NCO Group Announces Pro Forma Second Quarter Results

NCO Group, Inc. (“NCO”) (NasdaqNM:NCOG), a leading provider of accounts receivable management and collection services, announced today that during the second quarter it achieved pro forma net income of $0.47 per share, on a diluted basis, excluding the effect of a partial recovery from a previously announced environmental liability. Including the partial recovery from the environmental liability, NCO achieved net income of $0.48 per share, on a diluted basis.

Revenue in the second quarter of 2002 was $177.7 million, a decrease of 3.1%, or $5.6 million, from revenue of $183.3 million in the second quarter of the previous year. Pro forma net income was $13.1 million, or $0.47 per share, on a diluted basis, as compared to pro forma net income of $14.7 million, or $0.52 per share, on a diluted basis, in the second quarter a year ago, adjusted to eliminate the amortization of goodwill and to exclude $12.5 million of pre-tax one-time charges. Actual net income was $13.3 million, or $0.48 per share, on a diluted basis, as compared to net income of $7.4 million, or $0.28 per share, on a diluted basis, in the second quarter a year ago, adjusted to eliminate the amortization of goodwill.

NCO’s operations are currently organized into market specific divisions that include: U.S. Operations, Portfolio Management and International Operations. These divisions accounted for $162.3 million, $14.1 million and $12.0 million of the revenue for the second quarter of 2002, respectively. Included in U.S. Operations’ revenue was $8.1 million from Portfolio Management and included in International Operations’ revenue was $2.6 million from U.S. Operations. In the second quarter of 2001, these divisions accounted for $164.9 million, $17.9 million and $9.3 million of the revenue, respectively, before intercompany eliminations of $7.7 million included in U.S. Operations and $1.1 million included in International Operations.

NCO’s payroll and related expenses as a percentage of revenue decreased, and its selling, general and administrative expenses as a percentage of revenue increased for the second quarter of 2002 as compared to the same period in the prior year. Continued focus on managing our staffing levels to our business volumes resulted in further reductions in payroll and related expenses during the second quarter. The increase in NCO’s selling, general and administrative expenses related to the incremental costs associated with continuing efforts to maximize collections for clients in a difficult economic environment, as well as the effect of the downturn in the economy on the portfolio business.

Commenting on the quarter, Michael J. Barrist, Chairman and Chief Executive Officer, stated, ” During the second quarter, we continued to operate in an extremely challenging economic environment. Consumer payment patterns further decelerated, changes to our client’s delinquency patterns translated into changes in business referral patterns and we continued to feel upward pressure on expenses. Additionally, we continued to experience a weaker than expected debt purchase marketplace. I am extremely pleased that we have been able to meet our near-term profitability and growth challenges by aggressively managing our expense and operating structure. More importantly, I believe we have been able to meet these challenges without adversely affecting the execution of our long-term business strategy of positioning ourselves as the best in class service provider within our industry.”

NCO will host an investor conference call on Wednesday, August 7, 2002 at 11:30 a.m., ET, to discuss the items discussed in this 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). 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 5067759.

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 and commercial, utilities, education, telecommunications, and government sectors.

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