NCOG Nco

NCO Group Announces First Quarter Results of $0.43 Per Share and Provides Investor Guidance for the Second Quarter of 2004 HORSHAM, Pa., May 3 /PRNewswire-FirstCall/ -- NCO Group, Inc. ("NCO" or the "Company") , a leading provider of business process outsourcing services, announced today that during the first quarter of 2004 it achieved net income of $12.0 million, or $0.43 per diluted share, as compared to net income of $11.2 million, or $0.41 per diluted share, in the first quarter of 2003. These earnings were above NCO's previously announced guidance of $0.38 to $0.42 per diluted share. Revenue in the first quarter of 2004 was $201.2 million, an increase of 6.5%, or $12.2 million, from revenue of $189.0 million in the first quarter of the previous year. During the first quarter, NCO's operations were organized into market specific divisions that included: U.S. Operations, Portfolio Management and International Operations. These divisions accounted for $183.4 million, $21.6 million and $21.0 million of the revenue for the first quarter of 2004, respectively. Included in U.S. Operations' revenue was $15.1 million of inter-company revenue from Portfolio Management and included in International Operations' revenue was $9.7 million of inter-company revenue from U.S. Operations. In the first quarter of 2003, these divisions accounted for $173.1 million, $18.2 million and $15.8 million of the revenue, respectively, before inter-company eliminations of $12.3 million included in U.S. Operations and $5.8 million included in International Operations. NCO's payroll and related expenses as a percentage of revenue decreased for the first quarter of 2004 as compared to the same period in the prior year. The decrease in payroll and related expenses as a percentage of revenue was partially attributable to an increase in collector productivity due to higher liquidation rates in the first quarter of 2004 as compared to the same period last year. Additionally, an increase in the use of attorneys and other third-party service providers reduced payroll expense as a percentage of revenue in this quarter as these costs are reflected in selling, general and administrative expense. NCO's selling, general and administrative expenses as a percentage of revenue increased for the first quarter of 2004 as compared to the same period in the prior year. The increase in selling, general and administrative expenses as a percentage of revenue was primarily attributable to the increase in collections from outside attorneys and other third party service providers that are compensated on a contingency basis. NCO also announced that it expects earnings per share to be approximately $0.38 to $0.42 per diluted share for the second quarter of 2004. Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive Officer, stated, "We entered 2004 with an operating plan that focused on meeting our current year financial goals as well as our long-term objectives of transitioning NCO into a global provider of business process outsourcing. I am pleased that during the first quarter NCO exceeded its financial objectives and met or exceeded all of its operational objectives. Additionally, we completed the NCO Portfolio transaction and we began the process of implementing our new ERP solution. We also moved forward on several key initiatives that positioned us for the rapid integration of RMH Teleservices, which was acquired on April 2, 2004, and will create the core competencies needed for NCO to begin blending our multiple service offerings together in order to sell solutions-based outsourcing to our clients." Commenting on the economic environment, Mr. Barrist stated, "During the first quarter, we operated in a slightly better than anticipated collection environment. We are encouraged by this but feel it is too early to determine whether the improved collection environment is indicative of an improving economy or an anomaly based on a stronger than expected impact from the tax season." NCO will host an investor conference call on Tuesday, May 4, 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 7110497. 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 the long-term collection contact, 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. and the minority interest of NCO Portfolio Management, 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 Ended March 31, 2003 2004 Revenue $189,017 $201,231 Operating costs and expenses: Payroll and related expenses 88,298 91,039 Selling, general and administrative expenses 68,958 76,645 Depreciation and amortization expense 7,856 7,778 165,112 175,462 Income from operations 23,905 25,769 Other income (expense): Interest and investment income 836 996 Interest expense (5,819) (5,288) (4,983) (4,292) Income before income taxes 18,922 21,477 Income tax expense 7,179 8,888 Income from operations before minority interest 11,743 12,589 Minority interest (551) (606) Net income $11,192 $11,983 Net income per share: Basic $0.43 $0.46 Diluted $0.41 $0.43 Weighted average shares outstanding: Basic 25,908 26,125 Diluted 29,718 30,234 Selected Balance Sheet Information: As of As of December 31, March 31, 2003 2004 Cash and cash equivalents $45,644 $64,010 Current assets 229,452 241,822 Total assets 946,111 969,133 Current liabilities 123,043 137,839 Long-term debt, net of current portion 248,964 231,140 Shareholders' equity 490,417 543,434 NCO GROUP, INC. Unaudited Selected Financial Data (in thousands, except for per share amounts) Consolidating Statements of Income: For the Three Months Ended March 31, 2004 Intercompany NCO NCO Elimina- Consoli- Group Portfolio tions dated Revenue $194,709 $21,602 $(15,080) $201,231 Operating costs and expenses: Payroll and related expenses 90,392 647 -- 91,039 Selling, general and administrative expenses 75,634 16,091 (15,080) 76,645 Depreciation and amortization expense 7,697 81 -- 7,778 173,723 16,819 (15,080) 175,462 Income from operations 20,986 4,783 -- 25,769 Other income (expense): Interest and investment income 502 630 (136) 996 Interest expense (2,656) (2,684) 52 (5,288) (2,154) (2,054) (84) (4,292) Income before income tax expense 18,832 2,729 (84) 21,477 Income tax expense 7,896 992 -- 8,888 Income from operations before minority interest 10,936 1,737 (84) 12,589 Minority interest (1) -- (84) (522) (606) Net income $10,936 $1,653 $(606) $11,983 (1) Prior to March 26, 2004, NCO Group owned 63% percent of the outstanding common stock of NCO Portfolio Management, Inc. On March 26, 2004, NCO Group acquired all of the outstanding common stock of NCO Portfolio that it did not own. DATASOURCE: NCO Group, Inc. CONTACT: Michael J. Barrist, Chairman and CEO, or Steven L. Winokur, EVP, Finance and CFO, +1-215-441-3000, both of NCO Group, Inc. Web site: http://www.ncogroup.com/

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