Exhibit 99.1
StarTek, Inc. Reports a 7% Increase in Revenue;
Company Ramps Three New Call Centers
DENVER--(BUSINESS WIRE)--May 4, 2006--StarTek, Inc. (NYSE:SRT)
reported first quarter 2006 fully diluted earnings per share from
continuing operations of $0.14 per share, a decline of $0.09 per share
from the same period in 2005. Fully diluted earnings per share
including discontinued operations was also $0.14 per share in 2006, a
decline of $0.04 per share from the previous year.
Revenue increased $3.8 million, or 7.1%, to $57.1 million during
the first quarter of 2006 compared to the same period in the prior
year. Incremental revenue from clients new to StarTek since first
quarter of 2005, in addition to increased volume from its second
largest client, drove the increase. Gross margin declined from 23.8%
in the first quarter of 2005 to 17.1% in the first quarter of 2006.
The largest single contributor to this gross margin decline was costs
associated with ramping three new call centers, which is principally
related to new agent training. Other contributing factors include
increased costs associated with agent attrition, increased
depreciation expense and an unfavorable fluctuation in the value of
the U.S. dollar versus the Canadian dollar in the first quarter of
2006 compared to the same period in 2005. As a percent of revenue,
selling, general and administrative expenses declined to 13.3% in
first quarter of 2006 compared to 14.4% in first quarter 2005.
Operating profit declined $2.8 million to $2.2 million in first
quarter 2006, as a result of lower gross margin compared to the
previous year. Income tax expense was $1.5 million lower in first
quarter of 2006 than in the same period in the prior year as a result
of lower earnings before taxes and the release of a tax valuation
allowance relating to the favorable settlement of an outstanding tax
audit. Resulting net income after discontinued operations of $2.1
million was $0.5 million lower than in the prior year.
In addition, the Board of Directors declared a quarterly dividend
of $0.25 per share, payable on May 25, 2006, to our stockholders of
record as of May 15, 2006. After consideration of the growth
opportunities available to us and the capital required to fund them,
the Board has determined that this dividend is an appropriate level of
cash return to stockholders.
"As we expected and communicated previously, first quarter
earnings were impacted negatively as we continued to ramp three new
call centers in response to new business that was contracted in late
2005," said Steve Butler, President and CEO of StarTek. "While the
ramp process can provide challenges to our margins in the short-term,
we are confident in our business model and expect that in the
long-term, these centers and the relationships they support will be
beneficial for the business and for our stockholders. We remain
diligent in our quest to lower our attrition rates and redefine our
products and business as we leverage the expertise we have in the call
center business into new markets."
About StarTek
StarTek, Inc. (NYSE:SRT) is a leading provider of Business Process
Optimization services for outsourced customer interactions. Since 1987
StarTek has provided customer experience management solutions that
solve strategic business challenges so that fast-moving businesses can
effectively manage customer relationships across all contact points --
web, voice, email, fax, and video. This blended solution helps
companies create and maintain customer satisfaction and frees them to
focus on preserving capital, while StarTek delivers the ultimate
customer experience. The Company is managed by executives from the
Financial, Cable MSO, CRM and business services industries.
Headquartered in Denver, Colorado, StarTek has 18 operational
facilities across North America. For more information visit the
Company's website at www.StarTek.com.
Conference Call
The Company will host a conference call on May 4, 2006, to discuss
the Company's financial results. The call will begin at 7:30 a.m.
Mountain Time (9:30 a.m. Eastern Time) and can be accessed as follows:
USA: 866-831-6243
International: 617-213-8855
Passcode: 83439780
Conference Host: Steve Butler
A dial-in replay will be available May 4, 2006, at 9:30 a.m.
Mountain Time through May 11, 2006, and can be accessed as follows:
USA: 888-286-8010
International: 617-801-6888
Passcode: 10843623
A Web-based replay will be available on May 11, 2006, and
accessible from the Investor Relations section of the Company's
Web site at www.startek.com.
Forward-Looking Statements
The matters regarding the future discussed in this news release
include forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Such statements are subject
to a number of risks and uncertainties.
The following are important risks and uncertainties relating to
StarTek's business 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. 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, 2005, and subsequent filings with the Securities and
Exchange Commission.
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data, unaudited)
Three Months Ended
March 31,
------------------
2006 2005
------- -------
Revenue $57,105 $53,338
Cost of services 47,333 40,644
------- -------
Gross profit 9,772 12,694
Selling, general and administrative expenses 7,573 7,682
------- -------
Operating profit 2,199 5,012
Net interest and other income 533 445
------- -------
Income from continuing operations before income
taxes 2,732 5,457
Income tax expense 596 2,103
------- -------
Income from continuing operations 2,136 3,354
Loss from discontinued operations - (708)
------- -------
Net income $ 2,136 $ 2,646
======= =======
Earnings per share from continuing operations:
-------- --------
Basic $ 0.15 $ 0.23
------- -------
Diluted $ 0.14 $ 0.23
======= =======
Earnings per share including discontinued
operations:
-------- --------
Basic $ 0.15 $ 0.18
======= =======
Diluted $ 0.14 $ 0.18
======= =======
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
As of
--------------------------
March 31, December 31,
2006 2005
---------- -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 16,196 $ 17,425
Investments 19,751 28,168
Trade accounts receivable, less
allowance for doubtful accounts of
$146 and $250, respectively 43,849 40,612
Income tax receivable 3,245 4,227
Prepaid expenses and other current
assets 3,683 3,161
---------- -------------
Total current assets 86,724 93,593
Property, plant and equipment, net 60,409 57,066
Long-term deferred tax assets 2,620 2,402
Other assets 935 853
---------- -------------
Total assets $ 150,688 $ 153,914
========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,815 $ 4,744
Accrued liabilities:
Accrued payroll 5,258 7,280
Accrued compensated absences 3,763 3,522
Accrued health insurance 264 462
Other accrued liabilities 287 806
Current portion of long-term debt 2,574 2,551
Short-term deferred income tax
liabilities 1,288 1,108
Other current liabilities 1,154 1,150
---------- -------------
Total current liabilities 21,403 21,623
Long-term debt, less current portion 2,452 3,099
Other liabilities 1,139 1,028
---------- -------------
Total liabilities 24,994 25,750
---------- -------------
Stockholders' equity:
Common stock 147 146
Additional paid-in capital 61,124 60,139
Accumulated other comprehensive income 1,451 1,776
Retained earnings 62,972 66,103
---------- -------------
Total stockholders' equity 125,694 128,164
---------- -------------
Total liabilities and stockholders' equity $ 150,688 $ 153,914
========== =============
STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands, unaudited)
Three Months Ended March 31,
-----------------------------
2006 2005
------------- -------------
Operating Activities
Net income $ 2,136 $ 2,646
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 3,895 3,267
Non-cash compensation cost 54 -
Deferred income taxes 130 1,015
Realized gain on investments (21) -
Gain on sale of assets (123) (47)
Changes in operating assets and
liabilities:
Sales of trading
securities, net - 2,934
Trade accounts receivable,
net (3,237) 15,289
Prepaid expenses and other
assets (805) (214)
Accounts payable 1,851 (2,064)
Income taxes, net 982 8,793
Accrued and other
liabilities (2,384) (1,266)
------------- -------------
Net cash provided by operating
activities 2,478 30,353
------------- -------------
Investing Activities
Purchases of investments available for
sale (62,100) (312,026)
Proceeds from disposition of investments
available for sale 70,602 293,986
Purchases of property, plant and
equipment (7,531) (3,500)
Proceeds from disposition of property,
plant and equipment 343 25
------------- -------------
Net cash provided by (used in) investing
activities 1,314 (21,515)
------------- -------------
Financing Activities
Proceeds from stock option exercises 823 354
Principal payments on borrowings (624) (1,851)
Dividend payments (5,268) (6,142)
------------- -------------
Net cash used in financing activities (5,069) (7,639)
Effect of exchange rate changes on cash 48 25
------------- -------------
Net increase (decrease) in cash and cash
equivalents (1,229) 1,224
Cash and cash equivalents at beginning
of period 17,425 14,609
------------- -------------
Cash and cash equivalents at end of
period $ 16,196 $ 15,833
============= =============
CONTACT: StarTek, Inc.
Media Contact:
Steve Butler, 303-262-4500
steve.butler@startek.com
or
Investor Relations Contact:
Jennifer Martin, 303-262-4587
jennifer.martin@startek.com