<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000 or
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_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 333-57249
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NATIONWIDE CREDIT, INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-1900192
--------------------------------- ---------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
2015 Vaughn Road, Building 300, Kennesaw, GA 30144
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 933-6659
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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TABLE OF CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
as of September 30, 2000 and December 31, 1999....................... 2
Consolidated Statements of Operations
for the Quarters ended September 30, 2000 and September 30, 1999,
and the Nine Months Ended September 30, 2000 and September 30, 1999.. 4
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2000 and September 30, 1999.. 5
Notes to Consolidated Financial Statements as of September 30, 2000.... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.................................................. 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.............................................. 14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
27 Financial Data Schedule
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the
three months ended September 30, 2000
SIGNATURE.............................................................. 15
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONWIDE CREDIT, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
2000 1999
Unaudited Audited
-------------------- ------------------
Assets
Current assets:
Cash and cash equivalents $ 4,628 $ --
Cash held for clients 1,083 1,090
Accounts receivable, net of allowance of
$498 and $351, respectively 18,903 18,209
Prepaid expenses and other current assets 4,384 2,603
-------- --------
Total current assets 28,998 21,902
Property and equipment, less accumulated
Depreciation of $12,933 and $8,946, respectively 19,089 14,852
Other assets, net:
Goodwill, less accumulated amortization of $9,705
and $7,058, respectively 96,166 98,812
Other intangible assets, less accumulated
amortization of $18,486 and $17,412, respectively 1,792 2,867
Deferred financing costs, less accumulated
amortization of $3,334 and $2,811, respectively 3,632 4,063
Other assets 1,960 1,188
-------- --------
Total assets $151,637 $143,684
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
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NATIONWIDE CREDIT, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
Unaudited Audited
------------------- ------------------
<S> <C> <C>
Liabilities and stockholder's deficit
Current liabilities:
Collections due to clients $ 1,083 $ 1,090
Accrued compensation 3,693 4,557
Accounts payable 6,452 6,468
Accrued severance and office closure costs, current 369 1,139
Restructuring accrual 918 --
Other accrued liabilities 6,618 6,525
Deferred revenue 333 500
Current portion of capital leases 623 293
Current portion of notes payable 57 60
Current maturities of long-term debt 1,500 750
-------- --------
Total current liabilities 21,646 21,382
Accrued severance and office closure costs, long-term 609 843
Capital lease obligations, less current portion 1,617 359
Long-term debt, less current maturities 132,503 121,308
-------- --------
Total liabilities 156,375 143,892
Stockholder's deficit:
Common stock - $.01 par value
Authorized shares - 10,000 shares
Issued and outstanding shares - 1,000 shares -- --
Additional paid in capital 49,465 43,465
Accumulated deficit (54,063) (43,533)
Notes receivable - officers (140) (140)
-------- --------
(4,738) (208)
-------- --------
Total liabilities and stockholder's deficit $151,637 $143,684
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
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NATIONWIDE CREDIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------------------ -----------------------------------
2000 1999 2000 1999
Unaudited Unaudited Unaudited Unaudited
------------------------------------ -----------------------------------
<S> <C> <C> <C> <C>
Revenue $31,359 $26,349 $ 98,673 $81,499
Expenses:
Salaries and benefits 19,339 16,657 63,533 53,581
Telecommunication 1,203 1,084 3,695 3,182
Occupancy 1,572 1,135 4,699 3,268
Other operating and administrative 5,343 3,650 15,640 10,353
Depreciation and amortization 3,086 2,316 8,819 6,994
Provision for employee severance, office
closure and other unusual costs 752 -- 752 243
Restructuring expense -- -- 1,274 --
-------------------------- --------------------------
Total expenses 31,295 24,842 98,412 77,621
-------------------------- --------------------------
Operating income 64 1,507 261 3,878
Interest expense 3,780 3,307 10,791 9,525
-------------------------- --------------------------
Loss before income taxes (3,716) (1,800) (10,530) (5,647)
Provision for income taxes -- -- -- --
-------------------------- --------------------------
Net loss $(3,716) $(1,800) $(10,530) $(5,647)
========================== ==========================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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NATIONWIDE CREDIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-------------------------------------------
<S> <C> <C>
2000 1999
Unaudited Unaudited
----------------- -----------------
Operating activities
Net loss $(10,530) $(5,647)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 10,023 7,388
Other non-cash charges 2,279 276
Changes in operating assets and liabilities:
Accounts receivable (841) (2,139)
Prepaid expenses and other assets (3,236) (1,661)
Accrued compensation (864) (106)
Accounts payable and other accrued liabilities (1,648) (4,246)
-------- -------
Net cash used in operating activities (4,817) (6,135)
Investing activities
Purchases of property and equipment (7,956) (2,916)
Financing activities
Capital contribution 6,000 4,000
Net proceeds from revolving credit facility 12,179 3,450
Repayment of other long-term debt (686) (188)
Debt issuance costs (92) (144)
-------- -------
Net cash provided by financing activities 17,401 7,118
Increase (decrease) in cash and cash equivalents 4,628 (1,933)
Cash and cash equivalents at beginning of period -- 3,201
-------- -------
Cash and cash equivalents at end of period $ 4,628 $ 1,268
======== =======
Supplemental disclosures of cash flow information:
Cash paid for interest $ 12,473 $11,623
Non-cash activities:
Fixed assets acquired under capital lease obligations $ 2,037 $ --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
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NATIONWIDE CREDIT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, certain information and footnote
disclosures required by generally accepted accounting principles for complete
financial statements have been excluded. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. All significant intercompany
accounts and transactions have been eliminated in the consolidation. The
accompanying unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements of the Company
for the year ended December 31, 1999 included in Form 10-K.
Certain reclassifications were made to the December 31, 1999 balance sheet to
conform with the September 30, 2000 presentation.
Operating results for the nine-month period ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative and Hedging Activities" (SFAS No. 133). SFAS No. 133 requires
companies to record derivatives on the balance sheet as assets or liabilities
at fair value. It is effective for financial statements for fiscal years
beginning after June 15, 2000, as amended by SFAS No. 137.
In June 2000, the FASB issued Statement of Financial Accounting Standards No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities" ("SFAS No. 138). This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS No.
138 also addresses issues when implementing SFAS No. 133. This statement
should be adopted concurrently with SFAS No. 133. Management is evaluating
the impact of SFAS No. 133 and SFAS No. 138 on the Company's future earnings
and financial position, but does not expect it to be material.
2. Nature of Operations
The Company is among the largest independent providers of accounts receivable
management services in the United States. The Company's client base is
comprised of companies located throughout the United States primarily in the
financial services, telecommunications, retail, institutional and healthcare
industries.
3. Long-Term Debt and Stockholder's Equity
On April 18, 2000, the Company negotiated an amendment to its revolving
credit facility and term loan (the "Bank Facilities") to create an additional
$6.0 million of borrowing capacity to fund the Company's working capital
needs. Specifically, the existing line of credit under the revolving
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credit facility was increased from $6.5 million to $12.5 million, maturing
January 2004 and bearing interest at the Company's option of either (A) the
Base Rate plus the Applicable Margin or (B) the Eurodollar Rate plus the
Applicable Margin. The amendment also revised certain financial covenants. At
the end of the third quarter 2000 the Company was in compliance with the
financial covenants as revised on November 13, 2000. The Company will have to
have a significant increase in EBITDA to achieve fourth quarter covenant
levels.
4. Commitments and Contingencies
The Company is involved in certain litigation arising in the ordinary course
of business. In the opinion of management, the ultimate resolution of these
matters will not have a material adverse effect on the Company's consolidated
financial position or results of operations.
5. Provision for Employee Severance, Office Closure, Restructuring Expense and
other Unusual Costs
In 1998, as a result of the acquisition of the Company and in connection with
the implementation of an operating improvement plan, the Company accrued
estimated costs of approximately $4.0 million associated with closing certain
offices and branches ($2.3 million), severance payments to employees ($0.8
million), and relocation costs ($0.9 million). As of June 30, 2000,
substantially all charges related to employee severance and relocation had
been incurred.
In July 2000, the Company established an additional reserve of $0.8 million
primarily for the write-off of leasehold improvements and disposition of
furniture and fixtures associated with the expiration of a lease. The
Company relocated all operations to a new location in September 2000.
Substantially all costs associated with closing this facility have been
incurred.
In the first nine months of 2000, the Company recorded a charge of $1.8
million against the provision, mostly related to office closure costs. The
remaining accrued office closure costs of $1.0 million as of September 30,
2000 represent estimated future rent obligations under cancelled leases net
of sublease income.
In order to reduce costs and improve productivity and asset utilization, the
Company decided to consolidate and reorganize its operations. This
restructuring plan was formalized by the end of the second quarter of 2000.
The plan involves the Company removing itself from the directory assistance
operations for a telecommunications company, as it was not considered part of
the core business of the Company. In addition, the plan involves
consolidation of its collections systems and reorganization of its
information technology operations from a remote location to corporate
headquarters. Due to reorganization and shutdown of the directory assistance
operations, the plan includes the termination of 172 employees. All
employees were notified as of June 30, 2000. The plan also includes the
relocation of certain information technology personnel who were notified and
agreed to the relocation in the second quarter of 2000.
The Company recorded a total estimated charge of $1.3 million to complete
this plan, included in restructuring expenses. These charges include costs
for severance and benefits to terminate and relocate employees, and the
write-off of certain software and hardware. Management expects to complete
the execution of this restructuring plan by June 2001.
7
<PAGE>
Components of the restructuring provision recorded in 2000 and utilized
through September 30, 2000 are as follows (amounts in thousands):
<TABLE>
<CAPTION>
Write-off
Severance Relocation hardware
costs costs /software Total
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Provision as of June 30, 2000 $593 $415 $266 $1,274
Payments 356 - - 356
---- ---- ---- -------
Balance, September 30, 2000 $237 $415 $266 $ 918
</TABLE>
In the last quarter of 1999 and the first six months of 2000, the Company
expanded its pre-chargeoff services to provide more comprehensive collection
solutions for its clients. This expansion required the addition of two new
facilities. Accordingly, in the first nine months of 2000, the Company
incurred $1.2 million for the costs of such expansion activities, which are
included in operating expenses, under "Other operating and administrative",
"Salaries and benefits", and "Occupancy".
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
(Nine months ended September 30, 2000 compared to nine months ended September
30, 1999)
Revenue. Total revenue increased $17.2 million or 21% from $81.5 million for
the nine months ended September 30, 1999 to $98.7 million for the nine months
ended September 30, 2000. The increase was primarily the result of (i) a $9.6
million increase in revenue from telecommunications account placements, (ii) a
$8.7 million increase in revenue from outsourced pre-charge-off management
services, (iii) a $5.9 million increase in revenue from consumer and financial
services account placements, (iv) a $1.9 million increase in revenue from legal
collections, partially offset by a $5.0 million decrease in revenue from on-site
call center management services for a major telecommunications company and a
$3.9 million decrease in revenue from healthcare and institutional services. In
the first quarter of 2000, the Company gave notice of its intent to terminate
its service offering of directory assistance operations for a telecommunications
company, as it was not considered part of the core business of the Company. The
Company ceased this operation by July 30, 2000. Revenues generated from
directory assistance services in 1999 were less than 10% of the Company's total
revenues for the year; the impact on net income is expected to be minimal in the
year 2000.
Expenses. Salaries and benefits expense increased $9.9 million or 19% to $63.5
million for the nine months ended September 30, 2000 from $53.6 million for the
nine months ended September 30, 1999. This increase is primarily the result of
the Company's service expansion in outsourced pre-charge-off management services
and telecommunications, including the impact of a parallel ramp-up of two new
facilities in March and April 2000 (approximately $0.2 million).
Telecommunications expense increased $0.5 million or 16% to $3.7 million for the
nine months ended September 30, 2000 from $3.2 million for the same period in
1999. The increase is primarily the result of increases in activity due to
service expansion and the addition of new facilities in the first and second
quarter of 2000.
Occupancy expense increased $1.4 million or 44% to $4.7 million for the nine
months ended September 30, 2000 from $3.3 million for the same period in 1999.
The increase is the result of annual rent escalations and the addition of new
facilities in the fourth quarter of 1999 and the first quarter of 2000. These
new facilities provide the needed capacity for future growth.
Other operating and administrative expense increased $5.3 million or 51% to
$15.6 million for the nine months ended September 30, 2000 from $10.3 million
for the same period in 1999. The increase is the result of the Company's service
expansion.
Depreciation and amortization expense increased $1.8 million or 26% to $8.8
million for the nine months ended September 30, 2000 from $7.0 million for the
period ended September 30, 1999. The increase was primarily the result of
depreciation on capital assets acquired to open new facilities in late 1999 and
the first half of 2000.
Provision for employee severance, office closure and other unusual charges. In
July 2000, the Company established a reserve for $0.8 million primarily for the
write-off of leasehold improvements and disposition of furniture and fixtures
associated with the expiration of a lease. The Company relocated all
9
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operations to a new location in September 2000. Substantially all costs
associated with closing this facility have been incurred.
Restructuring charge. In order to reduce costs and improve productivity and
asset utilization, the Company decided to consolidate and reorganize its
operations. This restructuring plan was formalized by the end of the second
quarter of 2000. The plan involves the Company removing itself from the
directory assistance operations for a telecommunications company, as it was not
considered part of the core business of the Company. In addition, the plan
involves consolidation of its collections systems and reorganization of its
information technology operations from a remote location to corporate
headquarters. Due to reorganization and shutdown of the directory assistance
operations, the plan includes the termination of 172 employees. All employees
were notified as of June 30, 2000. The plan also includes the relocation of
certain information technology personnel and the disposal of certain information
technology hardware and software.
The Company recorded a total charge of $1.3 million to complete this
restructuring, included in restructuring expenses. These charges include costs
for severance and benefits to terminate and relocate employees, and the write-
off of certain software and hardware.
Operating Income. Operating income was $0.3 million for the nine months ended
September 30, 2000, a decrease of $3.6 million or 93 % from operating income of
$3.9 million for the same period in 1999. This decrease is primarily the result
of the restructuring charge, provision for office closure and deprecation on
fixed assets acquired to open new facilities. Start-up costs related to the
Company's growth and to the opening of two new facilities including the impact
of parallel staffing costs temporarily reduced margins in the nine month period
as capacity was added to meet the projected increase in business activity. The
Company incurred $1.2 million for the costs of such expansion activities in the
nine months ended September 30, 2000.
Interest Expense. Interest expense related to the Term Loan Facility, Senior
Notes and capital leases was $10.8 million for the nine months ended September
30, 2000 compared to $9.5 million for the same period in 1999, an increase of
$1.3 million. This increase is the result of (i) borrowings of $12.2 million
against the revolving credit facility, (ii) an increase in interest rates on the
term loan facility and (iii) interest paid on capital lease obligations incurred
since the fourth quarter of 1999.
Net Loss. The Company incurred a net loss for the nine months ended September
30, 2000 of $10.5 million as compared to a net loss of $5.6 million in the same
period of 1999.
(Three months ended September 30, 2000 compared to three months ended September
30, 1999)
Revenue. Total revenue was $31.4 million for the three months ended September
30, 2000, as compared to $26.3 million for the three months ended September 30,
1999, an increase of $5.0 million or 19%. The increase was primarily the result
of (i) an increase in revenue of $3.5 million from telecommunications account
placements (ii) an increase in revenue of $2.8 million from outsourced pre-
charge-off management services, (iii) an increase in revenue of $1.9 million
from consumer and financial services account placements and (iv) an increase in
revenue $0.8 million from legal collections. These increases were partially
offset by (i) a decrease in revenue of $2.3 million from on-site call center
management services for a major telecommunications company and (ii) a decrease
in revenue of $1.7 million from healthcare and institutional services.
10
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Expenses. Salaries and benefits expense increased $2.7 million or 16% to $19.3
million for the three months ended September 30, 2000 from $16.6 million for the
three months ended September 30, 1999. This increase is primarily the result of
the Company's service expansion in outsourced pre-charge-off management services
and telecommunications.
Telecommunications expense increased 0.1 million or 11% to $1.2 million for the
three months ended September 30, 2000 from $1.1 million for the same period in
1999.
Occupancy expense increased $0.4 million or 39% to $1.5 million for the three
months ended September 30, 2000 from $1.1 million for the same period in 1999.
The increase is the result of annual rent escalations and the addition of two
new facilities in the fourth quarter of 1999 and the first quarter of 2000.
These new facilities provide the needed capacity for future growth.
Other operating and administrative expense increased $1.7 million or 47% to $5.3
million for the three months ended September 30, 2000 from $3.6 million for the
same period in 1999. The increase is the result of the Company's service
expansion.
Depreciation and amortization expense increased $0.8 million or 33% to $3.1
million for the three months ended September 30, 2000 from $2.3 million for the
period ended September 30, 1999. The increase was primarily the result of
depreciation on capital assets acquired to open new facilities in late 1999 and
the first half of 2000.
Provision for employee severance, office closure and other unusual charges. In
July 2000, the Company established a reserve for $0.8 million primarily for the
write-off of leasehold improvements and disposition of furniture and fixtures
associated with the expiration of a lease. The Company relocated all operations
to a new location in September 2000. Substantially all costs associated with
closing this facility have been incurred.
Operating Income. Operating income was $0.1 million for the three months ended
September 30, 2000, a decrease of $1.4 million or 96% from operating income $1.5
million for the same period in 1999. This decrease is primarily the result of
the provision for office closure and deprecation on fixed assets acquired to
open new facilities.
Interest Expense. Interest expense related to the Term Loan Facility, Senior
Notes and capital leases was $3.8 million for the three months ended September
30, 2000 compared to $3.3 million for the same period in 1999, an increase of
$0.5 million. This increase is the result of (i) borrowings against the
revolving credit facility, (ii) an increase in interest rates on the term loan
facility and (iii) interest on new capital lease obligations.
Net Loss. The Company incurred a net loss for the three months ended September
30, 2000 of $3.7 million as compared to a net loss of $1.8 million in the same
period of 1999.
Liquidity and Capital Resources
During the first nine months of 2000, the Company's continued growth resulted in
an increase in working capital requirements. To support this growth, the Company
purchased approximately $8.0 million of property and equipment and entered into
capitalized leases totaling approximately $2.0 million. These capital
acquisitions along with the additional working capital requirements were
financed by an additional
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equity investment of $6.0 million from the Company's current investors and
borrowings of $12.2 million under the Revolving Credit Facility.
Cash used in operating activities was $4.8 million for the nine months ended
September 30, 2000 as compared to $6.1 million for the nine months ended
September 30, 1999, resulting in a decrease in cash used of $1.3 million. Net
working capital increased by $6.8 million to $7.3 million in the nine months
ended September 30, 2000 as compared to $0.5 million at December 31, 1999. This
increase is primarily due to an increase in cash and cash equivalents for the
nine months ended September 30, 2000 as compared to December 31, 1999. Net
income before extraordinary items and after adding back depreciation,
amortization, non-recurring charges, taxes and interest (EBITDA) increased 13%
to $12.6 million for the nine months ended September 30, 2000 from $11.1 million
for the nine months ended September 30, 1999.
Cash used in investing activities for the nine months ended September 30, 2000
was $8.0 million as compared to $2.9 million for the nine months ended September
30, 1999. The Company's principal use of cash in investing activities during
the first nine months of 2000 was for capital expenditures, primarily for new
computers, furniture and fixtures, leasehold improvements and telecommunications
equipment for the new facilities.
Cash provided by financing activities was $17.4 million for the nine months
ended September 30, 2000 representing $6.0 million of equity contribution from
current investors, $12.2 million in proceeds from a revolving line of credit,
$0.7 million of repayments on long-term debt and $0.1 million of debt issuance
costs. Cash provided by financing activities was $7.1 million for the nine
months ended September 30, 1999, representing $4.0 million of equity
contribution from current investors, $3.4 million in proceeds from a revolving
line of credit, repayments of $0.2 million on the term loan facility and $0.1
million of debt issuance costs.
During the second quarter of 2000, the Company negotiated an amendment to its
credit agreement (the "Amended and Restated Credit Agreement") that created an
additional $6.0 million of borrowing capacity and revised the cumulative EBITDA
and related financial covenants to reflect the Company's revised EBITDA
expectations. Substantially all the agreements relating to the Company's
outstanding indebtedness contain covenants that impact the Company's liquidity
and capital resources, including financial covenants and restrictions on the
incurrence of indebtedness, liens, and asset sales. At the end of the third
quarter 2000 the Company was in compliance with the covenants as revised on
November 13, 2000. The Company will have to have a significant increase in
EBITDA to achieve fourth quarter covenant levels.
The ability of the Company to meet its debt service obligations and to comply
with the restrictive and financial covenants contained in the Senior Credit
Facility, the Revolving Credit Facility and the Notes will be dependent on the
future operating and financial performance of the Company, which will be subject
in part to a number of factors beyond the control of the Company, such as
prevailing economic conditions, interest rates and demand for credit collection
services.
Management believes that, based on current levels of operations and anticipated
improvements in operating results, cash flows from operations and borrowings
available under the credit facilities will be adequate to allow for anticipated
capital expenditures for the next several years, to fund working capital
requirements and to make required payments of principal and interest on its debt
for the next several years. However, if the Company is unable to generate
sufficient cash flows from operations in the future, it may be necessary for the
Company to refinance all or a portion of its debt, obtain additional financing
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or obtain additional equity contribution from existing investors, but there can
be no assurance that the Company will be able to effect such refinancing or
obtain additional financing on commercially reasonable terms or at all.
Income Taxes
The Company has not recorded any tax benefit on its loss before income taxes for
the nine months ended September 30, 2000 due to the uncertainty regarding the
realization of such benefits.
Year 2000
In 1997, the Company initiated a company-wide Year 2000 project based on a
methodology recommended by an outside consultant, with a dedicated Year 2000
project office and coordinator. During the third quarter of 2000, the Company
experienced no disruptions in critical information technology and non-
information technology systems and believes those systems successfully responded
to the Year 2000 date change. The Company will continue to monitor its critical
computer applications and those of its suppliers and vendors throughout the year
2000 to ensure that any latent Year 2000 matters that may arise are promptly
addressed.
Forward-Looking Statements
This Form 10-Q and other communications, as well as oral statements made by
representatives of the Company, may contain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements relate to, among other things, the Company's outlook for future
periods, market forces within the industry, cost reduction strategies and their
results, planned capital expenditures, long-term objectives of management and
other statements of expectations concerning matters that are not historical
facts.
Predictions of future results contain a measure of uncertainty and, accordingly,
actual results could differ materially due to various factors. Factors that
could change forward-looking statements are, among others, changes in the
general economy, changes in demand for the Company's services and/or cyclicality
in the industries to which the Company's services are rendered, governmental
regulations and other unforeseen circumstances. A number of these factors are
discussed in this Form 10-Q and in the Company's annual report on Form 10-K for
the year ended December 31, 1999.
13
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Long Term Debt
Non-Traded Instruments
As of September 30, 2000
(In $000's)
<TABLE>
<CAPTION>
Fair
2000 2001 2002 2003 2004 Thereafter Total Value
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable Rate:
(1) Term Loan Facility : $ 563 $1,250 $1,250 $1,200 $17,500 $ -- $21, 763 $21,763
$18.0 million 10.67% 10.67% 10.67% 10.67% 10.67% 10.67%
$ 0.4 million 12.50% 12.50% 12.50% 12.50% 12.50% 12.50%
$ 3.45 million 12.75% 12.75% 12.75% 12.75% 12.75% 12.75%
(2) Revolving Loan
$12.2 million 12.25% 12.25% 12.25% 12.25% 12.25% 12.25% $ 12,179 $12,179
Fixed Rate:
Senior Notes due 2008: $ -- $ -- $ -- $ -- $ -- $100,000 $100,000 $25,000
$100 million @ 10.25% 10.25%
Security Agreements $ 10 $ 63 $ 46 $ 119 $ 119
22.50% 22.50% 22.50%
</TABLE>
The Company's primary risk exposure in the normal course of business is that of
interest rate risk. There have been no material changes in this type of
exposure since December 31, 1999.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Nationwide Credit, Inc., has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NATIONWIDE CREDIT, INC.
/s/ Eric R. Dey
--------------------------------
Eric R. Dey
Chief Financial Officer
Dated: November 14, 2000
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