UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001, or
/ / Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER 0-21639
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NCO GROUP, INC.
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA
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(State or other jurisdiction of incorporation or organization)
515 Pennsylvania Avenue, Fort Washington, Pennsylvania
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(Address of principal executive offices)
23-2858652
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(IRS Employer Identification Number)
19034
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(Zip Code)
215-793-9300
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(Registrant's telephone number including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
The number of shares outstanding of each of the issuer's classes of
common stock was 25,749,648 shares common stock, no par value, outstanding as of
May 14, 2001.
NCO GROUP, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1 CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Consolidated Balance Sheets -
December 31, 2000 and March 31, 2001 1
Consolidated Statements of Income -
Three months ended March 31, 2000 and 2001 2
Consolidated Statements of Cash Flows -
Three months ended March 31, 2000 and 2001 3
Notes to Consolidated Financial Statements 4
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 16
PART II - OTHER INFORMATION 17
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Shareholders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Part 1 - Financial Information
Item 1 - Financial Statements
NCO GROUP, INC.
Consolidated Balance Sheets
(Amounts in thousands)
March 31,
December 31, 2001
ASSETS 2000 (Unaudited)
------------ -----------
Current assets:
Cash and cash equivalents $ 13,490 $ 26,395
Restricted cash -- 1,125
Accounts receivable, trade, net of allowance for
doubtful accounts of $7,080 and $6,349, respectively 93,971 99,149
Purchased accounts receivable, current portion 10,861 34,898
Deferred income taxes 2,287 3,372
Other current assets 7,925 9,275
--------- ---------
Total current assets 128,534 174,214
Funds held on behalf of clients
Property and equipment, net 66,401 71,683
Other assets:
Intangibles, net of accumulated amortization 536,750 531,876
Purchased accounts receivable, net of current portion 23,614 105,388
Notes receivable 18,250 18,250
Other assets 10,457 15,873
--------- ---------
Total other assets 589,071 671,387
--------- ---------
Total assets $ 784,006 $ 917,284
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt, current portion $ 642 $ 26,547
Corporate taxes payable 1,328 622
Accounts payable 12,360 12,922
Accrued expenses 19,168 23,520
Accrued compensation and related expenses 15,304 16,373
--------- ---------
Total current liabilities 48,802 79,984
Funds held on behalf of clients
Long-term liabilities:
Long-term debt, net of current portion 303,920 376,723
Deferred income taxes 40,549 39,164
Other long-term liabilities 4,309 4,194
Minority interest -- 17,495
Shareholders' equity:
Preferred stock, no par value, 5,000 shares authorized,
no shares issued and outstanding -- --
Common stock, no par value, 37,500 shares authorized,
25,627 and 25,750 shares issued and outstanding, respectively 316,372 319,654
Other comprehensive loss (1,525) (3,786)
Retained earnings 71,579 83,856
--------- ---------
Total shareholders' equity 386,426 399,724
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Total liabilities and shareholders' equity $ 784,006 $ 917,284
========= =========
See accompanying notes
-1-
NCO GROUP, INC.
Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except per share data)
For the Three Months
Ended March 31,
--------------------------------
2000 2001
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Revenue $ 143,998 $ 171,029
Operating costs and expenses:
Payroll and related expenses 70,646 82,912
Selling, general, and administrative expenses 41,558 51,123
Depreciation and amortization expense 7,545 8,954
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Total operating costs and expenses 119,749 142,989
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Income from operations 24,249 28,040
Other income (expense):
Interest and investment income 503 916
Interest expense (6,421) (7,421)
Other income 1,313 --
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Total other income (expense) (4,605) (6,505)
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Income before income tax expense 19,644 21,535
Income tax expense 8,251 8,666
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Income from continuing operations before
minority interest 11,393 12,869
Minority interest -- (592)
--------- ---------
Income from continuing operations 11,393 12,277
Discontinued operations, net of income taxes:
Loss from discontinued operations (904) --
Loss on disposal of discontinued operations (20,814) --
--------- ---------
Net (loss) income $ (10,325) $ 12,277
========= =========
Income from continuing operations per share:
Basic $ 0.45 $ 0.48
Diluted $ 0.44 $ 0.47
Net (loss) income per share:
Basic $ (0.40) $ 0.48
Diluted $ (0.40) $ 0.47
Weighted average shares outstanding:
Basic 25,540 25,687
Diluted 25,852 26,340
See accompanying notes.
-2-
NCO GROUP, INC
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
For the Three Months
Ended March 31,
------------------------------
2000 2001
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Cash flows from operating activities:
Income from continuing operations $ 11,393 $ 12,277
Adjustments to reconcile income from continuing
operations to net cash (used in) provided by
continuing operating activities:
Depreciation 3,278 4,628
Amortization of intangibles 4,267 4,326
Provision for doubtful accounts 657 779
Minority interest -- 592
Changes in operating assets and liabilities,
net of acquisitions:
Restricted cash -- 2,555
Accounts receivable, trade (10,290) (6,183)
Deferred income taxes 1,555 7,530
Other assets (2,696) (2,147)
Accounts payable and accrued expenses (417) 1,278
Corporate taxes payable (4,049) (294)
Other long-term liabilities (3,727) (115)
-------- --------
Net cash (used in) provided by continuing operating activities (29) 25,226
Net cash provided by discontinued
operating activities 1,551 --
-------- --------
Net cash provided by operating activities 1,522 25,226
Cash flows from investing activities:
Acquisition of purchased accounts receivable (7,583) (13,493)
Collections applied to principal of purchased
accounts receivable 1,343 6,978
Purchase of property and equipment (9,798) (7,755)
Investment in consolidated subsidiary by minority interest -- 2,320
Net cash paid for pre-acquisition liabilities
and acquisition related costs -- (11,077)
-------- --------
Net cash used in investing activities (16,038) (23,027)
Cash flows from financing activities:
Repayment of notes payable (398) (4,390)
Repayment of acquired notes payable -- (20,084)
Borrowings under revolving credit agreement -- 47,350
Repayment of borrowings under revolving credit agreement -- (13,800)
Payment of fees to acquire new debt -- (939)
Issuance of common stock, net 7 2,872
-------- --------
Net cash (used in) provided by financing activities (391) 11,009
Effect of exchange rate on cash 1 (303)
-------- --------
Net (decrease) increase in cash and cash equivalents (14,906) 12,905
Cash and cash equivalents at beginning of period 50,513 13,490
-------- --------
Cash and cash equivalents at end of period $ 35,607 $ 26,395
======== ========
See accompanying notes.
-3-
NCO GROUP, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Nature of Operations:
NCO Group, Inc. (the "Company" or "NCO") is a leading provider of accounts
receivable management and collection services. The Company also owns
approximately 63% of NCO Portfolio Management, Inc., a separate public company
that purchases and manages accounts receivable. The Company's client base
includes companies in the financial services, healthcare, retail, commercial,
education, utilities, government and telecommunications sectors. These clients
are primarily located throughout the United States of America, Canada, the
United Kingdom, and Puerto Rico.
2. Accounting Policies:
Interim Financial Information:
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of only normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three-month period ended March 31,
2001, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2001, or for any other interim period. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 16, 2001.
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and
all affiliated subsidiaries and entities controlled by the Company. All
significant intercompany accounts and transactions have been eliminated.
Contingency Fees and Contractual Services:
The Company generates revenue from contingent fees and contractual services.
Contingent fee revenue is recognized upon collection of funds on behalf of
clients. Contractual services revenue is recognized as services are performed
and accepted by the client.
Purchased Accounts Receivable:
The Company accounts for its investment in purchased accounts receivable on an
accrual basis under the guidance of Practice Bulletin 6, "Amortization of
Discounts on Certain Acquired Loans," using unique and exclusive static pools.
Static pools are established with accounts having similar attributes. Typically,
each pool consists of an individual acquisition of accounts. Once a static pool
is established, the accounts in the pool are not changed.
Each static pool is initially recorded at cost. Collections on the pools are
allocated to revenue and principal reduction based on the estimated internal
rate of return for each pool. The internal rate of return for each static pool
is estimated based on the expected monthly collections over the estimated
economic life of each pool (generally five years, based on the Company's
collection experience), compared to the original purchase price. Revenue on
purchased accounts receivable is recorded monthly based on each static pool's
effective internal rate of return applied to each static pool's monthly opening
carrying value. To the extent collections exceed the revenue, the carrying value
is reduced and the reduction is recorded as collections applied to principal.
Because the internal rate of return reflects collections for the entire economic
life of the static pool and those collections are not constant, lower collection
rates, typically in the early months of ownership, can result in a situation
where the actual collections are less than the revenue accrual. In this
situation, the carrying value of the pool may be accreted for the difference
between the revenue accrual and the carrying value.
-4-
2. Accounting Policies (continued):
Purchased Accounts Receivable (continued):
To the extent the estimated future cash flow increases or decreases from the
expected level of collections, the Company adjusts the yield (the internal rate
of return) accordingly. To the extent that the carrying amount of a particular
static pool exceeds its expected future cash flows, a charge to earnings would
be recognized in the amount of such impairment. After the impairment of a static
pool, no income is recorded on that static pool and collections are recorded as
a return of capital. The estimated yield for each static pool is based on
estimates of future cash flows from collections, and actual cash flows may vary
from current estimates. The difference could be material.
Proceeds from the sale of accounts that are included as parts of a static pool
are accounted for as collections in that static pool. Collections on replacement
accounts received from the originator of the loans are included as collections
in the corresponding static pools. The discount between the cost of each static
pool and the face value of the static pool is not recorded since the Company
expects to collect a relatively small percentage of each static pool's face
value.
Credit Policy:
The Company has two types of arrangements under which it collects its contingent
fee revenue. For certain clients, the Company remits funds collected on behalf
of the client net of the related contingent fees while, for other clients, the
Company remits gross funds collected on behalf of clients and bills the client
separately for its contingent fees. Management carefully monitors its client
relationships in order to minimize its credit risk and generally does not
require collateral. In many cases, in the event of collection delays from
clients, management may, at its discretion, change from the gross remittance
method to the net remittance method.
Intangibles:
Intangibles consist primarily of goodwill and deferred financing costs.
Goodwill represents the excess of purchase price over the fair market value of
the net assets of the acquired businesses based on their respective fair values
at the date of acquisition. Goodwill is amortized on a straight-line basis over
15 to 40 years. The Company reviews the recoverability of its goodwill whenever
events or circumstances indicate that the carrying amount of the goodwill may
not be recoverable. If such circumstances arise, the Company would use an
estimate of the undiscounted value of expected future operating cash flows to
determine whether the goodwill is recoverable.
Deferred financing costs relate to debt issuance costs incurred, which are
capitalized and amortized over the term of the debt.
Income Taxes:
The Company accounts for income taxes using an asset and liability approach. The
asset and liability approach requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities.
Income taxes were computed after giving effect to the nondeductible portion of
goodwill expenses attributable to certain acquisitions.
The static pools of purchased accounts receivable are comprised of distressed
debt. Collection results are not guaranteed until received; accordingly, for tax
purposes, any gain on a particular static pool is deferred until the full cost
of its acquisition is recovered. Revenue for financial reporting purposes is
recognized over the life of the static pool. Deferred income tax benefits are
created during the early stages of the static pool, and are realized after the
cost basis of the static pool is recovered. The creation of new deferred income
tax benefits from future purchases of static pools are expected to offset the
reversal of the deferred income tax benefits from static pools where the
collections have become fully taxable.
-5-
2. Accounting Policies (continued):
Use of Estimates:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant estimates have been made by management with respect to the amount of
future cash flows of purchased accounts receivable portfolios. The estimated
future cash flows of the portfolios are used to recognize revenue and amortize
the carrying values of the purchased accounts receivable. Actual results could
differ from these estimates, making it reasonably possible that a change in
these estimates could occur within one year. On a quarterly basis, management
reviews the estimate of future collections, and it is reasonably possible that
its assessment may change based on actual results and other factors. The change
could be material.
Derivative Financial Instruments:
During the first quarter of 2001, the Company adopted the provisions of
Financial Accounting Standards Board's SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was subsequently amended by SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities --Deferral of
the Effective Date of FASB Statement No. 133," collectively referred to as SFAS
No. 133. SFAS No. 133 requires that an entity recognize all derivative
instruments as either assets or liabilities on its balance sheet at their fair
values. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction, and, if it is, the type
of hedge transaction. The adoption of SFAS No. 133 did not have a material
impact on the Company's consolidated results of operations, financial condition,
or cash flows for the three months ended March 31, 2001.
Reclassifications:
Certain amounts for December 31, 2000, and for the three months ended March 31,
2000, have been reclassified for comparative purposes.
3. Discontinued Operations:
On April 14, 2000 (the "Measurement Date"), the Company's Board of Directors
approved a plan to divest the Company's Market Strategy division as part of its
strategic plan to increase long-term shareholder value and focus on its core
business of accounts receivable management services. The Market Strategy
division provided market research and telemarketing services. The market
research assets were acquired through the January 1997 acquisition of the
Tele-Research Center, Inc. and the February 1998 acquisition of The Response
Center. The telemarketing assets were acquired as non-core components of the
March 1999 acquisition of JDR Holdings, Inc., and the August 1999 acquisition of
Compass International Services Corporation. On October 26, 2000, TRC Holdings,
Inc. and Creative Marketing Strategies, Inc., both management-led groups,
acquired the assets of the market research and telemarketing businesses,
respectively.
In consideration for the purchased assets of the market research business, the
Company received a $12.25 million note. The note earns interest at a fixed rate
of 9% per year and the interest payments are due monthly. The entire principal
balance is due on December 31, 2002. In the event that the principal and the
remaining interest is not paid in full on December 31, 2002, the principal of
the note will be increased by a maximum of $2.0 million. The remaining principal
and interest will be due in equal monthly payments until December 31, 2005.
In consideration for the purchased assets of the telemarketing business, the
Company received a $6.0 million note. The note earns interest at a fixed rate of
9% per year and the interest payments are due monthly. Commencing on December 1,
2003, in addition to the interest payments, principal payments of $25,000 will
be due monthly until November 1, 2005. The remaining principal and interest will
become due in full on November 1, 2005.
-6-
3. Discontinued Operations (continued):
In accordance with the Accounting Principles Board Opinion No. 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
consolidated financial statements and the accompanying notes of the Company have
been presented to reflect the Market Strategy division as discontinued
operations for all periods presented.
The following summary of the Market Strategy division's operations prior to the
Measurement Date have been presented net in the Company's consolidated statement
of income for the three months ended March 31, 2000 (amounts in thousands):
2000
-----------
Revenue $ 6,607
===========
Loss from discontinued operations
before income tax benefit $ (1,403)
Income tax benefit (499)
-----------
Loss from discontinued operations,
net of income tax benefit $ (904)
===========
During the three months ended March 31, 2001, the Company recorded a $20.8
million loss (net of a tax benefit of $2.9 million), or $0.81 loss per share on
a diluted basis, on the disposal of the Market Strategy division. This loss
reflected management's estimate of the difference between the net assets of the
Market Strategy division over the proceeds from the divestiture and the
estimated operating losses from the Measurement Date through the completion of
the divestiture.
4. Acquisition:
In February 2001, the Company merged NCO Portfolio Management, Inc. ("NCO
Portfolio"), its wholly owned subsidiary, with Creditrust Corporation
("Creditrust") to form a new public entity focused on the purchase of accounts
receivable. After the merger, the Company owned approximately 63% of the
outstanding stock of NCO Portfolio, subject to certain adjustments. The
Company's contribution to the NCO Portfolio merger consisted of $25.0 million of
purchased accounts receivable. As part of the acquisition, NCO Portfolio signed
a ten-year service agreement that appointed the Company as the sole provider of
collection services to NCO Portfolio. The Company has agreed to offer all of its
future U.S. accounts receivable purchase opportunities to NCO Portfolio. In
connection with the acquisition, NCO Group amended its credit agreement with
Mellon Bank, N.A. to make $50.0 million of its credit facility available for the
use of NCO Portfolio. Upon completion of the acquisition, NCO Group borrowed
$36.3 million for NCO Portfolio under this credit facility.
5. Comprehensive (Loss) Income:
Comprehensive (loss) income consists of net income from operations, plus certain
changes in assets and liabilities that are not included in net income but are
reported as a separate component of shareholders' equity. The Company's
comprehensive (loss) income for the three months ended March 31, 2000 and 2001
was as follows (amounts in thousands):
2000 2001
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Net (loss) income $ (10,325) $ 12,277
Foreign currency translation adjustment (5) (2,261)
---------- ---------
Comprehensive (loss) income $ (10,330) $ 10,016
========== =========
-7-
6. Purchased Accounts Receivable:
The Company purchases defaulted consumer receivables at a discount from the
actual principal balance. The following summarizes the change in purchased
accounts receivable for the year ended December 31, 2000 and for the three
months ended March 31, 2001:
December 31, March 31,
2000 2001
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Balance, at beginning of period $ 4,694 $ 31,480
Purchased accounts receivable acquired
from Creditrust -- 98,988
Purchases of accounts receivable 31,351 14,287
Collections on purchased accounts receivable (17,716) (19,253)
Revenue recognized 13,151 12,618
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Balance, at end of period $ 31,480 $ 138,120
========= =========
To the extent that the carrying amount of a static pool exceeds its fair value,
a valuation allowance would be recognized in the amount of such impairment. As
of December 31, 2000 and March 31, 2001, no valuation allowance has been
recorded.
7. Funds Held on Behalf of Clients:
In the course of the Company's regular business activities as a provider of
accounts receivable management services, the Company receives clients' funds
arising from the collection of accounts placed with the Company. These funds are
placed in segregated cash accounts and are generally remitted to clients within
30 days. Funds held on behalf of clients of $54.1 million and $68.2 million at
December 31, 2000 and March 31, 2001, respectively, have been shown net of their
offsetting liability for financial statement presentation.
8. Long-Term Debt:
Revolving Credit Facility
The Company has a credit agreement with Mellon Bank, N.A. ("Mellon Bank"), for
itself and as administrative agent for other participating lenders, that
provides for borrowings up to $350.0 million, structured as a $350.0 million
revolving credit facility. At the option of NCO, the borrowings bear interest at
a rate equal to either Mellon Bank's prime rate plus a margin of 0.25% to 0.50%
that is determined quarterly based upon the Company's consolidated funded debt
to earnings before interest, taxes, depreciation, and amortization ("EBITDA")
ratio (Mellon Bank's prime rate was 8.00% at March 31, 2001), or the London
InterBank Offered Rate ("LIBOR") plus a margin of 1.25% to 2.25% depending on
the Company's consolidated funded debt to EBITDA ratio (LIBOR was 5.08% at March
31, 2001). The Company is charged a fee on the unused portion of the credit
facility ranging from 0.13% to 0.38% depending on the Company's consolidated
funded debt to EBITDA ratio.
In connection with the merger of Creditrust into NCO Portfolio, the Company
amended its revolving credit facility to allow the Company to provide NCO
Portfolio with a $50 million revolving line of credit in the form of a
sub-facility under its existing credit facility. At the option of NCO, the
borrowings bear interest at a rate equal to either Mellon Bank's prime rate plus
a margin of 1.25% to 1.50% that is determined quarterly based upon the Company's
consolidated funded debt to EBITDA ratio, or LIBOR plus a margin of 2.25% to
3.25% depending on the Company's consolidated funded debt to EBITDA ratio.
Borrowings are collateralized by substantially all the assets of the Company,
including the common stock of NCO Portfolio, and certain assets of NCO
Portfolio. The balance under the revolving credit facility shall become due on
May 20, 2004. The credit agreement contains certain financial covenants such as
maintaining net worth and funded debt to EBITDA requirements and includes
restrictions on, among other things, acquisitions and distributions to
shareholders.
-8-
8. Long-Term Debt (continued):
Securitized Debt
The Company has assumed three securitized notes payable in connection with the
acquisition of Creditrust. These notes payable were originally established to
fund the purchase of accounts receivable. Each of the notes payable is
non-recourse, secured by a pool of purchased accounts receivable, and is bound
by an indenture and servicing agreement. Pursuant to the acquisition, the
trustee appointed NCO Group as the successor servicer for each pool of purchased
accounts receivables. When the notes payable were established, a separate
special purpose finance subsidiary was created to house the assets and debt.
The first securitized note ("Warehouse Facility") was established in September
1998 through Creditrust Funding I LLC, a special purpose finance subsidiary. The
Warehouse Facility carries a floating interest rate of LIBOR plus 0.65% per
annum, and the final due date of all payments under the facility is March 2005.
A $900,000 liquidity reserve is included in restricted cash as of March 31,
2001, and restricted as to use until the facility is retired. Interest expense,
trustee fees and guarantee fees aggregated $257,000 for the period from February
21, 2001 to March 31, 2001. As of March 31, 2001, the amount outstanding on the
facility was $20.3 million. The note issuer, Asset Guaranty Insurance Company,
has been guaranteed against loss by NCO Portfolio for up to $4.5 million, which
will be reduced if and when reserves and residual cash flows from another
securitization are posted as additional collateral for this facility.
The second securitized note ("SPV99-1 Financing") was established in August 1999
through Creditrust SPV99-1, LLC, a special purpose finance subsidiary. SPV99-1
Financing carries interest at 9.43% per annum, with a final payment date of
August 2004. A $225,000 liquidity reserve is included in restricted cash as of
March 31, 2001, and restricted as to use until the facility is retired. Interest
expense and trustee fees aggregated $141,000 for the period from February 21,
2001 to March 31, 2001. As of March 31, 2001, the amount outstanding on the
facility was $12.7 million.
The third securitized note ("SPV99-2 Financing") was established in August 1999
through Creditrust SPV99-2, LLC, a special purpose finance subsidiary. SPV99-2
Financing carries interest at 15.00% per annum, with a final payment date of
December 2004. Interest expense and trustee fees aggregated $421,000 for the
period from February 21, 2001 to March 31, 2001. As of March 31, 2001, the
amount outstanding on the facility was $28.1 million.
9. Earnings Per Share:
Basic earnings per share ("EPS") were computed by dividing the income from
continuing operations and the net (loss) income for the three months ended March
31, 2000 and 2001, by the weighted average number of shares outstanding. Diluted
EPS were computed by dividing the income from continuing operations and the net
(loss) income for the three months ended March 31, 2000 and 2001, by the
weighted average number of shares outstanding plus all common equivalent shares.
Outstanding options, warrants and convertible securities have been utilized in
calculating diluted net (loss) income per share only when their effect would be
dilutive.
The reconciliation of basic to diluted weighted average shares outstanding for
the three months ended March 31, 2000 and 2001 consisted of the following
(amounts in thousands):
2000 2001
--------- ---------
Basic 25,540 25,687
Dilutive effect of warrants 108 154
Dilutive effect of options 204 499
--------- ---------
Diluted 25,852 26,340
========= =========
-9-
10. Supplemental Cash Flow Information:
The following are supplemental disclosures of cash flow information for the
three months ended March 31, 2000 and 2001 (amounts in thousands):
2000 2001
---- ----
Non-cash investing and financing activities:
Fair value of assets acquired $ - $121,511
Liabilities assumed from acquisitions - 106,627
11. Segment Reporting:
During the first nine months of 2000, the Company was organized into operating
divisions that were focused on the operational delivery of services. The
Company's focus on the operational delivery of services allowed it to take
advantage of significant cross-selling opportunities and enhance the level of
service provided to its clients. The operating divisions during the first nine
months of 2000 included Accounts Receivable Management Services,
Technology-Based Outsourcing, and International Operations. During 2000, the
continued integration of the Company's infrastructure facilitated the further
reduction of the operating divisions from three to two. Effective October 1,
2000, the new operating divisions included U.S. Operations (formerly Accounts
Receivable Management Services and Technology-Based Outsourcing) and
International Operations. Each of these divisions will maintain industry
specific functional groups including healthcare, commercial, banking, retail,
education, utilities, telecommunications, and government. The Company created
the Portfolio Management division as a result of the February 2001 acquisition
of Creditrust. Prior to the acquisition, NCO's portfolio business was part of
the U.S. operations division. The segment information for the three months ended
March 31, 2000, has been restated to reflect the three continuing operating
segments.
The accounting policies of the segments are the same as those described in Note
2, "Accounting Policies." Segment data include a charge allocating corporate
overhead costs to each of the operating segments based on revenue and employee
headcount.
The U.S Operations division provides accounts receivable management services to
consumer and commercial accounts for all market segments, serving clients of all
sizes in local, regional and national markets. In addition to traditional
accounts receivable collections, these services include developing the client
relationship beyond bad debt recovery and delinquency management, delivering
cost-effective receivables and customer relationship management solutions to all
market segments, serving clients of all sizes in local, regional and national
markets. The U.S. Operations division had total assets, net of any intercompany
balances, of $704.5 million and $714.4 million at December 31, 2000 and March
31, 2001, respectively.
The Portfolio Management division purchases and manages defaulted consumer
receivables from credit grantors, including banks, finance companies, retail
merchants and other service providers. The Portfolio Management division had
total assets, net of any intercompany balances, of $32.1 million and $157.2
million at December 31, 2000 and March 31, 2001, respectively.
The International Operations division provides accounts receivable management
services across Canada and the United Kingdom. The International Operations
division had total assets, net of any intercompany balances, of $47.4 million
and $45.7 million at December 31, 2000 and March 31, 2001, respectively.
-10-
11. Segment Reporting (continued):
The following tables represent the revenue, payroll and related expenses,
selling, general and administrative expenses, and earnings before interest,
taxes, depreciation, and amortization ("EBITDA") for each segment for the three
months ended March 31, 2000 and 2001. EBITDA is used by the Company's management
to measure the segments' operating performance and is not intended to report the
segments' operating results in conformity with generally accepted accounting
principles.
For the three months ended March 31, 2000
(amounts in thousands)
--------------------------------------------------------------------
Selling,
Payroll and General and
Revenue Related Expenses Admin. Expenses EBITDA
--------------- ---------------- ---------------- --------------
U.S. Operations $ 136,113 $ 66,202 $ 39,185 $ 30,726
Portfolio Management 890 74 523 293
International Operations 7,511 4,370 2,366 775
Eliminations (516) - (516) -
--------------- ---------------- ---------------- --------------
Total $ 143,998 $ 70,646 $ 41,558 $ 31,794
=============== ================ ================ ==============
For the three months ended March 31, 2001
(amounts in thousands)
--------------------------------------------------------------------
Selling,
Payroll and General and
Revenue Related Expenses Admin. Expenses EBITDA
--------------- ---------------- ---------------- --------------
U.S. Operations $ 155,772 $ 78,691 $ 47,929 $ 29,152
Portfolio Management 12,618 257 6,105 6,256
International Operations 8,768 4,742 2,440 1,586
Eliminations (6,129) (778) (5,351) -
--------------- ---------------- ---------------- --------------
Total $ 171,029 $ 82,912 $ 51,123 $ 36,994
=============== ================ ================ ==============
12. Subsequent Event:
In April 2001, the Company completed the sale of $125.0 million aggregate
principal amount of 4.75% Convertible Subordinated Notes due 2006 ("Notes") in a
private placement pursuant to Rule 144A and Regulation S under the Securities
Act of 1933. The Notes are convertible into NCO common stock at an initial
conversion price of $32.92 per share. The Company used the $121.3 million of net
proceeds from this offering to repay debt under its revolving credit agreement.
In accordance with the terms of the credit agreement, 50% of the net proceeds
from the Notes permanently reduced the maximum borrowings available under the
revolving credit facility from $350.0 million to $289.4 million.
-11-
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Certain statements included in this Report on Form 10-Q, other than
historical facts, are forward-looking statements (as such term is defined in the
Securities Exchange Act of 1934, and the regulations thereunder) which are
intended to be covered by the safe harbors created thereby. Forward-looking
statements include, without limitation, statements as to the Company's expected
future results of operations, the Company's growth strategy, the Company's
internet and e-commerce strategy, expected increases in operating efficiencies,
anticipated trends in the accounts receivable management industry, estimate of
future cash flows of purchased accounts receivable, the effects of legal or
governmental proceedings, the effects of changes in accounting pronouncements
and statements as to trends or the Company's or management's beliefs,
expectations and opinions. Forward-looking statements are subject to risks and
uncertainties and may be affected by various factors that may cause actual
results to differ materially from those in the forward-looking statements. In
addition to the factors discussed in this report, certain risks, uncertainties
and other factors, including, without limitation, the risk that the Company will
not be able to achieve expected future results of operations, the risk that the
Company will not be able to implement its growth strategy as and when planned,
risks associated with the recent expansion of NCO Portfolio Management, Inc.,
risks associated with growth and future acquisitions, the risk that the Company
will not be able to realize operating efficiencies in the integration of its
acquisitions, fluctuations in quarterly operating results, risks relating to the
timing of contracts, risks related to purchased accounts receivable, risks
associated with technology, the internet and the Company's e-commerce strategy
and other risks detailed from time to time in the Company's filings with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K, filed March 16, 2001, 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, Fort
Washington, PA 19034.
Three Months Ended March 31, 2001, Compared to Three Months Ended March 31,
2000
Revenue. Revenue increased $27.0 million or 18.8% to $171.0 million for the
three months ended March 31, 2001, from $144.0 million for the comparable period
in 2000. The U.S. Operations, Portfolio Management, and International Operations
divisions represented $155.8 million, $12.6 million, and $8.7 million,
respectively, of the revenue for the three months ended March 31, 2001.
The U.S. Operations division's revenue increased $19.7 million, or 14.4%,
to $155.8 million for the three months ended March 31, 2001, from $136.1 million
for the comparable period in 2000. This increase in the U.S. Operations
division's revenue was attributable to the addition of new clients and the
growth in business from existing clients.
The Portfolio Management division's revenue increased $11.7 million, or
1,317.8%, to $12.6 million for the three months ended March 31, 2001, from
$890,000 for the comparable period in 2000. This increase in the Portfolio
Management division's revenue was partially attributable to an increase in
acquisitions of purchased accounts receivable. The remainder of the increase was
attributable to the acquisition of Creditrust in February 2001.
The International Operations division's revenue increased $1.2 million, or
16.7%, to $8.7 million for the three months ended March 31, 2001, from $7.5
million for the comparable period in 2000. This increase in the International
Operations division's revenue was primarily attributable to the addition of new
clients and growth in business from existing clients.
-12-
Payroll and related expenses. Payroll and related expenses increased $12.3
million to $82.9 million for the three months ended March 31, 2001, from $70.6
million for the comparable period in 2000, but decreased as a percentage of
revenue to 48.5% from 49.1%. The overall decrease as a percentage of revenue was
the result of the increase in productivity that was achieved through the
expansion of predictive dialing equipment and the result of spreading the fixed
portion of the payroll cost structure over a larger revenue base. In addition, a
portion of the decrease was attributable to the increase in the size of the
Portfolio Management division, which has a lower payroll cost structure than the
remainder of the Company.
The payroll and related expenses of the U.S Operations division increased
$12.5 million to $78.7 million for the three months ended March 31, 2001, from
$66.2 million for the comparable period in 2000, and increased as a percentage
of revenue to 50.5% from 48.6%. This increase as a percentage of revenue was
primarily the result of a difficult economic and collection environment that
necessitated higher payroll costs to achieve collection objectives.
The payroll and related expenses of the Portfolio Management division
increased $183,000 to $257,000 for the three months ended March 31, 2001, from
$74,000 for the comparable period in 2000, but decreased as a percentage of
revenue to 2.0% from 8.3%. The Portfolio Management division outsources all of
its collection services to the U.S. Operations division and, therefore, has a
relatively small fixed payroll cost structure. This increase as a percentage of
revenue was the result of spreading the fixed cost structure over a larger
revenue base.
The payroll and related expenses of the International Operations division
increased $372,000 to $4.7 million for the three months ended March 31, 2001,
from $4.4 million for the comparable period in 2000, but decreased as a
percentage of revenue to 54.1% from 58.2%. This decrease as a percentage of
revenue was partially attributable to the continuing process of rationalizing
staff levels, as well as an increase in productivity that was achieved through
the expansion of our use of predictive dialing equipment. In addition, a portion
of the decrease was the result of spreading the fixed portion of the payroll
cost structure over a larger revenue base.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $9.5 million to $51.1 million for the three
months ended March 31, 2001, from $41.6 million for the comparable period in
2000, and increased as a percentage of revenue to 29.9% from 28.9%. This
increase as a percentage of revenue was primarily the result of a difficult
economic and collection environment that necessitated additional collection
costs to achieve revenue objectives.
Depreciation and amortization. Depreciation and amortization increased to
$9.0 million for the three months ended March 31, 2001 from $7.5 million for the
comparable period in 2000. This increase consisted of depreciation resulting
from normal capital expenditures made in the ordinary course of business during
2000. These capital expenditures included purchases associated with our planned
migration towards a single, integrated information technology platform, and
predictive dialers and other equipment required to expand our infrastructure to
handle future growth.
Other income (expense). Interest and investment income increased $413,000
to $916,000 for the three months ended March 31, 2001 over the comparable period
in 2000. This increase was primarily attributable to increases in operating cash
and funds held on behalf of clients, and the implementation of our new cash
investment strategy. Interest expense increased to $7.4 million for the three
months ended March 31, 2001, from $6.4 million for the comparable period in
2000. This increase was partially attributable to the Portfolio Management
division borrowing $36.3 million in connection with the February 2001
acquisition of Creditrust Corporation ("Creditrust"). In addition, a portion of
the increase was attributable to interest from securitized debt that was assumed
as part of the Creditrust acquisition. A portion of these increases was offset
by debt repayments made during 2000 and the first quarter of 2001. During the
three months ended March 31, 2000, the Company recorded insurance proceeds of
approximately $1.3 million for flood and telephone outages experienced in the
fourth quarter of 1999.
Income tax expense. Income tax expense for the three months ended March 31,
2001 increased to $8.7 million, or 40.2% of income before income tax expense,
from $8.3 million, or 42.0% of income before income tax expense, for the
comparable period in 2000. The decrease in the effective tax rate was primarily
attributable to the expansion of the Portfolio Management division, which has a
lower effective tax rate than the remainder of the Company. In addition, a
portion of the decrease in the effective tax rate was the result of the
implementation of certain tax savings initiatives during the fourth quarter of
2000.
-13-
Discontinued operations. On April 14, 2000 (the "Measurement Date"), the
Company's Board of Directors approved a plan to divest the Company's Market
Strategy division as part of its strategic plan to increase long-term
shareholder value and focus on its core business of accounts receivable
management services. An estimate of the operations of the Market Strategy
division for the period from the Measurement Date to the expected completion of
the divestiture were recorded during the first quarter of 2000 as part of the
loss on the disposal of the Market Strategy division. The Company completed the
divestiture of the Market Strategy division on October 26, 2000.
Liquidity and Capital Resources
Historically, the Company's primary sources of cash have been bank
borrowings, public offerings, and cash flows from operations. Cash has been used
for acquisitions, repayments of bank borrowings, purchases of equipment,
purchases of receivables, and working capital to support the Company's growth.
Cash Flows from Operating Activities. Cash provided by operating activities
was $25.2 million for the three months ended March 31, 2001, compared to $1.5
million for the comparable period in 2000. The increase in cash provided by
operations was attributable to a smaller increase in accounts receivable, a
larger increase in deferred income taxes, and smaller decreases in corporate
taxes payable and other long-term liabilities. The smaller increase in accounts
receivable was achieved by the allocation of additional resources to mitigate
the spike in accounts receivable that normally accompanies the seasonal increase
in revenue. The increase in the deferred income taxes was primarily the result
of the expansion of the Portfolio Management division, which generates deferred
income tax liabilities. The smaller decrease in corporate taxes payable was the
result of larger tax payments and the implementation of certain tax savings
initiatives during the fourth quarter of 2000.
Cash Flows from Investing Activities. Cash used in investing activities was
$23.0 million for the three months ended March 31, 2001, compared to $16.0
million for the comparable period in 2000. The increase was due primarily to
cash paid in 2001 to acquire Creditrust and an increase in the purchase of
delinquent receivables. These increases were partially offset by an increase in
collections applied to the principal of purchased accounts receivable.
Capital expenditures were $7.8 million for the three months ended March 31,
2001, compared to $9.8 million for the same period in 2000.
Cash Flows from Financing Activities. Cash provided by financing activities
was $11.0 million for the three months ended March 31, 2001, compared to cash
used in financing activities of $391,000 for the same period in 2000. During the
first three months of 2001, the primary source of cash from financing activities
was the borrowings under the revolving credit facility made in connection with
the Creditrust acquisition that were used to repay the acquired notes payable,
finance purchased accounts receivable, and repay other acquisition related
liabilities.
Credit Facility. The Company has a credit agreement with Mellon Bank, N.A.,
for itself and as administrative agent for other participating lenders, to
provide for borrowings up to $350.0 million, structured as a $350.0 million
revolving credit facility. At the Company's option, the borrowings bear interest
at a rate equal to either Mellon Bank's prime rate plus a margin of 0.25% to
0.50% that is determined quarterly based upon the Company's consolidated funded
debt to earnings before interest, taxes, depreciation, and amortization, also
referred to as EBITDA, ratio (Mellon Bank's prime rate was 8.00% at March 31,
2001), or the London InterBank Offered Rate, also referred to as LIBOR, plus a
margin of 1.25% to 2.25% depending on the Company's consolidated funded debt to
EBITDA ratio (LIBOR was 5.08% at March 31, 2001). As of March 31, 2001, there
was $12.7 million available on the revolving credit facility.
In connection with the merger of Creditrust into NCO Portfolio, the Company
amended its revolving credit facility to allow the Company to provide NCO
Portfolio with a $50 million revolving line of credit in the form of a
sub-facility under its existing credit facility. At the option of NCO, the
borrowings bear interest at a rate equal to either Mellon Bank's prime rate plus
a margin of 1.25% to 1.50% that is determined quarterly based upon the Company's
consolidated funded debt to EBITDA ratio, or LIBOR plus a margin of 2.25% to
3.25% depending on the Company's consolidated funded debt to EBITDA ratio. As of
March 31, 2001, there was $41.6 million outstanding under the NCO Portfolio
sub-facility.
-14-
Borrowings are collateralized by substantially all the assets of the
Company, including the common stock of NCO Portfolio, and certain assets of NCO
Portfolio. The balance under the revolving credit facility shall become due on
May 20, 2004. The credit agreement contains certain financial covenants such as
maintaining net worth and funded debt to EBITDA requirements and includes
restrictions on, among other things, acquisitions and distributions to
shareholders. As of March 31, 2001, there was $12.7 million available on the
revolving credit facility.
In April 2001, the Company completed the sale of $125.0 million aggregate
principal amount of 4.75% Convertible Subordinated Notes due 2006 ("Notes") in a
private placement pursuant to Rule 144A and Regulation S under the Securities
Act of 1933. The Notes are convertible into NCO common stock at an initial
conversion price of $32.92 per share. The Company used the $121.3 million of net
proceeds from this offering to repay debt under its revolving credit agreement.
In accordance with the terms of the credit agreement, 50% of the net proceeds
from the Notes permanently reduced the maximum borrowings available under the
revolving credit facility from $350.0 million to $289.4 million. The Notes are
expected to dilute earnings per share for the last nine months of 2001 by a
range of approximately $0.08 to $0.10 per share.
Management believes that funds generated from operations, together with
existing cash and available borrowings under the credit agreement will be
sufficient to finance current operations, planned capital expenditure
requirements, and internal growth at least through the next twelve months.
However, additional debt or equity financing could be required if any other
significant acquisitions for cash are made during that period.
Market Risk
The Company is exposed to various types of market risk in the normal course
of business, including the impact of interest rate changes, foreign currency
exchange rate fluctuations, and changes in corporate tax rates. A 25 basis-point
increase in interest rates could increase annual interest expense by $250,000
for each $100 million of variable debt outstanding for the entire year. The
Company employs risk management strategies that may include the use of
derivatives such as interest rate swap agreements, interest rate ceilings and
floors, and foreign currency forwards and options to manage these exposures. The
fair value of the interest rate collar agreements was determined to be
immaterial at December 31, 2000 and March 31, 2001.
Goodwill
The Company's balance sheet includes amounts designated as "intangibles",
which are predominantly comprised of "goodwill'. Goodwill represents the excess
of purchase price over the fair market value of the net assets of the acquired
businesses, based on their respective fair values at the date of acquisition.
Accounting principles generally accepted in the United States require that this
and all other intangible assets be amortized over the period benefited.
Management has determined that period to be from 15 to 40 years based on the
attributes of each acquisition.
As of March 31, 2001, the Company's balance sheet included goodwill that
represented approximately 57.4% of total assets and 131.8% of shareholders'
equity.
If management has incorrectly overestimated the length of the amortization
period for goodwill, earnings reported in periods immediately following the
acquisition would be overstated. In later years, NCO would be burdened by a
continuing charge against earnings without the associated benefit to income
valued by management in arriving at the consideration paid for the business.
Earnings in later years also could be significantly affected if management
determined then that the remaining balance of goodwill was impaired. Management
has concluded that the anticipated future cash flows associated with intangible
assets recognized in the acquisitions will continue indefinitely, and there is
no persuasive evidence that any material portion will dissipate over a period
shorter than the respective amortization period.
-15-
Recent Accounting Pronouncement:
In February 2001, the FASB issued an Exposure Draft regarding Business
Combinations and Intangible Assets Accounting for Goodwill where it concluded
that purchased goodwill would not be amortized but would be reviewed for
impairment when certain events indicate that the goodwill of a reporting unit is
impaired. The impairment test will use a fair-value based approach, whereby if
the implied fair value of a reporting unit's goodwill is less than its carrying
amount, goodwill would be considered impaired. The proposed statement would not
require that goodwill be tested for impairment upon adoption of the final
statement unless an indicator of impairment exists at that date. However, it
would require that a benchmark assessment be performed for all existing
reporting units within six months of the date of adoption. The new goodwill
model would apply not only to goodwill arising from acquisitions completed after
the effective date of a new standard, but also to goodwill previously recorded.
The Company would be required to initially apply the provisions of this proposed
statement at the beginning of the first fiscal quarter following issuance of the
final statement.
Statement of Financial Accounting Standards No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities",
is effective for transfers of financial assets and extinguishments of
liabilities occurring after March 31, 2001. Statement No. 140, which replaces
FASB No. 125, requires transfers of financial assets and servicing of financial
assets and extinguishments of liabilities occurring after March 31, 2001 to
de-recognize the assets when control has been surrendered, and to de-recognize
liabilities only when they have been extinguished. The Company will adopt
Statement No. 140 in the second quarter of 2001. Management does not expect the
adoption of the statement to have a material impact on the consolidated
financial statements.
Item 3
Quantitative and Qualitative Disclosures about Market Risk
Included in Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations, of this Report on Form 10-Q.
-16-
Part II. Other Information
Item 1. Legal Proceedings
The Company is involved in legal proceedings from time to time in the
ordinary course of its business. Management believes that none of these
legal proceedings will have a materially adverse effect on the financial
condition or results of operations of the Company.
Item 2. Changes in Securities
On April 4, 2001, the Company issued a total of $125,000,000 principal
amount of 4.75% convertible subordinated notes due 2006 (the "Notes"). The
Company issued and sold these Notes to Deutsche Bank Alex. Brown Inc., as
the initial purchaser (the "Initial Purchaser"), in reliance on the
exemption from registration under Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act"). The Company sold the Notes to the
Initial Purchasers at a discount of three percent, for an aggregate
discount of $3.75 million. The Initial Purchasers represented to the
Company that it was a "qualified institutional buyer" (as such term is
defined in Rule 144A under the Securities Act). The Notes are convertible
into approximately 3.8 million shares of the Company's common stock at a
conversion price of $32.92 per share, subject to adjustment upon certain
events described in the Indenture, at any time on or after July 3, 2001,
through maturity, unless previously redeemed or repurchased. The Notes
mature on April 15, 2006.
The Initial Purchaser advised the Company that they proposed to resell
the Notes (1) in the United States only to "qualified institutional buyers"
in reliance on the exemption from registration under Rule 144A and (2)
outside the United States to certain non-United States persons in offshore
transactions in reliance on Rule 904 of Regulation S under the Securities
Act. The Notes and the shares of common stock issuable upon conversion
constitute "restricted securities" within the meaning of Rule 144. The
Company's Confidential Offering Memorandum and related offering documents
and agreements imposed certain restrictions on the resale or other transfer
of the Notes and shares necessary for the availability of the exemptions
from registration under the Securities Act referred to above. In accordance
with the terms of the Note Purchase Agreement, the Company is required to
file not later than July 3, 2001, a registration statement on Form S-3
under the Securities Act to register the Notes and shares for resale by the
holders.
The net proceeds of the Note offering of approximately $121.25 million
were used to repay debt under the Company's Credit Agreement with Mellon
Bank.
Item 3. Defaults Upon Senior Securities
None - not applicable
Item 4. Submission of Matters to a Vote of Shareholders
None - not applicable
Item 5. Other Information
None - not applicable
-17-
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Purchase Agreement dated as of March 29, 2001, between
Deutsche Bank Alex. Brown Inc. and NCO Group, Inc.
4.2 Indenture dated as of April 4, 2001, between NCO Group, Inc.
and Bankers Trust Company, as Trustee.
4.3 Registration Rights Agreement dated as of April 4, 2001
Deutsche Bank Alex. Brown Inc. and NCO Group, Inc.
4.4 Global Note dated April 4, 2001 of NCO Group, Inc.
99.1 Consolidating Schedule
(b) Reports on Form 8-K
Date of Report Item Reported
-------------- -------------
3/5/01 Item 2 - Creditrust Corporation acquisition
Item 5 - Investor Guidance for 2001
3/14/01 Item 7 - Creditrust Corporation acquisition
4/10/01 Item 5 - Issuance of Convertible Debt
5/4/01 Item 7 - Creditrust Corporation acquisition
-18-
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 15, 2001 By: /s/ Michael J. Barrist
----------------------
Michael J. Barrist
Chairman of the Board, President
and Chief Executive Officer
(principal executive officer)
Date: May 15, 2001 By: /s/ Steven L. Winokur
---------------------
Steven L. Winokur
Executive Vice President, Finance,
Chief Financial Officer and
Treasurer
-19-