This discussion should be read in conjunction with the accompanying Consolidated Financial Statements and the notes thereto that appear elsewhere in this Annual Report on Form 10-K. The following discussion and analysis compares the year ended December 31, 2012 ("2012") to the year ended December 31, 2011 ("2011"), and 2011 to the year ended December 31, 2010 ("2010").

The following discussion and analysis and other sections of this document contain forward-looking statements that involve risks and uncertainties. Words such as "may," "expects," "projects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. Similarly, statements that describe our future plans, objectives, or goals also are forward-looking statements. Future events and actual results could differ materially from the results reflected in these forward-looking statements, as a result of certain of the factors set forth below and elsewhere in this analysis and in this Annual Report on Form 10-K for the year ended December 31, 2012 in Item 1.A., "Risk Factors."

Executive Summary

We provide comprehensive customer contact management solutions and services to a wide range of clients including Fortune 1000 companies, medium-sized businesses and public institutions around the world, primarily in the communications, financial services, technology/consumer, transportation and leisure and healthcare industries. We serve our clients through two geographic operating regions: the Americas (United States, Canada, Latin America, Australia and the Asia Pacific Rim) and EMEA (Europe, the Middle East and Africa). Our Americas and EMEA groups primarily provide customer contact management services (with an emphasis on inbound technical support and customer service), which include customer assistance, healthcare and roadside assistance, technical support and product sales to our clients' customers. These services, which represented 98% of consolidated revenues in 2012, are delivered through multiple communication channels encompassing phone, e-mail, Internet, text messaging and chat. We also provide various enterprise support services in the United States ("U.S.") that include services for our clients' internal support operations, from technical staffing services to outsourced corporate help desk services. In Europe, we also provide fulfillment services including multilingual sales order processing via the Internet and phone, payment processing, inventory control, product delivery, and product returns handling. Our complete service offering helps our clients acquire, retain and increase the lifetime value of their customer relationships. We have developed an extensive global reach with customer contact management centers throughout the United States, Canada, Latin America, Australia, the Asia Pacific Rim and Europe.

Revenues from these services is recognized as the services are performed, which is based on either a per minute, per hour, per call, per transaction or per time and material basis, under a fully executed contractual agreement, and we record reductions to revenues for contractual penalties and holdbacks for a failure to meet specified minimum service levels and other performance based contingencies. Revenue recognition is limited to the amount that is not contingent upon delivery of any future product or service or meeting other specified performance conditions. Product sales, accounted for within our fulfillment services, are recognized upon shipment to the customer and satisfaction of all obligations.

Direct salaries and related costs include direct personnel compensation, severance, statutory and other benefits associated with such personnel and other direct costs associated with providing services to customers.

General and administrative costs include administrative, sales and marketing, occupancy, depreciation and amortization, and other costs.

The net gain (loss) on disposal of property and equipment represents the difference between the amount of proceeds received, if any, and the carrying value of the asset.

The net gain on insurance settlement includes the insurance proceeds received for damages to our customer contact management centers.

The impairment of goodwill and intangibles in 2010 is primarily related to customer relationships in the ICT-acquired United Kingdom operations.

Interest income primarily relates to interest earned on cash and cash equivalents.

Interest expense includes interest on outstanding borrowings and commitment fees charged on the unused portion of our revolving credit facility, as more fully described in this Item 7, under "Liquidity and Capital Resources."

Other (expense) includes gains and losses on foreign currency derivative instruments not designated as hedges, foreign currency transaction gains and losses, gains and losses on the liquidation of foreign subsidiaries and other miscellaneous income (expense).

Our effective tax rate for the periods presented includes the effects of state income taxes, net of federal tax benefit, tax holidays, valuation allowance changes, foreign rate differentials, foreign withholding and other taxes, and permanent differences.

Acquisition of Alpine Access, Inc.

On August 20, 2012, we completed the acquisition of Alpine Access, Inc. ("Alpine"), a Delaware corporation and an industry leader in the at-home agent space - recruiting, training, managing and delivering award-winning customer contact management services through a secured and proprietary virtual call center environment with its operations located in the United States and Canada. We refer to such acquisition herein as the "Alpine acquisition."

The Company acquired Alpine to: create significant competitive differentiation for quality, speed to market, scalability and flexibility driven by proprietary, internally-developed software, systems, processes and other intellectual property which uniquely overcome the challenges of the at-home delivery model; strengthen the Company's current service portfolio and go-to-market offering while expanding the breadth of clients with minimal client overlap; broaden the addressable market opportunity within existing and new verticals as well as clients; expand the addressable pool of skilled labor; leverage operational best practices across the Company's global platform, with the potential to convert more of its fixed cost to variable cost; and to further enhance the growth and margin profile of the Company to drive shareholder value. This resulted in the Company paying a substantial premium for Alpine resulting in the recognition of goodwill.

The total purchase price of $149.0 million was funded by $41.0 million in cash on hand and borrowings of $108.0 million under our credit agreement with KeyBank National Association ("KeyBank"), dated May 3, 2012. We repaid $17.0 million of the initial borrowing and had $154.0 million available for future borrowings under our 2012 Credit Agreement at December 31, 2012. See "Liquidity & Capital Resources" later in this Item 7 and Note 21, Borrowings, of "Notes to Consolidated Financial Statements" for further information.

The results of operations of Alpine have been reflected in the accompanying Consolidated Statement of Operations for the period from August 20, 2012 to December 31, 2012.

Acquisition of ICT Group, Inc.

On February 2, 2010, we completed the acquisition of ICT Group, Inc. ("ICT"), a Pennsylvania corporation and a leading global provider of outsourced customer management and BPO solutions. We refer to such acquisition herein as the "ICT acquisition."

The Company acquired ICT to expand and complement its global footprint, provide entry into additional vertical markets, and increase revenues to enhance its ability to leverage the Company's infrastructure to produce improved sustainable operating margins. This resulted in the Company paying a substantial premium for ICT resulting in recognition of goodwill.

• each outstanding share of ICT's common stock, par value $0.01 per share, was converted into the right to receive $7.69 in cash, without interest, and 0.3423 of a share of SYKES common stock, par value $0.01 per share;

• each outstanding ICT stock option, whether or not then vested and exercisable, became fully vested and exercisable immediately prior to, and then was canceled at, the effective time of the acquisition, and the holder of such option became entitled to receive an amount in cash, without interest and less any applicable taxes to be withheld, equal to
(i) the excess, if any, of (1) $15.38 over (2) the exercise price per share of ICT common stock subject to such ICT stock option, multiplied by
(ii) the total number of shares of ICT common stock underlying such ICT stock option, with the aggregate amount of such payment rounded up to the nearest cent. If the exercise price was equal to or greater than $15.38, then the stock option was canceled without any payment to the stock option holder; and

• each outstanding ICT restricted stock unit ("RSU") became fully vested and then was canceled and the holder of such vested awards became entitled to receive $15.38 in cash, without interest and less any applicable taxes to be withheld, in respect of each share of ICT common stock into which the RSU would otherwise have been convertible.

The total aggregate purchase price of the transaction of $277.8 million was comprised of $141.1 million in cash and 5.6 million shares of SYKES common stock valued at $136.7 million. The transaction was funded through borrowings consisting of a $75 million short-term loan from KeyBank National Association in December 2009, due March 31, 2010, and a $75 million term loan from a syndicate of banks due in varying installments through February 1, 2013. Both of these loans were repaid during 2010 and are no longer available for borrowings. See "Liquidity & Capital Resources" later in this Item 7 for further information.

The results of operations of ICT have been reflected in the accompanying Consolidated Statements of Operations for the years ended December 31, 2012 and 2011 and the period from February 2, 2010 to December 31, 2010.

Discontinued Operations

In March 2012, we sold our operations in Spain (the "Spanish operations"), pursuant to an asset purchase agreement dated March 29, 2012 and a stock purchase agreement dated March 30, 2012. We have reflected the operating results related to the operations in Spain as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented. The assets and related liabilities of Spain are presented as held for sale in the accompanying Consolidated Balance Sheet as of December 31, 2011. This business was historically reported as part of the EMEA segment.

In December 2010, we sold our operations in Argentina (the "Argentine operations") pursuant to stock purchase agreements, dated December 16, 2010 and December 29, 2010. We have reflected the operating results related to the Argentine operations as discontinued operations in the accompanying Consolidated Statements of Operations for all periods presented. This business was historically reported as part of the Americas segment.

See "Results of Operations - Discontinued Operations" later in this Item 7 for more information. Unless otherwise noted, discussions below pertain only to our continuing operations.

The following table sets forth, for the periods indicated, the percentage of revenues represented by certain items reflected in the accompanying Consolidated Statements of Operations:

                                                                    Years Ended December 31,
                                                            2012              2011              2010
Percentage of Revenue:
Revenues                                                       100.0 %           100.0 %           100.0 %
Direct salaries and related costs                               65.4              65.3              63.8
General and administrative                                      30.3              29.2              32.7
Net (gain) loss on disposal of property and equipment            0.0              (0.3 )             0.0
Net (gain) on insurance settlement                              (0.0 )            (0.0 )            (0.2 )
Impairment of goodwill and intangibles                            -                 -                0.0
Impairment of long-lived assets                                  0.0               0.1               0.3

Income from continuing operations                                4.3               5.7               3.4
Interest income                                                  0.1               0.1               0.1
Interest (expense)                                              (0.1 )            (0.1 )            (0.4 )
Other (expense)                                                 (0.2 )            (0.2 )            (0.5 )

Income from continuing operations before income taxes            4.1               5.5               2.6
Income taxes                                                     0.5               1.0               0.2

Income from continuing operations, net of taxes                  3.6               4.5               2.4
(Loss) from discontinued operations, net of taxes               (1.0 )            (0.3 )            (3.2 )

Net income (loss)                                                2.6 %             4.2 %            (0.8 %)

The following table sets forth, for the periods indicated, certain data derived from the accompanying Consolidated Statements of Operations (in thousands):

                                                                  Years Ended December 31,
                                                           2012             2011             2010
Revenues                                                $ 1,127,698      $ 1,169,267      $ 1,121,911
Direct salaries and related costs                           737,952          763,930          715,571
General and administrative                                  341,354          341,586          366,565
Net (gain) loss on disposal of property and equipment           391           (3,021 )            143
Net (gain) on insurance settlement                             (133 )           (481 )         (1,991 )
Impairment of goodwill and intangibles                           -                -               362
Impairment of long-lived assets                                 355            1,718            3,280

Income from continuing operations                            47,779           65,535           37,981
Interest income                                               1,458            1,352            1,201
Interest (expense)                                           (1,547 )         (1,132 )         (4,963 )
Other (expense)                                              (2,533 )         (2,099 )         (5,907 )

Income from continuing operations before income taxes        45,157           63,656           28,312
Income taxes                                                  5,207           11,342            2,197

Income from continuing operations, net of taxes              39,950           52,314           26,115
(Loss) from discontinued operations, net of taxes           (11,527 )         (3,973 )        (36,388 )

Net income (loss)                                       $    28,423      $    48,341      $   (10,273 )

The following table summarizes our revenues for the periods indicated, by reporting segment (in thousands):

                                             Years Ended December 31,
                          2012                         2011                         2010
  Americas       $   947,147        84.0 %    $   963,142        82.4 %    $   934,329        83.3 %
  EMEA               180,551        16.0 %        206,125        17.6 %        187,582        16.7 %

  Consolidated   $ 1,127,698       100.0 %    $ 1,169,267       100.0 %    $ 1,121,911       100.0 %

                                                             Years Ended December 31,
                                            2012                       2011                       2010
Direct salaries and related
costs:
Americas                            $ 609,836        64.4 %    $ 611,783        63.5 %    $ 580,741        62.2 %
EMEA                                  128,116        71.0 %      152,147        73.8 %      134,830        71.9 %

Consolidated                        $ 737,952        65.4 %    $ 763,930        65.3 %    $ 715,571        63.8 %


General and administrative:
Americas                            $ 243,186        25.7 %    $ 237,899        24.7 %    $ 244,213        26.1 %
EMEA                                   46,879        26.0 %       57,241        27.8 %       57,714        30.8 %
Corporate                              51,289          -          46,446          -          64,638          -

Consolidated                        $ 341,354        30.3 %    $ 341,586        29.2 %    $ 366,565        32.7 %


Net (gain) loss on disposal of
property and equipment:
Americas                            $     323         0.0 %    $  (3,030 )      -0.3 %    $      78         0.0 %
EMEA                                       68         0.0 %            9         0.0 %           65         0.0 %

Consolidated                        $     391         0.0 %    $  (3,021 )      -0.3 %    $     143         0.0 %


Net (gain) on insurance
settlement:
Americas                            $    (133 )       0.0 %    $    (481 )       0.0 %    $  (1,991 )      -0.2 %
EMEA                                       -          0.0 %           -          0.0 %            0         0.0 %

Consolidated                        $    (133 )       0.0 %    $    (481 )       0.0 %    $  (1,991 )      -0.2 %


Impairment of goodwill and
intangibles:
Americas                            $      -          0.0 %    $      -          0.0 %    $      -          0.0 %
EMEA                                       -          0.0 %           -          0.0 %          362         0.2 %

Consolidated                        $      -          0.0 %    $      -          0.0 %    $     362         0.0 %


Impairment of long-lived assets:
Americas                            $     355         0.0 %    $   1,244         0.1 %    $   3,121         0.3 %
EMEA                                       -          0.0 %          474         0.2 %          159         0.1 %

Consolidated                        $     355         0.0 %    $   1,718         0.1 %    $   3,280         0.3 %

Revenues

For 2012, we recognized consolidated revenues of $1,127.7 million, a decrease of $41.6 million or 3.6%, from $1,169.3 million in 2011.

On a geographic segment basis, revenues from the Americas region, including the United States, Canada, Latin America, Australia and the Asia Pacific Rim, represented 84.0%, or $947.1 million, for 2012 compared to 82.4%, or $963.1 million, in 2011. Revenues from the EMEA region, including Europe, the Middle East and Africa, represented 16.0%, or $180.6 million, for 2012 compared to 17.6%, or $206.2 million, in 2011.

Americas' revenues decreased $16.0 million, including the positive foreign currency impact of $0.5 million, for 2012 from 2011. The remaining decrease of $16.5 million was primarily due to end-of-life client programs of $85.9 million and lower volumes from existing contracts of $35.7 million, partially offset by new contract sales of $64.5 million and Alpine acquisition revenues of $40.6 million. Revenues from our offshore operations represented 47.1% of Americas' revenues, compared to 47.8% in 2011. While operating margins generated offshore are generally comparable to those in the United States, our ability to maintain these offshore operating margins longer term is difficult to predict due to potential increased competition for the available workforce, the trend of higher occupancy costs and costs of functional currency fluctuations in offshore markets. We weight these factors in our continual focus to re-price or replace certain sub-profitable target client programs.

EMEA's revenues decreased $25.6 million, including the negative foreign currency impact of $11.7 million, for 2012 from 2011. The remaining decrease of $13.9 million was primarily due to end-of-life client programs of $32.7 million and lower volumes from existing contracts of $0.5 million, partially offset by new contract sales of $19.3 million.

On a consolidated basis, we had 39,300 brick-and-mortar seats as of December 31, 2012, a decrease of 2,000 seats from 2011. The capacity utilization rate on a combined basis was 75% compared to 73% in 2011. This increase was primarily due to seat rationalizations associated with the strategic actions in connection with the Fourth Quarter 2011 Exit Plan (see Note 5, Costs Associated with Exit or Disposal Activities, of "Notes to Consolidated Financial Statements").

On a geographic segment basis, 34,000 seats were located in the Americas, a decrease of 1,500 seats from 2011, and 5,300 seats were located in EMEA, a decrease of 500 seats from 2011. The consolidated offshore seat count as of December 31, 2012 was 22,000, or 56%, of our total seats, a decrease of 300 seats, or 1%, from 2011. Capacity utilization rates as of December 31, 2012 were 74% for the Americas and 82% for EMEA, compared to 74% and 71%, respectively, as of December 31, 2011, primarily due to seat rationalizations associated with the strategic actions in connection with the Fourth Quarter 2011 Exit Plan. We achieved our 2012 gross seat addition target of approximately 3,700 seats at the end of the third quarter of 2012.

The Company plans to add approximately 6,000 seats on a gross basis in 2013. Approximately 75% of the seat count is expected to be added in the first half of 2013, with the remainder in the second half. Total seat count on a net basis for the full year, however, is expected to increase by approximately 1,000 seats.

Direct Salaries and Related Costs

Direct salaries and related costs decreased $26.0 million, or 3.4%, to $737.9 million for 2012 from $763.9 million in 2011.

On a reporting segment basis, direct salaries and related costs from the Americas segment decreased $2.0 million, including the negative foreign currency impact of $1.1 million, for 2012 from 2011. Direct salaries and related costs from the EMEA segment decreased $24.0 million, including the positive foreign currency impact of $8.2 million, for 2012 from 2011.

In the Americas segment, as a percentage of revenues, direct salaries and related costs increased to 64.4% for 2012 from 63.5% in 2011. This increase of 0.9%, as a percentage of revenues, was primarily attributable to higher compensation costs of 0.8%, higher travel costs of 0.1% and higher other costs of 0.2%, partially offset by lower communication costs of 0.2%.

General and Administrative

General and administrative expenses decreased $0.3 million, or 0.1%, to $341.3 million for 2012 from $341.6 million in 2011.

On a reporting segment basis, general and administrative expenses from the Americas segment increased $5.2 million, including the negative foreign currency impact of $0.4 million, for 2012 from 2011. General and administrative expenses from the EMEA segment decreased $10.3 million, including the positive foreign currency impact of $2.9 million, for 2012 from 2011. Corporate general and administrative expenses increased $4.8 million for 2012 from 2011. This increase of $4.8 million was primarily attributable to higher merger and acquisition costs of $2.9 million, higher compensation costs of $1.5 million, higher legal and professional fees of $1.1 million, higher software maintenance costs of $0.3 million and higher other costs of $0.2 million, partially offset by lower charitable contributions of $1.2 million.

In the Americas segment, as a percentage of revenues, general and administrative expenses increased to 25.7% for 2012 from 24.7% in 2011. This increase of 1.0%, as a percentage of revenues, was primarily attributable to higher compensation costs of 0.4% primarily related to higher wage rates, higher facility-related costs of 0.2% principally from the expansion of U.S. facilities and lease termination costs in connection with the Fourth Quarter 2011 Exit Plan, higher software maintenance of 0.2%, higher legal and professional fees of 0.1%, higher taxes of 0.1% and higher other costs of 0.3%, partially offset by lower equipment and maintenance costs of 0.3%.

In the EMEA segment, as a percentage of revenues, general and administrative expenses decreased to 26.0% for 2012 from 27.8% in 2011. This decrease of 1.8%, as a percentage of revenues, was primarily attributable to lower severance-related costs of 0.8% and lower facility-related costs of 0.5% due to the closure of certain sites in connection with the Fourth Quarter 2011 Exit Plan, lower depreciation and amortization of 0.3%, lower equipment and maintenance costs of 0.2%, lower legal and professional fees of 0.2% and lower other costs of 0.1%, partially offset by higher communications costs of 0.2% and higher compensation costs of 0.1%.

Net (Gain) Loss on Disposal of Property and Equipment

Net (gain) loss on disposal of property and equipment was $0.4 million for 2012, compared to $(3.0) million in 2011. The gain in 2011 primarily related to the sale of land and a building located in Minot, North Dakota.

Net (Gain) on Insurance Settlement

Net (gain) on insurance settlement of $(0.1) million in 2012 primarily relates to funds received for damage to our building and contents as a result of a tornado at one of our customer contact management centers located in Ponca City, Oklahoma. Net (gain) on insurance settlement of $(0.5) million in 2011 primarily relates to funds received for flood damage from Typhoon Ondoy to the building and contents of one of our customer contact management centers located in Marikina City, The Philippines (acquired as part of the ICT acquisition). The damaged property and equipment had been written down by ICT prior to the ICT . . .