##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from
 _____ 
to
 _____
 Commission file number 1-12793
 
 StarTek, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    84-1370538(I.R.S. employer
Identification No.)
 44 Cook Street, 4thFloor
    
    80206Denver, Colorado
    
    (Zip code)(Address of principal executive offices)
 (303) 262-4500  (Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $.01 par value
    
    New York Stock Exchange, Inc.
 Securities registered pursuant to Section 12(g) of the Act: None
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




---



TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for the Registrants Common Stock, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7a. Quantitative and Qualitative Disclosure About Market RiskItem 8. Financial Statement and Supplementary Financial DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItems 10 through 14PART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESINDEX OF EXHIBITSExhibit 10.11Exhibit 10.16Exhibit 10.24Exhibit 10.25Exhibit 10.43Exhibit 10.44Exhibit 10.46Exhibit 10.50Exhibit 10.53Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1    Table of Contents  Forward-Looking Statements
 All statements contained in this Form 10-K that are not statements of historical facts are
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act, as amended, that involve substantial
risks and uncertainties. Forward-looking statements are preceded by terms such as may, will,
should, anticipates, expects, believes, plans, future, estimate, continue,
intends, budgeted, projections, outlook and similar expressions. The following are
important factors that could cause actual results to differ materially from those expressed or
implied by such forward-looking statements. These factors include, but are not limited to, risks
relating to our revenue from our principal clients, concentration of our client base in the
communications industry, consolidation in the communications industry, trend of communications
companies to out-source non-core services, management turnover, dependence on and requirement to
recruit qualified employees, labor costs, need to retain key management personnel and to add
specialized sales personnel, considerable pricing pressure, capacity utilization of our facilities,
collection of note receivable from sale of Supply Chain Management Services platform, defense and
outcome of pending class action lawsuit, lack of success of our clients products or services,
risks related to our contracts, decreases in numbers of vendors used by clients or potential
clients, inability to effectively manage growth, risks associated with advanced technologies,
highly competitive markets, foreign exchange risks and other risks relating to conducting business
in Canada, lack of a significant international presence, potentially significant influence on
corporate actions by our largest stockholder, volatility of our stock price, geopolitical military
conditions, interruption to our business, increasing costs of or interruptions in telephone and
data services, compliance with SEC rules, risks in renewing or replacing capital funding,
fluctuations in the value of our investment securities portfolio, and variability of quarterly
operating results. These factors include risks and uncertainties beyond our ability to control, and
in many cases we cannot predict the risks and uncertainties that could cause actual results to
differ materially from those indicated by use of forward-looking statements. Similarly, it is
impossible for management to foresee or identify all such factors. As such, investors should not
consider the foregoing list to be an exhaustive statement of all risks, uncertainties, or
potentially inaccurate assumptions. All forward-looking statements herein are made as of the date
hereof, and we undertake no obligation to update any such forward-looking statements. All
forward-looking statements herein are qualified in their entirety by information set forth in
Managements Discussion and Analysis of Financial Condition and Results of Operations  Risk
Factors appearing elsewhere in this Form 10-K .
  
 PART I
 
 Item 1. Business
 Business Overview
  Customer Service Offerings People Technology
 Customer Service Offerings 
 Customer Care.
 Sales Support.
  2




---



##### Table of Contents



Complex Order Processing.
 Accounts Receivable Management.
 Technical Support.
 Other.
 People 
 Technology 
  Customer Trends
  Key Competitive Differentiators
   3




---



##### Table of Contents



Our industry expertise.
 Our reputation for operational excellence.
 Our flexible technology.
 Our people.
 Strategy
  
    
    grow our existing client base by deepening and broadening our relationships,
    
    add new clients in the communications segment and continue to diversify our client base,
    
    improve the profitability of our business through operational improvements and securing higher margin business,
    
    add new services to broaden our offering to the communications segment and
    
    make prudent acquisitions to expand our business scale and service offerings.
 History of the Business
     Exhibits and
Financial Statement Schedules
 Managements
Discussion and Analysis of Financial Condition and Results of Operations  Risk Factors
  4




---



##### Table of Contents



Industry
    Competition
  Clients
 Managements Discussion and Analysis of Financial Condition and Results of
Operations  Risk Factors
 Government and Environmental Regulation
  Employees and Training
 Managements Discussion and Analysis of Financial Condition and
Results of Operations  Risk Factors
  5




---



##### Table of Contents



Corporate Information
 th www.startek.com
 Web Site Availability of Reports
   
 Item 1A. Risk Factors
 Managements Discussion and Analysis of Financial Condition and Results of Operations  Risk
Factors
 
 Item 1B. Unresolved Staff Comments
   6




---



##### Table of Contents



Item 2. Properties
  Year
    
    
    ApproximateProperties
    
    Opened
    
    
    Square Feet
    
    
    Leased or OwnedU.S. FacilitiesGreeley, Colorado
    
    
    1998
    
    
    
    35,000
    
    
    Company OwnedLaramie, Wyoming
    
    
    1998
    
    
    
    22,000
    
    
    Company OwnedGrand Junction, Colorado
    
    
    1999
    
    
    
    46,350
    
    
    LeasedGreeley, Colorado
    
    
    1999
    
    
    
    88,000
    
    
    Company OwnedBig Spring, Texas
    
    
    1999
    
    
    
    30,000
    
    
    LeasedEnid, Oklahoma
    
    
    2000
    
    
    
    47,500
    
    
    Company OwnedGrand Junction, Colorado
    
    
    2000
    
    
    
    54,500
    
    
    LeasedDecatur, Illinois
    
    
    2003
    
    
    
    37,500
    
    
    LeasedAlexandria, Louisiana
    
    
    2003
    
    
    
    40,000
    
    
    LeasedLynchburg, Virginia
    
    
    2004
    
    
    
    38,600
    
    
    LeasedCollinsville, Virginia
    
    
    2004
    
    
    
    49,250
    
    
    LeasedDenver, Colorado
    
    
    2004
    
    
    
    23,000
    
    
    Leased (a)Petersburg, Virginia
    
    
    2005
    
    
    
    39,600
    
    
    Leased (b)Canadian FacilitiesKingston, Ontario
    
    
    2001
    
    
    
    49,000
    
    
    Company OwnedKingston, Ontario
    
    
    2001
    
    
    
    20,000
    
    
    LeasedCornwall, Ontario
    
    
    2001
    
    
    
    73,800
    
    
    LeasedRegina, Saskatchewan
    
    
    2003
    
    
    
    62,000
    
    
    LeasedSarnia, Ontario
    
    
    2003
    
    
    
    37,200
    
    
    LeasedThunder Bay, Ontario
    
    
    2006
    
    
    
    33,000
    
    
    LeasedHawkesbury, Ontario
    
    
    2006
    
    
    
    41,000
    
    
    Leased (c)
 (a)
    
    Company headquarters, which houses executive and administrative employees.(b)
    
    Our Petersburg facility ceased operations in January 2007 and reopened in May 2007.(c)
    
    Our Hawkesbury, Ontario facility ceased operations in August 2007. In 2008, we intend to
sublet the facility through the remainder of the lease term.   
 Item 3. Legal Proceedings
   7




---



##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for the Registrants Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities
 Market Price of Common Stock
  DividendHigh
    
    
    Low
    
    
    Per Share2007First Quarter
    
    $
    14.05
    
    
    $
    9.46
    
    
    $
    Second Quarter
    
    $
    10.93
    
    
    $
    9.41
    
    
    $
    Third Quarter
    
    $
    11.60
    
    
    $
    10.01
    
    
    $
    Fourth Quarter
    
    $
    10.94
    
    
    $
    8.73
    
    
    $
    2006First Quarter
    
    $
    24.50
    
    
    $
    17.71
    
    
    $
    0.36Second Quarter
    
    $
    24.47
    
    
    $
    12.56
    
    
    $
    0.25Third Quarter
    
    $
    14.83
    
    
    $
    10.83
    
    
    $
    0.25Fourth Quarter
    
    $
    15.46
    
    
    $
    11.65
    
    
    $
    0.25
   8




---



##### Table of Contents



Holders of Common Stock
 Managements Discussion and Analysis of Financial Condition and Results
of Operations  Risk Factors
 Dividend Policy
  Stock Repurchase Program
 
  9




---



##### Table of Contents



Stock Performance Graph
  
   10




---



##### Table of Contents



Item 6. Selected Financial Data
 Exhibits and Financial Statement
Schedules Managements Discussion and Analysis of Financial Condition and Results of
Operations,
 Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(In thousands, except per share data)Consolidated Statement of Operations Data:Revenue
    
    $
    245,304
    
    
    $
    237,612
    
    
    $
    216,371
    
    
    $
    221,906
    
    
    $
    165,537Cost of services
    
    
    206,087
    
    
    
    201,424
    
    
    
    167,223
    
    
    
    164,363
    
    
    
    114,291Gross profit
    
    
    39,217
    
    
    
    36,188
    
    
    
    49,148
    
    
    
    57,543
    
    
    
    51,246Selling, general and administrative expenses
    
    
    38,991
    
    
    
    30,247
    
    
    
    28,435
    
    
    
    27,451
    
    
    
    25,446Impairment losses and restructuring charges
    
    
    4,325
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating (loss) income
    
    
    (4,099
    )
    
    
    5,941
    
    
    
    20,713
    
    
    
    30,092
    
    
    
    25,800Net interest and other income
    
    
    745
    
    
    
    2,126
    
    
    
    1,479
    
    
    
    3,532
    
    
    
    4,048(Loss) income from continuing operations before income taxes
    
    
    (3,354
    )
    
    
    8,067
    
    
    
    22,192
    
    
    
    33,624
    
    
    
    29,848Income tax (benefit) expense
    
    
    (523
    )
    
    
    2,303
    
    
    
    8,177
    
    
    
    12,747
    
    
    
    11,125(Loss) income from continuing operations
    
    
    (2,831
    )
    
    
    5,764
    
    
    
    14,015
    
    
    
    20,877
    
    
    
    18,723(Loss) gain from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (1,155
    )
    
    
    99
    
    
    
    3,475Net (loss) income
    
    $
    (2,831
    )
    
    $
    5,764
    
    
    $
    12,860
    
    
    $
    20,976
    
    
    $
    22,198Net (loss) income per share from continuing operations:Basic
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.96
    
    
    $
    1.44
    
    
    $
    1.31Diluted
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.95
    
    
    $
    1.41
    
    
    $
    1.28Net (loss) income per share including discontinued operations:Basic
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.88
    
    
    $
    1.45
    
    
    $
    1.56Diluted
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.88
    
    
    $
    1.42
    
    
    $
    1.52Weighted average shares outstanding:Basic
    
    
    14,696
    
    
    
    14,680
    
    
    
    14,629
    
    
    
    14,455
    
    
    
    14,243Diluted
    
    
    14,696
    
    
    
    14,714
    
    
    
    14,681
    
    
    
    14,780
    
    
    
    14,623Balance Sheet Data:Total assets
    
    $
    155,458
    
    
    $
    155,735
    
    
    $
    153,914
    
    
    $
    166,872
    
    
    $
    153,607Total debt
    
    $
    11,355
    
    
    $
    15,968
    
    
    $
    5,650
    
    
    $
    9,363
    
    
    $
    104Total stocholders equity
    
    $
    118,214
    
    
    $
    118,382
    
    
    $
    128,164
    
    
    $
    136,883
    
    
    $
    133,000Other Selected Financial Data:Capital expenditures, net of proceeds
    
    $
    15,207
    
    
    $
    19,767
    
    
    $
    9,379
    
    
    $
    17,839
    
    
    $
    23,736Depreciation
    
    $
    17,092
    
    
    $
    16,758
    
    
    $
    13,364
    
    
    $
    12,546
    
    
    $
    10,045Cash dividends declared per common share
    
    $
    
    
    
    $
    1.11
    
    
    $
    1.50
    
    
    $
    1.58
    
    
    $
    0.73
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Executive Overview
   11




---



##### Table of Contents



12




---



##### Table of Contents



Results of Operations
  The following table presents selected items from our Consolidated Statements of Operations in
dollars and as a percentage of revenue for the periods indicated:
 Year Ended December 31,2007
    
    
    2006
    
    
    2005(Dollars in thousands)Revenue
    
    $
    245,304
    
    
    
    100.0
    %
    
    $
    237,612
    
    
    
    100.0
    %
    
    $
    216,371
    
    
    
    100.0
    %Cost of services
    
    
    206,087
    
    
    
    84.0
    %
    
    
    201,424
    
    
    
    84.8
    %
    
    
    167,223
    
    
    
    77.3
    %Gross profit
    
    
    39,217
    
    
    
    16.0
    %
    
    
    36,188
    
    
    
    15.2
    %
    
    
    49,148
    
    
    
    22.7
    %Selling, general and administrative expenses
    
    
    38,991
    
    
    
    15.9
    %
    
    
    30,247
    
    
    
    12.7
    %
    
    
    28,435
    
    
    
    13.1
    %Impairment losses and restructuring charges
    
    
    4,325
    
    
    
    1.8
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Operating (loss) income
    
    
    (4,099
    )
    
    
    -1.7
    %
    
    
    5,941
    
    
    
    2.5
    %
    
    
    20,713
    
    
    
    9.6
    %Net interest and other income
    
    
    745
    
    
    
    0.3
    %
    
    
    2,126
    
    
    
    0.9
    %
    
    
    1,479
    
    
    
    0.7
    %(Loss) income from continuing operations
before income taxes
    
    
    (3,354
    )
    
    
    -1.4
    %
    
    
    8,067
    
    
    
    3.4
    %
    
    
    22,192
    
    
    
    10.3
    %Income tax (benefit) expense
    
    
    (523
    )
    
    
    -0.2
    %
    
    
    2,303
    
    
    
    1.0
    %
    
    
    8,177
    
    
    
    3.8
    %(Loss) income from continuing operations
    
    
    (2,831
    )
    
    
    -1.2
    %
    
    
    5,764
    
    
    
    2.4
    %
    
    
    14,015
    
    
    
    6.5
    %Loss from discontinued operations, net of tax
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    (1,155
    )
    
    
    -0.5
    %Net (loss) income
    
    $
    (2,831
    )
    
    
    -1.2
    %
    
    $
    5,764
    
    
    
    2.4
    %
    
    $
    12,860
    
    
    
    5.9
    %
 2007 Compared to 2006
 Revenue.
 Cost of Services.
 Selling, General and Administrative Expenses.
 Impairment Losses and Restructuring Charges.
  13




---



##### Table of Contents



Operating Income (Loss).
 Net Interest and Other Income.
 Income Tax Expense (Benefit).
 Net Income (Loss).
 2006 Compared to 2005
 Revenue.
 Cost of Services.
 Selling, General and Administrative Expenses.
 Operating Income.
  14




---



##### Table of Contents



Net Interest and Other Income.
 Income Tax Expense.
 Discontinued Operations.
 Net Income.
 Liquidity and Capital Resources
   Net Cash Provided by Operating Activities.
 Net Cash Provided by (Used in) Investing Activities.
  15




---



##### Table of Contents



Net Cash Used in Financing Activities.
  16




---



##### Table of Contents



Contractual Obligations.
 Less Than
    
    
    Two to Three
    
    
    Four to
    
    
    More thanOne Year
    
    
    Years
    
    
    Five Years
    
    
    Five Years
    
    
    TotalOperating leases (1)
    
    $
    4,633
    
    
    $
    8,675
    
    
    $
    5,476
    
    
    $
    751
    
    
    $
    19,535Purchase obligations (2)
    
    
    2,171
    
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    2,233Long-term debt, including current
portion(3)
    
    
    3,975
    
    
    
    7,380
    
    
    
    
    
    
    
    
    
    
    
    11,355Total contractual obligations
    
    $
    10,779
    
    
    $
    16,117
    
    
    $
    5,476
    
    
    $
    751
    
    
    $
    33,123
 (1)
    
    We lease facilities and equipment under various non-cancelable operating leases.(2)
    
    Purchase obligations include commitments to purchase goods and services that in some cases
may include provisions for cancellation.(3)
    
    Our outstanding debt obligations as of December 31, 2007 are described below. Line of Credit
  Secured Equipment Loan
  Canadian Dollar Secured Equipment Loan
   17




---



##### Table of Contents



Secured Promissory Note
  Other Factors Impacting Liquidity
  Exhibits and Financial Statement Schedules
  Variability of Operating Results
  Critical Accounting Policies and Estimates
  Revenue Recognition
   18




---



##### Table of Contents



Impairment of Long-Lived Assets
 Exhibits and Financial
Statement Schedules.
 Restructuring Charges
 Exhibits and Financial Statement Schedules.
 Investments
    Exhibits and Financial Statement
Schedules.
  19




---



##### Table of Contents



Derivative Instruments and Hedging Activities
   Income Taxes
     20




---



##### Table of Contents



Stock-Based Compensation
 Exhibits and
Financial Statement Schedules.
 Risk Factors
 Over 70% of our revenue in the past several years has been received from our two largest clients.
The loss or reduction in business from any of these clients would adversely affect our business and
results of operations.
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(1)AT&T Inc. (formerly Cingular Wireless, LLC and AT&T Corp.)
    
    
    50.4
    %
    
    
    52.7
    %
    
    
    63.6
    %T-Mobile
    
    
    21.8
    %
    
    
    21.2
    %
    
    
    23.9
    %
 (1)
    
    2005 data has been adjusted from amounts previously reported due to the
merger of two of our clients, AT&T Corp. and Cingular Wireless, LLC.     21




---



##### Table of Contents



Our client base is concentrated in the communications industry, which has recently experienced
consolidation trends. As our clients businesses change as a result of merger and acquisition
activity, there is no guarantee that the newly formed companies will continue to use our services.
  Our client base is concentrated in the communications industry and our strategy partially depends
on a trend of communications companies continuing to outsource non-core services. If the
communications industry suffers a downturn or the trend toward outsourcing reverses, our business
will suffer.
  We have experienced significant management turnover and need to retain key management personnel.
  If we are not able to hire and retain qualified employees, our ability to service our existing
customers and retain new customers will be adversely affected.
    22




---



##### Table of Contents



Our operating costs may increase as a result of higher labor costs.
  We may need to add specialized sales personnel in order to grow our business. We may have
difficulty recruiting candidates for these positions.
  We face considerable pricing pressure in our business, and if we are not able to continually
increase productivity, our gross margins and results of operations may be adversely affected.
  Our operating results may be adversely affected if we are unable to maximize our facilities
capacity utilization.
   23




---



##### Table of Contents



We may not collect on a $740 thousand note receivable due from the purchasers of our Supply Chain
Management Services platform.
  We and some of our former management employees are the subject of a class action lawsuit. The
defense and ultimate outcome of these allegations could negatively affect our future operating
results.
      24




---



##### Table of Contents



We generate revenue based on the demand for, and inquiries generated by, our clients products and
services. If our clients products and services are not successful or do not generate the
anticipated call volumes, our revenue and results of operations will be adversely affected.
   Our contracts generally do not contain minimum purchase requirements and can generally be
terminated by our customers on short notice without penalty.
  Our existing and potential clients are currently decreasing the number of vendors they are using to
outsource their business process services. If we lose more business than we gain as a result of
this vendor consolidation, our business and results of operations will be adversely affected.
  If we do not effectively manage our growth or control costs related to growth, our results of
operations will suffer.
   25




---



##### Table of Contents



Failure to implement technological advancements could make our services less competitive.
  Our markets are highly competitive. If we do not compete effectively, we may lose our existing
business or fail to gain new business.
   Our operations in Canada subject us to the risk of currency exchange fluctuations.
  We face risks inherent in conducting business in Canada.
   26




---



##### Table of Contents



Our lack of a significant international presence outside of North America may adversely affect our
ability to serve existing customers or limit our ability to obtain new customers.
    Our largest stockholder has the ability to significantly influence corporate actions.
  Our stock price has been volatile and may decline significantly and unexpectedly.
  Geopolitical military conditions, including terrorist attacks and other acts of war, may materially
and adversely affect the markets in which we operate, and our results of operations.
   27




---



##### Table of Contents



If we experience an interruption to our business, our results of operations may suffer.
  Increases in the cost of telephone and data services or significant interruptions in such services
could adversely affect our business.
  Compliance with SEC rules requiring that we and our independent auditors assess the effectiveness
of our internal controls over financial reporting may have adverse consequences.
   If we are unable to renew or replace sources of capital funding on satisfactory terms, potential
growth and results of operations may suffer.
  If the value of our portfolio of investment securities declines, our results of operations will
suffer.
   28




---



##### Table of Contents



Our quarterly operating results have historically varied, and may not be a good indicator of future
performance.
  
 Item 7a. Quantitative and Qualitative Disclosure About Market Risk
   Interest Rate Risk
 Cash and Cash Equivalents
  Investments
    Weighted-AverageInterest
    
    
    Within
    
    
    1 - 2
    
    
    2 - 3
    
    
    3 - 4
    
    
    4 - 5
    
    
    
    
    
    
    
    
    
    
    FairRates
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Thereafter
    
    
    Total
    
    
    ValueCorporate
debt securities
    
    
    4.70
    %
    
    $
    10,492
    
    
    $
    5,920
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    16,412
    
    
    $
    16,349Total
    
    
    
    
    
    $
    10,492
    
    
    $
    5,920
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    16,412
    
    
    $
    16,349
   29




---



##### Table of Contents



Outstanding Debt
 Managements
Discussion and Analysis of Financial Condition and Results of Operations. Exhibits
and Financial Statement Schedules
 Within
    
    
    1 - 2
    
    
    2 - 3
    
    
    3 - 4
    
    
    4 - 51 Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Thereafter
    
    
    TotalDebt obligations

(including current portion)
    
    $
    3,975
    
    
    $
    3,745
    
    
    $
    3,635
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,355Total
    
    $
    3,975
    
    
    $
    3,745
    
    
    $
    3,635
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,355
 Foreign Currency Exchange Risks
   
 Item 8. Financial Statement and Supplementary Financial Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
   30




---



##### Table of Contents



Managements Report on Internal Control over Financial Reporting
    Changes in Internal Control over Financial Reporting
   31




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
      .
  /s/ Ernst & Young LLP
 
  32




---



##### Table of Contents



Item 9B. Other Information
  
 PART III
 
 Items 10 through 14
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 Document List
 Financial Statements
 Supplementary Data and Financial Statement Schedules
 Index of Exhibits
 Index of Exhibits
  33




---



##### Table of Contents



STARTEK, INC. AND SUBSIDIARIES
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND
FINANCIAL STATEMENT SCHEDULES
 Financial Statements:
 Report of Independent Registered Public Accounting Firm
    35Consolidated
Statements of Operations and Other Comprehensive Income (Loss) for
the years ended December 31, 2007, 2006, and 2005
    36Consolidated Balance Sheets as of December 31, 2007 and 2006
    37Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
    38Consolidated Statements of Stockholders Equity for the years ended December 31, 2007, 2006 and 2005
    39Notes to Consolidated Financial Statements
    40Financial Statement SchedulesAll schedules have been included in the Consolidated Financial Statements or notes thereto.
  34




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
       /s/ Ernst & Young LLP
 
  35




---



##### Table of Contents



STARTEK, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Revenue
    
    $
    245,304
    
    
    $
    237,612
    
    
    $
    216,371Cost of services
    
    
    206,087
    
    
    
    201,424
    
    
    
    167,223Gross profit
    
    
    39,217
    
    
    
    36,188
    
    
    
    49,148Selling, general and administrative expenses
    
    
    38,991
    
    
    
    30,247
    
    
    
    28,435Impairment losses and restructuring charges
    
    
    4,325
    
    
    
    
    
    
    
    Operating (loss) income
    
    
    (4,099
    )
    
    
    5,941
    
    
    
    20,713Net interest and other income
    
    
    745
    
    
    
    2,126
    
    
    
    1,479(Loss) income from continuing operations before income taxes
    
    
    (3,354
    )
    
    
    8,067
    
    
    
    22,192Income tax (benefit) expense
    
    
    (523
    )
    
    
    2,303
    
    
    
    8,177(Loss) income from continuing operations
    
    
    (2,831
    )
    
    
    5,764
    
    
    
    14,015Discontinued operations:Loss from operations of discontinued operations
    
    
    
    
    
    
    
    
    
    
    (2,153
    )Gain on disposal of discontinued operations
    
    
    
    
    
    
    
    
    
    
    300Income tax benefit
    
    
    
    
    
    
    
    
    
    
    698Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (1,155
    )Net (loss) income
    
    $
    (2,831
    )
    
    $
    5,764
    
    
    $
    12,860Other comprehensive (loss) income, net of tax:Foreign currency translation adjustments, net of tax
    
    
    1,331
    
    
    
    (424
    )
    
    
    380Unrealized loss on investments available for sale, net of tax
    
    
    (30
    )
    
    
    (2
    )
    
    
    (546
    )Change in fair value of derivative instruments, net of tax
    
    
    255
    
    
    
    (362
    )
    
    
    127Comprehensive (loss) income
    
    $
    (1,275
    )
    
    $
    4,976
    
    
    $
    12,821Net (loss) income per share from continuing operations:Basic
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.96Diluted
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.95Net (loss) income per share including discontinued operations:Basic
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.88Diluted
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.88Dividends declared per common share
    
    $
    
    
    
    $
    1.11
    
    
    $
    1.50
 See Notes to Consolidated Financial Statements.
  36




---



##### Table of Contents



STARTEK, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  As of December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    23,026
    
    
    $
    33,437Investments
    
    
    16,349
    
    
    
    5,933Trade accounts receivable, less allowance for
doubtful accounts of $0 and $16, respectively
    
    
    48,887
    
    
    
    46,364Income tax receivable
    
    
    2,502
    
    
    
    1,281Prepaid expenses and other current assets
    
    
    2,408
    
    
    
    3,009Total current assets
    
    
    93,172
    
    
    
    90,024Property, plant and equipment, net
    
    
    57,532
    
    
    
    60,101Long-term deferred tax assets
    
    
    3,686
    
    
    
    4,444Other assets
    
    
    1,068
    
    
    
    1,166Total assets
    
    $
    155,458
    
    
    $
    155,735LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    5,908
    
    
    $
    6,061Accrued liabilities:Accrued payroll
    
    
    7,902
    
    
    
    6,798Accrued compensated absences
    
    
    5,072
    
    
    
    4,146Other accrued liabilities
    
    
    1,494
    
    
    
    415Current portion of long-term debt
    
    
    3,975
    
    
    
    5,654Short-term deferred income tax liabilities
    
    
    1,274
    
    
    
    754Other current liabilities
    
    
    1,358
    
    
    
    502Total current liabilities
    
    
    26,983
    
    
    
    24,330Long-term debt, less current portion
    
    
    7,380
    
    
    
    10,314Long-term deferred rent liability
    
    
    2,731
    
    
    
    1,729Other liabilities
    
    
    150
    
    
    
    980Total liabilities
    
    
    37,244
    
    
    
    37,353Commitments and contingenciesStockholders equity:Common stock, 32,000,000 non-convertible shares, $0.01 par value,
authorized; 14,735,791 and 14,695,791 shares issued and outstanding at
December 31, 2007 and 2006, respectively
    
    
    147
    
    
    
    147Additional paid-in capital
    
    
    62,776
    
    
    
    61,669Cumulative translation adjustment
    
    
    2,553
    
    
    
    1,222Unrealized (loss) gain on investments available for sale
    
    
    (29
    )
    
    
    1Unrealized gain (loss) on derivative instruments
    
    
    20
    
    
    
    (235
    )Retained earnings
    
    
    52,747
    
    
    
    55,578Total stockholders equity
    
    
    118,214
    
    
    
    118,382Total liabilities and stockholders equity
    
    $
    155,458
    
    
    $
    155,735
 See Notes to Consolidated Financial Statements.
  37




---



##### Table of Contents



STARTEK, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Operating ActivitiesNet (loss) income
    
    $
    (2,831
    )
    
    $
    5,764
    
    
    $
    12,860Adjustments to reconcile net (loss) income to net cash provided
by operating activities:Depreciation
    
    
    17,092
    
    
    
    16,758
    
    
    
    13,364Impairment of property, plant and equipment
    
    
    3,583
    
    
    
    
    
    
    
    Non-cash compensation cost
    
    
    1,107
    
    
    
    321
    
    
    
    Deferred income taxes
    
    
    454
    
    
    
    (1,830
    )
    
    
    (595
    )Realized (gain) loss on investments
    
    
    
    
    
    
    (128
    )
    
    
    623Loss (gain) on sale of assets
    
    
    60
    
    
    
    (98
    )
    
    
    (1,083
    )Changes in operating assets and liabilities:Sales of trading securities, net
    
    
    
    
    
    
    
    
    
    
    2,929Trade accounts receivable, net
    
    
    (2,367
    )
    
    
    (5,752
    )
    
    
    10,679Prepaid expenses and other assets
    
    
    1,004
    
    
    
    (361
    )
    
    
    (549
    )Accounts payable
    
    
    230
    
    
    
    939
    
    
    
    (2,704
    )Income taxes, net
    
    
    (1,214
    )
    
    
    2,946
    
    
    
    8,405Accrued and other liabilities
    
    
    3,529
    
    
    
    319
    
    
    
    1,530Net cash provided by operating activities
    
    
    20,647
    
    
    
    18,878
    
    
    
    45,459Investing ActivitiesPurchases of investments available for sale
    
    
    (36,813
    )
    
    
    (351,108
    )
    
    
    (733,935
    )Proceeds from disposition of investments available for sale
    
    
    26,348
    
    
    
    373,466
    
    
    
    726,126Purchases of property, plant and equipment
    
    
    (15,207
    )
    
    
    (20,110
    )
    
    
    (15,365
    )Proceeds from disposition of property, plant and equipment
    
    
    
    
    
    
    343
    
    
    
    5,986Net cash (used in) provided by investing activities
    
    
    (25,672
    )
    
    
    2,591
    
    
    
    (17,188
    )Financing ActivitiesProceeds from stock option exercises
    
    
    
    
    
    
    1,112
    
    
    
    327Principal payments on borrowings
    
    
    (5,828
    )
    
    
    (2,798
    )
    
    
    (4,594
    )Dividend payments
    
    
    
    
    
    
    (16,289
    )
    
    
    (21,943
    )Proceeds from borrowings
    
    
    
    
    
    
    13,294
    
    
    
    880Net cash used in financing activities
    
    
    (5,828
    )
    
    
    (4,681
    )
    
    
    (25,330
    )Effect of exchange rate changes on cash
    
    
    442
    
    
    
    (776
    )
    
    
    (125
    )Net (decrease) increase in cash and cash equivalents
    
    
    (10,411
    )
    
    
    16,012
    
    
    
    2,816Cash and cash equivalents at beginning of period
    
    
    33,437
    
    
    
    17,425
    
    
    
    14,609Cash and cash equivalents at end of period
    
    $
    23,026
    
    
    $
    33,437
    
    
    $
    17,425Supplemental Disclosure of Cash Flow InformationCash paid for interest
    
    $
    772
    
    
    $
    237
    
    
    $
    253Income taxes paid
    
    $
    1,990
    
    
    $
    3,013
    
    
    $
    9,486Unrealized loss on investments available for sale, net of tax
    
    $
    (30
    )
    
    $
    (2
    )
    
    $
    (546
    )
 See Notes to Consolidated Financial Statements.
  38




---



##### Table of Contents



STARTEK, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
  AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance, December 31, 2004
    
    
    14,606,011
    
    
    $
    146
    
    
    $
    59,736
    
    
    $
    75,186
    
    
    $
    1,815
    
    
    $
    136,883Stock options exercised
    
    
    25,080
    
    
    
    
    
    
    
    327
    
    
    
    
    
    
    
    
    
    
    
    327Income tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    76Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,943
    )
    
    
    
    
    
    
    (21,943
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,860
    
    
    
    
    
    
    
    12,860Foreign currency translation adjustments, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    380
    
    
    
    380Unrealized loss on investments available for
sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (546
    )
    
    
    (546
    )Change in fair value of derivative
instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127
    
    
    
    127Balance, December 31, 2005
    
    
    14,631,091
    
    
    $
    146
    
    
    $
    60,139
    
    
    $
    66,103
    
    
    $
    1,776
    
    
    $
    128,164Stock options exercised
    
    
    64,700
    
    
    
    1
    
    
    
    1,112
    
    
    
    
    
    
    
    
    
    
    
    1,113Income tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    97Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    321
    
    
    
    
    
    
    
    
    
    
    
    321Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,289
    )
    
    
    
    
    
    
    (16,289
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,764
    
    
    
    
    
    
    
    5,764Foreign currency translation adjustments, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (424
    )
    
    
    (424
    )Unrealized loss on investments available for
sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Change in fair value of derivative
instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (362
    )
    
    
    (362
    )Balance, December 31, 2006
    
    
    14,695,791
    
    
    $
    147
    
    
    $
    61,669
    
    
    $
    55,578
    
    
    $
    988
    
    
    $
    118,382Restricted shares granted
    
    
    40,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    1,107
    
    
    
    
    
    
    
    
    
    
    
    1,107Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    (2,831
    )
    
    
    
    
    
    
    (2,831
    )Foreign currency translation adjustments, net
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,331
    
    
    
    1,331Unrealized loss on investments available for
sale, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    (30
    )Change in fair value of derivative
instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    255Balance, December 31, 2007
    
    
    14,735,791
    
    
    $
    147
    
    
    $
    62,776
    
    
    $
    52,747
    
    
    $
    2,544
    
    
    $
    118,214
 See Notes to Consolidated Financial Statements.
  39




---



##### Table of Contents



STARTEK, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2007
  1. Basis of Presentation and Summary of Significant Accounting Policies
  Consolidation
  Reclassifications
   Use of Estimates
  Concentration of Credit Risk
  Foreign Currency Translation
   40




---



##### Table of Contents



Revenue Recognition
 Business Process Outsourcing Services 
  Supply Chain Management Services (SCMS)
 Allowance for Doubtful Accounts
  Fair Value of Financial Instruments
  Cash and Cash Equivalents
  Investments
   41




---



##### Table of Contents



Derivative Instruments and Hedging Activities
    Legal Proceedings
   42




---



##### Table of Contents



Property, Plant and Equipment
  Estimated Useful LifeBuildings and improvements
    
    3-30 yearsTelephone and computer equipment
    
    3-5 yearsSoftware
    
    3 yearsFurniture, fixtures, and miscellaneous equipment
    
    5-7 years
  Impairment of Long-Lived Assets
  Restructuring Charges
  Operating Leases
  Income Taxes
   43




---



##### Table of Contents



Stock-Based Compensation
  New Accounting Pronouncements
     2. Restructuring Charges and Impairment Losses
 Hawkesbury Closure
   44




---



##### Table of Contents



Facility-Related CostsBalance as of December 31, 2006
    
    $
    Expense
    
    
    742Reclassification
of long-term
liability
    
    
    48Payments
    
    
    (288
    )Balance as of December 31, 2007
    
    $
    502
  Software Projects
  3. Discontinued Operations
    45




---



##### Table of Contents



4. Net (Loss) Income Per Share
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Net (loss) income available to common shareholders from continuing operations
    
    $
    (2,831
    )
    
    $
    5,764
    
    
    $
    14,015Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (1,155
    )Net (loss) income
    
    $
    (2,831
    )
    
    $
    5,764
    
    
    $
    12,860Weighted average shares of common stock
    
    
    14,696
    
    
    
    14,680
    
    
    
    14,629Dilutive effect of stock options
    
    
    
    
    
    
    34
    
    
    
    52Common stock and common stock equivalents
    
    
    14,696
    
    
    
    14,714
    
    
    
    14,681Basic net (loss) income per share from:Continuing operations
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.96Discontinued operations
    
    
    
    
    
    
    
    
    
    
    (0.08
    )Net (loss) income
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.88Diluted net (loss) income per share from:Continuing operations
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.95Discontinued operations
    
    
    
    
    
    
    
    
    
    
    (0.07
    )Net (loss) income
    
    $
    (0.19
    )
    
    $
    0.39
    
    
    $
    0.88
  5. Principal Clients
  Year Ended December 31,2007
    
    
    2006
    
    
    2005(1)AT&T Inc. (formerly Cingular Wireless, LLC and AT&T Corp.)
    
    
    50.4
    %
    
    
    52.7
    %
    
    
    63.6
    %T-Mobile, a subsidiary of Deutsche Telekom
    
    
    21.8
    %
    
    
    21.2
    %
    
    
    23.9
    %
 (1)
    
    2005 data has been adjusted from amounts previously reported due to the
merger of two of our clients, AT&T Corp. and Cingular Wireless, LLC.    46




---



##### Table of Contents



6. Investments
  Year Ended December 31,2007
    
    
    2006Basis
    
    $
    16,412
    
    
    $
    5,937Gross unrealized gains
    
    
    59
    
    
    
    Gross unrealized losses
    
    
    (122
    )
    
    
    (4
    )Estimated fair value
    
    $
    16,349
    
    
    $
    5,933
   After 5
    
    
    
    
    
    
    EstimatedWithin 1 Year
    
    
    1 - 5 Years
    
    
    Years
    
    
    Total
    
    
    Fair ValueCorporate debt
securities
    
    $
    10,492
    
    
    $
    5,920
    
    
    $
    
    
    
    $
    16,412
    
    
    $
    16,349Total
    
    $
    10,492
    
    
    $
    5,920
    
    
    $
    
    
    
    $
    16,412
    
    
    $
    16,349
  7. Property, Plant and Equipment
  As of December 31,2007
    
    
    2006Land
    
    $
    1,733
    
    
    $
    1,685Buildings and improvements
    
    
    39,413
    
    
    
    36,772Telephone and computer equipment
    
    
    50,443
    
    
    
    45,091Software
    
    
    27,866
    
    
    
    24,403Furniture, fixtures, and miscellaneous equipment
    
    
    21,008
    
    
    
    19,553Construction in progress
    
    
    8,047
    
    
    
    3,003148,510
    
    
    
    130,507Less accumulated depreciation
    
    
    (90,978
    )
    
    
    (70,406
    )Total property, plant and equipment, net
    
    $
    57,532
    
    
    $
    60,101
 8. Debt
  As of December 31,2007
    
    
    20063.65% secured equipment loan
    
    $
    446
    
    
    $
    3,069Secured equipment promissory note
    
    
    3,665
    
    
    
    4,772Canadian dollar secured equipment loan
    
    
    7,244
    
    
    
    8,101Greeley, Colorado promissory note
    
    
    
    
    
    
    2611,355
    
    
    
    15,968Less current portion of long-term debt
    
    
    (3,975
    )
    
    
    (5,654
    )Long-term debt, less current portion
    
    $
    7,380
    
    
    $
    10,314
  47




---



##### Table of Contents



Amount2008
    
    $
    3,9752009
    
    
    3,7452010
    
    
    3,635$
    11,355
 Line of Credit
  3.65% Secured Equipment Loan
  Secured Promissory Note
    48




---



##### Table of Contents



Canadian Dollar Secured Equipment Loan
   Greeley, Colorado Promissory Note
  9. Share-Based Compensation
     49




---



##### Table of Contents



Income from
    
    
    
    
    
    
    Loss fromcontinuing
    
    
    
    
    
    
    discontinuedoperations
    
    
    
    
    
    
    operations
    
    
    
    
    
    
    Net incomeAs reported
    
    $
    14,015
    
    
    
    
    
    
    $
    (1,155
    )
    
    
    
    
    
    $
    12,860Share-based employee (including non-employee directors)
compensation expense that would have been included
in the determination of net income if the fair value
method had been applied to all awards, net of tax
    
    
    (1,633
    )
    
    
    
    
    
    
    (1,633
    )
    
    
    
    
    
    
    (1,633
    )Pro forma
    
    $
    12,382
    
    
    
    
    
    
    $
    (2,788
    )
    
    
    
    
    
    $
    11,227Basic earnings (loss) per shareAs reported
    
    $
    0.96
    
    
    
    
    
    
    $
    (0.08
    )
    
    
    
    
    
    $
    0.88Pro forma
    
    $
    0.85
    
    
    
    
    
    
    $
    (0.19
    )
    
    
    
    
    
    $
    0.77Diluted earnings (loss) per shareAs reported
    
    $
    0.95
    
    
    
    
    
    
    $
    (0.08
    )
    
    
    
    
    
    $
    0.88Pro forma
    
    $
    0.84
    
    
    
    
    
    
    $
    (0.19
    )
    
    
    
    
    
    $
    0.76
  2007
    
    2006
    
    2005Risk-free interest
rate
    
    3.16% - 4.74%
    
    4.53% - 5.11%
    
    3.97% - 4.18%Dividend yield
    
    0%
    
    6.63% - 9.02%
    
    6.11% - 9.63%Expected volatility
    
    43.12% - 50.47%
    
    42.57%
    
    42.10%Expected life in
years
    
    4.3
    
    4.1
    
    7.0
   50




---



##### Table of Contents



Weighted-Average
    
    
    AggregateWeighted-Average
    
    
    Remaining
    
    
    Intrinsic ValueShares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    (000s)Outstanding as of December 31, 2004
    
    
    787,230
    
    
    $
    25.42Granted
    
    
    578,000
    
    
    
    16.10Exercised
    
    
    (25,080
    )
    
    
    15.06Forfeited
    
    
    (358,660
    )
    
    
    22.95Outstanding as of December 31, 2005
    
    
    981,490
    
    
    $
    19.68Granted
    
    
    282,840
    
    
    
    13.29Exercised
    
    
    (64,700
    )
    
    
    17.19Forfeited
    
    
    (259,430
    )
    
    
    17.31Outstanding as of December 31, 2006
    
    
    940,200
    
    
    $
    18.58Granted
    
    
    1,379,180
    
    
    
    9.85Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (699,038
    )
    
    
    15.30Outstanding as of December 31, 2007
    
    
    1,620,342
    
    
    $
    12.50
    
    
    
    8.6
    
    
    $
    37Exercisable as of December 31, 2007
    
    
    284,974
    
    
    $
    23.23
    
    
    
    5.7
    
    
    $
    
    Restricted Shares
   51




---



##### Table of Contents



Number of
    
    
    Weighted-AverageRestricted Shares
    
    
    Grant Date Fair ValueNonvested balance as of
December 31, 2006
    
    
    
    
    
    $
    Granted
    
    
    40,000
    
    
    
    12.37Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Nonvested
balance as of December 31, 2007
    
    
    40,000
    
    
    $
    12.37
  10. Net Interest and Other Income
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Interest income
    
    $
    1,579
    
    
    $
    1,433
    
    
    $
    1,500Interest expense
    
    
    (854
    )
    
    
    (196
    )
    
    
    (361
    )Net gain on sale of assets
    
    
    (60
    )
    
    
    98
    
    
    
    783Recovery of previously impaired asset
    
    
    128
    
    
    
    663
    
    
    
    Investment and other (loss) income
    
    
    (48
    )
    
    
    128
    
    
    
    (443
    )Net interest and other income
    
    $
    745
    
    
    $
    2,126
    
    
    $
    1,479
  11. Income Taxes
  Year Ended December 31,2007
    
    
    2006
    
    
    2005U.S.
    
    $
    (7,810
    )
    
    $
    4,302
    
    
    $
    17,462Foreign
    
    
    4,456
    
    
    
    3,765
    
    
    
    4,730Total
    
    $
    (3,354
    )
    
    $
    8,067
    
    
    $
    22,192
  52




---



##### Table of Contents



Year Ended December 31,2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    (1,893
    )
    
    $
    1,398
    
    
    $
    6,809State
    
    
    (205)
    
    
    
    246
    
    
    
    621Foreign
    
    
    1,159
    
    
    
    2,343
    
    
    
    2,016Total current (benefit) expense
    
    $
    (939
    )
    
    $
    3,987
    
    
    $
    9,446Deferred:Federal
    
    $
    (1,554
    )
    
    $
    (393
    )
    
    $
    (1,519
    )State
    
    
    (169
    )
    
    
    (69
    )
    
    
    (138
    )Foreign
    
    
    421
    
    
    
    (930
    )
    
    
    (227
    )Net change in valuation allowance
    
    
    1,718
    
    
    
    (292
    )
    
    
    615Total deferred expense (benefit)
    
    $
    416
    
    
    $
    (1,684
    )
    
    $
    (1,269
    )Income tax (benefit) expense
    
    $
    (523
    )
    
    $
    2,303
    
    
    $
    8,177
   53




---



##### Table of Contents



Year Ended December 31,2007
    
    
    2006Current deferred tax assets:Restructuring costs
    
    $
    165
    
    
    $
    Total current deferred tax assets
    
    $
    165
    
    
    $
    Current deferred tax liabilities:Bad debt allowance
    
    $
    
    
    
    $
    6Vacation accrual
    
    
    635
    
    
    
    463Deferred revenue
    
    
    
    
    
    
    36Unrealized loss on investments
    
    
    14
    
    
    
    (3
    )Self-funded insurance program
    
    
    61
    
    
    
    28Prepaids
    
    
    (531
    )
    
    
    (756
    )Cumulative translation adjustment
    
    
    (1,454
    )
    
    
    (669
    )Other
    
    
    1
    
    
    
    141Total current deferred tax liabilities
    
    $
    (1,274
    )
    
    $
    (754
    )Long-term deferred tax assets (liabilities):Depreciation, amortization, and gain/loss
    
    $
    1,483
    
    
    $
    1,251Loss on impaired investments
    
    
    974
    
    
    
    990Foreign tax credit carryforward
    
    
    554
    
    
    
    554Capital loss carryforward
    
    
    1,718
    
    
    
    2,121Stock-based compensation
    
    
    457
    
    
    
    122Deferred compensation
    
    
    56
    
    
    
    75Lease inducement
    
    
    367
    
    
    
    Other
    
    
    349
    
    
    
    214Net long-term deferred tax assets (liabilities)
    
    $
    5,958
    
    
    $
    5,327Subtotal
    
    $
    4,849
    
    
    $
    4,573Valuation allowance
    
    
    (2,272
    )
    
    
    (883
    )Total net deferred tax asset (liability)
    
    $
    2,577
    
    
    $
    3,690
    54




---



##### Table of Contents





Year Ended December 31,2007
    
    
    2006
    
    
    2005U.S. statutory tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Effect of state taxes (net of Federal benefit)
    
    
    4.9
    %
    
    
    1.7
    %
    
    
    2.4
    %Release of reserve for state audit settlements
    
    
    0.0
    %
    
    
    -5.1
    %
    
    
    0.0
    %Capital loss valuation allowance
    
    
    -51.2
    %
    
    
    -3.6
    %
    
    
    2.6
    %Work opportunity tax credits
    
    
    29.2
    %
    
    
    -1.7
    %
    
    
    -1.8
    %Meals & entertainment
    
    
    -2.7
    %
    
    
    0.8
    %
    
    
    0.3
    %Other, net
    
    
    0.4
    %
    
    
    1.4
    %
    
    
    -1.7
    %Total
    
    
    15.6
    %
    
    
    28.5
    %
    
    
    36.8
    %
   12. Accumulated Other Comprehensive Income (Loss)
  Year Ended December 31,2007
    
    
    2006Accumulated foreign currency translation adjustments:Beginning balance
    
    $
    1,222
    
    
    $
    1,646Translation adjustments
    
    
    2,126
    
    
    
    (671
    )Taxes associated with translation adjustments
    
    
    (795
    )
    
    
    247Ending balance
    
    $
    2,553
    
    
    $
    1,222Accumulated unrealized derivative gains (losses):Beginning balance
    
    $
    (235
    )
    
    $
    (127
    )Reclassification into income
    
    
    406
    
    
    
    582Taxes associated with reclassification
    
    
    (151
    )
    
    
    (220
    )Ending balance
    
    $
    20
    
    
    $
    (235
    )Accumulated unrealized (losses) gains on available for sale securities:Beginning balance
    
    $
    1
    
    
    $
    3Unrealized (losses) gains
    
    
    (48
    )
    
    
    (4
    )Taxes associated with unrealized (losses) gains
    
    
    18
    
    
    
    2Ending balance
    
    $
    (29
    )
    
    $
    1
  55




---



##### Table of Contents



13. Reserves and Allowances
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Allowance for Doubtful AccountsBalance at beginning of year
    
    $
    16
    
    
    $
    250
    
    
    $
    357Reserve adjustment
    
    
    (16
    )
    
    
    (86
    )
    
    
    (107
    )Writeoffs
    
    
    
    
    
    
    (148
    )
    
    
    Recoveries
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    $
    
    
    
    $
    16
    
    
    $
    250
 14. Commitments and Contingencies
 Leases
  Minimum LeasePayments2008
    
    $
    4,6332009
    
    
    4,4362010
    
    
    4,2392011
    
    
    3,5582012
    
    
    1,918Thereafter
    
    
    751Total minimum lease payments
    
    $
    19,535
 Other Purchase Commitments
  PurchaseObligations2008
    
    $
    2,1712009
    
    
    62Thereafter
    
    
    Total purchase obligations
    
    $
    2,233
 Legal Proceedings
   56




---



##### Table of Contents



15. Quarterly Financial Data (Unaudited)
  2007 Quarters EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31Revenue
    
    $
    57,647
    
    
    $
    58,832
    
    
    $
    63,169
    
    
    $
    65,656Gross profit
    
    
    8,910
    
    
    
    8,537
    
    
    
    10,316
    
    
    
    11,454Selling, general and administrative expenses
    
    
    9,392
    
    
    
    9,040
    
    
    
    9,693
    
    
    
    10,866Operating (loss) income
    
    
    (482
    )
    
    
    (3,521
    )
    
    
    (409
    )
    
    
    313Net (loss) income
    
    $
    (189
    )
    
    $
    (3,443
    )
    
    $
    371
    
    
    $
    430Basic net (loss) income per share
    
    $
    (0.01
    )
    
    $
    (0.23
    )
    
    $
    0.03
    
    
    $
    0.03Diluted net (loss) income per share
    
    $
    (0.01
    )
    
    $
    (0.23
    )
    
    $
    0.03
    
    
    $
    0.03
 2006 Quarters EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31Revenue
    
    $
    57,105
    
    
    $
    59,525
    
    
    $
    61,865
    
    
    $
    59,117Gross profit
    
    
    9,772
    
    
    
    8,204
    
    
    
    9,761
    
    
    
    8,451Selling, general and administrative expenses
    
    
    7,573
    
    
    
    7,389
    
    
    
    7,533
    
    
    
    7,752Operating profit
    
    
    2,199
    
    
    
    815
    
    
    
    2,228
    
    
    
    699Net income
    
    $
    2,136
    
    
    $
    825
    
    
    $
    1,570
    
    
    $
    1,233Basic net income per share
    
    $
    0.15
    
    
    $
    0.06
    
    
    $
    0.11
    
    
    $
    0.08Diluted net income per share
    
    $
    0.14
    
    
    $
    0.06
    
    
    $
    0.11
    
    
    $
    0.08
  57




---



##### Table of Contents



16. Subsequent Events
 th
   58




---



##### Table of Contents



SIGNATURES
  STARTEK, INC.(REGISTRANT)By:
    
    /s/ A. LAURENCE JONES
    
    Date: February 29, 2008A. Laurence JonesChief Executive Officer and PresidentBy:
    
    /s/ DAVID G. DURHAM
    
    Date: February 29, 2008David G. DurhamChief Financial Officer, Executive VicePresident, and Treasurer
  /s/ A. LAURENCE JONES
    
    Chief Executive Officer and President
    
    Date: February 29, 2008A. Laurence Jones/s/ DAVID G. DURHAM
    
    Chief Financial Officer, Executive Vice
    
    Date: February 29, 2008David G. Durham
    
    President, and Treasurer/s/ ED ZSCHAU
    
    Chairman of the Board
    
    Date: February 29, 2008Ed Zschau/s/ ALBERT C. YATES
    
    Director
    
    Date: February 29, 2008Albert C. Yates/s/ P. KAY NORTON
    
    Director
    
    Date: February 29, 2008P. Kay Norton
  59




---



##### Table of Contents



STARTEK, INC.
 
 INDEX OF EXHIBITS
 Exhibit
    
    
    
    Incorporated Herein by ReferenceNo.
    

Exhibit Description
    
    Form
    
    Exhibit
    Filing Date3.1
    
    
    Restated Certificate of Incorporation of the Company.
    
    S-1
    
    
    3.1
    
    
    1/29/19973.2
    
    
    Restated Bylaws of the Company.
    
    8-K
    
    
    3.2
    
    
    8/2/20073.3
    
    
    Certificate of Amendment to the Certificate of Incorporation of
StarTek, Inc. filed with the Delaware Secretary of State on May 21,
1999.
    
    10-K
    
    
    3.3
    
    
    3/8/20003.4
    
    
    Certificate of Amendment to the Certificate of Incorporation of
StarTek, Inc. filed with the Delaware Secretary of State on May 23,
2000.
    
    10-Q
    
    
    3.4
    
    
    8/14/20004.1
    
    
    Specimen Common Stock certificate.
    
    10-Q
    
    
    4.2
    
    
    11/6/200710.1
    
    
    Registration Rights Agreement by and among StarTek, Inc. and A. Emmet
Stephenson, Jr.
    
    10-K
    
    
    10.47
    
    
    3/9/200410.2
    
    
    Investor Rights Agreement by and among StarTek, Inc., A. Emmet
Stephenson Jr., and Toni E. Stephenson.
    
    10-K
    
    
    10.48
    
    
    3/9/200410.3
    
    
    StarTek, Inc. Stock Option Plan, as amended.
    
    Def 14a
    
    
    A
    
    
    3/27/200710.4
    
    
    Form of Stock Option Agreement.
    
    S-1/A
    
    
    10.2
    
    
    3/7/199710.5
    
    
    Form of Option agreement pursuant to StarTek, Inc. Stock Option Plan
(four year vesting schedule).
    
    8-K
    
    
    10.26
    
    
    6/16/200610.6
    
    
    StarTek, Inc. Director Stock Option Plan, as amended.
    
    Def 14a
    
    
    B
    
    
    3/27/200710.7
    
    
    Form of Option Agreement pursuant to StarTek, Inc. Director Stock
Option Plan.
    
    8-K
    
    
    10.2
    
    
    9/9/200410.8
    
    
    Form of Indemnification Agreement between StarTek, Inc. and its
Officers and Directors.
    
    10-K
    
    
    10.49
    
    
    3/9/200410.9
    
    
    Form of Executive Confidentiality and Non-competition Agreement.
    
    8-K
    
    
    10.1
    
    
    9/14/200410.10
    
    
    Form of Executive Employment Contract.
    
    8-K
    
    
    10.115
    
    
    8/21/200710.11*
    
    
    Amendment No. 1 to Form of Executive Employment Contract.10.12
    
    
    Employment Agreement between StarTek, Inc. and Steven D. Butler.
    
    8-K
    
    
    10.20
    
    
    5/17/200510.13
    
    
    Option Agreement issued to Steven D. Butler.
    
    8-K
    
    
    10.21
    
    
    5/17/200510.14
    
    
    Amended and Restated Option Agreement issued to Steven D. Butler.
    
    8-K
    
    
    10.22
    
    
    5/17/200510.15
    
    
    Separation Agreement by and between StarTek, Inc. and Steven D. Butler.
    
    8-K
    
    
    10.81
    
    
    1/23/200710.16*
    
    
    Amendment to Separation Agreement by and between StarTek, Inc. and
Steven D. Butler.10.17
    
    
    Employment Agreement between StarTek, Inc. and A. Laurence Jones.
    
    8-K
    
    
    10.78
    
    
    1/08/200710.18
    
    
    Amendment to employment agreement of A. Laurence Jones signed July 9,
2007.
    
    10-Q
    
    
    10.110
    
    
    8/8/200710.19
    
    
    Option Agreement between StarTek, Inc. and A. Laurence Jones.
    
    8-K
    
    
    10.79
    
    
    1/08/200710.20
    
    
    Restricted Stock Agreement between StarTek, Inc. and A. Laurence Jones.
    
    8-K
    
    
    10.80
    
    
    1/08/200710.21
    
    
    Employment Agreement (Stock Option and Restricted Stock agreements are
attachments to the Employment Agreement) between StarTek, Inc. and
David G. Durham dated August 22, 2007.
    
    8-K
    
    
    10.116
    
    
    8/27/2007
  60




---



##### Table of Contents



Exhibit
    
    
    
    Incorporated Herein by ReferenceNo.
    
    Exhibit Description
    
    Form
    
    Exhibit
    Filing Date10.22
    
    
    2007 Sales Commission Plan.
    
    10-Q
    
    
    10.113
    
    
    8/8/200710.23
    
    
    2007 Incentive Bonus Plan.
    
    10-Q
    
    
    10.114
    
    
    8/8/200710.24*
    
    
    2008 Sales Commission Plan.10.25*
    
    
    2008 Incentive Bonus Plan.10.26
    
    
    Confidential Severance Agreement and General Release by and between
StarTek USA, Inc. and Steven R. Boyer, dated March 15, 2007.
    
    8-K
    
    
    10.87
    
    
    3/22/200710.27
    
    
    Credit Agreement and $10,000,000 Revolving Line of Credit Note between
StarTek, Inc. and Wells Fargo Bank West, National Association dated
June 30, 2003.
    
    10-Q
    
    
    10.32
    
    
    8/14/200310.28
    
    
    Renewal and Amended Credit Agreement by and between StarTek, Inc. and
Wells Fargo NA, dated June 30, 2005.
    
    8-K
    
    
    10.34
    
    
    7/5/200510.29
    
    
    Third Amendment to Credit Agreement and $10,000,000 Revolving Line of
Credit Note, each entered into as of June 1, 2007.
    
    8-K
    
    
    10.88
    
    
    7/3/200710.30
    
    
    Promissory Note to Wells Fargo Equipment Finance, Inc.
    
    10-K
    
    
    10.50
    
    
    3/9/200410.31
    
    
    Security Agreement between StarTek Canada Services, Ltd. and Wells
Fargo Equipment Finance Company.
    
    8-K
    
    
    10.74
    
    
    11/21/200610.32
    
    
    Form of Guaranty of StarTek Canada Obligations executed by StarTek,
Inc. and StarTek USA, Inc.
    
    8-K
    
    
    10.75
    
    
    11/21/200610.33
    
    
    Promissory Note between StarTek USA, Inc. and Wells Fargo Equipment
Finance, Inc.
    
    8-K
    
    
    10.76
    
    
    11/21/200610.34
    
    
    Form of Guaranty of StarTek USA Obligations executed by StarTek, Inc.
and StarTek Canada Services, Ltd.
    
    8-K
    
    
    10.77
    
    
    11/21/200610.35
    
    
    Share Purchase Agreement by and among StarTek, Inc., StarTek Europe
Ltd. and Taelus Limited, dated September 30, 2004.
    
    8-K
    
    
    10.1
    
    
    10/6/200410.36
    
    
    Personal Property Purchase Agreement between StarTek USA, Inc. and DPL
Corporation Southeast.
    
    8-K
    
    
    10.70
    
    
    12/21/200510.37
    
    
    Real Property Purchase Agreement between StarTek USA, Inc. and DPL
Corporation Southeast.
    
    8-K
    
    
    10.71
    
    
    12/21/200510.38
    
    
    Promissory Note between StarTek USA, Inc. and DPL Corporation
Southeast.
    
    8-K
    
    
    10.72
    
    
    12/21/200510.39&
    
    
    Services agreement and statement of work by and between StarTek, Inc.
and T-Mobile USA, Inc. for certain call center services dated
effective October 1, 2007.
    
    10-Q
    
    
    10.120
    
    
    11/6/200710.40#
    
    
    AT&T General Agreement between StarTek, Inc. and AT&T Corp., dated
January 1, 2002.
    
    10-Q
    
    
    10.42
    
    
    5/15/200210.41
    
    
    Provider Master Services Agreement and Statement of Work between
StarTek, Inc. and AT&T Mobility, LLC (f/k/a Cingular Wireless, LLC)
for certain call center services dated effective January 1, 2002.
    
    10-Q
    
    
    10.44
    
    
    11/12/200210.42#
    
    
    Amendment No. 001 to the AT&T Wireless Services Provider Master
Agreement dated April 1, 2004, between StarTek USA, Inc. and AT&T
Wireless Service, Inc.
    
    10-Q
    
    
    10.55
    
    
    8/9/200410.43*
    
    

Amendment effective March 1, 2008 to Provider Master Services
Agreement effective January 1, 2002 between StarTek, Inc. and AT&T
Mobility, LLC (f/k/a Cingular Wireless, LLC) for certain call center
services.
  61




---



##### Table of Contents



Exhibit
    
    
    
    Incorporated Herein by ReferenceNo.
    
    Exhibit Description
    
    Form
    
    Exhibit
    Filing Date10.44*
    
    

Amendment effective March 1, 2008 to Statement of Work dated April
1, 2004 under the Provider Master Services Agreement effective January
1, 2002 between StarTek, Inc. and AT&T Mobility, LLC (f/k/a Cingular
Wireless, LLC) for certain call center services.10.45#
    
    
    Master Services Agreement effective August 11, 2006 between StarTek
USA, Inc. and Cingular Wireless LLC.
    
    10-K
    
    
    10.85
    
    
    3/15/200710.46*&
    
    
    Amendment effective December 7, 2007 to Master Services Agreement
effective August 11, 2006 between StarTek, Inc. and AT&T Mobility, LLC
(f/k/a Cingular Wireless, LLC).10.47#
    
    
    Statement of Work dated December 21, 2006, between StarTek USA, Inc.
and Cingular Wireless, LLC.
    
    10-K
    
    
    10.83
    
    
    3/15/200710.48#
    
    
    Contact Call Center Agreement between StarTek, Inc. and AT&T Services,
Inc., effective January 26, 2007.
    
    10-Q
    
    
    10.90
    
    
    5/8/200710.49#
    
    
    General Authorization Work Order by and between StarTek, Inc. and AT&T
Services, Inc.
    
    10-Q
    
    
    10.95
    
    
    5/8/200710.50*&
    
    
    Amendment effective October 31, 2007 to Master Services Agreement
entered on January 26, 2007 between StarTek, Inc. and AT&T Services,
Inc.10.51#
    
    
    Amendment No. 4 to LSSD Ordering and Provisioning Order by and between
StarTek, Inc. and AT&T Services, Inc., effective April 1, 2007.
    
    10-Q
    
    
    10.91
    
    
    5/8/200710.52#
    
    
    Amendment No. 2 to ACS Order by and between StarTek, Inc. and AT&T
Services, Inc.. effective April 1, 2007.
    
    10-Q
    
    
    10.92
    
    
    5/8/200710.53*
    
    
    Amendment effective April 1, 2007 to Amendment No. 2 to ACS Order by
and between StarTek, Inc. and AT&T Corp.10.54#
    
    
    Amendment No. 5 to Nodal Voice Ordering and Provisioning Order by and
between StarTek, Inc. and AT&T Services, Inc.
    
    10-Q
    
    
    10.93
    
    
    5/8/200710.55#
    
    
    Prime Local Order by and between StarTek, Inc. and AT&T Corp.
    
    10-Q
    
    
    10.94
    
    
    5/8/200710.56#
    
    
    Agreement Order for AT&T Mobile Solutions Order Processing & Customer
Care Services statement of work by and between StarTek, Inc. and AT&T
Services, Inc., signed June 21, 2007.
    
    10-Q
    
    
    10.103
    
    
    8/8/200710.57#
    
    
    Agreement Order for High Speed Service Delivery between StarTek, Inc.
and AT&T Services, Inc., signed May 2, 2007.
    
    10-Q
    
    
    10.104
    
    
    8/8/200710.58#
    
    
    Agreement Order for Tier III Service Management by and between
StarTek, Inc. and AT&T Services, Inc., signed May 2, 2007.
    
    10-Q
    
    
    10.105
    
    
    8/8/200710.59#
    
    
    Agreement Order for EMBR Program between StarTek, Inc. and AT&T Crop.
signed June 15, 2007.
    
    10-Q
    
    
    10.106
    
    
    8/8/200721.1*
    
    
    Subsidiaries of the Registrant.23.1*
    
    
    Consent of Ernst & Young, LLP, Independent Registered Public
Accounting Firm.31.1*
    
    
    Certification of A. Laurence Jones pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2*
    
    
    Certification of David G. Durham pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1*
    
    
    Written Statement of the Chief Executive Officer and Chief Financial
Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 *
    
    Filed with this Form 10-K.
    
    Management contract or compensatory plan or arrangement.#
    
    The Securities and Exchange Commission has granted our request that
certain material in this agreement be treated as confidential. Such
material has been redacted from the exhibit as filed.&
    
    Certain portions of this exhibit have been omitted pursuant to a
request for confidential treatment and have been filed separately with
the Securities and Exchange Commission  62