HORSHAM, Pa., Aug. 17 /PRNewswire-FirstCall/ -- NCO Group, Inc. ("NCO" or the "Company"), a leading provider of business process outsourcing services, announced today that for the three months ended June 30, 2009 it reported revenues of $378.6 million, a net loss attributable to NCO of $5.2 million, and EBITDA of $48.9 million. The results for the second quarter of 2009 included a non-cash allowance for impairment of purchased accounts receivable of $1.3 million, $1.3 million of restructuring charges and net gains of $6.2 million from foreign exchange contracts. This compares to revenues of $405.0 million, net loss attributable to NCO of $14.8 million, and EBITDA of $31.8 million for the three months ended June 30, 2008. The results for the second quarter of 2008 included a non-cash allowance for impairment of purchased accounts receivable of $24.6 million and $4.9 million of restructuring and other nonrecurring charges.
NCO is organized into three operating divisions: Accounts Receivable Management ("ARM"), Customer Relationship Management ("CRM") and Portfolio Management ("PM"). During the second quarter of 2009, both the ARM and CRM divisions operated below their respective revenue objectives but slightly above their respective profitability targets. The revenue shortfall in ARM was primarily the result of lower than expected collections as a result of the ongoing difficult economic climate, as well as reductions in volume and average balances from clients. The revenue shortfall in CRM was primarily as a result of lower than expected volume from existing clients. The ARM and CRM divisions were both positively impacted by net gains from foreign exchange contracts during the quarter. During the quarter, PM operated below its revenue target and slightly above its profitability target. PM's revenue shortfall was primarily a result of lower than expected collection results and fewer than expected purchases during the quarter.
Commenting on the quarter Michael J. Barrist, Chairman and Chief Executive Officer, stated, "Although NCO met its overall profitability target, the second quarter presented many challenges as we began to experience volume reductions from clients as a result of declines in credit card activity and continued weakness in general consumer spending patterns. This was offset by continued expense reductions and the benefit from foreign currency gains. As we move into the back half of the year, we will continue to focus on positioning NCO to be prepared to capitalize on potential opportunities from future improvements in consumer activity."
The Company also announced that it will host an investor conference call on Tuesday, August 18, 2009, at 11:00 a.m., ET, to address the items discussed above in more detail and to allow the investment community an opportunity to ask questions. Interested parties can access the conference call by dialing (866) 388-2676 (domestic callers) or (706) 679-3487 (international callers) and providing the pass code 22805013. 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 22805013.
About NCO Group, Inc.
NCO Group, Inc. is a leading global provider of business process outsourcing services, primarily focused on accounts receivable management and customer relationship management. NCO provides services through over 100 offices throughout North America, Asia, Europe and Australia.
For further information contact:
NCO Investor Relations
(215) 441-3000
Certain statements in this press release, including, without limitation, statements as to fluctuations in quarterly operating results, statements as to the impact from economic conditions, statements as to acquisition integrations and operating efficiencies, statements about expected opportunities in our markets, 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, risks related to the economy, the risk that NCO will not be able to implement its business strategy as and when planned, the risk that NCO will not be able to realize operating efficiencies in the integration of its acquisitions, risks related to NCO's significant level of debt, risks of future impairment charges to our goodwill, intangible assets and purchased accounts receivable, risks related to union organizing efforts at the Company's facilities, risks related to past and possible future terrorists attacks, the risk that NCO will not be able to improve margins, risks relating to growth and acquisitions, 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, 2008, 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)
Condensed Statements of Operations:
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
--------- ---------
2009(1) 2008 (1) 2009(1) 2008 (1)
---- -------- ---- --------
Revenues $378,619(2) $404,984(2) $780,748(2) $769,552(2)
Operating costs and
expenses:
Payroll and related
expenses 197,922 223,894 403,687 420,313
Selling, general and
admin. expenses 137,642 147,619 279,834 276,437
Depreciation and
amortization expense 30,619 32,147 61,701 59,933
Restructuring charges 1,337 4,227 1,780 6,868
----- ----- ----- -----
367,520 407,887 747,002 763,551
------- ------- ------- -------
Income (loss) from
operations 11,099 (2,903) 33,746 6,001
Other income (expense):
Interest and investment
income 594 539 936 819
Interest expense (26,674) (23,003) (49,784) (45,410)
Other income (expense)(3) 6,866 (579) 3,162 (161)
----- ---- ----- ----
(19,214) (23,043) (45,686) (44,752)
------- ------- ------- -------
Loss before income taxes (8,115) (25,946) (11,940) (38,751)
Income tax benefit (2,538) (8,107) (3,684) (12,003)
------ ------ ------ -------
Net loss (5,577) (17,839) (8,256) (26,748)
Less: Net loss
attributable to
noncontrolling interest (361) (3,088) (931) (2,761)
---- ------ ---- ------
Net loss attributable to
NCO Group, Inc. $(5,216) $(14,751) $(7,325) $(23,987)
======= ======== ======= ========
Selected Cash Flow
Information: For the Six
Months Ended
June 30,
--------
2009 2008
---- ----
Net cash provided by
operating activities $58,933 $68,312
Purchases of accounts
receivable 32,954 73,889
Purchases of property
and equipment 18,055 18,310
Selected Balance Sheet
Information: As of As of
June 30, December 31,
2009 2008
---- ----
Cash and cash equivalents $35,449 $29,880
Working capital 163,285 151,547
Long-term debt 1,005,165 1,079,076
NCO GROUP, INC.
Unaudited Selected Segment Financial Data
(in thousands)
For the Three Months Ended June 30, 2009(1)
-------------------------------------------
Portfolio Intercompany
ARM CRM Management Eliminations Consolidated
--- --- ---------- ------------ ------------
Revenues $296,211 $85,239 $17,556(2) $(20,387)(4)(5) $378,619
Operating
costs and
expenses:
Payroll and
related
expenses 139,336 61,097 1,551 (4,062)(5) 197,922
Selling,
general and
admin.
expenses 120,834 16,291 16,842 (16,325)(4) 137,642
Depreciation
and
amortization
expense 18,190 11,005 1,424 - 30,619
Restructuring
charges 1,333 4 - - 1,337
----- --- --- --- -----
279,693 88,397 19,817 (20,387) 367,520
------- ------ ------ ------- -------
Income (loss)
from
operations $16,518 $(3,158) $(2,261) $- $11,099
======= ======= ======= == =======
For the Three Months Ended June 30, 2008 (1)
--------------------------------------------
Portfolio Intercompany
ARM CRM Management Eliminations Consolidated
--- --- ---------- ------------ ------------
Revenues $334,788 $84,768 $8,803(2) $(23,375)(4)(5) $404,984
Operating
costs and
expenses:
Payroll and
related
expenses 160,446 62,173 1,980 (705)(5) 223,894
Selling,
general and
admin.
expenses 131,619 14,997 23,673 (22,670)(4) 147,619
Depreciation
and
amortization
expense 21,025 9,762 1,360 - 32,147
Restructuring
charges 1,888 2,339 - - 4,227
----- ----- --- --- -----
314,978 89,271 27,013 (23,375) 407,887
------- ------ ------ ------- -------
Income (loss)
from
operations $19,810 $(4,503) $(18,210) $- $(2,903)
======= ======= ======== == =======
NCO GROUP, INC.
Unaudited EBITDA(6)
(in thousands)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
Net loss
attributable to
NCO Group, Inc. $(5,216) $(14,751) $(7,325) $(23,987)
Income tax benefit (2,538) (8,107) (3,684) (12,003)
Interest expense,
Net 26,080 22,464 48,848 44,591
Depreciation and
amortization 30,619 32,147 61,701 59,933
------ ------ ------ ------
EBITDA(6) $48,945(1)(2) $31,753(1)(2) $99,540(1)(2) $68,534(1)(2)
(3) (3)
======= ======= ======= =======
(1) Includes restructuring and other nonrecurring charges of $1.3
million and $1.8 million for the three and six months ended June
30, 2009, respectively, and $4.9 million and $10.4 million for the
three and six months ended June 30, 2008, respectively.
(2) Includes $1.3 million of non-cash allowance for impairments of
purchased accounts receivable for the three and six months ended
June 30, 2009, and $24.6 million and $30.8 million for the three
and six months ended June 30, 2008, respectively.
(3) Includes net gains from foreign exchange contracts of $6.2 million
and $2.8 million for the three and six months ended June 30, 2009,
respectively.
(4) Represents the elimination of intercompany revenue for services
provided by ARM to Portfolio Management.
(5) Represents the elimination of intercompany revenue for services
provided by CRM to ARM.
(6) Earnings before interest expense, taxes, depreciation and
amortization, referred to as EBITDA, is presented since certain
investors use this as a measurement of the Company's ability to
service its debt. It is not intended to report the Company's
operating results or free cash flow in conformity with accounting
principles generally accepted in the United States. EBITDA as
presented herein is not necessarily comparable to similarly
titled measures of other companies.
