EXHIBIT 99.2
ICT Group, Inc.
Reconciliation Tables for Investor Presentations during the week of August 1, 2005
About Non-GAAP Financial Measures
Management uses certain non-GAAP measures of financial performance. These non-GAAP measures include adjusted net income, EBITDA, adjusted EBITDA, adjusted operating income and adjusted diluted earnings per share. Management also uses certain non-GAAP measures the evaluate liquidity. These non-GAAP measures include free cash flow and adjusted free cash flow. With respect to the financial projections and forecasts that may be disclosed, the Company is unable to forecast future expenses and potential insurance recoveries related to the recently settled class action litigation and consequently is unable to forecast its operating results under GAAP for the third quarter and full-year of 2005.
Adjusted Net Income and Adjusted Diluted Earnings per Share
The following table shows a reconciliation of net income to adjusted net income. The calculation of adjusted diluted earnings per share is also shown. Management uses these measurements to evaluate the profitability of the business.
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(in thousands) (unaudited) For the fiscal quarters ended: | | 3/31/2004
| | | 6/30/2004
| | | 9/30/2004
| | | 12/31/2004
| | | 3/31/2005
| | | 6/30/2005
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Net income (loss), as reported | | $ | 224 | | | $ | 350 | | | $ | 276 | | | $ | (3,543 | ) | | $ | 1,064 | | | $ | 1,744 | |
Addback: | | | | | | | | | | | | | | | | | | | | | | | | |
Litigation costs | | | 560 | | | | 445 | | | | 887 | | | | 8,446 | | | | 477 | | | | 91 | |
Tax effect of litigation costs | | | (184 | ) | | | (146 | ) | | | (293 | ) | | | (2,995 | ) | | | (143 | ) | | | (27 | ) |
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Adjusted net income | | $ | 600 | | | $ | 649 | | | $ | 870 | | | $ | 1,908 | | | $ | 1,398 | | | $ | 1,808 | |
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Shares used to compute diluted earnings per share | | | 12,953 | | | | 12,918 | | | | 12,849 | | | | 12,625 | | | | 12,911 | | | | 12,897 | |
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Adjusted diluted earnings per share | | $ | 0.05 | | | $ | 0.05 | | | $ | 0.07 | | | $ | 0.15 | | | $ | 0.11 | | | $ | 0.14 | |
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Free Cash Flow and Adjusted Free Cash Flow
Free cash flow is an additional measurement used by management to evaluate the liquidity of the business. Free cash flow measures operating cash flows less purchases of property and equipment. In addition, management also evaluates liquidity using an adjusted free cash flow measurement, which excludes the cash flows associated with litigation settlement payments.
The reconciliation of operating cash flows to free cash flow and adjusted free cash flow is as follows:
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(in thousands) (unaudited) For the six months ended: | | June 30, 2005
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Cash flows provided by operating activities | | $ | 6,969 | |
Less: Purchases of property and equipment | | | (9,929 | ) |
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Free Cash Flow | | $ | (2,960 | ) |
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Cash flows associated with litigation settlement payments (1) | | | 12,080 | |
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Adjusted Free Cash Flow | | $ | 9,120 | |
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EBITDA and Adjusted EBITDA
EBITDA is commonly defined as Earnings before Interest, Taxes, Depreciation and Amortization. Management believes that Adjusted EBITDA is a meaningful indicator of profitability for the business. Adjusted EBITDA excludes from EBITDA the effects of special charges.
Adjusted EBITDA, as presented, is supplemental information and is not presented and should not be considered in isolation, or as a substitute for ICT’s consolidated financial information presented under GAAP. There are potentially different definitions of EBITDA and ICT’s definition may differ from other definitions.
The reconciliation of net income to EBITDA and Adjusted EBITDA is as follows:
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(in thousands) For fiscal years: | | 1994
| | 1995
| | 1996
| | | 1997
| | | 1998
| | 1999
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Net income, as reported | | $ | 898 | | $ | 1,570 | | $ | (7,517 | ) | | $ | 2,672 | | | $ | 2,427 | | $ | 4,745 |
Addback: | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | 511 | | | 833 | | | 180 | | | | (398 | ) | | | 406 | | | 801 |
Income tax provision or benefit | | | — | | | — | | | (2,998 | ) | | | 1,708 | | | | 1,549 | | | 3,033 |
Depreciation and Amortization | | | 1,243 | | | 1,877 | | | 2,792 | | | | 3,560 | | | | 5,667 | | | 8,004 |
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EBITDA | | $ | 2,652 | | $ | 4,280 | | $ | (7,543 | ) | | $ | 7,542 | | | $ | 10,049 | | $ | 16,583 |
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Addback: | | | | | | | | | | | | | | | | | | | | |
Charge related to stock compensation at time of IPO | | | — | | | — | | | 12,690 | | | | — | | | | — | | | — |
Restructuring charge (reversals) | | | — | | | — | | | — | | | | — | | | | — | | | — |
Client claim | | | — | | | — | | | — | | | | — | | | | — | | | — |
Litigation costs | | | — | | | — | | | — | | | | — | | | | — | | | — |
Writeoff of deferred offering costs | | | — | | | — | | | — | | | | — | | | | — | | | — |
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Adjusted EBITDA | | $ | 2,652 | | $ | 4,280 | | $ | 5,147 | | | $ | 7,542 | | | $ | 10,049 | | $ | 16,583 |
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(in thousands) For fiscal years: | | 2000
| | 2001
| | 2002
| | 2003
| | | 2004
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Net income, as reported | | $ | 6,729 | | $ | 7,978 | | $ | 2,968 | | $ | (1,144 | ) | | $ | (2,693 | ) |
Addback: | | | | | | | | | | | | | | | | | |
Interest expense, net | | | 1,207 | | | 1,079 | | | 828 | | | 1,183 | | | | 1,594 | |
Income tax provision or benefit | | | 4,302 | | | 4,506 | | | 1,398 | | | (856 | ) | | | (1,634 | ) |
Depreciation and Amortization | | | 9,621 | | | 11,279 | | | 15,443 | | | 17,855 | | | | 17,822 | |
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EBITDA | | $ | 21,859 | | $ | 24,842 | | $ | 20,637 | | $ | 17,038 | | | $ | 15,089 | |
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Addback: | | | | | | | | | | | | | | | | | |
Charge related to stock compensation at time of IPO | | | — | | | — | | | — | | | — | | | | — | |
Restructuring charge (reversals) | | | — | | | — | | | 8,894 | | | (686 | ) | | | — | |
Client claim | | | — | | | — | | | 1,409 | | | — | | | | — | |
Litigation costs | | | — | | | — | | | 1,673 | | | 4,693 | | | | 10,338 | |
Writeoff of deferred offering costs | | | — | | | — | | | 581 | | | — | | | | — | |
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Adjusted EBITDA | | $ | 21,859 | | $ | 24,842 | | $ | 33,194 | | $ | 21,045 | | | $ | 25,427 | |
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Adjusted Operating Income
The following table shows a reconciliation of net income and operating income to adjusted operating income, which excludes litigation costs. The calculation of adjusted diluted earnings per share is also shown. Management uses these measurements to evaluate the profitability of the business.
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(in thousands) (unaudited) For the six months ended: | | June 30, 2005
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Net income | | $ | 1,744 |
Addback: | | | |
Income tax provision | | | 748 |
Interest expense, net | | | 659 |
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Operating income | | $ | 3,151 |
Addback litigation costs | | | 91 |
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Adjusted operating income | | $ | 3,242 |
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