NCOG Nco

NCO Group Announces Second Quarter Results of $0.42 Per Diluted Share HORSHAM, Pa., July 28 /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 2005, it reported net income of $14.1 million, or $0.42 per diluted share, as compared to net income of $14.4 million, or $0.43 per diluted share, in the second quarter of 2004. Revenue in the second quarter of 2005 was $247.2 million, a decrease of 3.2%, or $8.1 million, from revenue of $255.3 million in the second quarter of 2004. NCO's operations are organized into four market specific divisions that include: Accounts Receivable Management North America ("ARM North America"), Customer Relationship Management ("CRM"), Portfolio Management, and Accounts Receivable Management International ("ARM International"). For the second quarter of 2005, these divisions accounted for $192.5 million, $43.8 million, $27.8 million, and $3.3 million of revenue, respectively. Included in ARM North America's revenue was $20.1 million of intercompany revenue from Portfolio Management and included in ARM International's revenue was $79,000 of intercompany revenue from Portfolio Management. All intercompany revenue is eliminated in consolidation. For the second quarter of 2004, the ARM North America, CRM, Portfolio Management and ARM International divisions accounted for $185.0 million, $59.4 million, $24.1 million and $3.5 million of the revenue, respectively. Included in ARM North America's revenue was $16.6 million of intercompany revenue from Portfolio Management and included in ARM International's revenue was $97,000 of intercompany revenue from Portfolio Management. All intercompany revenue is eliminated in consolidation. The decrease in revenue was primarily attributable to the previously discussed loss of a telecommunications client within the Company's CRM division. While the implementation of newly committed client contracts is progressing on schedule, the revenue from such opportunities has not yet had a meaningful impact on the Company. NCO's payroll and related expenses as a percentage of revenue decreased to 49.6% for the second quarter of 2005 as compared to 52.0% for the same period in the prior year. The decrease in payroll and related expenses as a percentage of revenue was attributable to continued diligence in monitoring staffing levels against revenue, as well as the use of labor in Barbados and the Philippines. NCO's selling, general and administrative expenses as a percentage of revenue increased to 36.9% for the second quarter of 2005 as compared to 32.8% for the same period in the prior year. This increase was primarily due to the additional use of outside attorneys and other third party service providers including the use of the Company's business partner in India. Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive Officer, stated, "The second quarter is difficult to compare to the prior year because of several unique situations imbedded in the results of the current quarter. During the quarter our CRM division continued both the planned exit of a large telecom client and the implementation of several new client opportunities. While our ARM North America division grew its revenue, clients continued to impact our margins by adding many administrative and security burdens and as well as exerting pricing pressure. This was partially offset by the extremely strong operating results within our Portfolio Management division, which included a new process of identifying and selling accounts that have a very low probability of collection. As a result of this process we recognized a gain during the quarter of approximately $5.3 million. However, due to the nature of these sales, the gain was included in other income since it was not considered to be a component of operating income. We are encouraged by our success in positioning our portfolio business for the remainder of this year and beyond with closed deals, as well as deals that are still in the pipeline and have a high probability of closing." NCO also announced that it continues to expect earnings per share to be approximately $1.70 to $1.80 per diluted share for 2005. NCO will host an investor conference call on Friday, July 29, 2005, at 10:00 a.m., ET, to address the items discussed in the 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) and providing the pass code 7916050. 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 7916050. 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 Report on Form 8-K. 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 87 offices in the United States, Canada, the United Kingdom, India, the Philippines, the Caribbean and Panama. For further information: At NCO Group, Inc. Investor Relations (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 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, including the acquisition of Risk Management Alternatives, Inc., 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 for the year ended December 31, 2004, 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 Ended For the Six Months Ended June 30, June 30, 2005 2004 2005 2004 Revenue $247,185 $255,255 $507,534 $456,486 Operating costs and expenses: Payroll and related expenses 122,524 132,823 250,255 223,862 Selling, general and admin. expenses 91,313 83,752 184,350 160,397 Depreciation and amortization expense 10,920 11,147 21,678 18,925 224,757 227,722 456,283 403,184 Income from operations 22,428 27,533 51,251 53,302 Other income (expense): Interest and investment income 726 599 1,460 1,595 Interest expense (4,867) (5,256) (10,042) (10,544) Other income 4,663 621 4,756 621 522 (4,036) (3,826) (8,328) Income before income taxes 22,950 23,497 47,425 44,974 Income tax expense 8,814 9,078 18,018 17,966 Income before minority interest 14,136 14,419 29,407 27,008 Minority interest (1) - (9) (606) Net income $14,135 $14,419 $29,398 $26,402 Net income per share: Basic $0.44 $0.46 $0.92 $0.92 Diluted $0.42 $0.43 $0.86 $0.86 Weighted average shares outstanding: Basic 32,101 31,502 32,090 28,814 Diluted 36,099 35,723 36,136 32,979 Selected Balance Sheet Information: As of As of June 30, December 31, 2005 2004 Cash and cash equivalents $20,601 $26,334 Current assets 244,055 245,839 Total assets 1,084,104 1,113,889 Current liabilities 132,594 175,369 Long-term debt, net of current portion 167,257 186,339 Shareholders' equity 723,316 695,601 NCO GROUP, INC. Unaudited Selected Segment Financial Data (in thousands) For the Three Months Ended June 30, 2005 ARM North Portfolio America CRM Management Revenue $192,496 $43,787 $27,759 Operating costs and expenses: Payroll and related expenses 86,707 32,489 1,211 Selling, general and admin. expenses 81,220 8,263 21,038 Depreciation and amortization expense 6,959 3,601 207 174,886 44,353 22,456 Income (loss) from operations $17,610 $(566) $5,303 ARM Intercompany International Eliminations(1) Consolidated Revenue $3,308 $(20,165) $247,185 Operating costs and expenses: Payroll and related expenses 2,117 - 122,524 Selling, general and admin. expenses 957 (20,165) 91,313 Depreciation and amortization expense 153 - 10,920 3,227 (20,165) 224,757 Income (loss) from operations $81 $- $22,428 For the Three Months Ended June 30, 2004 ARM North Portfolio America CRM Management Revenue $184,962 $59,445 $24,132 Operating costs and expenses: Payroll and related expenses 87,849 42,476 485 Selling, general and admin. expenses 72,339 10,147 17,012 Depreciation and amortization expense 7,693 3,254 81 167,881 55,877 17,578 Income from operations $17,081 $3,568 $6,554 ARM Intercompany International Eliminations(1) Consolidated Revenue $3,459 $(16,743) $255,255 Operating costs and expenses: Payroll and related expenses 2,013 - 132,823 Selling, general and admin. expenses 997 (16,743) 83,752 Depreciation and amortization expense 119 - 11,147 3,129 (16,743) 227,722 Income from operations $330 $- $27,533 (1) Represents the elimination of intercompany revenue for accounts receivable management services provided by ARM North America and ARM International to Portfolio Management. DATASOURCE: NCO Group, Inc. CONTACT: Investor Relations, +1-215-441-3000 Web site: http://www.ncogroup.com/

Copyright