EX-99 3 ex99-1.txt EXHIBIT 99.1 [NCO group LOGO omitted] NEWS RELEASE For Immediate Release NCO GROUP ANNOUNCES THIRD QUARTER RESULTS OF $0.29 PER SHARE AND INVESTOR GUIDANCE FOR THE FOURTH QUARTER OF 2002 HORSHAM, PA, November 5, 2002 - NCO Group, Inc. ("NCO")(Nasdaq: NCOG), a leading provider of accounts receivable management and collection services, announced today that during the third quarter it achieved net income of $0.29 per share, on a diluted basis. Revenue in the third quarter of 2002 was $170.5 million, a decrease of 2.2%, or $3.8 million, from revenue of $174.3 million in the third quarter of the previous year. Net income was $7.7 million, or $0.29 per share, on a diluted basis, as compared to pro forma net income of $11.1 million, or $0.40 per share, on a diluted basis, in the third quarter a year ago, adjusted to eliminate the amortization of goodwill and to exclude $11.2 million of pre-tax one-time charges. Actual net income for the third quarter of 2001 was $952,000, or $0.04 per share, on a diluted basis. NCO's operations are currently organized into market specific divisions that include: U.S. Operations, Portfolio Management and International Operations. These divisions accounted for $154.0 million, $16.3 million and $11.9 million of the revenue for the third quarter of 2002, respectively. Included in U.S. Operations' revenue was $8.9 million from Portfolio Management and included in International Operations' revenue was $2.8 million from U.S. Operations. In the third quarter of 2001, these divisions accounted for $157.3 million, $16.2 million and $9.7 million of the revenue, respectively, before intercompany eliminations of $7.3 million included in U.S. Operations and $1.6 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 third quarter of 2002 as compared to the pro forma results for the same period in the prior year. The decrease in payroll and related expenses was attributable to the rapid adjustment of staffing levels to the changing business volumes. 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 and spreading the fixed portion of the cost structure over a smaller revenue base. Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive Officer, stated, "During the quarter NCO continued to operate in a difficult environment. We have made further changes to our operating model and expense structure in order to stabilize and improve our near-term profitability. Additionally, we are rolling out a new tactical sales and business development plan that will better allow us to take advantage of rapid changes in our operating environment. We firmly believe that this plan, in conjunction with our strong performance against our peers and our strong financial position, will allow NCO to increase shareholder value by growing our business in the current environment and will position us to be able to harness all the benefits of an improving economy." NCO also announced that it expects earnings per share, on a diluted basis, to be approximately $0.28 to $0.33 per share for the fourth quarter of 2002. These expectations are in line with the third quarter results despite the seasonal decline typically experienced in the fourth quarter. NCO will host an investor conference call on Wednesday, November 6, 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 6396668. 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. For further information: At NCO Group, Inc. At FRB / Weber Shandwick Michael J. Barrist, Joe Calabrese (General) - (212) 445-8434 Chairman and CEO Michael DiPaolo (Media) - (212) 445-8454 Steven L. Winokur, Nicole Engel (Analysts) - (212) 445-8452 EVP, Finance and CFO (215) 441-3000 www.ncogroup.com -------------------------------- Certain statements in this press release, including, without limitation, statements concerning projections, statements as to the economy and its effects on NCO's business, statements as to the NCO's tactical sales and business development plan, statements as to trends, 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 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 September 30, -------------------------------------------------- 2001 ------------------------------------ Historical Pro Forma (2) 2002 ------------- ------------------ --------- Revenue $ 174,347 $ 174,347 $ 170,542 Operating costs and expenses: Payroll and related expenses 85,305 85,305 81,869 Selling, general and administrative expenses 69,027 57,789 63,211 Depreciation and amortization expense 9,774 5,851 7,031 --------- --------- --------- 164,106 148,945 152,111 --------- --------- --------- 10,241 25,402 18,431 Other income (expense): Interest and investment income 763 763 690 Interest expense (6,627) (6,627) (5,296) --------- --------- --------- (5,864) (5,864) (4,606) --------- --------- --------- Income before income tax expense 4,377 19,538 13,825 Income tax expense 2,435 7,407 5,237 --------- --------- --------- Income from operations before minority interest 1,942 12,131 8,588 Minority interest (990) (990) (887) --------- --------- --------- Net income $ 952 $ 11,141 $ 7,701 ========= ========= ========= Net income per share: Basic $ 0.04 $ 0.43 $ 0.30 ========= ========= ========= Diluted $ 0.04 $ 0.40 $ 0.29 ========= ========= ========= Weighted average shares outstanding: Basic 25,811 25,811 25,908 Diluted 25,957 (1) 29,754 29,721 Selected Balance Sheet Information: As of As of December 31, 2001 September 30, 2002 ------------------- -------------------- Cash and cash equivalents $ 32,161 $ 31,352 Current assets 202,802 204,429 Total assets 931,025 954,162 Current liabilities 90,429 95,291 Long-term debt, net of current portion 357,868 331,450 Shareholders' equity 414,095 447,828
(1) The shares that would have been issued assuming the $125 million of 4.75% convertible subordinated notes were converted into common stock were excluded from the calculation because they were antidilutive. (2) Excludes $3.9 million of pre-tax goodwill amortization expense as if SFAS 142 was adopted on January 1, 2001 and the effects of $11.2 million of pre-tax one-time charges. NCO GROUP, INC. Unaudited Selected Financial Data (in thousands, except for per share amounts)
Statements of Income: For the Nine Months Ended September 30, ------------------------------------------------------------------- 2001 2002 ------------------------------- --------------------------------- Historical Pro Forma (1) Historical Pro Forma (2) ------------ --------------- ------------ --------------- Revenue $ 528,651 $ 528,651 $ 527,127 $ 527,127 Operating costs and expenses: Payroll and related expenses 267,692 256,981 251,469 251,469 Selling, general and administrative expenses 178,314 165,268 185,627 185,627 Depreciation and amortization expense 28,351 16,603 19,778 19,778 --------- --------- --------- --------- 474,357 438,852 456,874 456,874 --------- --------- --------- --------- 54,294 89,799 70,253 70,253 Other income (expense): Interest and investment income 2,567 2,567 2,144 2,144 Interest expense (21,343) (21,343) (15,245) (15,245) Other income (expense) - - (290) - --------- --------- --------- --------- (18,776) (18,776) (13,391) (13,101) --------- --------- --------- --------- Income before income tax expense 35,518 71,023 56,862 57,152 Income tax expense 14,820 26,924 21,556 21,666 --------- --------- --------- --------- Income from operations before minority interest 20,698 44,099 35,306 35,486 Minority interest (3,020) (3,020) (2,492) (2,492) --------- --------- --------- --------- Net income $ 17,678 $ 41,079 $ 32,814 $ 32,994 ========= ========= ========= ========= Net income per share: Basic $ 0.69 $ 1.59 $ 1.27 $ 1.28 ========= ========= ========= ========= Diluted $ 0.67 $ 1.49 $ 1.19 $ 1.20 ========= ========= ========= ========= Weighted average shares outstanding: Basic 25,760 25,760 25,884 25,884 Diluted 28,651 28,651 29,867 29,867
(1) Excludes $11.7 million of pre-tax goodwill amortization expense as if SFAS 142 was adopted on January 1, 2001 and the effects of $23.8 million of pre-tax one-time charges. (2) Excludes the effects of a pre-tax insurance gain of $1.0 million and a pre-tax 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 September 30, 2002 ---------------------------------------------------------------- Intercompany NCO Group NCO Portfolio Eliminations Consolidated ----------- --------------- -------------- --------------- Revenue $ 163,136 $ 16,338 $ (8,932) $ 170,542 Operating costs and expenses: Payroll and related expenses 81,541 328 81,869 Selling, general and administrative expenses 62,098 10,045 (8,932) 63,211 Depreciation and amortization expense 6,953 78 7,031 --------- -------- -------- --------- 150,592 10,451 (8,932) 152,111 --------- -------- -------- --------- 12,544 5,887 - 18,431 Other income (expense): Interest and investment income 662 135 (107) 690 Interest expense (3,260) (2,143) 107 (5,296) --------- -------- -------- --------- (2,598) (2,008) - (4,606) --------- -------- -------- --------- Income before income tax expense 9,946 3,879 - 13,825 Income tax expense 3,782 1,455 5,237 --------- -------- -------- --------- Income from operations before minority interest 6,164 2,424 - 8,588 Minority interest (1) - - (887) (887) --------- -------- -------- --------- Net income $ 6,164 $ 2,424 $ (887) $ 7,701 ========= ======== ======== =========
(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 Nine Months Ended September 30, 2002 ---------------------------------------------------------------- Intercompany NCO Group NCO Portfolio Eliminations Consolidated ----------- --------------- -------------- --------------- Revenue $ 505,707 $ 46,716 $ (25,296) $ 527,127 Operating costs and expenses: Payroll and related expenses 250,038 1,431 251,469 Selling, general and administrative expenses 181,944 28,979 (25,296) 185,627 Depreciation and amortization expense 19,550 228 19,778 --------- -------- --------- --------- 451,532 30,638 (25,296) 456,874 --------- -------- --------- --------- 54,175 16,078 - 70,253 Other income (expense): Interest and investment income 1,916 569 (341) 2,144 Interest expense (9,824) (5,762) 341 (15,245) Other income (expense) (290) - (290) --------- -------- --------- --------- (8,198) (5,193) - (13,391) --------- -------- --------- --------- Income before income tax expense 45,977 10,885 - 56,862 Income tax expense 17,473 4,083 21,556 --------- -------- --------- --------- Income from operations before minority interest 28,504 6,802 - 35,306 Minority interest (1) - - (2,492) (2,492) --------- -------- --------- --------- Net income $ 28,504 $ 6,802 $ (2,492) $ 32,814 ========= ======== ========= =========
(1) NCO Group owns approximately 63% percent of the outstanding common stock of NCO Portfolio Management, Inc.