DELAWARE | 1-12793 | 84-1370538 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
(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. |
STARTEK, INC. | |||
By: | /s/ Lisa A. Weaver | Date: August 10, 2015 | |
Lisa A. Weaver | |||
Senior Vice President, Chief Financial Officer and Treasurer |
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 | ) |
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 |
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 | ) |
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 |
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 |
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 |
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 | % |
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 | ) |
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 |
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 |
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 |
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 |
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 |
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 |
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 | ) |