rican Colones

     51,600         October 2015         41,600         October 2014   

Hungarian Forints

     —          
—  
  
     550         January 2014   

Romanian Leis

     10,414         December 2015         619         January 2014   

Net investment hedges: (2)

           

Forwards:

           

Euros

     51,648         March 2016         32,657         September 2014   

Non-designated hedges: (3)

           

Forwards

     64,541         March 2015         59,207         June 2014   

 

(1) 

Cash flow hedge as defined under ASC 815. Purpose is to protect against the risk that eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates.

 

(2) 

Net investment hedge as defined under ASC 815. Purpose is to protect against the risk that the net assets of certain of our international subsidiaries will be adversely affected by changes in exchange rates and economic exposures related to our foreign currency-based investments in these subsidiaries.

 

(3) 

Foreign currency hedge contract not designated as a hedge as defined under ASC 815. Purpose is to reduce the effects on the Company’s operating results and cash flows from fluctuations caused by volatility in currency exchange rates, primarily related to intercompany loan payments and cash held in non-functional currencies. See Note 1, Overview and Summary of Significant Accounting Policies, for additional information on the Company’s purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategies.

Master netting agreements exist with each respective counterparty to reduce credit risk by permitting net settlement of derivative positions. In the event of default by the Company or one of its counterparties, these agreements include a set-off clause that provides the non-defaulting party the right to net settle all derivative transactions, regardless of the currency and settlement date. The maximum amount of loss due to credit risk that, based on gross fair value, the Company would incur if parties to the derivative transactions that make up the concentration failed to perform according to the terms of the contracts was $5.5 million and $2.2 million as of December 31, 2014 and 2013, respectively. After consideration of these netting arrangements and offsetting positions by counterparty, the total net settlement amount as it relates to these positions are asset positions of $4.4 million and $0.4 million, and liability positions of $0.1 million and $3.3 million as of December 31, 2014 and 2013, respectively.

Although legally enforceable master netting arrangements exist between the Company and each counterparty, the Company has elected to present the derivative assets and derivative liabilities on a gross basis in the accompanying Consolidated Balance Sheets. Additionally, the Company is not required to pledge, nor is it entitled to receive, cash collateral related to these derivative transactions.

 

80


Table of Contents

The following tables present the fair value of the Company’s derivative instruments included in the accompanying Consolidated Balance Sheets (in thousands):

 

    Derivative Assets  
    December 31, 2014     December 31, 2013  
    Fair Value     Fair Value  

Derivatives designated as cash flow hedging instruments under ASC 815:

   

Foreign currency forward and option contracts (1) 

  $ 974      $ 862   

Derivatives designated as net investment hedging instruments under ASC 815:

   

Foreign currency forward contracts (2)

    4,060        —     
 

 

 

   

 

 

 
    5,034        862   

Derivatives not designated as hedging instruments under ASC 815:

   

Foreign currency forward contracts (1)

    515        1,378   
 

 

 

   

 

 

 

Total derivative assets

  $ 5,549      $ 2,240   
 

 

 

   

 

 

 

 

    Derivative Liabilities  
    December 31, 2014     December 31, 2013  
    Fair Value     Fair Value  

Derivatives designated as cash flow hedging instruments under ASC 815:

   

Foreign currency forward and option contracts (3) 

  $ 406      $ 2,997   

Derivatives designated as net investment hedging instruments under ASC 815:

   

Foreign currency forward contracts (3)

    —          1,720   
 

 

 

   

 

 

 
    406        4,717   

Derivatives not designated as hedging instruments under ASC 815:

   

Foreign currency forward contracts (3)

    855        346   
 

 

 

   

 

 

 

Total derivative liabilities

  $ 1,261      $ 5,063   
 

 

 

   

 

 

 

 

(1)

Included in “Other current assets” in the accompanying Consolidated Balance Sheets.

 

(2)

Included in “Deferred charges and other assets” in the accompanying Consolidated Balance Sheets.

 

(3)

Included in “Other accrued expenses and current liabilities” in the accompanying Consolidated Balance Sheets.

 

81


Table of Contents

The following tables present the effect of the Company’s derivative instruments included in the accompanying Consolidated Financial Statements for the years ended December 31, 2014, 2013 and 2012 (in thousands):

 

    Gain (Loss)
Recognized  in AOCI
on Derivatives
(Effective Portion)
    Gain (Loss)
Reclassified  From Accumulated
AOCI Into “Revenues”

(Effective Portion)
    Gain (Loss)
Recognized  in “Revenues”
on Derivatives
(Ineffective Portion)
 
    December 31,     December 31,     December 31,  
    2014     2013     2012     2014     2013     2012     2014     2013     2012  

Derivatives designated as cash flow hedging instruments under ASC 815:

                 

Foreign currency forward and option contracts

  $ (2,787   $ (2,823   $ 4,400      $ (5,339   $ (666   $ 4,156      $ (3   $ 119      $ 17   

Derivatives designated as net investment hedging instruments under ASC 815:

                 

Foreign currency forward contracts

    6,344        (1,720     —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreign currency forward and option contracts

  $ 3,557      $ (4,543   $ 4,400      $ (5,339 )    $ (666   $ 4,156      $ (3 )    $ 119      $ 17   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Gain (Loss) Recognized in
“Other income and (expense)”
on Derivatives
 
     December 31,  
     2014     2013      2012  

Derivatives not designated as hedging instruments under ASC 815:

       

Foreign currency forward contracts

   $ (44 )    $ 4,216       $ (295
  

 

 

   

 

 

    

 

 

 

Note 13. Investments Held in Rabbi Trust

The Company’s investments held in rabbi trust, classified as trading securities and included in “Other current assets” in the accompanying Consolidated Balance Sheets, at fair value, consist of the following (in thousands):

 

     December 31, 2014      December 31, 2013  
     Cost      Fair Value      Cost      Fair Value  

Mutual funds

   $ 5,160       $ 6,952       $ 4,749       $ 6,421   
  

 

 

    

 

 

    

 

 

    

 

 

 

The mutual funds held in the rabbi trust were 80% equity-based and 20% debt-based as of December 31, 2014. Net investment income (losses), included in “Other income (expense)” in the accompanying Consolidated Statements of Operations consists of the following (in thousands):

 

     Years Ended
December 31,
 
     2014     2013     2012  

Gross realized gains from sale of trading securities

   $ 586      $ 160      $ 163   

Gross realized (losses) from sale of trading securities

     —          (10     (1

Dividend and interest income

     58        279        129   

Net unrealized holding gains (losses)

     (276     568        312   
  

 

 

   

 

 

   

 

 

 

Net investment income (losses)

   $ 368      $ 997      $ 603   
  

 

 

   

 

 

   

 

 

 

 

82


Table of Contents

Note 14. Property and Equipment

Property and equipment consist of the following (in thousands):

 

     December 31,  
     2014      2013  

Land

   $ 3,600       $ 4,144   

Buildings and leasehold improvements

     94,786         92,652   

Equipment, furniture and fixtures

     293,857         287,728   

Capitalized internally developed software costs

     7,963         7,752   

Transportation equipment

     531         624   

Construction in progress

     8,071         1,909   
  

 

 

    

 

 

 
     408,808         394,809   

Less: Accumulated depreciation

     298,928         277,260   
  

 

 

    

 

 

 
   $ 109,880       $ 117,549   
  

 

 

    

 

 

 

Capitalized internally developed software, net of depreciation, included in “Property and equipment, net” in the accompanying Consolidated Balance Sheets as of December 31, 2014 and 2013 was as follows (in thousands):

 

     December 31,  
     2014      2013  

Capitalized internally developed software costs, net

   $   1,270       $   2,599   
  

 

 

    

 

 

 

Sale of Fixed Assets, Land and Building Located in Bismarck, North Dakota

In November 2014, the Company sold the fixed assets, land and building located in Bismarck, North Dakota for cash of $3.1 million (net of selling costs of $0.2 million) resulting in a net gain on disposal of property and equipment of $2.6 million, which is included in “Net gain (loss) on disposal of property and equipment” in the accompanying Consolidated Statement of Operations for the year ended December 31, 2014. These assets, with a carrying value of $0.9 million, were included in “Property and equipment” in the accompanying Consolidated Balance Sheet as of December 31, 2013. Related to these assets were deferred property grants of $0.4 million, which were included in “Deferred grants” in the accompanying Consolidated Balance Sheet as of December 31, 2013.

Note 15. Deferred Charges and Other Assets

Deferred charges and other assets consist of the following (in thousands):

 

     December 31,  
      2014      2013  

Non-current deferred tax assets (Note 22)

   $   1,681       $   13,048   

Non-current mandatory tax security deposits (Note 22)

     15,906         17,317   

Non-current value added tax certificates (Note 11)

     856         5,406   

Foreign currency forward contracts (Note 12)

     4,060         —     

Rent and other deposits

     3,215         3,169   

Other

     4,365         4,632   
  

 

 

    

 

 

 
   $ 30,083       $ 43,572   
  

 

 

    

 

 

 

 

83


Table of Contents

Note 16. Accrued Employee Compensation and Benefits

Accrued employee compensation and benefits consist of the following (in thousands):

 

     December 31,  
     2014      2013  

Accrued compensation

   $ 32,786       $ 32,003   

Accrued bonus and commissions

     18,590         14,265   

Accrued vacation

     16,613         17,055   

Accrued employment taxes

     9,362         12,448   

Other

     4,721         5,293   
  

 

 

    

 

 

 
   $ 82,072       $ 81,064   
  

 

 

    

 

 

 

Note 17. Deferred Revenue

The components of deferred revenue consist of the following (in thousands):

 

     December 31,  
     2014      2013  

Future service

   $ 25,222       $ 25,102   

Estimated potential penalties and holdbacks

     9,023         9,923   
  

 

 

    

 

 

 
   $ 34,245       $ 35,025   
  

 

 

    

 

 

 

Note 18. Other Accrued Expenses and Current Liabilities

Other accrued expenses and current liabilities consist of the following (in thousands):

 

     December 31,  
     2014      2013  

Accrued legal and professional fees

   $ 4,508       $ 3,220   

Accrued equipment and software

     2,196         1,779   

Accrued roadside assistance claim costs

     1,878         2,341   

Accrued utilities

     1,329         1,425   

Foreign currency forward and option contracts (Note 12)

     1,261         5,063   

Accrued telephone charges

     1,068         1,475   

Customer deposits

     793         2,418   

Accrued rent

     640         2,057   

Accrued restructuring (Note 4)

     630         1,245   

Other

     7,913         9,370   
  

 

 

    

 

 

 
   $ 22,216       $ 30,393   
  

 

 

    

 

 

 

 

84


Table of Contents

Note 19. Deferred Grants

The components of deferred grants consist of the following (in thousands):

 

     December 31,  
     2014     2013  

Property grants

   $ 5,110      $ 6,643   

Employment grants

     207        146   
  

 

 

   

 

 

 

Total deferred grants

     5,317        6,789   

Less: Property grants — short-term (1)

     —          (6

Less: Employment grants — short-term (1)

     (207     (146
  

 

 

   

 

 

 

Total long-term deferred grants (2)

   $ 5,110      $ 6,637   
  

 

 

   

 

 

 

 

(1) 

Included in “Other accrued expenses and current liabilities” in the accompanying Consolidated Balance Sheets.

 

(2) 

Included in “Deferred grants” in the accompanying Consolidated Balance Sheets.

Note 20. Borrowings

On May 3, 2012, the Company entered into a $245 million revolving credit facility (the “2012 Credit Agreement”) with a group of lenders and KeyBank National Association, as Lead Arranger, Sole Book Runner and Administrative Agent (“KeyBank”). The 2012 Credit Agreement replaced the Company’s previous $75 million revolving credit facility dated February 2, 2010, as amended, which agreement was terminated simultaneous with entering into the 2012 Credit Agreement. The 2012 Credit Agreement is subject to certain borrowing limitations and includes certain customary financial and restrictive covenants.

The 2012 Credit Agreement includes a $184 million alternate-currency sub-facility, a $10 million swingline sub-facility and a $35 million letter of credit sub-facility, and may be used for general corporate purposes including acquisitions, share repurchases, working capital support and letters of credit, subject to certain limitations. The Company is not currently aware of any inability of its lenders to provide access to the full commitment of funds that exist under the revolving credit facility, if necessary. However, there can be no assurance that such facility will be available to the Company, even though it is a binding commitment of the financial institutions.

Borrowings consist of the following (in thousands):

 

     December 31,  
     2014      2013  

Revolving credit facility

   $ 75,000       $ 98,000   

Less: Current portion

     —           —     
  

 

 

    

 

 

 

Total long-term debt

   $ 75,000       $ 98,000   
  

 

 

    

 

 

 

The 2012 Credit Agreement matures on May 2, 2017 and has no varying installments due.

Borrowings under the 2012 Credit Agreement will bear interest at the rates set forth in the Credit Agreement. In addition, the Company is required to pay certain customary fees, including a commitment fee of 0.175%, which is due quarterly in arrears and calculated on the average unused amount of the 2012 Credit Agreement.

The 2012 Credit Agreement is guaranteed by all of the Company’s existing and future direct and indirect material U.S. subsidiaries and secured by a pledge of 100% of the non-voting and 65% of the voting capital stock of all the direct foreign subsidiaries of the Company and those of the guarantors.

In May 2012, the Company paid an underwriting fee of $0.9 million for the 2012 Credit Agreement, which is deferred and amortized over the term of the loan. The 2012 Credit Agreement had an average daily utilization of $85.9 million and $102.5 million during the years ended December 31, 2014 and 2013, respectively, and $96.8 million for the period outstanding during the year ended December 31, 2012. During the years ended December 31, 2014, 2013 and 2012, the related interest expense, excluding amortization of deferred loan fees, under our credit agreements was $1.1 million, $1.5 million and $0.5 million, respectively, which represented weighted average interest rates of 1.3%, 1.5% and 1.5%, respectively.

 

85


Table of Contents

Note 21. Accumulated Other Comprehensive Income (Loss)

The Company presents data in the Consolidated Statements of Changes in Shareholders’ Equity in accordance with ASC 220 “Comprehensive Income” (“ASC 220”). ASC 220 establishes rules for the reporting of comprehensive income (loss) and its components. The components of accumulated other comprehensive income (loss) consist of the following (in thousands):

 

     Foreign
Currency
Translation
Gain (Loss)
    Unrealized Gain
(Loss) on  Net
Investment
Hedges
    Unrealized
Actuarial  Gain
(Loss) Related
to Pension
Liability
    Unrealized
Gain (Loss)  on
Cash Flow
Hedging
Instruments
    Unrealized
Gain (Loss)  on
Post
Retirement
Obligation
    Total  

Balance at January 1, 2012

   $ 5,995      $ (2,565   $ 985      $ (438   $ 459      $ 4,436   

Pre-tax amount

     9,516        —          499        4,417        92        14,524   

Tax (provision) benefit

     —          —          (90     (306     —          (396

Reclassification of (gain) loss to net income

     570        —          (48     (4,174     (56     (3,708

Foreign currency translation

     2        —          67        (69     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2012

     16,083        (2,565     1,413        (570     495        14,856   

Pre-tax amount

     (3,465     (1,720     (136     (2,704     (127     (8,152

Tax (provision) benefit

     —          602        16        449        —          1,067   

Reclassification of (gain) loss to net income

     —          —          (41     321        (54     226   

Foreign currency translation

     133        —          (102     (31     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2013

     12,751        (3,683     1,150        (2,535     314        7,997   

Pre-tax amount

     (34,947     6,344        (50     (2,790     77        (31,366

Tax (provision) benefit

     —          (2,385     57        (17     —          (2,345

Reclassification of (gain) loss to net income

     —          —          (35     5,237        (49     5,153   

Foreign currency translation

     120        —          (114     (6     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2014

   $ (22,076   $ 276      $ 1,008      $ (111   $ 342      $ (20,561
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table summarizes the amounts reclassified to net income from accumulated other comprehensive income (loss) and the associated line item in the accompanying Consolidated Statement of Operations (in thousands):

 

     Years Ended December 31,    

Statements of Operations Location

     2014     2013      

Actuarial Gain (Loss) Related to Pension Liability: (1)

      

Pre-tax amount

   $ 50      $ 60      Direct salaries and related costs

Tax (provision) benefit

     (15     (19   Income taxes
  

 

 

   

 

 

   

Reclassification to net income

     35        41     

Gain (Loss) on Cash Flow Hedging Instruments: (2)

      

Pre-tax amount

     (5,342     (547   Revenues

Tax (provision) benefit

     105        226      Income taxes
  

 

 

   

 

 

   

Reclassification to net income

     (5,237     (321  

Gain (Loss) on Post Retirement Obligation: (1)

      

Pre-tax amount

     49        54      General and administrative

Tax (provision) benefit

     —          —        Income taxes
  

 

 

   

 

 

   

Reclassification to net income

     49        54     
  

 

 

   

 

 

   

Total reclassification of gain (loss) to net income

   $ (5,153 )    $ (226  
  

 

 

   

 

 

   

 

(1) 

See Note 25, Defined Benefit Pension Plan and Postretirement Benefits, for further information.

 

(2)

See Note 12, Financial Derivatives, for further information.

 

86


Table of Contents

Except as discussed in Note 22, Income Taxes, earnings associated with the Company’s investments in its foreign subsidiaries are considered to be indefinitely reinvested and no provision for income taxes on those earnings or translation adjustments have been provided.

Note 22. Income Taxes

The income from continuing operations before income taxes includes the following components (in thousands):

 

     Years Ended December 31,  
     2014      2013      2012  

Domestic (U.S., state and local)

   $ 28,563       $ 5,544       $ (10,430

Foreign

     48,596         45,781         55,587   
  

 

 

    

 

 

    

 

 

 

Total income from continuing operations before income taxes

   $ 77,159       $ 51,325       $ 45,157   
  

 

 

    

 

 

    

 

 

 

Significant components of the income tax provision are as follows (in thousands):

 

     Years Ended December 31,  
     2014     2013     2012  

Current:

      

U.S. federal

   $ 2,579      $ 881      $ 236   

State and local

     542        82        (61

Foreign

     11,382        13,464        9,899   
  

 

 

   

 

 

   

 

 

 

Total current provision for income taxes

     14,503        14,427        10,074   
  

 

 

   

 

 

   

 

 

 

Deferred:

      

U.S. federal

     5,437        866        (2,846

State and local

     (446     —          —     

Foreign

     (126     (1,228     (2,021
  

 

 

   

 

 

   

 

 

 

Total deferred provision (benefit) for income taxes

     4,865        (362     (4,867
  

 

 

   

 

 

   

 

 

 

Total provision for income taxes

   $ 19,368      $ 14,065      $ 5,207   
  

 

 

   

 

 

   

 

 

 

The temporary differences that give rise to significant portions of the deferred income tax provision (benefit) are as follows (in thousands):

 

     Years Ended December 31,  
     2014     2013     2012  

Net operating loss and tax credit carryforwards

   $ 19,335      $ 8,029      $ (4,113

Depreciation and amortization

     (6,220     (5,030     (5,684

Accrued expenses/liabilities

     (4,505     954        (1,274

Valuation allowance

     (3,706     (1,887     4,120   

Deferred statutory income

     (29     (2,425     2,084   

Other

     (10     (3     —     
  

 

 

   

 

 

   

 

 

 

Total deferred provision (benefit) for income taxes

   $ 4,865      $ (362   $ (4,867
  

 

 

   

 

 

   

 

 

 

 

87


Table of Contents

The reconciliation of the income tax provision computed at the U.S. federal statutory tax rate to the Company’s effective income tax provision is as follows (in thousands):

 

     Years Ended December 31,  
     2014     2013     2012  

Tax at U.S. federal statutory tax rate

   $ 27,005      $ 17,964      $ 15,805   

State income taxes, net of federal tax benefit

     934        82        (61

Foreign rate differential

     (13,164     (9,319     (7,078

Tax holidays

     (2,749     (4,686     (6,450

Permanent differences

     10,170        9,051        3,531   

Tax credits

     (4,894     (5,020     (699

Foreign withholding and other taxes

     2,541        4,643        1,263   

Change in valuation allowance, net of related adjustments

     (7     1,354        (538

Changes in uncertain tax positions

     (468     (4     (613

Change of assertion related to foreign earnings distribution

     —          —          47   
  

 

 

   

 

 

   

 

 

 

Total provision for income taxes

   $ 19,368      $ 14,065      $ 5,207   
  

 

 

   

 

 

   

 

 

 

Withholding taxes on offshore cash movements assessed by certain foreign governments of $1.8 million, $4.1 million and $0.8 million were included in the provision for income taxes in the accompanying Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012, respectively.

Earnings associated with the investments in the Company’s foreign subsidiaries of $380.8 million at December 31, 2014 are considered to be indefinitely reinvested outside of the U.S. Therefore, a U.S. provision for income taxes on those earnings or translation adjustments has not been recorded, as permitted by criterion outlined in ASC 740 “Income Taxes.” Determination of any unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries that are essentially permanent in duration is not practicable due to the inherent complexity of the multi-national tax environment in which the Company operates.

The Company has been granted tax holidays in The Philippines, Colombia, Costa Rica and El Salvador. The tax holidays have various expiration dates ranging from 2015 through 2028. In some cases, the tax holidays expire without possibility of renewal. In other cases, the Company expects to renew these tax holidays, but there are no assurances from the respective foreign governments that they will renew them. This could potentially result in future adverse tax consequences in the local jurisdiction, the impact of which is not practicable to estimate due to the inherent complexity of estimating critical variables such as long-term future profitability, tax regulations and rates in the multi-national tax environment in which the Company operates. The Company’s tax holidays decreased the provision for income taxes by $2.7 million ($0.06 per diluted share), $4.7 million ($0.11 per diluted share) and $6.5 million ($0.15 per diluted share) for the years ended December 31, 2014, 2013 and 2012, respectively.

 

88


Table of Contents

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income taxes. The temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below (in thousands):

 

     December 31,  
     2014     2013  

Deferred tax assets:

    

Net operating loss and tax credit carryforwards

   $ 35,400      $ 61,626   

Valuation allowance

     (34,146     (42,664

Accrued expenses

     25,694        21,305   

Deferred revenue

     3,757        4,045   

Depreciation and amortization

     835        559   

Other

     —          104   
  

 

 

   

 

 

 
     31,540        44,975   
  

 

 

   

 

 

 

Deferred tax liabilities:

    

Depreciation and amortization

     (20,172     (26,379

Deferred statutory income

     (772     (241

Accrued liabilities

     (141     (79

Other

     (1     (114
  

 

 

   

 

 

 
     (21,086     (26,813
  

 

 

   

 

 

 

Net deferred tax assets

   $ 10,454      $ 18,162   
  

 

 

   

 

 

 
     December 31,  
     2014     2013  

Classified as follows:

    

Other current assets (Note 10)

   $ 13,703      $ 7,961   

Other long-term liabilities

     (4,786     (2,763

Deferred charges and other assets (Note 15)

     1,681        13,048   

Current deferred income tax liabilities

     (144     (84
  

 

 

   

 

 

 

Net deferred tax assets

   $ 10,454      $ 18,162   
  

 

 

   

 

 

 

There are approximately $185.0 million of income tax loss carryforwards as of December 31, 2014, with varying expiration dates, approximately $131.4 million relating to foreign operations and $53.6 million relating to U.S. state operations. For U.S. federal purposes, $2.7 million of tax credits are available for carryforward as of December 31, 2014, with the latest expiration date ending December 2035. With respect to foreign operations, $109.0 million of the net operating loss carryforwards have an indefinite expiration date and the remaining $22.4 million net operating loss carryforwards have varying expiration dates through December 2035. Regarding the U.S. state and foreign aforementioned tax loss carryforwards, no benefit has been recognized for $50.3 million and $123.5 million, respectively, as it is more likely than not that these losses will expire without realization of tax benefits.

The Company has accrued $13.3 million and $15.0 million as of December 31, 2014 and 2013, respectively, excluding penalties and interest, for the liability for unrecognized tax benefits. As of December 31, 2014, $2.7 million of unrecognized tax benefits have been recorded to “Deferred charges and other assets” in the accompanying Consolidated Balance Sheet in accordance with ASU 2013-11. The remaining $10.6 million of the unrecognized tax benefits at December 31, 2014 and the $15.0 million at December 31, 2013 are recorded in “Long-term income tax liabilities” in the accompanying Consolidated Balance Sheets. Had the Company recognized these tax benefits, approximately $13.3 million and $15.0 million, and the related interest and penalties, would have favorably impacted the effective tax rate in 2014 and 2013, respectively. The Company anticipates that approximately $2.2 million of the unrecognized tax benefits will be recognized in the next twelve months due to a lapse in the applicable statute of limitations.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company had $10.1 million and $10.5 million accrued for interest and penalties as of December 31, 2014 and 2013, respectively. Of the accrued interest and penalties at December 31, 2014 and 2013, $3.3 million and $3.8 million, respectively, relate to statutory penalties. The amount of interest and penalties, net, included in the provision for income taxes in the accompanying Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012 was $(0.5) million, $0.4 million and $(0.1) million, respectively.

 

89


Table of Contents

The tabular reconciliation of the amounts of unrecognized net tax benefits is presented below (in thousands):

 

     Years Ended December 31,  
     2014     2013     2012  

Gross unrecognized tax benefits as of January 1,

   $ 14,991      $ 16,897      $ 17,136   

Prior period tax position increases (decreases) (1)

     —          —          321   

Decreases from settlements with tax authorities

     —          —          (426

Decreases due to lapse in applicable statute of limitations

     —          (390     (561

Foreign currency translation increases (decreases)

     (1,706     (1,516     427   
  

 

 

   

 

 

   

 

 

 

Gross unrecognized tax benefits as of December 31,

   $ 13,285      $ 14,991      $ 16,897   
  

 

 

   

 

 

   

 

 

 

 

(1) 

Includes amounts assumed upon acquisition of Alpine on August 20, 2012.

The Company is currently under audit in several tax jurisdictions. The Company received assessments for the Canadian 2003-2009 audit. Requests for Competent Authority Assistance were filed with both the Canadian Revenue Agency and the U.S. Internal Revenue Service and the Company paid mandatory security deposits to Canada as part of this process. The total amount of deposits, net of fluctuations in the foreign exchange rate, are $15.9 million and $17.3 million as of December 31, 2014 and 2013, respectively, and are included in “Deferred charges and other assets” in the accompanying Consolidated Balance Sheets. Although the outcome of examinations by taxing authorities is always uncertain, the Company believes it is adequately reserved for these audits and that resolution is not expected to have a material impact on its financial condition and results of operations.

The significant tax jurisdictions currently under audit are as follows:

 

Tax Jurisdiction

  

Tax Year Ended

Canada

   2003 to 2009

The Philippines

   2009 and 2010

The Company and its subsidiaries file federal, state and local income tax returns as required in the U.S. and in various foreign tax jurisdictions. The following table presents the major tax jurisdictions and tax years that are open and subject to examination by the respective tax authorities as of December 31, 2014:

 

Tax Jurisdiction

  

Tax Year Ended

Canada    2003 to present
The Philippines    2009 to present
United States    2002 to 2010 (1) and 2011 to present

 

(1) 

These tax years are open to the extent of the net operating loss and tax credit carryforward amounts.

 

90


Table of Contents

Note 23. Earnings Per Share

Basic earnings per share are based on the weighted average number of common shares outstanding during the periods. Diluted earnings per share includes the weighted average number of common shares outstanding during the respective periods and the further dilutive effect, if any, from stock appreciation rights, restricted stock, restricted stock units and shares held in a rabbi trust using the treasury stock method.

The numbers of shares used in the earnings per share computation are as follows (in thousands):

 

     Years Ended December 31,  
     2014      2013      2012  

Basic:

        

Weighted average common shares outstanding

     42,609         42,877         43,105   

Diluted:

        

Dilutive effect of stock appreciation rights, restricted stock, restricted stock units and shares held in a rabbi trust

     205         48         43   
  

 

 

    

 

 

    

 

 

 

Total weighted average diluted shares outstanding

     42,814         42,925         43,148   
  

 

 

    

 

 

    

 

 

 

Anti-dilutive shares excluded from the diluted earnings per share calculation

     37         42         —     
  

 

 

    

 

 

    

 

 

 

On August 18, 2011, the Company’s Board authorized the Company to purchase up to 5.0 million shares of its outstanding common stock (the “2011 Share Repurchase Program”). A total of 4.0 million shares have been repurchased under the 2011 Share Repurchase Program since inception. The shares are purchased, from time to time, through open market purchases or in negotiated private transactions, and the purchases are based on factors, including but not limited to, the stock price, management discretion and general market conditions. The 2011 Share Repurchase Program has no expiration date.

The shares repurchased under the Company’s share repurchase programs were as follows (in thousands, except per share amounts):

 

     Total Number                    Total Cost of  
     of Shares      Range of Prices Paid Per Share      Shares  

For the Years Ended

   Repurchased          Low              High          Repurchased  

December 31, 2014

     630       $ 19.80       $ 20.00       $ 12,581   

December 31, 2013

     341       $ 15.61       $ 16.99       $ 5,479   

December 31, 2012

     537       $ 13.85       $ 15.00       $ 7,908   

 

91


Table of Contents

Note 24. Commitments and Loss Contingency

Lease and Purchase Commitments

The Company leases certain equipment and buildings under operating leases having original terms ranging from one to twenty years, many with options to cancel at varying points during the lease. The building leases can contain up to three five-year renewal options. Rental expense under operating leases was as follows (in thousands):

 

     Years Ended December 31,  
     2014      2013      2012  

Rental expense

   $ 44,916       $ 47,365       $ 43,626   
  

 

 

    

 

 

    

 

 

 

The following is a schedule of future minimum rental payments required under operating leases that have noncancelable lease terms as of December 31, 2014 (in thousands):

 

     Amount  

2015

   $ 33,287   

2016

     24,907   

2017

     21,586   

2018

     20,325   

2019

     15,617   

2020 and thereafter

     35,801   
  

 

 

 

Total minimum payments required

   $ 151,523   
  

 

 

 

The Company enters into agreements with third-party vendors in the ordinary course of business whereby the Company commits to purchase goods and services used in its normal operations. These agreements, which are not cancelable, generally range from one to five year periods and contain fixed or minimum annual commitments. Certain of these agreements allow for renegotiation of the minimum annual commitments based on certain conditions.

The following is a schedule of future minimum purchases remaining under the agreements as of December 31, 2014 (in thousands):

 

     Amount  

2015

   $ 33,039   

2016

     21,025   

2017

     10,448   

2018

     1,485   

2019

     1,483   

2020 and thereafter

     1,600   
  

 

 

 

Total minimum payments required

   $ 69,080   
  

 

 

 

Indemnities, Commitments and Guarantees

From time to time, during the normal course of business, the Company may make certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include, but are not limited to: (i) indemnities to clients, vendors and service providers pertaining to claims based on negligence or willful misconduct of the Company and (ii) indemnities involving breach of contract, the accuracy of representations and warranties of the Company, or other liabilities assumed by the Company in certain contracts. In addition, the Company has agreements whereby it will indemnify certain officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has director and officer insurance coverage that limits its exposure and enables it to recover a portion of any future amounts paid. The Company believes the applicable insurance

 

92


Table of Contents

coverage is generally adequate to cover any estimated potential liability under these indemnification agreements. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying Consolidated Balance Sheets. In addition, the Company has some client contracts that do not contain contractual provisions for the limitation of liability, and other client contracts that contain agreed upon exceptions to limitation of liability. The Company has not recorded any liability in the accompanying Consolidated Balance Sheets with respect to any client contracts under which the Company has or may have unlimited liability.

Loss Contingency

The Company from time to time is involved in legal actions arising in the ordinary course of business. With respect to these matters, management believes that it has adequate legal defenses and/or when possible and appropriate, provided adequate accruals related to those matters such that the ultimate outcome will not have a material adverse effect on the Company’s financial position or results of operations.

Note 25. Defined Benefit Pension Plan and Postretirement Benefits

Defined Benefit Pension Plans

The Company sponsors non-contributory defined benefit pension plans (the “Pension Plans”) for its covered employees in The Philippines. The Pension Plans provide defined benefits based on years of service and final salary. All permanent employees meeting the minimum service requirement are eligible to participate in the Pension Plans. As of December 31, 2014, the Pension Plans were unfunded. The Company expects to make no cash contributions to its Pension Plans during 2015.

The following table provides a reconciliation of the change in the benefit obligation for the Pension Plans and the net amount recognized, included in “Other long-term liabilities”, in the accompanying Consolidated Balance Sheets (in thousands):

 

     December 31,  
     2014     2013  

Beginning benefit obligation

   $ 2,481      $ 1,997   

Service cost

     387        392   

Interest cost

     104        137   

Actuarial (gains) losses

     50        136   

Effect of foreign currency translation

     78        (181
  

 

 

   

 

 

 

Ending benefit obligation

   $ 3,100      $ 2,481   
  

 

 

   

 

 

 
    

Unfunded status

   $ (3,100   $ (2,481
  

 

 

   

 

 

 

Net amount recognized

   $ (3,100   $ (2,481
  

 

 

   

 

 

 

The actuarial assumptions used to determine the benefit obligations and net periodic benefit cost for the Pension Plans were as follows:

 

     Years Ended December 31,
         2014            2013            2012    

Discount rate

   4.5% - 4.9%    4.3% - 5.2%    5.9%

Rate of compensation increase

   2.0%    2.0%    2.0%

The Company evaluates these assumptions on a periodic basis taking into consideration current market conditions and historical market data. The discount rate is used to calculate expected future cash flows at a present value on the measurement date, which is December 31. This rate represents the market rate for high-quality fixed income investments. A lower discount rate would increase the present value of benefit obligations. Other assumptions include demographic factors such as retirement, mortality and turnover.

 

93


Table of Contents

The following table provides information about the net periodic benefit cost and other accumulated comprehensive income for the Pension Plans (in thousands):

 

     Years Ended December 31,  
     2014     2013     2012  

Service cost

   $ 387      $ 392      $ 372   

Interest cost

     104        137        120   

Recognized actuarial (gains)

     (50     (60     (46
  

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

     441        469        446   

Unrealized net actuarial (gains), net of tax

     (1,008     (1,150     (1,413
  

 

 

   

 

 

   

 

 

 

Total amount recognized in net periodic benefit cost and other accumulated comprehensive income (loss)

   $ (567   $ (681   $ (967
  

 

 

   

 

 

   

 

 

 

The estimated future benefit payments, which reflect expected future service, as appropriate, are as follows (in thousands):

 

Years Ending December 31,

   Amount  

2015

   $ 28   

2016

     133   

2017

     77   

2018

     58   

2019

     303   

2020 - 2024

     963   

The Company expects to recognize less than $0.1 million of net actuarial gains as a component of net periodic benefit cost in 2015.

Employee Retirement Savings Plans

The Company maintains a 401(k) plan covering defined employees who meet established eligibility requirements. Under the plan provisions, the Company matches 50% of participant contributions to a maximum matching amount of 2% of participant compensation. The Company’s contributions included in the accompanying Consolidated Statements of Operations were as follows (in thousands):

 

     Years Ended December 31,  
     2014      2013      2012  

401(k) plan contributions

   $ 870       $ 895       $ 1,221   
  

 

 

    

 

 

    

 

 

 

Split-Dollar Life Insurance Arrangement

In 1996, the Company entered into a split-dollar life insurance arrangement to benefit the former Chairman and Chief Executive Officer of the Company. Under the terms of the arrangement, the Company retained a collateral interest in the policy to the extent of the premiums paid by the Company. The postretirement benefit obligation included in “Other long-term liabilities” and the unrealized gains (losses) included in “Accumulated other comprehensive income” in the accompanying Consolidated Balance Sheets were as follows (in thousands):

 

     December 31,  
     2014      2013  

Postretirement benefit obligation

   $ 46       $ 81   

Unrealized gains (losses) in AOCI (1)

     342         314   

 

(1)

Unrealized gains (losses) are due to changes in discount rates related to the postretirement obligation.

 

94


Table of Contents

Post-Retirement Defined Contribution Healthcare Plan

On January 1, 2005, the Company established a Post-Retirement Defined Contribution Healthcare Plan for eligible employees meeting certain service and age requirements. The plan is fully funded by the participants and accordingly, the Company does not recognize expense relating to the plan.

Note 26. Stock-Based Compensation

The Company’s stock-based compensation plans include the 2011 Equity Incentive Plan, the 2004 Non-Employee Director Fee Plan and the Deferred Compensation Plan. The following table summarizes the stock-based compensation expense (primarily in the Americas), income tax benefits related to the stock-based compensation and excess tax benefits (deficiencies) (in thousands):

 

     Years Ended December 31,  
     2014     2013     2012  

Stock-based compensation (expense) (1) 

   $ (6,381   $ (4,873   $ (3,467

Income tax benefit (2)

     2,233        1,706        1,213   

Excess tax benefit (deficiency) from stock-based compensation (3)

     (82     (187     (292

 

(1)

Included in “General and administrative” costs in the accompanying Consolidated Statements of Operations.

 

(2)

Included in “Income taxes” in the accompanying Consolidated Statements of Operations.

 

(3)

Included in “Additional paid-in capital” in the accompanying Consolidated Statements of Changes in Shareholders’ Equity.

There were no capitalized stock-based compensation costs at December 31, 2014, 2013 and 2012.

2011 Equity Incentive PlanThe Company’s Board adopted the Sykes Enterprises, Incorporated 2011 Equity Incentive Plan (the “2011 Plan”) on March 23, 2011, as amended on May 11, 2011 to reduce the number of shares of common stock available to 4.0 million shares. The 2011 Plan was approved by the shareholders at the May 2011 annual shareholders meeting. The 2011 Plan replaced and superseded the Company’s 2001 Equity Incentive Plan (the “2001 Plan”), which expired on March 14, 2011. The outstanding awards granted under the 2001 Plan will remain in effect until their exercise, expiration or termination. The 2011 Plan permits the grant of restricted stock, stock appreciation rights, stock options and other stock-based awards to certain employees of the Company, and certain non-employees who provide services to the Company in order to encourage them to remain in the employment of, or to faithfully provide services to, the Company and to increase their interest in the Company’s success.

Stock Appreciation Rights — The Board, at the recommendation of the Compensation and Human Resource Development Committee (the “Committee”), has approved in the past, and may approve in the future, awards of stock-settled stock appreciation rights (“SARs”) for eligible participants. SARs represent the right to receive, without payment to the Company, a certain number of shares of common stock, as determined by the Committee, equal to the amount by which the fair market value of a share of common stock at the time of exercise exceeds the grant price.

SARs are granted at the fair market value of the Company’s common stock on the date of the grant and vest one-third on each of the first three anniversaries of the date of grant, provided the participant is employed by the Company on such date. The SARs have a term of 10 years from the date of grant. In the event of a change in control, the SARs will vest on the date of the change in control, provided that the participant is employed by the Company on the date of the change in control.

All currently outstanding SARs are exercisable within three months after the death, disability, retirement or termination of the participant’s employment with the Company, if and to the extent the SARs were exercisable immediately prior to such termination. If the participant’s employment is terminated for cause, or the participant terminates his or her own employment with the Company, any portion of the SARs not yet exercised (whether or not vested) terminates immediately on the date of termination of employment.

 

95


Table of Contents

The fair value of each SAR is estimated on the date of grant using the Black-Scholes valuation model that uses various assumptions. The fair value of the SARs is expensed on a straight-line basis over the requisite service period. Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate for periods within the contractual life of the award is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the award is granted with a maturity equal to the expected term of the award. Exercises and forfeitures are estimated within the valuation model using employee termination and other historical data. The expected term of the SARs granted represents the period of time the SARs are expected to be outstanding.

The following table summarizes the assumptions used to estimate the fair value of SARs granted:

 

     Years Ended December 31,  
     2014     2013     2012  

Expected volatility

     38.9     45.2     47.1

Weighted-average volatility

     38.9     45.2     47.1

Expected dividend rate

     0.0     0.0     0.0

Expected term (in years)

     5.0        5.0        4.7   

Risk-free rate

     1.7     0.8     0.8

The following table summarizes SARs activity as of December 31, 2014 and for the year then ended:

 

Stock Appreciation Rights

   Shares (000s)     Weighted
Average
Exercise Price
     Weighted
Average
Remaining
Contractual
Term (in
years)
     Aggregate
Intrinsic
Value (000s)
 

Outstanding at January 1, 2014

     963      $ —           

Granted

     246      $ —           

Exercised

     (77   $ —           

Forfeited or expired

     (173   $ —           
  

 

 

         

Outstanding at December 31, 2014

     959      $ —           7.0       $ 5,171   
  

 

 

   

 

 

    

 

 

    

 

 

 

Vested or expected to vest at December 31, 2014

     959      $ —           7.0       $ 5,171   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable at December 31, 2014

     548      $ —           5.8       $ 2,700   
  

 

 

   

 

 

    

 

 

    

 

 

 

The following table summarizes information regarding SARs granted and exercised (in thousands, except per SAR amounts):

 

     Years Ended December 31,  
     2014      2013      2012  

Number of SARs granted

     246         318         259   

Weighted average grant-date fair value per SAR

   $ 7.20       $ 6.08       $ 5.97   

Intrinsic value of SARs exercised

   $ 391       $ 488       $ —     

Fair value of SARs vested

   $ 1,553       $ 1,298       $ 1,388   

The following table summarizes nonvested SARs activity as of December 31, 2014 and for the year then ended:

 

Nonvested Stock Appreciation Rights    Shares (000s)     Weighted
Average Grant-
Date Fair
Value
 

Nonvested at January 1, 2014

     535      $ 6.17   

Granted

     246      $ 7.20   

Vested

     (246   $ 6.31   

Forfeited or expired

     (124   $ 6.48   
  

 

 

   

 

 

 

Nonvested at December 31, 2014

     411      $ 6.61   
  

 

 

   

 

 

 

 

96


Table of Contents

As of December 31, 2014, there was $1.7 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested SARs granted under the 2011 Plan and 2001 Plan. This cost is expected to be recognized over a weighted average period of 1.3 years.

Restricted Shares — The Board, at the recommendation of the Committee, has approved in the past, and may approve in the future, awards of performance and employment-based restricted shares (“restricted shares”) for eligible participants. In some instances, where the issuance of restricted shares has adverse tax consequences to the recipient, the Board may instead issue restricted stock units (“RSUs”). The restricted shares are shares of the Company’s common stock (or in the case of RSUs, represent an equivalent number of shares of the Company’s common stock) which are issued to the participant subject to (a) restrictions on transfer for a period of time and (b) forfeiture under certain conditions. The performance goals, including revenue growth and income from operations targets, provide a range of vesting possibilities from 0% to 100% and will be measured at the end of the performance period. If the performance conditions are met for the performance period, the shares will vest and all restrictions on the transfer of the restricted shares will lapse (or in the case of RSUs, an equivalent number of shares of the Company’s common stock will be issued to the recipient). The Company recognizes compensation cost, net of estimated forfeitures, based on the fair value (which approximates the current market price) of the restricted shares (and RSUs) on the date of grant ratably over the requisite service period based on the probability of achieving the performance goals.

Changes in the probability of achieving the performance goals from period to period will result in corresponding changes in compensation expense. The employment-based restricted shares currently outstanding vest one-third on each of the first three anniversaries of the date of grant, provided the participant is employed by the Company on such date. In the event of a change in control (as defined in the 2011 Plan and 2001 Plan) prior to the date the restricted shares vest, all of the restricted shares will vest and the restrictions on transfer will lapse with respect to such vested shares on the date of the change in control, provided that participant is employed by the Company on the date of the change in control.

If the participant’s employment with the Company is terminated for any reason, either by the Company or participant, prior to the date on which the restricted shares have vested and the restrictions have lapsed with respect to such vested shares, any restricted shares remaining subject to the restrictions (together with any dividends paid thereon) will be forfeited, unless there has been a change in control prior to such date.

The following table summarizes nonvested restricted shares/RSUs activity as of December 31, 2014 and for the year then ended:

 

Nonvested Restricted Shares and RSUs

   Shares (000s)     Weighted
Average Grant-
Date Fair
Value
 

Nonvested at January 1, 2014

     1,367      $ 15.96   

Granted

     500      $ 19.77   

Vested

     (57   $ 15.67   

Forfeited or expired

     (616   $ 17.45   
  

 

 

   

Nonvested at December 31, 2014

     1,194      $ 16.80   
  

 

 

   

The following table summarizes information regarding restricted shares/RSUs granted and vested (in thousands, except per restricted share/RSU amounts):

 

     Years Ended December 31,  
     2014      2013      2012  

Number of restricted shares/RSUs granted

     500         706         420   

Weighted average grant-date fair value per restricted share/RSU

   $ 19.77       $ 15.25       $ 15.21   

Fair value of restricted shares/RSUs vested

   $ 895       $ 366       $ 3,845   

As of December 31, 2014, based on the probability of achieving the performance goals, there was $14.1 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested restricted shares/RSUs granted under the 2011 Plan and 2001 Plan. This cost is expected to be recognized over a weighted average period of 1.4 years.

 

97


Table of Contents

2004 Non-Employee Director Fee PlanThe Company’s 2004 Non-Employee Director Fee Plan (the “2004 Fee Plan”), as last amended on May 17, 2012, provided that all new non-employee directors joining the Board would receive an initial grant of shares of common stock on the date the new director is elected or appointed, the number of which will be determined by dividing $60,000 by the closing price of the Company’s common stock on the trading day immediately preceding the date a new director is elected or appointed, rounded to the nearest whole number of shares. The initial grant of shares vested in twelve equal quarterly installments, one-twelfth on the date of grant and an additional one-twelfth on each successive third monthly anniversary of the date of grant. The award lapses with respect to all unvested shares in the event the non-employee director ceases to be a director of the Company, and any unvested shares are forfeited.

The 2004 Fee Plan also provided that each non-employee director would receive, on the day after the annual shareholders meeting, an annual retainer for service as a non-employee director (the “Annual Retainer”). Prior to May 17, 2012, the Annual Retainer was $95,000, of which $50,000 was payable in cash, and the remainder was paid in stock. The annual grant of cash vested in four equal quarterly installments, one-fourth on the day following the annual meeting of shareholders, and an additional one-fourth on each successive third monthly anniversary of the date of grant. The annual grant of shares paid to non-employee directors prior to May 17, 2012 vests in eight equal quarterly installments, one-eighth on the day following the annual meeting of shareholders, and an additional one-eighth on each successive third monthly anniversary of the date of grant. On May 17, 2012, upon the recommendation of the Compensation and Human Resource Development Committee, the Board adopted the Fifth Amended and Restated Non-Employee Director Fee Plan (the “Amendment”), which increased the common stock component of the Annual Retainer by $30,000, resulting in a total Annual Retainer of $125,000, of which $50,000 was payable in cash and the remainder paid in stock. In addition, the Amendment also changed the vesting period for the annual equity award, from a two-year vesting period, to a one-year vesting period (consisting of four equal quarterly installments, one-fourth on the date of grant and an additional one-fourth on each successive third monthly anniversary of the date of grant). The award lapses with respect to all unpaid cash and unvested shares in the event the non-employee director ceases to be a director of the Company, and any unvested shares and unpaid cash are forfeited.

In addition to the Annual Retainer award, the 2004 Fee Plan also provided for any non-employee Chairman of the Board to receive an additional annual cash award of $100,000, and each non-employee director serving on a committee of the Board to receive an additional annual cash award. The additional annual cash award for the Chairperson of the Audit Committee is $20,000 and Audit Committee members’ are entitled to an annual cash award of $10,000. Prior to May 20, 2011, the annual cash awards for the Chairpersons of the Compensation and Human Resource Development Committee, Finance Committee and Nominating and Corporate Governance Committee were $12,500 and the members of such committees were entitled to an annual cash award of $7,500. On May 20, 2011, the Board increased the additional annual cash award to the Chairperson of the Compensation and Human Resource Development Committee to $15,000. All other additional cash awards remained unchanged.

The 2004 Fee Plan expired in May 2014, prior to the 2014 Annual Shareholder Meeting. In March 2014, upon the recommendation of the Compensation Committee, the Board determined that, following the expiration of the 2004 Fee Plan, the compensation of non-employee Directors should continue on the same terms as provided in the Fifth Amended and Restated Non-Employee Director Fee Plan, and that the stock portion of such compensation would be issued under the 2011 Plan.

The Board may pay additional cash compensation to any non-employee director for services on behalf of the Board over and above those typically expected of directors, including but not limited to service on a special committee of the Board.

 

98


Table of Contents

The following table summarizes nonvested common stock share award activity as of December 31, 2014 and for the year then ended:

 

Nonvested Common Stock Share Awards

   Shares (000s)     Weighted
Average Grant-
Date Fair
Value
 

Nonvested at January 1, 2014

     9      $ 16.01   

Granted

     36      $ 20.15   

Vested

     (33   $ 18.95   

Forfeited or expired

     —        $ —     
  

 

 

   

Nonvested at December 31, 2014

     12      $ 20.24   
  

 

 

   

The following table summarizes information regarding common stock share awards granted and vested (in thousands, except per share award amounts):

 

     Years Ended December 31,  
     2014      2013      2012  

Number of share awards granted

     36         37         42   

Weighted average grant-date fair value per share award

   $ 20.15       $ 16.01       $ 16.15   

Fair value of share awards vested

   $ 630       $ 669       $ 771   

As of December 31, 2014, there was $0.2 million of total unrecognized compensation costs, net of estimated forfeitures, related to nonvested common stock share awards granted under the 2004 Fee Plan. This cost is expected to be recognized over a weighted average period of 0.7 years.

Deferred Compensation PlanThe Company’s non-qualified Deferred Compensation Plan (the “Deferred Compensation Plan”), which is not shareholder-approved, was adopted by the Board effective December 17, 1998. It was last amended and restated on August 20, 2014, effective as of January 1, 2014. It provides certain eligible employees the ability to defer any portion of their compensation until the participant’s retirement, termination, disability or death, or a change in control of the Company. Using the Company’s common stock, the Company matches 50% of the amounts deferred by certain senior management participants on a quarterly basis up to a total of $12,000 per year for the president, chief executive officer and executive vice presidents and $7,500 per year for senior vice presidents, global vice presidents and vice presidents (participants below the level of vice president are not eligible to receive matching contributions from the Company). Matching contributions and the associated earnings vest over a seven year service period. Deferred compensation amounts used to pay benefits, which are held in a rabbi trust, include investments in various mutual funds and shares of the Company’s common stock (See Note 13, Investments Held in Rabbi Trust). As of December 31, 2014 and 2013, liabilities of $7.0 million and $6.4 million, respectively, of the Deferred Compensation Plan were recorded in “Accrued employee compensation and benefits” in the accompanying Consolidated Balance Sheets.

Additionally, the Company’s common stock match associated with the Deferred Compensation Plan, with a carrying value of approximately $1.5 million and $1.6 million at December 31, 2014 and 2013, respectively, is included in “Treasury stock” in the accompanying Consolidated Balance Sheets.

 

99


Table of Contents

The following table summarizes nonvested common stock activity as of December 31, 2014 and for the year then ended:

 

Nonvested Common Stock

   Shares (000s)     Weighted
Average  Grant-
Date Fair

Value
 

Nonvested at January 1, 2014

     6      $ 16.89   

Granted

     10      $ 20.54   

Vested

     (10   $ 20.13   

Forfeited or expired

     (1   $ 16.30   
  

 

 

   

Nonvested at December 31, 2014

     5      $ 17.88   
  

 

 

   

The following table summarizes information regarding shares of common stock granted and vested (in thousands, except per common stock amounts):

 

     Years Ended December 31,  
     2014      2013      2012  

Number of shares of common stock granted

     10         13         15   

Weighted average grant-date fair value per common stock

   $ 20.54       $ 16.76       $ 15.27   

Fair value of common stock vested

   $ 212       $ 257       $ 195   

Cash used to settle the obligation

   $ 1,493       $ 1,014       $ 459   

As of December 31, 2014, there was less than $0.1 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested common stock granted under the Deferred Compensation Plan. This cost is expected to be recognized over a weighted average period of 2.1 years.

Note 27. Segments and Geographic Information

The Company operates within two regions, the Americas and EMEA. Each region represents a reportable segment comprised of aggregated regional operating segments, which portray similar economic characteristics. The Company aligns its business into two segments to effectively manage the business and support the customer care needs of every client and to respond to the demands of the Company’s global customers.

The reportable segments consist of (1) the Americas, which includes the United States, Canada, Latin America, Australia and the Asia Pacific Rim, and provides outsourced customer contact management solutions (with an emphasis on technical support and customer service) and technical staffing and (2) EMEA, which includes Europe, the Middle East and Africa, and provides outsourced customer contact management solutions (with an emphasis on technical support and customer service) and fulfillment services. The sites within Latin America, Australia and the Asia Pacific Rim are included in the Americas segment given the nature of the business and client profile, which is primarily made up of U.S.-based companies that are using the Company’s services in these locations to support their customer contact management needs.

 

100


Table of Contents

Information about the Company’s reportable segments was as follows (in thousands):

 

     Americas     EMEA     Other (1)     Consolidated  

Year Ended December 31, 2014:

        

Revenues (2)

   $ 1,070,824      $ 256,699        $ 1,327,523   

Percentage of revenues

     80.7     19.3       100.0

 

Depreciation, net (2)

   $ 40,557      $ 4,806        $ 45,363   

Amortization of intangibles (2)

   $ 14,396      $ —          $ 14,396   

 

Income (loss) from continuing operations

   $ 113,549      $ 16,208      $ (50,202   $ 79,555   

Other (expense), net

         (2,396     (2,396

Income taxes

         (19,368     (19,368
        

 

 

 

Income from continuing operations, net of taxes

           57,791   

(Loss) from discontinued operations, net of taxes (3)

   $ —        $ —            —     
        

 

 

 

Net income

         $ 57,791   
        

 

 

 

 

Total assets as of December 31, 2014

   $ 1,080,010      $ 1,373,590      $ (1,509,100   $ 944,500   
  

 

 

   

 

 

   

 

 

   

 

 

 

Year Ended December 31, 2013:

        

Revenues (2) 

   $ 1,050,813      $ 212,647        $ 1,263,460   

Percentage of revenues

     83.2     16.8       100.0

 

Depreciation, net (2)

   $ 37,818      $ 4,266        $ 42,084   

Amortization of intangibles (2)

   $ 14,863      $ —          $ 14,863   

 

Income (loss) from continuing operations

   $ 94,006      $ 6,052      $ (46,531   $ 53,527   

Other (expense), net

         (2,202     (2,202

Income taxes

         (14,065     (14,065
        

 

 

 

Income from continuing operations, net of taxes

           37,260   

(Loss) from discontinued operations, net of taxes (3) 

   $ —        $ —            —     
        

 

 

 

Net income

         $ 37,260   
        

 

 

 

 

Total assets as of December 31, 2013

   $ 1,097,788      $ 1,409,185      $ (1,556,712   $ 950,261   
  

 

 

   

 

 

   

 

 

   

 

 

 

Year Ended December 31, 2012:

        

Revenues (2) 

   $ 947,147      $ 180,551        $ 1,127,698   

Percentage of revenues

     84.0     16.0       100.0

 

Depreciation, net (2)

   $ 36,494      $ 3,875        $ 40,369   

Amortization of intangibles (2)

   $ 10,479      $ —          $ 10,479   

 

Income (loss) from continuing operations

   $ 93,580      $ 5,488      $ (51,289   $ 47,779   

Other (expense), net

         (2,622     (2,622

Income taxes

         (5,207     (5,207
        

 

 

 

Income from continuing operations, net of taxes

           39,950   

(Loss) from discontinued operations, net of taxes (3) 

   $ (10,707   $ (820       (11,527
        

 

 

 

Net income

         $ 28,423   
        

 

 

 

 

Total assets as of December 31, 2012

   $ 1,265,119      $ 1,100,938      $ (1,457,368   $ 908,689   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Other items (including corporate costs, other income and expense, and income taxes) are shown for purposes of reconciling to the Company’s consolidated totals as shown in the tables above for the years ended December 31, 2014, 2013 and 2012. The accounting policies of the reportable segments are the same as those described in Note 1 to the accompanying Consolidated Financial Statements. Inter-segment revenues are not material to the Americas and EMEA segment results. The Company evaluates the performance of its geographic segments based on revenues and income (loss) from continuing operations, and does not include segment assets or other income and expense items for management reporting purposes.

 

(2) 

Revenues, depreciation and amortization include results from continuing operations only.

 

(3) 

Includes both the (loss) from discontinued operations, net of taxes, and the (loss) on sale of discontinued operations, net of taxes, if any.

 

101


Table of Contents

Total revenues by segment from AT&T Corporation, a major provider of communication services for which the Company provides various customer support services, were as follows (in thousands):

 

     Years Ended December 31,  
     2014     2013     2012  
     Amount      % of Revenues     Amount      % of Revenues     Amount      % of Revenues  

Americas

   $ 212,607         19.9   $ 162,888         15.5   $ 130,072         13.7

EMEA

     3,519         1.4     3,513         1.7     3,018         1.7
  

 

 

      

 

 

      

 

 

    
   $ 216,126         16.3   $ 166,401         13.2   $ 133,090         11.8
  

 

 

      

 

 

      

 

 

    

The Company has multiple distinct contracts with AT&T spread across multiple lines of businesses, which expire at varying dates between 2015 and 2017. The Company has historically renewed most of these contracts. However, there is no assurance that these contracts will be renewed, or if renewed, will be on terms as favorable as the existing contracts. Each line of business is governed by separate business terms, conditions and metrics. Each line of business also has a separate decision maker such that a loss of one line of business would not necessarily impact the Company’s relationship with the client and decision makers on other lines of business. The loss of (or the failure to retain a significant amount of business with) any of the Company’s key clients, including AT&T, could have a material adverse effect on its performance. Many of the Company’s contracts contain penalty provisions for failure to meet minimum service levels and are cancelable by the client at any time or on short notice. Also, clients may unilaterally reduce their use of the Company’s services under the contracts without penalty.

Total revenues by segment from the Company’s next largest client, which was in the financial services vertical market in each of the years, were as follows (in thousands):

 

     Years Ended December 31,  
     2014     2013     2012  
     Amount      % of Revenues     Amount      % of Revenues     Amount      % of Revenues  

Americas

   $ 70,255         6.6   $ 73,226         7.0   $ 70,311         7.4

EMEA

     —           0.0     —           0.0     —           0.0
  

 

 

      

 

 

      

 

 

    
   $ 70,255         5.3   $ 73,226         5.8   $ 70,311         6.2
  

 

 

      

 

 

      

 

 

    

The Company’s top ten clients accounted for approximately 46.8%, 45.9% and 47.8% of its consolidated revenues during the years ended December 31, 2014, 2013 and 2012, respectively.

 

102


Table of Contents

Information about the Company’s operations by geographic location was as follows (in thousands):

 

     Years Ended December 31,  
     2014      2013      2012  

Revenues: (1)

        

United States

   $ 425,746       $ 388,775       $ 302,046   

The Philippines

     205,332         213,132         225,629   

Canada

     195,739         210,463         198,585   

Costa Rica

     97,295         101,888         100,101   

El Salvador

     52,609         46,301         46,910   

Australia

     33,126         36,725         24,633   

China

     32,167         25,478         21,614   

Mexico

     20,439         23,701         23,315   

Other

     8,371         4,350         4,314   
  

 

 

    

 

 

    

 

 

 

Total Americas

     1,070,824         1,050,813         947,147   
  

 

 

    

 

 

    

 

 

 

Germany

     88,887         77,950         73,380   

Sweden

     68,057         49,953         22,229   

United Kingdom

     42,328         33,750         35,833   

Romania

     18,288         14,856         10,773   

Hungary

     8,723         8,525         7,619   

Netherlands

     3,126         3,073         6,511   

Other

     27,290         24,540         24,206   
  

 

 

    

 

 

    

 

 

 

Total EMEA

     256,699         212,647         180,551   
  

 

 

    

 

 

    

 

 

 
   $ 1,327,523       $ 1,263,460       $ 1,127,698   
  

 

 

    

 

 

    

 

 

 

 

(1)

Revenues are attributed to countries based on location of customer, except for revenues for Costa Rica, The Philippines, China and India which are primarily comprised of customers located in the U.S., but serviced by centers in those respective geographic locations.

 

     December 31,  
     2014      2013  

Long-Lived Assets: (1)

     

United States

   $ 108,030       $ 120,759   

Canada

     16,257         23,164   

The Philippines

     14,656         17,197   

Costa Rica

     5,625         4,759   

El Salvador

     3,298         2,552   

Australia

     2,923         3,799   

Mexico

     1,575         1,902   

Other

     6,998         6,695   
  

 

 

    

 

 

 

Total Americas

     159,362         180,827   
  

 

 

    

 

 

 

United Kingdom

     3,871         4,158   

Sweden

     2,478         3,676   

Germany

     2,310         2,097   

Romania

     682         679   

Slovakia

     496         666   

Norway

     490         603   

Hungary

     442         564   

Other

     369         334   
  

 

 

    

 

 

 

Total EMEA

     11,138         12,777   
  

 

 

    

 

 

 
   $ 170,500       $ 193,604   
  

 

 

    

 

 

 

 

(1)

Long-lived assets include property and equipment, net, and intangibles, net.

 

103


Table of Contents

Goodwill by segment was as follows (in thousands):

 

     December 31,  
     2014      2013  

Americas

   $ 193,831       $ 199,802   

EMEA

     —           —     
  

 

 

    

 

 

 
   $ 193,831       $ 199,802   
  

 

 

    

 

 

 

Revenues for the Company’s products and services were as follows (in thousands):

 

     Years Ended December 31,  
     2014      2013      2012  

Outsourced customer contract management services

   $ 1,303,607       $ 1,240,328       $ 1,104,442   

Fulfillment services

     18,392         16,953         16,357   

Enterprise support services

     5,524         6,179         6,899   
  

 

 

    

 

 

    

 

 

 
   $ 1,327,523       $ 1,263,460       $ 1,127,698   
  

 

 

    

 

 

    

 

 

 

Note 28. Other Income (Expense)

Other income (expense) consists of the following (in thousands):

 

     Years Ended December 31,  
     2014     2013     2012  

Foreign currency transaction gains (losses)

   $ (1,740   $ (5,962   $ (2,856

Gains (losses) on foreign currency derivative instruments not designated as hedges

     (44     4,216        (295

Gains (losses) on liquidation of foreign subsidiaries

     —          —          (582

Other miscellaneous income (expense)

     441        985        1,200   
  

 

 

   

 

 

   

 

 

 
   $ (1,343   $ (761   $ (2,533
  

 

 

   

 

 

   

 

 

 

Note 29. Related Party Transactions

In January 2008, the Company entered into a lease for a customer contact management center located in Kingstree, South Carolina. The landlord, Kingstree Office One, LLC, is an entity controlled by John H. Sykes, the founder, former Chairman and Chief Executive Officer of the Company and the father of Charles Sykes, President and Chief Executive Officer of the Company. The lease payments on the 20 year lease were negotiated at or below market rates, and the lease is cancellable at the option of the Company. There are significant penalties for early cancellation which decrease over time. The Company paid $0.4 million to the landlord during each of the years ended December 31, 2014, 2013 and 2012 under the terms of the lease.

 

104


Table of Contents

Schedule II — Valuation and Qualifying Accounts

Years ended December 31, 2014, 2013 and 2012:

 

(in thousands)

   Balance at
Beginning
of Period
     Charged
(Credited)
to Costs
and
Expenses
    Additions
(Deductions)(1)
    Balance at
End  of
Period
 

Allowance for doubtful accounts:

         

Year ended December 31, 2014

   $ 4,987         (181   $ (145   $ 4,661   

Year ended December 31, 2013

     5,081         483        (577     4,987   

Year ended December 31, 2012

     4,304         1,115        (338     5,081   

Valuation allowance for net deferred tax assets:

         

Year ended December 31, 2014

   $ 42,664       $ (8,518   $ —        $ 34,146   

Year ended December 31, 2013

     43,298         (634     —          42,664   

Year ended December 31, 2012

     38,544         4,754        —          43,298   

Reserves for value added tax receivables:

         

Year ended December 31, 2014

   $ 2,530       $ (638   $ (1,617   $ 275   

Year ended December 31, 2013

     3,076         143        (689     2,530   

Year ended December 31, 2012

     2,355         546        175        3,076   

 

(1)

Net write-offs and recoveries, including the effect of foreign currency translation.

 

 

105


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-K’ Filing    Date    Other Filings
5/2/17
12/15/164
12/31/1510-K,  4
12/15/15
3/31/1510-Q,  4
Filed on:2/19/15
2/10/15
2/6/15
1/31/15
1/1/15
For Period end:12/31/144
12/15/14
12/1/14
11/30/14
11/1/14
10/31/14
10/29/143
10/1/14
9/30/1410-Q,  4
8/20/144
7/31/14
6/30/1410-Q,  4
4/15/143,  8-K
3/24/144,  8-K,  SC 13G/A
1/1/14
12/31/1310-K,  4
12/15/13
9/30/1310-Q,  4
6/30/1310-Q
3/31/1310-Q
1/2/134
1/1/13
12/31/1210-K,  4
9/19/128-K
9/13/123,  8-K
8/20/124,  8-K
7/30/128-K
7/27/128-K
5/17/128-K,  DEF 14A
5/7/128-K
5/3/128-K
4/14/12
4/4/128-K
3/30/124
3/29/128-K
1/1/12
11/8/1110-Q
8/18/114,  8-K
8/9/1110-Q,  4
5/20/114,  8-K
5/11/114,  DEFA14A
3/23/11
3/14/11
12/30/104,  4/A,  8-K
12/24/108-K
12/22/104,  4/A,  8-K
12/13/10
2/2/108-K
12/31/0910-K,  4,  S-4/A
10/9/09425,  8-K
10/5/093,  8-K
4/22/09DEF 14A
3/10/0910-K
12/30/084
12/29/08
11/5/0810-Q
5/29/088-K
5/28/084
5/7/0810-Q
2/12/08
1/25/08
1/8/088-K
1/2/084,  8-K
1/2/078-K
12/28/068-K
5/31/068-K
5/24/064,  8-K
4/4/064,  8-K
3/29/068-K,  8-K/A
3/22/05
1/1/05
12/16/048-K
12/10/048-K
8/9/0410-Q,  4
5/7/0110-Q
3/29/9910-K405
12/17/98
10/23/97S-3
3/1/96
 List all Filings 


1 Subsequent Filing that References this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/26/21  Sykes Enterprises Inc.            10-K       12/31/20  166:28M                                    ActiveDisclosure/FA
Top
Filing Submission 0001193125-15-054298   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
AboutPrivacyRedactionsHelp — Fri., Mar. 29, 3:03:50.3am ET