10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2005

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 incorporation or organization)	(I.R.S. Employer Identification No.)
100 Brandywine Boulevard, Newtown, PA	18940
(Address of principal executive offices)	(Zip code)

267-685-5000

(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  ¨

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

YES  x     NO  ¨

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

YES  ¨     NO  x

As of October 28, 2005, there were 12,762,500 outstanding shares of common stock, par value $0.01 per share, of the registrant.

ICT GROUP, INC.

INDEX

		PAGE
PART I	FINANCIAL INFORMATION
Item 1	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
	Condensed Consolidated Balance Sheets - September 30, 2005 and December 31, 2004	3
	Condensed Consolidated Statements of Operations - Three and nine months ended September 30, 2005 and 2004	4
	Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 2005 and 2004	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14
Item 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25
Item 4	CONTROLS AND PROCEDURES	26
PART II	OTHER INFORMATION
Item 1	LEGAL PROCEEDINGS	27
Item 6	EXHIBITS	27
SIGNATURES		27

ICT GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

	September 30, 2005			December 31, 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,023		$	11,419
Accounts receivable, net		75,954			64,848
Prepaid expenses and other		11,255			14,332
Deferred income taxes		6,196			7,410
Total current assets		103,428			98,009
PROPERTY AND EQUIPMENT:
Communications and computer equipment		123,867			113,593
Furniture and fixtures		26,643			25,495
Leasehold improvements		21,519			19,855
		172,029			158,943
Less: Accumulated depreciation and amortization		(116,620	)		(102,645	)
		55,409			56,298
OTHER ASSETS		6,991			6,269
	$	165,828		$	160,576
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	22,727		$	16,853
Accrued expenses		18,319			16,399
Book overdraft		4,783			—
Income taxes payable		2,412			1,215
Accrued litigation		—			14,803
Total current liabilities		48,241			49,270
LINE OF CREDIT		38,000			39,000
OTHER LIABILITIES		2,308			2,259
DEFERRED INCOME TAXES		1,099			1,099
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.01 par value 5,000 shares authorized, none issued		—			—
Common stock, $0.01 par value, 40,000 shares authorized, 12,763 and 12,646 shares issued and outstanding		128			127
Additional paid-in capital		51,609			51,756
Retained earnings		23,671			15,391
Accumulated other comprehensive income		772			1,674
Total shareholders’ equity		76,180			68,948
	$	165,828		$	160,576

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

ICT GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2005			2004		2005			2004
REVENUE	$	99,921		$	80,395	$	290,931		$	233,004
OPERATING EXPENSES:
Cost of services		61,155			47,548		175,872			139,156
Selling, general and administrative		35,070			31,097		105,637			89,616
Litigation costs (recoveries)		(4,064	)		887		(3,496	)		1,892
		92,161			79,532		278,013			230,664
Operating income		7,760			863		12,918			2,340
INTEREST EXPENSE, net of interest income of $46 and $29 for the three months and $131 and $90 for the nine months		656			451		1,802			1,070
Income before income taxes		7,104			412		11,116			1,270
INCOME TAX PROVISION		1,632			136		2,836			420
NET INCOME	$	5,472		$	276	$	8,280		$	850
EARNINGS PER SHARE:
Basic earnings per share	$	0.43		$	0.02	$	0.65		$	0.07
Diluted earnings per share	$	0.42		$	0.02	$	0.64		$	0.07
Shares used in computing basic earnings per share		12,757			12,595		12,704			12,552
Shares used in computing diluted earnings per share		12,981			12,849		12,917			12,892

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

ICT GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	8,280		$	850
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,425			12,847
Tax benefit of stock option exercises		22			102
Deferred income taxes		564			—
Amortization of deferred financing costs		149			157
Gain on sale of property and equipment		(184	)		—
Asset impairment		440			—
(Increase) decrease in:
Accounts receivable		(11,029	)		(15,753	)
Prepaid expenses and other		3,025			(164	)
Other assets		(317	)		(116	)
Increase (decrease) in:
Accounts payable		5,947			3,750
Accrued expenses and other liabilities		1,797			180
Income taxes payable		1,343			1,383
Accrued litigation		(14,750	)		—
Net cash provided by operating activities		10,712			3,236
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sales of marketable securities		—			1,500
Purchases of property and equipment		(14,837	)		(18,511	)
Proceeds from sale of property and equipment		249			—
Business acquisitions		(178	)		(3,011	)
Net cash used in investing activities		(14,766	)		(20,022	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit		34,000			34,000
Payments on line of credit		(35,000	)		(24,000	)
Book overdraft		4,783			—
Cash paid for debt issuance costs		(592	)		—
Proceeds from exercise of stock options		71			314
Net cash provided by financing activities		3,262			10,314
EFFECT OF FOREIGN EXCHANGE RATE CHANGE ON CASH
AND CASH EQUIVALENTS		(604	)		(1,564	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,396	)		(8,036	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		11,419			12,091
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	10,023		$	4,055

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

ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1: BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. 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 U.S. generally accepted accounting principles for complete financial statements. In the opinion of our management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended September 30, 2005 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2004. Unless the context indicates otherwise, “ICT,” the “Company,” “we,” “our,” and “us” refer to ICT Group, Inc., and, where appropriate, one or more of its subsidiaries.

Note 2: LINE OF CREDIT AND LONG-TERM DEBT

On June 24, 2005, we entered into an Amended and Restated Credit Agreement (the “Credit Facility”).

The Credit Facility, which amended our existing three-year $100.0 million revolving credit facility, is structured as a $125.0 million secured revolving facility with a $5.0 million sub-limit for swing line loans and a $30.0 million sub-limit for multicurrency borrowings. The Credit Facility includes a $50.0 million accordion feature, which will allow us to increase our borrowing capacity to $175.0 million, subject to obtaining commitments for the incremental capacity from existing or new lenders. The amendment extends the maturity date from December 2, 2006 to June 24, 2010.

Borrowings under the Credit Facility can bear interest at various rates, depending upon the type of loan. We have two borrowing options, either a “Base Rate” option, under which interest rate is calculated using the higher of the federal funds rate plus 0.5% or the Bank of America prime rate, plus a spread ranging from 0% to 0.75%, or a “Eurocurrency Rate” option, under which interest rate is calculated using LIBOR plus a spread ranging from 1.00% to 2.25%. The amount of the spread under each borrowing option depends on our ratio of funded debt to EBITDA (which, for purposes of the Credit Facility, is defined as income before interest expense, interest income, income taxes, and depreciation and amortization and certain other charges).

The Credit Facility contains certain affirmative and negative covenants including limitations on specified levels of consolidated leverage, consolidated fixed charges and minimum net worth requirements, and includes limitations on, among other things, liens, mergers, consolidations, sales of assets, incurrence of debt and capital expenditures. We are also required to pay a quarterly commitment fee ranging from 0.20% to 0.50% of the unused amount. Under the Credit Facility, upon the occurrence of an event of default, such as non-payment or failure to observe specific covenants, the lenders would be entitled to declare all amounts outstanding under the facility immediately due and payable.

We incurred $592,000 of debt issuance costs associated with the Credit Facility. These costs have been deferred and are being amortized over the five-year term of the Credit Facility. The unamortized issuance costs associated with the original credit facility of $306,000 will continue to be amortized over the new five-year term.

Prior to the end of September 2005, we repaid $9.0 million of the amounts outstanding under our Credit Facility. The payment was made out of one of our operating accounts. At the time the payment was made, this operating account had insufficient funds (approximately $4.8 million short) to cover the payment, and we needed to transfer the funds from another operating account to cover this shortage. Accordingly, our financial statements reflect a book overdraft liability of approximately $4.8 million. On October 4, 2005, the transfer of funds between our banks was completed.

At September 30, 2005, $38.0 million of borrowings was outstanding under the Credit Facility and was classified as a long-term liability. At September 30, 2005, there were no outstanding foreign currency loans nor were there any outstanding letters of credit. The amount of the unused Credit Facility at September 30, 2005 was $87.0 million. The Credit Facility can be drawn upon through June 24, 2010, at which time all amounts outstanding must be repaid. Borrowings under the Credit Facility are collateralized by substantially all of our assets, as well as the capital stock of our subsidiaries. As of September 30, 2005, we were in compliance with all covenants contained in the Credit Facility.

Note 3: EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

We follow Statement of Financial Accounting Standard (“SFAS”) No. 128, “Earnings Per Share.” Basic earnings per share (Basic EPS) is computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share (Diluted EPS) is computed by dividing net income by the weighted average number of shares of common stock outstanding, after giving effect to the potential dilution from the exercise of securities, such as stock options, into shares of common stock as if those securities were exercised. A reconciliation of shares used to compute EPS is shown below:

	Three months ended September 30,				Nine months ended September 30,
(in thousands, except per share amounts)	2005		2004		2005		2004
Net income	$	5,472	$	276	$	8,280	$	850
Basic earnings per share:
Weighted average shares outstanding		12,757		12,595		12,704		12,552
Net income per share	$	0.43	$	0.02	$	0.65	$	0.07
Diluted earnings per share:
Weighted average shares outstanding		12,757		12,595		12,704		12,552
Dilutive shares resulting from common stock equivalents (1)		224		254		213		340
Weighted average shares and common stock equivalents outstanding		12,981		12,849		12,917		12,892
Net income per share	$	0.42	$	0.02	$	0.64	$	0.07

(1) Excluded from the calculation of diluted shares is the effect of the exercise of options to purchase 355,000 and 723,000 shares for the three months ended September 30, 2005 and 2004, respectively and 538,000 and 402,000 shares for the nine months ended September 30, 2005 and 2004, respectively, as giving effect to such exercises would be antidilutive.

We use the intrinsic value method of accounting for stock-based employee compensation in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Deferred compensation is recorded for option grants to employees for the amount, if any, by which the market price per share exceeds the exercise price per share at the measurement date, which is generally the grant date. Typically, the exercise price of the options equals the market price at the date of grant. For the three and nine-month periods ended September 30, 2005 and 2004, we did not record any stock-based compensation expense. For option grants to non-employees, we apply fair value accounting in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation” and Emerging Issues Task Force (“EITF”) Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.”

Had compensation cost for our stock-based compensation plans been determined under SFAS No. 123, net income and earnings per share would have been decreased to the following pro forma amounts:

	Three Months Ended September 30,				Nine Months Ended September 30,
In thousands, except per share data	2005		2004		2005		2004
Net income, as reported	$	5,472	$	276	$	8,280	$	850
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax		156		123		310		357
Pro forma net income	$	5,316	$	153	$	7,970	$	493
Diluted earnings per share, as reported	$	0.42	$	0.02	$	0.64	$	0.07
Pro forma diluted earnings per share	$	0.41	$	0.01	$	0.61	$	0.04

The weighted average fair value of the options granted during the three months ended September 30, 2005 and 2004 is estimated at $7.01 and $5.87 per share, respectively. The weighted average fair value of the options granted during the nine months ended September 30, 2005 and 2004 is estimated at $6.99 and $8.01 per share, respectively. These estimates, calculated on the date of grant, are derived from the Black-Scholes option-pricing model with the following weighted average assumptions:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
Expected dividend yield	0.0	%	0.0	%	0.0	%	0.0	%
Volatility	67	%	64	%	67	%	63	%
Risk free interest rate	4.30	%	4.15	%	4.26	%	4.35	%
Expected life	7.5 years		8.0 years		7.6 years		8.0 years

Note 4: COMPREHENSIVE INCOME

We follow SFAS No. 130, “Reporting Comprehensive Income.” SFAS No. 130 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 consolidated balance sheet.

(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005			2004
Net income	$	5,472	$	276	$	8,280		$	850
Derivative instruments, net of tax		234		307		(89	)		322
Foreign currency translation adjustments		409		871		(813	)		(697	)
Comprehensive income	$	6,115	$	1,454	$	7,378		$	475

Note 5: LEGAL PROCEEDINGS

From time to time, we are involved in litigation incidental to our business. Litigation can be expensive and disruptive to normal business operations. Moreover, results of complex legal proceedings are difficult to predict.

In 1998, William Shingleton filed a class action lawsuit against us in the Circuit Court of Berkeley County, West Virginia (the “Court”). The lawsuit alleged that the Company and twelve current and former members of management had violated the West Virginia Wage Payment and Collection Act (the “Wage Act”) for failure to pay promised signing and incentive bonuses and wage increases, failure to compensate employees for short breaks or “transition” periods, and production hours worked and improper deductions for the cost of purchasing telephone headsets.

On March 1, 2005, we announced a settlement with the plaintiffs in this litigation. Under the terms of the settlement, we, without admitting any liability or wrongdoing, agreed to pay $14.75 million to the plaintiff class to settle all allegations relating to unpaid wages, bonuses and other claims, as well as payments for liquidated damages allowed by West Virginia law of 30 days of wages plus interest, which was being sought for all class members regardless of the amount of wages allegedly unpaid.

Because this settlement was a subsequent event that occurred prior to the release of our consolidated financial statements for the year ended December 31, 2004, and provided additional evidence on a matter that existed at the balance sheet date, we reflected the financial outcome of this settlement in our consolidated financial statements as of December 31, 2004.

Our accrual at December 31, 2004 was $14.8 million, which included the settlement amount disclosed above and a small amount for certain payroll taxes. In March 2005 we made payments of $14.8 million to satisfy our obligations under the settlement. This payment was funded partially with cash-on-hand and partially with borrowings under our Credit Facility.

On June 27, 2005, the Court approved the proposed settlement agreement that was announced on March 1, 2005. In September 2005, the settlement was distributed to the class. As of September 30, 2005, we have no accruals remaining related to the Shingleton litigation.

We sought insurance coverage for part of the damages in this litigation under our Directors and Officers policies that were in effect with two insurers. We received a payment of $2.67 million in March 2005 from one of the insurers. The insurance proceeds were recorded as a receivable within prepaid expenses and other assets on our consolidated balance sheet at December 31, 2004.

In September 2005, we recovered $4.1 million from our other insurer. This payment was a negotiated settlement of the outstanding litigation that we filed against this insurer. These proceeds were received and have been recorded on the litigation costs (recoveries) line-item in our condensed consolidated statements of operations for the three and nine-month periods ended September 30, 2005.

In addition to the Shingleton litigation, we are a co-defendant in 12 putative consumer class action lawsuits filed against Time Warner, Inc. or America Online, in various state and Federal courts during the period from July 2003 to December 2004. No class has been certified in any of these suits. We believe the allegations against us are without merit and intend to vigorously defend ourselves against them, including seeking dismissals and summary judgments, as appropriate. America Online is paying for our defense and has agreed to indemnify us against any costs or damages that we may incur as a result of these lawsuits. All of these suits allege that America Online, a customer of ICT, violated consumer protection laws by charging members for accounts they purportedly did not agree to create and that America Online and ICT violated consumer protection laws in the handling of subscribers’ calls seeking to cancel accounts and obtain refunds of amounts paid for such accounts. America Online contracted with us to answer customer service calls from America Online subscribers in accordance with instructions provided by America Online. America Online employees and other call center contractors also answered customer service calls from subscribers using the same instructions. Nine of the lawsuits that were filed in, or removed to, Federal court have been centralized in the Central District of California for consolidated or coordinated pre-trial proceedings pursuant to a February 27, 2005 order of the Judicial Panel on Multidistrict Litigation (the “MDL Litigation”). The defendants’ Motion to Dismiss that complaint was denied. The three remaining lawsuits were filed and remain in state courts.

On April 5, 2005, we were joined as a co-defendant in three additional cases, and America Online and we signed a settlement agreement with plaintiffs’ counsel in the three cases on behalf of a putative national class of all persons and entities who were charged or billed by or through America Online or its agents, assigns, contracted customer service providers, or other designees acting on behalf of or through America Online, for services and/or goods without their consent or authorization. Consistent with America Online’s agreement to indemnify us against any costs or damages that we may incur as a result of these lawsuits, all settlement payments or services under the settlement agreement will be paid or provided by America Online. On April 7, 2005, the Circuit Court for St. Clair County, Illinois, certified the settlement class, which includes the putative classes alleged in all of the cases discussed above, and preliminarily approved the settlement.

On May 9, 2005, the judge in the MDL Litigation issued an order enjoining America Online and ICT from proceeding with the settlement in St. Clair County, Illinois, to the extent that the settlement releases the plaintiffs’ claims in the MDL Litigation. America Online and ICT have appealed this decision to the United States Court of Appeals for the Ninth Circuit.

On June 22, 2005, one of the putative consumer class action lawsuits filed in the U.S. District Court for the Middle District of Louisiana was settled by agreement of the parties, and the Court issued a joint motion to dismiss the matter with prejudice. Consistent with America Online’s agreement to indemnify us against any costs or damages that we may incur as a result of these lawsuits, all costs and payments associated with the settlement were paid by America Online.

In October 2005, the Plaintiffs in the MDL Litigation agreed to join the St. Clair County, Illinois settlement, and a revised settlement agreement was signed on October 21, 2005. The Plaintiffs in the MDL litigation have subsequently filed a motion to vacate the injunction preventing AOL and ICT from proceeding with the settlement.

Note 6: INCOME TAXES

In accordance with FASB Interpretation No. 18, “Accounting for Income Taxes in Interim Periods,” the effective income tax rate of 23% and 26% for the three and nine months ended September 30, 2005 has been computed to include the effects of discrete events that occurred during the quarter. In September 2005, we received proceeds of $4.1 million from one of our insurance carriers in connection with the Shingleton litigation (see Note 5). The income taxes related to these proceeds are reflected in the third quarter and not spread out over the third and fourth quarters. The estimated effective income tax rate for the full year 2005, including the effect of the insurance proceeds, is expected to be approximately 25%.

Also impacting our income tax rate as a discrete event in the third quarter is an additional valuation allowance that was recorded on certain research and development credits that were recorded in 2004. In 2004, we had recorded tax benefits of approximately $620,000, net of valuation allowances and reserves, relating to federal tax credits for research and development. Of this $620,000, $421,000 was classified as net deferred tax asset with the remainder reflected within our current income tax payable. In the third quarter of 2005 the IRS denied our tax credits associated with research and development. While we plan to appeal the denial, we have determined that a full valuation allowance should be placed on the remaining deferred tax asset as it was more likely than not that we will not be able to realize the tax benefit of this deferred tax asset. Therefore, we recorded additional valuation allowances and reserves of $620,000 during the three months ended September 30, 2005.

Partially offsetting the effects of the events described above was a reduction to foreign income taxes previously recorded associated with our Philippines operations, as further described in Note 7. In August 2005, one of our facilities in the Philippines was awarded Philippine Economic Zone Authority (PEZA) status from the inception of its operations. Therefore, certain Philippines income taxes that we had previously recorded are no longer required and accordingly, we reversed approximately $1.3 million of income taxes that had been previously accrued and included in our full year income tax estimates. See Note 7 for additional information on our reorganization in the Philippines.

Note 7: PHILIPPINES REORGANIZATION

Effective August 25, 2005, we completed a tax-free reorganization of our Philippines operations. The primary purpose of the reorganization was to minimize Subpart F income from future operations and to obtain flexibility with respect to investments in our foreign operations.

Prior to the reorganization, we operated two contact centers in the Philippines. One of our facilities was located in a PEZA-registered zone, and is exempt from Philippines income taxes. Our other facility was located in a zone that was in the process of being PEZA-registered. Because such approval was outside of our control, we accrued Philippines tax on the income generated in this facility. In August 2005, the zone in which our second facility was located was formally approved as a PEZA-registered zone. After discussions with us, the PEZA authority granted us tax exemption from the beginning of our operations. As a result, we were not subject to income tax during the period of time we maintained operations before the zone was PEZA-registered.

As of September 30, 2005, we now possess PEZA exemption from Philippines income taxes through mid-year 2007 for one of our facilities and mid-year 2010 for our other facility. We are subject to withholding taxes on any profits that are repatriated.

Note 8: FACILITIES

Effective July 1, 2005, we executed an early termination of a facilities lease. This facilities lease had originally been entered into at the request of a former customer and the lease term ran through September 2006. While we were able to exit the lease without any penalties being assessed by the landlord, we did have a significant amount of assets, including leasehold improvements, associated with this facility. We were able to redeploy a portion of these assets. The remaining carrying value of assets that were not redeployed was approximately $440,000 and was written off in the second quarter as impaired assets. We were able to recover $125,000 from this former customer, as part of an early contract termination agreement signed in May 2005, which partially offset this write-off. Both of these amounts were recorded in selling, general and administrative costs in the condensed consolidated statement of operations for the nine months ended September 30, 2005.

In February 2005, we moved our Australian operations into a new facility. In April 2005, we signed an agreement to sell the furniture and fixtures from the prior facility to the new tenants and recognized a gain on the sale of approximately $184,000. This gain was recorded in selling, general and administrative costs in the condensed consolidated statement of operations for the nine months ended September 30, 2005.

Note 9: OPERATING AND GEOGRAPHIC INFORMATION

Based on guidance in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” we believe that we have one reportable segment. Our services are provided through contact centers located throughout the world and include customer care management services as well as inbound and outbound telesales, database marketing services, marketing research services, technology hosting services, and data management and collection services on behalf of customers operating in our target industries. Technological advancements have allowed us to better control production output at each contact center by routing customer call lists to different centers depending on capacity. A contact center and the technology assets utilized by the contact center may have different geographic locations. Accordingly, many of our contact centers are not limited to performing only one of the above-mentioned services; rather, they can perform a variety of different services for different customers in different geographic markets.

The following table shows information by geographic area. For the purposes of our disclosure, revenue is attributed to countries based on the location of the customer being served and property and equipment is attributed to countries based on physical location of the asset.

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2005		2004		2005		2004
Revenue:
United States	$	76,328	$	62,226	$	225,810	$	181,498
Canada		12,845		9,119		33,280		25,385
Other foreign countries		10,748		9,050		31,841		26,121
	$	99,921	$	80,395	$	290,931	$	233,004

	September 30, 2005		December 31, 2004
Property and equipment, net:
United States	$	31,636	$	29,052
Canada		8,955		10,928
Philippines		8,667		8,663
Other foreign countries		6,151		7,655
	$	55,409	$	56,298

Note 10: DERIVATIVE INSTRUMENTS

We have operations in Canada, Ireland, the United Kingdom, Australia, Barbados, Mexico and the Philippines that are subject to foreign currency fluctuations. As currency rates change, translation of the statement of operations from local currencies to U.S. dollars affects year-to-year comparability of operating results.

Our most significant foreign currency exposures occur when revenue and associated accounts receivable are collected in one currency and expenses incurred to generate that revenue are paid in another currency. Our most significant area of exposure has been with the Canadian operations, where a portion of revenue is generated in U.S. dollars (USD) and the corresponding expenses are generated in Canadian dollars (CAD). When the value of the CAD increases against the USD, CAD denominated expenses increase and operating margins are negatively impacted. Partially offsetting this exposure is indigenous Canadian business and associated profitability where profits will be higher in a period of a strong CAD. To mitigate this exposure, we enter into derivative contracts to hedge a portion of anticipated operating costs and payables associated with the CAD, primarily payroll expenses, rental expenses and other known recurring costs.

The forward contracts and currency options that are used to hedge these exposures are designated as cash flow hedges. The gain or loss from the effective portion of the hedge is reported as a component of accumulated other comprehensive income in shareholders’ equity until settlement of the contract occurs. Settlement occurs in the same period that the hedged item affects earnings. Any gain or loss from the ineffective portion of the hedge that exceeds the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in the current period. For accounting purposes, effectiveness refers to the cumulative changes in the fair value of the derivative instrument being highly correlated to the inverse changes in the fair value of the hedged item. Any related gains and losses on derivative instruments are recorded in selling, general and administrative costs in the condensed consolidated statements of operations.

For the three months ended September 30, 2005 and 2004, we realized (losses) gains of ($16,650) and $59,500 on the derivative instruments, respectively. For the nine months ended September 30, 2005 and 2004, we realized gains (losses) of $24,300 and ($137,800) on the derivative instruments, respectively. The fair value of outstanding derivative instruments is recorded on our condensed consolidated balance sheets. As of September 30, 2005, the fair value of outstanding derivative instruments was an asset of approximately $305,000 ($198,000, net of tax). At December 31, 2004, the fair value of outstanding derivative instruments was an asset of approximately $429,000 ($287,000, net of tax). The outstanding derivative instruments at September 30, 2005 hedge a portion of anticipated operating costs and payables associated with the CAD from October 2005 through December 2005. In October 2005, our management entered into additional derivative contracts to hedge CAD exposures for the 2006 fiscal year.

The expansion of operations in the Philippines has increased the level of currency exposure in that operation. In October 2005, our management addressed the potential currency exposure associated with the PHP by entering into derivative contracts for the 2006 fiscal year.

Note 11: CORPORATE RESTRUCTURING

The following is a rollforward of the accrual associated with our December 2002 corporate restructuring:

(in thousands)	Accrual at December 31, 2004		Cash Payments			Accrual at September 30, 2005
Lease obligations and facility exit costs	$	1,835	$	(627	)	$	1,208

During 2005, we did not enter into any sublease arrangements. We did exercise an early termination option with respect to one of our facilities, which required a payment to be made to the landlord. This option was included in our restructuring estimate in 2002. All other cash payments made were related to the ongoing lease obligations.

We continue to evaluate and update our estimate of the remaining liabilities. At September 30, 2005 and December 31, 2004, $797,000 and $1.2 million of the restructuring accrual is recorded in other liabilities in the condensed consolidated balance sheet, which represents lease obligation payments and estimated facility exit cost payments to be made beyond one year. As of September 30, 2005, the expiration dates of the remaining equipment leases and facilities leases range from 2005 to 2009. The balance of the restructuring accrual is included in accrued expenses in our condensed consolidated balance sheet at September 30, 2005 and December 31, 2004.

Note 12: RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, “Share-Based Payment.” SFAS No. 123R replaces SFAS No. 123, supercedes APB Opinion No. 25 and amends SFAS No. 95, “Statement of Cash Flows.” SFAS No. 123R eliminates the ability to account for stock-based compensation transactions using APB Opinion No. 25, and will require instead that such transactions be accounted for using a fair value based method. SFAS No. 123R requires compensation costs related to share-based payment transactions to be recognized in the financial statements over the period that an employee provides service in exchange for the award. In April 2005, the Securities and Exchange Commission postponed the effective date of SFAS No. 123R until the fiscal year beginning after June 15, 2005. We will adopt SFAS No. 123R effective January 1, 2006.

Public companies may adopt the new standard using a modified prospective method or they may elect to restate prior periods using the modified retrospective method. Under the modified prospective method, companies are required to record compensation cost for new and modified awards over the related vesting period of such awards prospectively and record compensation cost prospectively for the unvested portion, at the date of adoption, of previously issued and outstanding awards over the remaining vesting period of such awards. No change to prior periods presented is permitted under the modified prospective method. Under the modified retrospective method, a company records compensation costs for prior periods retroactively through restatement of such periods using the exact pro forma amounts disclosed in the company’s footnotes. We will adopt the standard using the modified prospective method.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets”, which eliminates an exception in APB Opinion No. 29, “Accounting For Nonmonetary Transactions”, for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153 did not have a material impact on our financial position or results of operations.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”, which replaces APB Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements – An Amendment of APB Opinion No. 28.” SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application as of the earliest period presented, or the latest practicable date, as the required method for reporting a voluntary change in accounting principle and the reporting of a correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We believe that the adoption of this statement will not have a material effect on our financial condition or results of operations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a leading global provider of outsourced customer management and business process outsourcing solutions. Our comprehensive, balanced mix of sales, service, marketing and technology solutions includes: customer care/retention, technical support and customer acquisition, cross-selling/up-selling as well as market research, database marketing, data capture/collection, e-mail management, collections and other back office business processing services. We provide our services through contact centers located throughout the world, including the U.S., Ireland, the U.K., Canada, Australia, Mexico, Barbados and the Philippines. In total, we have 43 contact centers from which we support domestic and multinational corporations and institutions, primarily in the financial, insurance, healthcare, telecommunications, information technology, consumer electronics industries and government.

We also offer a comprehensive suite of Customer Relationship Management (CRM) technologies, which are available on a hosted basis, for use by clients at their own in-house facilities, or on a co-sourced basis in conjunction with our fully integrated, Web-enabled contact centers. These technologies include: automatic call distribution (ACD) voice processing, interactive voice response (IVR) and advanced speech recognition (ASR), Voice over Internet Protocol (VoIP), contact management, automated e-mail management and processing, sales force and marketing automation, and alert notification and Web self help, for the delivery of consistent, quality customer care across multiple channels.

Our customer care/retention clients typically enter into multi-year arrangements that may contain provisions for early contract terminations. We generally operate under month-to-month contractual relationships with our telesales clients. The pricing component of a contract is often comprised of a base service charge and separate charges for ancillary services. Our services are generally priced based upon per-minute or hourly rates. On occasion, we perform services for which we are paid incentives based on completed sales. The nature of our business is such that we generally compete with other outsourced service providers as well as the retained in-house call center operations of our customers. This can create pricing pressures and impact the rates we can charge in our contracts.

Revenue is recognized as the services are performed, generally based on hours of work performed; however, certain types of revenue relating to up front project set-up costs must be deferred and recognized over a period of time, typically the length of the customer contract.

We improved our operations in 2005 by growing our customer base in key vertical markets, particularly in providing customer care management services, which command higher revenue rates. We were also able to control our direct operating costs for labor and telecommunications. Our centralized technology infrastructure, implemented in 2004, continues to help us achieve savings in our telecommunications costs as well as increase the utilization of our workstations and software licenses.

On March 1, 2005, we announced a settlement to resolve the Shingleton litigation. Under the terms of the settlement, we, without admitting liability or wrongdoing, agreed to pay $14.75 million to settle all allegations relating to unpaid wages, bonuses and other claims, as well as payments for liquidated damages required by the West Virginia Wage Payment and Collection Act (the “Wage Act”). We subsequently made this payment in March 2005 using cash-on-hand, borrowings under our Credit Facility, and $2.67 million of proceeds from responsive insurance coverage. For the remainder of the year we do not expect to incur any significant litigation costs associated with the Shingleton litigation. In September 2005, we resolved an ongoing action related to the Shingleton litigation with one of our insurance carriers and accepted $4.1 million as settlement of our claims against them.

Our future profitability will be impacted by, among other things, our ability to expand our service offerings to existing customers as well as our ability to obtain new customers, especially within the vertical markets where we have had the most success, including the financial services industry and the healthcare industry. We also need to continue to explore and grow new vertical markets. Our near-term profitability is also impacted by our ability to manage costs and mitigate the effects of foreign currency exchange risk. Our business is very labor intensive and consequently, in an effort to reduce costs and be as competitive as possible in the marketplace, we have been reallocating some of our services to near-shore and offshore contact centers, which typically have lower labor costs.

Some of these benefits, however, are offset by the expanded training and associated costs we may incur because of the variety of services we provide. Many of our customer care services require more complex and costly training processes during the start-up period and to the extent we cannot bill these amounts to our clients, our profitability will be impacted. In addition to the more complex training, the employees who work on our customer care programs are generally paid a higher hourly rate because of the more complex level of services they are providing.

We believe that our continued success for the remainder of 2005 will be largely dependent on our ability to execute on existing contracts and capture new marketing and customer service contracts, maintain stabilized Sales revenue and leverage the investments we have made in our infrastructure by producing more billable hours with existing workstations. We believe that major corporations will continue to utilize the skills of companies like ours and that the functions outsourced by companies will continue to expand beyond the contact center services that currently comprise the large majority of our business. To capitalize on these opportunities, we will continue to enhance the technologies we use. We plan to leverage our existing strength in the financial services, insurance and healthcare markets and provide additional business services to our customers in these and other industries. In addition, our goal is to expand our position in other vertical markets, including government, technology, consumer electronics and energy.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. These generally accepted accounting principles require our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Our significant accounting policies are described in the footnotes to our audited consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2004. The following discussion addresses our critical accounting policies, which are those that are most important to the portrayal of our financial condition and results and require our management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. However, we are not currently aware of any reasonably likely events or circumstances that would result in materially different results. Our senior management has reviewed these critical accounting policies and estimates with our audit committee.

Revenue Recognition

We recognize revenue as services are performed, generally based on hours of work incurred. Revenue is typically calculated based on contracted hourly rates with customers.

In order to provide our business services solutions, we may incur certain upfront project set-up costs specific to each customer contract. In certain instances, we can bill the customer for these costs; however, because the delivered item (project set-up costs) does not have stand alone value to the customer, revenue is deferred and recognized as services are provided over the contract term or until contract termination, should that occur prior to the end of the contract term. To the extent we have billed these costs and there are no customer issues with collection, we will defer the project set-up costs and amortize such amounts as the services are provided over the remaining contract term or until contract termination. The costs incurred are deferred only to the extent of the amounts billed. Amounts collected from customers prior to the performance of services are also recorded as deferred revenue. Total deferred revenue was $5.0 million and $4.3 million as of September 30, 2005 and December 31, 2004, respectively, and is included in accrued expenses in the accompanying condensed consolidated balance sheets. The deferred revenue related to upfront project set-up costs was $4.0 million and $1.6 million as of September 30, 2005 and December 31, 2004, respectively. The deferred set-up costs are included in prepaid expenses and other in the accompanying condensed consolidated balance sheets. The deferred set-up costs totaled $2.7 million and $1.1 million at September 30, 2005 and December 31, 2004, respectively.

We believe our revenue recognition policy is in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” and Emerging Issues Task Force (EITF) Issue 00-21, “Revenue Arrangements with Multiple Deliverables.”

Allowance for Doubtful Accounts

Our accounts receivable balances are net of an estimated allowance for uncollectible accounts. Our management continuously monitors collections and payments from customers and maintains an allowance for uncollectible accounts based upon our historical write-off experience and any specific customer collection issues that have been identified. Other items considered in estimating the allowance for uncollectible accounts include the age of the receivables, the financial status of our customers and general economic conditions. While we believe the reserve estimate to be appropriate, it may be necessary to adjust the allowance for doubtful accounts if actual bad debt expense differs significantly from the estimated reserve. We are subject to concentration risks as some of our customers and industries we support generate a high percentage of our total revenue and corresponding receivables. Accounts receivable as of September 30, 2005 and December 31, 2004 was approximately $76.0 million and $64.8 million, respectively, representing approximately 46% and 40% of total assets, respectively. Given the significance of accounts receivable to our consolidated financial statements, the determination of net realizable values is considered to be a critical accounting estimate.

Impairment of Long-Lived Assets

We continually evaluate whether events or circumstances have occurred that would indicate that the remaining estimated useful lives of our long-lived assets may warrant revision or that the remaining balance may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, an estimate of the related undiscounted cash flows over the remaining life of the long-lived assets is used to measure recoverability. Some of the more important factors we consider include our financial performance relative to our expected and historical performance, significant changes in the way we manage our operations, negative events that have occurred, and negative industry and economic trends. If any impairment is indicated, measurement of the impairment will be based on the difference between the carrying value and fair value of the assets, generally determined based on the present value of expected future cash flows associated with the use and ultimate disposition of the asset. In the second quarter of 2005 we recorded an impairment of certain assets associated with a facility that we exited early. The impairment charge was $440,000. No other impairments have been recorded during 2005 or 2004. Net property and equipment as of September 30, 2005 and December 31, 2004 totaled $55.4 million and $56.3 million, respectively, and represented approximately 33% and 35%, respectively of total assets for each period presented.

Impairment of Goodwill and Other Intangible Assets

Goodwill and other intangible assets are recorded as a result of business combinations. As of September 30, 2005 and December 31, 2004, we had $3.5 million and $3.3 million of goodwill, respectively. We also had $697,000 and $953,000 of other intangible assets, net of amortization, at September 30, 2005 and December 31, 2004, respectively. An impairment of these assets could have a significant impact on our results of operations. An impairment exists when events have occurred or circumstances exist that result in the fair value of these assets to fall below their carrying value. Although goodwill is no longer required to be amortized, we are required to perform an annual impairment review of our goodwill. This impairment review is performed in the fourth quarter of each year. The impairment assessment is performed using projected cash flows. On an interim basis, we also evaluate whether any events have occurred or whether any circumstances exist that could indicate an impairment of our goodwill. For the three and nine-month periods ended September 30, 2005 and 2004, there were no impairment charges related to goodwill or other intangible assets.

Accounting for Income Taxes

As part of the process of preparing our condensed consolidated financial statements, our management is required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items, such as depreciation of property and equipment, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the condensed consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be realized through future taxable income. As of September 30, 2005, we had recorded valuation allowances totaling $3.8 million against deferred tax assets that we had recorded for net operating loss carryforwards and certain Federal tax credits. During the third quarter of 2005, we recorded additional valuation allowances and reserves of $620,000 on certain Federal tax credits that had been recorded in prior periods. Refer to Note 6 to the condensed consolidated financial statements.

As of September 30, 2005, the total amount of our deferred tax assets, before the valuation allowance, was approximately $5.5 million. Although realization is not assured with our deferred tax assets, our management believes it is more likely than not that the remaining deferred tax assets 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 are reduced. We will continue to evaluate and assess the realizability of all deferred tax assets and adjust valuation allowances, if required in the future. During the third quarter of 2005, two other events occurred which impacted our income tax rate estimates and resulted in an overall decrease in our effective tax rates. These events are also described in Note 6.

Restructuring Charges

As of September 30, 2005, we had a remaining accrual of $1.2 million for the amount of estimated costs required to terminate the leases and close the facilities included in our December 2002 restructuring. The original charge of $8.9 million consisted of severance, site closure costs and asset impairments. Certain estimates were made in determining the amount of the charge for site closure costs and asset impairments, but no estimate for sublease income was made, given the market conditions at that time and the inability to find suitable tenants. The amount of the charge will be subject to change over time if a suitable tenant is identified or to the extent we are able to negotiate early lease terminations.

For the nine months ended September 30, 2005, the only activity in the accrual were payments of $627,000 related ongoing lease obligations.

Accounting for Contingencies

In the ordinary course of business, we have entered into various contractual relationships with strategic corporate partners, customers, suppliers, vendors and other parties. As such, we could be subject to litigation, claims or assessments arising from any or all of these relationships, or from our relationships with our employees. Our management accounts for contingencies such as these in accordance with SFAS No. 5 “Accounting for Contingencies.” SFAS No. 5 requires an estimated loss contingency be recorded when information available prior to issuance of a company’s financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. SFAS No. 5 and its interpretations further state that when there is a range of loss and no amount within that range is a better estimate than any other, that the minimum amount in the range shall be accrued. Accounting for contingencies arising from contractual, tax, or legal proceedings requires our management to use its best judgment when estimating an accrual related to such contingencies. As additional information becomes known, the accrual for a loss contingency could fluctuate, thereby creating variability in our results of operations from period to period. Likewise, an actual loss arising from a loss contingency that significantly exceeds the amount accrued could have a material adverse impact on our operating results for the period in which such actual loss becomes known.

At December 31, 2004, we had recorded an accrual related to the Shingleton litigation. Our accrual at December 31, 2004, was $14.8 million and reflected amounts that were agreed upon in a settlement that was announced on March 1, 2005 and approved by the Court on June 27, 2005 as well as an estimate for employer wage taxes. In March 2005, we made payments of $14.75 million to satisfy our obligations under the settlement. These payments were partially funded with $2.67 million of insurance proceeds that we received. The insurance proceeds were recorded as a receivable within prepaid expenses and other on our consolidated balance sheet at December 31, 2004. In September 30, 2005, the settlement proceeds were distributed to the class. As of September 30, 2005, we have no accruals remaining relating to the Shingleton litigation.

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” and amends SFAS No. 95, “Statement of Cash Flows.” SFAS No. 123R eliminates the ability to account for stock-based compensation transactions using APB Opinion No. 25, and will require instead that such transactions be accounted for using a fair value based method. SFAS No. 123R requires compensation costs related to share-based payment transactions to be recognized in the financial statements over the period that an employee provides service in exchange for the award. In April 2005, the SEC postponed the effective date of SFAS No. 123R until the fiscal year beginning after June 15, 2005. We will adopt SFAS No. 123R effective January 1, 2006.

Public companies may adopt the new standard using a modified prospective method or they may elect to restate prior periods using the modified retrospective method. Under the modified prospective method, companies are required to record compensation cost for new and modified awards over the related vesting period of such awards prospectively and record compensation cost prospectively for the unvested portion, at the date of adoption, of previously issued and outstanding awards over the remaining vesting period of such awards. No change to prior periods presented is permitted under the modified prospective method. Under the modified retrospective method, a company records compensation costs for prior periods retroactively through restatement of such periods using the exact pro forma amounts disclosed in the company’s footnotes. We will adopt the standard using the modified prospective method.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets”, which eliminates an exception in APB Opinion No. 29, “Accounting for Nonmonetary Transactions”, for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153 did not have a material impact on our financial position or results of operations.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”, which replaces APB Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements – An Amendment of APB Opinion No. 28.” SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application as of the earliest period present, or the latest practicable date, as the required method for reporting a voluntary change in accounting principle and the reporting of a correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We believe that the adoption of this statement will not have a material effect on our financial condition or results of operations.

RESULTS OF OPERATIONS

Three and Nine Months Ended September 30, 2005 and 2004:

	Three months ended September 30,						Nine months ended September 30,
(dollars in thousands)	2005		2004		% change		2005		2004		% change
Revenue:	$	99,921	$	80,395	24.3	%	$	290,931	$	233,004	24.9	%
Services		69,907		53,415	30.9	%		196,646		151,928	29.4	%
Sales		30,014		26,980	11.2	%		94,285		81,076	16.3	%
Average Number of Workstations in Production		9,911		8,677				9,590		8,537

For both the three and nine months ended September 30, 2005, we have experienced significant growth in our Services revenue and our Sales revenue. Our Services revenue, which is made up primarily of inbound customer service programs, has increased to 70% of total revenue for the three months ended September 30, 2005, as compared to 66% for the three months ended September 30, 2004. For the nine months ended September 30, 2005, this percentage is 68% as compared to 65% for the same period in the prior year. Our Sales revenue, which has remained relatively consistent since the sharp decline in mid-2003 caused by the enactment of Federal legislation, which affected many outbound calling programs, increased primarily due to additional client programs in the financial services industry and strong growth in international markets.

Total revenue per average workstation in production for the three and nine months ended September 30, 2005 increased by 9% and 11%, respectively, over the same periods in the prior year, reflecting increased utilization of our existing workstations and growth in revenue from ancillary services further supported our growth in revenue per average workstation.

As we continue to perform work for our customers in near-shore and offshore locations, our revenue will be impacted by fluctuations in foreign currency exchange rates. For the three and nine months ended September 30, 2005, changes in foreign exchange rates had a positive impact of $1.2 million and $3.2 million, respectively, on total revenue, as compared to the same periods in the prior year. The impact in both periods was primarily due to changes in the Canadian dollar, the Euro, and the British pound sterling.

For the three and nine months ended September 30, 2005, no customers accounted for 10% or more of our revenue. For both the three and nine months ended September 30, 2004, Virgin Mobile USA LLC accounted for 11% of the Company’s revenue. No other customers accounted for 10% or more of our revenue during these periods in 2024.

	Three months ended September 30,								Nine months ended September 30,
(dollars in thousands)	2005			2004			% change		2005			2004			% change
Cost of Services:	$	61,155		$	47,548		28.6	%	$	175,872		$	139,156		26.4	%
Direct labor costs		43,343			33,546		29.2	%		125,555			98,265		27.8	%
Telecom costs		4,977			4,130		20.5	%		14,288			13,451		6.2	%
Other costs of services		12,835			9,872		30.0	%		36,029			27,440		31.3	%
As a Percentage of Revenue
Total Cost of Services		61.2	%		59.1	%				60.5	%		59.7	%

Our cost of services consists primarily of direct labor costs associated with our telephone service representatives (TSRs) and telecommunications costs. Other direct costs we incur for our client programs include information technology support, quality assurance costs, other billable labor costs and support services costs.

For the three and nine months ended September 30, 2005, the increase in our cost of services was driven primarily by direct labor cost increases as well as increases in other costs of services. Our labor costs are impacted by production hour volume, foreign exchange rates and changes in hourly payroll rates. Our direct labor cost per production hour for the three months ended September 30, 2005 was $11.17 compared to $10.82 for the three months ended September 30, 2004. For the nine months ended September 30, 2005, our direct labor cost per production hour was $11.14 compared to $11.00 for the nine months ended September 30, 2004. Both increases reflect an overall decrease in wage rates of approximately 3%, offset by the impact of foreign currency. Much of our new business is inbound customer service and support. These programs necessitate that our TSRs possess a higher skill set in order to provide the appropriate level of support. The primary reason for the increase in direct labor cost was the increased volume of production hours necessary to support our revenue growth. The increase in telecom costs for the three months ended September 30, 2005 was also due to increased telephony traffic required to support our customer programs.

Other costs of services increased primarily due to higher levels of training costs, support work for our client programs, increased costs related to quality assurance and subcontracting costs. These costs tend to increase as our volume of customer care and customer support business increases. These client programs are typically more complex than outbound sales programs and require a higher level of clerical and ancillary services, which are non-phone services. The training of TSRs for these types of programs is also more costly due to the inherent level of complexity.

For the three and nine months ended September 30, 2005, changes in foreign exchange rates had the effect of increasing our cost of services by $1.3 million and $4.1 million, respectively, as compared to the same periods in the prior year. Foreign exchange rate fluctuations will continue to have an impact on our results.

	Three months ended September 30,								Nine months ended September 30,
(dollars in thousands)	2005			2004			% change		2005			2004			% change
Selling, General and Administrative Expenses:	$	35,070		$	31,097		12.8	%	$	105,637		$	89,616		17.9	%
Salaries, benefits and other personnel-related costs		13,600			12,056		12.8	%		41,689			35,366		17.9	%
Facilities and equipment costs		13,214			11,381		16.1	%		38,630			33,360		15.8	%
Depreciation and amortization		5,274			4,532		16.4	%		15,425			12,847		20.1	%
Other SG&A costs		2,982			3,128		-4.7	%		9,893			8,043		23.0	%
As a Percentage of Revenue
Total SG&A		35.1	%		38.7	%				36.3	%		38.5	%

Selling, general and administrative (“SG&A”) expenses primarily are comprised of salaries and benefits, rental expenses relating to our facilities and some of our equipment, equipment maintenance and depreciation and amortization.

SG&A expenses for the three and nine months ended September 30, 2005 as compared to the same periods in the prior year increased primarily because of increased facilities costs along with increases in salaries and benefits. Our facilities costs consist primarily of rental fees, which increased in both periods because of our expansion over the past year. Contributing to the increase are increased costs relating to two new contact centers in the United States as well as expansion in some of our existing contact centers. Salaries and benefits costs increased primarily due to headcount increases worldwide as well as earned incentives. Approximately 34% of our SG&A expenses for both the three and nine months ended September 30, 2005 were incurred in foreign locations, which are subject to changes in foreign exchange rates. Foreign exchange rates had the effect of increasing SG&A expenses by $525,000 and $1.6 million for the three and nine months ended September 30, 2005, respectively, as compared to the same periods in the prior year.

As a percentage of revenue, our SG&A expenses declined for both the three and nine months ended September 30, 2005 as compared to the same periods in the prior year, primarily as a result of our ability to handle a portion of the increased revenue with our existing infrastructure as well as being able to control some of our expenses as we open new facilities.

	Three months ended September 30,							Nine months ended September 30,
(dollars in thousands)	2005			2004		% change		2005			2004		% change
Litigation Costs (Recoveries):	$	(4,064	)	$	887	-558.2	%	$	(3,496	)	$	1,892	-284.8	%

Our litigation costs for the three and nine months ended September 30, 2005 include proceeds from one of our insurance carriers for $4.1 million. These insurance proceeds were partially offset by legal expenses of $36,000 and $604,000 for the three and nine months ended September 30, 2005, respectively. The insurance proceeds represent the culmination of litigation we were pursuing against one of the insurance carriers involved in the Shingleton litigation. For the remainder of the year we do not expect to incur any significant litigation costs associated with the Shingleton litigation. The litigation costs in the prior year represented ongoing legal costs incurred as part of litigating the Shingleton class action.

	Three months ended September 30,						Nine months ended September 30,
(dollars in thousands)	2005		2004		% change		2005		2004		% change
Interest Expense, Net:	$	656	$	451	45.5	%	$	1,802	$	1,070	68.4	%

Interest expense is shown net of interest income on our investments. The increase in interest expense, net for the three and nine months ended September 30, 2005, compared to the same periods in 2004, reflects additional net borrowings against our line of credit, higher interest rates and less investment income. The weighted average interest rate on amounts outstanding under the Credit Facility was 5.1% and 4.8% for the three and nine months ended September 30, 2005, respectively, as compared to 4.0% and 3.5% for the three and nine months ended September 30, 2004, respectively.

	Three months ended September 30,						Nine months ended September 30,
(dollars in thousands)	2005		2004		% change		2005		2004		% change
Income Tax Provision:	$	1,632	$	136	1100.0	%	$	2,836	$	420	575.2	%

Our income tax provision for both the three and nine months ended September 30, 2005 increased as compared to the same periods in the prior year due to increased income from operations. Also, as described in Note 6 to the condensed consolidated financial statements there were three discrete events that impacted our effective income tax rate in the third quarter of 2005. The most significant event related to the Philippine Economic Zone Authority (PEZA). We obtained exemption from Philippine income taxes related to one of our Philippine facilities. This facility was approved as a PEZA economic zone, which provides income tax holidays. These events partially reduced our overall effective income tax rate in 2005. For the three and nine months ended September 30, 2005, the effective income tax rate was approximately 23% and 26% compared to approximately 33% for the comparable periods in 2004.

Quarterly Results and Seasonality

We have experienced and expect to continue to experience quarterly variations in our operating results, principally as a result of the timing of client programs (particularly programs with substantial amounts of upfront project set-up costs), the commencement and expiration of contracts, the timing and amount of new business we generated, our revenue mix, the timing of additional selling, general and administrative expenses to support the growth and development of existing and new business units, competitive industry conditions and litigation costs.

Historically, our business tends to be the strongest in the fourth quarter due to the high level of client sales and service activity for the holiday season.

Liquidity and Capital Resources

At September 30, 2005, we had $10.0 million of cash and cash equivalents compared to $11.4 million at December 31, 2004. We generate cash through various means, primarily through cash from operations and, when required, through borrowings under our Credit Facility. The primary areas of our business in which we spend cash include capital expenditures, payments of principal and interest on amounts owed under our Credit Facility, costs of operations, litigation defense and business combinations.

Cash From Operations

Cash provided by operations for the nine months ended September 30, 2005 and 2004 was $10.7 million and $3.2 million, respectively.

Cash provided by operations for the nine months ended September 30, 2005 was generated by net income of $8.3 million and non-cash adjustments of $16.4 million, primarily depreciation and amortization. Net working capital changes decreased cash flow from operations by approximately $14.0 million. The change in working capital was primarily due to the payment of the Shingleton litigation of $14.75 million and unfavorable changes in other working capital accounts of $6.1 million, offset by $6.8 million of insurance proceeds received.

Cash provided by operations for the nine months ended September 30, 2004 was generated by net income of $850,000, and non-cash expenses of $13.1 million, primarily depreciation and amortization, offset by changes in working capital. Net working capital changes decreased cash flow from operations by approximately $10.7 million. The change in working capital was primarily due to an increase in our accounts receivable balance, partially offset by favorable changes in accounts payable and accrued expenses.

Credit Facility

For the nine months ended September 30, 2005 we had net repayments of $1.0 million as compared to net borrowings of $10.0 million for the nine months ended September 30, 2004. During the first quarter of 2005 we borrowed under our Credit Facility in order to fund a portion of the settlement reached in the Shingleton litigation. During the third quarter of 2005, we were able to repay $8.0 million of borrowings. The funds used to repay these borrowing were provided by cash flow from operations, which included the $4.1 million of insurance proceeds we received during the third quarter. In 2004, the primary use of the borrowings was to fund a portion of capital expenditures and the acquisition of DPS Data Group LLC (DPS).

On June 24, 2005, we entered into the Credit Facility. The Credit Facility, which amended our existing three-year $100.0 million revolving credit facility, is structured as a $125.0 million secured revolving facility with a $5.0 million sublimit for swing line loans and a $30.0 million sublimit for multicurrency borrowings. The Credit Facility includes a $50.0 million accordion feature, which will allow us to increase our borrowing capacity to $175.0 million, subject to obtaining commitments for the incremental capacity from existing or new lenders. The amendment extends the maturity date from December 2, 2006 to June 24, 2010.

We incurred $592,000 of debt issuance costs associated with this Credit Facility. These costs have been deferred and are being amortized over the five-year term of the Credit Facility. The unamortized issuance costs associated with the original credit facility of $306,000 will continue to be amortized over the new five-year term. As of September 30, 2005, we were in compliance with all of the covenants contained in the Credit Facility.

Litigation

On March 1, 2005, we announced a settlement with the plaintiffs in the Shingleton litigation. Under the terms of the settlement, ICT, without admitting liability or wrongdoing, agreed to pay $14.75 million to the plaintiff class to settle all allegations relating to unpaid wages, bonuses and other claims, as well as payments for liquidated damages allowed by West Virginia law of 30 days of wages plus interest, which was being sought for all class members regardless of the amount of wages allegedly unpaid. The settlement agreement was approved by the Court on June 27, 2005.

Until the litigation was settled, we had spent significant resources defending the Company in both the class action and its related litigation. Our associated legal costs for the nine months ended September 30, 2005 and 2004 were $604,000 and $1.9 million, respectively.

Our accrual at December 31, 2004 was $14.8 million. In March 2005, we made payments of $14.8 million to satisfy our obligations under the settlement. This payment was funded with cash-on-hand, borrowings under our Credit Facility and proceeds from responsive insurance coverage.

We sought insurance coverage for part of the damages in this litigation under our Directors and Officers policies that were in effect with two insurers. We received a payment of $2.67 million in March 2005 from one of the insurers. During the third quarter of 2005, we negotiated a settlement with the other insurer and collected the $4.1 million settlement amount.

Capital Expenditures and Business Combinations

For the nine months ended September 30, 2005, we spent $14.8 million on capital expenditures compared to $18.5 million for the nine months ended September 30, 2004. For each period, these amounts represented substantially all of our investing activities. In 2005, our capital expenditures related to the fit-out of two new domestic facilities and one facility abroad. In 2004, we used $3.0 million of cash to acquire the assets of DPS Data Group LLC, in addition to our capital spending on property and equipment. During the first nine months of 2004, the level of capital spending primarily reflected our offshore expansion in the Philippines.

There were 10,208 workstations in operation at September 30, 2005, compared to 9,264 workstations at December 31, 2004 and 8,747 at September 30, 2004. The workstations added during 2005 were located in various jurisdictions. Approximately 65% of these new workstations were added in domestic contact centers and 35% were added in our contact centers offshore and near-shore.

In March 2005, we made an additional payment of $178,000 relating to our 2002 acquisition of Grupo TeleInter, S.A. de C.V. This payment was subject to the original acquisition agreement and was based on the cumulative 2004 and 2003 final operating results. The maximum amount that could have been paid under this arrangement was $750,000. There are no remaining payments required under the acquisition agreement.

Our operations will continue to require significant capital expenditures to support the growth of our business. Historically, equipment purchases have been financed through cash generated from operations, the Credit Facility, our ability to acquire equipment through operating leases, and through capital lease obligations with various equipment vendors and lending institutions. We believe that cash-on-hand, together with cash flow generated from operations, the ability to acquire equipment through operating leases, and funds available under our Credit Facility will be sufficient to finance our current operations and planned capital expenditures for at least the next twelve months.

Commitments and Obligations

As of September 30, 2005, we are also parties to various agreements that create contractual obligations and commercial commitments. These obligations and commitments will have an impact on future liquidity and the availability of capital resources. We expect to satisfy our contractual obligations through cash flows generated from continuing operations. We would also consider accessing capital markets to meet our needs, although we can give no assurances that this type of financing would be available when we need it. There has not been any material change to our outstanding contractual obligations from our disclosure in our Annual Report on Form 10-K for the fiscal year ended December 31, 2004, except for the Amended and Restated Credit Agreement.

FORWARD - LOOKING STATEMENTS

This document contains certain forward-looking statements that are subject to risks and uncertainties. Forward-looking statements include statements relating to our belief that the allegations against us in the MDL Litigation are without merit and our intention to vigorously defend ourselves against them, our expectations regarding recent accounting pronouncements, our expectation that no significant litigation costs associated with the Shingleton litigation will be incurred for the remainder of 2005, the appropriateness of our reserves for contingencies, the realizability of our deferred tax assets, our ability to finance our operations and capital requirements into 2006, our ability to finance our long-term commitments, certain information relating to outsourcing trends as well as other trends in the outsourced business services industry and the overall domestic economy, our business strategy including the markets in which we operate, the services we provide, our ability to attract new clients and the customers we target, the benefits of certain technologies we have acquired or plan to acquire and the investment we plan to make in technology, our plans regarding international expansion, the implementation of quality standards, the seasonality of our 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 “will,” “should,” “believes,” “plans,” “intends,” “expects,” “anticipates” or similar expressions. For such statements, we claim 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.

Some factors that could prevent us from achieving our goals—and cause the assumptions underlying the forward-looking statements and our actual results 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 outsourced business services industry and our ability to distinguish our services from other outsourced business services companies and other marketing activities on the basis of quality, effectiveness, reliability and value; (ii) economic, political or other conditions which could alter the desire of businesses to outsource certain sales and service functions and our ability to obtain additional contracts to manage outsourced sales and service functions; (iii) the cost to defend or settle litigation against us or judgments, orders, rulings and other developments in litigation against us; (iv) government regulation of the telemarketing industry, such as the Do-Not-Call legislation; (v) our ability to offer value-added services to businesses in our targeted industries and our ability to benefit from our industry specialization strategy; (vi) 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; (vii) equity market conditions; (viii) technology risks, including our ability 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, as well as costs to implement these new technologies; (ix) the results of our 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 us, our revenue mix, the timing of additional selling, general and administrative expenses and the general competitive conditions in the outsourced business services industry and the overall economy; (x) terrorist attacks and their aftermath; (xi) the outbreak of war, and (xii) our capital and financing needs.

All forward-looking statements included in this report are based on information available to us as of the date of this report, and we assume no obligation to update these cautionary statements or any forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our operations are exposed to market risks primarily as a result of changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative or trading purposes. To meet disclosure requirements, we perform a sensitivity analysis to determine the effects that market risk exposures may have on our debt and other financial instruments. Information provided by the sensitivity analysis does not necessarily represent the actual changes in fair value that would be incurred under normal market conditions because, due to practical limitations, all variables other than the specific market risk factor are held constant.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our Credit Facility. A change in market interest rates exposes us to the risk of earnings or cash flow loss but would not impact the fair market value of the related underlying instrument. Borrowings under our Credit Facility are subject to variable LIBOR or prime base rate pricing. Accordingly, a 1% change (100 basis points) in the LIBOR rate and the prime rate would have resulted in interest expense changing by approximately $110,000 and $404,000 for the three and nine-months ended September 30, 2005, respectively. The rate on the $38.0 million of outstanding borrowings at September 30, 2005 approximated market rates; thus, the fair value of the debt approximates its reported value. In the past, our management has not entered into financial instruments such as interest rate swaps or interest rate lock agreements. However, we may consider these instruments to manage the impact of changes in interest rates based on our management’s assessment of future interest rates, volatility of the yield curve and our ability to access the capital markets in a timely manner.

Foreign Currency Risk

We have operations in Canada, Ireland, the United Kingdom, Australia, Barbados, Mexico and the Philippines that are subject to foreign currency fluctuations. As currency rates change, translation of the foreign entities’ statements of operations from local currencies to U.S. dollars affects year-to-year comparability of operating results.

Our most significant foreign currency exposures occur when revenue is generated in one foreign currency and corresponding expenses are generated in another foreign currency. Our most significant exposure has been with our Canadian operations, where a portion of revenue is generated in U.S. dollars (USD) and the corresponding expenses are generated in Canadian dollars (CAD). When the value of the CAD increases against the USD, CAD denominated expenses increase and operating margins are negatively impacted. Partially offsetting this exposure is indigenous Canadian business and associated profitability where USD profits will be higher in a period of a strong CAD.

Beginning in 2003, our management has executed a strategy to hedge a portion of anticipated operating costs and payables associated with the CAD, primarily payroll expenses, rental expenses and other known recurring expenses, on a monthly basis to mitigate the impact of exchange rate fluctuations. The expansion of operations in the Philippines has increased the level of currency exposure in that operation and until recently, the exchange rate of the Philippine peso (PHP) against the USD had not fluctuated significantly. In October 2005, our management addressed the increased currency exposure associated with the PHP by entering into some derivative contracts for fiscal year 2006.

The impact of foreign currencies will continue to present economic challenges for us and could negatively impact overall earnings. A 5% change in the value of the USD relative to foreign currencies would have had an impact of approximately $700,000 and $1.6 million on our earnings for the three and nine months ended September 30, 2005, respectively, before the consideration of any income or loss resulting from our hedging activities.

Item 4. Controls and Procedures

a. Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure. A control system cannot provide absolute assurance, however, that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

b. Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in litigation incidental to our business. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. For more information on the legal proceedings we are involved in, please refer to Note 5 in the footnotes to the financial statements contained in this Quarterly Report on Form 10-Q. The disclosure in Note 5 is incorporated by reference into this Item 1.

Item 6. Exhibits

10.47	Settlement Agreement and Mutual Release, dated August 10, 2005 by and between ICT Group, Inc. with various Individual Insureds and National Union Fire Insurance Company, referred to as National Union (Filed as Exhibit 10.47 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2005) *
31.1	Chief Executive Officer’s Rule 13a-14(a)/15d-14(a) Certification *
31.2	Chief Financial Officer’s Rule 13a-14(a)/15d-14(a) Certification *
32.1	Chief Executive Officer’s Section 1350 Certification *
32.2	Chief Financial Officer’s Section 1350 Certification *

* Filed herewith

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.

	ICT GROUP, INC.
Date: November 3, 2005	By:	/s/    JOHN J. BRENNAN
		John J. Brennan
		Chairman, President and Chief Executive Officer
Date: November 3, 2005	By:	/s/    VINCENT A. PACCAPANICCIA
		Vincent A. Paccapaniccia
		Executive Vice President Corporate Finance, Chief Financial Officer and Assistant Secretary

EX-10.47

Exhibit 10.47

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

This Settlement Agreement and Mutual Release (the “Agreement”) is entered into, and is effective the 10th day of August, 2005, by and between ICT Group, Inc. (hereinafter known as “ICT”); John Brennan, Vincent Paccapaniccia, Anne Beeson, Vincent Dadamo, Timothy Kowalski, John Campbell, Jack Magee, Dean Kilpatrick, Carl Smith and Charles Feitner (the “Individual Insureds” and together with ICT the “Insureds”), and National Union Fire Insurance Company of Pittsburgh, PA (referred to herein as “National Union”). (National Union and the Insureds are sometimes referred to collectively as the “Parties.”)

RECITALS

A. Federal Insurance Company (“Federal”) issued Executive Protection Policy No. 8145-73-61 to ICT, effective June 20, 2000 to June 20, 2001, with limits of $5 million, which policy is hereinafter referred to as the “Primary Policy.”

B. National Union issued an excess policy to ICT, Policy No. 468-71-87, effective June 20, 2000 to June 20, 2001, which provides coverage in excess of the limits of the Primary Policy in the amount of $5 million, which policy is hereinafter referred to as the “First Level Excess Policy.”

C. Federal issued an excess policy to ICT, Policy No. 8179-69-21, effective June 20, 2000 to June 20, 2001, which provides coverage in excess of the limits of the Primary Policy and the First Level Excess Policy in the amount of $5 million, which policy is hereinafter referred to as the “Second Level Excess Policy.”

D. The Insureds claim that National Union received timely notice of claims made against ICT and the Individual Insureds asserted in a class action lawsuit filed by William Shingleton, as the representative plaintiff, in the Circuit Court of Berkeley County, West Virginia, at Docket No. 98-C-517, and captioned William Shingleton, et al. v. ICT Group, Inc., et al. (referred to herein as the “Shingleton Litigation”).

E. It is National Union’s position that it did not receive timely notice of the Shingleton Litigation, and it has raised certain coverage issues and defenses and has reserved all rights under the First Level Excess Policy with respect to claims asserted in the Shingleton Litigation.

F. After the Shingleton Litigation was filed, ICT and the Individual Insureds filed an action against Federal, National Union and Johnson, Kendall & Johnson, Inc. (“JKJ”) in the Circuit Court of Berkeley County, West Virginia, at Docket No. 03-C-387, and captioned ICT Group, Inc. et al. v. Federal Insurance Company, et al. (referred to herein as the “Coverage Litigation”).

G. In the Coverage Litigation, the Insureds have asserted, inter alia, coverage claims against National Union and Federal, and claims for professional negligence and breach of fiduciary duty against JKJ. National Union has answered the Insureds’ complaint and asserted affirmative defenses thereto.

H. In the Shingleton Litigation, the Insureds, through their respective counsel, have denied the plaintiffs allegations and have vigorously defended the Shingleton Litigation.

I. The Insureds have reached a settlement of the Shingleton Litigation with the plaintiffs in that litigation, and the court in that litigation has entered an order finally approving that settlement;

J. Under and pursuant to the terms of the settlement agreement whereby the Shingleton Litigation was settled, ICT has paid $14,750,000.00 (Fourteen Million Seven Hundred Fifty Thousand Dollars).

K. The Insureds have reached a settlement with Federal relating to the Insureds’ claims against Federal in the Coverage Litigation, and, by reason of that settlement, as well as Federal’s payment of defense costs incurred by the Insureds in the Shingleton Litigation, the limits of the Primary Policy are exhausted.

L. The Parties desire to compromise, settle and resolve all disputes, claims, counterclaims, actions, suits, demands, causes of action, debts, liabilities, agreements, contracts or promises between them in connection with the Shingleton Litigation, and/or asserted with respect to the Coverage Litigation and/or asserted with respect to the First Level Excess Policy relating in any way to the Shingleton Litigation or the Coverage Litigation.

NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND COVENANTS CONTAINED HEREIN, THE PARTIES AGREE AS FOLLOWS:

I. Payments and Dismissals

A. By August 10, 2005, each of the Parties shall sign this Agreement and each Party shall provide the other Party with an executed original of this Agreement.

B. By August 15, 2005, the Insureds shall file appropriate papers in the Coverage Litigation seeking a stay of their claims against National Union in that litigation so that the parties may finalize their agreement to amicably resolve the litigation.

C. By August 15, 2005, National Union shall file appropriate papers with the Supreme Court of Appeals of West Virginia seeking a stay in regard to consideration of its Petition To Appeal so that the parties may finalize their agreement to amicably resolve the litigation.

D. On September 15, 2005, National Union shall pay the sum of $4,100,000.00 (the “Settlement Sum”) on behalf of the Insureds in settlement of the Shingleton Litigation by check made payable to “ICT Group, Inc.”

E. Promptly upon completion of the events set forth in Paragraph I(A) through (D) above, and no later than September 20, 2005, the Insureds shall file the appropriate papers in the Coverage Litigation seeking dismissal with prejudice of their claims asserted against National Union in that litigation, and National Union shall file the appropriate papers with the Supreme Court of Appeals seeking a dismissal of its Petition to Appeal.

II. No Admission of Liability

This Agreement is entered into for the sole purpose of resolving certain contested claims and disputes concerning the Coverage Litigation and coverage for the Shingleton Litigation, and avoiding the substantial costs, expenses and uncertainties associated with such claims and disputes, the trial of the Coverage Litigation and other potential litigation. Neither the execution nor the performance of any of the terms of this Agreement, nor the settlement of the Coverage Litigation and/or the Shingleton Litigation, shall be deemed by any Party to constitute an admission or indication that any of the claims asserted against any other Party in the Coverage Litigation, or otherwise, have any merit.

III. Release of National Union

A. Upon payment of the moneys provided for herein, and compliance with the terms and conditions of this Agreement, including, without limitation, completion of the events contemplated in Paragraph I of this Agreement, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and subject to and limited by Paragraph III (B) of this Agreement, ICT and each of the Individual Insureds, do hereby forever release, discharge and acquit National Union and any of its past, present, or future parent companies, divisions, subsidiaries, affiliates, predecessors, successors, owners, assigns, and any of their past, present, or future directors, officers, employees, agents, principals, trustees, insurers and reinsurers, and the heirs, executors and representatives of any of them, and their lawyers and all persons acting by, through, under or in concert with them or any of them, with the sole and express exception of JKJ, from any and all manner of action or actions, cause or causes of action, suits, debts, liens, contracts, agreements, promises, liabilities, claims, demands, damages, losses, attorneys’ fees, costs, or expenses, of any nature whatsoever, whether class, derivative or individual in nature, in law or in equity, for indemnity or otherwise, known or unknown, suspected or unsuspected, fixed or contingent (collectively “Claims”), which the Insureds ever had, now have, or may have in the future against National Union for coverage under the First Level Excess Policy (or any other insurance policy issued by National Union or any affiliate of National Union) for any liability that the Insureds have incurred or might incur in connection with, or arising from, the Shingleton Litigation, including, without limitation, all Claims that the Insureds asserted, or could have asserted against National Union in the Coverage Litigation, and specifically including the following types of Claims: (a) claims for “bad faith” or unfair claims handling practices; (b) common law claims for “bad faith” insurance practices or breach of the implied covenant of good faith and fair dealing; (c) all rights and claims pursuant to any applicable statute and/or case law for any alleged failure to effectuate prompt, fair and equitable settlements of claims; (d) claims relating in any way to National Union’s participation in the settlement of the Shingleton Litigation; and (e) claims arising out of National Union’s denial of coverage under the First Level Excess Policy and/or National Union’s position that it was neither obligated to pay for all or any portion of ICT’s and/or the Individual Insureds’ defense of the Shingleton Litigation nor required to indemnify ICT and/or the Individual Insureds against any liability they may incur in the Shingleton Litigation.

B. Notwithstanding anything set forth in Paragraph III (A) of this Agreement, the release provided for in that Paragraph III (A) does not release, and shall not be construed in any proceeding to release, any Claim the Insureds, or any of them now have, or may have in the future: (a) not based upon, arising from, or related to, the Shingleton Litigation, the settlement of the Shingleton Litigation and/or the Coverage Litigation or National Union’s handling of the settlement of the Shingleton Litigation for the benefit of ICT and/or the Insureds; or (b) against any other persons against whom the Insureds may have rights in connection with the Shingleton Litigation who are not released in Paragraph III (A) of this Agreement, including, without, limitation, all Claims of the Insureds that have been asserted, or may be asserted in the future, against JKJ in the Coverage Litigation, or otherwise; or (c) for breach of this Agreement. Neither JKJ, nor any of its past, present, or future parent companies, divisions, subsidiaries, affiliates, predecessors, successors, owners, assigns, and any of its present, former or future directors, officers, employees, agents, principals, trustees, insurers and reinsurers or representatives are intended to be, or shall be construed to be, persons released under Paragraph III (A) of this Agreement.

IV. Release of ICT and the Individual Insureds

A. In return for the release provided in Paragraph III of this Agreement, including, without limitation, completion of the events contemplated in Paragraph I of this Agreement, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and subject to and limited by the limitation set forth in Paragraph III (B) of this Agreement, National Union does hereby forever release, discharge and acquit ICT, the Individual Insureds and, as appropriate, its/his/her past, present or future parent companies, divisions, subsidiaries, affiliates, predecessors, successors, owners, assigns, directors, officers, employees, agents, principals, trustees, insurers and reinsurers, and the heirs, executors and representatives of any of them, and their lawyers and all persons acting by, through, under or in concert with them or any of them, from any and all manner of action or actions, cause or causes of action, suits, debts, liens, contracts, agreements, promises, liabilities, claims, demands, damages, losses, attorneys’ fees, costs, or expenses, of any nature whatsoever, whether class, derivative or individual in nature, in law or in equity for indemnity or otherwise, known or unknown, suspected or unsuspected, fixed or contingent (collectively “Claims”) which National Union now has, or may have in the future against ICT, the Individual Insureds and/or Federal, or any of them, under the First Level Excess Policy, or otherwise, as a result of the claims that the Insureds have made for coverage for the Shingleton Litigation under the First Level Excess Policy, including without limitation, all Claims that National Union asserted, or could have asserted against the Insureds and/or Federal in the Coverage Litigation, and specifically including the following types of Claims: (a) claims for “reverse bad faith,” (b) common law claims for “reverse bad faith” insurance practices or breach of the implied covenant of good faith and fair dealing, (c) claims attempting to obtain contribution and/or indemnity from Federal as a result of any amounts paid or liabilities incurred by National Union in connection with the Shingleton Litigation and/or the Coverage Litigation; and (d) any claims arising out of National Union’s position that it was not required to indemnify ICT and/or the Insureds against any liability they may incur in the Shingleton Litigation; provided, however, that in the event that Federal asserts any Claim against National Union seeking damages or other relief from National Union arising out of, or as the result of, payments made by Federal to ICT and/or the Individual Insureds under the Primary Policy or the Second Level Excess Policy in connection with the Shingleton Litigation or arising out of or in any way related to the Shingleton Litigaton or the Coverage Litigation, the foregoing release of Federal by National Union shall be entirely null and void and of no effect and National Union shall maintain all of its rights to proceed against Federal.

B. Notwithstanding anything set forth in Paragraph IV (A), the release provided for in Paragraph IV (A) does not release, and shall not be construed to release any Claim National Union now has, or may have in the future: (a) not based upon, arising from, or related to, the Shingleton Litigation, the settlement of the Shingleton Litigation and/or the Coverage Litigation or National Union’s handling of the settlement of the Shingleton Litigation for the benefit of ICT and/or the Insureds; or (b) against any other persons against whom National Union may have rights in connection with the Shingleton Litigation who are not released in Paragraph IV (A) of this Agreement, including, without, limitation, all Claims of National Union that have been asserted, or may be asserted in the future, against JKJ in the Coverage Litigation, or otherwise; or (c) for breach of this Agreement. Neither JKJ, nor any of its past, present, or future parent companies, divisions, subsidiaries, affiliates, predecessors, successors, owners, assigns, and any of its present, former or future directors, officers, employees, agents, principals, trustees, insurers and reinsurers or representatives are intended to be, or shall be construed to be, persons released under Paragraph IV (A) of this Agreement.

V. Non-Assignment of Claims

A. ICT represents and warrants that neither ICT nor any of its affiliates, predecessors, successors, or authorized agents or assigns, up to and including the time of signing this Agreement, have assigned or transferred, or purported to assign or transfer, any of its rights in respect of any matter as to which ICT is granting a release in this Agreement.

B. Each of the Individual Insureds represents and warrants that neither he/she, nor any authorized agents or assigns of such Individual Insured, up to and including the time of signing this Agreement, have assigned or transferred, or purported to assign or transfer, any of his/her rights in respect of any matter as to which that Individual Insured is granting a release in this Agreement.

C. National Union represents and warrants that neither National Union, nor any of its affiliates, predecessors, successors, or authorized agents or assigns, up to and including the time of signing this Agreement, have assigned or transferred, or purported to assign or transfer, any of its rights in respect of any matter as to which National Union is granting a release in this Agreement.

VI. Confidentiality

A. Effective on the final execution of this Agreement, and subject only to the exceptions set forth in this Paragraph VI of this Agreement, the fact of this Agreement, the terms thereof, and the negotiations leading thereto are, and shall be treated by the Parties as, confidential.

B. The confidentiality provided for in this Paragraph VI shall not apply in the following situations:

1. Any disclosure as may be necessary and appropriate by any Party to: that Party’s spouse; attorney(s) or accountant(s); the Internal Revenue Service or applicable state taxing authorities, as required by law; that Party’s insurers and/or reinsurers; that Party’s financial institutions for the purpose of the Party obtaining financing;

2. National Union may make such disclosure as may be necessary and appropriate within its corporate structure and to its reinsurers;

3. ICT may make such disclosure as may be necessary and appropriate within its corporate structure;

4. Any Party may make disclosures when, and to the extent that, they are bound by a legal duty to disclose, including, but not limited to disclosures in order to meet fiduciary duties, disclosures to regulatory agencies of the government or disclosures to shareholders of a party;

5. Any Party may make such disclosures as may be compelled pursuant to order of court of competent jurisdiction;

6. Any Party may make such disclosures as are necessary and appropriate to JKJ in the course of discovery or at trial in the Coverage Litigation; or any other litigation involving JKJ; and

7. Any Party may make such disclosures as may be required to enforce this Agreement.

C. In the event that any Party is served with a subpoena, discovery request or other similar legal instrument (“disclosure request”) that could lead to a court order compelling disclosure of this Agreement, or any of the terms and conditions thereof, that Party shall, within fourteen (14) days of the receipt of such disclosure request, notify the other Parties of that request, including providing them with a copy of the request, unless fourteen days notice would not permit sufficient time in which to allow the other Parties to assert any interest they may have in opposing the disclosure request, in which case the Party to whom the disclosure request is directed shall give notice to the other Parties as soon as possible, but, in any event, before actual disclosure of any information made confidential under this Agreement. Notwithstanding the foregoing, the requirement of this Paragraph VI(C) shall not apply to disclosures by the Insureds or National Union to JKJ in the Coverage Litigation, or any other litigation involving JKJ, which such disclosures are governed by Paragraph IV (B) (6) of this Agreement.

D. Any notice required to be given to National Union under this Paragraph VI shall be provided to:

Antonios Daskalakis, Esq.

AIG Domestic Claims, Inc.

175 Water Street, 11th Floor

New York, NY 10038

Samuel F. Paniccia, Esq.

D’Amato & Lynch

70 Pine Street – 47th Floor

New York, NY 10270

E. Any notice required to be given to the Insureds shall be provided to:

Jeffrey Moore

Vice President and General Counsel

ICT Group, Inc.

100 Brandywine Boulevard

Newtown, PA 18940

Richard F. McMenamin, Esq.

Morgan, Lewis & Bockius, LLP

1701 Market Street

Philadelphia, PA 19103

VII. Amendment And Waiver

A. This Agreement may be modified or amended only in a writing that is duly executed by all Parties to this Agreement.

B. Any Party who desires to waive any provision of this Agreement, or any breach thereof by any other Party, must do so in a writing directed to the representatives of the Parties identified in Paragraph VI of this Agreement. Waiver of any one breach of this Agreement, or any particular provision thereof, shall not be deemed a waiver of any other breach of the Agreement or any other provision thereof.

VIII. Severability

In the event any of the provisions of this Agreement are deemed to be invalid and unenforceable, those provisions shall be severed from the remainder of this Agreement.

IX. Counterparts

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one agreement.

X. Rule of Construction

This Agreement has been drafted by counsel for the Parties, and reviewed by such counsel and by each Party, and any rule of construction whereby an agreement is to be construed against the drafter is inapplicable to the construction of this Agreement.

XI. Entire Agreement

No promise, inducement, or agreement not herein expressed has been made to any Party, or the representative of any Party, in connection with the negotiation, drafting or execution of this Agreement. This Agreement consists of the entire agreement between the Parties. The terms of this Agreement are contractual in nature and not mere recitals.

XII. Change in Facts Known

If any fact now believed by any Party to be true is found hereafter to be other than, or different from, that which is now believed by such Party, that Party expressly assumes the risk of such difference in fact and this Agreement shall remain fully effective notwithstanding any such difference in fact.

XIII. Attorneys’ Fees

If, and to the extent that, the Parties hereafter mutually agree to an arbitration proceeding to seek relief for any breach of this Agreement, to enforce the terms of this Agreement, or if any Party hereafter commences, joins in, or in any manner seeks relief against any other Party through any judicial or arbitration proceeding arising out of, based upon, or relating to any of the claims released hereunder, the prevailing party shall be entitled to recover, in addition to any other damages, all its reasonable attorneys fees and costs incurred in connection therewith.

XIV. Acknowledgment of Legal Advice

Each Party hereby acknowledges he, she or it is entering into this Agreement upon the legal advice of his, her or its attorney, that said attorney has explained the terms of this Agreement, and that each Party fully understands and voluntarily accepts the terms of this Agreement.

XV. Choice of Law

The signatories hereto understand, agree and acknowledge that this Agreement shall be construed under, and interpreted in accordance with, the law of the Commonwealth of Pennsylvania as it exists on the date that this Agreement is fully executed by the Parties.

XVI. Use of Headings

All headings contained in this Agreement are used solely for the convenience of the Parties and are not to be interpreted as part of this Agreement.

XVII. Successors

This Agreement shall be binding upon and inure to the benefit of, and be enforceable by, the Parties and their respective successors, heirs, administrators, trustees, executors and assigns.

XVIII. Authority of Signatories

The undersigned individuals who are signing this Agreement on behalf of National Union or ICT declare, warrant and represent that they have the authority to enter into this Agreement on behalf of the party on whose behalf they are signing.

[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]

	AIG DOMESTIC CLAIMS, INC., on behalf of NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA
Dated: ______________________________	By:
	Title:

	ICT GROUP, INC.
Dated: ______________________________	By:
	Title:

	INDIVIDUAL INSUREDS
Dated: ______________________________	By:
		JOHN BRENNAN

Dated: ______________________________	By:
		VINCENT PACCAPANICCIA

Dated: ______________________________	By:
		ANNE BEESON

Dated: ______________________________	By:
		VINCENT DADAMO

Dated: ______________________________	By:
		TIMOTHY KOWALSKI

Dated: ______________________________	By:
		JOHN CAMPBELL

Dated: ______________________________	By:
		JACK MAGEE

Dated: ______________________________	By:
		DEAN KILPATRICK

Dated: ______________________________	By:
		CARL SMITH

Dated: ______________________________	By:
		CHARLES FEITNER

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification

I, John J. Brennan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ICT Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2005	/s/    JOHN J. BRENNAN
	John J. Brennan Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification

I, Vincent A. Paccapaniccia, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ICT Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2005	/s/    VINCENT A. PACCAPANICCIA
	Vincent A. Paccapaniccia Executive Vice President, Corporate Finance and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of ICT Group, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John J. Brennan, Chairman, President and Chief Executive Officer of the Company, hereby certify, to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 3, 2005	/s/    JOHN J. BRENNAN
	John J. Brennan Chairman, President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of ICT Group, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Vincent A. Paccapaniccia, Executive Vice President, Corporate Finance and Chief Financial Officer of the Company, hereby certify, to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 3, 2005	/s/    VINCENT A. PACCAPANICCIA
	Vincent A. Paccapaniccia Executive Vice President, Corporate Finance and Chief Financial Officer