Note 18. 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):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Stock-based compensation (expense) ⁽¹⁾	$	(1,250	)	$	(798	)	$	(3,111	)	$	(3,411	)
Income tax benefit ⁽²⁾		438			311			1,089			1,330
Excess tax benefit (deficiency) from stock-based compensation ⁽³⁾		—			(87	)		(278	)		(52	)

⁽¹⁾	Included in “General and administrative” costs in the accompanying Condensed Consolidated Statements of Operations.

⁽²⁾	Included in “Income taxes” in the accompanying Condensed Consolidated Statements of Operations.

⁽³⁾	Included in “Additional paid-in capital” in the accompanying Condensed Consolidated Statements of Changes in Shareholder’s Equity.

There were no capitalized stock-based compensation costs as of September 30, 2012 and December 31, 2011.

2011 Equity Incentive Plan — The 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 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 The 2011 Plan replaced and superseded the Company’s 2001 Equity Incentive Plan (the “2001 Plan”), which expired on March 14, 2011.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 stock options, stock appreciation rights 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 — Stock appreciation rights (“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. The 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. The fair value of each SAR is estimated on the date of grant using the Black-Scholes valuation model that uses various assumptions.

The following table summarizes the assumptions used to estimate the fair value of SARs granted:


	Nine Months Ended September 30,
	2012			2011
Expected volatility		47.1	%		44.3	%
Weighted-average volatility		47.1	%		44.3	%
Expected dividend rate		0.0	%		0.0	%
Expected term (in years)		4.7			4.6
Risk-free rate		0.8	%		2.0	%

The following table summarizes SARs activity as of September 30, 2012 and for the nine months 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, 2012		657		$	—
Granted		259		$	—
Exercised		—		$	—
Forfeited or expired		(51	)	$	—

Outstanding at September 30, 2012		865		$	—		7.5	$	—

Vested or expected to vest at September 30, 2012		865		$	—		7.5	$	—

Exercisable at September 30, 2012		470		$	—		6.3	$	—

The following table summarizes information regarding SARs granted and exercised (in thousands, except per SAR amounts):


	Nine Months Ended September 30,
	2012		2011
Number of SARs granted		259		215
Weighted average grant-date fair value per SAR	$	5.97	$	7.10
Intrinsic value of SARs exercised	$	—	$	—
Fair value of SARs vested	$	1,388	$	1,198

The following table summarizes nonvested SARs activity as of September 30, 2012 and for the nine months then ended:


Nonvested Stock Appreciation Rights	Shares (000s)			Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2012		362		$	7.90
Granted		259		$	5.97
Vested		(175	)	$	7.98
Forfeited or expired		(51	)	$	6.76

Nonvested at September 30, 2012		395		$	6.74

As of September 30, 2012, there was $1.9 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 1.4 years.

Restricted Shares — The Company’s Board of Directors approves 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 will 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 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 following table summarizes nonvested restricted shares/RSUs activity as of September 30, 2012 and for the nine months then ended:


Nonvested Restricted Shares and RSUs	Shares (000s)			Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2012		793		$	20.39
Granted		420		$	15.21
Vested		(195	)	$	19.74
Forfeited or expired		(146	)	$	19.03

Nonvested at September 30, 2012		872		$	18.25

The following table summarizes information regarding restricted shares/RSUs granted and vested (in thousands, except per restricted share/RSU amounts):


	Nine Months Ended September 30,
	2012		2011
Number of restricted shares/RSUs granted		420		339
Weighted average grant-date fair value per restricted share/RSU	$	15.21	$	18.67
Fair value of restricted shares/RSUs vested	$	3,845	$	4,392

As of September 30, 2012, based on the probability of achieving the performance goals, there was $15.0 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 1.5 years.

2004 Non-Employee Director Fee Plan — The Company’s 2004 Non-Employee Director Fee Plan (the “2004 Fee Plan”), as amended on May 17, 2012, provides that all new non-employee directors joining the Board will 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 vests 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 provides that each non-employee director will 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 vests 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 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 is 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.

Prior to 2008, the grants were comprised of CSUs rather than shares of common stock. A CSU is a bookkeeping entry on the Company’s books that records the equivalent of one share of common stock.

The following table summarizes nonvested CSUs and share awards activity as of September 30, 2012 and for the nine months then ended:


Nonvested Common Stock Units and Share Awards	Shares (000s)			Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2012		16		$	21.08
Granted		42		$	16.15
Vested		(31	)	$	17.75
Forfeited or expired		(1	)	$	21.83

Nonvested at September 30, 2012		26		$	17.18

The following table summarizes information regarding CSUs/share awards granted and vested (in thousands, except per CSU/share award amounts):


	Nine Months Ended September 30,
	2012		2011
Number of CSUs/share awards granted		42		21
Weighted average grant-date fair value per CSU/share award	$	16.15	$	21.83
Fair value of CSUs/share awards vested	$	551	$	320

As of September 30, 2012, there was $0.3 million of total unrecognized compensation costs, net of estimated forfeitures, related to nonvested CSUs granted since March 2008 under the Plan. This cost is expected to be recognized over a weighted average period of 0.3 years.

Deferred Compensation Plan — The Board adopted the Sykes Enterprises, Incorporated non-qualified Deferred Compensation Plan (the “Deferred Compensation Plan”) on December 17, 1998, which was amended on May 23, 2006. The Deferred Compensation Plan, which was not shareholder-approved, 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 and senior vice presidents and $7,500 per year for 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 8, Investments Held in Rabbi Trusts.) As of September 30, 2012 and December 31, 2011, liabilities of $5.1 million and $4.2 million, respectively, of the Deferred Compensation Plan were recorded in “Accrued employee compensation and benefits” in the accompanying Condensed Consolidated Balance Sheets.

Additionally, the Company’s common stock match associated with the Deferred Compensation Plan, with a carrying value of approximately $1.4 million and $1.2 million at September 30, 2012 and December 31, 2011, respectively, is included in “Treasury stock” in the accompanying Condensed Consolidated Balance Sheets.

The following table summarizes nonvested common stock activity as of September 30, 2012 and for the nine months then ended:


Nonvested Common Stock	Shares (000s)			Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2012		8		$	18.30
Granted		13		$	15.28
Vested		(13	)	$	15.63
Forfeited or expired		(1	)	$	18.22

Nonvested at September 30, 2012		7		$	17.17

The following table summarizes information regarding shares of common stock granted and vested (in thousands, except per common stock amounts):


	Nine Months Ended September 30,
	2012		2011
Number of shares of common stock granted		13		10
Weighted average grant-date fair value per common stock	$	15.28	$	19.19
Fair value of common stock vested	$	178	$	141
Cash used to settle the obligation	$	263	$	—

As of September 30, 2012, there was $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 3.0 years.