<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 JUNE 30, 1999


    [ ] 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 Identification No.)
   incorporation or organization)

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


                                (305) 816-4600
              (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 AUGUST 3, 1999, THE REGISTRANT HAD 21,549,000 OUTSTANDING SHARES OF
COMMON STOCK, $0.01 PAR VALUE.


<PAGE>   2


                PRECISION RESPONSE CORPORATION AND SUBSIDIARIES

                                     INDEX

<TABLE>
<CAPTION>

                                              PART I.
ITEM NO.                                                                                PAGE(S)
--------                                                                                -------
<S>                                                                                    <C>
      1.     FINANCIAL STATEMENTS

             Consolidated Balance Sheets - (Unaudited)
                  June 30, 1999 and December 31, 1998.....................................3

             Consolidated Statements of Operations (Unaudited) -
                  Three and six months ended June 30, 1999 and 1998.......................4

             Consolidated Statements of Cash Flows (Unaudited) -
                  Six months ended June 30, 1999 and 1998.................................5

             Notes to Consolidated Financial Statements................................6-10

      2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS...........................................11-21

      3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                  RISK...................................................................21

                                             PART II.

      1.     LEGAL PROCEEDINGS...........................................................22

      2.     CHANGES IN SECURITIES AND USE OF PROCEEDS...................................22

      4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................23

      6.     EXHIBITS AND REPORTS ON FORM 8-K............................................24

             Signatures..................................................................25

</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)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                 JUNE 30,           DECEMBER 31,
                                                                                   1999                 1998
                                                                             -----------------    -----------------
<S>                                                                           <C>                    <C>
ASSETS
Current assets:
    Cash and cash equivalents..............................................   $       514            $    1,656
    Accounts receivable, net of allowances
        of $1,437 and $8,225, respectively.................................        37,870                42,771
    Income taxes receivable................................................           215                   215
    Deferred income taxes..................................................         3,698                 6,906
    Prepaid expenses and other current assets..............................         3,263                 4,186
                                                                             -----------------    -----------------
            Total current assets ..........................................        45,560                55,734
Property and equipment, net................................................        78,352                71,414
Deferred income taxes......................................................         6,684                 5,516
Other assets...............................................................         2,364                   782
                                                                             -----------------    -----------------
            Total assets...................................................     $ 132,960             $ 133,446
                                                                             =================    =================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Current maturities of long-term obligations............................   $     2,187           $     2,510
    Accounts payable.......................................................         9,505                16,571
    Restructuring accrual..................................................         1,980                 3,244
    Accrued compensation expenses..........................................         7,026                 3,108
    Other accrued expenses.................................................         7,621                 7,174
    Customer deposits......................................................         1,614                 1,108
                                                                             -----------------    -----------------
            Total current liabilities......................................        29,933                33,715
Long-term obligations, less current maturities.............................        18,033                16,916
Restructuring accrual......................................................         2,674                 3,456
                                                                             -----------------    -----------------
            Total liabilities..............................................        50,640                54,087
                                                                             -----------------    -----------------

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

Shareholders' equity:
    Common stock, $0.01 par value; 100,000,000 shares
        authorized; 21,549,000 issued and outstanding......................           215                   215
    Additional paid-in capital.............................................        97,665                97,179
    Accumulated deficit....................................................       (15,101)              (18,035)
    Unearned compensation..................................................          (459)                   --
                                                                             -----------------    -----------------
            Total shareholders' equity.....................................        82,320                79,359
                                                                             -----------------    -----------------
            Total liabilities and shareholders' equity.....................    $  132,960             $ 133,446
                                                                             =================    =================

</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)

<TABLE>
<CAPTION>


                                                            FOR THE THREE MONTHS                FOR THE SIX MONTHS
                                                               ENDED JUNE 30,                     ENDED JUNE 30,
                                                       -------------------------------    -------------------------------
                                                           1999              1998             1999              1998
                                                       -------------     -------------    --------------    -------------
<S>                                                     <C>                <C>             <C>                <C>
REVENUES..........................................      $    50,090        $   43,379      $   96,338         $   83,914
                                                       -------------     -------------    --------------    -------------
OPERATING EXPENSES:
    Cost of services..............................           41,435            37,222           80,366            73,732
    Selling, general and administrative
       expenses...................................            5,671             4,430           10,541             7,750
                                                       -------------     -------------    --------------    -------------
            Total operating expenses..............           47,106            41,652           90,907            81,482
                                                       -------------     -------------    --------------    -------------
            Operating income .....................            2,984             1,727            5,431             2,432
OTHER INCOME (EXPENSE):
    Interest income...............................               22                89               45               152
    Interest expense..............................             (166)             (479)            (502)             (646)
                                                       -------------     -------------    --------------    -------------
            INCOME BEFORE INCOME TAXES............            2,840             1,337            4,974             1,938
Income tax provision..............................            1,144               508            2,040               736
                                                       -------------     -------------    --------------    -------------
            NET INCOME ...........................      $     1,696       $       829      $     2,934       $     1,202
                                                       =============     =============    ==============    =============

NET INCOME PER COMMON SHARE:
    Basic.........................................      $      0.08       $      0.04      $      0.14       $      0.06
                                                       =============     =============    ==============    =============
    Diluted.......................................      $      0.08       $      0.04      $      0.14       $      0.06
                                                       =============     =============    ==============    =============

WEIGHTED AVERAGE NUMBER OF COMMON
   SHARES OUTSTANDING:
    Basic.........................................           21,549            21,549           21,549            21,547
                                                       =============     =============    ==============    =============
    Diluted.......................................           21,573            21,609           21,604            21,786
                                                       =============     =============    ==============    =============

</TABLE>




       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 SIX MONTHS ENDED
                                                                                             JUNE 30,
                                                                                   ------------------------------
                                                                                       1999             1998
                                                                                   -------------    -------------
<S>                                                                                <C>               <C>
Operating activities:
    Net income..................................................................   $     2,934       $    1,202
    Adjustments to reconcile net income to net cash provided by
        (used in) operating activities:
        Depreciation and amortization...........................................         6,945            6,352
        Provision for bad debts and sales allowances............................           871            6,204
        Amortization of unearned compensation...................................            27              108
        Deferred income taxes...................................................         2,040              513
    Changes in operating assets and liabilities:
        Accounts receivable.....................................................         4,030          (21,423)
        Income taxes receivable.................................................            --            6,879
        Prepaid expenses and other current assets...............................           923              742
        Other assets............................................................           (82)               6
        Accounts payable........................................................        (7,066)          (3,987)
        Restructuring accrual...................................................        (2,046)          (1,767)
        Accrued compensation expenses...........................................         3,918              327
        Other accrued expenses..................................................           447             (201)
        Customer deposits.......................................................           506           (2,493)
                                                                                   -------------    -------------
            Net cash provided by (used in) operating activities.................        13,447           (7,538)
                                                                                   -------------    -------------
Investing activities:
    Purchases of property and equipment.........................................       (13,883)         (11,124)
    Investment in unconsolidated affiliate......................................        (1,500)              --
                                                                                   -------------    -------------
            Net cash used in investing activities...............................       (15,383)         (11,124)
                                                                                   -------------    -------------
Financing activities:
    Net proceeds from revolving credit facility.................................         2,000            5,700
    Proceeds from long-term obligations.........................................            --            4,000
    Payments on long-term obligations...........................................        (1,206)          (1,534)
                                                                                   -------------    -------------
            Net cash provided by financing activities...........................           794            8,166
                                                                                   -------------    -------------
Net decrease in cash and cash equivalents.......................................        (1,142)         (10,496)

Cash and cash equivalents at beginning of period................................         1,656           11,080
                                                                                   =============    =============
Cash and cash equivalents at end of period......................................   $       514      $       584
                                                                                   =============    =============
</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 teleservices, Internet customer communications,
database marketing and management, and fulfillment services on an outsourced
and cosourced basis to large corporations and high-growth Internet-focused
companies.

         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 normal recurring 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,
1998 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 and six months ended June 30,
1999 and 1998 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, 1998 filed with the SEC on March
31, 1999 (the "1998 Form 10-K").

2.  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 JUNE 30,
                                                     -------------------------------------------------------------
                                                                 1999                              1998
                                                     ------------------------------   ----------------------------
                                                        NET                 PER         NET                 PER
                                                      INCOME     SHARES    SHARE       INCOME    SHARES    SHARE
                                                     ------------------------------   ----------------------------
<S>                                                  <C>          <C>     <C>          <C>     <C>         <C>
BASIC EPS:
    Income available to common shareholders.......     $1,696    21,549    $   0.08    $829    21,549      $ 0.04

EFFECT OF DILUTIVE SECURITIES:
    Stock options ................................         --        24          --      --        60           --
                                                       ----------------------------   ----------------------------

DILUTED EPS:
    Income available to common shareholders
        and assumed exercises ....................     $1,696    21,573    $   0.08    $829    21,609      $  0.04
                                                       ============================   ============================
</TABLE>

<TABLE>
<CAPTION>

                                                                     FOR THE SIX MONTHS ENDED JUNE 30,
                                                     --------------------------------------------------------------
                                                                 1999                         1998
                                                     -----------------------------   ------------------------------
                                                        NET                  PER        NET                 PER
                                                      INCOME      SHARES    SHARE      INCOME    SHARES    SHARE
                                                     -----------------------------   -----------------------------
<S>                                                  <C>          <C>      <C>         <C>       <C>      <C>
   BASIC EPS:
       Income available to common shareholders....   $  2,934     21,549   $  0.14     $1,202    21,547   $  0.06

   EFFECT OF DILUTIVE SECURITIES:
       Stock options..............................         --         55        --         --       239        --
                                                     -----------------------------   ----------------------------

   DILUTED EPS:
       Income available to common shareholders
           and assumed exercises..................   $  2,934     21,604   $  0.14     $1,202    21,786    $ 0.06
                                                     =============================   ============================

</TABLE>




                                       6
<PAGE>   7
                PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



3.  INVESTMENT IN UNCONSOLIDATED AFFILIATE

         On June 15, 1999, the Company acquired 6,000,000 shares of common stock
of Global Reservation Systems, Inc. ("GRS"), representing approximately a 16%
ownership interest on a fully-diluted basis, for an aggregate purchase price of
$1.5 million. GRS, a California corporation, specializes in developing
Internet-based travel products and service systems. This investment in GRS has
been accounted for using the cost method and is included in Other assets in the
accompanying Consolidated Balance Sheet as of June 30, 1999.

         In conjunction with this transaction, the Company was also issued a
warrant to purchase an aggregate of 3,000,000 shares of GRS common stock at an
exercise price equivalent to the lesser of (i) the lowest per share price of any
sales or issuances of GRS common stock (other than sales or issuances related to
outstanding GRS options to purchase 6,065,391 shares or an additional 2,900,000
shares reserved by GRS for future issuances of options) that take place up to
the time of exercise or (ii) $0.85 per share. The exercise price and/or number
of shares issuable upon exercising the warrant will be proportionately adjusted
if effected after any future stock dividends, stock splits, combinations of
stocks or issuance of stock in a reclassification. The right to exercise the
warrant, in whole or in part, expires on June 15, 2002. In addition, the
Company's decision to exercise this warrant currently would require the consent
of the lender on its revolving credit facility and existing mortgage loan (see
Note 6 herein below).

         The Company also provided information services to GRS earning revenue
in the amount of $80,000 for the three and six months ended June 30, 1999.

4.  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>

                                                     JUNE 30, 1999                             DECEMBER 31, 1998
                                         --------------------------------------     ----------------------------------------
                                           OWNED        LEASED         TOTAL          OWNED         LEASED         TOTAL
                                         ----------    ----------    ----------     -----------    ----------    -----------

<S>                                      <C>            <C>          <C>            <C>             <C>          <C>
Land.............................        $  1,057            --      $   1,057      $    1,057           --      $  1,057
Buildings and improvements.......           5,040            --          5,040           4,878           --         4,878
Telecommunications equipment
  and software...................          22,253         4,432         26,685          20,946        4,432        25,378
Computer equipment and software..          40,299         5,523         45,822          33,768        5,523        39,291
Leasehold improvements...........          11,310            --         11,310          11,167           --        11,167
Furniture and fixtures...........           8,248           242          8,490           8,044          242         8,286
Vehicles.........................             111            --            111             111           --           111
                                         ----------    ----------    ----------     -----------    ----------    -----------
                                           88,318        10,197         98,515          79,971       10,197        90,168
Development in process...........          16,944            --         16,944          11,408           --        11,408
                                         ----------    ----------    ----------     -----------    ----------    -----------
                                          105,262        10,197        115,459          91,379       10,197       101,576
Less: accumulated depreciation
  and amortization...............         (32,036)       (5,071)       (37,107)        (25,943)      (4,219)      (30,162)
                                         ----------    ----------    ----------     -----------    ----------    -----------
                                         $ 73,226      $  5,126       $ 78,352       $  65,436      $ 5,978      $ 71,414
                                         ==========    ==========    ==========     ===========    ==========    ===========
</TABLE>

         In accordance with Statement of Position 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1"),
the Company capitalizes certain costs in connection with internal use software,
which includes InfiniteAccess and IMA Advantage/Edge, and business process
reengineering associated with its initiative to implement an Enterprise
Resource Planning solution, which the Company designated the PRISM Project.
Approximately $911,000 of software developed for internal use that was




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



available for use, as well as $4.2 million related to the PRISM Project modules
that were operational, as of June 30, 1999, are included within Computer
equipment and software in the above table. Additionally, as of June 30, 1999,
$7.3 million related to the internal use software not yet available for use,
and $8.1 million related to the PRISM Project modules not yet operational, are
included within Development in process in the above table.

         In accordance with Statement of Financial Accounting Standards No. 34,
Capitalization of Interest, the Company capitalizes interest costs that are
incurred as a result of borrowings under the Company's revolving credit
facility used to partially fund the Company's PRISM Project and the development
of internal use software. Total interest cost incurred during the six months
ended June 30, 1999 was $867,000, of which $365,000 was capitalized. As
internal use software is available for use and as each module of the PRISM
Project is implemented, all associated capitalized costs are amortized on a
straight-line basis over the software's or module's estimated useful life.

5.  RESTRUCTURING AND OTHER NON-RECURRING SPECIAL CHARGES

         During the third quarter of 1998, the Company performed an extensive
review of its operations and existing available workstation capacity. As a
result of this review, the Company initiated a restructuring and performance
enhancing initiatives plan, which centered on exiting the incentive-based
outbound teleservicing program, making adjustments to certain call centers'
workstation capacity, reducing overhead and administrative headcount and
replacing certain existing software programs utilized in its call center
operations with new customer interaction software reflective of advances in
customer care technology. In adopting this plan, the Company recorded
non-recurring restructuring and other special charges of approximately $22.1
million in the third quarter of 1998 with an after-tax impact of $13.8 million.
Of the total non-recurring restructuring and other special charges accrued in
connection with the plan, at June 30, 1999, approximately $4.5 million is
included in Restructuring accrual and $867,000 relating to other special
charges is included in Other accrued expenses in the accompanying Consolidated
Balance Sheets.

         As of June 30, 1999, the Company had exited the incentive-based
outbound teleservices program and terminated designated employees. The Company
had also initiated the relocation and consolidation of teleservicing programs
to effectuate the closing of one call center and the reduction in size of
another call center and the implementation of new customer interaction software
reflective of advances in customer care technology, both of which are currently
expected to be completed during the third quarter of 1999.

         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. At June 30, 1999,
approximately $200,000 of the total costs accrued is included in Restructuring
accrual in the accompanying Consolidated Balance Sheets, relating to facility
consolidation costs associated with the 1997 restructuring plan.

         As of June 30, 1998, the Company had terminated designated employees
and reorganized its operational and administrative management structure in
connection with the 1997 restructuring and cost savings plan. The Company had
also initiated and completed the relocation and consolidation of administrative
office space into unused space at an existing facility. Additionally, the
Company also continued its attempts to divest unused facilities.




                                       8
<PAGE>   9
                PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         The following table sets forth the details and the cumulative activity
in the restructuring accrual during the six months ended June 30, 1999 (in
thousands):

<TABLE>
<CAPTION>

                                                          ACCRUAL                              ACCRUAL
                                                        BALANCE AT                            BALANCE AT
                                                       DECEMBER 31,                            JUNE 30,
                                                           1998            EXPENDITURES          1999
                                                      ----------------    ---------------    -------------

<S>                                                    <C>                    <C>             <C>
Severance and other employee costs............         $     697              $    (656)      $      41
Closure and consolidation of facilities and
 related exit costs...........................             6,003                 (1,390)          4,613
                                                      ----------------    ---------------    -------------
           Total restructuring accrual........             6,700              $  (2,046)          4,654
                                                                          ===============
           Less: current portion..............            (3,244)                                (1,980)
                                                      ----------------                       -------------
           Total restructuring accrual, long-term        $ 3,456                                $ 2,674
                                                      ================                       =============
</TABLE>

6.  CREDIT FACILITY AND LONG-TERM DEBT

         On March 2, 1998, the Company entered into a three-year, $25.0 million
revolving credit facility, replacing its then existing $15.0 million revolving
credit facility. Effective June 30, 1999, the $25.0 million revolving credit
facility was amended (the "Credit Facility") to increase the amount available
under the Credit Facility to $35.0 million through January 31, 2000, subject to
certain limitations as described below. Effective as of February 1, 2000, the
amount available under the Credit Facility reverts back to $25.0 million.

         The Credit Facility is collateralized by all of the Company's owned
and hereafter acquired assets. The Company may borrow up to 80% of eligible
accounts receivable. The Credit Facility accrues interest at the Company's
option at (i) the greater of the prime rate or the Federal funds rate plus
0.50% or (ii) the LIBOR rate plus a specified percentage (1.25% to 1.75%) based
upon the ratio of funded debt to earnings before interest, taxes, depreciation
and amortization ("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, investments and
acquisitions. At June 30, 1999, the outstanding balance of the Credit Facility
was $13.0 million ($3.0 million at 7.75% per annum and $10.0 million at 6.25%
per annum) and is included in Long-term obligations, less current maturities in
the accompanying Consolidated Balance Sheets. At June 30, 1999, the available
balance under the terms of the Credit Facility was $22.0 million, for which the
applicable unused commitment fee was at the rate of 0.1875% per annum.

         The Company also has secured a mortgage, as amended effective June 30,
1999, with the lender on its Credit Facility to acquire a property (land and
existing building) located in Sunrise, Florida. The mortgage loan is for $5.1
million, of which $4.0 million was advanced at closing in 1998. The remaining
$1.1 million available under the loan is subject to the Company's completion of
future interior improvements to the property by January 31, 2000. The amended
mortgage note accrues interest payable quarterly at the LIBOR rate plus 1.50%
per annum, of which the interest rate was 6.76% per annum at June 30, 1999.
Principal payments are due quarterly, commencing on January 31, 2000, based




                                       9
<PAGE>   10
                PRECISION RESPONSE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



upon a 20-year amortization schedule, with a balloon payment due at maturity on
June 1, 2005. The amended mortgage loan is cross-defaulted with and has terms
substantially similar to the Credit Facility.

7.    COMMITMENTS AND CONTINGENCIES

         On or about August 26, 1998 a lawsuit, captioned Henry E. Freeman and
Freeman Industrial Enterprises Corporation v. Precision Response Corporation,
Mark J. Gordon, David L. Epstein and Richard D. Mondre (Case No.
398-CV-1895-AVC (D. Conn)), was filed in the Superior Court of the Judicial
District of Stamford/Norwalk in the state of Connecticut. The lawsuit has since
been removed by the Company to the United States District Court for the
District of Connecticut. This lawsuit alleges that the Company breached its
contracts with the plaintiffs by allegedly failing to pay all commissions
relating to certain clients whom the plaintiffs allegedly claim they procured
for the Company. The complaint also contains claims of breach of fiduciary
duty, breach of covenant of good faith and fair dealing, civil conspiracy,
fraud/fraud in the inducement, intentional infliction of emotional distress and
violations of the Connecticut Unfair Trade Practices Act. The plaintiffs seek
actual, compensatory and punitive damages, declaratory judgement that certain
contracts are invalid due to undue influence exercised upon plaintiffs,
recission of such contracts, an accounting and interest, costs and attorneys'
fees.

         On January 6, 1999, the plaintiffs voluntarily dismissed with
prejudice this lawsuit against Richard Mondre, which dismissal has been
approved by the Court. On or about February 12, 1999, the plaintiffs filed an
Amended Complaint, asserting the same causes of action as in the original
complaint, as well as a claim for negligent misrepresentation. The Company has
filed a motion to dismiss the Amended Complaint for failure to state a cause of
action, which is currently pending before the Court.

         The case is currently in the discovery stage. The Company believes
that the plaintiffs' allegations are totally without merit and intends to
defend the lawsuit vigorously. A provision for legal defense costs has been
accrued and is included in Other accrued expenses in the accompanying
Consolidated Balance Sheets which management believes is adequate based on
available information. No other provisions have been reflected since management
is unable, at this time, to predict the ultimate outcome of this matter.





                                      10
<PAGE>   11
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, Internet communications, 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, beginning in the third quarter of 1997, the Company had also generated
teleservicing revenues under incentive-based outbound compensation agreements
whereby the amount of revenue earned correlates to the achievement of
established targets. At the end of the third quarter of 1998, the Company made
a strategic decision to exit the incentive-based outbound programs, which was
completed during the fourth quarter of 1998. The majority of teleservicing
revenues are derived from inbound calls, which represented approximately 92% of
teleservicing revenues and 81% of total revenues for the three months ended
June 30, 1999 as compared to approximately 85% of teleservicing revenues and
62% of total revenues for the three months ended June 30, 1998. For the six
months ended June 30, 1999, teleservicing revenues derived from inbound calls
represented approximately 92% of teleservicing revenues and 81% of total
revenues as compared to approximately 81% of teleservicing revenues and 59% of
total revenues for the same period of the prior year. Inbound teleservicing
consists mostly of longer-term customer care and customer service programs that
tend to be more predictable than other teleservicing revenues. 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).

         Commencing in 1998 and during the six months ended June 30, 1999, the
Company began strategic initiatives to capitalize on the extraordinary growth
of Internet commerce by integrating Internet technologies with the Company's
current products and services to, in effect, create multimedia customer
interaction centers. In the first and second quarters of 1999, the Company
continued to make advances in the development and marketing of the
Internet-based and e-commerce services offered by prcnetcare.comSM, its
recently created Internet-based customer service subsidiary. During the three
months ended June 30, 1999, its second quarter of operation, prcnetcare.com
generated revenues of approximately $1.2 million primarily from InfiniteAccess,
the subsidiary's newest Internet-based customer care offering. During the six
months ended June 30, 1999, prcnetcare.com generated revenues of approximately
$1.5 million.

         The InfiniteAccess suite of products and services enables the Company
to integrate clients' Internet-based customer care and e-commerce activities
with the Company's existing teleservices, database marketing and management,
and fulfillment services. InfiniteAccess's current base of offerings includes:
PRC SmartMail, an automated electronic messaging response service; PRC Web
On-Line, a Web collaborative service enabling the Company's customer care
associates to interact with clients' customers live over the telephone and the
Internet; PRC Internet Fulfillment Service, an e-mail and Web-based fulfillment




                                      11
<PAGE>   12

process that supports e-commerce transactions; and PRC Host, a Web application
hosting and information service that enables clients to conduct e-commerce
activities while limiting their technology investments.

         The Company is currently committed to investing in and expanding its
Internet-based and e-commerce services and continues to make strategic
infrastructure and software investments as it seeks to leverage its existing
technological capabilities into a leading position in the emerging market for
interactive customer care services. The Company's commitment was reinforced
through an approximate 16% investment (on a fully diluted basis) in Global
Reservation Systems, Inc. ("GRS"), a West Coast firm specializing in
Internet-based travel products and service systems. (See Note 3 - Investment in
Unconsolidated Affiliate of the Notes to Consolidated Financial Statements). GRS
will use prcnetcare.com's InfiniteAccess product to enhance its globeres.net
system, which helps travel agents compete more effectively using e-commerce.

         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.

         Fulfillment services include high-speed laser and electronic document
printing, lettershop and mechanical inserting, sorting, packaging and mailing
capabilities. While fulfillment services represents a relatively small portion
of the Company's total revenues, it is an important element in the Company's
overall marketing strategy of providing its customers with a "one-stop"
solution to their telephone-based and interactive customer service and
marketing needs.

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             FOR THE SIX MONTHS
                                                                ENDED JUNE 30,                  ENDED JUNE 30,
                                                          ---------------------------      --------------------------
                                                             1999           1998              1999           1998
                                                          -----------    ------------      -----------    -----------
<S>                                                         <C>            <C>               <C>            <C>
SELECTED OPERATING RESULTS:
    Revenues..........................................      100.0%         100.0%            100.0%         100.0%
    Cost of services..................................       82.7           85.8              83.4           87.9
                                                          -----------    ------------      -----------    -----------
            Gross margin..............................       17.3           14.2              16.6           12.1
    Selling, general and administrative expenses......       11.3           10.2              10.9            9.2
                                                          -----------    ------------      -----------    -----------
            Operating income..........................        6.0%          4.0%               5.7%           2.9%
                                                          ===========    ============      ===========    ===========

</TABLE>

REVENUES

         Revenues for the three and six months ended June 30, 1999 were $50.1
million and $96.3 million, respectively, an increase of $6.7 million, or 15.5%,
and $12.4 million, or 14.8%, over the comparable periods in the prior year. The
principal components of revenues are teleservicing activities (representing
88.8% and 88.5% of revenues for the three and six months ended June 30, 1999,
respectively, and 74.4% and 73.5% of revenues for the three and six months ended
June 30, 1998, respectively), information services (representing 8.1% and 8.3%
of revenues for the three and six months ended June 30, 1999, respectively, and
11.4% and 10.2% of revenues for the three and six months ended June 30, 1998,
respectively) and fulfillment services (representing 3.1% and 3.2% of revenues
for the three and six months ended June 30, 1999, respectively, and 14.2% and
16.3% of revenues for the three and six months ended June 30, 1998,
respectively).





                                      12
<PAGE>   13

         The Company had eight call centers and approximately 4,500
workstations in operation as of June 30, 1999 and 1998. In connection with its
1998 restructuring and performance-enhancing initiatives plan, the Company
continued its efforts that were initiated during the first quarter of 1999 to
eliminate 800 workstations in two specific call centers. This elimination was
offset by the expansion of workstations in existing call centers. As of June
30, 1999, the Company's workstation utilization rate was approximately 82%.
This compares to a utilization rate of approximately 68% at June 30, 1998.
Although utilization automatically increases with the reduction of
workstations, the Company continues to attempt to seek the award of additional
work from existing clients and pursue new client opportunities in order to
improve the utilization of its workstations. Absent the award of any
significant new business, the Company has no immediate plans for new call
centers. Alternatively, the Company is expanding workstation capacity in its
existing sites to meet current capacity needs.

         Teleservicing activities accounted for the majority of the revenue
growth during both the three and six months ended June 30, 1999. Revenues from
teleservicing activities for the three and six months ended June 30, 1999 were
$44.4 million and $85.2 million, respectively, an increase of $12.1 million, or
37.7%, and $23.5 million, or 38.2%, over the comparable periods in 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, including a major national wireless service provider, a
leader in the deployment of enhanced telecommunications and interactive
information systems and a company that specializes in developing Internet-based
travel products and service systems. Revenues from the Company's largest client
accounted for 42.5% and 44.9% of total revenues for the three and six months
ended June 30, 1999, compared to 46.7% and 41.1% for the three and six months
ended June 30, 1998. Besides the Company's largest client, no other client
accounted for 10% or more of total revenues for the three or six months ended
June 30, 1999. Generally, teleservicing revenues are earned on a rate-per-hour
basis. However, during the three and six months ended June 30, 1998,
approximately 12.1% and 14.7% of total revenues were earned under
incentive-based compensation agreements, respectively. As discussed above, the
Company ceased earning revenues under incentive-based compensation agreements
during the fourth quarter of 1998.

         Revenues from information services for the three and six months ended
June 30, 1999 were $4.1 million and $8.0 million, respectively, a decrease of
$0.8 million, or 17.6%, and $0.5 million, or 6.2%, compared to the same periods
of the prior year, primarily attributable to information services provided to a
certain client during the three months ended June 30, 1998, compared to no such
services provided to this client for the comparable periods of 1999. These
decreases were partially offset by information services provided during the
three and six months ended June 30, 1999, as a result of the addition of new
clients and growth in the Company's relationships with existing clients.

         Revenues from Internet-based customer care services for the three and
six months ended June 30, 1999, in connection with prcnetcare.com's second
quarter of operations, were approximately $1.2 million and $1.5 million,
respectively, and are included in revenues from teleservicing and information
services noted above.

         Revenues from fulfillment services for the three and six months ended
June 30, 1999 were $1.6 million and $3.1 million, respectively, a decrease of
$4.6 million, or 74.6%, and $10.6 million, or 77.6%, compared to the same
period of the prior year. Revenues from fulfillment services for both the three
and six months ended June 30, 1998 included fulfillment services provided in
connection with the incentive-based outbound teleservices program. As described
above under "Overview and Basis of Presentation," the Company exited the
incentive-based outbound teleservices program in the fourth quarter of 1998.




                                      13
<PAGE>   14

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 for
the three and six months ended June 30, 1999 were $41.4 million and $80.4
million, respectively, an increase of $4.2 million, or 11.3%, and $6.6 million,
or 9.0%, over the comparable periods in the prior year. The increases are
principally as a result of the growth in operations. In addition, included in
these amounts are the cost of services related to prcnetcare.com, which were
approximately $1.2 million and $1.8 million for the three and six months ended
June 30, 1999, respectively.

         The decrease in cost of services, as a percentage of revenues, from
85.8% for the three months ended June 30, 1998 to 82.7% for the three months
ended June 30, 1999 and from 87.9% for the six months ended June 30, 1998 to
83.4% for the six months ended June 30, 1999, was primarily attributable to the
Company's less than satisfactory operating results generated by the
incentive-based outbound teleservices program for the three and six months
ended June 30, 1998. As described above under "Overview and Basis of
Presentation," the Company exited the incentive-based outbound teleservices
program in the fourth quarter of 1998. The decrease is also attributable to the
Company's continued improvement in the utilization of workstation capacity.

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, finance and management information systems functions. SG&A for the
three and six months ended June 30, 1999 were $5.7 million and $10.5 million,
respectively, an increase of $1.2 million, or 28.0%, and $2.8 million, or
36.0%, over the comparable periods in the prior year. A portion of this
increase is due to the Company's continued advances in the development and
marketing of prcnetcare.com, resulting in SG&A of approximately $700,000 and
$1.1 million during the three and six months ended June 30, 1999, respectively.
The remainder of the increase is principally due to the Company's growth in
operations, the addition of certain management positions during the first half
of 1999 and annual salary increases.

         As a percentage of revenues, SG&A increased from 10.2% for the three
months ended June 30, 1998 to 11.3% for the three months ended June 30, 1999
and from 9.2% for the six months ended June 30, 1998 to 10.9% for the six
months ended June 30, 1999. This increase is a result of the development and
marketing of prcnetcare.com, as well as the addition of certain management
positions during the first half of 1999 and annual salary increases.

INTEREST, NET

         Interest expense, net of interest income and capitalized interest, was
$144,000 and $457,000 for the three and six months ended June 30, 1999,
respectively, compared to net interest expense of $390,000 and $494,000 for the
comparable periods of the prior year. The decrease in net interest expense is
due to the capitalization of certain interest costs during the three and six
months ended June 30, 1999 that were incurred as a result of borrowings under




                                      14
<PAGE>   15

the Company's revolving credit facility used to partially fund the Company's
PRISM Project and the development of internal use software. (See Note 4 -
Property and Equipment of the Notes to Consolidated Financial Statements.)

INCOME TAXES

         The Company had a deferred tax asset of $10.4 million at June 30, 1999
and $12.4 million at December 31, 1998. The net deferred tax asset in the
amount of $10.4 million at June 30, 1999 is based upon expected utilization of
net operating loss carryforwards and reversal of certain temporary differences.
Although realization is not assured, the Company believes it is more likely
than not that all of the net deferred tax asset will be realized. The amount of
the deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward period
are reduced. The Company will continue to review the assumptions used on a
quarterly basis and make adjustments as appropriate.

NET INCOME AND NET INCOME PER SHARE

         For the three months ended June 30, 1999, net income was $1.7 million
compared to net income of $829,000 for the comparable period of 1998. Net
income per common share for the three months ended June 30, 1999 and 1998, was
$0.08 and $0.04, respectively.

         For the six months ended June 30, 1999, net income was $2.9 million
compared to net income of $1.2 million for the comparable period of 1998. Net
income per common share for the six months ended June 30, 1999 and 1998 was
$0.14 and $0.06, respectively.

LIQUIDITY AND CAPITAL RESOURCES

         During the first six months of 1999, the Company funded its operations
and capital expenditures primarily through cash flows from operations and, to a
lesser extent, bank borrowings.

         On March 2, 1998, the Company entered into a three-year, $25.0 million
revolving credit facility, replacing its then existing $15.0 million revolving
credit facility. Effective June 30, 1999, the $25.0 million revolving credit
facility was amended (the "Credit Facility") to increase the amount available
under the Credit Facility to $35.0 million through January 31, 2000, subject to
certain limitations. Effective as of February 1, 2000, the amount available
under the Credit Facility reverts back to $25.0 million. For a further
discussion of the terms of the Credit Facility, see Note 6 - Credit Facility and
Long-Term Debt of the Notes to Consolidated Financial Statements.

         The Company also has secured a mortgage, as amended effective June 30,
1999, with the lender on its Credit Facility to acquire a property (land and
existing building) located in Sunrise, Florida. The mortgage loan is for $5.1
million, of which $4.0 million was advanced at closing in 1998. The remaining
$1.1 million available under the loan is subject to the Company's completion of
future interior improvements to the property by January 31, 2000. For a further
discussion of the terms of the amended mortgage loan, see Note 6 - Credit
Facility and Long-Term Debt of the Notes to Consolidated Financial Statements.

         At June 30, 1999, the Company had cash and cash equivalents of
$514,000 and total long-term obligations (including current maturities thereof)
of $20.2 million. Net cash provided by operating activities was $13.4 million
for the six months ended June 30, 1999 and net cash used in operating
activities was $7.5 million for the same period in the prior year. The decrease




                                      15
<PAGE>   16
in cash used in operating activities from the first six months of 1999 compared
to the same period in 1998 was primarily attributable to the reduction in
accounts receivable due to increased collection efforts offset in part by a
decrease in accounts payable.

         Net cash used in investing activities was $15.4 million and $11.1
million for the six months ended June 30, 1999 and 1998, respectively. Investing
activities for the six months ended June 30, 1999 were principally for capital
expenditures as well as a $1.5 million investment in GRS, which is described in
further detail above. (Also see Note 3 - Investment in Unconsolidated Affiliate
of the Notes to Consolidated Financial Statements). All investing activities for
the six months ended June 30, 1998 were for capital expenditures.

         Capital expenditures increased from $11.1 million for the six months
ended June 30, 1998 to $13.9 million for the same period of the current year.
Capital expenditures for the six months ended June 30, 1998 were primarily for
the completion of the relocation and consolidation of administrative office
space into unused space in an existing facility, costs incurred for the
Company's internal financial and operating system enhancements (the PRISM
Project) and the purchase of land and a building located in Sunrise, Florida.
Capital expenditures for the six months ended June 30, 1999 relate primarily to
costs incurred for the expansion of workstations in existing facilities and the
PRISM Project, prcnetcare.com product and service offerings, and IMA
Advantage/Edge, as discussed below.

         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 general ledger) to be
fully integrated into a common platform. The Company has designated its ERP
implementation as the PRISM Project. The PRISM Project is utilizing both
internal resources as well as outside consultants to allow for a quick and
efficient implementation. Full implementation, including software, hardware,
consulting fees, training and internal resources, will cost approximately $13.0
million and will take place by the end of the third quarter of 1999. The first
modules of the PRISM Project, human resources/payroll, general ledger, accounts
receivable and accounts payable, were placed in service during the fourth
quarter of 1998. Additionally, the purchasing and inventory and order entry
modules of the PRISM Project were placed in service during the second quarter
of 1999. Costs of the PRISM Project have been capitalized or charged to
earnings based upon SOP 98-1. See Note 4- Property and Equipment of the Notes
to Consolidated Financial Statements.

         In connection with prcnetcare.com, beginning in 1998 and through the
end of 1999, the Company currently expects to invest in excess of $6.0 million
in developing and enhancing software products and technology infrastructure to
accommodate Internet-based interactive customer communications. In addition, the
Company is in the process of implementing IMA Advantage/Edge, a third-party
software product. The full implementation of IMA Advantage/Edge is currently
expected to cost approximately $7.0 to $8.0 million and will take place during
the third quarter of 1999. See Note 4- Property and Equipment of the Notes to
Consolidated Financial Statements.

         Net cash provided by financing activities was $794,000 and $8.2
million for the six months ended June 30, 1999 and 1998, respectively.
Financing activities for the first half of 1999 and 1998 are principally
comprised of net borrowings under the Company's revolving credit facility. In
addition, during the first half of 1998 included in net cash provided by
financing activities are the proceeds from the mortgage loan for the land and
building located in Sunrise, Florida.




                                      16
<PAGE>   17

         The Company believes that funds generated from operations, available
borrowings under the revolving credit facility and capital lease financings
will be sufficient to finance its planned capital expenditures for 1999. 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 and the level of future capital expenditures required to develop
and/or enhance software products and technology infrastructure to accommodate
Internet-based interactive customer communications. 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 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, including those with embedded microprocessors, 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 system and equipment failures or malfunctions causing
disruption of operations, including among others, a temporary inability to
process calls, transactions and information, or engage in similar normal
business activities.

         The Company has evaluated its installed computer systems, network
elements, software applications and other business systems that have
time-sensitive programs and has developed a plan to ensure their Year 2000
compliance. The Company has established a Year 2000 Compliance Team that meets
generally on a weekly basis to monitor the progress and status of the Company's
Year 2000 plan. The Company's Year 2000 plan is divided into seven major
sections: Internal Systems and Equipment (business applications for accounting,
administration, human resources and other Company-wide applications and office
equipment, including non-information technology infrastructure in which
non-compliant software or embedded microprocessors might exist); Hardware
(Company-wide information technology architecture); Software Packages (standard
personal computer and individual software packages, such as electronic
spreadsheet and word processing software); Application Tools and Products
(products utilized by information technology development organizations to
develop and implement automated business applications); Client Applications;
Client Interfaces; and Third Party Suppliers. In order to address the Year 2000
issue and the seven major sections stated above, the Company's Year 2000 plan
involves five phases: Planning and Awareness Phase (developing a budget and
project plan); Inventory and Assessment Phase (identify systems and
applications, assess risks and prioritize efforts); Remediation Phase (repair,
replace or retire non-compliant systems or processes); Validation Phase
(perform testing of systems and processes); and Implementation Phase.





                                      17
<PAGE>   18
         The following chart outlines, by major section, the phases of the
Company's Year 2000 plan that have been completed or, if not yet completed, the
current estimated date of completion:

<TABLE>
<CAPTION>

                                                                          PHASES
                                 -----------------------------------------------------------------------------------------
                                   PLANNING         INVENTORY
                                     AND               AND
       MAJOR SECTION              AWARENESS         ASSESSMENT       REMEDIATION        VALIDATION        IMPLEMENTATION
-----------------------------    -------------     -------------    ---------------    -------------     -----------------
<S>                               <C>               <C>               <C>               <C>                 <C>
Internal Systems and
  Equipment................       Completed         Completed         Completed         Completed           Completed
Hardware...................       Completed         Completed            9/99              9/99                9/99
Software Packages..........       Completed         Completed         Completed         Completed              8/99
Application Tools and
  Products.................       Completed         Completed         Completed         Completed           Completed
Client Applications........       Completed         Completed         Completed            9/99                9/99
Client Interfaces..........       Completed         Completed         Completed            9/99                9/99
Third Party Suppliers......       Completed         Completed         Completed         Completed           Completed

</TABLE>

         The Company, pursuant to the PRISM Project, which was undertaken by
the Company for reasons unrelated to any Year 2000 issues, has expended
approximately $12.3 million of the estimated $13.0 million required to upgrade
and enhance its internal financial and administrative systems. An ancillary
benefit of the PRISM Project is that the resulting systems will be Year 2000
compliant with full implementation of all aspects of the PRISM Project taking
place by the end of the third quarter of 1999. Based upon its most recent
assessment, the Company has determined that the incremental cost of insuring
that its remaining computer systems and processes are Year 2000 compliant is
expected to be approximately $1.5 million. This amount will be funded as part
of the Company's budgeted expenditures during 1999. Through June 30, 1999, the
Company, exclusive of the PRISM Project, has spent approximately $900,000 on
the Year 2000 issue. These amounts do not include any costs associated with the
implementation of contingency plans, if required, which are described in more
detail below. All incremental costs associated with the Year 2000 issue are
being expensed as incurred.

         Since 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 its customers and suppliers to determine their overall Year
2000 readiness and the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
issues. As part of its overall communication process, the Company has mailed
letters to all of its customers and suppliers in an effort to receive the
appropriate warranties and assurances that those parties are, or will be, Year
2000 compliant. For those responses that have not been received from customers
or suppliers or for those customers or suppliers that have not published a
statement or disclosure concerning their Year 2000 readiness, the Company has
developed contingency plans, which are described in further detail below.
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, 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.

         The extent of the Company's Year 2000 exposure, the costs of achieving
Year 2000 compliance and the time period within which the Company believes it
will achieve its Year 2000 compliance are based on management's knowledge to
date and its best estimates to date. Although the Company expects its critical
systems and applications to be Year 2000 compliant prior to any anticipated
impact on its operations, there is no guarantee that these results will be
achieved. Specific factors that give rise to this uncertainty, as well as the





                                      18
<PAGE>   19

timing and cost of achieving Year 2000 compliance (if at all), include, but are
not limited to, availability and cost of personnel, failure to identify and
correct all Year 2000 susceptible systems and applications, noncompliance by
customers, suppliers and other third parties whose systems and operations
impact the Company, and other similar uncertainties. A reasonably possible
worst case scenario might include the failure of third parties to provide
services, such as power and telecommunication services, or the loss of the
Company's automated call distributors or dialers which could, depending on its
duration, result in a material disruption to the Company's operations and its
ability to generate revenue.

         The Company has developed contingency plans in the unlikely event that
the uncertainties or worst case scenario described above do in fact occur. The
Company's contingency plans, which were created based on the probability of an
event and the magnitude of its impact on operations, are as follows:

         Suppliers - The Company's providers of basic resources, such as
         electric, telephone service, water, etc., have been contacted and/or
         the Company has reviewed statements or disclosures published by its
         suppliers concerning their Year 2000 readiness. Substantially all of
         the Company's suppliers are addressing the Year 2000 issue and
         planning to achieve compliance prior to any impact on their respective
         business. In the unlikely event a critical supplier fails to achieve
         Year 2000 compliance, with the exception of the Company's local and
         long distance telecommunications carriers which are addressed below,
         contingency plans have been developed by the Company to mitigate
         minor, short-term disruptions, such as in-house generation for the
         loss of electric power. Long-term, widespread disruptions, for which
         there is no viable contingency, would cause operations to be
         discontinued and call centers to be shut down, which would result in a
         material disruption to the Company's operations and its ability to
         generate revenue.

         The Company's local and long distance telecommunications carriers will
         have the greatest impact on the Company's operations should they not
         achieve Year 2000 compliance. The Company addressed the issue on
         several levels and assessed the feasibility of developing and
         implementing a contingency plan, including the use of back-up or
         replacement telecommunication lines. The Company determined that there
         is no feasible contingency for a failure of its local and/or long
         distance telecommunications carriers to achieve Year 2000 compliance,
         based upon the following:

                o     There would be no guarantee that the replacement networks
                      would continue without disruption, as the alternate
                      carriers offer no greater guarantees than the Company's
                      current telecommunication providers.
                o     Transition from one network to another has the potential
                      to create the same types of disruptions that the Company
                      would be attempting to avoid.
                o     The Company's local and long distance telecommunications
                      providers have declared themselves to be Year 2000
                      compliant and the risk of massive network outages are
                      remote based on their assurances, as well as the critical
                      nature of their services to businesses and consumers
                      nationwide.
                o     The high cost of establishing replacement networks would
                      not be justified in light of the issues described above.

         Customers - The Company's customers have been contacted and/or the
         Company has reviewed statements or disclosures published by its
         customers concerning their Year 2000 readiness. Substantially all of
         the Company's customers are addressing the Year 2000 issue and
         planning to achieve compliance prior to any impact on their respective





                                      19
<PAGE>   20

         business. For those customers that have not yet directly responded to
         the Company with respect to their Year 2000 compliance or for those
         customers that have not published a statement or disclosure concerning
         their Year 2000 readiness, the Company has determined that any impact
         on its operations resulting from those customers' noncompliance will
         be minor. Nonetheless, contingency plans have been developed as
         necessary on a client-by-client basis.

         Internal Systems and Applications - Due to the Company's adherence to
         its plan for achieving Year 2000 compliance, the Company expects its
         critical systems and applications to be Year 2000 compliant. The
         Company currently anticipates that the impact of Year 2000, if any, on
         its systems and applications would be minor disruptions of short-term
         duration to be remedied in the normal course of business. The Company
         has developed contingency plans, such as taking steps to ensure that
         adequate personnel will be available to provide maximum support of the
         Company's systems and infrastructure prior and subsequent to the turn
         of the century.

         The Company will continue to assess the need for further or modified
contingency plans based on the progress of the Year 2000 efforts by the Company
and third parties throughout the remainder of 1999.

FLUCTUATIONS IN QUARTERLY RESULTS

         The Company experiences quarterly variations in revenues, operating
margins 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 (if any) of services provided
under incentive-based compensation agreements, and the timing of additional
operating and capital expenses to acquire and support new business and/or in
connection with new products and services. In addition, the completion or
termination of a large customer service program or the loss or delay in the
implementation of a large customer service program or in a transfer of
teleservicing-based application software could cause the Company to experience
such quarterly variations.

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," "feels," "estimates," "plans,"
"expects," "intends," "projects," "anticipates," "sees," 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 effective completion of the implementation
of the Company's restructuring plan and performance-enhancing initiatives, the
achievement of satisfactory levels of both gross and operating margins, the
opening of new customer interaction 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 development
and continued enhancement of telecommunication, Internet, computer and





                                      20
<PAGE>   21

information technologies and infrastructures and operational and financial
systems (including the successful and timely completion of the implementation
and installation of the PRISM Project), the effective and timely marketing to,
and level of acceptance and increased utilization by, existing and new clients
of the Company of Precision Resolution, InfiniteAccess and other Internet
products and services, technical difficulties or errors, problems or excessive
costs incurred by the Company in connection with the completion of the
development, implementation and/or future enhancement of InfiniteAccess,
Precision Resolution, and/or IMA Advantage/Edge, and/or the integration of
Internet technologies with the Company's current products and services to
create customer interaction centers and the success and acceptance by the
Company's clients thereof, the failure of the Company to cost-effectively
develop new Internet services and products or to maintain or enter into new
strategic or key business relationships in connection with the development
and/or enhancement of its Internet offerings, the over-estimation by the
Company of the level of need and demand for customer support and service
through the use of the Internet, the ability of the Company to hire, train and
retain qualified technology and other personnel in connection with its
development, implementation and/or enhancement efforts and the operations of
prcnetcare.com, the compatibility of InfiniteAccess, Precision Resolution and
other Internet products and services with existing systems of the Company's
clients and the extent of the technical problems arising with respect to
obtaining such compatibility, the realization by the Company of the expected
direct and indirect benefits and returns (including operational and marketing
benefits) from its investment in GRS, the introduction of new competitive
Internet and other products and services in the Company's industry by other
companies and, in connection therewith, the ability of the Company to maintain
a leadership role in both traditional and Internet-based customer care products
and services, the achievement by the Company and its suppliers and customers of
Year 2000 compliance in a timely and cost efficient manner, the anticipated
growth in industry trends towards outsourcing and cosourcing of telephone and
Internet based marketing and customer service operations (particularly in the
telecommunications services and equipment, transportation, financial services,
utility, consumer products, food and beverage, and travel 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 level of costs associated with the development and then
expansion of prcnetcare.com's business and operations, the achievement of
satisfactory levels of both gross and operating profits, the adequacy of cash
flows from operations and available financing to fund capital needs and future
growth, changes in and additions to governmental rules and regulations
applicable to the Company, the realization of the Company's net deferred tax
asset and other risks set forth in this report, in the Company's other filings
with the SEC and in the Company's press releases. 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.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         During the quarter ended June 30, 1999, there have been no material
changes in the information about the Company's market risk as of December 31,
1998 as set forth in Item 7A. of the 1998 Form 10-K.





                                      21
<PAGE>   22



                           PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

         For a discussion of the lawsuit captioned HENRY E. FREEMAN AND FREEMAN
INDUSTRIAL ENTERPRISES CORPORATION V. PRECISION RESPONSE CORPORATION, MARK J.
GORDON, DAVID L. EPSTEIN AND RICHARD D. MONDRE (Case No. 398-CV-1895-AVC (D.
Conn)), see Note 7 - Commitments and Contingencies of the Notes to Consolidated
Financial Statements in Item 1 of Part I of this report, which Note 7 is
incorporated by reference into this Item 1 of 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 June 30, 1999, although the Company granted the
         stock options described below pursuant to the Company's Amended and
         Restated 1996 Incentive Stock Plan, as amended (the "Incentive Stock
         Plan"):

         (i)      The Company granted options to purchase 60,000 shares of
                  Common Stock to an executive officer of the Company at an
                  exercise price of $4.38 per share. These options have a term
                  of seven years and vest at the rate of 33 1/3% on each of the
                  first three anniversaries from the date of grant (April 26,
                  1999).

         (ii)     The Company granted options to purchase 37,500 shares of
                  Common Stock to 24 employees at an exercise price of $4.06
                  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 (May 3, 1999).

         (iii)    The Company granted options to purchase 250,000 shares of
                  Common Stock to each of two employees at an exercise price of
                  $5.1875 per share. These options have a term of seven years
                  and vest at the rate of 15% following the first six months,
                  an additional 18% following the first year, an additional 33%
                  following the second year and an additional 34% following the
                  third year from the date of grant (June 22, 1999).

         The Company also granted an option to purchase 15,000 shares of Common
         Stock to each of three nonemployee directors pursuant to the terms of
         the Company's Amended and Restated 1996 Nonemployee Director Stock
         Option Plan. Each option has an exercise price of $5.53 per share, a
         term of ten years and vests 100% on the first anniversary from the
         date of grant (June 21, 1999).

         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.




                                      22
<PAGE>   23

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)      On June 21, 1999, the Company held its 1999 Annual Meeting of
         Shareholders (the "Annual Meeting").

(b)      One matter voted on at the Annual Meeting was the election of all
         seven directors of the Company. The seven nominees, who were all
         existing directors of the Company and nominees of the Company's Board
         of Directors, were re-elected at the Annual Meeting as directors of
         the Company, receiving the number and percentage of votes for election
         and abstentions as set forth next to their respective names below:

<TABLE>
<CAPTION>

                      NOMINEES FOR DIRECTORS               FOR ELECTION                  ABSTENTIONS
                  -------------------------------     ------------------------      ----------------------

                  <S>                                 <C>                           <C>
                  Mark J. Gordon                      17,573,434  (92.6%)           1,411,181  (7.4%)
                  David L. Epstein                    17,573,434  (92.6%)           1,411,181  (7.4%)
                  Richard D. Mondre                   17,573,434  (92.6%)           1,411,181  (7.4%)
                  Bernard J. Kosar, Jr.               17,573,434  (92.6%)           1,411,181  (7.4%)
                  Christian Mustad                    17,573,434  (92.6%)           1,411,181  (7.4%)
                  Neil A. Natkow                      17,573,434  (92.6%)           1,411,181  (7.4%)
                  Richard N. Krinzman                 17,573,434  (92.6%)           1,411,181  (7.4%)

</TABLE>

(c)      The only other matters voted upon at the Annual Meeting were the
         following:

         (i)      A proposal to approve an amendment to the Incentive Stock
                  Plan increasing the number of shares of the Company's Common
                  Stock reserved for issuance under the Incentive Stock Plan to
                  4,750,000 shares. The proposal, which was approved, received
                  the votes of the holders of the number of shares of Common
                  Stock voted in person or by proxy at the Annual Meeting and
                  the percentage of total votes cast as indicated below:

                                                    VOTES          PERCENTAGE
                                               ----------------   -------------

                                For               16,032,988          84.4%
                                Against            2,939,452          15.5%
                                Abstain               12,175           0.1%

         (ii)     A proposal to approve the amendment and restatement in its
                  entirety of the Company's 1996 Nonemployee Director Stock
                  Option Plan. The proposal, which was approved, received the
                  votes of the holders of the number of shares of Common Stock
                  voted in person or by proxy at the Annual Meeting and the
                  percentage of total votes cast as indicated below:

                                                    VOTES          PERCENTAGE
                                               ----------------   -------------

                                For               17,939,271          94.5%
                                Against            1,035,619           5.4%
                                Abstain                9,725           0.1%

(d)      Not applicable.




                                      23
<PAGE>   24




ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits


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

     10.1         Precision Response Corporation Amended and Restated 1996
                  Incentive Stock Plan (as amended through June 21, 1999)*+

     10.2         Precision Response Corporation Amended and Restated 1996
                  Non-employee Director Stock Option Plan (incorporated by
                  reference to Exhibit "A" to the Company's Proxy Statement
                  dated April 30, 1999, File No. 0-20941)+

     10.3         Third Amendment to Revolving Credit Agreement effective as of
                  June 30, 1999, between the Company and Bank of America, N.A.,
                  d/b/a NationsBank, N.A., successor to NationsBank, N.A.
                  ("NationsBank")*

     10.4         Third Amendment to Mortgage Loan Agreement effective as of
                  June 30, 1999, between the Company and NationsBank*

     10.5         First Amendment to Consolidated Renewal Promissory Note
                  effective as of June 30, 1999, between the Company and
                  NationsBank*

     10.6         Securities Purchase Agreement dated as of June 15, 1999,
                  between the Company and Global Reservation Systems, Inc.
                  ("GRS") (without exhibits or schedules)*

     10.7         Common Stock Purchase Warrant dated June 15, 1999, from GRS
                  in favor of the Company*

     10.8         Shareholders' Rights Agreement dated as of June 15, 1999,
                  among the Company, GRS and certain shareholders of GRS*

     10.9         Registration Rights Agreement dated as of June 15, 1999,
                  between the Company and GRS*

     27.1         Financial Data Schedule (for SEC use only)*
---------------
       * Filed herewith.
       + Indicates a management contract or compensatory plan or arrangement.

(b)      Reports on Form 8-K

         No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1999.




                                      24
<PAGE>   25

                                   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
                                             Executive 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:  August 9, 1999






                                      25
<PAGE>   26




                         PRECISION RESPONSE CORPORATION

                               INDEX TO EXHIBITS



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

     10.1         Precision Response Corporation Amended and Restated 1996
                  Incentive Stock Plan (as amended through June 21, 1999)*

     10.2         Precision Response Corporation Amended and Restated 1996
                  Non-employee Director Stock Option Plan (incorporated by
                  reference to Exhibit "A" to the Company's Proxy Statement
                  dated April 30, 1999, File No. 0-20941)

     10.3         Third Amendment to Revolving Credit Agreement effective as of
                  June 30, 1999, between the Company and Bank of America, N.A.,
                  d/b/a NationsBank, N.A., successor to NationsBank, N.A.
                  ("NationsBank")*

     10.4         Third Amendment to Mortgage Loan Agreement effective as of
                  June 30, 1999, between the Company and NationsBank*

     10.5         First Amendment to Consolidated Renewal Promissory Note
                  effective as of June 30, 1999, between the Company and
                  NationsBank*

     10.6         Securities Purchase Agreement dated as of June 15, 1999,
                  between the Company and Global Reservation Systems, Inc.
                  ("GRS") (without exhibits or schedules)*

     10.7         Common Stock Purchase Warrant dated June 15, 1999, from GRS
                  in favor of the Company*

     10.8         Shareholders' Rights Agreement dated as of June 15, 1999,
                  among the Company, GRS and certain shareholders of GRS*

     10.9         Registration Rights Agreement dated as of June 15, 1999,
                  between the Company and GRS*

     27.1         Financial Data Schedule*
---------------

* Filed herewith.