NCO Group Announces Fourth Quarter Results of $0.36 Per Diluted Share After the Correction of a Revenue Recognition Policy, and

NCO Group Announces Fourth Quarter Results of $0.36 Per Diluted
Share After the Correction of a Revenue Recognition Policy, and Provides
Investor Guidance for 2005 


HORSHAM, Pa., March 15  /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 2004, it reported
net income of $12.2 million, or $0.36 per diluted share, as compared to net
income of $10.3 million, or $0.37 per diluted share, in the fourth quarter of
2003. The results for the fourth quarter of 2004 include the reduction in
revenue from a correction of one of the Company's revenue recognition policies.
The correction resulted in a reduction of diluted earnings per share of
approximately $0.03 for the fourth quarter of 2004.

The correction related to the previously announced change in the timing of
revenue recognition on certain cash receipts for contingency revenues. The
Company previously recognized contingency fee revenue attributable to payments
postmarked prior to the end of the period and received in the mail from
consumers on the first business day after such period as applicable to the
prior reporting period. The Company changed its policy in order to recognize
contingency fee revenue when physically received. The impact of this correction
was a $2.7 million reduction in revenues and a $947,000 reduction in net
income, or $0.03 per diluted share, during the fourth quarter of 2004. No
restatement of prior period financial statements is required for this
correction.

Revenue in the fourth quarter of 2004 was $237.3 million, an increase of 26.5%,
or $49.7 million, from revenue of $187.6 million in the fourth quarter of 2003.

NCO's operations are organized into four market specific divisions that
include: Accounts Receivable Management North America ("ARM North America"),
Customer Relationship Management ("CRM"), Portfolio Management, and Accounts
Receivable Management International ("ARM International"). For the fourth
quarter of 2004, these divisions accounted for $176.8 million, $46.8 million,
$26.0 million, and $3.1 million of revenue, respectively. Included in ARM North
America's revenue was $15.4 million of intercompany revenue from Portfolio
Management and included in ARM International's revenue was $86,000 of
intercompany revenue from Portfolio Management. All intercompany revenue is
eliminated in consolidation.

For the fourth quarter of 2003, the ARM North America, Portfolio Management and
ARM International divisions accounted for $176.6 million, $20.3 million and
$3.4 million of the revenue, respectively. Included in ARM North America's
revenue was $12.6 million of intercompany revenue from Portfolio Management and
included in ARM International's revenue was $101,000 of intercompany revenue
from Portfolio Management. The CRM division was created in the second quarter
of 2004 in connection with the acquisition of RMH Teleservices, Inc. ("RMH") on
April 2, 2004 and, accordingly, is not included in the results for 2003. All
intercompany revenue is eliminated in consolidation.

NCO's payroll and related expenses as a percentage of revenue increased to
52.2% for the fourth quarter of 2004 as compared to 45.8% for the same period
in the prior year. The increase in payroll and related expenses as a percentage
of revenue was primarily attributable to the CRM division. The CRM division has
a more significant amount of payroll and related expenses as compared to the
ARM business. The increase was also attributable to the additional revenue
recorded in the fourth quarter of 2003 as a result of the amendment to the
long-term collection contact since no expenses were incurred in that quarter in
connection with the recognition of that revenue.

NCO's selling, general and administrative expenses as a percentage of revenue
decreased to 33.3% for the fourth quarter of 2004 as compared to 38.4% for the
same period in the prior year. The decrease was primarily attributable to the
difference in CRM's expense structure discussed above.

In comparing the fourth quarter of 2004 to the fourth quarter of 2003, there
are several additional factors to consider. In 2003, the Company amended a
long-term contract, which resulted in additional revenue of $6.9 million.
Because there were no related expenses, this amendment reduced selling, general
and administrative expense as a percentage of revenue.

In the fourth quarter of 2004, the Company was able to resolve several
outstanding matters. These included the settlement of two customer contracts,
the negotiation of a settlement of an outstanding claim with a vendor, and the
resolution of certain matters with other customers. The net result of these
matters was a decrease in selling, general and administrative expenses of $3.0
million.

NCO also announced that it expects earnings per share to be approximately $1.70
to $1.80 per diluted share for 2005. This guidance does not include the
potential impact from the adoption of FASB Statement of Financial Accounting
Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123R") on July
1, 2005. SFAS 123R requires that the cost of all share-based payments to
employees, including stock option grants, be recognized in the financial
statements based on their fair values, as currently permitted but not required
under SFAS 123. We are currently evaluating the requirements of SFAS 123R and
will update investors on the impact once we determine the method of adoption.

Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive
Officer, stated, "2004 represented both a challenging and opportunistic year
for NCO. During 2004 we began to once again see growth in our earnings as a
result of our tactical efforts in business development and operational
efficiency. More importantly, we began the strategic transition of NCO into a
global provider of Business Process Outsourcing. Over the next few years this
ongoing transition, including our expansion during 2004 into CRM, will allow us
to meet our longer term goal of providing our investors with consistent growth
in both revenue and earnings with enough diversity in services and geography to
minimize the future effects of the types of challenges we have dealt with over
the last few years."

NCO will host an investor conference call on Tuesday, March 15, 2005, at 2:00
p.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 4697390. 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 4697390. 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 Form 8-K report.

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 90 offices in the United
States, Canada, the United Kingdom, India, Barbados and the Philippines.

   For further information:
   At NCO Group, Inc.
   Michael J. Barrist,
   Chairman and CEO
   Steven L. Winokur,
   EVP, Finance and CFO
   [phone]
   http://www.ncogroup.com/



Certain statements in this press release, including, without limitation,
statements as to the impact of the change in the revenue recognition policy,
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 the
integration of the acquisitions of RMH Teleservices, Inc., 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, 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 future acquisitions, risks related to the
integration of the acquisitions of RMH Teleservices, Inc. and the minority
interest of NCO Portfolio Management, Inc., risks related to fluctuations in
quarterly operating results, risks related to the timing of contracts, risks
related to international operations, risks relating to any adverse impact of
restating the Company's historical financial statements 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, 2003, 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      For the Twelve
                                        Months Ended        Months Ended
                                         December 31,        December 31,
                                       2004      2003      2004      2003

  Revenue                            $237,265  $187,606  $939,797  $753,816

  Operating costs and expenses:
      Payroll and related expenses    123,766    85,863   472,915   350,369
      Selling, general and admin.
       expenses                        79,102    71,969   324,187   282,268
      Depreciation and amortization
       expense                         10,820     7,882    40,225    31,628
                                      213,688   165,714   837,327   664,265
  Income from operations               23,577    21,892   102,470    89,551

  Other income (expense):
      Interest and investment income      823       975     3,185     3,927
      Interest expense                 (5,361)   (5,731)  (21,244)  (22,998)
      Other income                        -         -         447     1,128
                                       (4,538)   (4,756)  (17,612)  (17,943)
  Income before income taxes           19,039    17,136    84,858    71,608

  Income tax expense                    6,831     6,071    32,389    26,732

  Income before minority interest      12,208    11,065    52,469    44,876

  Minority interest                       -        (811)     (606)   (2,430)

  Net income                          $12,208   $10,254   $51,863   $42,446

  Net income per share:
      Basic                             $0.38     $0.39     $1.71     $1.64
      Diluted                           $0.36     $0.37     $1.60     $1.54

  Weighted average shares outstanding:
      Basic                            32,043    25,981    30,397    25,934
      Diluted                          36,395    30,149    34,652    29,895


  Selected Balance Sheet Information:
                                                     As of December 31,
                                                   2004             2003

  Cash and cash equivalents                       $26,334          $45,644
  Current assets                                  245,839          229,452
  Total assets                                  1,113,889          946,111

  Current liabilities                             175,369          123,043
  Long-term debt, net of current portion          186,339          248,964
  Shareholders' equity                            695,601          490,417


                       For the Three Months Ended December 31, 2004
                 ARM                          ARM    Intercompany
                North            Portfolio   Inter-     Elimi-      Consol-
               America    CRM   Management  national   nations(1)    idated

  Revenue     $176,844  $46,785   $25,956    $3,130    $(15,450)    $237,265

  Operating costs
   and expenses:
    Payroll and
     related
     expenses   87,794   33,609       481     1,882         -       123,766
    Selling,
     general
     and admin.
     expenses   70,555    7,418    15,810       769     (15,450)     79,102
    Depreciation
     and
     amortization
     expense     7,807    2,797        70       146         -        10,820
               166,156   43,824    16,361     2,797     (15,450)    213,688

  Income from
   operations  $10,688   $2,961    $9,595      $333       $ -       $23,577


                           For the Three Months Ended December 31, 2003
                     ARM                    ARM     Intercompany
                    North    Portfolio     Inter-      Elimi-      Consol-
                   America  Management    national    nations(1)    idated

  Revenue         $176,592    $20,289      $3,413     $(12,688)    $187,606

  Operating costs
   and expenses:
    Payroll and
     related
     expenses       83,636        449       1,778         -          85,863
     Selling,
      general
      and admin.
      expenses      69,986     13,704         967      (12,688)      71,969
     Depreciation
      and
      amortization
      expense        7,683         81         118         -           7,882
                   161,305     14,234       2,863      (12,688)     165,714

  Income from
   operations      $15,287     $6,055        $550       $ -         $21,892

  (1) Represents the elimination of intercompany revenue for accounts
      receivable management services provided by ARM North America and ARM
      International to Portfolio Management.


DATASOURCE: NCO Group, Inc.



CONTACT:  Michael J. Barrist, Chairman and CEO, or Steven L. Winokur,

EVP, Finance and CFO, both of NCO Group, Inc., [phone] 



Web site:  http://www.ncogroup.com/ 

Copyright