NCOG Nco

NCO Group Announces Second Quarter Results of $0.43 Per Diluted Share and Provides Investor Guidance for the Remainder of 2004 HORSHAM, Pa., Aug. 2 /PRNewswire-FirstCall/ -- NCO Group, Inc. ("NCO" or the "Company") (NASDAQ:NCOG), a leading provider of business process outsourcing services, announced today that during the second quarter of 2004 it reported net income of $14.4 million, or $0.43 per diluted share, as compared to net income of $10.3 million, or $0.38 per diluted share, in the second quarter of 2003. These earnings were above NCO's previously announced guidance of $0.38 to $0.42 per diluted share. Revenue in the second quarter of 2004 was $255.3 million, an increase of 35.4%, or $66.7 million, from revenue of $188.6 million in the second quarter of the previous year. NCO's operations are organized into four market specific divisions that include: Accounts Receivable Management U.S. ("ARM U.S."), Customer Relationship Management ("CRM"), Portfolio Management, and Accounts Receivable Management International ("ARM International"). For the second quarter of 2004, these divisions accounted for $177.7 million, $59.5 million, $24.1 million, and $21.3 million of the revenue, respectively. Included in ARM U.S.'s revenue was $16.7 million of intercompany revenue from Portfolio Management and included in ARM International's revenue was $10.6 million of intercompany revenue from ARM U.S. For the second quarter of 2003, the ARM U.S., Portfolio Management and ARM International divisions accounted for $172.0 million, $18.1 million and $17.4 million of the revenue, respectively. Included in ARM U.S.'s revenue was $12.1 million of intercompany revenue from Portfolio Management and included in ARM International's revenue was $6.8 million of intercompany revenue from ARM U.S. The CRM division was created in the second quarter of 2004 in connection with the acquisition of RMH Teleservices, Inc. ("RMH") on April 2, 2004 and, accordingly, is not included in the results for 2003. NCO's payroll and related expenses as a percentage of revenue increased to 52.0% for the second quarter of 2004 as compared to 46.8% for the same period in the prior year. The increase in payroll and related expenses as a percentage of revenue was primarily attributable to the CRM division, which was created with the acquisition of RMH. The CRM division has a more significant amount of payroll and related expenses as compared to the ARM business. Excluding the CRM division, payroll and related expenses as a percentage of revenue decreased for the second quarter of 2004. This decrease was primarily attributable to the continuing increase in the use of near shore and off shore staffing solutions, and the continuing rationalization of staff. NCO's selling, general and administrative expenses as a percentage of revenue decreased to 32.8% for the second quarter of 2004 as compared to 37.5% for the same period in the prior year. The decrease was primarily attributable to the CRM division's expense structure. Excluding the CRM division, the selling, general and administrative expenses as a percentage of revenue remained relatively consistent with the same period in the prior year. Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive Officer, stated, "I am pleased that we were able to exceed our operating objectives during the second quarter. More important than the short- term success felt by exceeding expectations, is the fact that during the quarter NCO reached several key milestones. We completed the RMH merger, we successfully launched our new customer relationship business to our client base, and we continued to lay the groundwork for the future with key ongoing initiatives such as SAP, and new approaches to the use and management of labor alternatives. Additionally, the positive performance year to date has allowed us to slightly improve our overall outlook for 2004." NCO also announced that it expects earnings per share to be approximately $0.38 to $0.42 per diluted share for the third quarter of 2004 and approximately $1.62 to $1.70 per diluted share for 2004. NCO will host an investor conference call on Tuesday, August 3, 2004, at 10:00 a.m., ET, to address 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 9031459. A transcript of the conference call will also be available on NCO's website (http://www.ncogroup.com/) and will be furnished to the SEC in a Form 8-K report. NCO Group, Inc. is a leading provider of business process outsourcing services including accounts receivable management, customer relationship management and other services. NCO provides services through over 90 offices in the United States, Canada, the United Kingdom, India, Barbados and the Philippines. For further information: At NCO Group, Inc. Michael J. Barrist, Chairman and CEO Steven L. Winokur, EVP, Finance and CFO (215) 441-3000 http://www.ncogroup.com/ Certain statements in this press release, including, without limitation, statements as to fluctuations in quarterly operating results, statements concerning projections, statements concerning strategic initiatives, statements as to the economy and its effects on NCO's business, statements as to the integration of the acquisitions of RMH Teleservices, Inc., 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 ERP implementation, 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 the integration of the acquisitions of RMH Teleservices, Inc. and the minority interest of NCO Portfolio Management, Inc., 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 for the year ended December 31, 2003, can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements. The Company disclaims any intent or obligation to publicly update or revise any forward-looking statements, regardless of whether new information becomes available, future developments occur or otherwise. NCO GROUP, INC. Unaudited Selected Financial Data (in thousands, except for per share amounts) Statements of Income: For the Three Months For the Six Months Ended Ended June 30, June 30, 2004 2003 2004 2003 Revenue $255,255 $188,574 $456,486 $377,591 Operating costs and expenses: Payroll and related expenses 132,823 88,330 223,862 176,628 Selling, general and admin. expenses 83,752 70,718 160,397 139,676 Depreciation and amortization expense 11,147 8,039 18,925 15,895 227,722 167,087 403,184 332,199 Income from operations 27,533 21,487 53,302 45,392 Other income (expense): Interest and investment income 599 789 1,595 1,625 Interest expense (5,256) (5,862) (10,544) (11,681) Other income 621 726 621 726 (4,036) (4,347) (8,328) (9,330) Income before income taxes 23,497 17,140 44,974 36,062 Income tax expense 9,078 6,504 17,966 13,683 Income from operations before minority interest 14,419 10,636 27,008 22,379 Minority interest -- (359) (606) (910) Net income $14,419 $10,277 $26,402 $21,469 Net income per share: Basic $0.46 $0.40 $0.92 $0.83 Diluted $0.43 $0.38 $0.86 $0.78 Weighted average shares outstanding: Basic 31,502 25,908 28,814 25,908 Diluted 35,723 29,768 32,979 29,743 Selected Balance Sheet Information: As of As of June 30, December 31, 2004 2003 Cash and cash equivalents $58,798 $45,644 Current assets 264,186 229,452 Total assets 1,110,999 946,111 Current liabilities 173,412 123,043 Long-term debt, net of current portion 229,048 248,964 Shareholders' equity 656,075 490,417 NCO GROUP, INC. Unaudited Selected Segment Financial Data (in thousands) For the Three Months Ended June 30, 2004 Portfolio ARM U.S. CRM Management Revenue $177,712 $59,445 $24,132 Operating costs and expenses: Payroll and related expenses 87,579 42,476 485 Selling, general and admin. expenses 68,612 10,147 17,012 Depreciation and amortization expense 7,106 3,254 81 163,297 55,877 17,578 Income from operations $14,415 $3,568 $6,554 ARM Inter- Inter- company Consoli- national Eliminations dated Revenue $21,329 $(27,363) $255,255 Operating costs and expenses: Payroll and related expenses 12,903 (10,620)(1) 132,823 Selling, general and admin. expenses 4,724 (16,743)(2) 83,752 Depreciation and amortization expense 706 -- 11,147 18,333 (27,363) 227,722 Income from operations $2,996 $ -- $27,533 For the Three Months Ended June 30, 2003 ARM Intercompany ARM Portfolio Inter- Elimi- Consoli- U.S. Management national nations dated Revenue $172,011 $18,086 $17,361 $(18,884) $188,574 Operating costs and expenses: Payroll and related expenses 84,411 563 10,128 (6,772)(1) 88,330 Selling, general and admin. expenses 65,214 13,382 4,234 (12,112)(2) 70,718 Depreciation and amortization expense 7,286 105 648 -- 8,039 156,911 14,050 15,010 (18,884) 167,087 Income from operations $15,100 $4,036 $2,351 $ -- $21,487 (1) Represents elimination of intercompany revenue from accounts receivable management services provided by ARM International to ARM U.S. (2) Represents elimination of intercompany revenue from accounts receivable management services provided by ARM U.S. to Portfolio Management. DATASOURCE: NCO Group, Inc. CONTACT: Michael J. Barrist, Chairman and CEO, or Steven L. Winokur, EVP, Finance and CFO, both of NCO Group, Inc., +1-215-441-3000 Web site: http://www.ncogroup.com/

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