Discontinued Operations

9 Months Ended

Sep. 30, 2012

Discontinued Operations

Note 3. Discontinued Operations

In November 2011, the Finance Committee of the Board of Directors 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, with annual revenues of approximately $39.3 million in 2011, 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 completed the sale of 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 completed the sale of 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 are no material post closing obligations.

The Spanish operations met the held for sale criteria as of December 31, 2011; therefore, the Company reflected the assets and related liabilities of the Spanish operations as “Assets held for sale, discontinued operations” and “Liabilities held for sale, discontinued operations” in the accompanying Condensed Consolidated Balance Sheet as of December 31, 2011. The Company reflected the operating results related to the Spanish operations as discontinued operations in the accompanying Condensed Consolidated Statements of Operations for all periods presented. Cash flows from discontinued operations are included in the accompanying Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011. This business was historically reported by the Company as part of the EMEA segment.

The results of the Spanish operations included in discontinued operations were as follows (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012		2011			2012			2011
Revenues	$	—	$	9,235		$	10,102		$	29,582
(Loss) from discontinued operations before income taxes	$	—	$	(755	)	$	(820	)	$	(3,091	)
Income taxes (1)		—		—			—			—
(Loss) from discontinued operations, net of taxes	$	—	$	(755	)	$	(820	)	$	(3,091	)
(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.

The assets and liabilities of the Spanish operations in the accompanying Condensed Consolidated Balance Sheet as of December 31, 2011 were as follows (in thousands):

Assets
Current assets:
Receivables, net	$	8,970
Prepaid expenses		23
Total current assets		8,993
Deferred charges and other assets		597
Total assets (1)		9,590
Liabilities
Current liabilities:
Accounts payable		1,191
Accrued employee compensation and benefits		4,592
Deferred revenue		335
Other accrued expenses and current liabilities		1,010
Total current liabilities (2)		7,128
Total net assets	$	2,462

⁽¹⁾  Classified as current and included in “Assets held for sale, discontinued operations” in the accompanying Condensed Consolidated Balance Sheet as of December 31, 2011.

⁽²⁾  Classified as current and included in “Liabilities held for sale, discontinued operations” in the accompanying Condensed Consolidated Balance Sheet as of December 31, 2011.