1029319--3/31/2010--OSI_COLLECTION_SERVICES

related topics

{debt, indebtedness, cash}

{system, service, information}

{capital, credit, financial}

{cost, contract, operation}

{regulation, government, change}

{tax, income, asset}

{cost, operation, labor}

{personnel, key, retain}

{competitive, industry, competition}

{product, market, service}

{acquisition, growth, future}

{customer, product, revenue}

{control, financial, internal}

{operation, international, foreign}

{product, liability, claim}

{stock, price, operating}

{stock, price, share}

{investment, property, distribution}

{loss, insurance, financial}

{condition, economic, financial}

Risks Related to the Current Environment and Recent Developments Recent instability in the financial markets and global economy may affect our access to capital, our ability to purchase accounts, and the success of our collection efforts which could have a material adverse effect on our results of operations and revenue. Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and access capital. There can be no assurance that actions of the U.S. Government, Federal Reserve and other governmental and regulatory bodies for the purpose of stabilizing the financial markets will achieve the intended effect. Derivative transactions may expose us to unexpected risk and potential losses. Our business is dependent on our ability to grow internally. We compete with a large number of providers in the ARM and CRM industries. This competition could have a materially adverse effect on our future financial results. Many of our clients are concentrated in the financial services, telecommunications, and healthcare sectors. If any of these sectors performs poorly or if there are any adverse trends in these sectors it could materially adversely affect us. We have international operations and utilize foreign sources of labor, and various factors relating to our international operations, including fluctuations in currency exchange rates, could adversely affect our results of operations. We are dependent on our employees and a higher turnover rate would have a material adverse effect on us. The employees at one of our offices voted to join a labor union. Our other employees could become unionized in the future, which could increase our costs and result in a loss of customers. If we are not able to respond to technological changes in telecommunications and computer systems in a timely manner, we may not be able to remain competitive. We are highly dependent on our telecommunications and computer systems. An increase in communication rates or a significant interruption in communication service could harm our business. We may seek to make strategic acquisitions of companies. Acquisitions involve additional risks that may adversely affect us. Our success depends on our senior management team and if we are not able to retain them, it could have a materially adverse effect on us. Goodwill and other intangible assets represented 60.2 percent of our total assets at December 31, 2009. If the goodwill or the other intangible assets, primarily our customer relationships and trade name, are deemed to be impaired, we may need to take a charge to earnings to write-down the goodwill or other intangibles to its fair value. Security and privacy breaches of the systems we use to protect personal data could adversely affect our business, results of operations and financial condition. If we fail to maintain an effective system of internal control over financial reporting and disclosure controls and procedures, we may be unable to accurately report our financial results and comply with the reporting requirements under the Securities Exchange Act of 1934. As a result, investors may lose confidence in our financial reporting and disclosure required under the Securities Exchange Act of 1934, which could adversely affect our business and could subject us to regulatory scrutiny. Most of our ARM contracts do not require clients to place accounts with us, may be terminated on 30 or 60 days notice, and are on a contingent fee basis. We cannot guarantee that existing clients will continue to use our services at historical levels, if at all. If we fail to comply with government regulation of the collections industry, it could result in the suspension or termination of our ability to conduct business. Risks Related to our CRM Business The CRM division relies on a few key clients for a significant portion of its revenues. The loss of any of these clients or their failure to pay us could reduce revenues and adversely affect results of operations. Government regulation of the CRM industry and the industries we serve may increase our costs and restrict the operation and growth of our CRM business. Collections may not be sufficient to recover the cost of investments in purchased accounts receivable and support operations. We use estimates to report results. For the year ended December 31, 2009, we recorded an impairment charge of $21.5 million relating to our purchased receivables portfolio. If the amount and/or timing of collections on portfolios are materially different than expected, we may be required to record further impairment charges that could have a materially adverse effect on us. We are controlled by an investor group led by One Equity Partners, a private equity firm, and its affiliates, whose interests may not be aligned with those of our noteholders. Our substantial leverage and significant debt service obligations could adversely affect our financial condition and our ability to fulfill our obligations and operate our business. We may be unable to generate sufficient cash to service all of our indebtedness, including the notes, and meet our other ongoing liquidity needs and may be forced to take other actions to satisfy our obligations under our indebtedness, which may be unsuccessful. Despite our current leverage, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks that we and our subsidiaries face. Our senior credit facility contains, and the indentures governing the notes contain, a number of restrictive covenants which will limit our ability to finance future operations or capital needs or engage in other business activities that may be in our interest. We are a holding company and we depend upon cash from our subsidiaries to service our debt. If we do not receive cash distributions, dividends or other payments from our subsidiaries, we may be unable to make payments on the notes. Each noteholder s right to receive payments on the notes is effectively junior to those lenders who have a security interest in our assets. Claims of noteholders will be structurally subordinate to claims of creditors of all of our non-U.S. subsidiaries and some of our U.S. subsidiaries because they have not guaranteed the notes. Each noteholder s right to receive payments on the notes is junior to all of our existing and future senior indebtedness and the guarantees of the notes is junior to all the guarantors existing and future senior indebtedness. If we default on our obligations to pay our other indebtedness, we may be unable to make payments on the notes. Federal and state fraudulent transfer laws may permit a court to void the notes and the guarantees and if that occurs, noteholders may not receive any payments on the notes. Noteholders ability to transfer the notes may be limited by the absence of an active trading market, and there is no assurance that any active trading market will develop for the notes.

Full 10-K form ▸

1029319--3/31/2010--OSI_COLLECTION_SERVICES_INC