NCO Group Announces Fourth Quarter and Full Year 2009 Results
HORSHAM, Pa., April 1 /PRNewswire/ -- NCO Group, Inc. (“NCO” or the “Company”), a leading provider of business process outsourcing services, announced today that for the year ended December 31, 2009, it reported revenues of $1.6 billion, a net loss attributable to NCO of $84.2 million, and Adjusted EBITDA of $200.2 million. The Adjusted EBITDA excludes non-cash allowance for impairments of $26.5 million, and $11.6 million of restructuring and other nonrecurring charges. This compares to revenues of $1.5 billion, a net loss attributable to NCO of $337.1 million, and Adjusted EBITDA of $209.6 million for 2008. The Adjusted EBITDA for 2008 excludes a non-cash allowance for impairment of $98.9 million and $15.2 million of restructuring and other nonrecurring charges. The net loss attributable to NCO for 2009 and 2008 included non-cash impairments of intangible assets of $30.0 million and $289.5 million, respectively.
For the fourth quarter of 2009, NCO reported revenues of $409.5 million, a net loss attributable to NCO of $52.3 million and Adjusted EBITDA of $47.8 million. The Adjusted EBITDA excludes non-cash allowance for impairments of $11.4 million and $7.9 million of restructuring and other nonrecurring charges. This compares to revenues of $362.5 million, a net loss attributable to NCO of $286.6 million, and Adjusted EBITDA of $48.0 million for the fourth quarter of 2008. The Adjusted EBITDA excludes non-cash allowance for impairments of $35.7 million and $1.4 million of restructuring and other nonrecurring charges. The net loss attributable to NCO for the fourth quarter of 2009 and 2008 included non-cash impairments of intangible assets of $30.0 million and $289.5 million, respectively.
NCO is organized into three operating divisions: Accounts Receivable Management (“ARM”), Customer Relationship Management (“CRM”) and Portfolio Management (“PM”). During 2009, the ARM division was below its revenue and profitability targets. The profitability shortfalls in ARM were primarily the result of lower than expected collections as a result of the ongoing difficult economic climate, as well as lower than expected volumes and average balances from clients. The CRM division operated below its revenue target but slightly above its profitability target. During 2009, the CRM division was impacted by the ramp-up of new client opportunities that were partially offset by lower than expected volumes from existing clients in the second half of the year, which were caused by the ongoing impact of the economy. PM operated below its revenue and profitability targets primarily as a result of fewer than expected purchases during 2009, in conjunction with lower than expected collections and the resultant impairment charges.
Commenting on 2009, Michael J. Barrist, Chairman and Chief Executive Officer, stated, “2009 presented many challenges and opportunities for NCO, as continued pressure on our clients’ businesses resulted in lower than expected volumes throughout ARM and CRM. While these challenges pressured our revenue assumptions for the year, I am pleased that we were able to come very close to meeting our profitability objectives as we offset many of these decreases with alternative revenue from new sources as well as ongoing planned cost structure and efficiency gains. Additionally, significant excess cash generation throughout the year helped us to repay over $100 million in senior debt.”
Commenting on expectations for 2010, Michael J. Barrist stated, “We are entering 2010 with the assumption that our operating environment will remain challenged both in volumes and our ability to collect from consumers. During 2010 our strategy for our ARM and CRM business units will be to continue to focus on operational efficiencies, cost control and the expansion of our client base and service offerings. Due to the ongoing difficult collection environment, in conjunction with the potential for regulatory changes, we have decided to limit purchases of delinquent accounts receivable in 2010 to existing commitments, and we will focus on maximizing the cash potential from our existing portfolios. We believe limiting our future purchases will allow NCO to focus its attention on growing its service businesses and using the future cash flows from the existing portfolios to repay senior debt. Based on the current operating environment and our limited purchases of delinquent accounts in 2010, we currently expect that Adjusted EBITDA will decrease by approximately 15 percent.”
The Company also announced that it will host an investor conference call on Tuesday, April 6, 2010, 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 67047584. 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 67047584.
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.
Certain statements in this press release, including, without limitation, statements as to expected operating results, statements as to fluctuations in annual and quarterly operating results, statements as to the impact from economic conditions, statements as to future opportunities, statements as to acquisition integrations and operating efficiencies, statements about expected opportunities in our markets, statements as to trends, statements as to regulatory changes, 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, risks related to regulatory changes 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, 2009, 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
Months Ended Year Ended
December 31, December 31,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
Services $333,603 $370,867 $1,400,610 $1,466,318
Portfolio (1) 9,171 (15,701) 51,398 18,029
Portfolio sales - 503 361 3,002
Reimbursable costs and
fees 66,726 6,864 111,549 25,792
------ ----- ------- ------
Total revenues 409,500 362,533 1,563,918 1,513,141
Operating costs and expenses:
Payroll and related
expenses 189,570 206,855 781,888 845,481
Selling, general and
admin. expenses 117,200 131,992 508,378 536,547
Reimbursable costs and
fees 66,726 6,864 111,549 25,792
Depreciation and
amortization expense 28,618 29,421 119,570 121,324
Impairment of
intangible assets 30,032 289,492 30,032 289,492
Restructuring charges 7,622 1,350 10,868 11,600
----- ----- ------ ------
439,768 665,974 1,562,285 1,830,236
------- ------- --------- ---------
(Loss) income from
operations (30,268) (303,441) 1,633 (317,095)
Other income (expense):
Interest expense, net (22,294) (24,423) (97,877) (93,740)
Other (expense) income (151) (14,416) 6,936 (16,468)
---- ------- ----- -------
(22,445) (38,839) (90,941) (110,208)
------- ------- ------- --------
Loss before income taxes (52,713) (342,280) (89,308) (427,303)
Income tax benefit (110) (45,773) (1,166) (71,947)
---- ------- ------ -------
Net loss (52,603) (296,507) (88,142) (355,356)
Less: Net loss
attributable to
noncontrolling interests (311) (9,866) (3,921) (18,250)
---- ------ ------ -------
Net loss attributable to
NCO Group, Inc. $(52,292) $(286,641) $(84,221) $(337,106)
======== ========= ======== =========
Selected Cash Flow Information:
For the Year Ended
December 31,
------------------
2009 2008
---- ----
Net cash provided by
operating activities $98,474 $93,733
Purchases of accounts
receivable 56,609 126,547
Purchases of property
and equipment 32,142 43,396
Selected Balance Sheet Information:
As of December 31,
--------------------
2009 2008
---- ----
Cash and cash equivalents $39,221 $29,880
Working capital 86,708 151,547
Long-term debt 951,530 1,079,076
NCO GROUP, INC.
Unaudited Selected Segment Financial Data
(in thousands)
For the Three Months Ended December 31, 2009
--------------------------------------------
Intercompany Consol-
ARM CRM PM Eliminations idated
--- --- -- ------------ -------
Revenues (1) $330,485 $85,756 $8,226 $(14,967) (2)(3) $409,500
Operating costs
and expenses:
Payroll and
related
expenses 129,343 60,931 1,418 (2,122) (3) 189,570
Selling,
general and
admin.
expenses 101,262 14,911 13,346 (12,319) (2) 117,200
Reimbursable
costs and
fees 67,252 - - (526) (4) 66,726
Depreciation
and
amortization
expense 16,487 11,043 1,088 - 28,618
Impairment of
intangible
assets - 24,753 5,279 - 30,032
Restructuring
charges 7,938 (1,014) 698 - 7,622
----- ------ --- -- -----
322,282 110,624 21,829 (14,967) 439,768
------- ------- ------ ------- -------
Income (loss)
from operations $8,203 $(24,868) $(13,603) $- $(30,268)
====== ======== ======== == ========
For the Three Months Ended December 31, 2008
--------------------------------------------
Intercompany Consol-
ARM CRM PM Eliminations idated
--- --- -- ------------ -------
Revenues (1) $296,358 $98,908 $(14,750) $(17,983) (2)(3) $362,533
Operating costs
and expenses:
Payroll and
related
expenses 140,441 65,676 1,800 (1,062) (3) 206,855
Selling,
general and
admin.
expenses 113,548 15,898 18,080 (15,534) (2) 131,992
Reimbursable
costs and
fees 8,251 - - (1,387) (4) 6,864
Depreciation
and
amortization
expense 17,959 10,102 1,360 - 29,421
Impairment of
intangible
assets 73,381 51,647 164,464 289,492
Restructuring
charges 202 1,148 - - 1,350
--- ----- -- -- -----
353,782 144,471 185,704 (17,983) 665,974
------- ------- ------- ------- -------
Loss from
operations $(57,424) $(45,563) $(200,454) $- $(303,441)
======== ======== ========= == =========
NCO GROUP, INC.
Unaudited EBITDA(5)
(in thousands)
For the Three For the
Months Ended Year Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Net loss attributable to
NCO Group, Inc. $(52,292) $(286,641) $(84,221) $(337,106)
Income tax benefit (110) (45,773) (1,166) (71,947)
Interest expense, net 22,294 24,423 97,877 93,740
Depreciation and
amortization expense 28,618 29,421 119,570 121,324
Impairment of intangible
assets 30,032 289,492 30,032 289,492
------ ------- ------ -------
EBITDA(5) $28,542 $10,922 $162,092 $95,503
======= ======= ======== =======
Addbacks:
Non-cash allowance for
impairments 11,389 35,723 26,514 98,892
Restructuring and other
nonrecurring charges 7,908 1,349 11,626 15,193
----- ----- ------ ------
Adjusted EBITDA(5) $47,839 $47,994 $200,232 $209,588
======= ======= ======== ========
(1) Includes $6.4 million and $21.5 million of non-cash allowance for
impairments of purchased accounts receivable for the three months
and year ended December 31, 2009, respectively, and $35.7 million
and $98.9 million for the three months and year ended December 31,
2008, respectively.
(2) Represents the elimination of intercompany revenue for services
provided by ARM to PM.
(3) Represents the elimination of intercompany revenue for services
provided by CRM to ARM.
(4) Represents the elimination of intercompany reimbursable costs and
fees for services provided by ARM to PM.
(5) Earnings before interest, taxes, depreciation and amortization,
referred to as EBITDA, and Adjusted EBITDA are 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 and
Adjusted EBITDA as presented herein are not necessarily comparable
to similarly titled measures of other companies.
SOURCE NCO Group, Inc.
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