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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For Annual and Transition Reports Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the fiscal year ended September 30, 2003

OR

Commission File Number 0-21333

RMH TELESERVICES, INC.

(Exact name of registrant as specified in its charter)

15 Campus Boulevard

Newtown Square, PA 19073

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (610) 325-3100

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no par value per share

(Title of each class)

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  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)    Yes  x    No  ¨

As of January 12, 2004, 16,011,830 shares of common stock were outstanding.

The aggregate market value of the shares of common stock owned by non-affiliates of the registrant as of March 31, 2003 was approximately $80.3 million (based upon the closing sales price of these shares as reported by the NASDAQ Stock Market’s national market). Calculation of the number of shares held by non-affiliates is based on the assumption that the affiliates of the registrant include only directors, executive officers and individual shareholders filing Schedules 13D or 13G with the registrant. The information provided shall in no way be construed as an admission that any person whose holdings are excluded from the figure is an affiliate or that any person whose holdings are included is not an affiliate and any such admission is hereby disclaimed. The information provided is included solely for record keeping purposes by the Securities and Exchange Commission.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s Proxy Statement for the Annual Meeting of Shareholders are incorporated by reference in Part III.

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In this Annual Report on Form 10-K, “RMH,” “we,” “us,” and “our” refer to RMH Teleservices, Inc., a Pennsylvania corporation, and, when applicable, its subsidiaries.

References to a given fiscal year in this Annual Report on Form 10-K are to the fiscal year ending on September 30th of that year. For example, the phrases “fiscal 2003” or “2003 fiscal year” refer to the fiscal year ended September 30, 2003.

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PART I

ITEM 1. BUSINESS

General

RMH Teleservices, Inc. is a provider of outsourced customer relationship management (“CRM”) services, offering customer interaction solutions that permit its clients to more effectively manage their relationships with their customers. We have developed strategic relationships with market leaders in the telecommunications, financial services, insurance, technology, retail and logistics industries. Our client base includes Aegon, AT&T, MCI, Microsoft, Nextel, SBC, UPS and others. We distinguish ourselves through our industry expertise, well-trained workforce and integrated customized technology solutions designed to meet the rigorous demands of our clients. At September 30, 2003, we operated over 7,600 workstations in our network of 14 customer interaction centers in the United States, Canada, and the Philippines.

The CRM industry provides a broad range of customer relationship management services to its clients on both an inbound and outbound basis. Inbound services typically include product service and support, response to customer inquiries and order processing. Outbound services may include direct sales, product inquiry and lead generation and appointment setting. These services are designed to improve the overall customer experience and build closer relationships between companies and their customers.

We believe that the continued growth in outsourced CRM services is driven by the following factors:

Intensifying Competition in Many Industries. The deregulation of industries such as telecommunications and financial services has increased the number of participating companies and the variety of products and services available to consumers. As companies in these competitive industries attempt to maintain their existing customer base and acquire new customers they are increasingly outsourcing their customer care activities to skilled providers.

Focus on the Customer. Consumers are increasingly able to quickly and easily choose among multiple competitors for various services and enjoy reduced costs by switching from one vendor to another. At the same time, competition is increasing across industries and companies see greater value in retaining existing customers. Consequently, companies are devoting an increasing amount of resources toward maintaining their existing customers.

Trend Toward Outsourcing. Many businesses lack the expertise, resources and infrastructure necessary to efficiently provide optimal customer support. As businesses find they are unable to effectively meet their customer care needs, they are increasingly turning to experienced providers of outsourced services. Outsourcing their customer care needs to dedicated CRM providers affords companies access to the skills, expertise and technology necessary for proper customer care and allows them to focus on the delivery of their products and services.

Pending Merger

On November 18, 2003, we signed a definitive merger agreement under which we agreed to be acquired by NCO Group, Inc. (“NCO”). The definitive merger agreement was subsequently amended on January 22, 2004. NCO is one of the largest providers of accounts receivable collection services in the world. NCO provides services to clients in the financial services, healthcare, retail, commercial, utilities, education, telecommunications and government sectors. Its common stock is traded on The NASDAQ National Market under the symbol “NCOG.” Under the terms of the original definitive merger agreement, the acquisition provided that our shareholders would receive $5.50 worth of NCO common stock for each share of our common stock, as long as NCO’s stock price, based on NCO’s twenty day average stock price prior to the closing, was valued between $22.00 and $27.00 per share. Based on the terms of the January 22, 2004 amendment to the definitive merger agreement, our shareholders will receive 0.2150 shares of NCO common stock for each share of our common stock, as long as NCO’s stock price, based on NCO’s twenty-day average stock price prior to closing, is valued between $18.75 and $26.75 per share. Within this range, the acquisition will be funded with approximately 3.5 million shares of NCO common stock.

The transaction is subject to approval by our shareholders. NCO has entered into voting agreements with certain of our shareholders holding approximately 38% of our outstanding shares pursuant to which such shareholders have agreed to vote their shares in favor of the acquisition. Our board of directors has unanimously voted to approve the transaction and recommend that RMH shareholders vote to approve the merger. The merger is subject to normal regulatory review and the expiration of applicable waiting periods. Additional information, including a discussion of the background and our reasons for the transaction, will be provided in the Proxy Statement/Prospectus to be mailed to our shareholders. The discussion in this report is qualified in its entirety by the impact of this transaction on us and our shareholders. See “Risk Factors—Risks relating to the NCO Transaction.”

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Growth Strategy

Our objective is to become the market leader in outsourced CRM solutions in the markets we target. We plan to capitalize on the substantial opportunities in the CRM industry and position our company for continued revenue growth by:

Targeting Top-Tier Clients in Key Industries

We target larger companies in the industries we serve and focus on becoming their preferred provider of CRM services. The larger contract size associated with such clients allows us to operate efficiently, and we expect our high level of service to allow us to obtain additional business from our existing clients, most of which have substantial and growing CRM needs. We focus our sales efforts on current and future clients in targeted industries with potentially significant needs for outsourced CRM services, primarily in the telecommunications, insurance, financial services, technology, retail and logistics industries. We believe that by developing and cultivating industry-specific expertise in-house, we are able to offer more customized and relevant solutions to our clients. As part of this approach, we continue to evaluate opportunities in other industries that have a substantial, long-term need for outsourced solutions.

Providing High Quality CRM Services on a Cost-Effective Basis

Our strategy is to provide high quality, cost-effective CRM services that meet our clients’ high standards. We have operations in medium to large-sized facilities in areas with substantial, well-qualified labor pools. Prior to opening a customer interaction center, we analyze the demographics of the targeted geographic area in order to determine the quality and availability of the local labor pool. Where appropriate, we will locate facilities in markets where we can obtain financial incentives from local and state governments to open and operate facilities in their respective jurisdictions. During fiscal 2003, significant capacity increases included:

Surrey, British Columbia – 270 workstation expansion

Saulte St. Marie, Ontario – 125 workstation expansion

Oromocto, New Brunswick - 90 workstation expansion

Yuma, Arizona – 75 workstation expansion

Allentown, Pennsylvania – 50 workstation expansion

We also opened 60 workstations in a call center in Manila, the Philippines. These capacity increases were offset by the closure of outbound call centers in Clearwater, Florida; Harlingen, Texas; and York, Pennsylvania. See further discussion regarding our restructuring activities under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

For financial information relating to the geographic distribution of our assets see the consolidated financial statements attached hereto.

We evaluate additional regions in which to locate new customer interaction centers on an ongoing basis. This careful attention to site selection has allowed us to lower our employee turnover and reduce the overall costs associated with operating a customer interaction center. We continued efforts in fiscal 2003 to reduce our cost structure by closing three of our older, higher-cost customer interaction centers in the United States. In addition, we have invested in quality assurance practices and personnel. We operate one quality assurance center that monitors all CRM representatives to ensure compliance with performance standards.

Diversifying Our Revenue Base

Over the past several years we have worked to increase the predictability of our revenue stream by transitioning our revenue base from outbound to inbound. For example we have increased our inbound services revenues, which are more predictable due to the longer-term nature of inbound contracts, from 36.9% of net revenues in fiscal 2001 to 59.8% of net revenues in fiscal 2003.

However, we rely on several clients for a significant portion of our revenues. The following table summarizes the percent of net revenues from each client that represented at least 10% of net revenues in 2003, 2002 and 2001:

We provide inbound and outbound CRM services to MCI WORLDCOM Communications, Inc. and MCI WORLDCOM Network Services, Inc. (collectively, “MCI”), a subsidiary of WorldCom, Inc. (“WorldCom”), under several agreements that expire through October 31, 2007. MCI accounted for 34.2%, 25.8%, and 19.2 % of our net revenues in 2003, 2002, and 2001, respectively. On July 21, 2002, WorldCom announced that it had filed for voluntary relief under Chapter 11 of the United States Bankruptcy Code.

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While we have continued to provide services to MCI, these events create uncertainty about our future business relationship with MCI, which, if not resolved in a manner favorable to us, could have a significant adverse impact on our future operating results and liquidity. In the event that our business relationship with MCI were to terminate, our contracts with MCI call for certain wind-down periods and the payment by us of certain termination fees, as defined in such contracts, during which time we would seek new business volume. However, replacing lost MCI business volume is subject to significant uncertainty, could take substantially longer than the wind-down periods, and would be dependent on a variety of factors that our management cannot predict at this time.

See additional discussion about our relationship with MCI under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our Services

Our services allow our clients to strengthen their customer relationships by providing a high level of support to their customers and generate incremental sales by acquiring new customers. We design and implement customized outsourced customer care solutions designed to optimize quality, price, and satisfaction in building customer relationships.

Our CRM services are generally classified as either inbound or outbound services, which are described as follows:

Inbound Services

Our inbound CRM services consist primarily of customer service and technical support programs, although some acquisition and retention services are also performed on an inbound basis. Inbound services involve the processing of incoming calls, often placed by our clients’ customers using toll-free numbers, to a customer service representative for service, order fulfillment or information. Our system receives an inbound call and directs it, together with scripting, pricing data, reference databases and any other relevant information, to an available CRM representative’s workstation.

Our customer service programs are designed to maintain and extend the customer relationship and maximize the long-term value of our clients’ relationships with their customers. We respond to billing and other account inquiries from our clients’ customers and manage customer complaints and product or service problems to promote faster resolution and follow predetermined procedures to ensure that the problems have been resolved. We offer help desk, product or service support, including troubleshooting and other first- and second-tier support services. We also confirm that products or services requested by customers have been delivered or provided and that changes requested by customers in products or services have been effected. In addition to these customer service initiatives, we use our inbound services to secure new customers for our clients by making direct sales in connection with providing traditional inbound services, by receiving orders for and processing purchases of products or services and by fulfilling information requests for product or service offerings. Finally, we use our inbound services to assist clients in regaining business from customers who have allowed their service to lapse. Inbound services represented 59.9% of our net revenues for fiscal 2003.

Outbound Services

We also provide outbound CRM services, which consist of customer acquisition and customer retention services. In providing our outbound services, our system receives data for target customers electronically from our clients. The data is retained in our database management systems and is then distributed for calling by our predictive dialing system. Once a live connection is established, the system transfers the call, along with the customer data and scripting information, to the workstation of a CRM representative trained for that specific client’s program. Our customer acquisition services are designed to secure new customers for our clients and can include a wide range of activities depending on our clients’ needs, including direct sales services, order processing, product inquiry and lead generation and appointment setting whereby we use information provided by our clients to identify and prioritize customer leads and schedule customer interactions with client representatives. Our customer retention services enable our clients to respond more effectively to their customers’ needs and concerns, reward customers for their continued patronage and reinstate customers who have previously canceled their service. These services include conducting satisfaction assessments to ascertain customer opinions regarding the quality of client product or service offerings and interacting with our clients’ customers who have allowed their service to lapse in an attempt to regain their business and learn their reasons for discontinuing service. Outbound services represented 40.1% of our net revenues for fiscal 2003.

For a summary of the operating results for each of our segments, see note 18 to the consolidated financial statements included with this report.

Our Client Contracts

Our client contracts are generally for terms of up to five years. Contracts are typically terminable by either party upon 60 days notice; however, in some cases, particularly in our longer term inbound contracts which often require substantial capital expenditures on our part, a client may be required to pay us a termination fee in connection with an early termination of the contract. Our contract with Aegon contains a termination clause under which we would be required to pay a penalty for terminating the contract, without cause, prior to its July 31, 2007 termination date. The amount of the termination payment to Aegon would vary based on the terms of the contract. As a result of an amendment to our Canadian services agreement with MCI that became

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effective on October 1, 2003, in the event MCI terminates the services agreement due to our material breach or a transaction in which a competitor of MCI acquired control of RMH or in the event we terminate the services agreement for convenience after October 1, 2004, we are required to pay a minimum termination fee of $153,061 for each month remaining in the agreement (or $7,499,989 at October 1, 2003). In most other instances (as defined in the services agreement) in which either party terminates the services agreement, we are required to pay a termination fee of $76,531 for each month remaining in the services agreement (or $3,750,019 at October 1, 2003).

In addition, certain of our inbound contracts may contain minimum volume commitments requiring our clients to provide us with agreed-upon levels of calls during the terms of the contracts. Our fees for services rendered under these contracts are based on pre-determined contracted chargeable rates that may include a base rate per hour plus a higher rate or “bonus” rate if we meet pre-determined objective performance criteria. These objective performance criteria include such items as sales generated during a defined period. Additionally, we may receive additional discretionary client determined bonuses based upon criteria established by our clients.

We have begun to negotiate amendments of certain customer contracts to provide for limited currency rate protection below certain pre-determined exchange rate levels and limited gain sharing above certain pre-determined exchange rate levels. Such changes may mitigate certain currency risks, however, there can be no assurance that contracts will be successfully negotiated or that the amendments will result in the elimination of currency risk for such contracts. Our Canadian services agreement with MCI was amended effective October 1, 2003 to provide limited foreign currency rate protection below certain pre-determined exchange rate levels and limited gain sharing above certain pre-determined exchange rate levels.

Our Technology

Our staff of skilled information technology professionals is focused on technological integration to meet our clients’ needs. We integrate our clients’ existing systems with our own systems to provide cost-effective, timely solutions that allow them to maximize their investment and minimize their costs.

Our customer interaction centers and network systems both use a flexible database architecture permitting the easy sharing of data among users of the system. As a result, we are able to configure our scalable systems to work cost-effectively at low and high volumes and permit the efficient addition of capacity. These technologies improve sales and customer service by providing our CRM representatives with enhanced access to real-time customer and product information. We have implemented procedures to protect our systems against power loss, fire and other disasters.

Sales and Marketing

Our sales and marketing team is comprised of six sales executives, all of whom have sales experience in the customer care outsourcing industry. In addition, members of our executive management team, including our chief executive officer and leaders of our operations and technology and quality assurance departments, are active participants in the sales process. Their involvement enables us to better manage our clients’ expectations and our ability to meet or exceed their expectations. A portion of the compensation of our core sales and marketing team is commission-based.

Quality Assurance

We have consolidated our quality assurance program into one quality assurance center that has dedicated quality assurance personnel who monitor CRM representatives to ensure compliance with performance standards. Sales confirmations are digitally recorded with the customer’s consent to ensure accuracy and to provide a record of each sale. Our personnel review the audio file of certain completed sales for compliance with client specifications. This system is designed to respond to client requests to review details of a particular sale within minutes and is able to identify the program, the date and time of the interaction and the CRM representative who made the sale. Clients also participate in the monitoring process and are able to electronically access relevant information.

Our information systems enable us to provide our clients with customized reports on the status of their CRM programs. Access to this data enables our clients to modify or enhance an ongoing campaign in order to improve its effectiveness.

Competition

Our primary competitors are large customer care outsourcing service providers. Secondary competitors include specialized outsourcing firms with focused capabilities in areas such as technical support, direct marketing, and human resources. We also compete with the internal operations of many of our existing clients and prospects. The outsourced customer care industry is highly fragmented and competitive. We distinguish ourselves from the competition by providing high quality customer care outsourcing services at affordable prices that meet our clients’ needs for satisfaction, scalability and time to market. The principal competitive factors in our industry are price, quality of service, performance, experience and reporting capabilities.

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Government Regulation

Telemarketing sales practices are regulated in the United States and Canada as discussed below.

United States

In the United States, there are two major federal laws that specifically address telemarketing. In 1991, Congress passed the Telephone Consumer Protection Act (“TCPA”) which authorized the Federal Communications Commission (“FCC”) to adopt rules implementing the TCPA. In 1994, Congress passed the Telemarketing and Consumer Fraud and Abuse Prevention Act (the “Fraud Prevention Act”) which authorized the Federal Trade Commission (“FTC”) to adopt the Telemarketing Sales Rule (“TSR”) which became effective on December 31, 1995. Within the past year, the TSR has been amended to include several new restrictions on telemarketing activities. In addition, the states have various regulatory restrictions and requirements for telemarketing companies.

The TCPA places restrictions on unsolicited automated telephone calls to residential telephone subscribers by means of automatic telephone dialing systems, prerecorded or artificial voice messages and telephone fax machines. In addition, the regulations require CRM firms to develop a “do not call” list and to train their CRM personnel to comply with these restrictions. The TCPA creates a right of action for both consumers and state attorneys general. A court may award damages or impose penalties of $500 per violation, which may be trebled for willful or knowing violations. Currently, we train our service representatives to comply with the regulations of the TCPA. On March 11, 2003, the Do-Not-Call Implementation Act (the “Do-Not-Call Act”) was signed into law. The Do-Not-Call Act required the FCC to issue final rules under the TCPA to maximize the consistency of the TCPA with the FTC’s December 18, 2002 amendments to the TSR, as discussed below. Accordingly, on July 3, 2003, the FCC issued rules regarding the national do-not-call registry, call abandonment and caller ID requirements.

The FTC regulates both general sales practices and telemarketing specifically and has broad authority to prohibit a variety of advertising or marketing practices that may constitute “unfair or deceptive acts or practices.” Pursuant to its general enforcement powers, the FTC can obtain a variety of types of equitable relief, including injunctions, refunds, disgorgement, the posting of bonds and bars from continuing to do business for a violation of the acts and regulations it enforces.

The FTC also administers the Fraud Prevention Act under which the FTC has issued the TSR prohibiting a variety of deceptive, unfair or abusive practices in direct telephone sales. Generally, these rules prohibit misrepresentations of the cost, quantity, terms, restrictions, performance or characteristics of products or services offered by telephone solicitation or of refund, cancellation or exchange policies. The regulations also regulate the use of prize promotions in direct telephone sales to prevent deception and require that a telemarketer identify promptly and clearly the seller on whose behalf the CRM representative is calling, the purpose of the call, the nature of the goods or services offered and that no purchase or payment is necessary to win a prize. The regulations also require that providers of services maintain records on various aspects of their businesses.

On December 18, 2002, the FTC amended the TSR. The major change was the creation of a centralized national “do not call” registry. Federal enforcement of the National Do Not Call Registry began on October 1, 2003. A consumer who receives a telemarketing call despite being on the registry will be able to file a complaint with the FTC, either online or by calling a toll free number. Violators could be fined up to $11,000 per incident. In addition, the amended TSR restricts call abandonment (with certain safe harbors) and unauthorized billing. Further, as of January 29, 2004, the amended TSR will require telemarketers to transmit their telephone numbers and, if possible, their names to consumers’ “caller id” services.

At the state level, most states have enacted consumer protection statutes prohibiting unfair or deceptive acts or practices as they relate to telemarketing sales. For example, telephone sales in certain states are not final until a written contract is delivered to and signed by the buyer, and such a contract often may be canceled within three business days. At least one state also prohibits parties conducting direct telephone sales from requesting credit card numbers in certain situations, and several other states require certain providers of such services to register annually, post bonds or submit sales scripts to the state’s attorney general. Under these general enabling statutes, depending on the willfulness and severity of the violation, penalties can include imprisonment, fines and a range of equitable remedies such as consumer redress or the posting of bonds before continuing in business.

Additionally, some states have enacted laws and others are considering enacting laws targeted at direct telephone sales practices. Some examples include laws regulating electronic monitoring of telephone calls and laws prohibiting any interference by direct telephone sales with “caller id” devices. Most of these statutes allow a private right of action for the recovery of damages or provide for enforcement by state agencies permitting the recovery of significant civil or criminal penalties, costs and attorneys’ fees. There can be no assurance that any such laws, if enacted, will not adversely affect or limit our current or future operations.

A growing number of states have also established statewide “do not call” lists. According to the FCC, as of July 2003, 36 states had passed “do not call” statutes and a number of other states have considered similar bills.

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The industries we serve are also subject to government regulation, and, from time to time, bills are introduced in Congress, which, if enacted, could affect our operations. We, and our employees who sell insurance products, are required to be licensed by various state and provincial insurance commissions for the particular type of insurance product to be sold and are required to participate in regular continuing education programs.

Telecommunications is another industry we serve that is subject to government regulation. For example, “slamming” is the illegal practice of changing a consumer’s telephone service without permission. The FCC has promulgated regulations regarding slamming rules that apply solely to the telecommunications carrier and not the telemarketer or the independent party verifying the service change. However, some state slamming rules may extend liability for violations to agents and other representatives of telecommunications carriers, such as telemarketers.

Our representatives undergo an extensive training program, part of which is designed to educate them about applicable laws and regulations and to try to ensure their compliance with such laws and regulations. Also, we program our call management system to avoid initiating telephone calls during restricted hours or to individuals maintained on our “do not call” list. We believe that we operate in compliance with all applicable laws and regulations, but we cannot guarantee that we will be in compliance with all applicable laws and regulations at all times.

Canada

In Canada, the Canadian Radio-Television and Telecommunications Commission enforces rules regarding unsolicited communications using automatic dialing and announcing devices, live voice and fax. Companies that violate any of the restrictions on unsolicited calls may have their telephone service terminated after two business days’ notice from the telephone company.

In 2001, the federal government of Canada enacted the Personal Information Protection and Electronic Documents Act (the “Federal Act”). Effective January 1, 2004, the Federal Act requires all commercial enterprises to obtain consent for the collection, use, and disclosure of an individual’s personal information. Failure to comply with the Federal Act could result in significant fines and penalties or possible damage awards for the tort of public humiliation. In addition to the foregoing sanctions, the Federal Act also contemplates that any finding of an improper use of personal information will be subject to public disclosure by the Privacy Commissioner. The Federal Act permits any Province of Canada to enact substantially similar legislation governing the subject matter of the Federal Act, in which case the legislation of the Province will override the provisions of the Federal Act. Our Canadian operations are located primarily in the Provinces of Ontario, British Columbia and New Brunswick. British Columbia has enacted legislation (the “B.C. Act”) governing the subject matter of the Federal Act. The federal government of Canada has not yet declared the B.C. Act substantially similar to the Federal Act. Until such time as the federal government of Canada makes such declaration, both the B.C. Act and the Federal Act will apply concurrently to our operations in British Columbia. The B.C. Act is presently scheduled to come into effect on January 1, 2004. Though neither has yet enacted legislation which is substantially similar to the Federal Act, both Ontario and New Brunswick have indicated that they may enact legislation governing the subject matter of the Federal Act. Failure to comply with the Federal Act, the B.C. Act, as well as, any such future legislation enacted by Ontario, New Brunswick or any other provinces in which we operate, may have an adverse affect on, or limit our current or future, operations.

The Competition Act (Canada) contains a number of provisions that regulate the conduct of telemarketers in Canada, in particular the manner in which outbound calls are to be conducted. Failure to comply with such legislation could adversely affect our business.

Employees

As of January 12, 2004, we employed 11,337 people, 5,692 of whom we employed on a full-time basis and 5,645 of whom we employed on a part-time basis. None of our employees are currently covered by collective bargaining agreements, although efforts have been made by some employees in support of such an agreement. We believe that our relations with our employees are good.

History

We were founded in 1983 and completed an initial public offering of shares of common stock in September 1996. RMH Teleservices, Inc. is a Pennsylvania corporation and its principal business office is located at 15 Campus Boulevard, Newtown Square, Pennsylvania 19073. Our telephone number is (610) 325-3100.

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). These filings are available to the public over the Internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room located at 450 Fifth Street, NW, Washington, CD 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

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Our principal Internet address is www.rmh.com. We make available free of charge on www.rmh.com our annual, quarterly and current reports, and amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Investment Considerations

Statements about our outlook and other statements in this Annual Report other than historical facts are forward-looking statements. These statements are subject to risks and uncertainties that may change at any time, and, therefore, actual results may differ materially from expected results. Forward-looking statements include information about our possible or assumed future financial results and usually contain words such as “believes,” “intend,” “expects,” “anticipates,” or similar expressions. The risks and uncertainties that may affect the operations, performance, development and results of our business include, but are not limited to, the items discussed below under the caption “Risk Factors.”

RISK FACTORS

Investing in our common stock involves a high degree of risk. Any of the following risks could materially harm our business, results of operations or financial condition and could result in the complete loss of your investment. You should carefully consider the following risk factors and all other information contained in this Annual Report before purchasing our common stock.

Risks Particular to Our Company

We may not be able to manage our growth effectively, which could adversely affect our results of operations.

We have experienced rapid growth over the past several years. Rapid growth places a significant strain on our management, operations and resources. Our future performance and profitability will depend on our ability to:

If we are unable to manage our growth successfully, our business and results of operations could be harmed.

There can be no assurance that we will be profitable in the future.

We sustained operating losses for the fiscal years 2003, 2002 and 2001. While we believe that we will be able to reduce such losses and become profitable in future periods, there can be no assurance that we will be able to do so.

The report of our independent auditors on our financial statements for the year ended September 30, 2003 states that our recurring losses from operations, uncertainty regarding the ability to remain in compliance with restrictive debt covenants under the revolving credit facility, and uncertainty regarding the ability to obtain additional financing to fund our operations and capital requirements raise substantial doubt about our ability to continue as a going concern.

We rely on a few major clients for a significant portion of our revenues. The loss of any of these clients or their failure to pay us could reduce our revenues and adversely affect our results of operations.

Substantial portions of our revenues are generated from a few key clients. One client, MCI, accounted for 34.2% of our net revenues in 2003. In addition, two other clients each accounted for over 10% of our net revenues in 2003. Most of our clients are not contractually obligated to continue to use our services at historic levels or at all. If any of these clients were to significantly reduce the amount of services we perform for them, fail to pay us, or were to terminate the relationship altogether, our revenues and business would be harmed.

On July 21, 2002, WorldCom announced that it had filed for voluntary relief under Chapter 11 of the United States Bankruptcy Code. While we have continued to provide services to MCI, these events create uncertainty about our future business relationship with MCI, which, if not resolved in a manner favorable to us, could have a significant adverse impact on our future operating results and liquidity. In the event that our business relationship with MCI were to terminate, our contracts with MCI call for certain wind-down periods and the payment by us of certain termination fees, as defined in such contracts, during which time we would seek new business volume. However, replacing lost MCI business volume is subject to significant uncertainty, could take substantially longer than the wind-down periods, and would be dependent on a variety of factors which management cannot predict at this time. See additional discussion about our relationship with MCI under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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A decrease in demand for our services in one or more of the industries to which we provide services could reduce our revenues and adversely affect our results of operations.

Our success is dependent in large part on continued demand for our services from businesses within the telecommunications, financial services, insurance, technology and logistics industries. A reduction in or the elimination of the use of outsourced CRM services within any of these industries could harm our business.

We may be unable to hire or retain qualified personnel.

By its nature, our industry is labor intensive. CRM representatives, who make up a significant portion of our workforce, generally receive modest hourly wages. Our recruiting and training costs are increased and our operating efficiency and productivity are decreased by:

Additionally, some of our employees have attempted to organize a labor union, which, if successful, could further increase our recruiting and training costs and could further decrease our operating efficiency and productivity. We may not be able to continue to cost-effectively recruit, train and retain a sufficient number of qualified personnel to meet the needs of our business or to support our growth. If we are unable to do so, our results of operations could be harmed.

Our results of operations may be subject to significant fluctuations.

Our quarterly and annual operating results have fluctuated in the past and may vary in the future due to a wide variety of factors including:

Due to these factors, our quarterly revenues, expenses and results of operations could vary significantly in the future. You should take these factors into account when evaluating past periods and, because of the potential variability in our quarterly results, you should not rely upon results of past periods as an indication of our future performance. In addition, because our operating results may vary significantly from quarter to quarter, results may not meet the expectations of securities analysts and investors, and this could cause the price of our common stock to fluctuate significantly.

Our business could be significantly disrupted if we lose members of our management team.

We believe that our success depends to a significant degree upon the continued contributions of our executive officers and other key personnel, both individually and as a group. Our future performance will be substantially dependent on our ability to retain them. The loss of the services of any of our executive officers, particularly John A. Fellows, our Chief Executive Officer, could prevent us from executing our business strategy.

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Anti-takeover provisions in our articles of incorporation, bylaws and Pennsylvania law and the right of our Board of Directors to issue preferred stock without shareholder approval could make a third-party acquisition of us difficult.

Provisions of our articles of incorporation and bylaws may have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt not approved by our board of directors, including those made at a premium over the prevailing market price of the common stock held by shareholders.

Our classified board of directors and the authority of our board to issue preferred stock and establish certain rights, preferences, privileges, limitations and other special rights thereof without any further vote or action by the shareholders could have the effect of delaying, impeding or discouraging the acquisition of control of our company in a transaction not approved by our board of directors.

The provision of our bylaws classifying the board of directors may only be repealed or amended by an affirmative vote of shareholders entitled to cast 75% of the votes at a shareholders meeting. In addition, we may obtain shareholder approval for certain actions without calling a meeting or soliciting proxies because our articles of incorporation and bylaws permit actions by written consent of shareholders holding a majority of the shares of common stock.

Subchapter F of Chapter 25 of the Pennsylvania Business Corporation Law of 1988, which is applicable to us, may have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that a shareholder might consider in his or her best interest, including those attempts that might result in a premium over the market price for the shares held by shareholders. In general, Subchapter F of Chapter 25 of the Pennsylvania Business Corporation Law delays for five years and imposes conditions upon “business combinations” between an “interested shareholder” and us, unless prior approval of our board of directors is given. The term “business combination” is defined broadly to include various merger, consolidation, division, exchange or sale transactions, including transactions using our assets for purchase price amortization or refinancing purposes. An “interested shareholder,” in general, would be a beneficial owner of shares entitling that person to cast at least 20% of the votes that all shareholders would be entitled to cast in an election of directors.

If we are unable to keep pace with technological changes, our business will be harmed.

Our business is highly dependent on our computer and telecommunications systems, including our customized software, predictive dialing equipment and automated customer interaction workstations. Our ability to compete effectively is dependent upon continued investment in advanced computer and telecommunications technology that is rapidly evolving. We cannot be assured that we will be successful in anticipating or adapting to technological changes or in selecting and developing new and enhanced technologies on a timely basis. In addition, the inability of equipment vendors to supply equipment on a timely basis could harm our operations and financial condition.

Interruptions or failures of our technology infrastructure could harm our business and reputation.

We are highly dependent on the stability of our computer equipment and systems. These systems could be interrupted by natural disasters, power losses, operating malfunctions or computer viruses and other disruptions caused by unauthorized or illegal access to our systems. Any interruption in or failure of our technology equipment systems could have a material adverse effect on both our business and our reputation.

An increase in communication rates or a significant interruption in communication service could harm our business.

Our ability to offer services at competitive rates is highly dependent upon the cost of communication services provided by various local and long distance telephone companies. Any change in the telecommunications market that would affect our ability to obtain favorable rates on communication services could harm our business. Moreover, any significant interruption in communication service or developments that could limit the ability of telephone companies to provide us with increased capacity in the future could harm our existing operations and prospects for future growth.

Fluctuations in currency exchange rates could adversely affect our business.

A significant portion of our operations is located in Canada. Our results of operations have been negatively impacted by the increase in the value of the Canadian dollar in relation to the value of the United States dollar over the past nine months, which has increased our cost of doing business in Canada. Further increases in the value of the Canadian dollar in relation to the value of the United States dollar would further increase such costs and adversely affect our results of operations. In addition, we expect to expand our operations into other countries and, accordingly, will face similar exchange rate risk with respect to the costs of doing business in such countries as a result of any increases in the value of the United States dollar in relation to the currencies of such countries.

There is no guarantee that we will be able to successfully hedge our foreign currency exposure in the future.

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Risks Related to Our Industry

We may not be able to effectively win business against our competition.

The CRM services industry is highly competitive. We compete with:

Many businesses that are significant consumers of CRM services use more than one CRM services firm at a time and reallocate work among various firms from time to time. We and other firms seeking to perform outsourced CRM services are frequently required to compete with each other as individual programs are initiated. We cannot be certain that we will be able to compete effectively against our current competitors or that additional competitors, some of which may have greater resources than we have, will not enter the industry and compete effectively against us. As competition in the industry increases, we may face increasing pressure on the prices for our services. We will face continued pricing pressure as our competitors migrate call centers to lower cost labor markets.

Consumer resistance to our outbound services could harm our industry.

As the CRM services industry continues to grow, the effectiveness of CRM services as a direct marketing tool may decrease as a result of consumer saturation and increased consumer resistance to customer acquisition activities, particularly direct sales.

Government regulation of our industry and the industries we serve may increase our costs and restrict the operation and growth of our business.

Our industry is subject to an increasing amount of regulation in the United States and Canada. Most of the statutes and regulations in the United States allow a private right of action for the recovery of damages or provide for enforcement by the Federal Trade Commission, state attorneys general or state agencies permitting the recovery of significant civil or criminal penalties, costs and attorneys’ fees. The Canadian Radio-Television and Telecommunications Commission enforces rules regarding unsolicited communications using automatic dialing and announcing devices, live voice and fax. We cannot assure you that we will be in compliance with all applicable regulations at all times. We also cannot assure you that new laws, if enacted, will not adversely affect or limit our current or future operations.

Several of the industries served by us, particularly the insurance, financial services and telecommunications industries, are subject to government regulation. We could be subject to a variety of regulatory enforcement or private actions for our failure or the failure of our clients to comply with these regulations. Our results of operations could be adversely impacted if the effect of government regulation of the industries we serve is to reduce the demand for our services or expose us to potential liability. We and our employees who sell insurance products are required to be licensed by various state insurance commissions for the particular type of insurance product sold and to participate in regular continuing education programs. Our participation in these insurance programs requires us to comply with certain state regulations, changes in which could materially increase our operating costs associated with complying with these regulations.

For further discussion of regulatory issues, see Government Regulation in Part I, Item 1.

Terrorist activities and resulting military and other actions could adversely affect our business.

The continued threat of terrorism and the potential for military action and heightened security measures in response to this threat may cause significant disruption to commerce throughout the world. We are unable to predict whether the threat of terrorism or the responses thereto will result in any long-term commercial disruptions or if such activities or responses will have a long-term adverse effect on our business, results of operations or financial condition.

Risks Relating to the NCO Transaction

On November 18, 2003, we entered into an agreement and plan of merger with NCO under which NCO will acquire all of our outstanding stock. We amended the merger agreement on January 22, 2004. Under the amended merger agreement, our shareholders would receive 0.2150 shares of NCO common stock for each share of our common stock, subject to possible adjustment described below. The following are the risks associated with this transaction:

Failure to complete the merger could harm the market price of our common stock and our future business operations.

If the merger is not completed, we may be subject to the following risks:

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Shareholders cannot be sure of the market value of the shares of NCO common stock that will be issued in the merger.

Subject to the adjustments described in the paragraph below, upon the completion of the merger, as amended, each share of our common stock will be converted into the right to receive 0.2150 of a share of NCO common stock so long as NCO’s common stock value is between $18.75 and $26.75. The exchange ratio will be fixed at 0.2150 of a share of NCO common stock for each share of our common stock if NCO’s common stock value i