Exhibit 99.1
| FOR RELEASE at 8:00 a.m. EST Friday, February 27, 2004 | Contact: A. Emmet Stephenson, Jr. Chairman Phone: (303) 399-2400 Ext. 0 |
StarTek, Inc. Fourth Quarter EPS Up 20%
DENVER, CO–StarTek, Inc. (NYSE:SRT) today reported net income for the fourth quarter of 2003 of $8.0 million, which is up 22% from $6.5 million, excluding a non-cash investment impairment charge in the fourth quarter of 2002. Fully diluted earnings per share rose 20% to $0.54 from $0.45 last year on more shares outstanding. Revenue in the fourth quarter of 2003 was $66.1 million compared with $66.5 million in the same quarter last year. During the fourth quarter of the prior year, the company recorded an impairment charge of $6.2 million for an “other than temporary” decline on its investment portfolio resulting in net income of $2.7 million, or $0.18 earnings per fully diluted share.
For the year ended December 31, 2003, net income for the year grew 17% to $22.2 million or $1.52 earnings per fully diluted share compared to $19.0 million, or $1.32 earnings per fully diluted share, excluding the investment impairment charge. Revenue increased 11% to $231.2 million for 2003 compared to $207.9 million for last year. Including investment impairment charges of $6.2 million in prior year 2002, net income for the year ended December 31, 2002 was $15.2 million, or $1.05 earnings per fully diluted share.
Chairman A. Emmet Stephenson, Jr. said, “We are very pleased with the 2003 results, a year of continued growth for StarTek, as revenue, operating income, net income, and earnings per share reached all time record levels for the year. Our margins further improved due to a better mix of services provided and additional productivity gains as a result of our innovative process management. In the fourth quarter, our business process management services were particularly strong which was reflected in both gross margins and operating profits.”
“We successfully opened four new facilities last year, which increased capacity significantly, to meet the growing demand for our outsourced services. As the economy has improved, our clients have responded with renewed emphasis on improving service to their customers and reducing costs, both of which lead to increased demand for StarTek’s service offerings.”
Company Profile
StarTek, Inc. is a leading provider of business process outsourced services, which consist of business process management and supply chain management services. StarTek provides services from eighteen operational facilities, including five in Colorado, five in Canada, two in Europe and one each in Illinois, Louisiana, Oklahoma, Tennessee, Texas, and Wyoming. The Company’s clients are primarily in the telecommunications and computer software industries. StarTek also services clients in the computer hardware, consumer products, cable, entertainment, internet and e-commerce industries. Please visit our web site at www.startek.com.
Forward Looking Statements
The matters regarding the future discussed in this news release may include certain forward-looking statements that involve specific risks and uncertainties. In accordance with the Private Securities Litigation Reform Act of 1995, the following are important risks and uncertainties that could cause StarTek’s actual results to differ materially from those expressed or implied by any such forward-looking statements. These include, but are not limited to, loss of its principal clients, concentration of its client base in a few select industries, highly competitive markets, risks related to its contracts, decreases in numbers of vendors used by clients or potential clients, lack of success of StarTek’s clients’ products or services, considerable pricing pressure, risks relating to fluctuations in the value of StarTek’s investment securities portfolio, risks associated with advanced technologies, inability to grow its business, inability to effectively manage growth, dependence on qualified employees and key management personnel, potential future declines in revenue, lack of a significant international presence, and risks relating to conducting business in Canada and the United Kingdom. Readers are encouraged to review Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Results and all other disclosures appearing in the Company’s Form 10-K and 10-Q filings and the Form 8-K filed on February 17, 2004 with the Securities and Exchange Commission.
STARTEK, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
| December 31, | December 31, | |||||||
| 2002 | 2003 | |||||||
ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 13,143 | $ | 5,955 | ||||
| Investments | 44,022 | 41,812 | ||||||
| Trade accounts receivable, less allowance for doubtful accounts of $816 and $790 in 2002 and 2003, respectively | 37,232 | 43,388 | ||||||
| Inventories | 1,463 | 1,720 | ||||||
| Income tax receivable | 335 | 805 | ||||||
| Deferred tax assets | 4,300 | 2,250 | ||||||
| Prepaid expenses and other assets | 958 | 907 | ||||||
| Total current assets | 101,453 | 96,837 | ||||||
| Property, plant and equipment, net | 38,797 | 54,563 | ||||||
| Long-term deferred tax assets | 110 | 1,743 | ||||||
| Other assets | 61 | 464 | ||||||
| Total assets | $ | 140,421 | $ | 153,607 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 11,156 | $ | 8,917 | ||||
| Accrued liabilities | 7,235 | 10,310 | ||||||
| Current portion of long-term debt | 2,221 | 26 | ||||||
| Other | 462 | 358 | ||||||
| Total current liabilities | 21,074 | 19,611 | ||||||
| Long-term debt, less current portion | 4,261 | 78 | ||||||
| Other | 492 | 918 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 142 | 144 | ||||||
| Additional paid-in capital | 50,060 | 53,917 | ||||||
| Cumulative translation adjustment | (123 | ) | 446 | |||||
| Unrealized gain (loss) on investments available for sale | (738 | ) | 1,462 | |||||
| Retained earnings | 65,253 | 77,031 | ||||||
| Total stockholders’ equity | 114,594 | 133,000 | ||||||
| Total liabilities and stockholders’ equity | $ | 140,421 | $ | 153,607 | ||||
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Income Statements
(dollars in thousands, except per share data)
(unaudited)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2002 | 2003 | 2002 | 2003 | |||||||||||||
| Revenue | $ | 66,458 | $ | 66,131 | $ | 207,864 | $ | 231,189 | ||||||||
| Cost of services | 50,975 | 46,852 | 157,005 | 171,401 | ||||||||||||
| Gross profit | 15,483 | 19,279 | 50,859 | 59,788 | ||||||||||||
| Selling, general and administrative expenses | 6,430 | 7.790 | 22,562 | 28,489 | ||||||||||||
| Operating profit | 9,053 | 11,489 | 28,297 | 31,299 | ||||||||||||
| Net interest income and other | 974 | 1,198 | 1,986 | 4,048 | ||||||||||||
| Loss on impaired investments | (6,210 | ) | — | (6,210 | ) | — | ||||||||||
| Income before income taxes | 3,817 | 12,687 | 24,073 | 35,347 | ||||||||||||
| Income tax expense | 1,153 | 4,720 | 8,907 | 13,149 | ||||||||||||
| Net income (A) | $ | 2,664 | $ | 7,967 | $ | 15,166 | $ | 22,198 | ||||||||
| Weighted average shares of common stock (B) | 14,147,888 | 14,310,632 | 14,140,765 | 14,243,273 | ||||||||||||
| Dilutive effect of stock options | 270,190 | 473,104 | 244,624 | 379,793 | ||||||||||||
| Common stock and common stock equivalents (C) | 14,418,078 | 14,783,736 | 14,385,389 | 14,623,066 | ||||||||||||
| Earnings per share: | ||||||||||||||||
| Basic (A/B) | $ | 0.19 | $ | 0.56 | $ | 1.07 | $ | 1.56 | ||||||||
| Diluted (A/C) | $ | 0.18 | $ | 0.54 | $ | 1.05 | $ | 1.52 | ||||||||
| Pro forma results excluding loss on impaired investment: | ||||||||||||||||
| Historical income before income taxes | $ | 3,817 | $ | 12,687 | $ | 24,073 | $ | 35,347 | ||||||||
| Add back loss on impaired investment | 6,210 | — | 6,210 | — | ||||||||||||
| Income before income taxes | 10,027 | 12,687 | 30,283 | 35,347 | ||||||||||||
| Income tax expense | 3,511 | 4,720 | 11,265 | 13,149 | ||||||||||||
| Net income, excluding loss on impaired investment | $ | 6,516 | $ | 7,967 | $ | 19,018 | $ | 22,198 | ||||||||
| Earnings per share, excluding loss on impaired investment: | ||||||||||||||||
| Basic | $ | 0.46 | $ | 0.56 | $ | 1.34 | $ | 1.56 | ||||||||
| Diluted | $ | 0.45 | $ | 0.54 | $ | 1.32 | $ | 1.52 | ||||||||
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
| 2002 | 2003 | |||||||
Operating Activities | ||||||||
| Net income | $ | 15,166 | $ | 22,198 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 9,220 | 10,045 | ||||||
| Deferred income taxes | 1,399 | (1,218 | ) | |||||
| (Gain) loss on sale of assets | 2 | (30 | ) | |||||
| Loss on investment impairments | 6,210 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Sales of trading securities, net | 1,085 | 1,537 | ||||||
| Trade accounts receivable, net | (11,047 | ) | (6,156 | ) | ||||
| Inventories | 1,151 | (257 | ) | |||||
| Prepaid expenses and other assets | 305 | (352 | ) | |||||
| Accounts payable | (822 | ) | (2,239 | ) | ||||
| Income taxes payable | (2,149 | ) | 482 | |||||
| Accrued and other liabilities | 621 | 3,397 | ||||||
| Net cash provided by operating activities | 21,141 | 27,407 | ||||||
Investing Activities | ||||||||
| Purchases of investments available for sale | (45,337 | ) | (45,054 | ) | ||||
| Proceeds from disposition of investments available for sale | 32,214 | 49,226 | ||||||
| Purchases of property, plant and equipment | (5,877 | ) | (23,867 | ) | ||||
| Proceeds from disposition of property, plant and equipment | 38 | 131 | ||||||
| Net cash used in investing activities | (18,962 | ) | (19,564 | ) | ||||
Financing Activities | ||||||||
| Stock options exercised | 1,681 | 2,907 | ||||||
| Principal payments on borrowings, net | (5,420 | ) | (7,368 | ) | ||||
| Dividends on common stock | — | (10,420 | ) | |||||
| Net cash used in financing activities | (3,739 | ) | (14,881 | ) | ||||
| Effect of exchange rate changes on cash | 421 | (150 | ) | |||||
| Net decrease in cash and cash equivalents | (1,139 | ) | (7,188 | ) | ||||
| Cash and cash equivalents at beginning of year | 14,282 | 13,143 | ||||||
| Cash and cash equivalents at end of year | $ | 13,143 | $ | 5,955 | ||||