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Form 8-K StarTek, Inc. For: Nov 13

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November 13, 2014 4:31 PM EST


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
�
Form 8-K
�
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
�
Date of Report (Date of earliest event reported): November�13, 2014
STARTEK, INC.
(Exact name of Registrant as specified in its charter)
�
DELAWARE
1-12793
84-1370538
(State or other jurisdiction of incorporation or organization)
(Commission File
Number)
�
(I.R.S. Employer Identification No.)
�
8200 E. Maplewood Ave., Suite 100, Greenwood Village, CO 80111
(Address of principal executive offices; zip code)
�
Registrants telephone number, including area code: (303) 262-4500
�
�
(Former name, former address and former fiscal year, if changed since last report)
�
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
�
�
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
�
�
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
�
�
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
�
�
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
�

�








Item 2.02 Results of Operations and Financial Condition.
�
On November�13, 2014, StarTek, Inc. (the Company) issued a press release reporting its earnings for its third quarter ended September 30, 2014. A copy of the press release is attached as Exhibit 99.1 and the Financial Scorecard is attached as Exhibit 99.2 to this Current Report on Form 8-K. This press release and Financial Scorecard shall not be deemed filed for purposes of Section 18 of the Securities and Exchange Act of 1934, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933.


Item 9.01 Financial Statements and Exhibits.
�
Exhibit Number
Exhibit Description
�
99.1
Press Release dated November 13, 2014
99.2
Financial Scorecard as of September 30, 2014
�







SIGNATURES
�
Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
�
�
STARTEK, INC.
�
�
�
�
�
�
Date: November�13, 2014
By:�
/s/ Lisa A. Weaver
�
�
Lisa A. Weaver
Senior Vice President, Chief Financial Officer and Treasurer
�






Exhibit 99.1



INVESTOR RELATIONS CONTACT:
Rosemary Hanratty
Vice President of Marketing
303.262.4144
�
�
StarTek, Inc. Reports Third Quarter 2014 Results
Continued Diversification Improvements with 14.7% Gross Margin
�
GREENWOOD VILLAGE, CO - November 13, 2014 - StarTek, Inc. ("STARTEK") (NYSE: SRT) today announced its third quarter 2014 financial results.
�
Third Quarter Highlights and Recent Events
"
Revenue diversification improvements continue with $23.0 million of new business signed in the third quarter, including seven new logos; $43.0 million of new business signed and 15 new logos year to date;
"
Capacity improvements with the grand opening of permanent facilities in Myrtle Beach, South Carolina and Iloilo, Philippines and completion of the closure in Heredia, Costa Rica;
"
Acquisition of Collections Center, Inc., a North Dakota based receivables management company, subsequent to quarter end, with a focus on healthcare, allowing for further expansion of healthcare and revenue cycle management; and
"
Addition of Kamalesh Dwivedi as Chief Information Officer in October 2014.

Third Quarter 2014 Financial Results
Third quarter 2014 revenue increased 5.1% compared to the third quarter of 2013, the result of new logos and new lines of business. All segments showed year-over-year revenue growth, the result of new clients and additional programs from existing clients. Gross margin increased to 14.7% in the third quarter of 2014, up from 11.2% in the third quarter of 2013. The Asia Pacific segment had significant margin improvements, the result of improved capacity utilization and better operational performance. Gross margin was penalized by 240 basis points during the quarter for start up expenses and adding new capacity.
�
SG&A expenses remained flat as a percentage of revenue at 12.2%. The incremental expense of $0.4 million of SG&A was due to the variable costs associated with the new revenues as well as the ongoing investments in the Company's healthcare vertical initiative.

Third quarter 2014 Adjusted EBITDA of $5.0 million, or 8.2% of revenue, improved by 67.0% from $3.0 million, or 5.2% of revenue, during the third quarter of 2013.

The Company had operating income of $0.3 million during the third quarter of 2014 as compared to an operating loss of $0.6 million in the third quarter of 2013. Excluding impairment losses and restructuring charges of $1.3 million in the third quarter of 2014, operating income was $1.5 million. The restructuring charges of $1.3 million primarily relate to the closure of the Company's Heredia, Costa Rica facility as well as the Company's IT transformation.

Liquidity and Capital Resources
The Company invested $9.6 million of capital expenditures for new facilities and expansion during the first nine months of 2014, which contributed to the $4.4 million cash reduction from December 31, 2013 to September 30, 2014.





We have continued to increase our client base, broaden service offerings, add healthy capacity and strengthen existing service offerings. All of which are key elements in our strategic plan. said Chad Carlson, President and CEO.� We are also pleased to add Kamalesh Dwivedi to our executive team as CIO.� He has the experience and vision to capitalize on our IT platform strategy.

For additional information on revenue and margin, please refer to the Financial Scorecard attached as Exhibit 99.2 to the
Current Report on Form 8-K, which includes this press release.
�
Conference Call and Webcast Details
The Company will host a conference call today, November 13, 2014, at 3:00 p.m. MST (5:00 p.m. EST) to discuss third quarter 2014 financial results. To participate in the teleconference, please call toll-free 877.703.6102 (or 857.244.7301 for international callers) and enter 22940870. You may also listen to the teleconference live via the Companys website at www.startek.com. For those that cannot access the live broadcast, a replay will be available on the Companys website at www.startek.com.
�
About STARTEK
STARTEK is a comprehensive contact center and business process outsourcing service company with employees we call Brand Warriors who for over 25 years have been committed to making a positive impact on our clients business results. We do this by improving the customer experience and reducing total cost of ownership through our STARTEK Advantage System. Our mission is to enable and empower our Brand Warriors to promote our clients brands every day and bring value to our stakeholders. We accomplish this by aligning with our clients business objectives. For more information, go to www.startek.com or call +1303.262.4500.

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 forward-looking statements are intended to be identified in this document by the words anticipate, believe, estimate, expect, intend, may, objective, outlook, plan, project, possible, potential, should and similar expressions.�� As described below, such statements are subject to a number of 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 factors include, but are not limited to, risks relating to our reliance on a limited number of significant customers, lack of minimum purchase requirements in our contracts, the concentration of our business in the communications industry, lack of wide geographic diversity, maximization of capacity utilization, foreign currency exchange risk, risks inherent in the operation of business outside of the United States, ability to hire and retain qualified employees, increases in labor costs, management turnover and retention of key personnel, trends affecting companies decisions to outsource non-core services, reliance on technology and computer systems, including investment in and development of new and enhanced technology, increases in the cost of telephone and data services, unauthorized disclosure of confidential client or client customer information or personally identifiable information, compliance with regulations governing protected health information, our ability to acquire and integrate complementary businesses, compliance with our debt covenants, ability of our largest stockholder to affect decisions and stock price volatility. Readers are encouraged to review Item 1A. - Risk Factors and all other disclosures appearing in the Company's Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission, for further information on risks and uncertainties that could affect STARTEK's business, financial condition and results of operation.





STARTEK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
�

�
�
Three Months
Ended�September 30,
�
Nine Months
Ended September 30,
�
�
2014
�
2013
�
2014
�
2013
Revenue
�
$
61,438

�
$
58,448

�
$
185,901

�
$
167,834

Cost of services
�
52,393

�
51,928

�
162,946

�
150,965

Gross profit
�
9,045

�
6,520

�
22,955

�
16,869

Selling, general and administrative expenses
�
7,503

�
7,153

�
23,052

�
21,601

Impairment losses and restructuring charges, net
�
1,262

�


�
3,504

�
(437
)
Operating income (loss)
�
280

�
(633
)
�
(3,601
)
�
(4,295
)
Interest and other income (expense), net
�
362

�
(1,075
)
�
216

�
(1,009
)
Income (loss) before income taxes
�
642

�
(1,708
)
�
(3,385
)
�
(5,304
)
Income tax expense
�
728

�
83

�
482

�
87

Net loss
�
$
(86
)
�
$
(1,791
)
�
$
(3,867
)
�
$
(5,391
)
�
�
�
�
�
�
�
�
�
Net loss per common share - basic and diluted
�
$
(0.01
)
�
$
(0.12
)
�
$
(0.25
)
�
$
(0.35
)
�
�
�
�
�
�
�
�
�
Weighted average shares outstanding - basic and diluted
�
15,400

�
15,351

�
15,389

�
15,330


�
STARTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
�
�
September 30, 2014
�
December 31, 2013
ASSETS
�
�

�
�

Current assets:
�
�

�
�

Cash and cash equivalents
�
$
6,552

�
$
10,989

Trade accounts receivable, net
�
46,003

�
43,708

Other current assets
�
3,249

�
5,367

Total current assets
�
55,804

�
60,064

Property, plant and equipment, net
�
24,377

�
22,210

Other assets
�
6,453

�
7,443

Total assets
�
$
86,634

�
$
89,717

LIABILITIES AND STOCKHOLDERS' EQUITY
�
�

�
�

Current liabilities
�
$
28,144

�
$
28,498

Other liabilities
�
3,280

�
3,045

Total liabilities
�
31,424

�
31,543

Total stockholders equity
�
55,210

�
58,174

Total liabilities and stockholders' equity
�
$
86,634

�
$
89,717

�
�





STARTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

�
�
Three Months Ended September 30,
�
Nine Months Ended September 30,
�
�
2014
�
2013
�
2014
�
2013
Operating Activities
�
�

�
�

�
�

�
�

Net loss
�
$
(86
)
�
$
(1,791
)
�
$
(3,867
)
�
$
(5,391
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
�
�

�
�

�
�

�
�

Depreciation and amortization
�
2,659

�
3,401

�
7,629

�
9,585

(Gains) losses on disposal of assets
�
(7
)
�
910

�
(182
)
�
898

(Gain) on dissolution of subsidiary
�
(413
)
�


�
(413
)
�


Share-based compensation expense
�
343

�
398

�
1,207

�
1,255

Amortization of deferred gain on sale leaseback transaction
�
(85
)
�
(68
)
�
(214
)
�
(206
)
Changes in operating assets & liabilities and other, net
�
(983
)
�
(3,994
)
�
(1,205
)
�
(4,049
)
Net cash provided by (used in) operating activities
�
1,428

�
(1,144
)
�
2,955

�
2,092

Investing Activities
�
�

�
�

�
�

�
�

Proceeds from note receivable
�
162

�
165

�
481

�
495

Purchases of property, plant and equipment
�
(2,737
)
�
(2,600
)
�
(9,562
)
�
(4,054
)
Proceeds from sale of assets
�
425

�


�
1,064

�


Cash paid for acquisitions of businesses
�
(203
)
�
(389
)
�
(603
)
�
(1,889
)
Net cash used in investing activities
�
(2,353
)
�
(2,824
)
�
(8,620
)
�
(5,448
)
Financing Activities
�
�

�
�

�
�

�
�

Other financing, net
�
1,423

�
64

�
1,442

�
203

Net cash provided by financing activities
�
1,423

�
64

�
1,442

�
203

Effect of exchange rate changes on cash
�
17

�
(74
)
�
(214
)
�
(13
)
Net increase (decrease) in cash and cash equivalents
�
515

�
(3,978
)
�
(4,437
)
�
(3,166
)
Cash and cash equivalents at beginning of period
�
$
6,037

�
$
9,995

�
$
10,989

�
$
9,183

Cash and cash equivalents at end of period
�
$
6,552

�
$
6,017

�
$
6,552

�
$
6,017








STARTEK, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In thousands)
(Unaudited)
�
This press release may contain certain non-GAAP financial measures including, 1) Adjusted EBITDA and 2) operating (income) loss or net income (loss) before impairment losses and restructuring charges. Reconciliations of these non-GAAP measures to their comparable GAAP measures are included in this press release or below. This non-GAAP information should not be construed as an alternative to the reported results determined in accordance with GAAP. It is provided solely to assist in an investors understanding of these items on the comparability of the Companys operations.

The Company defines non-GAAP Adjusted EBITDA as net income (loss) plus income tax expense (benefit), interest expense (income), impairment losses and restructuring charges, depreciation and amortization expense, (gains) losses on disposal of assets and share-based compensation expense. Management uses Adjusted EBITDA as a performance measure to analyze the performance of our business. Management believes that excluding these non-cash and other non-recurring items helps investors and analysts assess the strength and performance of our ongoing operations.

Management believes that the measures that exclude impairment losses and restructuring charges or other non-recurring items permit a more meaningful comparison and understanding of our operating performance for the current, past or future periods.

�
Adjusted EBITDA:
�
�
Three Months Ended
�
Nine Months Ended
�
�
September 30, 2014
�
September 30, 2013
�
September 30, 2014
�
September 30, 2013
Net loss
�
$
(86
)
�
$
(1,791
)
�
$
(3,867
)
�
$
(5,391
)
Income tax expense
�
728

�
83

�
482

�
87

Interest expense (income), net
�
136

�
12

�
434

�
21

Impairment losses and restructuring charges, net
�
1,262

�


�
3,504

�
(437
)
Depreciation and amortization expense
�
2,659

�
3,401

�
7,629

�
9,585

(Gains) losses on disposal of assets
�
(7
)
�
912

�
(182
)
�
870

Share-based compensation expense
�
343

�
398

�
1,207

�
1,255

Adjusted EBITDA
�
$
5,035

�
$
3,015

�
$
9,207

�
$
5,990

��
Operating Income (Loss) before Impairment Losses and Restructuring Charges, Net:
�
�
Three Months Ended
�
Nine Months Ended
�
�
September 30, 2014
�
September 30, 2013
�
September 30, 2014
�
September 30, 2013
Operating income (loss)
�
$
280

�
$
(633
)
�
$
(3,601
)
�
$
(4,295
)
Impairment losses and restructuring charges, net
�
1,262

�


�
3,504

�
(437
)
Operating income (loss) before impairment losses and restructuring charges, net
�
$
1,542

�
$
(633
)
�
$
(97
)
�
$
(4,732
)
�
�





Exhibit 99.2

�
�
�
�
�
�
�
�
�
�
�
�
�
Operating Results Scorecard
As of September 30, 2014
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Q1-13
Q2-13
Q3-13
Q4-13
2013
�
Q1-14
Q2-14
Q3-14
2014
Revenue (millions)
�
�
�
�
�
�
�
�
�
�
�
Domestic
�
$
28.0

$
28.9

$
30.2

$
33.9

$
120.9

�
$
33.3

$
30.9

$
30.7

$
94.9

Asia Pacific
�
$
19.7

$
19.9

$
20.5

$
21.1

$
81.1

�
$
21.1

$
21.0

$
22.5

$
64.6

Latin America
�
$
6.1

$
6.8

$
7.8

$
8.5

$
29.2

�
$
8.8

$
9.3

$
8.3

$
26.4

Company Total
�
$
53.8

$
55.6

$
58.4

$
63.4

$
231.3

�
$
63.2

$
61.3

$
61.4

$
185.9

�
�
�
�
�
�
�
�
�
�
�
�
Revenue %
�
�
�
�
�
�
�
�
�
�
�
Domestic
�
52.1
�%
52.0
�%
51.6
%
53.4
%
52.3
%
�
52.7
%
50.5
%
50.0
%
51.1
%
Asia Pacific
�
36.6
�%
35.7
�%
35.0
%
33.2
%
35.1
%
�
33.3
%
34.3
%
36.6
%
34.7
%
Latin America
�
11.3
�%
12.3
�%
13.4
%
13.4
%
12.6
%
�
14.0
%
15.2
%
13.5
%
14.2
%
Company Total
�
100.0
�%
100.0
�%
100.0
%
100.0
%
100.0
%
�
100.0
%
100.0
%
100.0
%
100.0
%
�
�
�
�
�
�
�
�
�
�
�
�
Gross Profit (millions)
�
�
�
�
�
�
�
�
�
�
�
Domestic
�
$
2.9

$
3.5

$
3.0

$
3.9

$
13.3

�
$
4.5

$
2.6

$
3.0

$
10.2

Asia Pacific
�
$
2.2

$
2.2

$
2.7

$
2.9

$
10.0

�
$
3.6

$
2.6

$
5.1

$
11.3

Latin America
�
$
(0.4
)
$
(0.1
)
$
0.9

$
0.7

$
1.1

�
$
0.1

$
0.4

$
0.9

$
1.4

Company Total
�
$
4.7

$
5.6

$
6.5

$
7.5

$
24.3

�
$
8.2

$
5.7

$
9.0

$
23.0

�
�
�
�
�
�
�
�
�
�
�
�
Gross Profit %
�
�
�
�
�
�
�
�
�
�
�
Domestic
�
10.4
�%
12.3
�%
9.8
%
11.4
%
11.0
%
�
13.6
%
8.5
%
9.9
%
10.8
%
Asia Pacific
�
11.2
�%
10.9
�%
13.1
%
13.9
%
12.3
%
�
17.1
%
12.5
%
22.6
%
17.5
%
Latin America
�
(6.6
)%
(1.2
)%
11.2
%
7.9
%
3.6
%
�
0.8
%
4.5
%
11.2
%
5.4
%
Company Total
�
8.8
�%
10.1
�%
11.2
%
11.8
%
10.5
%
�
13.0
%
9.3
%
14.7
%
12.3
%



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