UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 14, 2013
Syntel, Inc.
(Exact name of registrant as specified in its charter)
| Michigan | 000-22903 | 38-2312018 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 525 E. Big Beaver Road, Suite 300, Troy, Michigan | 48083 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (248) 619-2800
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. | Results of Operations and Financial Condition. |
On February 14, 2013, Syntel, Inc. (the “Company”) issued a press release announcing results of operations and related financial information for its fourth quarter and year ended December 31, 2012. A copy of the press release is attached to this Report as Exhibit 99.1. The information contained in this Current Report, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except if the Company expressly states that such information is to be considered “filed” under the Exchange Act or incorporates it by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit |
||
| 99.1 | Press Release dated February 14, 2013. | |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Syntel, Inc. | ||||||
| (Registrant) | ||||||
| Date February 14, 2013 | By | /s/ Daniel M. Moore | ||||
| Daniel M. Moore, Chief Administrative Officer | ||||||
3
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99.1 | Press Release dated February 14, 2013. | |
4
Exhibit 99.1
Syntel Reports Fourth Quarter 2012 Financial Results
Highlights:
| • | Q4 revenue of $187.8M, up 9% from year-ago quarter, and 1% sequentially |
| • | Q4 EPS of $1.19 per diluted share, up 13% from year-ago quarter, but down 3% sequentially |
| • | Full year revenue increase of 13% to $723.9M |
| • | Full year EPS of $4.44 per diluted share |
| • | 2012 year-ending cash & short term investments of $421.3M |
| • | Global Headcount of 21,407 on December 31, 2012, up 10% versus prior year |
TROY, Mich. – February 14, 2013 – Syntel, Inc. (NASDAQ: SYNT), a global information technology services and Knowledge Process Outsourcing (KPO) company today announced financial results for the fourth quarter and full year, ended December 31, 2012.
Fourth Quarter Financial Highlights
Syntel’s revenue for the fourth quarter increased nine percent to $187.8 million, compared to $172.4 million in the prior-year period, and increased one percent sequentially from $186.4 million in the third quarter of 2012. During the fourth quarter, Applications Outsourcing accounted for 76 percent of total revenue, with Knowledge Process Outsourcing (KPO) at 15 percent, e-Business contributing seven percent and TeamSourcing at two percent.
The Company’s gross margin was 45.2 percent in the fourth quarter, compared to 42.1 percent in the prior-year period and 45.5 percent in the third quarter of 2012. Selling, General and Administrative (SG&A) expenses were 15 percent of revenue in the fourth quarter, compared to 11.4 percent in the prior-year period and 15.6 percent in the previous quarter.
The fourth quarter income from operations was 30.2 percent of revenue as compared to 30.7 percent in the prior-year period and 29.9 percent in the third quarter. The sequential rise in operating margin primarily reflects the impact of currency-related balance sheet translations and, to a lesser extent, lower marketing costs.
Net income for the fourth quarter was $49.9 million or $1.19 per diluted share, compared to $44 million or $1.05 per diluted share in the prior-year period and net income of $51.5 million or $1.23 per diluted share in the third quarter of 2012.
Full Year 2012 Financial Highlights
Revenue for 2012 increased 13 percent to $723.9 million, from $642.4 million in 2011. The Company’s 2012 operating margin was 29.3 percent, compared to 21.5 percent in 2011. Net income for the year was $185.5 million compared to $122.9 million in 2011. EPS for 2012 increased 50.7% to $4.44 per diluted share from $2.94 per diluted share in 2011. Year-over-year margins and earnings were impacted by currency fluctuations, wage increases, and costs associated with investments in hiring and infrastructure, among other factors.
During 2012, Syntel spent $32.3 million in CAPEX, largely in support of campus infrastructure, paid $106.2 million in regular and special dividends ($2.55 per share), and finished the year with cash and short-term investments of $421.3 million. The Company added 19 new clients during the year and ended 2012 with 21,407 employees globally.
Operational Highlights
“Our fourth quarter results reflect solid execution in a rapidly evolving business environment,” said Syntel CEO and President Prashant Ranade. “While we faced some challenges this quarter, healthy growth in our recurring revenue businesses and improving business efficiency helped us navigate through them.”
“We will maintain our customer centricity and drive growth in the verticals we serve with our domain-led solutions,” said Ranade. “We are optimistic about the opportunities before us, given our positioning within the end markets we serve and our high-quality customer relationships.”
“We continue to see an expanding role for global delivery in the years ahead and plan to invest in our capabilities to provide innovative solutions, which will help us garner growth that meets or exceeds overall market growth.”
2013 Guidance
Based on current visibility levels and an exchange rate assumption of 53 Indian Rupees to the dollar, the Company currently expects 2013 revenue of $780 to $810 million and EPS in the range of $4.15 to $4.45.
Syntel to Host Conference Call
Syntel will discuss its fourth quarter and full year 2012 results today on a conference call at 10:00 a.m. (EST). To listen to the call, please dial (877) 837-3915 in the US/Canada or (973) 638-3495 internationally. The call will also be broadcast live via the Internet at Syntel’s web site: investor.syntelinc.com. Please access the site at least 15 minutes prior to the call to register and download any necessary software. A replay will be available until February 21, 2013 by dialing (855) 859-2056 and entering “98221987”. International callers may dial (404) 537-3406 and enter the same passcode.
About Syntel
Syntel (Nasdaq:SYNT) is a leading global provider of integrated information technology and Knowledge Process Outsourcing (KPO) solutions spanning the entire lifecycle of business and information systems and processes. The Company is driven by its mission to create new opportunities for clients by harnessing the passion, talent and innovation of Syntel employees worldwide. Syntel leverages dedicated Centers of Excellence, a flexible Global Delivery Model, and a strong track record of building collaborative client partnerships to create sustainable business advantage for Global 2000 organizations. Syntel is assessed at SEI CMMi Level 5, and is ISO 27001 and ISO 9001:2008 certified. As of December 31, 2012, Syntel employed more than 21,000 people worldwide. To learn more, visit us at: www.syntelinc.com.
Safe Harbor Provision
This news release includes forward-looking statements, including those with respect to the future level of business for Syntel, Inc. These statements are necessarily subject to risk and uncertainty. Actual results could differ materially from those projected in these forward-looking statements as a result of certain risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 or from other factors not currently anticipated.
Contacts:
North America/Europe: Jon Luebke, Syntel, 248/619-3503, jon_luebke@syntelinc.com
Asia/Pacific: Sikta Samantaray, +91 9167512186, sikta_samantaray@syntelinc.com
# # #
SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
| THREE MONTHS ENDED | TWELVE MONTHS ENDED | |||||||||||||||
| DECEMBER 31, | DECEMBER 31, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net revenues |
$ | 187,773 | $ | 172,420 | $ | 723,903 | $ | 642,404 | ||||||||
| Cost of revenues |
102,918 | 99,802 | 408,919 | 395,455 | ||||||||||||
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| Gross profit |
84,855 | 72,618 | 314,984 | 246,949 | ||||||||||||
| Selling, general and administrative expenses |
28,131 | 19,638 | 103,044 | 108,721 | ||||||||||||
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| Income from operations |
56,724 | 52,980 | 211,940 | 138,228 | ||||||||||||
| Other income, net |
7,280 | 2,534 | 27,988 | 16,208 | ||||||||||||
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| Income before income taxes |
64,004 | 55,514 | 239,928 | 154,436 | ||||||||||||
| Income tax expense |
14,077 | 11,554 | 54,385 | 31,580 | ||||||||||||
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| Net income |
$ | 49,927 | $ | 43,960 | $ | 185,543 | $ | 122,856 | ||||||||
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| Other Comprehensive Income(Loss) |
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| Foreign currency translation adjustments |
$ | (18,349 | ) | $ | (33,350 | ) | $ | (11,910 | ) | $ | (69,832 | ) | ||||
| Gains (losses) on derivatives |
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| Gains (losses) arising during period on net investment hedges |
(324 | ) | (2,817 | ) | (1,558 | ) | (4,077 | ) | ||||||||
| Unrealized gains(losses) on securities: |
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| Unrealized holding gains arising during period |
513 | 15 | 916 | 158 | ||||||||||||
| Reclassification adjustment for gains included in net income |
(623 | ) | (195 | ) | (269 | ) | (448 | ) | ||||||||
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| (110 | ) | (180 | ) | 647 | (290 | ) | ||||||||||
| Defined benefit pension plans: |
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| Net Profit(loss) arising during period |
(1,038 | ) | 397 | (1,051 | ) | 437 | ||||||||||
| Amortization of prior service cost included in net periodic pension cost |
8 | 8 | 32 | 37 | ||||||||||||
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| (1,030 | ) | 405 | (1,019 | ) | 474 | |||||||||||
| Other comprehensive income(loss), before tax |
(19,813 | ) | (35,942 | ) | (13,840 | ) | (73,725 | ) | ||||||||
| Income tax expenses related to Other Comprehensive Income(loss) |
382 | (82 | ) | 141 | (124 | ) | ||||||||||
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| Other comprehensive income(loss), net of tax |
(19,431 | ) | (36,024 | ) | (13,699 | ) | (73,849 | ) | ||||||||
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| Comprehensive Income(Loss) |
$ | 30,496 | $ | 7,936 | $ | 171,844 | $ | 49,007 | ||||||||
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| Dividend per share |
$ | 2.31 | $ | 0.06 | $ | 2.49 | $ | 0.24 | ||||||||
| EARNINGS PER SHARE: |
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| Basic |
$ | 1.20 | $ | 1.06 | $ | 4.45 | $ | 2.95 | ||||||||
| Diluted |
$ | 1.19 | $ | 1.05 | $ | 4.44 | $ | 2.94 | ||||||||
| Weighted average common shares outstanding: |
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| Basic |
41,739 | 41,651 | 41,697 | 41,619 | ||||||||||||
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| Diluted |
41,833 | 41,736 | 41,793 | 41,717 | ||||||||||||
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SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| ASSETS | ||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 94,622 | $ | 104,628 | ||||
| Short term investments |
326,653 | 215,798 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $2,168 and $2,407 at December 31 , 2012 and December 31, 2011, respectively |
86,004 | 88,573 | ||||||
| Revenue earned in excess of billings |
11,875 | 5,131 | ||||||
| Deferred income taxes and other current assets |
48,341 | 46,353 | ||||||
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| Total current assets |
567,495 | 460,483 | ||||||
| Property and equipment |
204,151 | 179,576 | ||||||
| Less accumulated depreciation and amortization |
85,033 | 73,574 | ||||||
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| Property and equipment, net |
119,118 | 106,002 | ||||||
| Goodwill |
906 | 906 | ||||||
| Non current Term Deposits with Banks |
14 | 130 | ||||||
| Deferred income taxes and other non current assets |
34,908 | 29,727 | ||||||
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| TOTAL ASSETS |
$ | 722,441 | $ | 597,248 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES |
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| Current liabilities: |
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| Accrued payroll and related costs |
$ | 49,889 | $ | 45,949 | ||||
| Income taxes payable |
9,799 | 3,080 | ||||||
| Accounts payable and other current liabilities |
30,629 | 35,341 | ||||||
| Loans and borrowings |
50,029 | — | ||||||
| Deferred revenue |
4,694 | 9,692 | ||||||
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| Total current liabilities |
145,040 | 94,062 | ||||||
| Other non current liabilities |
11,731 | 9,997 | ||||||
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| Total liabilities |
156,771 | 104,059 | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Total shareholders’ equity |
565,670 | 493,189 | ||||||
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| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 722,441 | $ | 597,248 | ||||
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