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) July 18, 2017
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.) |
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525 E. Big Beaver Road, Suite 300, Troy, Michigan | 48083 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. Entry into a Material Definitive Agreement.
On July 18, 2017, Syntel, Inc. (the Company) entered into a Second Amendment (the Amendment) to the credit agreement dated September 12, 2016 (the Credit Agreement) with Bank of America, N.A. as administrative agent L/C issuer and swing line lender, and the other lenders party thereto. Capitalized terms used but not defined herein have the meanings ascribed to them in the Amendment or the Credit Agreement, as applicable.
The Amendment modifies the Credit Agreement to allow the Borrower to make additional Restricted Payments in an aggregate amount not to exceed $50,000,000; provided that (i) no Default shall have occurred and is continuing or would immediately result from such Restricted Payment, and (ii) upon giving effect to such Restricted Payment, the Loan Parties would be in compliance with the financial covenants set forth in the Credit Agreement on a Pro Forma Basis. The Amendment contains customary representations and warranties applicable to the Company and the Guarantors.
The foregoing summary of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference. The Credit Agreement is attached as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on September 12, 2016.
Item 2.02. Results of Operations and Financial Condition.
On July 20, 2017, the Company issued a press release announcing results of operations and related financial information for its second quarter ended June 30, 2017. A copy of the press release is attached to this Report as Exhibit 99.1.
Item 8.01. Other Events.
The Companys July 20, 2017 press release also announced a stock repurchase plan under which the Company may repurchase shares of common stock with a total value not to exceed $60,000,000.00. The stock repurchase plan is effective on July 25, 2017 and is authorized to continue through December 31, 2018. A copy of the press release is attached to this Report as Exhibit 99.1.
The information contained in Items 2.02 and 8.01 of this Current Report, and in 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
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10.1 | Second Amendment, dated July 18, 2017, to the Credit Agreement dated September 12, 2016, between the Company and Bank of America, N.A., as administrative agent, L/C issuer and swing line lender and the other lenders party thereto. | |
99.1 | Press Release dated July 20, 2017. |
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. |
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(Registrant) | ||||||
Date July 20, 2017 | By |
/s/ Daniel M. Moore |
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Daniel M. Moore, Chief Administrative Officer |
3
EXHIBIT INDEX
Exhibit No. | Description | |
10.1 | Second Amendment, dated July 18, 2017, to the Credit Agreement dated September 12, 2016, between the Company and Bank of America, N.A., as administrative agent, L/C issuer and swing line lender and the other lenders party thereto. | |
99.1 | Press Release dated July 20, 2017. |
4
Exhibit 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT dated as of July 18, 2017 (the Amendment ) is entered into among Syntel, Inc., a Michigan corporation (the Borrower ), the Guarantors party hereto, the Lenders party hereto and Bank of America, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein have the meanings provided in the Credit Agreement (as defined below).
RECITALS
WHEREAS, the Borrower, the Guarantors, the Lenders and Bank of America, N.A, as Administrative Agent, L/C Issuer and Swing Line Lender entered into that certain Credit Agreement dated as of September 12, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement ); and
WHEREAS, the Borrower, the Lenders and the Administrative Agent, subject to the terms and conditions set forth, desire to amend certain terms of the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Amendments to Credit Agreement . The Credit Agreement is hereby amended as follows:
(a) Section 8.06 of the Credit Agreement is hereby amended by (i) deleting the and at the end of clause (g) thereof, (ii) re-numbering clause (h) as the new clause (i) thereof, and (iii) inserting a new clause (h) thereof as follows:
(h) the Borrower may make other Restricted Payments in an aggregate amount not to exceed $50,000,000; provided that (i) no Default shall have occurred and is continuing or would immediately result from such Restricted Payment, and (ii) upon giving effect to such Restricted Payment, the Loan Parties would be in compliance with the financial covenants set forth in Section 8.11 on a Pro Forma Basis; and
2. Conditions Precedent . This Amendment shall be effective upon receipt by the Administrative Agent of counterparts of this Amendment duly executed by the Borrower, the Guarantors, the Required Lenders and the Administrative Agent.
3. Miscellaneous .
(a) The Borrower represents and warrants to the Lenders that (i) the representations and warranties of the Borrower and each other Loan Party contained in Article VI of the Credit Agreement or any other Loan Document are true and correct in all material respects with respect to any representation or warranty that is not otherwise qualified as to materiality, and in all respects with respect to any representation or warranty that is qualified as to materiality, in each case on and as of the date hereof, except to the extent that any such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects or in all respects, as applicable, as of such earlier date, and (ii) no Default has occurred and is continuing.
(b) The Administrative Agent and the Lenders hereby expressly reserve any and all of the rights, powers, privileges and remedies available to the Administrative Agent and the Lenders under the Credit Agreement, the other Loan Documents and applicable Law that have arisen or may arise as a result of any Default or Event of Default, including any such Default or Event of Default that may exist as of the date hereof. No failure to exercise or delay in exercising any right, power, privilege or remedy shall constitute a waiver of any such right, power, privilege or remedy or preclude the Administrative Agent or any Lender from exercising such right, power, privilege or remedy in the future.
(c) The Credit Agreement and the other Loan Documents, and the obligations of the Borrower thereunder, are hereby ratified and confirmed and shall remain in full force and effect according to their terms.
(d) Each Guarantor (i) acknowledges and consents to all of the terms and conditions of this Amendment, (ii) affirms all of its obligations under the Guaranty and the other Loan Documents to which it is a party and (iii) agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge its obligations under the Guaranty or the Loan Documents.
(e) This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of an executed counterpart of this Amendment by telecopy shall be effective as an original and shall constitute a representation that an executed original shall be delivered.
(f) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(g) This Amendment is a Loan Document and all references to a Loan Document in the Credit Agreement and the other Loan Documents (including, without limitation, all such references in the representations and warranties in the Credit Agreement) shall be deemed to include this Amendment.
[signature pages follow]
Each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first written above.
BORROWER: | SYNTEL, INC., | |||||||
a Michigan corporation | ||||||||
By: |
/s/ Daniel M. Moore |
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Name: Daniel M. Moore | ||||||||
Title: Chief Administrative Officer | ||||||||
GUARANTORS: | SKILLBAY LLC, | |||||||
a Michigan limited liability company | ||||||||
By: |
/s/ Daniel M. Moore |
|||||||
Name: Daniel M. Moore | ||||||||
Title: Chief Administrative Officer | ||||||||
SYNTEL CONSULTING INC., a Michigan corporation |
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By: |
/s/ Daniel M. Moore |
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Name: Daniel M. Moore | ||||||||
Title: Chief Administrative Officer |
SYNTEL, INC.
SECOND AMENDMENT
ADMINISTRATIVE AGENT: | BANK OF AMERICA, N.A., | |||||||
as Administrative Agent | ||||||||
By: |
/s/ Christine Trotter |
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Name: Christine Trotter | ||||||||
Title: Assistant Vice President | ||||||||
LENDERS: |
BANK OF AMERICA, N.A., as a Lender |
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By: |
/s/ Gregory J. Bosio |
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Name: Gregory J. Bosio | ||||||||
Title: Senior Vice President | ||||||||
JPMORGAN CHASE BANK, N.A., as a Lender |
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By: |
/s/ Justin Burton |
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Name: Justin Burton | ||||||||
Title: Vice President | ||||||||
WELLS FARGO BANK, N.A., as a Lender |
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By: |
/s/ Debra E. DelVecchio |
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Name: Debra E. DelVecchio | ||||||||
Title: Senior Vice President | ||||||||
CITIBANK, N.A., as a Lender |
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By: |
/s/ Varun Gupta |
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Name: Varun Gupta | ||||||||
Title: SVP | ||||||||
BANK OF THE WEST, as a Lender |
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By: |
/s/ David Wang |
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Name: David Wang | ||||||||
Title: Director |
SYNTEL, INC.
SECOND AMENDMENT
Exhibit 99.1
Syntel Reports Second Quarter 2017 Financial Results
Highlights:
| Q2 revenue of $226.8M, down 8% from year-ago quarter and up 0.4% sequentially |
| Q2 EPS of $0.44 per diluted share, down 37% from year-ago quarter and 5% sequentially |
| Q2 cash & short term investments of $87M |
| Global Headcount of 21,850 on June 30, 2017, versus 23,773 in the year-ago quarter |
TROY, Mich. July 20, 2017 Syntel, Inc. (Nasdaq:SYNT), a leading global provider of integrated information technology and knowledge process services, today announced financial results for the second quarter, ended June 30, 2017.
Second Quarter Financial Highlights
Syntels revenue for the second quarter decreased 7.8 percent to $226.8 million from $246 million in the prior-year period, and rose 0.4 percent from $225.9 million in the first quarter of 2017. During the second quarter, Banking and Financial Services accounted for 45.6 percent of total revenue, with Retail, Logistics and Telecom at 18.1 percent, Healthcare and Life Sciences at 17.5 percent, Insurance at 14.6 percent, and Manufacturing at 4.2 percent.
The Companys gross margin was 35.9 percent in the second quarter, compared to 37 percent in the prior-year period and 36.5 percent in the first quarter of 2017. Selling, General and Administrative (SG&A) expenses were 12.7 percent of revenue in the second quarter, compared to 7.4 percent in the prior-year period and 13.4 percent in the previous quarter.
The second quarter income from operations was 23.3 percent of revenue as compared to 29.6 percent in the prior-year period and 23.1 percent in the first quarter 2017.
Net income for the second quarter was $36.7 million or $0.44 per diluted share, compared to $58.8 million or $0.70 per diluted share in the prior-year period and $38.4 million or $0.46 per diluted share in the first quarter of 2017.
During Q2, Syntel spent $1.8 million in CAPEX, largely in support of campus infrastructure, and finished the quarter with cash and short-term investments of $87 million. The Company ended the quarter with 21,850 employees globally.
Operational Highlights
Our customer relationships are strong and we are committed to growing revenue with all clients by supporting their changing technology needs, said Syntel CEO and President Rakesh Khanna. We expect faster growth from clients 4 to 50 given our relative penetration, the size of the opportunity and our plans to increase revenue from this segment.
The demand for digital services remained high during the second quarter and our Insurance segment continued to benefit from healthier industry trends, said Khanna. The broader environment was largely unchanged from last quarter and it will take some time for growth to return across all of our segments. We continue to focus on deal closures, invest in digital and automation-driven services and are encouraged by our strong pipelines.
2017 Guidance
Based on current visibility levels and an exchange rate assumption of 64.5 Indian rupees to the dollar, the Company currently expects 2017 revenue of $865 million to $900 million and EPS in the range of $1.62 to $1.77.
Stock Repurchase Plan
The Syntel Board of Directors has authorized a stock repurchase plan under which the Company may repurchase shares of common stock with a total value not to exceed $60,000,000.00. The stock repurchase plan is effective on July 25, 2017 and is authorized to continue through December 31, 2018. Repurchases under the Companys new program may be made in open market or privately negotiated transactions in compliance with Securities and Exchange Commission Rule 10b-18, subject to market conditions, applicable legal requirements, and other relevant factors. Any repurchased common stock will be available for use in connection with the Companys incentive plan and for other corporate purposes. Syntel had 83,675,545 shares of common stock issued and outstanding as of June 30, 2017.
Syntel to Host Conference Call
Syntel will discuss its second quarter 2017 results today on a conference call at 10:00 a.m. (EDT). 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 Syntels 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 July 27, 2017 by dialing (855) 859-2056 and entering 47210731. 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 services. Syntel helps global enterprises evolve the core by leveraging automation, scaled agile and cloud platforms to build efficient application development and management, testing and infrastructure solutions. Syntels digital services enable companies to engage customers, discover new insights through analytics, and create a more connected enterprise through the internet of things. Syntels Customer for Life philosophy builds collaborative partnerships and creates long-term client value by investing in IP, solutions and industry-focused delivery teams with deep domain knowledge.
To learn more, visit us at www.syntelinc.com .
Safe Harbor Provision
This news release may include 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 Companys Annual Report on Form 10-K for the year ended December 31, 2016, the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 or from other factors not currently anticipated.
Contacts:
North America/Europe: Jon Luebke, Syntel, 248/619-3503, jon_luebke@syntelinc.com
# # #
SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
JUNE 30, |
SIX MONTHS ENDED
JUNE 30, |
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2017 | 2016 | 2017 | 2016 | |||||||||||||
Net revenues |
$ | 226,811 | $ | 246,018 | $ | 452,680 | $ | 487,408 | ||||||||
Cost of revenues |
145,351 | 155,033 | 288,798 | 306,699 | ||||||||||||
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Gross profit |
81,460 | 90,985 | 163,882 | 180,709 | ||||||||||||
Selling, general and administrative expenses |
28,699 | 18,265 | 58,990 | 47,942 | ||||||||||||
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Income from operations |
52,761 | 72,720 | 104,892 | 132,767 | ||||||||||||
Other income (expense): |
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Interest expense |
(3,216 | ) | (575 | ) | (6,592 | ) | (1,145 | ) | ||||||||
Other income |
462 | 5,450 | 958 | 10,116 | ||||||||||||
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Other income (expense), net |
(2,754 | ) | 4,875 | (5,634 | ) | 8,971 | ||||||||||
Income before provision for income taxes |
50,007 | 77,595 | 99,258 | 141,738 | ||||||||||||
Income tax expense |
13,355 | 18,804 | 24,226 | 29,890 | ||||||||||||
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Net income |
$ | 36,652 | $ | 58,791 | $ | 75,032 | $ | 111,848 | ||||||||
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Other Comprehensive Income |
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Foreign currency translation adjustments |
$ | 937 | $ | (16,094 | ) | $ | 7,112 | $ | (17,334 | ) | ||||||
Gains/(losses) on derivatives: |
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Gains/(losses) arising during period on cash flow hedges |
(672 | ) | | 291 | | |||||||||||
Unrealized gains/(losses) on securities: |
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Unrealized holding gains arising during period |
198 | 970 | 241 | 1,803 | ||||||||||||
Reclassification adjustment for gains included in net income |
(89 | ) | (1,130 | ) | (81 | ) | (69 | ) | ||||||||
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109 | (160 | ) | 160 | 1,734 | ||||||||||||
Defined benefit pension plans: |
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Net profit arising during period |
| | 6 | | ||||||||||||
Amortization of prior service cost included in net periodic pension cost |
24 | 19 | 32 | 35 | ||||||||||||
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24 | 19 | 38 | 35 | |||||||||||||
Other comprehensive income/(loss), before tax |
398 | (16,235 | ) | 7,601 | (15,565 | ) | ||||||||||
Income tax benefit/(expenses) related to other comprehensive income/(loss) |
224 | 22 | (179 | ) | (713 | ) | ||||||||||
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Other comprehensive income/(loss), net of tax |
622 | (16,213 | ) | 7,422 | (16,278 | ) | ||||||||||
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Comprehensive Income |
$ | 37,274 | $ | 42,578 | $ | 82,454 | $ | 95,570 | ||||||||
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EARNINGS PER SHARE: |
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Basic |
$ | 0.44 | $ | 0.70 | $ | 0.90 | $ | 1.33 | ||||||||
Diluted |
$ | 0.44 | $ | 0.70 | $ | 0.89 | $ | 1.33 | ||||||||
Weighted average common shares outstanding: |
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Basic |
83,818 | 84,140 | 83,807 | 84,126 | ||||||||||||
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Diluted |
83,853 | 84,278 | 83,844 | 84,272 | ||||||||||||
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SYNTEL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(Unaudited)
June 30, |
(Audited)
December 31, |
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2017 | 2016 | |||||||
ASSETS | ||||||||
Current assets: |
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Cash and cash equivalents |
$ | 57,447 | $ | 78,332 | ||||
Short term investments |
29,562 | 21,614 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $2,143 at June 30, 2017 and $801 at December 31, 2016, respectively |
106,060 | 118,299 | ||||||
Revenue earned in excess of billings |
21,319 | 25,039 | ||||||
Other current assets |
33,352 | 36,306 | ||||||
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Total current assets |
247,740 | 279,590 | ||||||
Property and equipment |
237,700 | 227,056 | ||||||
Less accumulated depreciation and amortization |
130,495 | 120,580 | ||||||
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Property and equipment, net |
107,205 | 106,476 | ||||||
Goodwill |
906 | 906 | ||||||
Non current term deposits with banks |
237 | 225 | ||||||
Deferred income taxes and other non current assets |
78,018 | 67,346 | ||||||
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TOTAL ASSETS |
$ | 434,106 | $ | 454,543 | ||||
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LIABILITIES AND SHAREHOLDERS (DEFICIT)/EQUITY | ||||||||
LIABILITIES | ||||||||
Current liabilities: |
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Accrued payroll and related costs |
$ | 49,131 | $ | 56,650 | ||||
Income taxes payable |
19,611 | 15,195 | ||||||
Accounts payable and other current liabilities |
30,920 | 31,559 | ||||||
Deferred revenue |
4,827 | 7,973 | ||||||
Loans and borrowings |
20,449 | 21,264 | ||||||
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Total current liabilities |
124,938 | 132,641 | ||||||
Deferred income taxes and other non current liabilities |
28,953 | 26,373 | ||||||
Non Current loans and borrowings |
377,468 | 478,616 | ||||||
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TOTAL LIABILITIES |
531,359 | 637,630 | ||||||
SHAREHOLDERS EQUITY | ||||||||
Total shareholders (deficit)/equity |
(97,253 | ) | (183,087 | ) | ||||
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TOTAL LIABILITIES AND SHAREHOLDERS (DEFICIT)/EQUITY |
$ | 434,106 | $ | 454,543 | ||||
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