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): July 31, 2006

STARTEK, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE	1-12793	84-1370538
(State or other jurisdiction of incorporation	(Commission File	(I.R.S. Employer Identification No.)
or organization)	Number)

44 Cook Street, 4^th Floor, Denver, Colorado 80206

(Address of principal executive offices; zip code)

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

(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 1.01. Entry into a Material Definitive Agreement

On July 31, 2006, the Board of Directors of StarTek, Inc.(“StarTek”) approved that Ed Zschau will receive $15,000 annually, paid in quarterly installments, in addition to the normal director compensation, for his services as Chairman of the Board.

Item 2.02. Results of Operations and Financial Condition

On August 2, 2006, StarTek issued a press release reporting its earnings for the quarter ended June 30, 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 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

On July 31, 2006, A. Laurence Jones was appointed as a member of the Audit Committee, Compensation Committee, and Governance and Nominating Committee of the Board of Directors of StarTek.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

99.1      Press Release dated August 2, 2006

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: August 4, 2006	By:	/s/ Rodd E. Granger
		Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press release dated August 2, 2006

EX-99.1

Exhibit 99.1

FOR RELEASE at 7:00 a.m. ET
Wednesday, August 2, 2006

CONTACT:	INVESTOR RELATIONS CONTACT:
Steve Butler	Jennifer Martin
President, Chief Executive Officer, StarTek, Inc.	Director, SEC Reporting and Compliance, StarTek, Inc.
303-262-4500	303.262.4587
steve.butler@startek.com	jennifer.martin@startek.com

StarTek, Inc. Reports a 17% Increase in Revenue As Two More New Call Centers Go Live
Financial results reflect period of growth and continued implementation of strategic initiative

DENVER, Colo. — August 2, 2006 — StarTek, Inc. (NYSE:SRT) reported second quarter 2006 fully diluted earnings per share from continuing operations of $0.06. Fully diluted earnings per share from continuing operations for the same period in 2005 were $0.18.

Revenue for the second quarter of $59.5 million represented an increase of 17% over the same period in the previous year. New clients added since the second quarter of 2005 drove this increase, contributing $9.4 million to revenue during the quarter. These new clients also lessened StarTek’s revenue concentration as the Company’s two largest clients represented 66% of revenue during the second quarter of 2006, versus 78% during the same period of 2005. The Company also continued to expand its value-added services by launching two new business solutions during the quarter aimed at further diversifying its revenue base.

Gross margin declined from 22% to 14%. The majority of this decline was the result of costs attributable to greater than anticipated employee turnover in certain of our U.S. sites as well as the opening and ramping of two new call centers in Ontario, Canada during the second quarter. The ongoing strengthening of the Canadian dollar versus the U.S. dollar contributed approximately $1.3 million to the decline in margin. Lower volumes from our largest client as well as increased numbers of agents in training in many of our sites also negatively impacted second quarter gross margin.

“Launching three new call centers and ramping personnel to service three new clients over a six month period had a significant impact on our margins, as we had anticipated,” said Steve Butler, President and CEO of StarTek. “However, we are encouraged by the double-digit revenue growth that occurred in the second quarter primarily as a result of these new call centers and new clients. During the quarter we also broadened our service offerings to include Intelligent Enterprise, a suite of complex management services targeted at communications, financial services and healthcare organizations and a solution to provide support for emerging consumer-driven health care plans. This is a manifestation of our continuing efforts to focus on the long-term success of StarTek as we position the Company for future growth and revenue diversification.”

Selling, general and administrative expenses increased $0.9 million during the second quarter of 2006 due to increased legal expenses and costs associated with support of three new call centers placed into service during the first half of 2006. As a percentage of revenue, selling, general and administrative costs declined from 12.8% in the second quarter of 2005 to 12.4% in the same period of 2006. Net interest and

other income increased $0.9 million due to losses incurred in the previous year as we repositioned our portfolio investments to be in line with a new investment policy. Net income from continuing operations for the second quarter declined to $0.8 million in 2006 from $2.7 million in 2005.

The Board of Directors declared a quarterly dividend of $0.25 per share, payable on August 24, 2006, to our stockholders of record as of August 14, 2006.

About StarTek

StarTek, Inc. (NYSE: SRT) is a leading provider of Business Process Optimization services for outsourced customer interactions. Since 1987, StarTek has provided customer experience management solutions that solve strategic business challenges so that fast-moving businesses can effectively manage customer relationships across all contact points — web, voice, email, fax, and video. This blended solution helps companies create and maintain customer satisfaction and frees them to focus on preserving capital, while StarTek delivers the ultimate customer experience. The Company is managed by executives from the Financial, Cable MSO, CRM and business services industries. Headquartered in Denver, Colorado, StarTek has 18 operational facilities across North America. For more information visit the Company’s website at www.StarTek.com.

Conference Call

The Company will host a conference call on August 2, 2006, 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:	866.700.6293
International:	617.213.8835
Passcode:	59592106
Conference Host:	Steve Butler

A dial-in replay will be available August 2, 2006, at 10:30 a.m. Mountain Time through August 9, 2006, and can be accessed as follows:

USA:	888.286.8010
International:	617.801.6888
Passcode:	98114088

A web-based replay will be available on August 11, 2006, and accessible from the Investor Relations section of the Company’s website at www.startek.com.

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, loss of its principal clients, concentration of its client base in a few select industries, 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 relating to fluctuations in the value of StarTek’s investment securities portfolio, risks associated with advanced technologies, inability to grow its business, inability to effectively manage growth, dependence on qualified employees and key management personnel, potential future declines in revenue, lack of a significant international presence, and 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
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data, unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2006		2005			2006		2005
Revenue	$	59,525	$	50,991		$	116,630	$	104,329
Cost of services		51,321		39,648			98,654		80,292
Gross profit		8,204		11,343			17,976		24,037
Selling, general and administrative expenses		7,389		6,530			14,962		14,212
Operating profit		815		4,813			3,014		9,825
Net interest and other income		533		(407	)		1,066		38
Income from continuing operations before income taxes		1,348		4,406			4,080		9,863
Income tax expense		523		1,738			1,119		3,841
Income from continuing operations		825		2,668			2,961		6,022
Discontinued operations:
Income (loss) from operations of discontinued operations		—		46			—		(1,121	)
Income tax (expense) benefit		—		(71	)		—		388
Loss on discontinued operations		—		(25	)		—		(733	)
Net income	$	825	$	2,643		$	2,961	$	5,289
Net income per share from continuing operations:
Basic	$	0.06	$	0.18		$	0.20	$	0.41
Diluted	$	0.06	$	0.18		$	0.20	$	0.41
Net income per share including discontinued operations:
Basic	$	0.06	$	0.18		$	0.20	$	0.36
Diluted	$	0.06	$	0.18		$	0.20	$	0.36

STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)

	June 30,		December 31,
	2006		2005
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	14,999	$	17,425
Investments		15,461		28,168
Trade accounts receivable, less allowance for doubtful accounts of $4 and $250, respectively		44,031		40,612
Income tax receivable		1,914		4,227
Prepaid expenses and other current assets		3,839		3,161
Total current assets		80,244		93,593
Property, plant and equipment, net		62,860		57,066
Long-term deferred tax assets		4,087		2,402
Other assets		1,157		853
Total assets	$	148,348	$	153,914
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,140	$	4,744
Accrued liabilities:
Accrued payroll		7,059		7,280
Accrued compensated absences		4,061		3,522
Accrued health insurance		110		462
Other accrued liabilities		325		806
Current portion of long-term debt		2,597		2,551
Short-term deferred income tax liabilities		1,613		1,108
Grant advances		1,389		1,150
Total current liabilities		20,294		21,623
Long-term debt, less current portion		1,800		3,099
Long-term deferred rent		1,569		247
Other liabilities		781		781
Total liabilities		24,444		25,750
Stockholders’ equity:
Common stock		147		146
Additional paid-in capital		61,536		60,139
Accumulated other comprehensive income		2,099		1,776
Retained earnings		60,122		66,103
Total stockholders’ equity		123,904		128,164
Total liabilities and stockholders’ equity	$	148,348	$	153,914

STARTEK, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands, unaudited)

	Six Months Ended
	June 30,
	2006			2005
Operating Activities
Net income	$	2,961		$	5,289
Adjustments to reconcile net income to net cash provided by operating activities Depreciation		8,153			6,460
Non-cash compensation cost		153			—
Deferred income taxes		(1,243	)		(539	)
Realized (gain) loss on investments		(35	)		747
Gain on sale of assets		(101	)		(66	)
Changes in operating assets and liabilities:
Sales of trading securities, net		—			2,929
Trade accounts receivable, net		(3,419	)		7,110
Prepaid expenses and other assets		(940	)		(682	)
Accounts payable		(1,604	)		(2,244	)
Income taxes receivable, net		2,313			9,358
Accrued and other liabilities		1,045			(540	)
Net cash provided by operating activities		7,283			27,822
Investing Activities
Purchases of investments available for sale		(114,490	)		(515,736	)
Proceeds from disposition of investments available for sale		127,273			497,160
Purchases of property, plant and equipment		(13,339	)		(4,882	)
Proceeds from disposition of property, plant and equipment		343			57
Net cash used in investing activities		(213	)		(23,401	)
Financing Activities
Proceeds from stock option exercises		1,112			488
Principal payments on borrowings		(1,253	)		(2,458	)
Dividend payments		(8,942	)		(11,409	)
Proceeds from borrowings		—			880
Net cash used in financing activities		(9,083	)		(12,499	)
Effect of exchange rate changes on cash		(413	)		172
Net decrease in cash and cash equivalents		(2,426	)		(7,906	)
Cash and cash equivalents at beginning of period		17,425			14,609
Cash and cash equivalents at end of period	$	14,999		$	6,703