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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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84-1370538
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(State or other jurisdiction of
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(I.R.S. employer
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incorporation or organization)
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Identification No.)
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8200 E. Maplewood Ave., Suite 100
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Greenwood Village, Colorado
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80111
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(Address of principal executive offices)
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(Zip code)
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Emerging growth company
o
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PART I - FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL STATEMENTS
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Page
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Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016 (Unaudited)
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Consolidated Balance Sheets as of March 31, 2017 (Unaudited) and December 31, 2016
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Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016 (Unaudited)
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Notes to Consolidated Financial Statements (Unaudited)
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ITEM 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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ITEM 3.
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Quantitative and Qualitative Disclosures About Market Risk
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ITEM 4.
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Controls and Procedures
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PART II - OTHER INFORMATION
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ITEM 1A.
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Risk Factors
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ITEM 6.
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Exhibits
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SIGNATURES
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•
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certain statements, including possible or assumed future results of operations, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;
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•
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any statements regarding the prospects for our business or any of our services;
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•
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any statements preceded by, followed by or that include the words “may,” “will,” “should,” “seeks,” “believes,” “expects,” “anticipates,” “intends,” “continue,” “estimate,” “plans,” “future,” “targets,” “predicts,” “budgeted,” “projections,” “outlooks,” “attempts,” “is scheduled,” or similar expressions; and
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•
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other statements regarding matters that are not historical facts.
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Three Months Ended March 31,
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||||||
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2017
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2016
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Revenue
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$
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77,652
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$
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78,035
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Cost of services
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67,638
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69,647
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Gross profit
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10,014
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8,388
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Selling, general and administrative expenses
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7,882
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7,781
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Impairment losses and restructuring charges, net
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—
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12
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Operating income
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2,132
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595
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Interest and other income (expense), net
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(367
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)
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(439
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)
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Income before income taxes
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1,765
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156
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Income tax expense (benefit)
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(28
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)
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125
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Net income
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$
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1,793
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$
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31
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Other comprehensive income, net of tax:
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1
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Foreign currency translation adjustments
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(14
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)
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21
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Change in fair value of derivative instruments
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446
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258
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Comprehensive income
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$
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2,225
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$
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310
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Net income per common share - basic
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$
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0.11
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$
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0.00
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Weighted average common shares outstanding - basic
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15,815
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15,699
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Net income per common share - diluted
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0.11
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$
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0.00
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Weighted average common shares outstanding - diluted
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16,995
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15,956
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March 31,
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December 31,
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||||
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2017
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2016
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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1,364
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$
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1,039
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Trade accounts receivable, net
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54,639
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60,179
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Prepaid expenses
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2,546
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2,140
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Other current assets
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1,492
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1,670
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Total current assets
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$
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60,041
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$
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65,028
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Property, plant and equipment, net
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20,784
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23,276
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Deferred income tax assets
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338
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333
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Intangible assets, net
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6,412
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6,697
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Goodwill
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9,077
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9,077
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Other long-term assets
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2,408
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2,397
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Total assets
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$
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99,060
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$
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106,808
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable
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$
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7,095
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$
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7,612
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Accrued liabilities:
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Accrued employee compensation and benefits
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10,345
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13,767
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Other accrued liabilities
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2,696
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2,083
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Line of credit
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—
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26,025
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Derivative liability
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560
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980
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Other current debt
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2,446
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2,740
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Other current liabilities
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889
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1,157
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Total current liabilities
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$
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24,031
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$
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54,364
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Line of credit
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20,719
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—
|
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Deferred rent
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971
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1,151
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Deferred income tax liabilities
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564
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499
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Other debt
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4,889
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5,500
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Other liabilities
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589
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550
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Total liabilities
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$
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51,763
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$
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62,064
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Commitments and contingencies
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Stockholders’ equity:
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Common stock, 32,000,000 non-convertible shares, $0.01 par value, authorized; 15,898,694 and 15,811,516 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively
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$
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159
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$
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158
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Additional paid-in capital
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80,887
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80,560
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Accumulated other comprehensive income (loss)
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383
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(49
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)
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Accumulated deficit
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(34,132
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)
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(35,925
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)
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Total stockholders’ equity
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$
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47,297
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$
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44,744
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Total liabilities and stockholders’ equity
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$
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99,060
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$
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106,808
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Three Months Ended March 31,
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||||||
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2017
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2016
|
||||
Operating Activities
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Net income
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$
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1,793
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$
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31
|
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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2,962
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3,230
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|
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Share-based compensation expense
|
229
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|
|
489
|
|
||
Deferred income taxes
|
65
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|
|
51
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|
||
Income tax benefit related to other comprehensive income
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—
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(166
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)
|
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Changes in operating assets and liabilities:
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Trade accounts receivable
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5,545
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4,078
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Prepaid expenses and other assets
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(214
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)
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362
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|
||
Accounts payable
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18
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(268
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)
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Accrued and other liabilities
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(3,215
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)
|
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(2,943
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)
|
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Net cash provided by operating activities
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7,183
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|
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4,864
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|
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Investing Activities
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|
|
|
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|
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Proceeds from sale of assets
|
342
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|
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—
|
|
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Purchases of property, plant and equipment
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(1,113
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)
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(411
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)
|
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Cash paid for acquisition of businesses
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—
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(217
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)
|
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Net cash used in investing activities
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(771
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)
|
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(628
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)
|
||
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Financing Activities
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|
|
|
|
|
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Proceeds from the issuance of common stock
|
98
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|
|
39
|
|
||
Proceeds from line of credit
|
79,675
|
|
|
76,400
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|
||
Principal payments on line of credit
|
(84,980
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)
|
|
(81,759
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)
|
||
Principal payments on other debt
|
(868
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)
|
|
(700
|
)
|
||
Net cash used in financing activities
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(6,075
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)
|
|
(6,020
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)
|
||
Effect of exchange rate changes on cash
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(12
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)
|
|
(12
|
)
|
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Net increase (decrease) in cash and cash equivalents
|
325
|
|
|
(1,796
|
)
|
||
Cash and cash equivalents at beginning of period
|
$
|
1,039
|
|
|
$
|
2,626
|
|
Cash and cash equivalents at end of period
|
$
|
1,364
|
|
|
$
|
830
|
|
|
|
|
|
|
|
Gross Intangibles
|
|
Accumulated Amortization
|
|
Net Intangibles
|
|
Weighted Average Amortization Period (years)
|
||||||
Developed technology
|
|
$
|
390
|
|
|
$
|
195
|
|
|
$
|
195
|
|
|
3.75
|
Customer relationships
|
|
7,550
|
|
|
2,030
|
|
|
5,520
|
|
|
4.68
|
|||
Trade names
|
|
1,050
|
|
|
353
|
|
|
697
|
|
|
2.86
|
|||
|
|
$
|
8,990
|
|
|
$
|
2,578
|
|
|
$
|
6,412
|
|
|
4.45
|
|
|
|
||
Year Ending December 31,
|
|
Amount
|
||
Remainder of 2017
|
|
$
|
855
|
|
2018
|
|
1,140
|
|
|
2019
|
|
1,131
|
|
|
2020
|
|
1,128
|
|
|
2021
|
|
1,004
|
|
|
Thereafter
|
|
1,154
|
|
|
|
Three Months Ended March 31,
|
||||||||||||
|
|
2017
|
|
2016
|
||||||||||
|
|
Revenue
|
|
Percentage
|
|
Revenue
|
|
Percentage
|
||||||
T-Mobile
|
|
$
|
22,054
|
|
|
28.4
|
%
|
|
$
|
16,017
|
|
|
20.5
|
%
|
Sprint
|
|
$
|
10,256
|
|
|
13.2
|
%
|
|
$
|
10,871
|
|
|
13.9
|
%
|
AT&T
|
|
$
|
8,647
|
|
|
11.1
|
%
|
|
$
|
10,487
|
|
|
13.4
|
%
|
|
Local Currency Notional Amount
|
|
U.S. Dollar Notional Amount
|
|||
Canadian Dollar
|
13,880
|
|
|
$
|
10,571
|
|
Philippine Peso
|
1,646,700
|
|
|
32,471
|
|
|
|
|
|
$
|
43,042
|
|
|
As of March 31, 2017
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange contracts
|
$
|
—
|
|
|
$
|
560
|
|
|
$
|
—
|
|
|
$
|
560
|
|
Total fair value of liabilities measured on a recurring basis
|
$
|
—
|
|
|
$
|
560
|
|
|
$
|
—
|
|
|
$
|
560
|
|
|
As of December 31, 2016
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange contracts
|
$
|
—
|
|
|
$
|
980
|
|
|
$
|
—
|
|
|
$
|
980
|
|
Total fair value of liabilities measured on a recurring basis
|
$
|
—
|
|
|
$
|
980
|
|
|
$
|
—
|
|
|
$
|
980
|
|
|
Foreign Currency Translation Adjustment
|
|
Derivatives Accounted for as Cash Flow Hedges
|
|
Defined Benefit Plan
|
|
Total
|
||||||||
Balance at December 31, 2016
|
$
|
1,830
|
|
|
$
|
(2,132
|
)
|
|
$
|
253
|
|
|
$
|
(49
|
)
|
Foreign currency translation
|
(37
|
)
|
|
|
|
|
|
(37
|
)
|
||||||
Reclassification to operations
|
|
|
144
|
|
|
|
|
144
|
|
||||||
Unrealized gains
|
|
|
325
|
|
|
|
|
325
|
|
||||||
Balance at March 31, 2017
|
$
|
1,793
|
|
|
$
|
(1,663
|
)
|
|
$
|
253
|
|
|
$
|
383
|
|
Details about AOCI components
|
|
Amount reclassified from AOCI
|
|
Affected line item in the Consolidated Statements of Comprehensive Income
|
||||||
|
|
Three Months Ended March 31,
|
|
|
||||||
|
|
2017
|
|
2016
|
|
|
||||
Losses on cash flow hedges
|
|
|
|
|
|
|
||||
Foreign exchange contracts
|
|
$
|
134
|
|
|
$
|
295
|
|
|
Cost of services
|
Foreign exchange contracts
|
|
10
|
|
|
10
|
|
|
Selling, general and administrative expenses
|
||
Total reclassifications for the period
|
|
$
|
144
|
|
|
$
|
305
|
|
|
|
|
For the Three Months Ended March 31,
|
||||||||||||
|
2017
|
|
2016
|
||||||||||
|
(in 000s)
|
|
(% of Total)
|
|
(in 000s)
|
|
(% of Total)
|
||||||
Domestic:
|
|
|
|
|
|
|
|
|
|
|
|
||
Revenue
|
$
|
44,363
|
|
|
57.1
|
%
|
|
$
|
49,145
|
|
|
63.0
|
%
|
Gross profit
|
$
|
1,509
|
|
|
15.1
|
%
|
|
$
|
4,824
|
|
|
57.5
|
%
|
Gross profit %
|
3.4
|
%
|
|
|
|
|
9.8
|
%
|
|
|
|
||
Offshore:
|
|
|
|
|
|
|
|
|
|
|
|
||
Revenue
|
$
|
21,123
|
|
|
27.2
|
%
|
|
$
|
17,581
|
|
|
22.5
|
%
|
Gross profit
|
$
|
6,175
|
|
|
61.7
|
%
|
|
$
|
2,286
|
|
|
27.3
|
%
|
Gross profit %
|
29.2
|
%
|
|
|
|
|
13.0
|
%
|
|
|
|
||
Nearshore:
|
|
|
|
|
|
|
|
|
|
|
|
||
Revenue
|
$
|
12,166
|
|
|
15.7
|
%
|
|
$
|
11,309
|
|
|
14.5
|
%
|
Gross profit
|
$
|
2,330
|
|
|
23.2
|
%
|
|
$
|
1,278
|
|
|
15.2
|
%
|
Gross profit %
|
19.2
|
%
|
|
|
|
|
11.3
|
%
|
|
|
|
||
Company Total:
|
|
|
|
|
|
|
|
|
|
|
|
||
Revenue
|
$
|
77,652
|
|
|
100.0
|
%
|
|
$
|
78,035
|
|
|
100.0
|
%
|
Gross profit
|
$
|
10,014
|
|
|
100.0
|
%
|
|
$
|
8,388
|
|
|
100.0
|
%
|
Gross profit %
|
12.9
|
%
|
|
|
|
|
10.7
|
%
|
|
|
|
1.
Election of Directors:
|
|
Number of Shares Voted For
|
|
Number of Shares Voted Against
|
|
Abstain
|
|
Arnaud Ajdler
|
7,726,167
|
|
3,474,264
|
|
155,048
|
|
Chad A. Carlson
|
11,183,003
|
|
17,106
|
|
155,370
|
|
Jack D. Plating
|
11,180,778
|
|
19,653
|
|
155,048
|
|
Benjamin L. Rosenzweig
|
11,011,940
|
|
188,491
|
|
155,048
|
|
Robert Sheft
|
11,180,778
|
|
19,653
|
|
155,048
|
|
Ed Zschau
|
11,134,807
|
|
62,871
|
|
157,801
|
|
2.
Ratification of Appointment of Independent Registered Public Accounting Firm:
|
3.
Approval by Non-Binding Vote the Compensation of Named Executive Officers:
|
4.
Recommendation by Non-Binding Vote on the Compensation of our Named Executive Officers:
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Exhibit
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Incorporated Herein by Reference
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|||||
No.
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Exhibit Description
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Form
|
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Exhibit
|
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Filing Date
|
|
2.1
|
|
|
Membership Interest Purchase Agreement, dated as of May 11, 2015, by and among StarTek, Inc. MDC Corporate (US) Inc. and MDC Acquisition Inc. (excluding schedules and exhibits, which StarTek, Inc. agrees to furnish supplementally to the Securities and Exchange Commission upon request).
|
|
8-K
|
|
2.1
|
|
5/12/2015
|
3.1
|
|
|
Restated Certificate of Incorporation of StarTek, Inc.
|
|
S-1
|
|
3.1
|
|
1/29/1997
|
3.2
|
|
|
Amended and Restated Bylaws of StarTek, Inc.
|
|
8-K
|
|
3.2
|
|
11/1/2011
|
3.3
|
|
|
Certificate of Amendment to the Certificate of Incorporation of StarTek, Inc. filed with the Delaware Secretary of State on May 21, 1999
|
|
10-K
|
|
3.3
|
|
3/8/2000
|
3.4
|
|
|
Certificate of Amendment to the Certificate of Incorporation of StarTek, Inc. filed with the Delaware Secretary of State on May 23, 2000
|
|
10-Q
|
|
3.4
|
|
8/14/2000
|
4.1
|
|
|
Specimen Common Stock certificate
|
|
10-Q
|
|
4.2
|
|
11/6/2007
|
10.1*
|
|
|
Fourth amendment to the Credit Agreement with BMO Harris Bank N.A.
|
|
|
|
|
|
|
31.1*
|
|
|
Certification of Chad A. Carlson pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
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31.2*
|
|
|
Certification of Don Norsworthy pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
32.1*
|
|
|
Written Statement of the Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
101*
|
|
|
The following materials are formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, 2017 and 2016 (Unaudited), (ii) Consolidated Balance Sheets as of March 31, 2017 (Unaudited) and December 31, 2016, (iii) Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016 (Unaudited) and (iv) Notes to Consolidated Financial Statements (Unaudited)
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|
|
|
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*
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Filed with this Form 10-Q.
|
&
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Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.
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STARTEK, INC.
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|
|
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By:
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/s/ CHAD A. CARLSON
|
Date: May 10, 2017
|
|
Chad A. Carlson
|
|
|
President and Chief Executive Officer
|
|
|
(principal executive officer)
|
|
|
|
|
|
|
|
By:
|
/s/ DON NORSWORTHY
|
Date: May 10, 2017
|
|
Don Norsworthy
|
|
|
Senior Vice President, Chief Financial Officer and Treasurer
|
|
|
(principal financial and accounting officer)
|
|
Level
|
Average Availability
|
Eurodollar Rate Revolving Loans
|
Base Rate Revolving Loans
|
I
|
> 33% of Aggregate Revolving Credit Commitment
|
1.50%
|
0.50%
|
II
|
<
33% of Aggregate Revolving Credit Commitment
|
1.75%
|
0.75%
|
|
Borrowers
:
STARTEK, INC.
,
a Delaware Corporation
By:______________________________
Chad A. Carlson
President and Chief Executive Officer
|
|
STARTEK HEALTH SERVICES, INC.
, a Colorado Corporation
By:______________________________
Chad A. Carlson
President and Chief Executive Officer
|
|
STARTEK USA, INC.
,
a Colorado Corporation
By:______________________________
Chad A. Carlson
President and Chief Executive Officer
|
|
GUARANTOR
:
COLLECTION CENTER, INC.
,
a North Dakota Corporation
By:______________________________
Doug Tackett
Secretary
|
ADMINISTRATIVE AGENT:
|
BMO HARRIS BANK N.A.
, as Administrative Agent
By:______________________________
Quinn Heiden
Director
|
LENDERS:
|
BMO HARRIS BANK N.A.
, as a Lender, L/C Issuer and Swing Line Lender
By:______________________________ Quinn Heiden
Director
|
|
|
Date: May 10, 2017
|
/s/ CHAD A. CARLSON
|
|
Chad A. Carlson
|
|
President and Chief Executive Officer
|
|
|
Date: May 10, 2017
|
/s/ DON NORSWORTHY
|
|
Don Norsworthy
|
|
Senior Vice President, Chief Financial Officer and Treasurer
|
|
|
Date: May 10, 2017
|
/s/ CHAD A. CARLSON
|
|
Chad A. Carlson
|
|
President and Chief Executive Officer
|
|
|
Date: May 10, 2017
|
/s/ DON NORSWORTHY
|
|
Don Norsworthy
|
|
Senior Vice President, Chief Financial Officer and Treasurer
|