NCO Portfolio Management, Inc. (“NCPM) (Nasdaq:NCPM), a leading purchaser and manager of delinquent accounts receivable, announced today that during the first quarter of 2002 it achieved net income of $0.20 per share, on a diluted basis.
Total collections on purchased accounts receivable for the first quarter of 2002 were $28.9 million, an increase of $8.5 million, or 41.7%, from $20.4 million in the first quarter a year ago. Revenue in the first quarter of 2002 was up $3.7 million, or 29.4%, to $16.3 million from $12.6 million the previous year. Income from operations was $6.0 million for the first quarter of 2002, a decrease of $200,000, or 3.2%, from $6.2 million a year ago. During the first quarter of 2002, net income was $2.7 million, or $0.20 per share, on a diluted basis, compared to net income of $2.9 million, or $0.27 per share, on a diluted basis, from the first quarter in the previous year. The first quarter 2001 comparative results include the results of operations of Creditrust Corporation from the date of the merger, February 20, 2001, through March 31, 2001 and may not be comparable to the full quarter results for 2002.
Operating expenses were $10.3 million and $6.4 million in the first quarter of 2002 and 2001, respectively. Included in operating expenses for the first quarter of 2002 and 2001 was $8.3 million and $5.7 million of servicing fees, respectively, paid for collection activities, including contingency legal fees. It is important to note that servicing fees are paid as a percentage of collections and not as a function of revenue. Servicing fees as a percentage of collections for the first quarter of 2002 and 2001 were 29% and 28%, respectively. All of the servicing fees for the first quarter of 2002, and $5.4 million of the servicing fees paid in the first quarter of 2001, were paid to NCO Group, Inc. (“NCOG”)(Nasdaq: NCOG – news). NCOG owns approximately 63% of the outstanding common stock of the company.
On an ongoing basis, management reviews the expected future cash flows of each portfolio to assess the carrying value of the asset as well as the expected return on the asset. With a typical portfolio, the future cash flows are expected to recover the cost of the asset plus provide a return. Over time, this return is recognized as revenue. If, based on current circumstances, the estimates are changed, the rate at which revenue is recognized will also change. If the future estimated cash flows are not sufficient to recover the remaining carrying value of a portfolio, an impairment has occurred and the portfolio must be written down to its net realizable value. After a portfolio has been impaired, additional write downs to net realizable value may occur if actual collections subsequent to impairment and further downward revisions of future estimated cash flows, fall below the expected collections at the date of the original impairment. After impairment, no revenue is recorded until the carrying value has been fully recovered.
Total collections for the quarter ended March 31, 2002 were in line with our expectations. However, on several portfolios acquired over a year ago, unexpected collection shortfalls resulted in further reductions in future collections, which were significant enough to create impairments as the expected future collections were less than the carrying values on these portfolios. These impairments are despite normal, ongoing adjustments to projected collections from the time of acquisition forward. The impairment recorded during the first quarter of 2002 was approximately $797,000, which represented 0.6% of the carrying value of all the portfolios and $0.04 per diluted share, after taxes. The combined carrying values of all impaired portfolios as of March 31, 2002 aggregated $7.4 million, or 5.5% of purchased accounts receivable. There was no impairment charge in the first quarter of 2001.
Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive Officer, stated, “During the first quarter, our overall collections and financial results were in line with expectations. While continued weakness in consumer payment patterns were partially offset by the strong seasonal effects of income tax season, trends in the performance of certain portfolios purchased during a stronger economy necessitated further impairments. Additionally, we continue to see fewer than expected portfolios offered for sale as our clients continue to manage their business models through this difficult economy. As we proceed into the remainder of the year, we will continue to focus on quality underwriting and strict adherence to our business model.”
The Company also announced that it will host an investor conference call on Wednesday, May 1, 2002 at 10:00 a.m., ET, to address the items discussed in this press release for the first quarter earnings in more detail and to allow the investment community an opportunity to ask questions. Interested parties can access the conference call by dialing (800) 240-2134 (domestic callers) or (303) 262-2075 (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) 405-2236 (domestic callers) or (303) 590-3000 (international callers) and providing the pass code 466433.
NCO Portfolio Management, Inc. is a leading purchaser and manager of delinquent accounts receivable.
Certain statements in this press release, including, without limitation, statements as to NCO Portfolio’s or management’s outlook as to financial results in 2002 and beyond, statements as to the effects of the terrorist attacks and the economy on NCO Portfolio’s business, statements as to NCO Portfolio’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 relating to growth and future accounts receivable purchases, risks related to the company’s debt, risks related to the recoverability of the purchased accounts receivable, risks related to the use of estimates, risks related to the availability to purchase accounts receivable at favorable prices in the open market, risks related to regulatory oversight, risks related to the retention of its senior management team, risks related to securitization transactions, risks related to the fluctuation in quarterly results, risks related to NCOG’s ownership control of the company, risks related to the dependency on NCOG for its collections, 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 19, 2002, can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements.
For this complete story including charts and graphs, please visit biz.yahoo.com
