8-K

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): February 28, 2007

STARTEK, INC.
(Exact name of registrant as specified in its charter)

DELAWARE	1-12793	84-1370538
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

44 Cook Street, 4th Floor, Denver, Colorado	80206
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 399-2400

(Former name or former address 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:

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 2.02. Results of Operations and Financial Condition.

On February 28, 2007, StarTek issued a press release reporting its earnings for the fourth quarter and full year ended December 31, 2006. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K. This press release shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

On February 28, 2007, Steven Boyer, Senior Vice President and Chief Information Officer of StarTek, Inc., resigned effective immediately from all of his duties at the Company.  The Company has initiated a search for a successor to Mr. Boyer.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

99.1 Press Release dated February 28, 2007.

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.

Date: March 1, 2007

By: /s/ A. Laurence Jones                                        
A. Laurence Jones
President, Chief Executive Officer and Interim Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press Release dated February 28, 2007.

EX-99.1

Exhibit 99.1

FOR RELEASE at 5:30a.m. ET, 3:30a.m. MT
February 28, 2007

MEDIA/INDUSTRY ANALYST CONTACT:	INVESTOR RELATIONS CONTACT:
Matt Brekke Director of Marketing, StarTek, Inc. 303-262-4548 mbrekke@startek.com	Jennifer Martin Director, SEC Reporting and Compliance, StarTek, Inc. 303.262.4587 jennifer.martin@startek.com

StarTek Inc. Reports 2006 Revenue Increases 9.8% Over 2005
Fourth Quarter Revenue and EPS Decline

DENVER – February 28, 2007 – StarTek, Inc. (NYSE:SRT) today announced results for the fourth quarter and full year 2006. Full year 2006 revenue of $237.6 million, a 9.8% increase over 2005, was driven by revenue from new clients added since the second half of 2005. Fully diluted earnings per share including discontinued operations for the 2006 fiscal year was $0.39 compared to $0.88 in 2005. Fourth quarter revenue was $59.1 million, a 4.4% decline from the third quarter of 2006, as revenue from several clients declined due to challenges in hiring and retaining enough agents to respond to client demands and unfavorable changes in revenue mix. Fourth quarter fully diluted earnings per share was $0.08.

FULL YEAR RESULTS

Full year 2006 revenue increased 9.8% over 2005 to $237.6 million driven by $36.7 million in revenue from new clients added since the second half of 2005. Partially offsetting this increase was a decline in revenue from our largest client resulting from changes in revenue mix and operating hours as well as fourth quarter challenges in hiring and retaining enough agents to respond to client demand.

Gross margins for 2006 were 15.2%, down from 22.7% in 2005, largely due to the ramp of three new call centers opened during 2006 and the effect of increased agent attrition. Selling, general and administrative costs increased only $1.8 million over 2005 and represent a decline as a percentage of revenue as the Company realized benefits from cost savings initiatives implemented during 2005.

The Company’s effective tax rate declined from 36.8% in 2005 to 28.5% in 2006. This decline was driven by reversals of a $0.4 million reserve related to the favorable settlement of a state tax audit and a $0.3 million valuation allowance related primarily to the cash recovery of an investment the Company had previously written off.

As a result of the above, net income for the 2006 fiscal year was $5.8 million and fully diluted earnings per share including discontinued operations was $0.39 compared to $0.88 in 2005.

FOURTH QUARTER RESULTS

Fourth quarter 2006 revenue was $59.1 million, a 4.4% decline from the third quarter of 2006. The fourth quarter decline was due to challenges in staffing to client demands and changes in revenue mix. Gross margins for the quarter declined to 14.3% from 15.8% in third quarter of 2006. Gross margins in the fourth quarter were lower due to mix changes and higher fixed costs as a percentage of lower revenue, offset by approximately $1.2 million of one-time items, including incentive grants from local municipalities. Selling, general and administrative costs increased $0.2 million from third quarter of 2006.

During the fourth quarter, the Company’s other income benefited from a $0.5 million cash recovery of an investment that had previously been written off. This, along with lower income tax expense for the quarter, resulted in fully diluted earnings per share including discontinued operations of $0.08 compared to $0.11 in the third quarter of 2006. The Company’s year end cash, cash equivalents and investments were $39.4 million versus $45.6 million at the end of 2005. Additionally, in the fourth quarter, the Company entered into two new secured equipment loans for USD$4.9 million and CAD$9.6 million, bringing the Company’s total debt balance to $16.0 million as of December 31, 2006.

LOOKING AHEAD

Larry Jones, StarTek’s President and Chief Executive Officer, said “While the fourth quarter results were disappointing, we continue to address the agent hiring and retention challenges in several locations.” Mr. Jones continued, “We remain focused on our 2007 growth and margin recovery strategy driven by the new executive team, a strong sales effort and a focus on our human capital.”

CONFERENCE CALL

The Company will host a conference call on February 28, 2007, to discuss the Company’s financial results. The call will begin at 6:30 a.m. Mountain Time (8:30 a.m. Eastern Time) and can be accessed as follows:

USA:		800.638.4930
International:		617.614.3944
Passcode:		27889915
Conference Host:	Larry Jones

A dial-in replay will be available from February 28, 2007, at 10:30 a.m. Mountain Time through March 7, 2007, and can be accessed as follows:

USA:	888.286.8010
International:	617.801.6888
Passcode:	58512984

A web-based replay will be available on March 1, 2007, and accessible from the Company’s website at www.startek.com.

ABOUT STARTEK, INC.

StarTek, Inc. (NYSE: SRT) is a leading provider of high value business process outsourcing services to the communications industry. Since 1987 StarTek has partnered with their clients to solve strategic business challenges so that fast-moving businesses can improve customer retention, increase revenue and reduce costs through an improved customer experience. These robust solutions leverage industry knowledge, best business practices, highly skilled agents, proven operational excellence and flexible technology. The StarTek comprehensive service suite includes customer care, sales support, complex order processing, accounts receivable management, technical support and other industry-specific processes. Headquartered in Denver, Colorado, StarTek provides these services from 19 operational facilities in the US and Canada. For more information visit the Company’s website at www.StarTek.com or contact us at 800-541-1130.

FORWARD-LOOKING STATEMENTS

The matters regarding the future discussed in this news release include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements are subject to a number of risks and uncertainties.

The following are important risks and uncertainties relating to StarTek’s business that could cause StarTek’s actual results to differ materially from those expressed or implied by any such forward-looking statements. These include, but are not limited to, risks relating to revenue from its principal clients, concentration of its client base in the telecommunications industry, consolidation in the telecommunications industry, risks related to fluctuations in the value of its investment securities portfolio, inability to effectively manage capacity, highly competitive markets, risks related to its contracts, decreases in numbers of vendors used by clients or potential clients, lack of success of StarTek’s clients’ products or services, considerable pricing pressure, risks associated with advanced technologies, inability to effectively manage growth, dependence on and requirement to recruit qualified employees, including additional sales personnel and key management personnel, potential future declines in revenue, lack of a significant international presence, and foreign exchange risks and other risks relating to conducting business in Canada. Readers are encouraged to review Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Factors and all other disclosures appearing in the Company’s Form 10-K for the year ended December 31, 2005, and subsequent filings with the Securities and Exchange Commission.

STARTEK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)

	Year Ended December 31,
	2006		2005			2004
Revenue	$	237,612	$	216,371		$	221,906
Cost of services		201,424		167,223			164,363
Gross profit		36,188		49,148			57,543
Selling, general and administrative expenses		30,247		28,435			27,451
Operating profit		5,941		20,713			30,092
Net interest and other income		2,126		1,479			3,532
Income from continuing operations before income taxes		8,067		22,192			33,624
Income tax expense		2,303		8,177			12,747
Income from continuing operations		5,764		14,015			20,877
(Loss) income from discontinued operations		—		(1,155	)		99
Net income	$	5,764	$	12,860		$	20,976
Net income per share from continuing operations:
Basic	$	0.39	$	0.96		$	1.44
Diluted	$	0.39	$	0.95		$	1.41
Net income per share including discontinued operations:
Basic	$	0.39	$	0.88		$	1.45
Diluted	$	0.39	$	0.88		$	1.42
Dividends declared per common share	$	1.11	$	1.50		$	1.58

STARTEK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

	As of December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	33,437		$	17,425
Investments		5,933			28,168
Trade accounts receivable, less allowance for doubtful accounts of $16 and $250, respectively		46,364			40,612
Income tax receivable		1,281			4,227
Prepaid expenses and other current assets		3,009			3,161
Total current assets		90,024			93,593
Property, plant and equipment, net		60,101			57,066
Long-term deferred tax assets		4,444			2,402
Other assets		1,166			853
Total assets	$	155,735		$	153,914
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	6,061		$	4,694
Accrued liabilities:
Accrued payroll		6,798			7,280
Accrued compensated absences		4,146			3,522
Accrued health insurance		77			462
Other accrued liabilities		338			806
Current portion of long-term debt		5,654			2,551
Short-term deferred income tax liabilities		754			1,108
Grant advances		173			1,150
Other current liabilities		329			50
Total current liabilities		24,330			21,623
Long-term debt, less current portion		10,314			3,099
Other liabilities		2,709			1,028
Total liabilities		37,353			25,750
Stockholders’ equity:
Common stock, 32,000,000 non-convertible shares, $0.01 par value, authorized; 14,695,791 and 14,631,091 shares issued and outstanding at December 31, 2006 and 2005, respectively.		147			146
Additional paid-in capital		61,669			60,139
Cumulative translation adjustment		1,222			1,646
Unrealized gain on investments available for sale		1			3
Unrealized (loss) gain on derivative instruments		(235	)		127
Retained earnings		55,578			66,103
Total stockholders’ equity		118,382			128,164
Total liabilities and stockholders’ equity	$	155,735		$	153,914

STARTEK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

	Year Ended December 31,
	2006			2005			2004
Operating Activities
Net income	$	5,764		$	12,860		$	20,976
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		16,758			13,364			12,546
Non-cash compensation cost		321			—			—
Deferred income taxes		(1,830	)		(595	)		(402	)
Realized (gain) loss on investments		(128	)		623			(1,981	)
(Gain) loss on sale of assets		(98	)		(1,083	)		1,626
Changes in operating assets and liabilities:
Sales of trading securities, net		—			2,929			2,926
Trade accounts receivable, net		(5,752	)		10,679			(7,903	)
Prepaid expenses and other assets		(361	)		(549	)		257
Accounts payable		939			(2,704	)		(1,453	)
Income taxes, net		2,946			8,405			(10,197	)
Accrued and other liabilities		319			1,530			4,723
Net cash provided by operating activities		18,878			45,459			21,118
Investing Activities
Purchases of investments available for sale		(351,108	)		(733,935	)		(271,673	)
Proceeds from disposition of investments available for sale		373,466			726,126			286,077
Purchases of property, plant and equipment		(20,110	)		(15,365	)		(19,465	)
Proceeds from disposition of property, plant and equipment		343			5,986			1,626
Net cash provided by (used in) investing activities		2,591			(17,188	)		(3,435	)
Financing Activities
Proceeds from stock option exercises		1,112			327			4,477
Principal payments on borrowings		(2,798	)		(4,594	)		(7,751	)
Dividend payments		(16,289	)		(21,943	)		(22,820	)
Proceeds from borrowings		13,294			880			17,010
Net cash used in financing activities		(4,681	)		(25,330	)		(9,084	)
Effect of exchange rate changes on cash		(776	)		(125	)		55
Net increase in cash and cash equivalents		16,012			2,816			8,654
Cash and cash equivalents at beginning of period		17,425			14,609			5,955
Cash and cash equivalents at end of period	$	33,437		$	17,425		$	14,609