StarTek Inc. (SRT, Financial) filed Quarterly Report for the period ended 2011-03-31.
Startek Inc. has a market cap of $82.26 million; its shares were traded at around $5.44 with and P/S ratio of 0.31.
Cost of services declined $8.2 million from $60.3 million in the first quarter of 2010 to $52.1 million in the first quarter of 2011. As a percentage of revenue, cost of services decreased to 87.6% in the first quarter of 2011 compared to 89.4% in the first quarter of 2010. Cost of services in the U.S. decreased by approximately $8.8 million. Gross profit as a percentage of revenue in the U.S. decreased from 15.2% in the first quarter of 2010 to 14.7% in the first quarter of 2011. The decrease in cost of services in the U.S. was due primarily to an $8.1 million decline related to the site closures mentioned above. Gross profit as a percentage of revenue in Canada decreased slightly from 8.6% in the first quarter of 2010 to 8.0% in the first quarter of 2011. Cost of services in Canada declined by $4.2 million in the first quarter of 2011 from the first quarter of 2010, of which $3.7 million was due to the closures of the facilities in Thunder Bay and Sarnia, described above. Gross profit as a percentage of revenue in our Offshore segment increased from a (loss) of (25.9%) in the first quarter of 2010 to a 10.8% profit in the first quarter of 2011. Cost of services for our Offshore segment increased by approximately $4.9 million due to the opening of new sites in Ortigas, Philippines and Heredia, Costa Rica, and the ramp-up of our Makati, Philippines location.
Selling, general and administrative expenses decreased by $1.2 million, or 11.1%, from $10.9 million in the first quarter of 2010 to $9.7 million in the first quarter of 2011. The decrease in selling, general and administrative expenses was primarily due to a decrease in salary expense of approximately $0.8 million and bonus expense of approximately $0.4 million.
On March 23, 2011, we reached an agreement with UMB Bank to amend our line of credit agreement, whereby, the amount available on the secured line of credit was reduced from $15 million to $10 million. The reduction in the amount available on the line was in response to a modification of certain financial covenants. Our financial covenant to maintain a minimum tangible net worth was decreased from at least $100 million to at least $90 million in the new agreement. In addition, borrowings will bear interest at our option at the time of borrowing, of the thirty, sixty or ninety day LIBOR index, plus 2.50%, and the interest rate shall never be less than 4.00% per annum. This is an increase from the previous agreement which called for borrowings to bear interest, at our option at
Operating Activities. Net cash provided by operating activities decreased $8.4 million from $11.8 million for the three months ended March 31, 2010 to $3.4 million for the three months ended March 31, 2011. The decline in cash provided by operating activities was driven by 1) a $4.9 million decline in the change in income tax refunds due to the absence of a large income tax refund collected in the first quarter of 2010, 2) a $2.1 million increase in payments of accounts payable during the first quarter of 2011 compared to 2010 and 3) a $1.0 million decline in net loss before impairment losses.
Investing Activities. Net cash used in investing activities was $1.8 million in the first three months of 2011, compared to $4.4 million in the first three months of 2010. The decrease was due primarily to a decrease of $2.9 million in purchases of property, plant and equipment due to the fact that we did not invest in any new sites in 2011, compared to investment in two sites that opened in 2010, one in Costa Rica and one in the Philippines.
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Startek Inc. has a market cap of $82.26 million; its shares were traded at around $5.44 with and P/S ratio of 0.31.
Highlight of Business Operations:
Revenue decreased by $7.9 million, or 11.7%, from $67.4 million in the first quarter of 2010 to $59.5 million in the first quarter of 2011. The decrease was driven by a $10.7 million decline in revenue in our U.S. segment. Of that decrease, $8.6 million is attributable to site closures that occurred over the past year in Victoria, Laramie, Greeley, Grand Junction and Alexandria. The remainder of the decrease was attributable to a volume decline from our largest client, as well as a decrease in the number of billable agents in two locations due to increased attrition. Revenue in our Canadian segment declined by $4.6 million in the first quarter of 2011 compared to the first quarter of 2010. Of this decrease, $3.7 million is attributable to the closure of our facilities in Thunder Bay and Sarnia. The remainder of the decrease was primarily related to an unprofitable site, which we recently announced that we will downsize in the third quarter of 2011. Revenue in our Offshore segment totaled $12.0 million, an increase of $7.4 million comparedCost of services declined $8.2 million from $60.3 million in the first quarter of 2010 to $52.1 million in the first quarter of 2011. As a percentage of revenue, cost of services decreased to 87.6% in the first quarter of 2011 compared to 89.4% in the first quarter of 2010. Cost of services in the U.S. decreased by approximately $8.8 million. Gross profit as a percentage of revenue in the U.S. decreased from 15.2% in the first quarter of 2010 to 14.7% in the first quarter of 2011. The decrease in cost of services in the U.S. was due primarily to an $8.1 million decline related to the site closures mentioned above. Gross profit as a percentage of revenue in Canada decreased slightly from 8.6% in the first quarter of 2010 to 8.0% in the first quarter of 2011. Cost of services in Canada declined by $4.2 million in the first quarter of 2011 from the first quarter of 2010, of which $3.7 million was due to the closures of the facilities in Thunder Bay and Sarnia, described above. Gross profit as a percentage of revenue in our Offshore segment increased from a (loss) of (25.9%) in the first quarter of 2010 to a 10.8% profit in the first quarter of 2011. Cost of services for our Offshore segment increased by approximately $4.9 million due to the opening of new sites in Ortigas, Philippines and Heredia, Costa Rica, and the ramp-up of our Makati, Philippines location.
Selling, general and administrative expenses decreased by $1.2 million, or 11.1%, from $10.9 million in the first quarter of 2010 to $9.7 million in the first quarter of 2011. The decrease in selling, general and administrative expenses was primarily due to a decrease in salary expense of approximately $0.8 million and bonus expense of approximately $0.4 million.
On March 23, 2011, we reached an agreement with UMB Bank to amend our line of credit agreement, whereby, the amount available on the secured line of credit was reduced from $15 million to $10 million. The reduction in the amount available on the line was in response to a modification of certain financial covenants. Our financial covenant to maintain a minimum tangible net worth was decreased from at least $100 million to at least $90 million in the new agreement. In addition, borrowings will bear interest at our option at the time of borrowing, of the thirty, sixty or ninety day LIBOR index, plus 2.50%, and the interest rate shall never be less than 4.00% per annum. This is an increase from the previous agreement which called for borrowings to bear interest, at our option at
Operating Activities. Net cash provided by operating activities decreased $8.4 million from $11.8 million for the three months ended March 31, 2010 to $3.4 million for the three months ended March 31, 2011. The decline in cash provided by operating activities was driven by 1) a $4.9 million decline in the change in income tax refunds due to the absence of a large income tax refund collected in the first quarter of 2010, 2) a $2.1 million increase in payments of accounts payable during the first quarter of 2011 compared to 2010 and 3) a $1.0 million decline in net loss before impairment losses.
Investing Activities. Net cash used in investing activities was $1.8 million in the first three months of 2011, compared to $4.4 million in the first three months of 2010. The decrease was due primarily to a decrease of $2.9 million in purchases of property, plant and equipment due to the fact that we did not invest in any new sites in 2011, compared to investment in two sites that opened in 2010, one in Costa Rica and one in the Philippines.
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