0001031029-15-000048.txt : 20150810 0001031029-15-000048.hdr.sgml : 20150810 20150810160224 ACCESSION NUMBER: 0001031029-15-000048 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20150601 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20150810 DATE AS OF CHANGE: 20150810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: StarTek, Inc. CENTRAL INDEX KEY: 0001031029 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363] IRS NUMBER: 841370538 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12793 FILM NUMBER: 151040687 BUSINESS ADDRESS: STREET 1: 8200 E. MAPLEWOOD AVE. STREET 2: SUITE 100 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 BUSINESS PHONE: 303-262-4500 MAIL ADDRESS: STREET 1: 8200 E. MAPLEWOOD AVE. STREET 2: SUITE 100 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 FORMER COMPANY: FORMER CONFORMED NAME: STARTEK, INC. DATE OF NAME CHANGE: 20130201 FORMER COMPANY: FORMER CONFORMED NAME: STARTEK INC DATE OF NAME CHANGE: 19970121 8-K/A 1 a8-kaaccentfs.htm 8-K/A 8-K/A Accent FS


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K/A
(Amendment No. 1)
 
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  June 1, 2015
 
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)
 
Registrant’s 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):
 
o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 9.01 Financial Statements and Exhibits.
On June 1, 2015, StarTek, Inc. ("STARTEK"), filed a Current Report on Form 8-K to report under Item 2.01 thereof the consummation on June 1, 2015 of the transactions contemplated by that certain Membership Interest Purchase Agreement by and among StarTek, Inc., MDC Corporate (US), and MDC Acquisition Inc. Pursuant to the Membership Interest Purchase Agreement, STARTEK acquired substantially all of the assets, properties and business of Accent Marketing Services, L.L.C. ("ACCENT").

This Amendment No. 1 on Form 8-K/A amends and supplements the Form 8-K to provide the required historical audited financial statements, historical unaudited interim financial statements and pro forma financial information that were not filed with the Form 8-K and that are permitted to be filed by this amendment.
(a) Financial Statements of Business Acquired.
The (i) audited financial statements of ACCENT including the audited balance sheets of ACCENT at December 31, 2014, 2013 and 2012 and the audited statements of operations and comprehensive loss and cash flows for ACCENT for each of the three years ended December 31, 2014, the notes related thereto and the report of EKS&H LLLP, independent registered public accounting firm, and (ii) the unaudited interim financial statements of ACCENT, including the unaudited balance sheet of ACCENT at March 31, 2015 and the unaudited statements of operations and comprehensive loss and cash flows for ACCENT for each of the three month periods ended March 31, 2015 and 2014 and the notes related thereto, are collectively filed as Exhibit 99.1 to this Current Report on Form 8-K/A and incorporated herein by this reference.
(b) Pro Forma Financial Information.
The unaudited pro forma combined financial information of STARTEK and ACCENT, including a pro forma balance sheet at March 31, 2015 and pro forma statements of operations for the three months ended March 31, 2015 and the year ended December 31, 2014, giving effect to STARTEK's acquisition of ACCENT's assets, is filed as Exhibit 99.2 to this Current Report on Form 8-K/A and incorporated herein by this reference.

(d)
 
Exhibits.
23.1

 
Consent of EKS&H LLLP, Independent Registered Public Accounting Firm
99.1

 
Audited financial statements of Accent Marketing Services, L.L.C as of and for the years ended December 31, 2014, 2013 and 2012; and unaudited interim financial statements of Accent Marketing Services, L.L.C as of and for the three months ended March 31, 2015 and 2014.


99.2

 
Unaudited pro forma combined financial information.




SIGNATURES
 
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  
STARTEK, INC.
 
 
 
 
 
 
 
 
By:
/s/ Lisa A. Weaver
 
Date: August 10, 2015
Lisa A. Weaver
 
 
Senior Vice President, Chief Financial Officer and Treasurer
 
 



 EX-23.1 2 a231consent.htm EXHIBIT 23.1 23.1 Consent




Consent of Independent Registered Public Accounting Firm


We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-150634, 333-142780, 333-134903, 333-126989, 333-117451 and 333-183226) pertaining to the Employee Stock Purchase Plan, 2008 Equity Incentive Plan, Stock Option Plan and Directors’ Stock Option Plan of StarTek, Inc. of our report dated August 10, 2015, with respect to the consolidated financial statements of Accent Marketing Services, LLC as of and for the years ended December 31, 2014, 2013, and 2012, which appear in Form 8-K/A of StarTek, Inc., dated August 10, 2015.


EKS&H LLLP

Denver, Colorado
August 10, 2015



 EX-99.1 3 a991accentfs.htm EXHIBIT 99.1 99.1 Accent FS



Independent Auditor's Report

The Board of Directors and Stockholders
StarTek, Inc.
Greenwood Village, Colorado


We have audited the accompanying consolidated financial statements of Accent Marketing Services, L.L.C. which are comprised of the consolidated balance sheets as of December 31, 2014, 2013, and 2012, and the related consolidated statements of operations and comprehensive income, changes in members’ equity (deficit), and cash flows for the years then ended, and the related notes to the consolidated financial statements.

MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

AUDITORS' RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Accent Marketing Services, L.L.C. as of December 31, 2014, 2013, and 2012, and the related consolidated statements of operations and comprehensive income, changes in members’ equity (deficit), and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

EKS&H LLLP

Denver, Colorado
August 10, 2015







ACCENT MARKETING SERVICES, L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands)

 
Three Months Ended March 31,
 
Years Ended December 31,
 
2015 (Unaudited)
 
2014 (Unaudited)
 
2014
 
2013
 
2012
Revenue
$
15,563

 
$
17,692

 
$
70,073

 
$
86,356

 
$
90,403

Cost of services
13,705

 
13,903

 
59,020

 
66,830

 
72,397

Gross profit
1,858

 
3,789

 
11,053

 
19,526

 
18,006

Selling, general and administrative expenses
3,527

 
3,759

 
15,576

 
16,665

 
16,560

Operating income (loss)
(1,669
)
 
30

 
(4,523
)
 
2,861

 
1,446

Interest and other income (expense), net
(50
)
 
$
(26
)
 
(194
)
 
(273
)
 
(327
)
Operating income (loss) before discontinued operations
(1,719
)
 
4

 
(4,717
)
 
2,588

 
1,119

Loss on discontinued operations
—

 
$
—

 
—

 
(2,461
)
 
(3,533
)
Net income (loss)
$
(1,719
)
 
$
4

 
$
(4,717
)
 
$
127

 
$
(2,414
)
Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
2

 
(7
)
 
(48
)
 
(144
)
 
(65
)
Comprehensive loss
$
(1,717
)
 
$
(3
)
 
$
(4,765
)
 
$
(17
)
 
$
(2,479
)
 

See Notes to Consolidated Financial Statements.





ACCENT MARKETING SERVICES, L.L.C.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
As of March 31,
 
As of December 31,
 
2015 (Unaudited)
 
2014
 
2013
 
2012
ASSETS
 

 
 

 
 

 
 

Current assets:
 
 
 
 
 
 
 
Cash
$
102

 
$
19

 
$
144

 
$
5

Accounts receivable, net
8,280

 
7,461

 
9,604

 
10,641

Prepaid expenses
485

 
691

 
800

 
858

Other current assets
135

 
194

 
187

 
323

Total current assets
9,002

 
8,365

 
10,735

 
11,827

Property, plant and equipment, net
3,481

 
3,882

 
4,625

 
4,929

Assets of discontinued line of business
—

 
—

 
—

 
3,482

Total assets
$
12,483

 
$
12,247

 
$
15,360

 
$
20,238

 
 
 
 
 
 
 
 
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
 

 
 

 
 

 
 

Accounts payable
$
1,133

 
$
1,725

 
$
856

 
$
970

Accrued liabilities
3,071

 
2,047

 
4,464

 
5,138

Due to affiliates
9,177

 
7,828

 
4,326

 
1,237

Incentive grant payable
—

 
—

 
—

 
1,266

Other liabilities
402

 
226

 
268

 
275

Liabilities of discontinued line of business
—

 
—

 
—

 
5,948

Total liabilities
13,783

 
11,826

 
9,914

 
14,834

 

 

 

 

Members' equity (deficit)
(1,300
)
 
421

 
5,446

 
5,404

Total liabilities and members’ equity (deficit)
$
12,483

 
$
12,247

 
$
15,360

 
$
20,238

 

See Notes to Consolidated Financial Statements.





ACCENT MARKETING SERVICES, L.L.C.
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' EQUITY (DEFICIT)
(In thousands)    
 
Members' Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Retained Earnings (Deficit)
 
Total Members' Equity (Deficit)
Balance, January 1, 2012
$
103

 
$
—

 
$
7,095

 
$
7,198

Contributions
 
 
 
 
685

 
685

Foreign currency translation adjustments
 
 
(65
)
 
—

 
(65
)
Net loss


 
 
 
(2,414
)
 
(2,414
)
Balance, December 31, 2012
103

 
(65
)
 
5,366

 
5,404

Distributions
 
 
 
 
(6
)
 
(6
)
Foreign currency translation adjustments


 
$
(79
)
 
 
 
(79
)
Net income
 
 
 
 
127

 
127

Balance, December 31, 2013
103

 
(144
)
 
5,487

 
5,446

Distributions
 
 
 
 
(404
)
 
(404
)
Foreign currency translation adjustments
 
 
96

 
 
 
96

Net loss
 
 
 
 
(4,717
)
 
(4,717
)
Balance, December 31, 2014
103

 
(48
)
 
366

 
421

Distributions (unaudited)
 
 
 
 
(52
)
 
(52
)
Foreign currency translation adjustments (unaudited)
 
 
50

 
 
 
50

Net loss (unaudited)
 
 
 
 
(1,719
)
 
(1,719
)
Balance, March 31, 2015 (unaudited)
$
103

 
$
2

 
$
(1,405
)
 
$
(1,300
)


See Notes to Consolidated Financial Statements.







ACCENT MARKETING SERVICES, L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

 
Three Months Ended March 31,
 
Years Ended December 31,
 
2015 (Unaudited)
 
2014 (Unaudited)
 
2014
 
2013
 
2012
Operating Activities
 
 
 
 
 

 
 

 
 

Net income (loss)
$
(1,719
)
 
$
4

 
(4,717
)
 
$
127

 
$
(2,414
)
Adjustments to reconcile net income (loss) to total cash provided by (used in) operating activities:
 
 
 
 
 
 
 
 
 
Depreciation
626

 
659

 
2,801

 
2,961

 
3,894

(Gains) losses on disposal of assets
(27
)
 
—

 
—

 
(49
)
 
8

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
 
Accounts receivable
(819
)
 
649

 
2,143

 
1,037

 
4,658

Prepaid expenses
206

 
244

 
109

 
59

 
235

Other current assets
58

 
12

 
(6
)
 
136

 
415

Accounts payable
(591
)
 
191

 
866

 
(113
)
 
(1,290
)
Accrued liabilities
1,023

 
(943
)
 
(2,416
)
 
(675
)
 
950

Other liabilities
177

 
(58
)
 
(42
)
 
(7
)
 
(911
)
Net cash provided by (used in) continuing operating activities
(1,066
)
 
758

 
(1,262
)
 
3,476

 
5,545

Net cash provided by (used in) discontinued operating activities
—

 
—

 
—

 
(2,466
)
 
2,466

Total cash provided by (used in) operating activities
(1,066
)
 
758

 
(1,262
)
 
1,010

 
8,011

Investing Activities
 
 
 
 
 

 
 

 
 

Purchases of property, plant and equipment
(198
)
 
(498
)
 
(2,057
)
 
(2,609
)
 
(3,233
)
Net cash used in investing activities
(198
)
 
(498
)
 
(2,057
)
 
(2,609
)
 
(3,233
)
Financing Activities
 
 
 
 
 

 
 

 
 

Payments on incentive grant payable
—

 
—

 
—

 
(1,266
)
 
—

Due to/from affiliates
1,349

 
(188
)
 
3,502

 
3,089

 
(5,393
)
Members' capital contributions (distributions), net
(52
)
 
(87
)
 
(404
)
 
(6
)
 
685

Net cash provided by (used in) financing activities
1,297

 
(275
)
 
3,098

 
1,817

 
(4,708
)
Effect of exchange rate changes on cash
50

 
(7
)
 
96

 
(79
)
 
(65
)
Net increase (decrease) in cash and cash equivalents
83

 
(22
)
 
(125
)
 
139

 
5

Cash at beginning of period
19

 
144

 
144

 
5

 
—

Cash at end of period
$
102

 
$
122

 
$
19

 
$
144

 
$
5

 
 
 
 
 
 
 
 
 
 
Supplemental Disclosure of Cash Flow Information
 
 
 
 
 
 
 
 
 
Cash paid for interest
$
71

 
$
34

 
$
194

 
$
207

 
$
301



See Notes to Consolidated Financial Statements.





ACCENT MARKETING SERVICES, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Accent Marketing Services, L.L.C. ("ACCENT") is a customer engagement outsourcing company servicing the telecom, technology, manufacturing, insurance, retail, cable, healthcare and financial services industries. We operate in five U.S. locations and one location in Kingston, Jamaica. We were organized in Delaware on October 19, 1999.

The members' liability is limited as specified in our Limited Liability Company Agreement and pursuant to the laws of the State of Delaware. On June 1, 2015, our Members sold 100% of their membership interest to StarTek, Inc.

Consolidation
 
Our consolidated financial statements include the accounts of all wholly-owned subsidiaries after elimination of significant intercompany balances and transactions.

Use of Estimates
 
The preparation of financial statements in conformity with accounting principles general accepted in the United States of American ("GAAP") requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompanying notes.  Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they are determined to be necessary. Actual results could differ from those estimates.
 
Concentration of Credit Risk
 
We are exposed to credit risk in the normal course of business, primarily related to accounts receivable.  Historically, the losses related to credit risk have been immaterial.  We regularly monitor credit risk to mitigate the possibility of current and future exposures resulting in a loss.  We evaluate the creditworthiness of clients prior to entering into an agreement to provide services and on an on-going basis as part of the processes of revenue recognition and accounts receivable. 
 
Foreign Currency
 
The assets and liabilities of our Jamaican operations that are recorded in foreign currencies are translated into U.S. dollars at exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at the weighted-average exchange rate during the reporting period. Resulting translation adjustments are recorded in accumulated other comprehensive income (loss) in members' equity.  Foreign currency transaction gains and losses are included in selling, general and administrative in our consolidated statements of operations. Such gains and losses were not material for any period presented.

Revenue Recognition
 
We invoice our clients monthly in arrears and recognize revenues for such services when completed. Substantially all of our contractual arrangements are based either on a production rate, meaning that we recognize revenue based on the billable hours or minutes of each call center agent, or on a rate per transaction basis.  These rates could be based on the number of paid hours the agent works, the number of minutes the agent is available to answer calls, or the number of minutes the agent is actually handling calls for the client, depending on the client contract.  Production rates vary by client contract and can fluctuate based on our performance against certain pre-determined criteria related to quality and performance. Additionally, some clients are contractually entitled to penalties when we are out of compliance with certain quality and/or performance obligations defined in the client contract. Such penalties are recorded as a reduction to revenue as incurred based on a measurement of the appropriate penalty under the terms of the client contract.  Likewise, some client contracts stipulate that we are entitled to bonuses should we meet or exceed these predetermined quality and/or performance obligations.  These bonuses are recognized as incremental revenue in the period in which they are earned.
 
As a general rule, our contracts do not include multiple elements.  We provide initial training to customer service representatives upon commencement of new contracts and recognize revenues for such training as the services are provided based upon the production rate (i.e., billable hours and rates related to the training services as stipulated in our contractual arrangements). Accordingly, the corresponding training costs, consisting primarily of labor and related expenses, are recognized as incurred.





Allowance for Doubtful Accounts
 
Accounts receivable is stated at invoiced amounts less allowances for doubtful accounts. The allowance for uncollectible accounts receivables is determined principally on the basis of past collection experience as well as consideration of current economic conditions and changes in our customer collection trends. The allowance for uncollectible accounts receivable was $701 as of December 31, 2014, 2013 and 2012. There was no allowance established as of March 31, 2015.

Cash
 
We maintain our cash balances with various financial institutions and have not experienced any losses in such accounts. We believe we are not exposed to any significant credit risk on cash.

Property, Plant and Equipment
 
Property, plant, and equipment, are recorded at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated lives of the individual assets, which range from two to five years. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred.

Impairment of Long-Lived Assets
 
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates.
 
Leases
 
Rent holidays, landlord/tenant incentives and escalations are included in some instances in the base price of our rent payments over the term of our operating leases. We recognize rent holidays and rent escalations on a straight-line basis over the lease term. The landlord/tenant incentives are recorded as deferred rent and amortized on a straight line basis over the lease term.    

Advertising Costs

Advertising costs are expensed as incurred and included in selling, general and administrative expenses. Advertising expense was not material for any of the periods presented.

Income Taxes

We are organized as a partnership for federal and state income tax purposes and generally do not incur income taxes. Instead, our earnings and losses are included in the income tax returns of the members. Therefore, no provision or liability for federal or state income taxes has been included in these financial statements. Income or loss allocated to our Members for income tax reporting purposes differs from our income or loss for financial reporting purposes as a result of permanent and temporary differences in the recognition of certain revenue and expense items.
 
The Financial Accounting Standards Board has issued guidance on accounting for uncertainty in income taxes. Management evaluated our tax positions and concluded that we had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance.

Interest and penalties associated with tax positions are recorded in the period assessed as selling, general and administrative expenses. No interest or penalties have been assessed as of December 31, 2014, 2013, or 2012.





2. PROPERTY, PLANT AND EQUIPMENT

Our property, plant and equipment consisted of the following, by asset class:
 
 
 
 
December 31,
 
March 31, 2015 (Unaudited)
 
2014
 
2013
 
2012
Leasehold improvements
$
7,476

 
$
7,474

 
$
10,073

 
$
10,369

Computer equipment
6,631

 
6,634

 
8,327

 
9,702

Software
5,965

 
5,784

 
8,411

 
7,633

Furniture, fixtures, and miscellaneous equipment
5,968

 
5,926

 
7,243

 
9,119

 
26,040

 
25,818

 
34,054

 
36,823

Less accumulated depreciation
(22,559
)
 
(21,936
)
 
(29,429
)
 
(31,894
)
Total property, plant and equipment, net
$
3,481

 
$
3,882

 
$
4,625

 
$
4,929


3. ACCRUED LIABILITIES

Our accrued liabilities consisted of the following amounts:
 
 
 
 
December 31,
 
March 31, 2015 (Unaudited)
 
2014
 
2013
 
2012
Accrued payroll and related costs
$
1,421

 
$
664

 
$
1,338

 
$
2,609

Accrued purchases
399

 
223

 
455

 
395

Accrued bonus
40

 
41

 
1,127

 
210

Other accrued liabilities
1,211

 
1,119

 
1,544

 
1,924

Total accrued liabilities
$
3,071

 
$
2,047

 
$
4,464

 
$
5,138


4. DUE TO AFFILIATES

Amounts due to affiliates primarily consisted of various short-term advances from Members and their operating subsidiaries. Advances accrue interest at 2.75% or 4.25% based on outstanding balances and interest is paid in the subsequent month.

5. REVENUE CONCENTRATION

A major customer is defined as a customer to whom revenue exceeded 10% of total revenues for the year. For the three months ended March 31, 2015 and 2014 and the years ended December 31, 2014, 2013 and 2012, we had the following major customer:
 
Three Months Ended March 31,
 
2015 (Unaudited)
 
2014 (Unaudited)
 
Revenue
Percentage
 
Revenue
Percentage
Sprint/United Management Company
$
9,176

58.96
%
 
10,577

59.79
%
 
Years Ended December 31,
 
2014
 
2013
 
2012
 
Revenue
Percentage
 
Revenue
Percentage
 
Revenue
Percentage
Sprint/United Management Company
43,532

62.12
%
 
58,056

67.23
%
 
54,316

60.08
%

6. RETIREMENT PLAN

The Company has established a salary deferral plan under Section 401(k) of the Internal Revenue Code. The plan allows eligible employees to defer a portion of their compensation to the plan. Such deferrals accumulate on a tax deferred basis until the employee withdraws the funds. The Company makes matching contributions equal to 100% of the first 3% of employee contributions and 50% of the next 2% contributed. The total expense recorded for the Company’s match was $207, $230 and




$307 for years ended December 31, 2014, 2013 and 2012, respectively, and $50 (unaudited) and $56 (unaudited) for the three months ended March 31, 2015 and 2014, respectively.

7. DISCONTINUED OPERATIONS

During 2012, we discontinued our outbound sales and licensed insurance lines of business due to significant operating losses, which resulted in a combined loss on discontinued operations of $1,869 and $667 for the years ended December 31, 2012 and 2013. Discrete information is not available for the assets and liabilities related to these lines of business.

In January 2012, we discontinued the operations of our direct mail line of business, Communefx, and put the assets and business up for sale. We decided to sell this subsidiary due to the loss of a significant customer. In January 2013, we sold 81% of this subsidiary to a group of related parties for minimal consideration, resulting in a loss on discontinued operations of $1,439. The assets sold consisted primarily of accounts receivable, property and equipment and other assets. The buyer also assumed certain accounts payable and accrued liabilities. We had no continuing involvement in the line of business subsequent to sale; therefore, the remaining 19% ownership valued at $355 was deemed impaired and is included in loss on discontinued operations for the year ended December 31, 2013.
Communefx’s revenues, reported in discontinued operations, for the year ended December 31, 2012 were $15,022. Communefx's net operating loss, reported in discontinued operations, for the year ended December 31, 2012 was $1,664.
The assets and liabilities of the discontinued operations are presented separately under the captions "Assets of discontinued line of business" and "Liabilities of discontinued line of business" in the accompanying balance sheet at December 31, 2012. The following is a summary of the net assets sold and as finally reported on the closing date of January 1, 2013:
 
 
January 1, 2013
Assets of discontinued line of business:
 
 
Accounts receivable
 
$
3,013

Property and equipment, net
 
176

Other assets
 
293

Total assets
 
3,482

 
 
 
Liabilities of discontinued line of business:
 
 
Accounts payable
 
533

Accrued liabilities
 
6

Due to affiliate
 
4,662

Other liabilities
 
747

Total liabilities
 
5,948

Net liabilities of discontinued operations
 
$
(2,466
)

8. COMMITMENTS AND CONTINGENCIES

Operating Leases

We lease facilities under various non-cancelable operating leases. Some of these leases have renewal clauses that vary both in length and fee, based on our negotiations with the lessors. Rent expense, including equipment rentals, for the years ended December 31, 2014, 3013 and 2012 was $1,452, $1,821 and $1,543, respectively and for the three months ended March 31, 2015 and 2014 was $314 (unaudited) and $382 (unaudited), respectively. As of December 31, 2014, approximate minimum annual rentals under operating leases were as follows:




 
 
Minimum Lease Payments
2015
 
$
1,191,049

2016
 
885,044

2017
 
517,966

2018
 
394,057

2019
 
39,213

Total minimum lease payments
 
$
3,027,329

   
Legal Proceedings

We have been involved from time to time in litigation arising in the normal course of business, none of which is expected by management to have a material adverse effect on our business, consolidated financial condition, results of operations or cash flows.

9. SUBSEQUENT EVENT

On June 1, 2015, our members sold 100% of their membership interest to StarTek, Inc. The purchase price was approximately $18,326, which included $2,326 of working capital adjustments.

We have evaluated all subsequent events through the auditors' report date, which is the date the financial statements were available for issuance.




 EX-99.2 4 a992proforma.htm EXHIBIT 99.2 99.2 Pro Forma
Exhibit 99.2
 
PRO FORMA FINANCIAL INFORMATION
 
On June 1, 2015, StarTek, Inc. (“STARTEK”) acquired Accent Marketing Services, L.L.C. ("ACCENT"), a business process outsourcing company providing contact center services and customer engagement solutions across six locations in the U.S. and Jamaica.
 
The unaudited pro forma combined balance sheet gives effect to the acquisition as if it had been completed on March 31, 2015 and was prepared using the unaudited consolidated balance sheet of STARTEK and ACCENT as of March 31, 2015.

The unaudited pro forma combined statements of operations for the year ended December 31, 2014 and the three months ended March 31, 2015 give effect to the acquisition as if it had been consummated on January 1, 2014. The unaudited pro forma combined statements of operations include adjustments that give effect to events that are directly attributable to the transaction, are expected to have a continuing impact, and that are factually supportable. The notes to the unaudited pro forma combined financial information describe the pro forma amounts and adjustments.
 
The unaudited pro forma combined statements of operations are presented for illustrative purposes only and, therefore, are not necessarily indicative of the operating results that might have been achieved had the transaction occurred as of an earlier date, nor are they necessarily indicative of the operating results that may be achieved in the future.
 
The unaudited pro forma combined statements of operations, including the notes thereto, should be read in conjunction with STARTEK’s audited historical consolidated financial statements for the year ended December 31, 2014 included in our Annual Report on Form 10-K for the year ended December 31, 2014, STARTEK's unaudited consolidated financial statements for the three months ended March 31, 2015 included in our Form 10-Q, as well as ACCENT's audited financial statements for the years ended December 31, 2014, 2013 and 2012 included in Exhibit 99.1 to this Current Report on Form 8-K/A.





STARTEK, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2015
(In thousands, except per share data)
 

 
STARTEK, INC. HISTORICAL
 
ACCENT HISTORICAL
 
PRO FORMA ADJUSTMENTS
 
PRO FORMA COMBINED
Revenue
$
63,653

 
$
15,563

 
$
—

 
$
79,216

Cost of services
57,536

 
13,705

 
199

(a)
71,440

Gross profit
6,117

 
1,858

 
(199
)
 
7,776

Selling, general and administrative expenses
8,061

 
3,527

 
—

 
11,588

Restructuring charges
806

 
—

 
—

 
806

Operating loss
(2,750
)
 
(1,669
)
 
(199
)
 
(4,618
)
Interest and other income (expense), net
(238
)
 
(50
)
 
2

(b)
(286
)
Loss before income taxes
(2,988
)
 
(1,719
)
 
(197
)
 
(4,904
)
Income tax expense
187

 
—

 
28

(c)
215

Net loss
$
(3,175
)
 
$
(1,719
)
 
$
(225
)
 
$
(5,119
)
 
 
 
 
 
 
 
 
Net loss per common share - basic and diluted
$
(0.21
)
 


 


 
$
(0.33
)
 
 
 
 
 
 

 
 
Weighted average common shares outstanding - basic and diluted
15,417

 
 
 
 
 
15,417


See accompanying notes to Unaudited Pro Forma Combined Financial Statements





STARTEK, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
(In thousands, except per share data)
 
 
 
STARTEK, INC. HISTORICAL
 
ACCENT HISTORICAL
 
PRO FORMA ADJUSTMENTS
 
PRO FORMA COMBINED
Revenue
$
250,080

 
$
70,073

 
$
—

 
$
320,153

Cost of services
219,608

 
59,020

 
797

(a)
279,425

Gross profit
30,472

 
11,053

 
(797
)
 
40,728

Selling, general and administrative expenses
31,397

 
15,576

 
—

 
46,973

Impairment losses and restructuring charges, net
3,965

 
—

 
—

 
3,965

Operating loss
(4,890
)
 
(4,523
)
 
(797
)
 
(10,210
)
Interest and other income (expense), net
(6
)
 
(194
)
 
(417
)
(b)
(617
)
Loss before income taxes
(4,896
)
 
(4,717
)
 
(1,214
)
 
(10,827
)
Income tax expense
564

 
—

 
113

(c)
677

Net loss
$
(5,460
)
 
$
(4,717
)
 
$
(1,327
)
 
$
(11,504
)
 
 
 
 
 
 
 
 
Net loss per common share - basic and diluted
$
(0.35
)
 
 
 
 
 
$
(0.75
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic and diluted
15,394

 
 
 
 
 
15,394


See accompanying notes to Unaudited Pro Forma Combined Financial Statements






STARTEK, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
MARCH 31, 2015
(In thousands)
 
STARTEK, INC. HISTORICAL
 
ACCENT HISTORICAL
 
PRO FORMA ADJUSTMENTS
 
PRO FORMA COMBINED
ASSETS
 

 
 
 
 
 
 

Current assets:
 

 
 
 
 
 
 

Cash and cash equivalents
$
6,465

 
$
102

 
 
 
$
6,567

Trade accounts receivable, net
45,797

 
8,280

 
 
 
54,077

Derivative asset
17

 
—

 
 
 
17

Prepaid expenses
3,465

 
485

 
 
 
3,950

Other current assets
1,170

 
135

 
204

(b)
1,509

Total current assets
56,914

 
9,002

 
204

 
66,120

Property, plant and equipment, net
32,398

 
3,481

 
 
 
35,879

Long-term deferred income tax assets
1,386

 
—

 
 
 
1,386

Intangible assets, net
2,512

 
—

 
6,090

(a)
8,602

Goodwill
4,136

 
—

 
4,156

(a)
8,292

Other long-term assets
2,892

 
—

 
 
 
2,892

Total assets
$
100,238

 
$
12,483

 
$
10,450

 
$
123,171

LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 
 
 
 
 

Current liabilities:
 

 
 
 
 
 
 

Accounts payable
$
10,812

 
$
1,134

 
 
 
11,946

Accrued liabilities:
 

 
 
 
 
 


Accrued payroll
7,019

 
—

 
 
 
7,019

Accrued compensated absences
2,173

 
—

 
 
 
2,173

Other accrued liabilities
1,122

 
3,071

 
 
 
4,193

Line of credit
9,286

 
—

 
18,326

(b)
27,612

Due to affiliates
—

 
9,177

 
(9,177
)
(d)
—

Derivative liability
1,210

 
—

 
 
 
1,210

Deferred income tax liabilities
991

 
—

 
 
 
991

Other current liabilities
4,604

 
402

 
 
 
5,006

Total current liabilities
37,217

 
13,784

 
9,149

 
60,150

Deferred rent
1,897

 
—

 
 
 
1,897

Long-term obligations under capital leases
7,826

 
—

 
 
 
7,826

Other liabilities
1,303

 
—

 
 
 
1,303

Total liabilities
48,243

 
13,784

 
9,149

 
71,176

Commitments and contingencies
 
 
 
 
 
 
 
Stockholders’ equity:
 

 
 
 
 
 
 

Common stock
154

 
—

 
 
 
154

Additional paid-in capital
76,604

 
103

 
(103
)
(d)
76,604

Accumulated other comprehensive loss
(884
)
 
2

 
(2
)
(d)
(884
)
Accumulated deficit
(23,879
)
 
(1,406
)
 
1,406

(d)
(23,879
)
Total stockholders’ equity
51,995

 
(1,301
)
 
1,301

 
51,995

Total liabilities and stockholders’ equity
$
100,238

 
$
12,483

 
$
10,450

 
$
123,171


See accompanying notes to Unaudited Pro Forma Combined Financial Statements





STARTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(In thousands)

Note 1 - Basis of Presentation

The unaudited pro forma combined balance sheet as of March 31, 2015, and the unaudited pro forma combined statements of operations for the year ended December 31, 2014 and three months ended March 31, 2015, are presented herein. The unaudited pro forma combined balance sheet gives effect to the acquisition as if it had been completed on March 31, 2015, and combines the unaudited consolidated balance sheet of StarTek, Inc. ("the Company or STARTEK") and the assets acquired and liabilities assumed from ACCENT. The unaudited pro forma combined statements of operations for the year ended December 31, 2014 and three months ended March 31, 2015 give effect to the acquisition as if it had occurred on January 1, 2014.

The unaudited pro forma combined financial information should be read in conjunction with the accompanying notes to the unaudited combined financial statements, and is not necessarily indicative of the combined results of operations or financial condition had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma combined financial information does not reflect any cost savings or integration costs. The unaudited pro forma combined financial information does not purport to project the future results of operations or financial position of the combined company. The pro forma adjustments are based on preliminary estimates of the fair values of assets acquired and liabilities assumed and information available as of the date of this Current Report on Form 8-K/A. Certain valuations are currently in process. Actual results may differ from the amounts reflected in the unaudited pro forma combined financial statements, and the differences may be material.

Note 2 - Transaction and Purchase Consideration

On June 1, 2015, STARTEK acquired 100% of the membership interests of ACCENT pursuant to a Membership Interest Purchase Agreement with MDC Corporate (US) Inc. and MDC Acquisition Inc.

The acquisition date fair value of the consideration transferred totaled $18,326. The following summarizes the estimated fair values of the identifiable assets acquired and liabilities assumed as of the acquisition date. These estimates of fair value of identifiable assets acquired and liabilities assumed are preliminary, pending completion of a valuation, thus are subject to revisions that may result in adjustment to the values presented below:

 
Amount
 
 
Cash
$
16,000

Working capital adjustment
2,326

Total allocable purchase price
$
18,326

 
 
Accounts receivable
9,864

Fixed assets
3,230

Prepaid expenses and other assets
377

Customer relationships
5,240

Trade name
850

Goodwill
4,565

Accounts payable
(5,073
)
Other accrued expenses and current liabilities
(727
)
Total preliminary purchase price allocation
$
18,326


STARTEK incurred approximately $325 of acquisition-related costs, comprised of transaction and integration costs, during the three months ended June 30, 2015.







Note 3 - Pro Forma Adjustments

(a) Adjustment to reflect the preliminary allocation of the purchase price to identifiable intangible assets and goodwill acquired in the transaction. The following details the finite-lived intangible amortization adjustment for the year ended December 31, 2014 and the three months ended March 31, 2015:
Intangible asset type
Value
Life (years)
 
Annual Amortization
 
Quarterly Amortization
Customer relationships
$
5,240

8

 
$
655

 
$
164

Trade name
850

6

 
142

 
$
35

 
$
6,090

 
 
 
 
 
 
 
 
 
 
 
 
Total pro forma adjustment (increase to amortization)
 
 
 
$
797

 
$
199


(b) STARTEK entered into a secured revolving credit facility with BMO Harris Bank N.A. ("BMO Credit Facility") in the aggregate principal amount of $50,000. Proceeds from the BMO Credit Facility were used to finance the ACCENT acquisition and repay our previous credit facility.

Adjustments relate to the increase/(decrease) to interest expense, under the assumption that the BMO Credit Facility was in place at the beginning of each respective period. The BMO Credit Facility carries variable rates of interest on the revolving credit facility. Borrowings under the BMO Credit Facility bear interest at one-month LIBOR plus 1.75% to 2.50%, depending on current availability under the Credit Agreement. For purposes of these unaudited pro forma combined statements of operations we have assumed an interest rate of 1.934% for the BMO Credit Facility. This adjustment also includes the amortization of loan costs incurred in connection with the additional borrowings, amortized over the life of the facility, and the write off of loan costs related to the previous credit facility.

 
 
 
Interest Expense for the Year Ended December 31, 2014
 
Interest Expense for the Three Months Ended March 31, 2015
Amount borrowed for ACCENT acquisition
$
18,326

 
 
 
 
Amount borrowed to repay previous credit facility
1,000

 
 
 
 
 
$
19,326

 
$
374

 
$
89

 
 
 
 
 
 
Total loan costs on the BMO Credit Facility
$
280

 
56

 
14

Total loan costs associated with previous credit facility at March 31, 2015
$
76

 
 
 
 
Total loan costs associated with previous credit facility at January 1, 2014
 
 
88

 
—

Interest expense associated with previous credit facility, net of termination fee
 
 
(101
)
 
(105
)
Total pro forma adjustment (increase (decrease) to interest expense)
 
 
$
417

 
$
(2
)

(c) For purposes of these unaudited pro forma combined financial statements, an estimated income tax rate of approximately 37.3% has been used to calculate the income tax expense related to the tax amortization of goodwill.

(d) Elimination of ACCENT's members' equity accounts and liabilities not assumed in the acquisition.