HORSHAM, Pa., Feb. 13 /PRNewswire-FirstCall/ -- NCO Group, Inc.
("NCO" or the "Company") (NASDAQ:NCOG), a leading provider of
business process outsourcing services, announced today that during
the fourth quarter of 2005, it reported net income of $7.5 million,
or $0.23 per diluted share, as compared to net income of $12.2
million, or $0.36 per diluted share, in the fourth quarter of 2004.
These results are after special charges of $5.2 million, net of
taxes, or approximately $0.15 per diluted share. The special
charges are associated with the previously announced restructuring
of the Company's legacy operations to streamline the cost
structure, and integration of recent acquisitions. The
restructuring charges are included as a separate line item under
operating costs and expenses, and the integration charges are
included in payroll and related expenses and selling, general and
administrative expenses. NCO is organized into four divisions that
include Accounts Receivable Management North America ("ARM North
America"), Customer Relationship Management ("CRM"), Portfolio
Management, and Accounts Receivable Management International ("ARM
International"). Overall revenue in the fourth quarter of 2005 was
$290.3 million, an increase of 22.4%, or $53.0 million, from
revenue of $237.3 million in the fourth quarter of 2004. Included
in ARM North America's revenue for the fourth quarter of 2005, was
$29.3 million of inter-company revenue from Portfolio Management
and included in ARM International's revenue was $50,000 of inter-
company revenue from Portfolio Management. Included in ARM North
America's revenue for the fourth quarter of 2004 was $15.4 million
of inter-company revenue from Portfolio Management and included in
ARM International's revenue was $86,000 of inter-company revenue
from Portfolio Management. All inter- company revenue is eliminated
in consolidation. For the fourth quarter of 2005, ARM North
America's revenue was $211.7 million as compared to $176.8 million
in the fourth quarter of 2004. The increase was primarily
attributable to the acquisition of Risk Management Alternatives,
Inc. ("RMA"), which was completed on September 12, 2005. The
increase was also attributable to an increase in inter-company
revenue from Portfolio Management. During the quarter, the
lingering effects from Hurricanes Katrina and Rita continued to
negatively impact our collection efforts in the affected areas. In
addition, the Company experienced the expected deterioration in the
amount of payments it received from consumers as compared to the
fourth quarter of 2004, which the Company believes is due to the
effects of higher fuel costs on the broader economy. Continued
pressure from client initiatives to reduce costs also had an
adverse impact on revenue. During the quarter this division
recorded approximately $4.0 million, net of tax, of restructuring
charges and costs associated with integration of the Company's
recent acquisitions. For the fourth quarter of 2005, CRM's revenue
was $54.1 million as compared to $46.8 million in the fourth
quarter of 2004. This $7.3 million increase was primarily
attributable to new client ramp-up during the third and fourth
quarters of 2005. While these new contracts will allow this
division to expand its revenue base in 2006, the deployment of
large numbers of seats on an expedited schedule adversely impacted
near-term earnings due to incremental operating expenses related to
the implementation of these new business opportunities. Partially
offsetting the revenue from new clients was the previously
discussed reduction in revenue from a major client where we ceased
providing certain services when they decided to exit the consumer
long- distance space due to a change in telecommunications laws.
During the quarter this division recorded approximately $477,000,
net of tax, of restructuring charges. For the fourth quarter of
2005, Portfolio Management's revenue was approximately $48.8
million compared to $26.0 million in the fourth quarter of 2004.
The increase primarily reflects additional revenue from portfolio
assets acquired as part of two business combinations during the
third quarter of 2005, as well as $4.1 million of revenue from the
expected sale of portions of several older portfolios with little
or no remaining carrying value. For the fourth quarter of 2005, ARM
International had revenue of approximately $5.1 million compared to
$3.1 million in the fourth quarter of 2004. The increase in revenue
was primarily attributable to the acquisition of the international
operations of RMA. During the quarter this division recorded
approximately $785,000, net of tax, of restructuring and
integration charges. Commenting on the quarter, Michael J. Barrist,
Chairman and Chief Executive Officer, stated, "During the fourth
quarter we continued to execute on the planned restructuring of our
service platform, which is expected to begin yielding tangible
benefits as we move through 2006. This effort will allow us to
better react to the changing needs of our client base. In
combination with continued strong growth opportunities within our
CRM and Portfolio sectors, these changes should allow us to meet
our overall goal of providing our investors with consistent growth
in both revenue and earnings." NCO also announced that it expects
diluted earnings per share to be approximately $1.52 to $1.72 for
2006. This range includes the effects of approximately $6.1
million, after taxes, or approximately $0.18 per diluted share, of
restructuring and integration costs expected to be incurred during
the first quarter of 2006. For the first quarter NCO expects
diluted earnings per share to be approximately $0.17 to $0.22. This
range includes the effects of the approximately $6.1 million, after
taxes, or approximately $0.18 per diluted share, of restructuring
and integration costs. NCO will host an investor conference call on
Tuesday, February 14, 2006, 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 5031185. 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
5031185. 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 over 100 offices
in the United States, Canada, the United Kingdom, India, the
Philippines, the Caribbean and Panama. For further information
contact: NCO Investor Relations (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 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, the risk that NCO will not be able to realize
operating efficiencies in the integration of its acquisitions or
that the restructuring charges will be greater than anticipated,
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 acquisitions, including the acquisition of
Risk Management Alternatives, 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 For the Twelve Months Ended December 31, Ended
December 31, 2005 2004 2005 2004 Revenues $290,337 $237,265
$1,052,283 $939,797 Operating costs and expenses: Payroll and
related expenses 151,777 123,766 528,932 472,915 Selling, general
and admin. expenses 99,838 79,102 376,606 324,187 Restructuring
charge 7,179 - 9,621 - Depreciation and amortization expense 12,791
10,820 45,787 40,225 271,585 213,688 960,946 837,327 Income from
operations 18,752 23,577 91,337 102,470 Other income (expense):
Interest and investment income 818 823 3,162 3,185 Interest expense
(7,038) (5,361) (22,615) (21,244) Other income - - 30 447 (6,220)
(4,538) (19,423) (17,612) Income before income taxes 12,532 19,039
71,914 84,858 Income tax expense 4,189 6,831 26,182 32,389 Income
before minority interest 8,343 12,208 45,732 52,469 Minority
interest (843) - (1,213) (606) Net income $7,500 $12,208 $44,519
$51,863 Net income per share: Basic $0.23 $0.38 $1.39 $1.71 Diluted
$0.23 $0.36 $1.33 $1.60 Weighted average shares outstanding: Basic
32,174 32,043 32,125 30,397 Diluted 32,311 36,395 36,158 34,652
Selected Balance Sheet Information: As of December 31, 2005 2004
Cash and cash equivalents $23,287 $26,334 Current assets 323,134
245,839 Total assets 1,327,232 1,113,889 Current liabilities
151,648 175,369 Long-term debt, net of current portion 321,834
186,339 Shareholders' equity 742,685 695,601 NCO GROUP, INC.
Unaudited Selected Segment Financial Data (in thousands) For the
Three Months Ended December 31, 2005 ARM ARM North Portfolio Inter-
America CRM Management national Revenues $211,717 $54,071 $48,777
$5,109 Operating costs and expenses: Payroll and related expenses
102,755 43,912 1,853 3,257 Selling, general and admin. expenses
86,832 10,167 30,416 1,760 Restructuring charge 5,304 846 - 1,029
Depreciation and amortization expense 7,750 4,325 413 303 202,641
59,250 32,682 6,349 Income (loss) from operations $9,076 $(5,179)
$16,095 $(1,240) Intercompany Eliminations (1) Consolidated
Revenues $(29,337) $290,337 Operating costs and expenses: Payroll
and related expenses - 151,777 Selling, general and admin. expenses
(29,337) 99,838 Restructuring charge - 7,179 Depreciation and
amortization expense - 12,791 (29,337) 271,585 Income (loss) from
operations $- $18,752 For the Three Months Ended December 31, 2004
ARM ARM North Portfolio Inter- America CRM Management national
Revenues $176,844 $46,785 $25,956 $3,130 Operating costs and
expenses: Payroll and related expenses 87,794 33,609 481 1,882
Selling, general and admin. expenses 70,555 7,418 15,810 769
Depreciation and amortization expense 7,807 2,797 70 146 166,156
43,824 16,361 2,797 Income from operations $10,688 $2,961 $9,595
$333 Intercompany Eliminations (1) Consolidated Revenues $(15,450)
$237,265 Operating costs and expenses: Payroll and related expenses
- 123,766 Selling, general and admin. expenses (15,450) 79,102
Depreciation and amortization expense - 10,820 (15,450) 213,688
Income from operations $- $23,577 (1) Represents the elimination of
intercompany revenue for accounts receivable management services
provided by ARM North America and ARM International to Portfolio
Management. FCMN Contact: jennifer.collins@ncogroup.com DATASOURCE:
NCO Group, Inc. CONTACT: NCO Investor Relations: +1-215-441-3000
Web site: http://www.ncogroup.com/
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