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Exhibit 99.1
| FOR RELEASE at 8:00 a.m. Eastern Daylight Time Tuesday, August 5, 2003 | A. Emmet Stephenson, Jr. Chairman (303) 399-2400 |
StarTek, Inc. Initiates Quarterly Cash Dividend and Reports Second Quarter Earnings
DENVER—StarTek, Inc. (NYSE:SRT) reports revenue increased 26% for the second quarter to $54.5 million from $43.3 million for the same quarter in 2002. Net income for the second quarter was $4.2 million, or $0.29 earnings per fully diluted share, compared to $4.0 million, or $0.28 earnings per fully diluted share in the second quarter of 2002.
For the six months ended June 30, 2003, revenue was $105.1 million compared to $89.3 million for the same period last year, an increase of 18%. For the first six months of 2003, net income was $8.3 million, or $0.57 earnings per fully diluted share, compared to $8.0 million, or $0.56 earnings per fully diluted share in the same period last year.
The StarTek Board of Directors is pleased to declare its first ever quarterly cash dividend of $0.36 per share, payable August 29, 2003, to StarTek holders of record on August 15, 2003. More than 3,100 StarTek stockholders will receive these new quarterly dividends.
Chairman A. Emmet Stephenson, Jr. said, "We are pleased with the increase in our revenue, but as announced in May, we have been absorbing the costs of opening new facilities in Decatur, Illinois, and Regina, Saskatchewan, Canada, over the last few months. Both facilities are now open, and we are happy to report that both came in on time and within budget. Currently, our revenue is growing at the new facilities, and we expect the increase will continue to ramp over the coming quarters. At full capacity, these two facilities would employ 1,400 people. Overall, we see business conditions gradually improving for our company as they have for the last 7 quarters in a row.
"In recognition of the new 15% maximum tax on dividends recently enacted by Congress and signed by President Bush, the StarTek Board has decided to begin returning to stockholders profits earned by the company in the form of a quarterly cash dividend. The great attraction of StarTek's business model, which is cash generating, self financing, and produces high returns on invested capital, can now manifest itself in dividend payments to our stockholders. In the future the Board will consider the results produced by our company and determine the appropriate cash dividend for each period, while providing funds for the capital expenditures and reinvestment needed to fuel our continued growth."
Company Profile
StarTek, Inc. is a leading global provider of business process outsourcing services and owns proprietary Internet businesses arising from a world-class portfolio of branded domain names. Our integrated outsourcing services include business process management, high-end inbound technical support and customer care, E-commerce support and fulfillment, Internet support, and a comprehensive offering of supply chain management services. StarTek has seventeen facilities, including six in Colorado, four in Canada, and one each in Illinois, Oklahoma, Tennessee, Texas, and Wyoming. International services are performed from two facilities in the United Kingdom. The Company's clients are in the software, telecommunications, consumer products, cable, Internet, E-commerce, and technology industries. We are also targeting financial services and health care companies. Please visit our web sites at www.startek.com and www.startekeurope.com.
Forward Looking Statements
The matters regarding the future discussed in this news release 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 factors that could cause StarTek's actual results to differ materially from those expressed or implied by such forward-looking statements. These include, but are not limited to, general economic conditions in the Company's markets, the loss of its principal clients, the loss or delayed implementation of a large project which could cause quarterly variation in StarTek's revenue and earnings, difficulties of managing rapid growth, dependence on key personnel and our labor force, dependence on key industries and the trend toward outsourcing, risks associated with StarTek's contracts, risks associated with rapidly changing technology, risks of business interruption, risks associated with international operations and expansion, risks from offshore competition, highly competitive domestic and international markets, and risks related to fluctuating values in the company's portfolio of investment securities. 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 with the Securities and Exchange Commission.
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
| | December 31, 2002 | June 30, 2003 | |||||
|---|---|---|---|---|---|---|---|
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 13,143 | $ | 11,895 | |||
| Investments | 44,022 | 52,142 | |||||
| Trade accounts receivable, less allowance for doubtful accounts of $816 and $815, respectively | 37,232 | 31,016 | |||||
| Inventories | 1,463 | 1,425 | |||||
| Income tax receivable | 335 | 3,399 | |||||
| Deferred tax assets | 4,300 | 1,483 | |||||
| Prepaid expenses and other assets | 958 | 1,058 | |||||
| Total current assets | 101,453 | 102,418 | |||||
| Property, plant and equipment, net | 38,797 | 46,197 | |||||
| Long term deferred tax assets | 110 | — | |||||
| Other assets | 61 | 108 | |||||
| Total assets | $ | 140,421 | $ | 148,723 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 11,156 | $ | 8,834 | |||
| Accrued liabilities | 7,235 | 7,703 | |||||
| Current portion of long-term debt | 2,221 | 2,282 | |||||
| Other | 462 | 343 | |||||
| Total current liabilities | 21,074 | 19,162 | |||||
| Long-term debt, less current portion | 4,261 | 3,337 | |||||
| Deferred income taxes | — | 371 | |||||
| Other | 492 | 967 | |||||
| Stockholders' equity: | |||||||
| Common stock | 142 | 142 | |||||
| Additional paid-in capital | 50,060 | 50,506 | |||||
| Cumulative translation adjustment | (123 | ) | 175 | ||||
| Unrealized gain (loss) on investments available for sale | (738 | ) | 479 | ||||
| Retained earnings | 65,253 | 73,584 | |||||
| Total stockholders' equity | 114,594 | 124,886 | |||||
| Total liabilities and stockholders' equity | $ | 140,421 | $ | 148,723 | |||
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Income Statements
(dollars in thousands, except per share data)
(unaudited)
| | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2002 | 2003 | 2002 | 2003 | |||||||||
| Revenues | $ | 43,350 | $ | 54,528 | $ | 89,310 | $ | 105,056 | |||||
| Cost of services | 32,226 | 41,760 | 67,013 | 80,101 | |||||||||
| Gross profit | 11,124 | 12,768 | 22,297 | 24,955 | |||||||||
| Selling, general and administrative expenses | 5,089 | 7,203 | 10,309 | 13,553 | |||||||||
| Operating profit | 6,035 | 5,565 | 11,988 | 11,402 | |||||||||
| Net interest income and other | 399 | 1,085 | 976 | 1,864 | |||||||||
| Income before income taxes | 6,434 | 6,650 | 12,964 | 13,266 | |||||||||
| Income tax expense | 2,458 | 2,473 | 4,968 | 4,935 | |||||||||
| Net income | $ | 3,976 | $ | 4,177 | $ | 7,996 | $ | 8,331 | |||||
| Weighted average shares of common stock | 14,118,729 | 14,209,061 | 14,102,733 | 14,206,442 | |||||||||
| Dilutive effect of stock options | 291,589 | 292,933 | 241,563 | 283,648 | |||||||||
| Common stock and common stock equivalents | 14,410,318 | 14,501,994 | 14,344,296 | 14,490,090 | |||||||||
| Earnings per share: | |||||||||||||
| Basic | $ | 0.28 | $ | 0.29 | $ | 0.57 | $ | 0.59 | |||||
| Diluted | $ | 0.28 | $ | 0.29 | $ | 0.56 | $ | 0.57 | |||||
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
| | Six Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| | 2002 | 2003 | |||||||
| Operating Activities | |||||||||
| Net income | $ | 7,996 | $ | 8,331 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 4,601 | 4,749 | |||||||
| Deferred income taxes | 2,636 | 2,405 | |||||||
| (Gain) loss on sale of assets | 1 | (24 | ) | ||||||
| Changes in operating assets and liabilities: | |||||||||
| Sales (purchases) of trading securities, net | 568 | 98 | |||||||
| Trade accounts receivable, net | 1,738 | 6,216 | |||||||
| Inventories | 374 | 38 | |||||||
| Prepaid expenses and other assets | 109 | (147 | ) | ||||||
| Accounts payable | (3,632 | ) | (2,322 | ) | |||||
| Income taxes payable | (3,339 | ) | (2,977 | ) | |||||
| Accrued and other liabilities | (466 | ) | 824 | ||||||
| Net cash provided by operating activities | 10,586 | 17,191 | |||||||
| Investing Activities | |||||||||
| Purchases of investments available for sale | (23,576 | ) | (35,350 | ) | |||||
| Proceeds from disposition of investments available for sale | 10,618 | 29,066 | |||||||
| Purchases of property, plant and equipment | (3,083 | ) | (10,616 | ) | |||||
| Proceeds from disposition of property plant and equipment | 38 | 122 | |||||||
| Net cash used in investing activities | (16,003 | ) | (16,778 | ) | |||||
| Financing Activities | |||||||||
| Stock options exercised | 1,110 | 359 | |||||||
| Principal payments on borrowings, net | (3,349 | ) | (1,689 | ) | |||||
| Net cash used in financing activities | (2,239 | ) | (1,330 | ) | |||||
| Effect of exchange rate changes on cash | 217 | (331 | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | (7,439 | ) | (1,248 | ) | |||||
| Cash and cash equivalents at beginning of period | 14,282 | 13,143 | |||||||
| Cash and cash equivalents at end of period | $ | 6,843 | $ | 11,895 | |||||
StarTek, Inc. Initiates Quarterly Cash Dividend and Reports Second Quarter Earnings
STARTEK, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (dollars in thousands) (unaudited)
STARTEK, INC. AND SUBSIDIARIES Condensed Consolidated Income Statements (dollars in thousands, except per share data) (unaudited)
STARTEK, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (dollars in thousands) (unaudited)