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Sykes Enterprises, Incorporated Reports Fourth-Quarter And Full-Year 2010 Financial Results

Stocks in this article: SYKE

Solid execution drives strong fourth-quarter 2010 revenue, operating margin and earnings per share performance

Seat capacity utilization rate increases

Initiating first-quarter and full-year 2011 business outlook

TAMPA, Fla., Feb. 28, 2011 (GLOBE NEWSWIRE) -- Sykes Enterprises, Incorporated ("SYKES" or the "Company") (Nasdaq:SYKE) announced today its fourth-quarter and full-year 2010 financial results. The Company's fourth-quarter and full-year 2010 financial results and the accompanying year-ago and sequential comparisons discussed throughout the press release exclude financial contribution from the Argentina operation, which was disposed of in December 2010 and is reclassified as discontinued operations.

Fourth quarter 2010 Financial Highlights

  • Fourth quarter 2010 revenues of $309.1 million increased $95.8 million, or 44.9%, over the comparable quarter last year; fourth quarter 2010 revenues included $103.5 million from the ICT acquisition  
  • Fourth quarter 2010 operating margin was 4.6% versus 7.5% in the same period last year. Included in fourth quarter 2010 operating margins were a net gain of $2.0 million (0.6% of revenues) on an insurance settlement and a recovery of $0.4 million (0.1% of revenues) in regulatory penalty; on an adjusted basis, a non-GAAP measure (see explanation on Page 7 and see Exhibit 4 for reconciliation), fourth quarter 2010 operating margin was 7.4% versus 8.9%, due to previously-discussed program expirations in both the Americas and EMEA regions beginning in the second-half of 2009, duplicative costs related to migration of demand to near-shore locations in Cluj, Romania, Berlin, Germany, and Cairo, Egypt, coupled with severance expenses as well as training costs associated with new program ramp-ups in the Americas & EMEA regions  
  • Sequentially, fourth quarter 2010 revenues of $309.1 million increased 5.0% over the third quarter of 2010, or a 2.9% increase on a constant currency basis, driven by technology, communications, transportation and financial services verticals; operating margins increased sequentially to 4.6% in fourth quarter 2010 over 4.5%, while on an adjusted basis operating margins decreased sequentially to 7.4% in the fourth quarter of 2010 from 7.9% due to additional migration and ramp costs associated with some new client wins in EMEA, coupled with higher corporate expenses  
  • Excluding the ICT acquisition and on a constant currency basis, fourth quarter 2010 revenues decreased 4.2% comparably due to tougher year-ago comparisons driven principally by previously-discussed program expirations in both regions, migration of demand to near-shore locations as well as softness in the technology and communications verticals, most pronounced within the EMEA region, which more than offset increased overall demand from the financial services vertical within the Americas and EMEA regions  
  • Excluding the ICT acquisition, fourth quarter 2010 operating margins declined 280 basis points (6.1% vs. 8.9%) comparably due principally to previously-discussed client program expirations, migration costs, severance expenses and training costs associated with program ramp-ups in the Americas and EMEA regions  
  • Fourth quarter 2010 capacity utilization rate increased to 77% from 75% in the comparable quarter last year as the Company made solid strides in rationalizing seat capacity as part of the integration of the ICT acquisition and exiting Argentina  
  • Fourth quarter 2010 diluted earnings per share from continuing operations were $0.21 versus a loss of $0.08 in the comparable quarter last year and versus the Company's November 2010 business outlook diluted earnings per share range of $0.22 to $0.25. The Company's earnings per share in the fourth quarter of 2009 were impacted by the deemed change of assertion regarding permanent reinvestment of $85 million of its foreign subsidiaries' accumulated and undistributed earnings related to the ICT Group acquisition. Relative to the November 2010 business outlook share range, the decrease in fourth quarter 2010 diluted earnings per share was due principally to an additional withholding tax expense incurred as a result of cash management actions related to the Tax Relief Act of December 2010  
  • On an adjusted basis, fourth quarter 2010 diluted earnings per share from continuing operations were $0.31 compared to an adjusted fourth quarter 2010 diluted earnings per share range of $0.30 to $0.33 provided in the Company's November 2010 business outlook. The decrease relative to the business outlook was due mainly to the Tax Relief Act discussed above. Assuming a tax rate of 26%, which was the midpoint of the forecasted tax rate range of 25% to 27% projected in the Company's November 2010 business outlook, adjusted diluted earnings per share from continuing operations in the fourth quarter of 2010 would have been $0.36     
  • Fourth quarter 2010 loss per share from discontinued operations, net of taxes, was $0.58 versus $0.03 in the comparable quarter last year due principally to the loss on the sale of the Company's Argentina operations

Americas Region

Revenues generated from the Company's Americas region, including operations in North America and offshore (Latin America, South Asia and the Asia Pacific region), increased 72.1% to $250.8 million, or 81.1% of total revenues, for the fourth quarter of 2010. Revenues for the prior year period totaled $145.7 million, or 68.3% of total revenues. The ICT acquisition contributed approximately $103.4 million to the Americas fourth quarter 2010 revenues. Excluding the ICT acquisition and on a constant currency basis, fourth quarter 2010 Americas revenues decreased 1.9% comparably due principally to expiration of previously-discussed client programs within the communications and technology verticals, which more than offset increased demand from the financial services vertical and a gradually rebounding technology vertical.

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