<PAGE>

                                  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, 2002, or

/ /  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 0-21639
--------------------------------------------------------------------------------

                                 NCO GROUP, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                                  PENNSYLVANIA
--------------------------------------------------------------------------------
         (State or other jurisdiction of incorporation or organization)

                   507 Prudential Road, Horsham, Pennsylvania
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                   23-2858652
--------------------------------------------------------------------------------
                      (IRS Employer Identification Number)

                                      19044
--------------------------------------------------------------------------------
                                   (Zip Code)

                                  215-441-3000
--------------------------------------------------------------------------------
               (Registrant's telephone number including area code)

          515 Pennsylvania Avenue, Fort Washington, Pennsylvania, 19034
--------------------------------------------------------------------------------
              (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 25,877,000 shares common stock, no par value, outstanding as of
May 13, 2002.


<PAGE>




                                 NCO GROUP, INC.

                                      INDEX

                                                                            PAGE

PART I - FINANCIAL INFORMATION

     Item 1   CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

              Consolidated Balance Sheets -
                  December 31, 2001 and March 31, 2002                         1

              Consolidated Statements of Income -
                  Three months ended March 31, 2001 and 2002                   2

              Consolidated Statements of Cash Flows -
                  Three months ended March 31, 2001 and 2002                   3

              Notes to Consolidated Financial Statements                       4

     Item 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS                 15

     Item 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                ABOUT MARKET RISK                                             20

PART II - OTHER INFORMATION                                                   21

     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


<PAGE>


Part 1 - Financial Information
Item 1 - Financial Statements

                                 NCO GROUP, INC.
                           Consolidated Balance Sheets
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                                                         March 31,
                                                ASSETS                            December 31,             2002
                                                                                      2001              (Unaudited)
                                                                                  ------------          -----------
<S>                                                                                <C>                  <C>
Current assets:
     Cash and cash equivalents                                                      $ 32,161             $ 25,150
     Restricted cash                                                                   1,125                1,125
     Accounts receivable, trade, net of allowance for
          doubtful accounts of $5,311 and $6,717, respectively                        99,055              101,356
     Purchased accounts receivable, current portion                                   47,341               49,807
     Deferred income taxes                                                             8,336                8,153
     Other current assets                                                             14,784                9,682
                                                                                   ---------            ---------
          Total current assets                                                       202,802              195,273

Funds held on behalf of clients

Property and equipment, net                                                           71,457               76,243

Other assets:
     Goodwill                                                                        514,161              514,104
     Other intangible assets, net of accumulated amortization                          7,929                7,260
     Purchased accounts receivable, net of current portion                            92,660               87,089
     Other assets                                                                     42,016               49,502
                                                                                   ---------            ---------
          Total other assets                                                         656,766              657,955
                                                                                   ---------            ---------
Total assets                                                                       $ 931,025            $ 929,471
                                                                                   =========            =========

                                LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Long-term debt, current portion                                               $  21,922            $  22,964
     Income taxes payable                                                                176                3,264
     Accounts payable                                                                 12,164                9,171
     Accrued expenses                                                                 39,382               34,517
     Accrued compensation and related expenses                                        16,785               15,031
                                                                                   ---------            ---------
          Total current liabilities                                                   90,429               84,947

Funds held on behalf of clients

Long-term liabilities:
     Long-term debt, net of current portion                                          357,868              347,436
     Deferred income taxes                                                            42,855               44,648
     Other long-term liabilities                                                       4,565                4,100

Minority interest                                                                     21,213               22,185

Shareholders' equity:
     Preferred stock, no par value, 5,000 shares authorized,
         no shares issued and outstanding                                                 -                   -
     Common stock,  no par value, 50,000 shares authorized,
         25,816 and 25,874 shares issued and outstanding, respectively               320,993              321,067
     Other comprehensive loss                                                         (4,346)              (4,165)
     Retained earnings                                                                97,448              109,253
                                                                                   ---------            ---------
           Total shareholders' equity                                                414,095              426,155
                                                                                   ---------            ---------
Total liabilities and shareholders' equity                                         $ 931,025            $ 929,471
                                                                                   =========            =========
</TABLE>

                            See accompanying notes.
                                      -1-
<PAGE>


                                 NCO GROUP, INC.
                        Consolidated Statements of Income
                                   (Unaudited)
                  (Amounts in thousands, except per share data)
<TABLE>
<CAPTION>

                                                                                    For the Three Months
                                                                                        Ended March 31,
                                                                               ------------------------------
                                                                                   2001              2002
                                                                               ------------       -----------
<S>                                                                             <C>                <C>
Revenue                                                                          $ 171,029          $ 178,907

Operating costs and expenses:
     Payroll and related expenses                                                   82,912             86,120
     Selling, general and administrative expenses                                   51,123             61,073
     Depreciation and amortization expense                                           8,954              6,226
                                                                                 ---------          ---------
          Total operating costs and expenses                                       142,989            153,419
                                                                                 ---------          ---------
Income from operations                                                              28,040             25,488

Other income (expense):
     Interest and investment income                                                    916                667
     Interest expense                                                               (7,421)            (4,986)
     Other income (expense)                                                              -               (595)
                                                                                 ---------          ---------
          Total other income (expense)                                              (6,505)            (4,914)
                                                                                 ---------          ---------
Income before income tax expense                                                    21,535             20,574

Income tax expense                                                                   8,666              7,797
                                                                                 ---------          ---------

Income from operations before minority interest                                     12,869             12,777

Minority interest                                                                     (592)              (972)
                                                                                 ---------          ---------

Net income                                                                       $  12,277          $  11,805
                                                                                 =========          =========

Net income per share:
     Basic                                                                       $    0.48          $    0.46
     Diluted                                                                     $    0.47          $    0.43

Weighted average shares outstanding:
     Basic                                                                          25,687             25,855
     Diluted                                                                        26,340             29,903

</TABLE>

                            See accompanying notes.
                                      -2-

<PAGE>


                                 NCO GROUP, INC
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                             (Amounts in thousands)

<TABLE>
<CAPTION>

                                                                                    For the Three Months
                                                                                        Ended March 31,
                                                                               ------------------------------
                                                                                   2001              2002
                                                                               ------------       -----------
<S>                                                                             <C>                <C>
Cash flows from operating activities:
  Net income                                                                     $ 12,277          $ 11,805
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation                                                                  4,628             5,549
      Amortization of intangibles                                                   4,326               677
      Provision for doubtful accounts                                                 779             2,302
      Impairment of purchased accounts receivable                                     -                 797
      Gain on insurance proceeds from property and equipment                          -                (847)
      Minority interest                                                               592               972
      Changes in operating assets and liabilities, net of acquisitions:
          Restricted cash                                                           2,555                -
          Accounts receivable, trade                                               (6,183)           (4,921)
          Deferred income taxes                                                     7,530             1,777
          Other assets                                                             (2,147)           (3,425)
          Accounts payable and accrued expenses                                     1,278            (9,593)
          Income taxes payable                                                       (294)            3,093
          Other long-term liabilities                                                (115)             (465)
                                                                                 --------          --------
             Net cash provided by operating activities                             25,226             7,721

Cash flows from investing activities:
  Purchases of accounts receivable                                                (13,493)           (9,238)
  Collections applied to principal of purchased accounts receivable                 6,978            11,524
  Purchases of property and equipment                                              (7,755)          (10,366)
  Insurance proceeds from involuntary conversion of
    property and equipment                                                            -               2,633
  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                                (23,027)           (5,447)

Cash flows from financing activities:
  Repayment of notes payable                                                       (4,390)           (4,684)
  Repayment of acquired notes payable                                             (20,084)               -
  Borrowings under revolving credit agreement                                      47,350               370
  Repayment of borrowings under revolving credit agreement                        (13,800)           (5,000)
  Payment of fees to acquire debt                                                    (939)               -
  Issuance of common stock, net                                                     2,872                69
                                                                                 --------          --------
             Net cash provided by (used in) financing activities                   11,009            (9,245)

Effect of exchange rate on cash                                                      (303)              (40)
                                                                                 --------          --------

Net increase (decrease) in cash and cash equivalents                               12,905            (7,011)

Cash and cash equivalents at beginning of the period                               13,490            32,161
                                                                                 --------          --------

Cash and cash equivalents at end of the period                                   $ 26,395          $ 25,150
                                                                                 ========          ========
</TABLE>


                            See accompanying notes.
                                      -3-



<PAGE>



                                 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 defaulted consumer accounts receivable from consumer
creditors such as banks, finance companies, retail merchants, and other consumer
oriented companies. The Company's client base includes companies in the
financial services, healthcare, retail and commercial, utilities, education,
telecommunications, and government 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,
2002, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2002, 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 19, 2002.

     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. Two
entities that the Company does not control are InoVision-MEDCLR NCOP Ventures,
LLC and Creditrust SPV98-2, LLC (see note 14).

     Contingency Fees and Contractual Services:

The Company generates revenue from contingency fees and contractual services.
Contingency 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 the American Institute of Certified Public
Accountants' Practice Bulletin No. 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. Proceeds from the sale of
accounts within 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.


                                      -4-
<PAGE>

2.   Accounting Policies (continued):

     Purchased Accounts Receivable (continued):

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 ("IRR") for each pool. The IRR 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 IRR 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 IRR 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 collections.

To the extent the estimated future cash flow increases or decreases from the
expected level of collections, the Company prospectively adjusts the IRR
accordingly. If the carrying value of a particular static pool exceeds its
expected future cash flows, a charge to income would be recognized in the amount
of such impairment. Additional impairments on previously impaired static pools
may occur if the current estimated future cash flow projection, after being
adjusted prospectively for actual collection results, is less than the carrying
value recorded. After the impairment of a static pool, no income is recorded on
that static pool and collections are recorded as a return of capital until the
full carrying value of the static pool has been recovered. 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.

     Credit Policy:

The Company has two types of arrangements under which it collects its
contingency fee revenue. For certain clients, the Company remits funds collected
on behalf of the client net of the related contingency fees while, for other
clients, the Company remits gross funds collected on behalf of clients and bills
the client separately for its contingency 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:

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. Effective January 1, 2002, the Company adopted
Statement of Financial Accounting Standard No. 142, "Goodwill and Other
Intangibles" ("SFAS 142") (see note 3).

Other intangible assets consist primarily of deferred financing costs, which
relate to debt issuance costs incurred. Deferred financing costs are amortized
over the term of the debt (see note 3).

     Interest Rate Hedges:

The Company accounts for its interest rate swap agreements as either assets or
liabilities on the balance sheet measured at fair value. Changes in the fair
value of the interest rate swap agreements will be recorded in other
comprehensive income since the interest rate swap agreements were designated and
qualified as cash flow hedges. If the interest rate swap agreements no longer
qualify as cash flow hedges, the change in the fair value may be recorded in
current earnings.


                                      -5-
<PAGE>

2.   Accounting Policies (continued):

     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.

Prior to the adoption of SFAS 142 on January 1, 2002, 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 composed 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 ratably over the life of the static pool. Deferred tax liabilities
arise from income tax deferrals created during the early stages of the static
pool. These deferrals reverse after the cost basis of the static pool is
recovered. The creation of new tax deferrals from future purchases of static
pools are expected to offset the reversal of the deferrals from static pools
where the collections have become fully taxable.

     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 amounts reported in the financial statements and
the accompanying notes. Actual results could differ from those estimates.

In the ordinary course of accounting for purchased accounts receivable,
estimates have been made by management as to the amount of future cash flows
expected from each static pool. The estimated future cash flow of each static
pool is used to compute the IRR for the static pool. The IRR is used to allocate
cash flow between revenue and amortization of the carrying values of the
purchased accounts receivable.

On an ongoing basis, we compare the historical trends of each static pool to
projected collections. The future projections are then increased or decreased,
within parameters, in accordance with the historical trend. The results are
further reviewed by management with a view towards specifically addressing any
particular static pool's performance. Actual results will differ from these
estimates and a material change in these estimates could occur within one year.

     Reclassifications:

Certain amounts for December 31, 2001, have been reclassified for comparative
purposes.

3.   Intangible Assets:

     Goodwill:

Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standard No. 142, "Goodwill and Other Intangibles" ("SFAS 142"). As a result of
adopting SFAS 142, the Company no longer amortizes goodwill. Goodwill must be
tested at least annually for impairment, including an initial test completed
within six months of adopting SFAS 142. The test for impairment uses 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 Company is currently in the process of determining if there are
any impairment charges attributable to the adoption of SFAS 142. However, the
Company does not expect to incur an impairment charge based on its preliminary
valuations. Any impairment charge incurred in connection with the adoption of
SFAS 142 would be classified as an effect of a change in accounting principle.



                                      -6-

<PAGE>

3.   Intangible Assets (continued):

     Goodwill (continued):

SFAS 142 requires goodwill to be allocated and tested at the reporting unit
level. The Company's reporting units under SFAS 142 are U.S. Operations and
International Operations. These reporting units had the following goodwill as of
December 31, 2001 and March 31, 2002 (amounts in thousands):

                                        December 31,        March 31,
                                            2001              2002
                                        -------------       ---------

      U.S. Operations                     $ 484,182         $ 484,182
      International Operations               29,979            29,922
                                          ---------         ---------

      Total                               $ 514,161         $ 514,104
                                          =========         =========

The following presents the results of operations for the three months ended
March 31, 2001 as if SFAS 142 had been adopted on January 1, 2001 (dollars in
thousands):

                                                For the Three Months Ended
                                                       March 31, 2001
                                            -----------------------------------

                                                              Diluted Earnings
                                               Amount             Per Share
                                             -----------     ------------------

      Net income, as reported                  $ 12,277            $ 0.47
      Add back of goodwill amortization,
        net of tax                                2,916              0.11
                                               --------            ------

      Adjusted net income                      $ 15,193            $ 0.58
                                               ========            ======

     Other Intangible Assets:

The Company's adoption of SFAS 142 had no effect on its other intangible assets.
Other intangible assets consist primarily of deferred financing costs. The
following represents the other intangible assets as of December 31, 2001 and
March 31, 2002 (amounts in thousands):

<TABLE>
<CAPTION>
                                           December 31, 2001                    March 31, 2002
                                    ---------------------------------  ---------------------------------

                                    Gross Carrying     Accumulated     Gross Carrying     Accumulated
                                        Amount         Amortization        Amount         Amortization
                                    ----------------  ---------------  ----------------  ---------------
      <S>                                <C>             <C>                <C>              <C>

      Deferred financing costs         $ 11,855          $ 4,294          $ 11,863          $ 4,932
      Other intangible assets               900              532               900              571
                                       --------          -------          --------          -------

      Total                            $ 12,755          $ 4,826          $ 12,763          $ 5,503
                                       ========          =======          ========          =======

</TABLE>




                                      -7-

<PAGE>


3.   Intangible Assets (continued):

     Other Intangible Assets (continued):

During the three months ended March 31, 2001 and 2002, the Company recorded
amortization expense of $401,000 and $677,000, respectively, for all other
intangible assets. The following represents the Company's expected amortization
expense from these other intangible assets over the next five years (amounts in
thousands):

                                          Estimated
              For the Years Ended       Amortization
                 December 31,              Expense
              -------------------       ------------

                     2002                  $ 2,709
                     2003                    2,682
                     2004                    1,542
                     2005                      790
                     2006                      206

4.   Acquisition:

On February 20, 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 Creditrust 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 Creditrust merger, 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 Creditrust merger, the Company amended its
revolving credit facility to provide NCO Portfolio with a $50.0 million
revolving line of credit in the form of a sub-facility under its existing credit
facility. Initially, NCO Portfolio borrowed $36.3 million to fund the Creditrust
merger.

The following summarizes the unaudited pro forma results of operations for the
three months ended March 31, 2001, assuming the Creditrust merger occurred on
January 1, 2001. The pro forma information is provided for informational
purposes only. It is based on historical information, and does not necessarily
reflect the actual results that would have occurred, nor is it indicative of
future results of operations of the consolidated entities (amounts in thousands,
except per share data):

                                     For the Three Months
                                     Ended March 31, 2001
                                     --------------------

      Revenue                               $ 174,609
      Net income                            $   4,760
      Earnings per share - basic                $0.18
      Earnings per share - diluted              $0.20



                                      -8-

<PAGE>


5.   Comprehensive Income:

Comprehensive 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 income for the three months ended March 31, 2001 and 2002 was as
follows (amounts in thousands):

                                                    For the Three Months
                                                       Ended March 31,
                                                  --------------------------

                                                     2001          2002
                                                  ------------  ------------

      Net income                                     $ 12,277     $ 11,805
      Other comprehensive income:
        Foreign currency translation adjustment        (2,261)        (187)
        Unrealized gain on interest rate swap             -            368
                                                     --------     --------

      Comprehensive income                           $ 10,016     $ 11,986
                                                     ========     ========

6.   Purchased Accounts Receivable:

The Company's Portfolio Management and International Operations divisions
purchase defaulted consumer receivables at a discount from the actual principal
balance. As of March 31, 2002, the carrying value of Portfolio Management's and
International Operations' purchased accounts receivable was $133.5 million and
$3.4 million, respectively. The following summarizes the change in purchased
accounts receivable for the year ended December 31, 2001 and for the three
months ended March 31, 2002 (amounts in thousands):

                                                    December 31,      March 31,
                                                        2001             2002
                                                    ------------      ---------

      Balance, at beginning of period                 $  34,475       $ 140,001

      Purchased accounts receivable acquired
        from Creditrust                                  93,518             -
      Purchases of accounts receivable                   50,621           9,238
      Collections on purchased accounts receivable      (99,868)        (28,512)
      Revenue recognized                                 64,065          16,988
      Impairment of purchased accounts receivable        (2,738)           (797)
      Foreign currency translation adjustment               (72)            (22)
                                                      ---------       ---------
      Balance, at end of period                       $ 140,001       $ 136,896
                                                      =========       =========

During the three months ended March 31, 2002, an impairment of $797,000 was
recorded as a charge to income on static pools where the carrying amounts
exceeded the expected future cash flows. No revenue will be recorded on these
static pools until the carrying values have been fully recovered. As of March
31, 2002, the combined carrying values on all previously impaired static pools
aggregated $7.5 million, or 5.5% of the total purchased accounts receivable,
representing their net realizable value. No impairments were recorded during the
three months ended March 31, 2001.

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 $56.8 million and $59.6 million at
December 31, 2001 and March 31, 2002, respectively, have been shown net of their
offsetting liability for financial statement presentation.


                                      -9-

<PAGE>



8.   Long-term Debt:

Long-term debt consisted of the following at December 31, 2001 and March 31,
2002 (amounts in thousands):

                                      December 31,           March 31,
                                          2001                 2002
                                    ----------------      --------------

      Revolving credit loan            $ 206,630            $ 202,000
      Convertible notes                  125,000              125,000
      Securitized debt                    45,379               41,140
      Capital leases                       2,781                2,260
      Less current portion               (21,922)             (22,964)
                                       ---------            ---------

                                       $ 357,868            $ 347,436
                                       =========            =========

     Revolving Credit Facility:

The Company has a credit agreement with Citizens Bank of Pennsylvania, formerly
Mellon Bank, N.A., ("Citizens Bank"), for itself and as administrative agent for
other participating lenders, structured as a revolving credit facility. The
balance under the revolving credit facility is due on May 20, 2004 (the
"Maturity Date"). The borrowing capacity of the revolving credit facility is
subject to mandatory reductions, including a quarterly reduction of $6.3 million
on March 31, 2001, subsequent quarterly reductions of $5.2 million until the
Maturity Date, and 50 percent of the net proceeds received from any offering of
debt or equity.

At the option of NCO, the borrowings bear interest at a rate equal to either
Citizens Bank's prime rate plus a margin of 0.25% to 0.50%, which is determined
quarterly based upon the Company's consolidated funded debt to earnings before
interest, taxes, depreciation, and amortization ("EBITDA") ratio (Citizens
Bank's prime rate was 4.75% at March 31, 2002), 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 1.88% at March 31, 2002).
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. The borrowing capacity of the
sub-facility is subject to mandatory reductions including four quarterly
reductions of $2.5 million beginning March 31, 2002 through December 31, 2002.
Effective March 31, 2003, quarterly reductions of $3.75 million are required
until the earlier of the Maturity Date or the date at which the sub-facility is
reduced to $25 million. At the option of NCO, the borrowings bear interest at a
rate equal to either Citizens 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.

The following summarizes the availability under the revolving credit facility as
of March 31, 2002 (amounts in thousands):

<TABLE>
<CAPTION>

                                              NCO Group          NCO Portfolio          Combined
                                            ---------------    ------------------    ---------------
      <S>                                      <C>                   <C>                <C>
      Maximum capacity                        $ 214,825            $ 47,500          $ 262,325
      Less:
        Outstanding borrowings                  154,500              47,500            202,000
        Unused letters of credit                  2,554                -                 2,554
                                              ---------            --------          ---------

      Available                               $  57,771            $   -             $  57,771
                                              =========            ========          =========

</TABLE>






                                      -10-

<PAGE>

8.   Long-term Debt (continued):

     Revolving Credit Facility (continued):

Borrowings under the revolving credit facility are collateralized by
substantially all the assets of the Company, including the common stock of NCO
Portfolio, and certain assets of NCO Portfolio. 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, 2002, the
Company was in compliance with all required financial covenants.

     Convertible Debt:

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 will be required to repay the
$125.0 million of aggregate principal if the Notes are not converted prior to
their maturity in April 2006. The Company used the $121.3 million of net
proceeds from this offering to repay debt under its revolving credit facility.
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.

     Securitized Debt:

Creditrust established three securitized notes payable to fund the purchase of
accounts receivable prior to the Creditrust merger. Each of the notes payable is
non-recourse to the Company and NCO Portfolio, secured by a static pool of
purchased accounts receivable, and is bound by an indenture and servicing
agreement. Pursuant to the acquisition, the trustee appointed NCO as the
successor servicer for each static pool of purchased accounts receivable. When
the notes payable were established, a separate special purpose finance
subsidiary was created to house the assets and debt. These notes are term notes
without the ability to re-borrow. Monthly principal payments on the notes equal
all collections after servicing fees, collection costs, interest expense and
administrative fees.

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 the earlier
of March 2005, or satisfaction of the note from collections. A $900,000
liquidity reserve is included in restricted cash as of March 31, 2002, and is
restricted as to use until the facility is retired. Interest expense, trustee
fees and guarantee fees aggregated $257,000 and $167,000 for the period from
February 21, 2001, to March 31, 2001, and for the three months ended March 31,
2002, respectively. As of March 31, 2002, the amount outstanding on the facility
was $17.1 million. The note issuer, Radian Group, Inc., formerly 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, Creditrust SPV 98-2, LLC, are posted as additional
collateral for this facility (see note 14).

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 the
earlier of August 2004, or satisfaction of the note from collections. A $225,000
liquidity reserve is included in restricted cash as of March 31, 2002, and is
restricted as to use until the facility is retired. Interest expense and trustee
fees aggregated $141,000 and $52,000 for the period from February 21, 2001, to
March 31, 2001, and for the three months ended March 31, 2002, respectively. As
of March 31, 2002, the amount outstanding on the facility was $1.2 million.


                                      -11-

<PAGE>

8.   Long-term Debt (continued):

     Securitized Debt (continued):


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 the
earlier of December 2004, or satisfaction of the note from collections. Interest
expense and trustee fees aggregated $421,000 and $876,000 for the period from
February 21, 2001, to March 31, 2001, and for the three months ended March 31,
2002, respectively. As of March 31, 2002, the amount outstanding on the facility
was $22.8 million.

9.   Earnings Per Share:

Basic earnings per share ("EPS") was computed by dividing the net income for the
three months ended March 31, 2001 and 2002, by the weighted average number of
common shares outstanding. Diluted EPS was computed by dividing the adjusted net
income for the three months March 31, 2001 and 2002, by the weighted average
number of common shares outstanding plus all common equivalent shares. Net
income is adjusted to add-back convertible interest expense, net of taxes. The
convertible interest, net of taxes, included in the diluted EPS calculation for
the three months ended March 31, 2002, was $920,000. There was no convertible
interest during the three months ended March 31, 2001. Outstanding options,
warrants and convertible securities have been utilized in calculating diluted
net 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, 2001 and 2002 was as follows (amounts in
thousands):


                                            For the Three Months Ended
                                                    March 31,
                                            ---------------------------
                                               2001             2002
                                            ---------        ----------

      Basic                                    25,687           25,855
      Dilutive effect of convertible debt         -              3,797
      Dilutive effect of options                  154              251
      Dilutive effect of warrants                 499               -
                                              -------          -------
      Diluted                                  26,340           29,903
                                              =======          =======

10.   Interest Rate Hedge:

As of March 31, 2002, the Company was party to two interest rate swap
agreements, which qualified as cash flow hedges, to fix LIBOR at 2.8225% on an
aggregate amount of $102 million of the variable-rate debt outstanding under the
revolving credit facility. The aggregate notional amount of the interest rate
swap agreements is subject to quarterly reductions that will reduce the
aggregate notional amount to $62 million by maturity in September 2003.

11.   Supplemental Cash Flow Information:

The following are supplemental disclosures of cash flow information for the
three months ended March 31, 2001 and 2002 (amounts in thousands):


                                                    For the Three Months Ended
                                                            March 31,
                                                    ---------------------------
                                                       2001             2002
                                                    ---------        ----------

    Non-cash investing and financing activities:

      Fair value of assets acquired                 $ 123,978          $   -
      Liabilities assumed from acquisitions           109,394              -
      Warrants exercised                                 -                875





                                      -12-
<PAGE>



12.   Segment Reporting:

The Company's business consists of three operating divisions: U.S. Operations,
Portfolio Management and International Operations. The accounting policies of
the segments are the same as those described in note 2, "Accounting Policies."

U.S. Operations provides accounts receivable management services to consumer and
commercial accounts for all market sectors including financial services,
healthcare, retail and commercial, utilities, education, telecommunications, and
government. U.S. Operations serves 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 accounts
receivable and customer relationship management solutions to all market sectors,
serving clients of all sizes in local, regional and national markets. U.S.
Operations had total assets, net of any intercompany balances, of $732.4 million
and $727.5 million at December 31, 2001, and March 31, 2002, respectively.

Portfolio Management purchases and manages defaulted consumer accounts
receivable from consumer creditors such as banks, finance companies, retail
merchants, and other consumer oriented companies. Portfolio Management had total
assets, net of any intercompany balances, of $153.7 million and $153.0 million
at December 31, 2001, and March 31, 2002, respectively.

International Operations provides accounts receivable management services across
Canada and the United Kingdom. U.S. Operations uses International Operations as
a subcontractor to perform accounts receivable management services for some of
its clients. International Operations had total assets, net of any intercompany
balances, of $44.9 million and $49.0 million at December 31, 2001, and March 31,
2002, respectively.

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, 2001 and 2002. 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 accounting principles generally
accepted in the United States.

<TABLE>
<CAPTION>

                                                    For the Three Months Ended March 31, 2001
                                                             (amounts in thousands)
                                     -----------------------------------------------------------------------
                                                         Payroll and      Selling, General
                                                           Related           and Admin.
                                         Revenue           Expenses           Expenses           EBITDA
                                     ----------------  ---------------   -----------------   ---------------
    <S>                                  <C>               <C>                <C>                <C>
     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
                                        =========         ========           ========           ========


                                                    For the Three Months Ended March 31, 2001
                                                             (amounts in thousands)
                                     -----------------------------------------------------------------------
                                                         Payroll and      Selling, General
                                                           Related           and Admin.
                                         Revenue           Expenses           Expenses           EBITDA
                                     ----------------  ---------------   -----------------   ---------------

     U.S. Operations                    $ 162,277         $ 81,688           $ 56,957           $ 23,632
     Portfolio Management                  16,270              554              9,663              6,053
     International Operations              10,649            5,867              2,753              2,029
     Eliminations                         (10,289)          (1,989)            (8,300)                -
                                        ---------         --------           --------           --------

     Total                              $ 178,907         $ 86,120           $ 61,073           $ 31,714
                                        =========         ========           ========           ========

</TABLE>



                                      -13-

<PAGE>



13.   Net Loss Due to Flood and Relocation of Corporate Headquarters:

In June 2001, the entire first floor of the Company's Fort Washington, PA,
headquarters was severely damaged by a flood caused by remnants of Tropical
Storm Allison. During the third quarter of 2001, the Company decided to relocate
its corporate headquarters to Horsham, PA. The Company has filed a lawsuit
against its landlord to terminate the leases for the Fort Washington facilities.
Due to the uncertainty of the outcome of the lawsuit, the Company has recorded
the full amount of rent due under the remaining terms of the leases during the
third quarter of 2001. The Company has also recorded other expenses and expected
insurance proceeds during the third quarter of 2001 in connection with the flood
and the relocation of the corporate headquarters. The net effect of the charges
and the gain from the insurance proceeds included in selling, general, and
administrative expenses during the third quarter of 2001 was $11.2 million.
During the first quarter of 2002, the Company received insurance proceeds in
excess of its original estimate, which resulted in a gain of approximately $1.0
million. This gain was included in the Statement of Income in "other income
(expense)."

14.   Investments in Unconsolidated Subsidiaries:

NCO Portfolio owns a 100% retained residual interest in an investment in
securitization, Creditrust SPV 98-2, LLC, which was acquired as part of the
Creditrust merger. This transaction qualified for gain on sale accounting when
the purchased accounts receivable were originally securitized by Creditrust.
This securitization issued a note that is due in January 2004 and had a balance
of $4.7 million as of March 31, 2002. The retained interest represents the
present value of the residual interest in the securitization using discounted
future cash flows after the securitization note is fully repaid plus a cash
reserve. As of March 31, 2002, the investment in securitization was $7.3
million, composed of $4.0 million in present value of discounted residual cash
flows plus $3.3 million in cash reserves. The investment accrues non-cash income
at a rate of 8% per annum on the residual cash flow component only. The income
earned increases the investment balance until the securitization note has been
repaid. After repayment of the note, collections are split between income and
amortization of the investment in securitization based on the discounted cash
flows. The Company recorded $28,000 in income on this investment during the
three months ended March 31, 2002. The cash reserves of $3.3 million plus the
first $1.3 million in residual cash collections received after the
securitization note has been repaid have been pledged as collateral against the
Warehouse Facility (see note 8).

NCO Portfolio has a 50% ownership interest in a joint venture, InoVision-MEDCLR
NCOP Ventures, LLC ("Joint Venture") with IMNV Holdings, LLC ("IMNV"). The Joint
Venture was established in 2001 to purchase utility, medical and various other
small balance accounts receivable and is accounted for using the equity method
of accounting. As of March 31, 2002, NCO Portfolio and IMNV each had an
investment of $854,000 in the Joint Venture for the purchase of accounts
receivable. Included in the Statement of Income, in "interest and investment
income," was $83,000, representing the Company's 50% share of operating income
from this unconsolidated subsidiary for the three months ended March 31, 2002.
The Joint Venture has access to capital through a specialty finance lender who,
at its option, lends 90% of the value of the purchased accounts receivable to
the Joint Venture. The debt is cross-collateralized by all static pools in which
the lender participates, and is non-recourse to NCO Portfolio. The following
table summarizes the financial information of the Joint Venture as of and for
the three months ended March 31, 2002 (amounts in thousands):

           Total assets                       $ 6,150
           Total liabilities                    4,467
           Revenue                              1,860
           Operating income                       166




                                      -14-
<PAGE>



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, the final outcome of the environmental
liability, the effects of the terrorist attacks and the economy on the Company's
business, expected increases in operating efficiencies, anticipated trends in
the accounts receivable management industry, estimates of future cash flows of
purchased accounts receivable, estimates of goodwill impairments and
amortization expense for other intangible assets, 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,
risks related to the expected settlement of the environmental liability, risks
related to past or possible future terrorist attacks, risks related to the
economy, 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 19, 2002, 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., 507 Prudential Rd., Horsham, PA 19044.

     Three Months Ended March 31, 2002, Compared to Three Months Ended
March 31, 2001

     Revenue. Revenue increased $7.9 million, or 4.6%, to $178.9 million for the
three months ended March 31, 2002, from $171.0 million for the comparable period
in 2001. U.S. Operations, Portfolio Management and International Operations
accounted for $162.3 million, $16.3 million and $10.6 million, respectively, of
the revenue for the three months ended March 31, 2002. U.S. Operations' revenue
included $8.3 million of revenue earned on services performed for Portfolio
Management that was eliminated upon consolidation. International Operations'
revenue included $2.0 million of revenue earned on services performed for U.S.
Operations that was eliminated upon consolidation.

     U.S. Operations' revenue increased $6.5 million, or 4.2%, to $162.3 million
for the three months ended March 31, 2002, from $155.8 million for the
comparable period in 2001. The increase in U.S. Operations' revenue was
attributable to the addition of new clients and the growth in business from
existing clients.

     Portfolio Management's revenue increased $3.7 million, or 28.9%, to $16.3
million for the three months ended March 31, 2002, from $12.6 million for the
comparable period in 2001. This increase in Portfolio Management's revenue was
primarily attributable to a full quarter impact of the acquisition of Creditrust
Corporation ("Creditrust") in February 2001. The remainder of the increase was
attributable to an increase in acquisitions of purchased accounts receivable.
However, the growth in revenue was hindered by lower than projected collections
due to diminished consumer payments.



                                      -15-

<PAGE>


     International Operations' revenue increased $1.9 million, or 21.5%, to
$10.6 million for the three months ended March 31, 2002, from $8.8 million for
the comparable period in 2001. This increase in International Operations'
revenue was primarily attributable to new services provided for our U.S.
Operations, the addition of new clients, and growth in business from existing
clients.

     Payroll and related expenses. Payroll and related expenses increased $3.2
million to $86.1 million for the three months ended March 31, 2002, from $82.9
million for the comparable period in 2001, but decreased as a percentage of
revenue to 48.1% from 48.5%.

     U.S. Operations' payroll and related expenses increased $3.0 million to
$81.7 million for the three months ended March 31, 2002, from $78.7 million for
the comparable period in 2001, but decreased as a percentage of revenue to 50.3%
from 50.5%. Despite the difficult collection environment, we were able to reduce
the amount of labor required to attain our revenue goals and leverage the fixed
portion of our payroll structure over a larger revenue base.

     Portfolio Management's payroll and related expenses increased $297,000 to
$554,000 for the three months ended March 31, 2002, from $257,000 for the
comparable period in 2001, and increased as a percentage of revenue to 3.4% from
2.0%. Portfolio Management outsources all of its collection services to U.S.
Operations and, therefore, has a relatively small fixed payroll cost structure.
However, due to the expansion of this division and the Creditrust merger in
February 2001, Portfolio Management required additional employees to operate NCO
Portfolio Management, Inc. as a separate public company.

     International Operations' payroll and related expenses increased $1.2
million to $5.9 million for the three months ended March 31, 2002, from $4.7
million for the comparable period in 2001, and increased as a percentage of
revenue to 55.1% from 54.1%. The increase was primarily attributable to the
increase in outsourcing services since those services typically have a higher
payroll cost structure than the remainder of International Operations' business.
The higher payroll cost structure of the outsourcing services was offset by a
lower selling, general and administrative cost structure than the remainder of
International Operations' business.

     Selling, general and administrative expenses. Selling, general and
administrative expenses increased $10.0 million to $61.1 million for the three
months ended March 31, 2002, from $51.1 million for the comparable period in
2001, and increased as a percentage of revenue to 34.1% from 29.9%. The increase
as a percentage of revenue was primarily attributable to reduced collectibility
within the Company's contingency revenue stream due to the effects of the
difficult collection environment. Accordingly, in order to mitigate the effects
of the decreased collectibility while maintaining its performance for its
clients, the Company had to increase spending for direct costs of collections.
These costs included telephone, letter writing and postage, third-party
servicing fees, credit reporting, skiptracing, and legal and forwarding fees.

     Depreciation and amortization. Depreciation and amortization decreased $2.8
million to $6.2 million for the three months ended March 31, 2002, from $9.0
million for the comparable period in 2001. This decrease was the result of the
adoption of Statement of Financial Accounting Standard No. 142, "Goodwill and
Other Intangibles" ("SFAS 142") on January 1, 2002. SFAS 142 eliminated the
amortization of goodwill, which was $3.9 million for the three months ended
March 31, 2001. Partially offsetting the $3.9 million decrease was additional
depreciation resulting from normal capital expenditures made in the ordinary
course of business during 2001 and 2002. These capital expenditures included
purchases associated with our planned migration towards a single, integrated
information technology platform, the relocation of our corporate headquarters to
Horsham, PA, and predictive dialers and other equipment required to expand our
infrastructure to handle future growth.

     Other income (expense). Interest and investment income decreased $249,000
to $667,000 for the three months ended March 31, 2002, over the comparable
period in 2001. This decrease was primarily attributable to decreases in
operating cash and funds held on behalf of clients. Interest expense decreased
to $5.0 million for the three months ended March 31, 2002, from $7.4 million for
the comparable period in 2001. This decrease was primarily attributable to
falling interest rates and debt repayments made during 2001. The decrease was
partially offset by a full quarter of interest from the Portfolio Management's
$36.3 million of borrowings made in connection with the Creditrust merger in
February 2001 and its subsequent borrowings used to purchase accounts receivable
portfolios. In addition, a portion of the decrease was offset by a full quarter

                                      -16-
<PAGE>


of interest from securitized debt that was assumed as part of the Creditrust
merger. During the three months ended March 31, 2002, we recorded a net expense
of $595,000. This expense was the net effect of a $1.0 million insurance gain,
and a $1.6 million expense from the estimated settlement of an environmental
liability. The gain resulted from the settlement of the insurance claim related
to the June 2001 flood of the Fort Washington facilities. The insurance gain was
principally due to greater than estimated insurance proceeds. The expense from
the environmental liability was the result of contamination that allegedly
occurred in the pre-acquisition operations of a company acquired by a subsidiary
of Medaphis Services Corporation. We acquired Medaphis Services Corporation in
November 1998. These operations were unrelated to the accounts receivable
outsourcing business.

     Income tax expense. Income tax expense for the three months ended March 31,
2002, decreased to $7.8 million, or 37.9% of income before income tax expense,
from $8.7 million, or 40.2% of income before income tax expense, for the
comparable period in 2001. The decrease in the effective rate was primarily
attributable to the elimination of the amortization of nondeductible goodwill
related to certain acquisitions. The goodwill amortization was eliminated upon
the adoption of SFAS 142 on January 1, 2002.

     Liquidity and Capital Resources

     Historically, our 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 accounts
receivable, and working capital to support our growth.

     Cash Flows from Operating Activities. Cash provided by operating activities
was $7.7 million for the three months ended March 31, 2002, compared to $25.2
million for the comparable period in 2001. The decrease in cash provided by
operations was primarily attributable to less net income, a large reduction in
accounts payable and accrued expenses, and a smaller increase in deferred income
tax liabilities. The reduction in accounts payable and accrued expenses was
related to large payments made in the first quarter of 2002 including the
termination liability from the prior healthcare plan. The increase in deferred
tax liabilities in the first quarter of 2001 was primarily attributable to the
use of net operating losses. Income taxes payable for the three months ended
March 31, 2002, increased as compared to the three months ended March 31, 2001.

     Cash Flows from Investing Activities. Cash used in investing activities was
$5.4 million for the three months ended March 31, 2002, compared to $23.0
million for the comparable period in 2001. The decrease was due primarily to the
net cash used to pay pre-acquisition liabilities and acquisition related costs
during the three months ended March 31, 2001.

     Capital expenditures were $10.4 million for the three months ended March
31, 2002, compared to $7.8 million for the same period in 2001.

     Cash Flows from Financing Activities. Cash used in financing activities was
$9.2 million for the three months ended March 31, 2002, compared to cash
provided by financing activities of $11.0 million for the same period in 2001.
The cash provided by financing activities during the three months ended March
31, 2001 related to the net borrowings under the revolving credit facility made
in connection with the Creditrust merger that were used to repay the acquired
notes payable, finance purchased accounts receivable, and repay other
acquisition related liabilities.

     Credit Facility. We have a credit agreement with Citizens Bank of
Pennsylvania, formerly Mellon Bank, N.A., ("Citizens Bank"), for itself and as
administrative agent for other participating lenders, structured as a revolving
credit facility. The balance under the revolving credit facility is due on May
20, 2004 (the "Maturity Date"). The borrowing capacity of the revolving credit
facility is subject to mandatory reductions, including a quarterly reduction of
$6.3 million on March 31, 2001, subsequent quarterly reductions of $5.2 million
until the Maturity Date, and 50 percent of the net proceeds received from any
offering of debt or equity. As of March 31, 2002, the maximum borrowing capacity
and the availability under the revolving credit facility was $262.3 million and
$57.8 million, respectively.



                                      -17-
<PAGE>


     At our option, the borrowings bear interest at a rate equal to either
Citizens Bank's prime rate plus a margin of 0.25% to 0.50%, which is determined
quarterly based upon our consolidated funded debt to earnings before interest,
taxes, depreciation, and amortization, also referred to as EBITDA, ratio
(Citizens Bank's prime rate was 4.75% at March 31, 2002), or the London
InterBank Offered Rate, also referred to as LIBOR, plus a margin of 1.25% to
2.25% depending on our consolidated funded debt to EBITDA ratio (LIBOR was 1.88%
at March 31, 2002).

     In connection with the Creditrust merger, the revolving credit facility was
amended to provide NCO Portfolio with a $50 million revolving line of credit in
the form of a sub-facility under the existing revolving credit facility. The
borrowing capacity of the sub-facility is subject to mandatory reductions
including four quarterly reductions of $2.5 million beginning March 31, 2002,
through December 31, 2002. Effective March 31, 2003, quarterly reductions of
$3.75 million are required until the earlier of the Maturity Date or the date at
which the sub-facility is reduced to $25 million. At our option, the borrowings
bear interest at a rate equal to either Citizens Bank's prime rate plus a margin
of 1.25% to 1.50% that is determined quarterly based upon our consolidated
funded debt to EBITDA ratio, or LIBOR plus a margin of 2.25% to 3.25% depending
on our consolidated funded debt to EBITDA ratio. As of March 31, 2002, there was
no availability under the NCO Portfolio sub-facility.

     During February 2002, we entered into two interest rate swap agreements,
which qualified as cash flow hedges, to fix LIBOR at 2.8225% on an aggregate
amount of $102 million of the variable-rate debt outstanding under the revolving
credit facility. The aggregate notional amount of the interest rate swap
agreements is subject to quarterly reductions that will reduce the aggregate
notional amount to $62 million by maturity in September 2003.

     Borrowings under the revolving credit facility are collateralized by
substantially all of our assets, including the common stock of NCO Portfolio,
and certain assets of NCO Portfolio. The balance under the revolving credit
facility will 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, 2002, we were in compliance with
all required financial covenants.

     Convertible Notes. In April 2001, we 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 our common stock at
an initial conversion price of $32.92 per share. We used the $121.3 million of
net proceeds from this offering to repay debt under our 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.

     Off-Balance Sheet Arrangements

     NCO Portfolio owns a 100% retained residual interest in an investment in
securitization, Creditrust SPV 98-2, LLC, which was acquired as part of the
merger with Creditrust. This transaction qualified for gain on sale accounting
when the purchased accounts receivable were originally securitized. This
securitization issued a note that is due in January 2004 and had a balance of
$4.7 million as of March 31, 2002. The retained interest represents the present
value of the residual interest in the securitization using discounted future
cash flows after the securitization note is fully repaid plus a cash reserve. As
of March 31, 2002, the investment in securitization was $7.3 million, composed
of $4.0 million in present value of discounted residual cash flows plus $3.3
million in cash reserves. The investment accrues non-cash income at a rate of 8%
per annum on the residual cash flow component only. The income earned increases
the investment balance until the securitization note has been repaid, after
which the collections are split between income and amortization of the
investment in securitization based on the discounted cash flows. NCO Portfolio
recorded $28,000 of income on this investment for the three months ended March
31, 2002. The cash reserves of $3.3 million plus the first $1.3 million in
residual cash collections received after the securitization note has been repaid
have been pledged as collateral against another securitized note.

     NCO Portfolio has a 50% ownership interest in a joint venture,
InoVision-MEDCLR NCOP Ventures, LLC ("Joint Venture") with IMNV Holdings, LLC
("IMNV"). The Joint Venture was set up in 2001 to purchase utility, medical and
various other small balance accounts receivable and is accounted for using the
equity method of accounting. As of March 31, 2002, NCO Portfolio and IMNV each


                                      -18-

<PAGE>


had an investment of $854,000 in the Joint Venture for the purchase of accounts
receivable. Included in the Statement of Income, in "interest and investment
income," was $83,000 representing NCO Portfolio's 50% share of operating income
from this unconsolidated subsidiary for the three months ended March 31, 2002.
The Joint Venture has access to capital through a specialty finance lender who,
at its option, lends 90% of the value of the purchased accounts receivable to
the Joint Venture. The debt is cross-collateralized by all static pools in which
the lender participates, and is non-recourse to NCO Portfolio.

     Stock Repurchase Plan

     In September 2001, our Board of Directors and our lender group authorized
the repurchase of up to $15.0 million of our currently issued common stock,
subject to a limit of one million shares. The share purchases were to be made
from time to time, depending on market conditions, until March 31, 2002. Shares
were to be purchased either in the open market or through privately negotiated
transactions. The repurchase program did not obligate us to acquire any specific
number of shares and could be discontinued at any time. We did not repurchase
any shares under the stock repurchase plan.

     Market Risk

     We are 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 material
change in these rates could adversely affect our operating results and cash
flows. A 25 basis-point increase in interest rates could increase our annual
interest expense by $250,000 for each $100 million of variable debt outstanding
for the entire year. We employ 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.

     Goodwill

     The Company's balance sheet includes amounts designated as "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.

     As of March 31, 2002, the Company's balance sheet included goodwill that
represented approximately 55.3% of total assets and 120.6% of shareholders'
equity.

     Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standard No. 142, "Goodwill and Other Intangibles" ("SFAS 142"). As a
result of adopting SFAS 142, the Company no longer amortizes goodwill. Goodwill
must be tested at least annually for impairment, including an initial test
completed within six months of adopting SFAS 142. The test for impairment uses 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 Company is currently in the process of determining if there are
any impairment charges attributable to the adoption of SFAS 142. However, the
Company does not expect to incur an impairment charge based on its preliminary
valuations. Any impairment charge incurred in connection with the adoption of
SFAS 142 would be classified as an effect of a change in accounting principle.

     Impact of Recently Issued and Proposed Accounting Pronouncements

     During 2001, the Accounting Staff Executive Committee approved an exposure
draft on a proposed Statement of Position, "Accounting for Discounts Related to
Credit Quality" ("SOP"). The proposed SOP would limit the revenue that may be
accrued to the excess of the estimate of expected future cash flows over a
static pool's initial cost of accounts receivable acquired. The proposed SOP
would require that the excess of the contractual cash flows over expected future
cash flows not be recognized as an adjustment of revenue, expense or on the
balance sheet. The proposed SOP would freeze the internal rate of return ("IRR")
originally estimated when the accounts receivable are purchased for subsequent
impairment testing. Rather than lower the estimated IRR if the original
collection estimates are not received, the carrying value of a static pool would
be written down to maintain the original IRR. Increases in expected future cash
flows would be recognized prospectively through adjustment of the IRR over a
static pool's remaining life. The exposure draft provides that previously issued
annual financial statements would not need to be restated. Until final issuance
of this SOP, we cannot ascertain its effect on our reporting.


                                      -19-

<PAGE>



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.































                                      -20-

<PAGE>


Part II.  Other Information

Item 1.  Legal Proceedings
         -----------------

         The discussions concerning the Company's litigation with the landlord
     of its Fort Washington facilities and the environmental litigation
     involving its subsidiary AssetCare, Inc. contained in "Management's
     Discussion and Analysis of Financial Condition and Results of Operations"
     are incorporated herein by reference.

         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
         ---------------------

         In January 2002, the Company issued 55,267 shares of common stock upon
     the cashless exercise of a warrant to purchase 375,000 shares issued in
     February 1997 as part of the consideration for the acquisition of the
     Collection Division of CRW Financial, Inc. The shares were issued without
     registration under the Securities Act pursuant to the exemption under
     Section 3(a)(9) of the Securities Act.

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

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

     (a)  Exhibits

          10.1   Amended and Restated Note Receivable, as of April 1, 2002, from
                 TRC Holdings, Inc.

          10.2   Amended Asset Purchase Agreement, as of April 1, 2002, among
                 TRC Holdings, Inc., and NCO Group, Inc. and its wholly owned
                 subsidiary, NCO Teleservices, Inc.

          10.3   Amendment dated as of January 30, 2002 between the Company and
                 UBS AG, London Branch to Non-Transferable Common Stock Purchase
                 Warrant Dated February 2, 1997.

          99.1   Consolidating Schedule

    (b)   Reports on Form 8-K

          Date of Report    Item Reported
          --------------    -------------

          2/27/02           Item 5 - Press release and conference call
                                     transcript from the earnings release for
                                     the fourth quarter of 2001



                                      -21-

<PAGE>

                                   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 14, 2002                By:  /s/ Michael J. Barrist
                                       ----------------------
                                           Michael J. Barrist
                                           Chairman of the Board, President
                                           and Chief Executive Officer
                                           (principal executive officer)



Date: May 14, 2002                By:  /s/ Steven L. Winokur
                                       ---------------------
                                           Steven L. Winokur
                                           Executive Vice President, Finance,
                                           Chief Financial Officer and
                                           Treasurer








                                      -22-