EX-99 3 ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 NCO group(R) For further information: NEWS RELEASE At NCO Group, Inc. At FRB / Weber Shandwick Michael J. Barrist, Joe Calabrese (General) - (212) 445-8434 Chairman and CEO Judith Sylk-Siegel (Media) - (212) 445-8431 Steven L. Winokur, Nicole Engel (Analysts) - (212) 445-8452 EVP, Finance and CFO (215) 441-3000 www.ncogroup.com For Immediate Release NCO Group Announces pro forma Second QUARTER Results of $0.47 per share HORSHAM, PA, August 6, 2002 - NCO Group, Inc. ("NCO")(Nasdaq: NCOG), a leading provider of accounts receivable management and collection services, announced today that during the second quarter it achieved pro forma net income of $0.47 per share, on a diluted basis, excluding the effect of a partial recovery from a previously announced environmental liability. Including the partial recovery from the environmental liability, NCO achieved net income of $0.48 per share, on a diluted basis. Revenue in the second quarter of 2002 was $177.7 million, a decrease of 3.1%, or $5.6 million, from revenue of $183.3 million in the second quarter of the previous year. Pro forma net income was $13.1 million, or $0.47 per share, on a diluted basis, as compared to pro forma net income of $14.7 million, or $0.52 per share, on a diluted basis, in the second quarter a year ago, adjusted to eliminate the amortization of goodwill and to exclude $12.5 million of pre-tax one-time charges. Actual net income was $13.3 million, or $0.48 per share, on a diluted basis, as compared to net income of $7.4 million, or $0.28 per share, on a diluted basis, in the second quarter a year ago, adjusted to eliminate the amortization of goodwill. NCO's operations are currently organized into market specific divisions that include: U.S. Operations, Portfolio Management and International Operations. These divisions accounted for $162.3 million, $14.1 million and $12.0 million of the revenue for the second quarter of 2002, respectively. Included in U.S. Operations' revenue was $8.1 million from Portfolio Management and included in International Operations' revenue was $2.6 million from U.S. Operations. In the second quarter of 2001, these divisions accounted for $164.9 million, $17.9 million and $9.3 million of the revenue, respectively, before intercompany eliminations of $7.7 million included in U.S. Operations and $1.1 million included in International Operations. NCO's payroll and related expenses as a percentage of revenue decreased, and its selling, general and administrative expenses as a percentage of revenue increased for the second quarter of 2002 as compared to the same period in the prior year. Continued focus on managing our staffing levels to our business volumes resulted in further reductions in payroll and related expenses during the second quarter. The increase in NCO's selling, general and administrative expenses related to the incremental costs associated with continuing efforts to maximize collections for clients in a difficult economic environment, as well as the effect of the downturn in the economy on the portfolio business. Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive Officer, stated, "During the second quarter, we continued to operate in an extremely challenging economic environment. Consumer payment patterns further decelerated, changes to our client's delinquency patterns translated into changes in business referral patterns and we continued to feel upward pressure on expenses. Additionally, we continued to experience a weaker than expected debt purchase marketplace. I am extremely pleased that we have been able to meet our near-term profitability and growth challenges by aggressively managing our expense and operating structure. More importantly, I believe we have been able to meet these challenges without adversely affecting the execution of our long-term business strategy of positioning ourselves as the best in class service provider within our industry." NCO will host an investor conference call on Wednesday, August 7, 2002 at 11:30 a.m., ET, to discuss the items discussed in this press release in more detail and to allow the investment community an opportunity to ask questions. Interested parties can access the conference call by dialing (888) 209-7450 (domestic callers) or (706) 643-7734 (international callers). A taped replay of the conference call will be made available for seven days and can be accessed by interested parties by dialing (800) 642-1687 (domestic callers) or (706) 645-9291 (international callers) and providing the pass code 5067759. NCO Group, Inc. is the largest provider of accounts receivable collection services in the world. NCO provides services to clients in the financial services, healthcare, retail and commercial, utilities, education, telecommunications, and government sectors. --------------------------------------------------------- Certain statements in this press release, including, without limitation, statements as to fluctuations in quarterly operating results, statements concerning projections, statements as to trends, statements as to the final outcome of the environmental liability, statements as to NCO's or management's beliefs, expectations or opinions, and all other statements in this press release, other than historical facts, are forward-looking statements, as such term is defined in the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created thereby. Forward-looking statements are subject to risks and uncertainties, are subject to change at any time and may be affected by various factors that may cause actual results to differ materially from the expected or planned results. In addition to the factors discussed above, certain other factors, including without limitation, the risk that NCO will not be able to implement its five-year strategy as and when planned, risks related to the expected settlement of the environmental liability, risks related to past and possible future terrorists attacks, risks related to the economy, the risk that NCO will not be able to improve margins, risks relating to growth and future acquisitions, risks related to fluctuations in quarterly operating results, risks related to the timing of contracts, risks related to strategic acquisitions and international operations, and other risks detailed from time to time in NCO's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K, filed on March 19, 2002, can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements. A copy of the Annual Report on Form 10-K can be obtained, without charge except for exhibits, by written request to Steven L. Winokur, Executive Vice President, Finance/CFO, NCO Group, Inc., 507 Prudential Road, Horsham, PA 19044. --------------------------------------------------------- NCO GROUP, INC. Unaudited Selected Financial Data (in thousands, except for per share amounts)
Statements of Income: For the Three Months Ended June 30, --------------------------------------------------------------------- 2001 2002 -------------------------------- -------------------------------- Historical Pro Forma (1) Historical Pro Forma (2) ------------ --------------- ------------ --------------- Revenue $ 183,275 $ 183,275 $ 177,678 $ 177,678 Operating costs and expenses: Payroll and related expenses 99,475 88,764 83,480 83,480 Selling, general and administrative expenses 58,164 56,356 61,343 61,343 Depreciation and amortization expense 9,623 5,700 6,521 6,521 ------------ --------------- ------------ --------------- 167,262 150,820 151,344 151,344 ------------ --------------- ------------ --------------- 16,013 32,455 26,334 26,334 Other income (expense): Interest and investment income 888 888 787 787 Interest expense (7,295) (7,295) (4,963) (4,963) Other income (expense) -- -- 305 -- ------------ --------------- ------------ --------------- (6,407) (6,407) (3,871) (4,176) ------------ --------------- ------------ --------------- Income before income tax expense 9,606 26,048 22,463 22,158 Income tax expense 3,719 9,866 8,522 8,406 ------------ --------------- ------------ --------------- Income from operations before minority interest 5,887 16,182 13,941 13,752 Minority interest (1,438) (1,438) (633) (633) ------------ --------------- ------------ --------------- Net income $ 4,449 $ 14,744 $ 13,308 $ 13,119 ============ =============== ============ =============== Net income per share: Basic $ 0.17 $ 0.57 $ 0.51 $ 0.51 ============ =============== ============ =============== Diluted $ 0.17 $ 0.52 $ 0.48 $ 0.47 ============ =============== ============ =============== Weighted average shares outstanding: Basic 25,781 25,781 25,891 25,891 Diluted 26,229 29,859 29,977 29,977 Selected Balance Sheet Information: As of As of December 31, 2001 June 30, 2002 ----------------- ----------------- Cash and cash equivalents $ 32,161 $ 27,117 Current assets 202,802 196,866 Total assets 931,025 927,670 Current liabilities 90,429 77,278 Long-term debt, net of current portion 357,868 332,575 Shareholders' equity 414,095 442,046
(1) Excludes $3.9 million of goodwill amortization expense as if SFAS 142 was adopted on January 1, 2001 and the effects of $12.5 million of one-time charges. (2) Excludes the effects of a partial recovery from an environmental liability of $305,000. NCO GROUP, INC. Unaudited Selected Financial Data (in thousands, except for per share amounts)
Statements of Income: For the Six Months Ended June 30, --------------------------------------------------------------------- 2001 2002 -------------------------------- -------------------------------- Historical Pro Forma (1) Historical Pro Forma (2) ------------ --------------- ------------ --------------- Revenue $ 354,304 $ 354,304 $ 356,585 $ 356,585 Operating costs and expenses: Payroll and related expenses 182,387 171,676 169,600 169,600 Selling, general and administrative expenses 109,287 107,479 122,416 122,416 Depreciation and amortization expense 18,577 10,752 12,747 12,747 ------------ --------------- ------------ --------------- 310,251 289,907 304,763 304,763 ------------ --------------- ------------ --------------- 44,053 64,397 51,822 51,822 Other income (expense): Interest and investment income 1,804 1,804 1,454 1,454 Interest expense (14,716) (14,716) (9,949) (9,949) Other income (expense) -- -- (290) -- ------------ --------------- ------------ --------------- (12,912) (12,912) (8,785) (8,495) ------------ --------------- ------------ --------------- Income before income tax expense 31,141 51,485 43,037 43,327 Income tax expense 12,385 19,517 16,319 16,429 ------------ --------------- ------------ --------------- Income from operations before minority interest 18,756 31,968 26,718 26,898 Minority interest (2,030) (2,030) (1,605) (1,605) ------------ --------------- ------------ --------------- Net income $ 16,726 $ 29,938 $ 25,113 $ 25,293 ============ =============== ============ =============== Net income per share: Basic $ 0.65 $ 1.16 $ 0.97 $ 0.98 ============ =============== ============ =============== Diluted $ 0.63 $ 1.10 $ 0.90 $ 0.91 ============ =============== ============ =============== Weighted average shares outstanding: Basic 25,734 25,734 25,873 25,873 Diluted 28,100 28,100 29,940 29,940
(1) Excludes $7.8 million of goodwill amortization expense as if SFAS 142 was adopted on January 1, 2001 and the effects of $12.5 million of one-time charges. (2) Excludes the effects of an insurance gain of $1.0 million and an expense from an environmental liability of $1.3 million. NCO GROUP, INC. Unaudited Selected Financial Data (in thousands, except for per share amounts)
Consolidating Statements of Income: For the Three Months Ended June 30, 2002 ------------------------------------------------------------ Intercompany NCO Group NCO Portfolio Eliminations Consolidated ----------- ------------- ------------ ------------ Revenue $ 171,634 $ 14,108 $ (8,064) $ 177,678 Operating costs and expenses: Payroll and related expenses 82,931 549 83,480 Selling, general and administrative expenses 60,136 9,271 (8,064) 61,343 Depreciation and amortization expense 6,446 75 6,521 ----------- ------------- ------------ ------------ 149,513 9,895 (8,064) 151,344 ----------- ------------- ------------ ------------ 22,121 4,213 -- 26,334 Other income (expense): Interest and investment income 600 303 (116) 787 Interest expense (3,327) (1,752) 116 (4,963) Other income (expense) 305 -- 305 ----------- ------------- ------------ ------------ (2,422) (1,449) -- (3,871) ----------- ------------- ------------ ------------ Income before income tax expense 19,699 2,764 -- 22,463 Income tax expense 7,485 1,037 8,522 ----------- ------------- ------------ ------------ Income from operations before minority interest 12,214 1,727 -- 13,941 Minority interest (1) -- -- (633) (633) ----------- ------------- ------------ ------------ Net income $ 12,214 $ 1,727 $ (633) $ 13,308 =========== ============= ============ ============
(1) NCO Group owns approximately 63% percent of the outstanding common stock of NCO Portfolio Management, Inc. NCO GROUP, INC. Unaudited Selected Financial Data (in thousands, except for per share amounts)
Consolidating Statements of Income: For the Six Months Ended June 30, 2002 ------------------------------------------------------------ Intercompany NCO Group NCO Portfolio Eliminations Consolidated ----------- ------------- ------------ ------------ Revenue $ 342,571 $ 30,378 $ (16,364) $ 356,585 Operating costs and expenses: Payroll and related expenses 168,497 1,103 169,600 Selling, general and administrative expenses 119,846 18,934 (16,364) 122,416 Depreciation and amortization expense 12,597 150 12,747 ----------- ------------- ----------- ------------ 300,940 20,187 (16,364) 304,763 ----------- ------------- ----------- ------------ 41,631 10,191 -- 51,822 Other income (expense): Interest and investment income 1,254 434 (234) 1,454 Interest expense (6,564) (3,619) 234 (9,949) Other income (expense) (290) -- (290) ----------- ------------- ----------- ------------ (5,600) (3,185) -- (8,785) ----------- ------------- ----------- ------------ Income before income tax expense 36,031 7,006 -- 43,037 Income tax expense 13,691 2,628 16,319 ----------- ------------- ----------- ------------ Income from operations before minority interest 22,340 4,378 -- 26,718 Minority interest (1) -- -- (1,605) (1,605) ----------- ------------- ----------- ------------ Net income $ 22,340 $ 4,378 $ (1,605) $ 25,113 =========== ============= =========== ============
(1) NCO Group owns approximately 63% percent of the outstanding common stock of NCO Portfolio Management, Inc.