Exhibit 99.1
FOR RELEASE at 8:00 a.m. EST | Contact: William E. Meade, Jr. | |
Wednesday, July 28, 2004 | President and Chief Executive Officer | |
| Phone: (303) 262-4500 |
StarTek Reports Second Quarter 2004 Financials
Strong Sales and Business Growth Drive Earnings Increase of 52 percent
And Quarterly Dividend to $0.40
DENVER, CO — July 28, 2004 — For the quarter ended June 30, 2004, StarTek, Inc. (NYSE:SRT) is pleased to report fully diluted earnings per share rose 51.7% to $0.44 compared to $0.29 for the second quarter of 2003. For the six months ended June 30, 2004, fully diluted earnings per share increased 57.9% to $0.90 from $0.57 for the same period last year.
For the three months ended June 30, 2004, gross profit increased 30.0% on a revenue increase of 17.7% over the second quarter of 2003. The revenue increase was primarily due to continued growth in the Company’s Business Process Management Services platform, both with its core telecommunications clients as well as developing clients in new industries. The 2.5 percentage point increase in gross margin, from 23.4% to 25.9%, was primarily due to a greater proportion of the Company’s revenue portfolio being generated within the higher-margin Business Process Management Services platform. Operating margin increased 4.3 percentage points, from 10.2% to 14.5%. Selling, general and administrative expenses remained relatively flat for the period and total operating expense as a percent of total revenue decreased by 1.9 percentage points thus increasing operating margin even more than gross margin.
For the six months ended June 30, 2004, gross profit increased 40.1% on a revenue increase of 22.7% over the same period last year. The revenue increase was primarily due to additional increase in Business Process Management Services platform volume, the expansion into serving new vertical markets, and ramping up new contact centers. The 3.3 percentage point increase in gross margin, from 23.8% to 27.1%, was primarily due to achieving productivity objectives in both the Business Process Management Services and Supply Chain Management Services platforms. Operating margin increased 4.3 percentage points, from 10.9% to 15.4%. Selling, general and administrative expenses remained relatively flat during the first half of the year with an increase in our revenue base resulting in higher overall operating margins.
In addition, the Board of Directors declared an increase in its quarterly cash dividend to $0.40 per share, payable August 24, 2004, to StarTek shareholders of record as of August 11, 2004. The dividend per share for the 2nd quarter of 2004 was $0.39, which was increased from the 1st quarter 2004 dividend of $0.38.
Revenue growth was slightly stronger in Q1 compared to Q2 due to the slower pace of wireless number porting volumes seen across the overall marketplace. In addition, the Supply Chain Management Services business continued to decline in overall volume.
William E Meade, Jr., President and Chief Executive Officer said, “By leveraging our model of operational excellence, StarTek continues to be rewarded with additional business. Our clients and our shareholders benefit from our focus on customer-centric service and dedication to delivering ongoing operational efficiencies.”
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 nineteen operating facilities, including five in Colorado, five in Canada, two in Europe and one each in Illinois, Louisiana, Oklahoma, Tennessee, Texas, Virginia, and Wyoming. The Company’s primary clients are in the telecommunications and computer software industries, and it also serves clients in the computer hardware, consumer products, cable TV, entertainment, utility, internet, and e-commerce industries. Please visit the Company’s website at www.startek.com.
Conference Call
StarTek will host a one-hour conference call on Thursday, July 29, at 9:00 a.m. EDT to discuss the Company’s second quarter results. It will be hosted by Bill Meade, President and CEO, and Gene McKenzie, CFO. The access information is as follows:
| USA: | (866) 835-8904 | |||
| International: | (703) 639-1411 | |||
| Conference ID: | 521597 |
A replay will be available by August 3, 2004 at 7:00 p.m. EDT through August 31, 2004. The replay can be accessed from the Investor Relations section of the Company’s website 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 — Risk Factors and all other disclosures appearing in the Company’s Form 10-K for the year ended December 31, 2003, and subsequent filings with the Securities and Exchange Commission.
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands)
| December 31, | June 30, | |||||||
| 2003 | 2004 | |||||||
| (unaudited) | ||||||||
ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,955 | $ | 19,790 | ||||
| Investments | 41,812 | 37,973 | ||||||
| Trade accounts receivable, less allowance for doubtful accounts of $790 and $714, respectively | 43,388 | 40,663 | ||||||
| Inventories | 1,720 | 2,576 | ||||||
| Income tax receivable | 805 | 5,907 | ||||||
| Deferred tax assets | 2,250 | 2,593 | ||||||
| Prepaid expenses and other current assets | 907 | 2,902 | ||||||
| Total current assets | 96,837 | 112,404 | ||||||
| Property, plant and equipment, net | 54,563 | 53,675 | ||||||
| Long term deferred tax assets | 1,743 | 2,111 | ||||||
| Other assets | 464 | 836 | ||||||
| Total assets | $ | 153,607 | $ | 169,026 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 8,917 | $ | 8,380 | ||||
| Accrued liabilities | 10,310 | 13,458 | ||||||
| Current portion of long-term debt | 26 | 2,420 | ||||||
| Other current liabilities | 358 | 5 | ||||||
| Total current liabilities | 19,611 | 24,263 | ||||||
| Long-term debt, less current portion | 78 | 6,906 | ||||||
| Other liabilities | 918 | 831 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 144 | 145 | ||||||
| Additional paid-in capital | 53,917 | 56,581 | ||||||
| Cumulative translation adjustment | 446 | 135 | ||||||
| Unrealized gain on investments available for sale | 1,462 | 884 | ||||||
| Retained earnings | 77,031 | 79,281 | ||||||
| Total stockholders’ equity | 133,000 | 137,026 | ||||||
| Total liabilities and stockholders’ equity | $ | 153,607 | $ | 169,026 | ||||
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share data)
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2003 | 2004 | 2003 | 2004 | |||||||||||||
| Revenues | $ | 54,528 | $ | 64,204 | $ | 105,056 | $ | 128,899 | ||||||||
| Cost of services | 41,760 | 47,603 | 80,101 | 93,949 | ||||||||||||
| Gross profit | 12,768 | 16,601 | 24,955 | 34,950 | ||||||||||||
| Selling, general and administrative expenses | 7,203 | 7,263 | 13,553 | 15,087 | ||||||||||||
| Operating profit | 5,565 | 9,338 | 11,402 | 19,863 | ||||||||||||
| Net interest income and other | 1,085 | 1,134 | 1,864 | 1,746 | ||||||||||||
| Income before income taxes | 6,650 | 10,472 | 13,266 | 21,609 | ||||||||||||
| Income tax expense | 2,473 | 4,011 | 4,935 | 8,276 | ||||||||||||
| Net income | $ | 4,177 | $ | 6,461 | $ | 8,331 | $ | 13,333 | ||||||||
| Weighted average shares of common stock | 14,209,061 | 14,440,457 | 14,206,442 | 14,399,251 | ||||||||||||
| Dilutive effect of stock options | 292,933 | 341,988 | 283,648 | 410,608 | ||||||||||||
| Common stock and common stock equivalents | 14,501,994 | 14,782,445 | 14,490,090 | 14,809,859 | ||||||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 0.29 | $ | 0.45 | $ | 0.59 | $ | 0.93 | ||||||||
| Diluted | $ | 0.29 | $ | 0.44 | $ | 0.57 | $ | 0.90 | ||||||||
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2003 | 2004 | |||||||
Operating Activities | ||||||||
| Net income | $ | 8,331 | $ | 13,333 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 4,749 | 6,364 | ||||||
| Deferred income taxes | 2,405 | (215 | ) | |||||
| Gain on sale of assets | (24 | ) | 3 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Sales (purchases) of trading securities, net | 98 | (113 | ) | |||||
| Trade accounts receivable, net | 6,216 | 2,725 | ||||||
| Inventories | 38 | (856 | ) | |||||
| Prepaid expenses and other assets | (147 | ) | (2,367 | ) | ||||
| Accounts payable | (2,322 | ) | (537 | ) | ||||
| Income taxes payable | (2,977 | ) | (4,400 | ) | ||||
| Accrued and other liabilities | 824 | 2,708 | ||||||
| Net cash provided by operating activities | 17,191 | 16,645 | ||||||
Investing Activities | ||||||||
| Purchases of investments available for sale | (35,350 | ) | (11,479 | ) | ||||
| Proceeds from disposition of investments available for sale | 29,066 | 14,537 | ||||||
| Purchases of property, plant and equipment | (10,616 | ) | (6,087 | ) | ||||
| Proceeds from disposition of property plant and equipment | 122 | — | ||||||
| Net cash used in investing activities | (16,778 | ) | (3,029 | ) | ||||
Financing Activities | ||||||||
| Proceeds from stock option exercises | 359 | 1,963 | ||||||
| Principal payments on borrowings, net | (1,689 | ) | (778 | ) | ||||
| Dividend Payments | — | (11,083 | ) | |||||
| Proceeds from borrowings | — | 10,000 | ||||||
| Net cash provided by (used in) financing activities | (1,330 | ) | 102 | |||||
| Effect of exchange rate changes on cash | (331 | ) | 117 | |||||
| Net increase in cash and cash equivalents | (1,248 | ) | 13,835 | |||||
| Cash and cash equivalents at beginning of period | 13,143 | 5,955 | ||||||
| Cash and cash equivalents at end of period | $ | 11,895 | $ | 19,790 | ||||