EX-99 3 ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 NCO group(R) NEWS RELEASE For Immediate Release NCO GROUP ANNOUNCES SECOND QUARTER RESULTS OF $0.38 PER SHARE, INVESTOR GUIDANCE FOR THE THIRD QUARTER OF 2003, AND EXPANSION OF MANAGEMENT TEAM HORSHAM, PA, August 5, 2003 - NCO Group, Inc. ("NCO" or the "Company") (Nasdaq: NCOG), a leading provider of accounts receivable management and collection services, announced today that during the second quarter it achieved net income of $0.38 per share, on a diluted basis. These earnings were within NCO's previously announced guidance of $0.37 to $0.43. This wider than normal range took into consideration the potential for an increase in the amount of net revenue being deferred into future periods under a long-term collection contract. During the second quarter, NCO continued to receive a greater than expected amount of business under the long-term collection contract. The net impact of this deferral was a reduction in earnings of $0.04 per diluted share. Revenue in the second quarter of 2003 was $188.6 million, an increase of 7.7%, or $13.5 million, from revenue of $175.1 million in the second quarter of the previous year. Net income was $10.3 million, or $0.38 per share, on a diluted basis, as compared to net income of $11.7 million, or $0.42 per share, on a diluted basis, in the second quarter a year ago. NCO's operations are currently organized into market specific divisions that include: U.S. Operations, Portfolio Management and International Operations. These divisions accounted for $172.0 million, $18.1 million and $17.4 million of the revenue for the second quarter of 2003, respectively. Included in U.S. Operations' revenue was $12.1 million from Portfolio Management and included in International Operations' revenue was $6.8 million from U.S. Operations. In the second quarter of 2002, these divisions accounted for $159.7 million, $14.1 million and $12.0 million of the revenue, respectively, before intercompany eliminations of $8.1 million included in U.S. Operations and $2.6 million included in International Operations. Included in revenue for the second quarter of 2003 was a negative impact of $1.7 million, or $0.04 per diluted share, attributable to the accounting for a long-term collection contract. This compares to a positive impact of $2.4 million, or $0.05 per diluted share, for the second quarter of 2002. NCO's payroll and related expenses as a percentage of revenue decreased for the second quarter of 2003 as compared to the same period in the prior year, but its selling, general and administrative expenses as a percentage of revenue increased for the second quarter of 2003. The decrease in payroll and related expenses and the increase in the selling, general and administrative expenses were partially due to the shift of more of our collection work to the attorney network and other third party service providers, and the rationalization of collection staff. This shift was associated with the continuing efforts to maximize collections for clients, particularly as we approached the first reconciliation date of the long-term collection contract. This rise in costs was offset, in part, by a reduction in collection expenses and purchased data costs. NCO also announced the expansion of its management team to include Paul Burkitt, Executive Vice President, Sales and Marketing, and Charles Burns, Executive Vice President, Business Process Outsourcing. Mr. Burkitt will be responsible for the strategic direction as well as the day-to-day operations of NCO's sales and marketing functions. Mr. Burkitt has nearly twenty years of sales experience. Prior to joining NCO, he was the Executive Vice President of RMH Teleservices, Inc. Mr. Burns will be responsible for the expansion of NCO's service offerings in the Business Process Outsourcing marketplace. Mr. Burns has nearly twenty years of sales and consulting experience. Prior to joining NCO, he was a partner in BearingPoint, Inc., formerly KPMG Consulting, Inc., a business systems integrator and full service consulting firm. Additionally, NCO is pleased to announce that Steven Leckerman has assumed the responsibility of Chief Operating Officer, Accounts Receivable Outsourcing, and in addition to his role as Chief Financial Officer, Steven L. Winokur has assumed the role of Chief Operating Officer of Shared Services. Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive Officer, stated, "During the second quarter, we continued to meet all of our operational and financial objectives. Outside of the greater than expected net deferral of revenue on the long-term collection contract, our earnings were towards the higher end of the range of possible results we provided to our investors. Additionally, we continued to be the beneficiary of new client opportunities, we continued to brand ourselves as the best in class provider of outsourced accounts receivable management services and we continued to focus on balancing the near-term tactical challenges of operating a service business in our current environment with the longer-term strategic initiatives needed to improve shareholder value. With that in mind, it gives me great pleasure to welcome Paul Burkitt and Chuck Burns to the NCO management team, and to congratulate Steve Leckerman and Steve Winokur on their promotions. The addition of new talent to our team and the realignment of how we manage this business represent the first of many strategic changes we expect to unfold over the next several quarters as we begin the process of properly positioning NCO for growth regardless of the timing of an economic upturn." NCO also announced that it expects earnings per share, on a diluted basis, to be approximately $0.38 to $0.42 per share for the third quarter of 2003 and reiterates its expectations for 2003 diluted earnings per share of approximately $1.55 to $1.65. NCO will host an investor conference call on Wednesday, August 6, 2003 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 1922465. 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 Nicole Engel (Analysts) - (212) 445-8452 Steven L. Winokur, EVP, Finance and CFO (215) 441-3000 www.ncogroup.com ---------------------------------------------- Certain statements in this press release, including, without limitation, statements as to fluctuations in quarterly operating results, statements concerning projections, statements as to the economy and its effects on NCO's business, 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 business strategy as and when planned, risks related to the final outcome 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, risks relating to any adverse impact of restating the Company's historical financial statements 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, as amended, for the year ended December 31, 2002, can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements. -------------------------------- NCO GROUP, INC. Unaudited Selected Financial Data (in thousands, except for per share amounts) Statements of Income:
For the Three Months Ended June 30, ---------------------------- 2002 2003 -------- -------- Revenue $175,099 $188,574 Operating costs and expenses: Payroll and related expenses 83,480 88,330 Selling, general and administrative expenses 61,343 70,718 Depreciation and amortization expense 6,521 8,039 -------- -------- 151,344 167,087 -------- -------- 23,755 21,487 Other income (expense): Interest and investment income 787 789 Interest expense (4,963) (5,862) Other income (expense) 305 726 -------- -------- (3,871) (4,347) -------- -------- Income before income taxes 19,884 17,140 Income tax expense 7,542 6,504 -------- -------- Income from operations before minority interest 12,342 10,636 Minority interest (633) (359) -------- -------- Net income $ 11,709 $ 10,277 ======== ======== Net income per share: Basic $ 0.45 $ 0.40 ======== ======== Diluted $ 0.42 $ 0.38 ======== ======== Weighted average shares outstanding: Basic 25,891 25,908 Diluted 29,977 29,768
Selected Balance Sheet Information:
As of As of December 31, June 30, 2002 2003 -------- -------- Cash and cash equivalents $ 25,159 $ 29,706 Current assets 215,226 222,009 Total assets 966,281 971,909 Current liabilities 109,242 98,501 Long-term debt, net of current portion 334,423 321,040 Shareholders' equity 435,762 464,538
NCO GROUP, INC. Unaudited Selected Financial Data (in thousands, except for per share amounts) Statements of Income:
For the Six Months Ended June 30, -------------------------------------- 2002 2003 ----------------- ----------------- Revenue $ 363,106 $ 377,591 Operating costs and expenses: Payroll and related expenses 169,600 176,628 Selling, general and administrative expenses 122,416 139,676 Depreciation and amortization expense 12,747 15,895 --------------- --------------- 304,763 332,199 --------------- --------------- 58,343 45,392 Other income (expense): Interest and investment income 1,454 1,625 Interest expense (9,949) (11,681) Other income (expense) (290) 726 --------------- --------------- (8,785) (9,330) --------------- --------------- Income before income taxes 49,558 36,062 Income tax expense 18,797 13,683 --------------- --------------- Income from operations before minority interest 30,761 22,379 Minority interest (1,605) (910) --------------- --------------- Net income $ 29,156 $ 21,469 =============== =============== Net income per share: Basic $ 1.13 $ 0.83 =============== =============== Diluted $ 1.04 $ 0.78 =============== =============== Weighted average shares outstanding: Basic 25,873 25,908 Diluted 29,940 29,743
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, 2003 ---------------------------------------------------------------------------- Intercompany NCO Group NCO Portfolio Eliminations Consolidated ------------- ----------------- ------------------ --------------- Revenue $ 182,600 $ 18,086 (12,112) $ 188,574 Operating costs and expenses: Payroll and related expenses 87,767 563 88,330 Selling, general and administrative expenses 69,448 13,382 (12,112) 70,718 Depreciation and amortization expense 7,934 105 8,039 ------------ -------------- --------------- ------------- 165,149 14,050 (12,112) 167,087 ------------ -------------- --------------- ------------- 17,451 4,036 - 21,487 Other income (expense): Interest and investment income 442 496 (149) 789 Interest expense (3,157) (2,788) 83 (5,862) Other income 726 - 726 ------------ -------------- --------------- ------------- (1,989) (2,292) (66) (4,347) ------------ -------------- --------------- ------------- Income before income tax expense 15,462 1,744 (66) 17,140 Income tax expense 5,875 629 6,504 ------------ -------------- --------------- ------------- Income from operations before minority interest 9,587 1,115 (66) 10,636 Minority interest (1) - (66) (293) (359) ------------ -------------- --------------- ------------- Net income $ 9,587 $ 1,049 $ (359) $ 10,277 ============ ============== =============== =============
(1) NCO Group owns 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, 2003 ------------------------------------------------------------------------ Intercompany NCO Group NCO Portfolio Eliminations Consolidated ------------- ----------------- ---------------- --------------- Revenue $ 365,715 $ 36,318 $ (24,442) $ 377,591 Operating costs and expenses: Payroll and related expenses 175,585 1,043 176,628 Selling, general and administrative expenses 137,615 26,503 (24,442) 139,676 Depreciation and amortization expense 15,682 213 15,895 ----------- -------------- ------------- ------------- 328,882 27,759 (24,442) 332,199 ----------- -------------- ------------- ------------- 36,833 8,559 - 45,392 Other income (expense): Interest and investment income 947 990 (312) 1,625 Interest expense (6,416) (5,441) 176 (11,681) Other income 726 - 726 ----------- -------------- ------------- ------------- (4,743) (4,451) (136) (9,330) ----------- -------------- ------------- ------------- Income before income tax expense 32,090 4,108 (136) 36,062 Income tax expense 12,194 1,489 13,683 ----------- -------------- ------------- ------------- Income from operations before minority interest 19,896 2,619 (136) 22,379 Minority interest (1) - (136) (774) (910) ----------- -------------- ------------- ------------- Net income $ 19,896 $ 2,483 $ (910) $ 21,469 =========== ============== ============= =============
(1) NCO Group owns 63% percent of the outstanding common stock of NCO Portfolio Management, Inc.