NCO Group Announces Fourth Quarter and Full Year 2010 Results

Mar 31, 2011, 18:29 ET from NCO Group, Inc.

HORSHAM, Pa., March 31, 2011 /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, 2010, it reported revenues of $1.6 billion, a net loss attributable to NCO of $155.0 million, and Adjusted EBITDA of $140.1 million. The Adjusted EBITDA excludes the impact of $18.3 million of restructuring charges and a $14.3 million non-cash allowance for impairment of purchased accounts receivable portfolios. This compares to revenues of $1.6 billion, a net loss attributable to NCO of $84.2 million, and Adjusted EBITDA of $200.2 million for the year ended December 31, 2009. The Adjusted EBITDA for 2009 excludes $11.6 million of restructuring and other nonrecurring charges and a non-cash allowance for impairment of $26.5 million. The net loss attributable to NCO for 2010 and 2009 included non-cash impairments of intangible assets of $57.0 million and $30.0 million, respectively.

For the fourth quarter of 2010, NCO reported revenues of $390.3 million, a net loss attributable to NCO of $80.7 million and Adjusted EBITDA of $35.6 million. The Adjusted EBITDA for the fourth quarter of 2010 excludes non-cash allowance for impairments of $7.1 million and $4.4 million of restructuring charges. This compares to revenues of $423.4 million, a net loss attributable to NCO of $52.3 million, and Adjusted EBITDA of $47.8 million for the fourth quarter of 2009. The Adjusted EBITDA for the fourth quarter of 2009 excludes non-cash allowance for impairments of $11.4 million and $7.9 million of restructuring and other nonrecurring charges. The net loss attributable to NCO for the fourth quarters of 2010 and 2009 included non-cash impairments of intangible assets of $57.0 million and $30.0 million, respectively.

NCO is organized into three operating divisions: Accounts Receivable Management ("ARM"), Customer Relationship Management ("CRM") and Portfolio Management ("PM"). During the fourth quarter of 2010, the ARM and CRM divisions operated below their respective revenue and profitability targets.  This shortfall was primarily attributable to volume reductions due to the impact of the challenging economic environment on our clients' businesses. The PM division operated below its revenue target, primarily due to lower than expected collection results on certain portfolios, but was in line with its profitability target.  

Commenting on the results, Ronald A. Rittenmeyer, President and Chief Executive Officer, stated, "Although the results for 2010 did not meet our expectations, we have deployed a business plan for 2011 that we believe will stabilize revenue and earnings. As we execute on our plan in 2011, we will focus on leveraging our client relationships, business platform and workforce to rejuvenate the company's growth."

The Company also announced that it will host an investor conference call on Tuesday, April 5, 2011, at 4:00 p.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 56949002. 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 56949002.

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 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, its ability to service such debt and comply with debt covenants, 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 the possible loss of key clients or loss of significant volumes from key clients, 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, 2010, 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 Months Ended


For the Years Ended



December 31,


December 31,



2010


2009


2010


2009










Revenues:









Services

$ 301,538


$ 333,603


$ 1,223,501


$ 1,400,610


Portfolio (1)

3,366


9,171


35,561


51,759


Reimbursable costs and fees

85,407


80,641


343,101


126,992


   Total revenues

390,311


423,415


1,602,163


1,579,361










Operating costs and expenses:









Payroll and related expenses

173,227


189,570


702,032


781,888


Selling, general and admin. expenses

104,990


117,200


434,413


508,378


Reimbursable costs and fees

85,407


80,641


343,101


126,992


Depreciation and amortization expense

26,455


28,618


108,822


119,570


Impairment of intangible assets

57,015


30,032


57,015


30,032


Restructuring charges

4,444


7,622


18,272


10,868


   Total operating costs and expenses

451,538


453,683


1,663,655


1,577,728

(Loss) income from operations

(61,227)


(30,268)


(61,492)


1,633










Other income (expense):









Interest expense, net

(21,418)


(22,294)


(89,804)


(97,877)


Other income (expense), net

230


(151)


2,455


6,936


   Total other income (expense)

(21,188)


(22,445)


(87,349)


(90,941)

Loss before income taxes

(82,415)


(52,713)


(148,841)


(89,308)










Income tax (benefit) expense

(159)


(110)


6,872


(1,166)










Net loss

(82,256)


(52,603)


(155,713)


(88,142)










Less: Net loss attributable to noncontrolling interests

(1,577)


(311)


(713)


(3,921)










Net loss attributable to NCO Group, Inc.

$ (80,679)


$ (52,292)


$  (155,000)


$    (84,221)












Selected Cash Flow Information:




For the Years Ended December 31,



2010


2009

Net cash provided by operating activities

$   43,124


$   98,474

Purchases of accounts receivable

12,709


56,609

Purchases of property and equipment

24,313


32,142

Net repayment of senior debt

49,039


103,845



Selected Balance Sheet Information:






As of December 31,



2010


2009






Cash and cash equivalents

$   33,077


$   39,221

Working capital

87,844


86,708

Long-term debt

889,353


951,530



NCO GROUP, INC.

Unaudited Selected Segment Financial Data

(in thousands)
























For the Three Months Ended December 31, 2010










Intercompany






ARM


CRM


PM


Eliminations


Consolidated













Revenues (1)


$ 324,374


$  71,784


$    2,412


$           (8,259)


$        390,311













Operating costs and expenses:












Payroll and related expenses


117,766


54,774


687


-


173,227


Selling, general and admin. expenses


89,587


14,769


8,670


(8,036)


104,990


Reimbursable costs and fees


85,630


-


-


(223)


85,407


Depreciation and amortization expense


16,236


9,574


645


-


26,455


Impairment of intangible assets


-


57,015


-


-


57,015


Restructuring charges


4,695


(312)


61


-


4,444




313,914


135,820


10,063


(8,259)


451,538













Income (loss) from operations


$   10,460


$ (64,036)


$   (7,651)


$                  -


$        (61,227)


















For the Three Months Ended December 31, 2009










Intercompany






ARM


CRM


PM


Eliminations


Consolidated













Revenues (1)


$ 344,400


$  85,756


$    8,226


$         (14,967)


$        423,415













Operating costs and expenses:












Payroll and related expenses


129,343


60,931


1,418


(2,122)


189,570


Selling, general and admin. expenses


101,262


14,911


13,346


(12,319)


117,200


Reimbursable costs and fees


81,167


-


-


(526)


80,641


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




336,197


110,624


21,829


(14,967)


453,683













Income (loss) from operations


$     8,203


$ (24,868)


$ (13,603)


$                    -


$        (30,268)















NCO GROUP, INC.

Unaudited EBITDA(2)

(in thousands)










For the Three Months Ended


For the Years Ended


December 31,


December 31,


2010


2009


2010


2009









Net loss attributable to NCO Group, Inc.

$ (80,679)


$ (52,292)


$ (155,000)


$ (84,221)

Income tax (benefit) expense

(159)


(110)


6,872


(1,166)

Interest expense, net

21,418


22,294


89,804


97,877

Depreciation and amortization expense

26,455


28,618


108,822


119,570

Impairment of intangible assets

57,015


30,032


57,015


30,032









EBITDA(2)

24,050


28,542


107,513


162,092









Addbacks:








 Non-cash impairment

7,101


11,389


14,321


26,514

 Restructuring and other nonrecurring charges

4,444


7,908


18,272


11,626









Adjusted EBITDA(2)

$  35,595


$  47,839


$  140,106


$ 200,232









(1)   Includes $7.1 million and $6.4 million of non-cash allowance for impairments of purchased accounts receivable for the three months ended December 31, 2010 and 2009, respectively, and $14.3 million and $21.5 million for the year ended December 31, 2010 and 2009, respectively.  

(2)   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 flows 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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