-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WH1YWJmsCDTZa4H0Fyc1dXQhNXEAgr7gR+erixizx18R69BtWiaT7zpwjMJz1D6f wrx0J/8DNKRSyn3WOQrEeg== 0000950116-00-001235.txt : 20000516 0000950116-00-001235.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950116-00-001235 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICT GROUP INC CENTRAL INDEX KEY: 0001013149 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 232458937 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20807 FILM NUMBER: 634975 BUSINESS ADDRESS: STREET 1: 800 TOWN CENTER DR CITY: LANGHORNE STATE: PA ZIP: 19047 BUSINESS PHONE: 2157570200 MAIL ADDRESS: STREET 1: 800 TOWN CENTER DR CITY: LANGHORNE STATE: PA ZIP: 19047-1748 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2000 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ___________________ to ___________________. Commission File Number: 0-20807 ------- ICT GROUP, INC. ----------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-2458937 - ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 800 Town Center Drive, Langhorne PA 19047 - --------------------------------------- ---------------------------- (Address of principal executive offices) (Zip Code) 215-757-0200 -------------------------------------------------- Registrant's telephone number, includingarea 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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Common Shares, $0.01 par value, 11,821,025 shares outstanding as of May 5, 2000. ICT GROUP, INC. INDEX
PART 1 FINANCIAL INFORMATION PAGE Item 1 CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Consolidated Balance Sheets - March 31, 2000 and December 31, 1999 3 Consolidated Statements of Operations - Three months ended March 31, 2000 and 1999 5 Consolidated Statements of Cash Flows - Three months ended March 31, 2000 and 1999 6 Notes to Consolidated Financial Statements 7 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 PART II OTHER INFORMATION Item 1 LEGAL PROCEEDINGS 14 Item 6 EXHIBITS AND REPORTS ON FORM 8-K 14 SIGNATURES 15
2 ICT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
March 31, December 31, 2000 1999 --------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $7,727 $12,239 Accounts receivable, net 35,371 28,796 Prepaid expenses and other 2,581 2,600 Deferred income taxes 556 556 ------- ------- Total current assets 46,235 44,191 ------- ------- PROPERTY AND EQUIPMENT, net Communications and computer equipment 49,120 41,970 Furniture and fixtures 9,950 9,557 Leasehold improvements 4,769 4,678 ------- ------- 63,839 56,205 Less: Accumulated depreciation and amortization (28,872) (26,784) ------- ------- 34,967 29,421 ------- ------- DEFERRED INCOME TAXES 2,858 2,858 OTHER ASSETS 1,608 1,603 ------- ------- $85,668 $78,073 ======= =======
The accompanying notes are an integral part of these statements. 3 ICT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
March 31, December 31, 2000 1999 --------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $8,000 $4,000 Current portion of capitalized lease obligations 459 525 Accounts payable 7,751 7,869 Accrued expenses 5,857 5,031 ------- ------- Total current liabilities 22,067 17,425 ------- ------- LONG-TERM DEBT 12,000 10,000 ------- ------- CAPITALIZED LEASE OBLIGATIONS 209 308 ------- ------- SHAREHOLDERS' EQUITY: Preferred stock, $0.01 par value 5,000 shares authorized, none issued -- -- Common Stock, $0.01 par value, 40,000 shares authorized, 11,820 and 11,810 shares issued and outstanding 118 118 Additional paid-in capital 49,403 49,403 Retained earnings 2,766 1,554 Accumulated other comprehensive loss (895) (735) ------- ------- Total shareholders' equity 51,392 50,340 ------- ------- $85,668 $78,073 ======= =======
The accompanying notes are an integral part of these statements. 4 ICT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended March 31, ------------------------- 2000 1999 ------- ------- NET REVENUES $41,285 $36,951 OPERATING EXPENSES: Cost of services 23,450 20,388 Selling, general and administrative 15,681 14,653 ------- ------- 39,131 35,041 ------- ------- Operating income 2,154 1,910 INTEREST EXPENSE, NET 167 248 ------- ------- Income before income taxes 1,987 1,662 INCOME TAXES 775 648 ------- ------- NET INCOME $1,212 $1,014 ======= ======= EARNINGS PER SHARE: Basic earnings per share $0.10 $0.09 ======= ======= Diluted earnings per share $0.10 $0.08 ======= ======= Shares used in computing basic earnings per share 11,814 11,643 ======= ======= Shares used in computing diluted earnings per share 12,406 12,043 ======= =======
The accompanying notes are an integral part of these statements. 5 ICT GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31, -------------------------- 2000 1999 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,212 $1,014 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,116 1,582 (Increase) decrease in: Accounts receivable (6,575) (3,339) Prepaid expenses and other 19 (291) Other assets (33) (120) Increase (decrease) in: Accounts payable (118) 2,646 Accrued expenses 826 2,293 ------- -------- Net cash (used in) provided by operating activities (2,553) 3,785 ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (7,634) (3,378) ------- -------- Net cash used in investing activities (7,634) (3,378) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 7,000 - Payments on long-term debt (1,000) (1,000) Payments on capitalized lease obligations (165) (173) ------- -------- Net cash provided by (used in) financing activities 5,835 (1,173) ------- -------- EFFECT OF FOREIGN EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS (160) (50) ------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (4,512) (816) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,239 14,255 ------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $7,727 $13,439 ======= ========
The accompanying notes are an integral part of these statements. 6 ICT GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1: BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month periods ended March 31, 2000 and 1999 are not necessarily indicative of the results that may be expected for the complete fiscal year. For additional information, refer to the consolidated financial statements and footnotes thereto included in the Form 10-K for the year ended December 31, 1999. Note 2: EARNINGS PER SHARE The Company has presented earnings per share pursuant to Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," and the Securities and Exchange Commission Staff Accounting Bulletin No. 98. Basic earnings per share ("Basic EPS") is computed by dividing the net income for each period by the weighted average number of shares of Common stock outstanding for each period. Diluted earnings per share ("Diluted EPS") is computed by dividing the net income for each period by the weighted average number of shares of Common stock and Common stock equivalents outstanding for each period. For the three months ended March 31, 2000 and 1999, Common stock equivalents outstanding used in computing Diluted EPS were 592,000 and 400,000, respectively. For the three months ended March 31, 2000 and 1999, options to purchase 243,000 and 571,000 shares of Common stock were outstanding, but not included in the computation of Diluted EPS as the result would be antidilutive. Note 3: COMPREHENSIVE INCOME (LOSS) The Company follows SFAS No. 130, "Reporting Comprehensive Income". This statement requires companies to classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. Three Months Ended March 31, --------------------------- 2000 1999 ---------- ---------- Net Income $1,212,000 $1,014,000 Foreign currency translation adjustments (98,000) (31,000) ---------- ---------- Comprehensive income $1,114,000 $ 983,000 ========== ========== Note 4: OPERATING AND GEOGRAPHIC INFORMATION Under the disclosure requirements of SFAS No. 131, the Company classifies its operations into three business segments: Domestic TeleServices, International Services, and Customer Management Services. The operating segments are managed separately because each operating segment represents a strategic business unit that offers different services. Segment assets include amounts specifically identified to each segment. Corporate assets consist primarily of property and equipment. The Domestic TeleServices segment provides inbound and outbound telemarketing services. The International Services segment provides international multilingual inbound and outbound telemarketing services, customer management services, marketing, research and other value-added services and includes business conducted by Spantel for the US Hispanic market. The Customer Management Services segment provides marketing, research, consulting teleservices, and ongoing customer care management on behalf of customers operating in the Company's target industries. 7 Three Months Ended March 31, ------------------------------------ 2000 1999 ----------- ----------- Net Revenues: Domestic TeleServices $ 18,054 $ 23,272 International Services 9,305 5,584 Customer Management Services 13,926 8,095 ----------- ----------- $ 41,285 $ 36,951 =========== =========== Operating Income (loss): Domestic TeleServices $ 486 $ 1,795 International Services 14 (31) Customer Management Services 1,654 146 ----------- ----------- $ 2,154 $ 1,910 =========== =========== Total Assets: Domestic TeleServices $ 45,462 $ 44,397 International Services 17,652 14,189 Customer Management Services 17,405 16,994 Corporate 5,149 5,040 ----------- ----------- $ 85,668 $ 80,620 =========== =========== Depreciation and Amortization: Domestic TeleServices $ 669 $ 778 International Services 578 260 Customer Management Services 525 367 Corporate 344 177 ----------- ----------- $ 2,116 $ 1,582 =========== =========== Capital Expenditures: Domestic TeleServices $ 2,501 $ 1,288 International Services 209 616 Customer Management Services 4,298 1,000 Corporate 625 474 ----------- ----------- $ 7,634 $ 3,378 =========== =========== 8 The following table represents information about the Company by geographic area: Three Months Ended March 31, ------------------------------------ 2000 1999 ----------- ----------- Revenues: United States $ 33,704 $ 32,585 Canada 4,582 2,133 Europe 2,411 2,177 Australia 588 56 ----------- ----------- $ 41,285 $ 36,951 =========== =========== Operating income (loss): United States $ 2,451 $ 2,199 Canada 22 37 Europe (234) (254) Australia (85) (72) ----------- ----------- $ 2,154 $ 1,910 =========== =========== Identifiable assets: United States $ 68,016 $ 70,234 Canada 7,584 4,698 Europe 9,250 5,510 Australia 818 178 ----------- ----------- $ 85,668 $ 80,620 =========== =========== 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MARCH 31, 2000 GENERAL ICT Group, Inc. (the "Company" or "ICT") is a global supplier of customer relationship management (CRM) services. The Company provides integrated telesolutions, e-solutions and market solutions helping its clients identify, acquire, retain, service, measure, and maximize the lifetime value of their customer relationships. ICT's telesolutions offering includes outbound telesales and inbound customer support for sales and service applications, domestically and internationally. Its e-solutions offering provides real-time interaction-driven customer support for Internet sales and service applications through Web-enabled customer contact center services, e-mail management and processing, and multi-channel CRM services. Market research, database marketing, and data mining capabilities are available through its market solutions offering, including questionnaire design, telephone interviewing, and data coding, tabulating, and analysis services. The Company's customer management services experience, Internet and CRM technology capabilities and expertise in select target industries enables it to provide its clients with high quality cost-effective customer management services. While these solutions are available on an outsourced basis, using ICT's customer contact centers, the Company intends to also offer these services through a hosted arrangement, using the client's facility, or co-sourced arrangement, using both the client's facility and ICT's technologically compatible customer contact centers. With the growth of the Internet as a means of transacting business and the poor customer service experienced by many on-line buyers, ICT believes significant opportunities exist to expand its business. The Company's growth strategy includes the following key elements: [ ] Pursue e-Commerce Opportunities [ ] Expand Value-Added Services [ ] Develop Strategic Alliances and Acquisitions [ ] Increase International Presence [ ] Focus on Industry Specialization [ ] Maintain Technology Investment [ ] Continue Commitment to Quality Service In February 2000, ICT announced the formation of iCT ConnectedTouch.com, LLC a new wholly owned subsidiary formed to provide highly focused innovative E-solutions designed to maximize the value of customer relationships for business-to-business and business-to-consumer e-business sales and service operations. iCT ConnectedTouch.comsm is focused on supporting 1) dot.com companies and bricks-and-mortar e-commerce companies, 2) Internet support service companies including Internet Service Providers (ISPs) and Application Service Providers (ASPs), as well as 3) traditional clients that have added an Internet channel for sales and service. 10 RESULTS OF OPERATIONS Three Months Ended March 31, 2000 and 1999: Net Revenues. Net revenues increased 12% to $41.3 million for the three months ended March 31, 2000 from $37.0 million for the three months ended March 31, 1999. Revenues from the Domestic TeleServices segment decreased 22% to $18.1 million from $23.3 million in the three months ending March 31, 1999 and accounted for 44% of Company revenues versus 63% for the same period in the prior year. This was primarily the result of a slowdown in telesales campaigns which utilize credit card files as privacy concerns continued to restrain marketing activities. The decline in revenues from the Domestic TeleServices segment was more than offset by strong growth in the International Services and Customer Management Services segments. International Services revenues grew 67% to $9.3 million from $5.6 million in the three months ending March 31, 1999 and accounted for 22% of Company revenues versus 15% for the same period in the prior year. About half of this growth was from new clients with the balance from existing customers. Customer Management Services revenues grew 72% to $13.9 million from $8.1 million in the three months ending March 31, 1999 and accounted for 34% of Company revenues versus 22% for the same period in the prior year. Approximately $4.0 million of the increase came from existing customers with the balance coming from new customers. ICT Group's newly established subsidiary, ICT Connected Touch.com(sm) accounted for a rapidly growing portion of the Company's revenues. Net revenues from infrastructure support services provided by ICT Group operating divisions to dot.com companies, ISPs, ASPs and traditional clients that have added an Internet channel for sales and service totaled $2.1 million, or 5% of total Company net revenues during the first quarter of 2000. Cost of Services. Cost of services, which consist primarily of direct labor and telecommunications costs, increased 15% to $23.5 million for the three months ended March 31, 2000 from $20.4 million in the three months ended March 31, 1999. This increase is primarily the result of increased direct labor required to support the increased revenue volume. As a percentage of revenues, cost of services increased to 57% in the first quarter of 2000 from 55% in the same quarter of 1999 as an increase in labor cost per production hour offset savings in telecommunication costs. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 7% to $15.7 million for the three months ended March 31, 2000 from $14.7 million for the three months ended March 31, 1999 due to increased numbers of contact centers and workstation capacity and additional sales and systems support implemented to support business growth. As a percentage of revenues, selling, general and administrative expenses declined to 38% in the first quarter of 2000 from 40% in the same quarter of 1999. The Company was able to leverage the existing infrastructure to support volume growth. Interest Expense, net. Net interest expense of $167,000 versus $248,000 in the first quarter of 2000 and 1999, respectively, reflects the interest expense related to capital leases and borrowings against the Company's equipment line of credit for capital expansion offset by investment income. The decrease in net interest expense is primarily the result of decreased average outstanding balances on term borrowings in 2000 as compared to 1999. Provision for Income Taxes. Provision for income taxes increased $127,000 to $775,000 for the first quarter of 2000 from $648,000 in the first quarter of 1999. For both 2000 and 1999, the provision for income taxes was approximately 39% of income before taxes. Quarterly Results and Seasonality The Company has experienced and expects to continue to experience significant quarterly variations in operating results, principally as a result of the timing of client programs, the commencement and expiration of contracts, the timing and amount of new business generated by the Company, the Company's revenue mix, the timing of additional selling, general and administrative expenses to support the growth and development of existing and new business units and competitive industry conditions. 11 The Company's business tends to be strongest in the second and fourth quarters due to the high level of client sales activity in the spring and prior to the holiday season. In the first quarter, Domestic TeleServices business generally levels off or slows from the previous quarter as a result of reduced client sales activity and client transitions to new marketing programs during the first quarter of the calendar year. In the first quarter of 2000, strong growth in International Services and Customer Management Services business offset the Domestic Teleservices revenue decline. The Company typically expands it's operations in the first quarter to support anticipated business growth beginning in the second quarter. As a result, selling, general and administrative costs typically increase in the first quarter without a commensurate increase in revenues which results in decreased profitability for the first quarter versus the previous fourth quarter. In the first quarter of 2000, revenues of $41.3 million exceeded revenues of $38.8 million in the fourth quarter of 1999 by 6% but operating income of $2.2 million was less than the $2.4 million of operating income in the fourth quarter of 1999 as growth in selling, general and administrative expenses to support anticipated growth in the second quarter more than offset the margin generated on the increased revenue. Also, demand for the Company's services typically slows or decreases in the third quarter as the volume of business decreases during the summer months. In addition, the Company's operating expenses increase during the third quarter in anticipation of higher demand for its services during the fourth quarter. Liquidity and Capital Resources Cash used in operating activities was $2.6 million for the three months ended March 31, 2000 versus $3.8 million of cash provided by operating activities for the three months ended March 31, 1999. The approximate $6.4 million decrease resulted primarily from a temporary increase in accounts receivable as billing procedures with a major customer were revised that resulted in billing delays. These delays have been resolved and the Company expects that accounts receivable will be at normal levels by the end of the second quarter. Cash used in investing activities was $7.6 million for the three months ended March 31, 2000 compared to $3.4 million for the first quarter of 1999. The increase over the prior year is attributable to a significant investment in software licenses for iCT ConnectedTouch.com and the decision not to utilize operating leases as a means to finance capital additions. Approximately $2.0 million of capital additions in the first quarter of 1999 were financed by operating leases. Also, the Company added 158 workstations in the first quarter of 2000, and operates 4,326 workstations at March 31, 2000. In the first quarter of 1999 the Company added 126 workstations, and operated 3,542 workstations at March 31, 1999. Cash provided by financing activities was $5.8 million for the three months ended March 31, 2000 versus cash used in financing activities of $1.2 million for the comparable 1999 period. In 2000, the Company repaid $1.0 million on its term debt and borrowed $7.0 million under its equipment line to fund capital expenditures and to meet working capital requirements. The Company's operations will continue to require significant capital expenditures. Historically, equipment purchases have been financed through the Company's equipment line of credit, operating leases, and through capitalized lease obligations with various equipment vendors and lending institutions. The capitalized lease obligations are payable in varying installments through 2001. Outstanding obligations under capitalized leases at March 31, 2000 were $668,000. At March 31, 2000, term debt obligations were $13.0 million and borrowings under the line of credit were $7.0 million. The Company believes that cash on hand, together with cash flow generated from operations and funds available under the 1998 Line of Credit will be sufficient to finance its current operations and planned capital expenditures at least through 2000. 12 FORWARD LOOKING STATEMENTS This document contains certain forward-looking statements that are subject to risks and uncertainties. Forward-looking statements include certain information relating to outsourcing trends as well as other trends in the CRM services and the overall domestic economy, the Company's business strategy including the markets in which it operates, the services it provides, its ability to attract new clients and the customers it targets, the benefits of certain technologies the Company has acquired or plans to acquire and the investment it plans to make in technology, the Company's plans regarding international expansion, the implementation of quality standards, the seasonality of the Company's business, variations in operating results and liquidity, as well as information contained elsewhere in this document where statements are preceded by, followed by or include the words "believes," "plans," "intends," "expects," "anticipates" or similar expressions. For such statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document are subject to risks and uncertainties that could cause the assumptions underlying such forward-looking statements and the actual results to differ materially from those expressed in or implied by the statements. The most important factors that could prevent the Company from achieving its goals--and cause the assumptions underlying the forward-looking statements and the actual results of the Company to differ materially from those expressed in or implied by those forward-looking statements--include, but are not limited to, the following: (i) the competitive nature of the CRM services industry and the ability of the Company to continue to distinguish its services from other CRM service companies and other marketing activities on the basis of quality, effectiveness, reliability and value; (ii) economic conditions which could alter the desire of businesses to outsource certain sales and service functions and the ability of the Company to obtain additional contracts to manage outsourced sales and service functions; (iii) the ability of the Company to offer value-added services to businesses in its targeted industries and the ability of the Company to benefit from its industry specialization strategy; (iv) risks associated with investments and operations in foreign countries including, but not limited to, those related to relevant local economic conditions, exchange rate fluctuations, relevant local regulatory requirements, political factors, generally higher telecommunications costs, barriers to the repatriation of earnings and potentially adverse tax consequences; (v) technology risks including the ability of the Company to select or develop new and enhanced technology on a timely basis, anticipate and respond to technological shifts and implement new technology to remain competitive; (vi) the ability of the Company to successfully identify, complete and integrate strategic acquisitions that expand or complement its business; and (vii) the results of operations which depend on numerous factors including, but not limited to, the timing of clients' teleservices campaigns, the commencement and expiration of contracts, the timing and amount of new business generated by the Company, the Company's revenue mix, the timing of additional selling, general and administrative expenses and the general competitive conditions in the CRM services industry and the overall economy. 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings From time to time, the Company is involved in litigation incidental to its business. In the opinion of management, no litigation to which the Company is currently a party is likely to have a material adverse effect on the Company's results of operations, financial condition or liquidity, if decided adversely to the Company. As previously reported by the Company, on October 23, 1997, a shareholder, purporting to act on behalf of a class of ICT shareholders filed a complaint in the United States District Court for the Eastern District of Pennsylvania against the Company and certain of its directors. The complaint alleges that the defendants violated the federal securities laws, and seeks compensatory and other damages, including rescission of stock purchases made by the plaintiff and other class members in connection with the Company's initial public offering effective June 14, 1996. The defendants believe the complaint is without merit, deny all of the allegations of wrongdoing and are vigorously defending the suit. On February 2, 1998, the defendants filed a motion to dismiss the complaint. On May 19, 1998, the complaint was dismissed by a judge for the United States District Court for the Eastern District of Pennsylvania with leave to plaintiff to file an amended complaint on narrow accounting allegations. On June 22, 1998, plaintiffs filed a First Amended Class Action Complaint purporting to bring negligence claims in connection with the Company's initial public offering. The defendants continue to deny all allegations of wrongdoing, believe the amended complaint is without merit and are vigorously defending the suit. On November 3, 1998, the court granted a motion appointing Rowan Klein and Michael Mandat as lead plaintiffs. On February 2, 1999, the court dismissed the case without prejudice, directing that the case remain in status quo, that the statute of limitations be tolled and that the parties continue with discovery and advise the court if assistance by the court is needed. Since that time the defendants filed a motion for summary judgement seeking to have the case dismissed on the grounds that there is no material issue of fact. Plaintiffs filed a response in opposition to defendant's motion and discovery was conducted by the parties. Plaintiffs also filed a motion seeking to have the case certified as a class action, to which defendants have objected. The court has not ruled on defendants' motion for summary judgement or plaintiffs motion for class certification. On July 12, 1996, Main Street Marketing of America Incorporated (" Main Street Marketing") brought a demand for arbitration against the Company in the Commonwealth of Pennsylvania claiming damages as a result of the Company's alleged breach of a service agreement under which the Company agreed to provide Main Street Marketing with various data entry and data processing services relating to Main Street Marketing's magazine subscription program. Main Street Marketing alleges that the Company committed various breaches of the service agreement and has demanded an award in excess of $15 million. The Company has responded to this demand for arbitration by denying liability and counterclaiming in an amount in excess of $125,000. Discovery has progressed in this matter, but has not yet been completed. It is not possible at this stage of the proceeding to evaluate the probable outcome of this litigation. Item 6. Exhibits and Reports on Form 8-K (a) The following documents are furnished as exhibits and numbered pursuant to Item 601 of Regulation S-K: 27 Financial Data Schedule (b) The registrant was not required to file any reports on Form 8-K for the three months ended March 31, 2000. 14 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, hereunto duly authorized. ICT GROUP, INC. Date: May 12, 2000 By: /s/ John J. Brennan ------------------- John J. Brennan Chairman, President and Chief Executive Officer Date: May 12, 2000 By: /s/ Vincent A. Paccapaniccia ---------------------------- Vincent A. Paccapaniccia Senior Vice President, Finance and Administration, Chief Financial Officer and Assistant Secretary 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 0001013149 ICT GROUP, INC 1,000 U.S. DOLLARS 3-MOS 3-MOS DEC-31-2000 DEC-31-1999 JAN-01-2000 JAN-01-1999 MAR-31-2000 MAR-31-1999 1 1 7,727 13,439 0 0 35,371 29,683 0 0 0 0 46,235 45,166 63,839 50,936 28,872 20,492 85,668 80,620 22,067 20,189 0 0 0 0 0 0 118 116 51,274 46,647 85,668 80,620 0 0 41,285 36,951 0 0 23,450 20,388 15,681 14,653 0 0 167 248 1,987 1,662 775 648 1,212 1,014 0 0 0 0 0 0 1,212 1,014 0.10 0.09 0.10 0.08
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