NCOG Nco

NCO Group Announces First Quarter Results of $0.45 Per Diluted Share HORSHAM, Pa., May 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 first quarter of 2005, it reported net income of $15.3 million, or $0.45 per diluted share, as compared to net income of $12.0 million, or $0.43 per diluted share, in the first quarter of 2004. Revenue in the first quarter of 2005 was $260.3 million, an increase of 29.4%, or $59.1 million, from revenue of $201.2 million in the first 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 first quarter of 2005, these divisions accounted for $198.4 million, $47.6 million, $27.8 million, and $3.1 million of revenue, respectively. Included in ARM North America's revenue was $16.5 million of intercompany revenue from Portfolio Management and included in ARM International's revenue was $73,000 of intercompany revenue from Portfolio Management. All intercompany revenue is eliminated in consolidation. For the first quarter of 2004, the ARM North America, Portfolio Management and ARM International divisions accounted for $191.0 million, $21.6 million and $3.7 million of the revenue, respectively. Included in ARM North America's revenue was $15.0 million of intercompany revenue from Portfolio Management and included in ARM International's revenue was $116,000 of intercompany revenue from Portfolio Management. All intercompany revenue is eliminated in consolidation. 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 the first quarter of 2004. NCO's payroll and related expenses as a percentage of revenue increased to 49.1% for the first quarter of 2005 as compared to 45.2% for the same period in the prior year. The increase in payroll and related expenses as a percentage of revenue was attributable to the CRM division. 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 decreased as a percentage of revenue from the same period in the prior year due to continued diligence in monitoring staffing levels while maintaining productivity through the use of new technologies. NCO's selling, general and administrative expenses as a percentage of revenue decreased to 35.7% for the first quarter of 2005 as compared to 38.1% for the same period in the prior year. The decrease was primarily attributable to the difference in CRM's expense structure discussed above. Excluding the CRM division, selling, general and administrative expenses increased as a percentage of revenue from the same period in the prior year due to the continuing increase in the use of outside attorneys and other third party service providers. NCO also announced that it continues to expect earnings per share to be approximately $1.70 to $1.80 per diluted share for 2005. Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive Officer, stated, "As we entered 2005, we continued to execute strategic initiatives launched in 2004 that were designed to expand our overall growth opportunities. These initiatives were key to allowing each of our business units either to meet or exceed their operational goals during the first quarter. More important than our near-term accomplishments are several key new client opportunities that are currently being deployed and are expected to begin producing revenue during the latter part of 2005." NCO will host an investor conference call on Tuesday, May 3, 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 5672149. 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 5672149. 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. 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 acquisition 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, 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 March 31, 2005 2004 Revenue $260,349 $201,231 Operating costs and expenses: Payroll and related expenses 127,731 91,039 Selling, general and administrative expenses 93,037 76,645 Depreciation and amortization expense 10,758 7,778 231,526 175,462 Income from operations 28,823 25,769 Other income (expense): Interest and investment income 734 996 Interest expense (5,175) (5,288) Other income 93 - (4,348) (4,292) Income before income tax expense 24,475 21,477 Income tax expense 9,204 8,888 Income before minority interest 15,271 12,589 Minority interest (8) (606) Net income $15,263 $11,983 Net income per share: Basic $0.48 $0.46 Diluted $0.45 $0.43 Weighted average shares outstanding: Basic 32,080 26,125 Diluted 36,173 30,234 Selected Balance Sheet Information: As of As of March 31, December 31, 2005 2004 Cash and cash equivalents $41,471 $26,334 Current assets 268,795 245,839 Total assets 1,112,704 1,113,889 Current liabilities 206,606 175,369 Long-term debt, net of current portion 143,348 186,339 Shareholders' equity 710,488 695,601 NCO GROUP, INC. Unaudited Selected Segment Financial Data (in thousands) For the Three Months Ended March 31, 2005 ARM North Portfolio America CRM Management Revenue $198,457 $47,616 $27,802 Operating costs and expenses: Payroll and related expenses 90,144 34,341 1,203 Selling, general and admin. expenses 83,246 7,830 17,571 Depreciation and amortization expense 6,951 3,461 206 180,341 45,632 18,980 Income (loss) from operations $18,116 $1,984 $8,822 NCO GROUP, INC. Unaudited Selected Segment Financial Data (in thousands) For the Three Months Ended March 31, 2005 ARM Intercompany International Eliminations(1) Consolidated Revenue $3,062 $(16,588) $260,349 Operating costs and expenses: Payroll and related expenses 2,043 - 127,731 Selling, general and admin. expenses 978 (16,588) 93,037 Depreciation and amortization expense 140 - 10,758 3,161 (16,588) 231,526 Income (loss) from operations $(99) $- $28,823 For the Three Months Ended March 31, 2004 ARM North Portfolio ARM Intercompany America Management Intl Elimination(1) Consolidated Revenue $191,003 $21,602 $3,706 $(15,080) $201,231 Operating costs and expenses: Payroll and related expenses 88,301 647 2,091 - 91,039 Selling, general and admin. expenses 74,605 16,091 1,029 (15,080) 76,645 Depreciation and amortization expense 7,574 81 123 - 7,778 170,480 16,819 3,243 (15,080) 175,462 Income from operations $20,523 $4,783 $463 $- $25,769 (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: Michael J. Barrist, Chairman and CEO or Steven L. Winokur, EVP, Finance and CFO, NCO Group, +1-215-441-3000 Web site: http://www.ncogroup.com/

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