NCO Group, Inc. Announces Fourth Quarter Results

FORT WASHINGTON, PA ? NCO Group, Inc. (?NCO?) (Nasdaq: NCOG), a leading provider of accounts receivable management services, announced today that during the fourth quarter it achieved net income of $0.45 per share, on a diluted basis.

During the fourth quarter, net income was $11.6 million, or $0.45 per share, on a diluted basis, from $10.4 million, or $0.40 per share, on a diluted basis, in the fourth quarter a year ago. Revenue in the fourth quarter of 2000 was $154.0 million, an increase of 10.2% or $14.3 million, from revenue of $139.7 million in the fourth quarter of the previous year.

During 2000, income from continuing operations was $46.1 million, or $1.79 per share, on a diluted basis, an increase of 53.0% or $.62 per share, from $27.9 million, or $1.17 per share, on a diluted basis, for 1999. Revenue for 2000 was $605.9 million, an increase of 31.62% or $145.6 million, from revenue of $460.3 million for 1999.

The Company’s operations are currently organized into market specific divisions that include the U.S. Operations (formerly, Accounts Receivable Management Services and Technology-Based Outsourcing) and International Operations divisions. These divisions represented $145.7 million and $8.3 million of the revenue for the fourth quarter of 2000, respectively, and $132.1 million and $7.6 million of the revenue for the fourth quarter of 1999, respectively. The revenue from the U.S. Operations and International Operations divisions represented $574.2 million and $31.7 million for 2000, respectively, and $429.3 million and $31.0 million for 1999, respectively.

Income from operations climbed 2.1% to $24.1 million for the fourth quarter of 2000, up from $23.6 million for the same period a year ago. Income from operations climbed 38.1% to $100.3 million for 2000, up from $72.6 million, excluding non-recurring acquisition costs, for 1999.

NCO experienced a decrease in its payroll and related expenses as a percentage of revenue, and an increase in its selling, general and administrative expenses as a percentage of revenue for the fourth quarter and year 2000 as compared to the same periods in the prior year. Compared to last year, the change in the Company’s payroll structure was primarily attributable to the Company leveraging its payroll over an expanding revenue base.

Further deployment of predictive dialing technology resulted in a reduction of payroll expense, and an increase in information technology expenditures.

During the fourth quarter of 2000, the Company saw increases in both payroll and related expenses and selling, general, and administrative expenses, as compared to the third quarter of 2000, related to the incremental costs associated with increasing collection efforts in order to maximize collections for clients in the current economic environment, as well as costs incurred to prepare for new business opportunities expected to be in place for the first quarter of 2001.

Offsetting the increased payroll costs in the fourth quarter was a reduction in accrued management bonuses commensurate with the reduced profitability of the Company discussed above.

During the fourth quarter of 2000, the Company implemented several tax savings initiatives. As a result of these initiatives, the Company was able to utilize, on a one-time basis, previously generated tax benefits of $850,000. These initiatives are expected to have an ongoing positive effect on the Company’s income tax rate.

Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive Officer, stated, ?I am extremely pleased that we have been able to navigate NCO through the recent transition in the economy with minimal effects to the company’s profitability. As our investors will recall, in August, we gave guidance that we were entering a difficult collection environment. Our goal was to navigate through the transition in the economy, while preparing for increased business opportunities that we expected to derive from changes in our client’s delinquency rates. The fourth quarter was even more challenging, in that we began to experience substantial increases in our expense structure as we started up many new and expanded client engagements. Fortunately, we were able to take advantage of tax benefits to assure that we maintained our profitability. More importantly, the extra expenditures during the fourth quarter properly positioned the Company to enter the first quarter of 2001 with substantial amounts of new revenue and a resumption of our targeted growth rates. These revenue improvements should continue as the increases in delinquency that have positively impacted our outsourcing business transition towards our traditional delinquency management business.?

The Company also announced that it will host an investor conference call on Wednesday, February 14, 2001 at 11:00 a.m., EST, to address the items discussed in the press release for the fourth quarter earnings in more detail and to allow the public an opportunity to ask questions. Interested parties can access the conference call by dialing 800-521-5426 (domestic callers) or 303-267-1002 (international callers). A taped replay of the conference call will be made available for seven days and can be accessed by interested parties by dialing 800-696-1588 (domestic callers) or (303) 804-1727 (international callers) and providing the pass code 906477.

NCO Group, Inc. is the largest provider of accounts receivable collection services in the world. NCO provides services to clients in the financial services, healthcare, retail, commercial, education, telecommunications, utilities and government sectors.

Certain statements in this press release, including, without limitation, statements as to the effects of the economy on the Company’s business, statements as to the effects of potential business opportunities, statements as to the impact of tax savings initiatives, statements concerning projections of earnings per share or the earnings per share growth rate, statements as to fluctuations in quarterly operating results, statements as to trends, statements as to the Company’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 the Company will not be able to implement its five-year strategy as and when planned, risks relating to growth and future acquisitions, risks related to fluctuations in quarterly operating results, risks related to the timing of contracts, risks related to strategic acquisitions and international operations, and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K, filed on March 27, 2000, as amended, can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements.

A copy of the Annual Report on Form 10-K can be obtained, without charge except for exhibits, by written request to Steven L. Winokur, Executive Vice President, Finance/CFO, NCO Group, Inc., 515 Pennsylvania Avenue, Ft. Washington, Pa. 19034.

For more information on NCO Group, Inc., via fax at no charge, dial 1-800-pro-info and enter ticker symbol NCOG.