<PAGE>   1

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                                WASHINGTON, D.C.

                                    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, 1998

     [ ] 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: 0-20941

                         PRECISION RESPONSE CORPORATION
             (Exact name of Registrant as specified in its charter)

                  FLORIDA                                 59-2194806
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                 Identification No.)


                  1505 N.W. 167TH STREET, MIAMI, FLORIDA 33169
               (Address of principal executive offices)(Zip code)

                                 (305) 626-4600
              (Registrant's telephone number, including area code)

         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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]

         ON MAY 8, 1998, THE REGISTRANT HAD 21,549,000 OUTSTANDING SHARES OF
COMMON STOCK, $0.01 PAR VALUE.


<PAGE>   2


                 PRECISION RESPONSE CORPORATION AND SUBSIDIARIES

                                      INDEX


                                     PART I.

<TABLE>
<CAPTION>

ITEM NO.                                                                                                    PAGE(S)
--------                                                                                                    -------

<S>                                                                                                              <C>
      1.            FINANCIAL STATEMENTS

                    Consolidated Balance Sheets -
                         March 31, 1998 (Unaudited) and December 31, 1997.........................................3

                    Consolidated Statements of Operations (Unaudited) -
                         Three months ended March 31, 1998 and 1997...............................................4

                    Consolidated Statements of Cash Flows (Unaudited) -
                         Three months ended March 31, 1998 and 1997...............................................5

                    Notes to Consolidated Financial Statements..................................................6-9

      2.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                         AND RESULTS OF OPERATIONS............................................................10-16

                                                     PART II.

      2.            CHANGES IN SECURITIES AND USE OF PROCEEDS....................................................17

      6.            EXHIBITS AND REPORTS ON FORM 8-K.............................................................17

                    Signatures...................................................................................18
</TABLE>









                                       2


<PAGE>   3


                          PART I. FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                 PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                         MARCH 31, 1998 DECEMBER 31,
                                                           (UNAUDITED)     1997
                                                           ----------    ---------
<S>                                                         <C>          <C>      
ASSETS
Current assets:
    Cash and cash equivalents ...........................   $      --    $  11,080
    Restricted cash .....................................       3,468           --
    Accounts receivable, net of allowances
        of $4,232 and $2,864, respectively ..............      39,907       31,289
    Income taxes receivable .............................       4,229        6,970
    Deferred income taxes ...............................       2,796        2,796
    Prepaid expenses and other current assets ...........       6,636        5,866
                                                            ---------    ---------
            Total current assets ........................      57,036       58,001
Property and equipment, net .............................      63,348       63,301
Deferred income taxes ...................................       3,361        3,589
Other assets ............................................       2,148        2,522
                                                            ---------    ---------
            Total assets ................................   $ 125,893    $ 127,413
                                                            =========    =========

LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities:
    Current maturities of long-term obligations .........   $   2,541    $   2,393
    Accounts payable ....................................      10,847       13,725
    Restructuring accrual ...............................       1,592        2,863
    Accrued compensation expenses .......................       3,772        5,101
    Other accrued expenses ..............................       5,254        6,444
    Customer deposits ...................................       2,994        3,954
                                                            ---------    ---------
            Total current liabilities ...................      27,000       34,480
Long-term obligations, less current maturities ..........       8,996        3,493
                                                            ---------    ---------
            Total liabilities ...........................      35,996       37,973
                                                            ---------    ---------

Commitments and contingencies ...........................          --           --

Shareholders' equity:

    Common stock, $0.01 par value; 100,000,000 shares
        authorized; 21,549,000 and 21,542,000 issued
        and outstanding, respectively ...................         215          215
    Additional paid-in capital ..........................      97,179       97,179
    Accumulated deficit .................................      (7,474)      (7,846)
    Unearned compensation ...............................         (23)        (108)
                                                            ---------    ---------
            Total shareholders' equity ..................      89,897       89,440
                                                            ---------    ---------
            Total liabilities and shareholders' equity ..   $ 125,893    $ 127,413
                                                            =========    =========
</TABLE>

       The accompanying notes are an integral part of these consolidated
                             financial statements.



                                       3
<PAGE>   4


                 PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

                                                        FOR THE THREE MONTHS
                                                           ENDED MARCH 31,
                                                       ----------------------
                                                          1998        1997
                                                       ----------  ----------
REVENUES ............................................   $ 40,535    $ 38,015
                                                        --------    --------
OPERATING EXPENSES:
    Cost of services ................................     36,510      27,497
    Selling, general and administrative expenses ....      3,320       5,203
                                                        --------    --------
            Total operating expenses ................     39,830      32,700
                                                        --------    --------
            Operating income ........................        705       5,315

OTHER INCOME (EXPENSE):
    Interest income .................................         63         345
    Interest expense ................................       (167)       (173)
                                                        --------    --------
            INCOME BEFORE INCOME TAXES ..............        601       5,487
Income tax provision ................................        228       2,195
                                                        --------    --------
            NET INCOME ..............................   $    373    $  3,292
                                                        ========    ========

NET INCOME PER COMMON SHARE:

    Basic ...........................................   $   0.02    $   0.16
                                                        ========    ========
    Diluted .........................................   $   0.02    $   0.16
                                                        ========    ========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

    Basic ...........................................     21,545      21,024
                                                        ========    ========
    Diluted .........................................     21,943      21,186
                                                        ========    ========

















       The accompanying notes are an integral part of these consolidated
                             financial statements.



                                       4
<PAGE>   5


                 PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                     FOR THE THREE MONTHS ENDED
                                                                              MARCH 31,
                                                                     --------------------------
                                                                         1998         1997
                                                                     -----------   ---------
<S>                                                                     <C>         <C>     
Operating activities:
    Net income ......................................................   $    373    $  3,292
    Adjustments to reconcile net income to net cash used
        in operating activities:
        Depreciation and amortization ...............................      3,164       2,078
        Provision for bad debts and sales allowances ................      2,595         535
        Amortization of unearned compensation .......................         85          86
        Deferred income tax expense .................................        228         606
    Changes in operating assets and liabilities:
        Accounts receivable .........................................    (11,213)     (7,716)
        Income taxes receivable .....................................      2,741          --
        Prepaid expenses and other current assets ...................       (770)       (530)
        Other assets ................................................         79         609
        Accounts payable ............................................     (2,176)     (1,378)
        Restructuring accrual .......................................     (1,271)         --
        Accrued compensation expenses ...............................     (1,329)     (1,495)
        Income taxes payable ........................................         --      (1,645)
        Other accrued expenses ......................................     (1,191)      1,415
        Customer deposits ...........................................       (960)       (601)
                                                                        --------    --------
            Net cash used in operating activities ...................     (9,645)     (4,744)
                                                                        --------    --------

Investing activities:
    Purchases of property and equipment .............................     (2,916)    (19,148)
    Increase in restricted cash .....................................     (3,468)         --
                                                                        --------    --------
            Net cash used in investing activities ...................     (6,384)    (19,148)
                                                                        --------    --------

Financing activities:
    Net proceeds from revolving credit loan .........................      5,716          --
    Payments on long-term obligations ...............................       (767)       (664)
    Net proceeds from issuance of common stock ......................         --      49,290
                                                                        --------    --------
            Net cash provided by financing activities ...............      4,949      48,626
                                                                        --------    --------

Net (decrease) increase in cash and cash equivalents ................    (11,080)     24,734

Cash and cash equivalents at beginning of period ....................     11,080       7,262
                                                                        --------    --------
Cash and cash equivalents at end of period ..........................   $     --    $ 31,996
                                                                        ========    ========
Supplemental schedule of non-cash investing and financing activities:
        Installment loans and capital lease obligations .............   $     --    $  1,687
                                                                        ========    ========
</TABLE>


       The accompanying notes are an integral part of these consolidated
                             financial statements.



                                       5


<PAGE>   6


                 PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  OPERATIONS AND BASIS OF PRESENTATION

         Precision Response Corporation and subsidiaries (the "Company") is a
full-service provider of teleservicing, database marketing and management, and
fulfillment services on an outsourced and cosourced basis to large corporations.

         The accompanying unaudited consolidated financial statements were
prepared in accordance with generally accepted accounting principles for interim
financial information and the rules and regulations of the Securities and
Exchange Commission (the "SEC"). The unaudited consolidated interim financial
information reflects all adjustments, which are, in the opinion of management,
necessary for a fair presentation of the interim unaudited consolidated
financial statements. The balance sheet at December 31, 1997 included herein has
been derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. These interim results
of operations for the three months ended March 31, 1998 and 1997 are not
necessarily indicative of results that may be expected for the full fiscal
years. The unaudited consolidated financial statements contained herein should
be read in conjunction with the audited financial statements and notes thereto
contained in the Company's annual report on Form 10-K for the fiscal year ended
December 31, 1997 filed with the SEC on March 31, 1998.

2.  REVENUES

         Revenues for the three months ended March 31, 1998 were comprised of
the Company's traditional teleservicing, database marketing and management and
fulfillment services. During the three months ended March 31, 1997, $32.8
million of revenues were comprised of the Company's traditional teleservicing,
database marketing and management and fulfillment services and revenues of $5.2
million were generated from the transfer of teleservicing-based software
applications. Such transfers of existing teleservicing-based software
applications were made in lieu of developing new but functionally similar
applications over time for these customers. These transfers produced
substantially higher margins than would have been the case had the Company
developed unique applications for these customers.

3.  EARNINGS PER SHARE

         The following reconciles the numerators and denominators of the basic
and diluted earnings per share ("EPS") computations (in thousands, except per
share data):
<TABLE>
<CAPTION>

                                                               FOR THE THREE MONTHS ENDED MARCH 31,
                                                     ----------------------------------------------------------
                                                                 1998                         1997
                                                     ----------------------------- ----------------------------
                                                        NET                 PER      NET                 PER
                                                      INCOME     SHARES    SHARE    INCOME    SHARES    SHARE
                                                     ----------------------------------------------------------
<S>                                                 <C>          <C>       <C>       <C>       <C>     <C>    
      BASIC EPS
        Income available to common
          shareholders                                 $  373      21,545   $ 0.02    $ 3,292   21,024  $  0.16

      EFFECT OF DILUTIVE SECURITIES
        Stock options                                      --         398       --         --      162       --
                                                       ------   ---------   ------    -------   ------  -------
      DILUTED EPS
        Income available to common shareholders    
          and assumed exercises                        $  373      21,943   $ 0.02    $ 3,292   21,186  $  0.16
                                                       ======   =========   ======    =======   ======  =======
</TABLE>




                                       6

<PAGE>   7
                 PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




4.  RESTRICTED CASH

         In connection with its development plans for a future call center in
Sunrise, Florida, the Company is currently in negotiations with the primary
lender on its Credit Facility (see Note 7 below) to secure a mortgage in order
to purchase the property (land and existing building). As part of the
termination of prior negotiations with a different financial institution, the
Company was required to place approximately $3.5 million in escrow to secure
its obligation to purchase the property for the outstanding balance of the
mortgage on the property which it had previously guaranteed. The Company
has until June 2, 1998 to finalize its negotiations and secure the mortgage,
which, upon successful completion, will release the escrow funds back to the
Company. However, should the Company not secure a mortgage by June 2, 1998, the
funds in escrow will be utilized to purchase the property outright from the
other financial institution.

5.  PROPERTY AND EQUIPMENT

         Property and equipment is comprised of both owned property and property
under capital leases, the details of which are set forth below (in thousands):
<TABLE>
<CAPTION>

                                          MARCH 31, 1998               DECEMBER 31, 1997
                              ------------------------------   ---------------------------------
                             OWNED      LEASED      TOTAL       OWNED       LEASED      TOTAL
                           ----------  ----------  ---------   ---------   --------    ---------
<S>                        <C>         <C>         <C>         <C>         <C>         <C>     
Telecommunications
    equipment ..........   $ 20,354    $  5,134    $ 25,488    $ 20,823    $  4,500    $ 25,323
Computer equipment .....     28,692       5,017      33,709      28,605       5,017      33,622
Leasehold improvements .     12,166          --      12,166      11,843          --      11,843

Furniture and fixtures .      7,944         242       8,186       7,706         242       7,948
Vehicles ...............        239          70         309         239          70         309
                           --------    --------    --------    --------    --------    --------
Depreciable assets .....     69,395      10,463      79,858      69,216       9,829      79,045
Development in process .      2,560          --       2,560         457          --         457
                           --------    --------    --------    --------    --------    --------
                             71,955      10,463      82,418      69,673       9,829      79,502
Accumulated depreciation
    and amortization ...    (16,045)     (3,025)    (19,070)    (13,631)     (2,570)    (16,201)
                           --------    --------    --------    --------    --------    --------
                           $ 55,910    $  7,438    $ 63,348    $ 56,042    $  7,259    $ 63,301
                           ========    ========    ========    ========    ========    ========
</TABLE>

         During the first quarter of 1998, the Company adopted Statement of
Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR
OBTAINED FOR INTERNAL USE ("SOP 98-1"). Under the provisions of SOP 98-1, the
Company began capitalizing certain costs incurred in the enhancement of internal
financial and operating systems associated with its initiative to implement an
Enterprise Resource Planning solution, which the Company designated the PRISM
Project. Costs incurred during the application development stage of the PRISM
Project, consisting principally of software purchased from Oracle Corporation
and, to a lesser extent, outside consultant fees and payroll and payroll-related
costs for employees directly associated with the PRISM Project, were $1,685,000
as of March 31, 1998 and are included in Development in Process in the above
table.

         The PRISM Project will be implemented in phases with certain systems or
modules becoming functional at different points in the project timeframe. The
first modules of the PRISM Project are currently projected to be ready for use
by the fourth quarter of 1998 with full implementation of all aspects of the
PRISM Project expected by the third quarter of 1999. As each module is
implemented, all associated capitalized costs will begin to be amortized on a
straight-line basis over their estimated useful life.



                                       7
<PAGE>   8
                 PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






6.  RESTRUCTURING AND OTHER NON-RECURRING SPECIAL CHARGES

         During the third quarter of 1997, the Company initiated a restructuring
and cost savings plan. As a result, the Company recorded a pre-tax non-recurring
special charge to earnings of approximately $26.2 million in the third quarter
of 1997 with an after-tax impact of $15.7 million. A portion of the
non-recurring special charge was an accrual of costs related to severance and
lease obligations connected with the Company's plan to reduce overhead and
consolidate administrative facilities.

         As of March 31, 1998, the Company had terminated designated employees
and reorganized its operational and administrative management structure in
connection with the restructuring and cost savings plan. The Company had also
initiated the relocation and consolidation of administrative office space into
unused space at an existing facility, which will be completed during the second
quarter of 1998. The Company also continued to explore opportunities to divest
unused facilities during the three months ended March 31, 1998. This included
termination of a lease for an unused facility whose landlord is a corporation
that is wholly-owned by the Company's chairman and chief executive officer. In
consideration of a termination payment of approximately $82,000 on February 28,
1998, the landlord relieved the Company of its future lease commitments totaling
approximately $161,000. The Company believes that the amount of the termination
payment was no less favorable to it than could have been negotiated from an
unaffiliated party.

         The following table sets forth the details and the activity in the
restructuring accrual during the three months ended March 31, 1998 (in
thousands):
<TABLE>
<CAPTION>

                                              ACCRUAL                                  ACCRUAL
                                             BALANCE AT                               BALANCE AT    
                                             DECEMBER 31,                              MARCH 31,
                                                1997             EXPENDITURES            1998
                                           ---------------    -----------------   -----------------
<S>                                                <C>          <C>                    <C>       
Severance and other employee
    costs                                  $       482          $       (242)          $      240
Closure and consolidation of facilities
    and related exit costs                       2,381                (1,029)               1,352
                                           ---------------     ---------------    ------------------
Total                                      $     2,863          $     (1,271)          $    1,592
                                           ===============     ===============    ==================

</TABLE>

7.  CREDIT FACILITY AND LONG-TERM DEBT

         On March 2, 1998, the Company entered into a new three-year, $25.0
million revolving credit facility (the "Credit Facility"), replacing its then
existing $15.0 million revolving credit facility. The Company may borrow up to
80% of eligible accounts receivable. The Credit Facility is collateralized by
all of the Company's owned and hereafter acquired assets. The Credit Facility
accrues interest at the Company's option at (i) the greater of the prime rate or
the federal funds rate plus .50% or (ii) the LIBOR rate plus a specified
percentage (1.25% to 1.75%) based upon the ratio of funded debt to EBITDA. The
Company pays a fee of between 0.1875% and 0.25% per annum on unused commitments
under the Credit Facility based upon the ratio of funded debt to EBITDA. The
Company is required, under the terms of the Credit Facility, to maintain certain
financial covenants and ratios, including minimum tangible net worth and funded
debt to EBITDA and funded debt to capitalization ratios, to limit capital
expenditures and additional indebtedness and is restricted, among other things,
with respect to the declaration and payment of dividends, redemptions and
acquisitions. At March 31, 1998, the outstanding balance of the Credit Facility
was $5.7 million and is included in Long-term obligations, less 



                                       8

<PAGE>   9
                 PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




current maturities in the accompanying consolidated balance sheet. At March 31,
1998, the available balance under the terms of the Credit Facility was $19.3
million.

8.  COMMITMENTS AND CONTINGENCIES

         On or about February 25, 1998, a class action lawsuit, captioned NATHAN
S. DAVIS V. PRECISION RESPONSE CORPORATION; MARK J. GORDON; PAUL M. O'HARA;
DAVID L. EPSTEIN; JAMES F. MURRAY; RICHARD D. MONDRE; BERNARD J. KOSAR, JR.;
CHRISTIAN MUSTAD; NEIL A. NATKOW; GOLDMAN SACHS & CO.; DAIN BOSWORTH INC.;
MERRILL LYNCH & CO.; AND FURMAN SELZ LLC (Case No. 98-0334 CIV - Middlebrooks),
was filed in the United States District Court for the Southern District of
Florida. The suit alleges that the defendants violated Section 11 of the
Securities Act of 1933, as amended (the "Securities Act"), by allegedly making
misrepresentations and omissions of material facts in the prospectus prepared in
connection with the second equity offering of 4,740,000 shares of common stock
at an offering price of $35.125 per share completed on February 4, 1997 by the
Company and certain selling shareholders (the "Second Equity Offering"). The
alleged misrepresentations and omissions concern, among other matters, the
failure to include the financial results of the Company for the three months
ended December 31, 1996 and the omission to disclose the existence of a
cost-cutting program that had been allegedly initiated prior to the Second
Equity Offering by the Company's largest client and main source of revenue. The
suit also alleges that the individual defendants who were officers of the
Company violated Section 15 of the Securities Act based on the same alleged
conduct described above.

         In addition to seeking class certification, the plaintiff seeks class
monetary damages for himself and persons who purchased the Company's common
stock on, or traceable to, the Second Equity Offering or between January 29,
1997 through and inclusive of July 10, 1997 (excluding the defendants and the
immediate family members of each of the individual defendants and their
respective legal representatives, heirs, successors and assigns), costs and
expenses and appropriate further relief.

         The Company believes that this lawsuit is without merit and intends to
contest the lawsuit vigorously. No provision has been reflected in the
accompanying financial statements since management is unable, at this time, to
predict the outcome, including legal defense costs, of this matter.











                                       9


<PAGE>   10



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this report.

OVERVIEW AND BASIS OF PRESENTATION

         The Company currently offers its customers single source, integrated
solutions for their teleservicing, database marketing and management and
fulfillment needs. The Company's primary source of revenue is teleservicing
activities which are comprised of both inbound (customer-initiated) and outbound
(Company-initiated) calls. Teleservicing revenues are generally earned for
providing services on a rate per hour basis. However, the Company also generates
teleservicing revenues under incentive based compensation agreements whereby the
amount of revenue earned correlates to the achievement of established targets.
The majority of teleservicing revenues are derived from inbound calls, which
represented approximately 77% of teleservicing revenues and 56% of total
revenues for the three months ended March 31, 1998 as compared to approximately
91% of teleservicing revenues and 63% of total revenues for the three months
ended March 31, 1997. Inbound teleservicing consists mostly of longer term
customer care and customer service programs which tend to be more predictable.
Outbound teleservicing and, in particular, incentive based outbound
teleservicing, is driven by marketing programs which change frequently relative
to inbound programs. As such, outbound teleservicing is subject to greater
variation in operating results (see "Fluctuations in Quarterly Results" below).

         Information services provided by the database marketing and management
group typically include the design, development and implementation of software
applications for use in a particular client program and the integration of the
Company's systems with those of its clients. The Company's core business is
providing teleservices on an outsourced basis to its clients. However, on
occasion, clients prefer to "cosource" certain programs whereby the Company and
the client will jointly manage programs, with the Company making available to
the client certain software, systems and services.

         Fulfillment services include high-speed laser and electronic document
printing, lettershop and mechanical inserting, sorting, packaging and mailing
capabilities (all of which are generally directly related to teleservicing
activities being provided to clients). Fulfillment services are an important
element in the Company's overall marketing strategy of providing its customers
with a "one-stop" solution to their telephone-based customer service and direct
marketing needs.









                                       10



<PAGE>   11


RESULTS OF OPERATIONS

         The following table sets forth certain statements of operations data,
as a percentage of revenues, for the periods indicated:
<TABLE>
<CAPTION>

                                                             FOR THE THREE MONTHS
                                                                ENDED MARCH 31,
                                                           --------------------------
                                                              1998           1997
                                                           -----------    -----------

<S>                                                          <C>             <C>   
SELECTED OPERATING RESULTS:
    Revenues..........................................       100.0%          100.0%
    Cost of services..................................        90.1            72.3
                                                           -----------    -----------
            Gross margin..............................         9.9            27.7
    Selling, general and administrative expenses......         8.2            13.7
                                                           -----------    -----------
            Operating income..........................         1.7%           14.0%
                                                           ===========    ===========
</TABLE>


REVENUES

         Revenues for the three months ended March 31, 1998 were $40.5 million,
an increase of $2.5 million, or 6.6%, over the comparable period of the prior
year. The principal components of revenues are teleservicing activities,
including account services (representing 72.5% and 71.5% of revenues for the
three months ended March 31, 1998 and 1997, respectively), information services
(representing 8.9% and 24.2% of revenues for the three months ended March 31,
1998 and 1997, respectively) and fulfillment services (representing 18.6% and
4.3% of revenues for the three months ended March 31, 1998 and 1997,
respectively). The Company had eight call centers and approximately 4,500 and
4,400 workstations in operation as of March 31, 1998 and 1997, respectively.
However, as of March 31, 1998 and 1997, approximately 1,000 and 940
workstations, respectively, were not being utilized to generate revenues. The
Company is attempting to accelerate the award of additional work from existing
clients and pursuing new client opportunities in order to expedite the
utilization of these workstations for the remainder of 1998. During the three
months ended March 31, 1998, the Company generated new business from a number of
key accounts, including a new technical support help desk for its largest
client. Additionally, the Company has generated new client opportunities during
the first four months of 1998, including contracts to provide customer care
services for both a major national cellular telephone company and a leader in
the financial services industry.

         Teleservicing activities, including account services, accounted for the
majority of the revenue growth during the three months ended March 31, 1998.
Revenues from teleservicing activities for the three months ended March 31, 1998
were $29.4 million, an increase of $2.2 million, or 8.1%, over the comparable
period of the prior year. Major factors contributing to the increase in
teleservicing revenues were the addition of several new programs for existing
clients as well as the addition of new clients, principally in the financial
services and telecommunications service and equipment industries. Overall, new
client business accounted for $13.9 million, or 34.3%, of total revenues for the
first three months of 1998. Revenues from the Company's largest client accounted
for 35.8% of total revenues for the three months ended March 31, 1998 down from
46.3% for the first three months of 1997. Generally, teleservicing revenues are
earned on a rate per hour basis. However, during the three months ended March
31, 1998, approximately 17.3% of total revenues were earned under incentive
based compensation agreements.

         Revenues from information services for the three months ended March 31,
1998 were $3.6 million, a decrease of $5.6 million, or 60.9%, compared to the
same period of the prior year. This 




                                       11


<PAGE>   12

decrease was primarily attributable to the transfers of teleservicing-based
application software during the first quarter of 1997 totaling $5.2 million
compared with no such transfers for the three months ended March 31, 1998. Such
transfers produce substantially higher margins than other information services
(which involve the development of unique, individual customer-based
applications). The Company intends to continue to make available such
teleservicing-based application software for transfer to those clients that
prefer to cosource with the Company. There is no assurance that any clients will
desire to cosource, thereby effecting any such transfers in the future. Due to
the substantially higher margins on these transfers, the Company's operating
results can be significantly impacted based upon the Company effecting these
transactions in any period.

         Revenues from fulfillment services for the three months ended March 31,
1998 were $7.5 million, an increase of $5.9 million, or 368.8%, compared to the
same period of the prior year. This increase for the first quarter of 1998 is
reflective of fulfillment services obtained in connection with teleservicing
services provided to a new client in the telecommunications service and
equipment industries.

COST OF SERVICES

         Cost of services generally include all direct and some indirect costs
incurred in connection with the Company's revenue-producing departments,
including, but not limited to, labor, telephone expenses directly related to
revenue-generating activities, equipment under operating leases used in the call
centers and fulfillment facility, direct overhead for all such operational
facilities, such as rent, security and insurance, and depreciation and
amortization of property and equipment used in operations. Cost of services
increased by $9.0 million, or 32.8%, for the three months ended March 31, 1998
as compared to the same period of the prior year, principally as a result of the
growth in operations.

         The increase in cost of services, as a percentage of revenues, from
72.3% for the three months ended March 31, 1997 to 90.1% for the three months
ended March 31, 1998 was primarily attributable to the Company's expansion of
its infrastructure in 1997 and the resultant excess capacity together with lower
than expected yield on incentive based programs. The total number of
workstations, as of March 31, 1998, increased by 100 workstations compared to
the total as of March 31, 1997. However, approximately 940 workstations were
added in a call center that opened at the end of March 1997 primarily in
anticipation of providing increased services to the Company's largest client.
Accordingly, there were no cost of services incurred by this new call center,
and its corresponding workstations, for the three months ended March 31, 1997.
This increase in services did not materialize leaving the Company with excess
capacity and a higher than desired fixed cost structure. Additionally, the
Company's largest client instituted an across-the-board price reduction in the
third quarter of 1997 which remained in effect during the three months ended
March 31, 1998. A key component to enable the Company to reduce cost of services
as a percentage of revenue and achieve its gross margin percentage targets in
the future will be the more efficient utilization of its call center capacities.
Attainment of these goals at the Company's current capacity levels will likely
only be achieved by increasing revenues.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses ("SG&A") generally include
the costs of central services the Company provides to support and manage its
operations, including senior management, sales and marketing, human resources,
as well as finance and accounting functions. SG&A decreased $1.9 million, or
36.2%, for the three months ended March 31, 1998 as compared to the same period
of the prior year. This decrease is indicative of the Company's successful
implementation of its cost cutting initiatives associated with the restructuring
plan announced in the third quarter of 1997 along 



                                       12


<PAGE>   13

with management's efforts to postpone, or temporarily reduce, non-revenue
producing expenditures, whenever possible. While certain of these cost cutting
initiatives should continue to benefit future periods, the Company does not
expect that it can continue postponement and reduction of such non-revenue
producing expenditures in future periods.

         As a percentage of revenues, SG&A decreased from 13.7% for the three
months ended March 31, 1997 to 8.2% for the three months ended March 31, 1998.
This decrease is a result of increased revenues during the first quarter of 1998
coupled with the cost cutting initiatives and the postponement or reduction of
expenditures.

INTEREST, NET

         Interest income, net of interest expense, was $172,000 for the three
months ended March 31, 1997 compared to net interest expense of $104,000 for the
comparable period of the current year. During the first quarter of 1997, the
Company generated interest income from the investment of a portion of the net
proceeds from the Second Equity Offering, while during the first quarter of
1998, the Company incurred interest charges from borrowings on its Credit
Facility.

NET INCOME AND NET INCOME PER SHARE

         For the three months ended March 31, 1998, net income was $373,000
compared to net income of $3.3 million for the comparable period of 1997. Net
income per share for the three months ended March 31, 1998 and 1997 was $0.02
and $0.16, respectively.

LIQUIDITY AND CAPITAL RESOURCES

         During the first quarter of 1998, the Company funded its operations and
capital expenditures primarily through cash flows from operations, bank
borrowings and capital lease financing. During the first quarter of 1997, the
Company obtained additional liquidity from the net proceeds of the Second Equity
Offering.

         On March 2, 1998, the Company entered into a new three-year, $25.0
million revolving credit facility (the "Credit Facility"), replacing its then
existing $15.0 million revolving credit facility. The Company may borrow up to
80% of eligible accounts receivable. The Credit Facility is collateralized by
all the Company's owned and hereafter acquired assets. The Credit Facility
accrues interest at the Company's option at (i) the greater of the prime rate or
the federal funds rate plus .50% or (ii) the LIBOR rate plus a specified
percentage (1.25% to 1.75%) based upon the ratio of funded debt to EBITDA. The
Company pays a fee of between 0.1875% and 0.25% per annum on unused commitments
under the Credit Facility based upon the ratio of funded debt to EBITDA. The
Company is required, under the terms of the Credit Facility, to maintain certain
financial covenants and ratios, including minimum tangible net worth and funded
debt to EBITDA and funded debt to capitalization ratios, to limit capital
expenditures and additional indebtedness and is restricted, among other things,
with respect to the declaration and payment of dividends, redemptions and
acquisitions. At March 31, 1998, the outstanding balance of the Credit Facility
was $5.7 million.

         At March 31, 1998, the Company had no unrestricted cash and cash 
equivalents and total long-term obligations of $11.5 million. Net cash used in
operating activities was $9.6 million and $4.7 million for the three months
ended March 31, 1998 and 1997, respectively. The $4.9 million increase in net
cash used in operating activities during the first three months of 1998 was
primarily attributable to the reduction in net income before non-cash charges
(depreciation and amortization, provision for bad debts 


                                       13

<PAGE>   14

and sales allowances and deferred taxes) and the Company's investment in
primary working capital items (accounts receivable and accounts payable).

         Net cash used in investing activities was $6.4 million and $19.1
million for the three months ended March 31, 1998 and 1997, respectively.
Investing activities for the three months ended March 31, 1997 were principally
for capital expenditures associated with the increase of 1,180 workstations
during the first quarter of 1997. Although, the Company changed the composition
of its call centers during 1997 as part of its restructuring plan announced in
the third quarter of last year, workstation capacity was approximately 4,500 and
4,400 workstations as of March 31, 1998 and 1997, respectively. Investing
activities for the three months ended March 31, 1998 included both capital
expenditures (see below) and the placement of $3.5 million into escrow for a
property in Sunrise, Florida. In connection with its development plans for this
future call center, the Company is currently in negotiations with the primary
lender on its Credit Facility to secure a mortgage in order to purchase the
property (land and existing building). As part of the termination of prior
negotiations with a different financial institution, the Company was required to
place approximately $3.5 million in escrow to secure its obligation to purchase
the property for the outstanding balance of the mortgage on the property which
it had previously guaranteed. The Company has until June 2, 1998 to finalize its
negotiations and secure the mortgage, which, upon successful completion, will
release the escrow funds back to the Company. However, should the Company not
secure a mortgage by June 2, 1998, the funds in escrow will be utilized to
purchase the property outright from the other financial institution.

         Capital expenditures, including the capitalized value of property and
equipment, decreased from $20.8 million for the three months ended March 31,
1997 to $2.9 million for the same period of the current year. Capital
expenditures for the three months ended March 31, 1997 were primarily for
telecommunications and computer equipment associated with the increased
workstation capacity at the time. As discussed above, the Company is currently
in a situation of excess capacity and, therefore, absent the award of any
significant new business, has no immediate plans for call center/workstation
expansion. Capital expenditures for 1998 are expected to be primarily for
internal financial and operating system enhancements. During the first quarter
of 1998, the Company began its implementation of an Enterprise Resource Planning
("ERP") solution, which will allow for all internal systems (including those
related to billing, payroll, client profitability management, human resource
management and cash management) to be fully integrated into a common platform.
The Company has designated its ERP implementation as the PRISM Project. The
PRISM Project will utilize both internal resources as well as outside
consultants to allow for a quick, efficient implementation. Full implementation,
including software, hardware, consulting fees, training and internal resources,
will cost approximately $11 to $13 million and will take approximately eighteen
months to complete. A portion of these costs will be charged to earnings based
upon the provisions of AICPA Statement of Financial Position 98-1, ACCOUNTING
FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE ("SOP
98-1"). See Note 5 of the Notes to Consolidated Financial Statements.

         Net cash provided by financing activities was $4.9 million and $48.6
million for the three months ended March 31, 1998 and 1997, respectively. During
the three months ended March 31, 1997, the Company raised additional capital
from the Second Equity Offering and used a portion of the net proceeds provided
by such offering principally to fund workstation capacity growth. Financing
activities for the first quarter of 1998 are principally comprised of net
borrowings under the Company's new credit facility.

         The Company believes that funds generated from operations, available
borrowings under the Credit Facility, a mortgage financing for the Sunrise,
Florida property described above and lease financing will be sufficient to
finance its planned capital expenditures for 1998. The Company's long-term
capital requirements will depend on many factors, including, but not limited to,
the rate at which the Company expands its business. To the extent that the funds
generated from the sources described above are insufficient to fund the
Company's activities in the short or long term, the Company would need to






                                       14

<PAGE>   15

raise additional funds through public or private financings. No assurance can be
given that additional financing will be available or that, if available, it will
be available on terms favorable to the Company.

YEAR 2000 ISSUE

         The Year 2000 issue affects the Company's installed computer systems,
network elements, software applications and other business systems that have
time-sensitive programs that may not properly reflect or recognize the year 2000
and years thereafter. Because many computers and computer applications define
dates by the last two digits of the year, "00" or other two-digit dates after
the year 2000 may not be properly identified as the year 2000 or the appropriate
later year, but rather the year 1900 or a year between 1901 and 1999 (as the
case may be). This error could result in miscalculations or system failures.

         In order to improve operating performance, the Company has undertaken,
or will undertake in the near future, a number of significant system
initiatives. The Company will expend, pursuant to the PRISM Project, between
approximately $11.0 million and $13.0 million over the next eighteen months to
upgrade and enhance its internal financial and administrative systems. A portion
of these costs will be charged to earnings as incurred based upon the provisions
of SOP 98-1 (see Note 2 of the Notes to Consolidated Financial Statements). An
ancillary benefit of those system initiatives is that the resulting systems will
be Year 2000 compliant. Based upon a recent assessment, the Company has
determined that the incremental cost of insuring that its remaining computer
systems are Year 2000 compliant is not expected to be material. After completing
a preliminary assessment of each of its operations and their Year 2000
readiness, the Company believes that appropriate actions are being taken, and
expects to complete its overall Year 2000 remediation prior to any anticipated
impact on its operations. The Company believes that, with modifications or
routine maintenance to existing hardware and software and conversions to new
systems, the Year 2000 issue will not pose significant operational problems for
its computer systems. However, if such modifications, maintenance and
conversions are not made, or not completed timely, the Year 2000 issue could
have a material adverse impact on the operations of the Company.

         The Year 2000 issue may also affect the systems and applications of the
Company's customers or suppliers. The Company has initiated formal
communications with a number of its significant suppliers to determine the
extent to which the Company's interface systems are vulnerable to those third
parties' failure to remediate their own Year 2000 issues. The Company will
continue similar communication with major customers, and the balance of its
major suppliers, during 1998 to receive the appropriate warranties and
assurances that those parties are, or will be, Year 2000 compliant. Although the
Company currently does not anticipate any material adverse impact on its
operations as a result of Year 2000 issues of its customers or suppliers, at
this stage of its review no assurance can be given that the failure by one or
more of its major suppliers or customers to become Year 2000 compliant will not
have a material adverse impact on its operations.

FLUCTUATIONS IN QUARTERLY RESULTS

         The Company experiences quarterly variations in revenues and operating
income principally as a result of the timing of clients' marketing campaigns and
customer service programs, the commencement of new contracts, changes in the
Company's revenue mix among its various services offered to clients, including
the percentage of services provided under incentive-based compensation
agreements, and the timing of additional operating expenses to acquire and
support new business. In addition, the completion or termination of a large
customer service program or the loss or delay in the implementation of a large




                                       15


<PAGE>   16

customer service program or in a transfer of teleservicing-based application
software could cause the Company to experience such quarterly variations.

         Relative to revenue mix, due, for example, to the significantly higher
margins generated from revenue earned from the transfers of teleservicing-based
application software and to actual performance under incentive-based
compensation agreements, fluctuations in gross and operating margins may occur
whenever revenue mix or actual performance results fluctuates from quarter to
quarter.

FORWARD-LOOKING STATEMENTS

         This report contains forward-looking statements (within the meaning of
Section 21E. of the Securities Exchange Act of 1934, as amended), representing
the Company's current expectations and beliefs concerning future events. When
used in this report, the words "believes," "estimates," "plans," "expects,"
"intends," "anticipates," and similar expressions as they relate to the Company
or its management are intended to identify forward-looking statements. The
actual results of the Company could differ materially from those indicated by
the forward-looking statements because of various risks and uncertainties
related to and including, without limitation, the Company's effective and timely
initiation and development of new client relationships and programs, the
maintenance of existing client relationships and programs (particularly since
the Company's agreements with its clients generally do not assure the Company
will generate a specific level of revenue, do not designate the Company as the
exclusive service provider and are terminable on short notice), the successful
marketing of the Company's information- and teleservicing-based application
software, the effective completion of the implementation of the Company's
restructuring plan, the achievement of satisfactory levels of both gross and
operating margins, the opening of new call centers in accordance with strategic
plans and in a timely and economic manner consistent with existing capacity
requirements, the ability of the Company to hire, train and retain a sufficient
labor force of qualified personnel at competitive wage rates, the continued
enhancement of telecommunication, computer and information technologies and
operational and financial systems (including the successful and timely
completion of the implementation and installation of the PRISM Project), the
achievement by the Company and its suppliers and customers of Year 2000
compliance in a timely and cost efficient manner, the continued and anticipated
growth in industry trends towards outsourcing and cosourcing of telephone-based
marketing and customer service operations (particularly in the
telecommunications services and equipment, transportation, consumer products and
food and beverage industries), changes in competition and the forms of direct
sales and marketing techniques, consumer interest in, and use of, the Company's
clients' products and services, general economic conditions, costs of telephone
services, financing and leasing of equipment, the adequacy of cash flows from
operations and available financings to fund capital needs and future growth,
changes in governmental rules and regulations applicable to the Company, the
Company ultimately prevailing in the recently filed class action lawsuit without
incurring significant management time and attention and litigation costs or
class liability and other risks set forth in this report and in the Company's
other filings with the Securities and Exchange Commission. These risks and
uncertainties are beyond the ability of the Company to control; in many cases,
the Company cannot predict the risks and uncertainties that could cause actual
results to differ materially from those indicated by the forward-looking
statements.




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<PAGE>   17


                                    PART II.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

(c)           Recent Sales of Unregistered Securities

         The Company did not issue or sell any unregistered securities during
the quarter ended March 31, 1998, except for the granting of stock options
described below pursuant to the Company's Amended and Restated 1996 Incentive
Stock Plan:

         (i)  The Company granted options to purchase 250,000 shares of Common
              Stock to an executive officer of the Company at an exercise price
              of $8.03 per share. These options have a term of seven years, with
              options covering 50% of the shares vesting on the date of grant
              and an additional 25% on each of the first two anniversaries from
              the date of grant.

         (ii) The Company also granted options to purchase 1,000 shares of
              Common Stock to an employee of the Company at an exercise price of
              $9.16 per share. These options have a term of seven years and vest
              at the rate of 20% on each of the first five anniversaries from
              the date of grant.

         The foregoing stock options were granted by the Company in reliance
upon the exemption from registration available under Section 4(2) of the
Securities Act of 1933, as amended.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

                                INDEX TO EXHIBITS


  EXHIBIT
  NUMBER                           DESCRIPTION OF EXHIBIT
------------        ------------------------------------------------------------

   27.1             Financial Data Schedule (for SEC use only)

(b)    Reports on Form 8-K

         No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 1998.
















                                       17
<PAGE>   18


                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                 PRECISION RESPONSE CORPORATION
                                             (Registrant)



                                 By: /s/ Paul M. O'Hara
                                     -----------------------------------------
                                     Paul M. O'Hara
                                     Senior Vice President - Finance
                                     and Chief Financial Officer

                                 By: /s/ Thomas F. Jennings, Jr.
                                     -----------------------------------------
                                     Thomas F. Jennings, Jr.
                                     Vice President and Controller
                                     (Principal Accounting Officer)


Dated:  May 15, 1998





















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