SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 June 30, 2000
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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 333-16867
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Outsourcing Solutions Inc.
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(Exact name of registrant as specified in its charter)
Delaware 58-2197161
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
390 South Woods Mill Road, Suite 350
Chesterfield, Missouri 63017
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (314) 576-0022
Indicate by checkmark 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Outstanding at
Class June 30, 2000
--------------------------------- -------------
Voting common stock 6,024,428.07
Non-voting common stock 480,321.30
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6,504,749.37
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Transitional Small Disclosure _______ (check one):Yes [ ] No [ X ]
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<PAGE>
PAGE 2
OUTSOURCING SOLUTIONS INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
Part I. Financial Information Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets June 30, 2000
(unaudited) and December 31, 1999................................. 3
Condensed Consolidated Statements of Operations for
the three and six months ended June 30, 2000
(unaudited) and 1999 (unaudited).................................. 4
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 2000 (unaudited )and
1999 (unaudited).................................................. 5
Notes to Condensed Consolidated Financial Statements
(unaudited)....................................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 11
Part II. Other Information................................................... 12
<PAGE>
PAGE 3
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
--------------------------------------------------------------------------------
June 30, December 31,
2000 1999
Unaudited Audited
------------ ------------
ASSETS
Cash and cash equivalents $ 10,601 $ 6,059
Cash and cash equivalents held for clients 26,167 22,521
Accounts receivable - trade, less allowance for 55,864 52,082
doubtful receivables of $559 and $529
Purchased loans and accounts receivable portfolios 30,490 39,947
Property and equipment, net 44,491 43,647
Intangible assets, net 404,099 410,471
Deferred financing costs, less accumulated 25,017 27,224
amortization of $2,456 and $248
Other assets 27,401 22,761
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TOTAL $ 624,130 $ 624,712
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable - trade $ 8,979 $ 6,801
Collections due to clients 26,167 22,521
Accrued salaries, wages and benefits 12,981 17,009
Debt 525,602 518,307
Other liabilities 66,834 68,306
Commitments and contingencies - -
Mandatorily redeemable preferred stock; redemption 94,323 85,716
amount of $115,243 and $107,877
Stockholders' deficit:
Voting common stock; $.01 par value; authorized
15,000,000 shares, 9,102,677.14 shares issued 91 90
Non-voting common stock; $.01 par value; authorized
2,000,000 shares, 480,321.30 issued and outstanding 5 5
Paid-in capital 198,138 196,339
Retained deficit (172,715) (155,525)
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25,519 40,909
Notes receivable from management for shares sold (1,418) -
Common stock in treasury, at cost; 3,078,249.07 shares (134,857) (134,857)
-------- --------
Total stockholders' deficit (110,756) (93,948)
-------- --------
TOTAL $ 624,130 $ 624,712
======== ========
The accompanying notes are an integral part of the
unaudited condensed consolidated financial statements.
<PAGE>
PAGE 4
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands)
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2000 1999 2000 1999
REVENUES $ 137,373 $ 127,829 $ 270,623 $ 257,076
EXPENSES:
Salaries and benefits 66,411 61,427 132,417 22,162
Service fees and other operating 43,414 39,482 85,011 79,894
and administrative expenses
Amortization of purchased loans and
accounts receivable portfolios 8,109 9,177 14,785 20,477
Amortization of goodwill and other
intangibles 3,979 4,102 7,949 8,204
Depreciation expense 4,098 3,614 8,111 7,225
Nonrecurring realignment and
relocation expenses 1,000 - 1,000 -
Compensation expense related to
redemption of stock options 187 - 187 -
-------- -------- -------- --------
Total expenses 127,198 117,802 249,460 237,962
-------- -------- -------- --------
OPERATING INCOME 10,175 10,027 21,163 19,114
OTHER EXPENSE - - - 76
INTEREST EXPENSE - Net 15,209 12,644 29,452 25,209
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES (5,034) (2,617) (8,289) (6,171)
PROVISION FOR INCOME TAXES 169 375 294 375
-------- -------- -------- --------
NET LOSS (5,203) (2,992) (8,583) (6,546)
PREFERRED STOCK DIVIDEND REQUIREMENTS
AND ACCRETION OF SENIOR PREFERRED
STOCK 4,364 - 8,607 506
-------- -------- -------- --------
NET LOSS TO COMMON STOCKHOLDERS $ (9,567)$ (2,992)$ (17,190)$ (7,052)
======== ======== ======== ========
The accompanying notes are an integral part of the
unaudited condensed consolidated financial statements.
<PAGE>
PAGE 5
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Six Months Ended
June 30,
--------------------
2000 1999
OPERATING ACTIVITIES AND PORTFOLIO PURCHASING:
Net loss $ (8,583) $ (6,546)
Adjustments to reconcile net loss to net cash
from operating activities and portfolio purchasing:
Depreciation and amortization 18,268 16,943
Amortization of purchased loans and accounts 14,785 20,477
receivable portfolios
Change in assets and liabilities:
Purchases of loans and accounts receivable portfolios (5,328) (4,088)
Accounts receivable and other assets (8,242) (4,978)
Accounts payable, accrued expenses and other
liabilities (3,322) (8,378)
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Net cash from operating activities and
portfolio purchasing 7,578 13,430
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INVESTING ACTIVITIES:
Acquisition of property and equipment (8,955) (7,260)
Purchases of loans and accounts receivable
portfolios for resale to FINCO (54,306) (29,324)
Sales of loans and accounts receivable
portfolios to FINCO 54,306 29,324
Other (1,577) (559)
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Net cash from investing activities (10,532) (7,819)
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FINANCING ACTIVITIES:
Borrowings under revolving credit agreement 174,650 134,250
Repayments under revolving credit agreement (165,650) (133,050)
Repayments of debt (1,705) (8,488)
Proceeds from issuance of common stock 201 -
Deferred financing fees - (248)
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Net cash from financing activitie 7,496 (7,536)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,542 (1,925)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,059 8,814
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,601 $ 6,889
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period for interest $ 27,621 $ 23,927
======= =======
Net cash paid (received) during period for taxes $ 181 $ (39)
======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION:
Paid preferred stock dividends through issuance
of preferred stock $ - $ 992
======= =======
Accrued dividends on mandatorily redeemable
preferred stock $ 7,366 $ -
======= =======
Accretion of mandatorily redeemable preferred stock $ 1,241 $ -
======= =======
Notes receivable for common stock $ 1,400 $ -
======= =======
The accompanying notes are an integral part of the
unaudited condensed consolidated financial statements.
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed 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, 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 normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended June 30,
2000 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2000. For purposes of comparability, certain prior year
amounts have been reclassified to conform to current quarter presentation. These
Condensed Consolidated Financial Statements should be read in conjunction with
the Consolidated Financial Statements and notes thereto contained in the
Company's Form 10-K for the year ended December 31, 1999.
Comprehensive loss for the periods presented is equal to the Company's net loss
as the Company had no other comprehensive income (loss) items.
NOTE 2. LITIGATION
From time to time, the Company and certain of its subsidiaries are subject to
various investigations, claims and legal proceedings covering a wide range of
matters that arise in the normal course of business and are routine to the
nature of the Company's businesses. In addition, as a result of the acquisition
of The Union Corporation, certain subsidiaries of the Company are a party to
several on-going environmental remediation investigations by federal and state
governmental agencies and clean-ups and, along with other companies, has been
named a "potentially responsible party" for certain waste disposal sites. While
the results of litigation cannot be predicted with certainty, the Company has
provided for the estimated uninsured amounts and costs to resolve the pending
suits and management, in consultation with legal counsel, believes that reserves
established for the ultimate resolution of pending matters are adequate at June
30, 2000.
NOTE 3. PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS FINANCING
OSI Funding LLC ("FINCO") is a special-purpose finance company with the Company
owning approximately 78% of the financial interest but having only approximately
29% of the voting rights.
The following summarizes the transactions between the Company and FINCO for the
periods ended June 30:
Three Months Six Months
Ended June 30, Ended June 30,
---------------- -----------------
2000 1999 2000 1999
Sales of purchased loans and accounts
receivable portfolios by the
Company to FINCO $37,782 $11,666 $54,306 $29,324
Servicing fees paid by FINCO to $5,032 $4,002 $9,337 $5,845
the Company
Sales of purchased loans and accounts receivable portfolios ("Receivables") by
the Company to FINCO were in the same amount and occurred shortly after such
portfolios were acquired by the Company from the various unrelated sellers. In
conjunction with sales of Receivables to FINCO and the servicing agreement, the
Company recorded servicing assets which are being amortized over the servicing
agreement. The carrying value of such servicing assets is $2,450 at June 30,
2000 and was $1,300 at December 31, 1999.
At June 30, 2000 and December 31, 1999, FINCO had unamortized Receivables of
$77,548 and $42,967, respectively. At June 30, 2000 and December 31, 1999, FINCO
had outstanding borrowings of $64,766 and $32,051, respectively, under its
revolving warehouse financing arrangement.
NOTE 4: STOCKHOLDERS' DEFICIT
In the quarter ended June 30, 2000, the Company issued 40,032.03 shares of its
voting common stock at prices approximating fair value to certain members of
senior management in exchange for cash and interest bearing notes secured by the
shares along with certain personal assets of the members of senior management.
The outstanding principal balances plus accrued interest of these notes amounted
to $1,418 at June 30, 2000 and are classified as a reduction of stockholders'
deficit. In addition, the Company sold 8,007 shares of its voting common stock
at prices approximating fair value to certain directors of the Company.
NOTE 5: NONRECURRING EXPENSES
In continuing the adopted strategy to align the Company along business services
and establish call centers of excellence, the Company incurred $1,000 of
nonrecurring realignment and relocation expenses in the three months ended June
30, 2000. These expenses include costs resulting from closure of certain call
centers, severance associated with these office closures and certain other
one-time costs.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
-----------------------------------------------------------------------------
Revenues for the three months ended June 30, 2000 were $137.4 million compared
to $127.8 million in the same period last year - an increase of 7.5%. The
revenue increase of $9.6 million was due to increased collection, outsourcing
and portfolio services revenues. Revenues from collection services were $95.7
million for the three months ended June 30, 2000 compared to $93.0 million in
the comparable period in 1999. The increase in collection services revenue was
primarily attributable to increased government and letter series business.
Partially offsetting this increase, however, was a continued weakness in the
bankcard market, primarily driven by changes in the portfolio sales market. The
outsourcing services revenue of $18.1 million compared favorably to $14.5
million in 1999 due to increased revenue from new and existing business.
Revenues from portfolio services increased 16.3% to $23.6 million for the three
months ended June 30, 2000 from $20.3 million for the comparable period in 1999.
The increased revenue was due to higher servicing fee revenues for the
off-balance sheet collections of FINCO portfolios and higher strategic sales of
portfolios partially offset by lower revenues from on-balance sheet portfolios
resulting in the shift from on-balance sheet ownership of purchased loans and
accounts receivable portfolios to off-balance sheet. During the three months
ended June 30, 2000, the Company recorded revenue from FINCO servicing fees of
$5.0 million on total collections of $14.3 million compared to servicing fees of
$4.0 million on total collections of $10.0 million for the three months ended
June 30, 1999.
Operating expenses, inclusive of salaries and benefits, service fees and other
operating and administrative expenses, were $109.8 million for the three months
ended June 30, 2000 and $100.9 million for the comparable period in 1999 - an
increase of 8.8%. The increase in these operating expenses resulted primarily
from higher collection-related expenses associated with the increased revenues
of collection and outsourcing services and increased collection expenses
associated with collections of on and off-balance sheet purchased portfolios
partially offset by lower consulting expenses. For the three months ended June
30, 2000, amortization and depreciation charges of $16.2 million were lower than
the $16.9 million for the comparable period in 1999 by $0.7 million. The lower
amortization and depreciation charges resulted primarily from lower portfolio
amortization as a result of the shift towards off-balance sheet purchased loans
and accounts receivable portfolios.
In continuing with the strategy to align the Company along business services and
establish call centers of excellence by industry specialization adopted in early
1999, the Company incurred nonrecurring realignment and relocation expenses of
$1.0 million which includes costs for closure of certain call centers, severance
associated with these office closures and certain other one-time costs. These
costs were recognized as incurred in 2000.
In the three months ended June 30, 2000, the Company incurred approximately $0.2
million of additional compensation expense resulting from the redemption of
vested stock options.
Earnings before interest expense, taxes, depreciation and amortization (EBITDA)
for the three months ended June 30, 2000 was $26.4 million. Adding back the
nonrecurring charges and the additional compensation expense, EBITDA of $27.5
million for the three months ended June 30, 2000 compared favorably to $26.9
million for the same period in 1999.
Operating income of $10.2 million for the three months ended June 30, 2000
compared favorably to last year's operating income of $10.0 million for the same
period. Adding back the nonrecurring charges of $1.0 million and the additional
compensation expense of approximately $0.2 million, operating income was $11.4
million for the three months ended June 30, 2000 compared to $10.0 million for
the same period in 1999 - an increase of 14%. The shift to off-balance sheet
ownership of portfolios has negatively impacted EBITDA as revenue is recognized
for off-balance sheet portfolios when servicing fees (a certain percentage of
collections) are earned whereas for on-balance sheet portfolios the Company
recognizes revenue when collections are received. Nevertheless, operating income
has been positively impacted by lower amortization as the Company amortizes only
on-balance sheet portfolios, which have become smaller.
Net interest expense for the three months ended June 30, 2000 was $15.2 million
compared to $12.6 million for the comparable period in 1999. The increase was
due primarily to higher interest rates and higher amortization of deferred
financing fees.
The provision for income taxes of $0.2 million was provided for state and
foreign income tax obligations, which the Company cannot offset currently by net
operating losses.
Due to the factors stated above, the net loss for the three months ended June
30, 2000 of $5.2 million compared unfavorably to the net loss of $3.0 million
for the three months ended June 30, 1999.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
-------------------------------------------------------------------------
Revenues for the six months ended June 30, 2000 were $270.6 million compared to
$257.1 million in the same period last year - an increase of 5.3%. The revenue
increase of $13.5 million was due to increased collection, outsourcing and
portfolio services revenues. Revenues from collection services were $192.4
million for the six months ended June 30, 2000 compared to $186.8 million in the
comparable period in 1999 due primarily to increased governement and letter
series business. Partially offsetting this increase, however, was a continued
weakness in the bankcard market, primarily driven by changes in the portfolio
sales market. The outsourcing services revenue of $35.0 million compared
favorably to $28.4 million in 1999 due to increased revenue from new and
existing business. Revenues from portfolio services increased to $43.2 million
for the six months ended June 30, 2000 from $41.9 million for the comparable
period in 1999. The increased revenues was due to higher servicing fee revenues
for the off-balance sheet collections of FINCO portfolios and higher strategic
sales of portfolios partially offset by lower revenues from on-balance sheet
portfolios resulting in the shift from on-balance sheet ownership of purchase
loans and accounts receivable portfolios to off-balance sheet. During the six
months ended June 30, 2000, the Company recorded revenue from FINCO servicing
fees of $9.3 million on total collections of $26.2 million compared to servicing
fees of $5.8 million on total collections of $14.7 million for the six months
ended June 30, 1999.
Operating expenses, inclusive of salaries and benefits, service fees and other
operating and administrative expenses, were $217.4 million for the six months
ended June 30, 2000 and $202.1 million for the comparable period in 1999 - an
increase of 7.6%. The increase in these operating expenses resulted primarily
from higher collection-related expenses associated with the increased revenues
of collection and outsourcing services and increased collection expenses
associated with the increase in collections of on and off-balance sheet
purchased portfolios partially offset by lower consulting expenses. For the six
months ended June 30, 2000, amortization and depreciation charges of $30.8
million were lower than $35.9 million for the comparable period in 1999 - a
decrease of 14.2%. The lower amortization and depreciation charges resulted
primarily from lower portfolio amortization as a result of the shift towards
off-balance sheet purchased loans and accounts receivable portfolios.
In continuing with the strategy to align the Company along business services and
establish call centers of excellence by industry specialization adopted in early
1999, the Company incurred nonrecurring realignment and relocation expenses of
$1.0 million which includes costs for closures of certain call centers,
severance associated with these office closures and certain other one-time
costs. These costs were recognized as incurred in 2000.
In the six months ended June 30, 2000, the Company incurred approximately $0.2
million of additional compensation expense resulting from the redemption of
vested stock options.
Earnings before interest expenses, taxes, depreciation and amortization (EBITDA)
for the six months ended June 30, 2000 was $52.0 million. Adding back the
nonrecurring charges and the additional compensation expense, EBITDA was $53.2
million for the six months ended June 30, 2000 compared to $55.0 million for the
same period in 1999. The decrease of $1.8 million was primarily attributable to
the increased collection expenses in relation to the revenue reported from the
collections of purchased portfolios partially offset by the contribution from
increased collection and outsourcing services revenues and lower consulting
expenses.
While EBITDA was down slightly due to the off-balance sheet ownership of the
portfolios, depreciation and amortization also declined resulting in operating
income of $21.2 million. Adding back the nonrecurring charges of $1.0 million
and the additional compensation expense of approximately $0.2 million, operating
income was $22.4 million for the six months ended June 30, 2000 compared to
$19.1 million for the same period in 1999.
Net interest expense for the six months ended June 30, 2000 of $29.5 million
compared unfavorably to $25.2 million for the same period in 1999 due primarily
to higher interest rates and higher amortization of deferred financing fees.
The provision for income taxes of $0.3 million was provided for state and
foreign income tax obligations, which the Company cannot offset currently by net
operating losses.
Due to the factors stated above, the net loss for the six months ended June 30,
2000 of $8.6 million compared unfavorably to the net loss of $6.5 million for
the six months ended June 30, 1999.
Financial Condition, Liquidity and Capital Resources
At June 30, 2000, the Company had cash and cash equivalents of $10.6 million.
The Company's credit agreement provides for a $75.0 million revolving credit
facility, which allows the Company to borrow for working capital, general
corporate purposes and acquisitions, subject to certain conditions. As of June
30, 2000, the Company had $22.0 million outstanding under the revolving credit
facility leaving $48.8 million, after outstanding letters of credit, available
under the revolving credit facility.
Since December 31, 1999, cash and cash equivalents increased $4.5 million
primarily due to cash from operating activities and portfolio purchasing of $7.6
million and net cash from financing activities of $7.5 million offset by the use
of cash of $10.5 million primarily for capital expenditures. The Company also
held $26.2 million of cash for clients in restricted trust accounts at June 30,
2000.
For the first six months in 2000, the Company made capital expenditures of $9.0
million primarily for the replacement and upgrading of equipment, expansion of
facilities and expansion and conversion of the Company's information services
systems. The Company anticipates capital spending of approximately $18.0 million
during 2000, which the Company intends to fund from cash flow from operations
and if necessary, borrowings under the revolving credit facility.
See Item 3. "Quantitative and Qualitative Disclosures About Market Risk" for the
Company's derivative activities during the quarter ended June 30, 2000.
Forward-Looking Statements
The following statements in this document are or may constitute forward-looking
statements made in reliance upon the safe harbor of the Private Securities
Litigation Reform Act of 1995: (1) statements concerning the anticipated costs
and outcome of legal proceedings and environmental liabilities, (2) statements
regarding the Company's expected capital expenditures, (3) any statements
preceded by, followed by or that include the word "believes," "expects,"
"anticipates," "intends," "should," "may," or similar expressions; and (4) other
statements contained or incorporated by reference in this document regarding
matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual results
may differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to: (1) the demand for the Company's services, (2)
the demand for accounts receivable management generally, (3) general economic
conditions, (4) changes in interest rates, (5) competition, including but not
limited to pricing pressures, (6) changes in governmental regulations including,
but not limited to the federal Fair Debt Collection Practices Act and comparable
state statutes, (7) legal proceedings, (8) environmental investigations and
clean up efforts, (9) expected synergies, economies of scale and cost savings
from acquisitions by the Company not being fully realized or realized within the
expected time frames, (10) costs of operational difficulties related to
integrating the operations of acquired companies with the Company's operations
being greater than expected, (11) the Company's ability to generate cash flow or
obtain financing to fund its operations, service its indebtedness and continue
its growth and expand successfully into new markets and services, and (12)
factors discussed from time to time in the Company's public filings.
These forward-looking statements speak only as of the date they were made. These
cautionary statements should be considered in connection with any written or
oral forward-looking statements that the Company may issue in the future. The
Company does not undertake any obligation to release publicly any revisions to
such forward-looking statements to reflect later events or circumstances or to
reflect the occurrence of unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to the risk of fluctuating interest rates in the normal
course of business. From time to time and as required by the Company's credit
agreement, the Company will employ derivative financial instruments as part of
its risk management program. The Company's objective is to manage risks and
exposures and not to trade such instruments for profit or loss.
At December 31, 1999 (the most recent completed fiscal year), the Company had no
outstanding interest rate agreements. Pursuant to the Company's credit
agreement, the Company was obligated to secure interest rate protection in the
nominal amount of $150.0 million by July 2000. In June 2000, the Company entered
into interest rate collared swap agreements with several financial institutions
for interest rate protection on the $150.0 million. Under the agreements, the
Company pays floating three month LIBOR between 5.90% and 8.50% in addition to
the applicable margin as set forth in the credit agreement. In the event,
however, the three month LIBOR drops below 5.9%, the Company would be required
to pay 7.0% plus the applicable margin, until such time the three month LIBOR
rises above 5.90%, at which time the rate returns to a variable rate.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company and certain of its subsidiaries are involved in
various investigations, claims and legal proceedings covering a wide range of
matters that arise in the normal course of business and are routine to the
nature of the Company's business. Other information with respect to legal
proceedings appears in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
Item 2. Changes in Securities
See Note 4 of the Condensed Consolidated Financial Statements included
elsewhere herein.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
Exhibit 10.1 Management Stock Purchase Agreement, Non-recourse
Secured Promissory Note and Management Stock Pledge
Agreement dated as of April 19, 2000 between the Company
and Timothy Beffa.
Exhibit 10.2 Management Stock Purchase Agreement, Promissory Note
and Management Stock Pledge Agreement dated as of April 19,
2000 between the Company and Gary Weller.
Exhibit 10.3 Form of Director Stock Purchase and Option Agreement.
Exhibit 10.4 Form of Non-Qualified Stock Option Award Agreement [F]
Exhibit 27 Financial Data Schedule (Unaudited)
(b). Reports on Form 8-K
During the quarter, the following report on Form 8-K was filed:
Report on Form 8-K filed June 30, 2000
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
OUTSOURCING SOLUTIONS INC.
(Registrant)
/s/ Timothy G. Beffa
------------------------------------
Timothy G. Beffa
President and Chief Executive Officer
/s/ Gary L. Weller
------------------------------------
Gary L. Weller
Executive Vice President
and Chief Financial Officer
Date: August 11, 2000
