<Page>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<Table>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</Table>
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
OR
<Table>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</Table>
Commission File Number 0-22010
------------------------
THOMAS GROUP, INC.
(Exact name of registrant as specified in its charter)
<Table>
DELAWARE 72-0843540
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5221 NORTH O'CONNOR BOULEVARD
SUITE 500
IRVING, TX 75039-3714
(Address of principal executive offices, including zip code)
(972) 869-3400
(Registrant's telephone number, including area code)
</Table>
------------------------
NONE
(Former name, former address and former fiscal year, if changed since last
report)
------------------------
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 / /
As of August 9, 2001 the following number of shares of the registrant's
stock were outstanding:
<Table>
<Caption>
Common stock................................................ 4,166,571
Class B common stock........................................ 3,970
---------
Total..................................................... 4,170,541
=========
</Table>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Page>
THOMAS GROUP, INC.
PART I--FINANCIAL INFORMATION
<Table>
<Caption>
PAGE NO.
--------
Item 1--Financial Statements (unaudited)
Consolidated Balance Sheets, June 30, 2001 and
December 31, 2000.................................... 3
Consolidated Statements of Operations for the Three
and Six Month Periods Ended
June 30, 2001 and 2000............................. 4
Consolidated Statements of Cash Flows for the Six
Month Periods Ended June 30,
2001 and 2000...................................... 5
Notes to Consolidated Financial Statements........... 6
Item 2-- Management's Discussion and Analysis of Financial
Condition and Results of
Operations......................................... 8
</Table>
PART II--OTHER INFORMATION
<Table>
Item 6--Exhibits and Reports on Form 8-K.................... 12
</Table>
2
<Page>
ITEM 1--FINANCIAL STATEMENTS
THOMAS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
-------- ------------
ASSETS
Current Assets
Cash and cash equivalents................................. $ 7,918 $ 6,631
Trade accounts receivable, net of allowances of $437 and
$269 in 2001 and 2000, respectively..................... 7,625 10,856
Unbilled receivables...................................... 149 233
Deferred tax asset........................................ 1,339 1,339
Other assets.............................................. 4,036 3,102
-------- --------
Total Current Assets.................................... 21,067 22,161
-------- --------
Property and equipment, net................................. 3,319 3,829
Deferred tax asset.......................................... 2,000 2,000
Other assets................................................ 3,088 3,092
-------- --------
$ 29,474 $ 31,082
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities.................. $ 3,381 $ 5,738
Income taxes payable...................................... 186 575
Current maturities of long-term obligations............... 575 575
-------- --------
Total Current Liabilities............................... 4,142 6,888
Long-term obligations....................................... 2,806 2,782
-------- --------
Total Liabilities....................................... 6,948 9,670
-------- --------
Commitments and Contingencies
Stockholders' Equity
Common stock, $.01 par value; 25,000,000 shares
authorized; 6,680,479 and 6,659,267 shares issued and
4,158,780 and 4,214,968 shares outstanding in 2001 and
2000, respectively...................................... 67 67
Class B common stock, $.01 par value; 1,200,000 shares
authorized; 3,970 shares issued and outstanding......... -- --
Additional paid-in capital................................ 24,373 24,265
Retained earnings......................................... 21,805 20,344
Accumulated other comprehensive loss...................... (1,362) (1,362)
Treasury stock, 2,521,699 and 2,444,299 shares in 2001 and
2000,
respectively............................................ (22,357) (21,902)
-------- --------
Total Stockholders' Equity.............................. 22,526 21,412
-------- --------
$ 29,474 $ 31,082
======== ========
</Table>
See accompanying notes to consolidated financial statements.
3
<Page>
THOMAS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Revenue....................................... $ 15,812 $ 15,016 $ 32,172 $ 31,291
Cost of sales................................. 8,032 8,889 17,681 17,795
---------- ---------- ---------- ----------
Gross profit.................................. 7,780 6,127 14,491 13,496
Selling, general and administrative........... 6,116 6,418 12,119 12,563
---------- ---------- ---------- ----------
Operating income (loss)....................... 1,664 (291) 2,372 933
Other income, net............................. 88 60 63 113
---------- ---------- ---------- ----------
Income (loss) from continuing operations
before income taxes......................... 1,752 (231) 2,435 1,046
Income taxes (benefit)........................ 701 (93) 974 418
---------- ---------- ---------- ----------
Income (loss) from continuing operations...... 1,051 (138) 1,461 628
Discontinued Operations:
Gain from discontinued operations, net of
income tax of $100.......................... -- 149 -- 149
========== ========== ========== ==========
Net income.................................... $ 1,051 $ 11 $ 1,461 $ 777
========== ========== ========== ==========
Earnings (loss) per common share:
Basic:
Income (loss) from continuing operations...... $ .25 $ (.03) $ .35 $ .13
Gain from discontinued operations............. -- .03 -- .03
---------- ---------- ---------- ----------
Net Income.................................... $ .25 $ -- $ .35 $ .16
========== ========== ========== ==========
Diluted:
Income (loss) from continuing operations...... $ .25 $ (.03) $ .35 $ .13
Gain from discontinued operations............. -- .03 -- .03
---------- ---------- ---------- ----------
Net income.................................... $ .25 $ -- $ .35 $ .16
========== ========== ========== ==========
Weighted average shares:
Basic......................................... 4,158,384 4,663,786 4,171,357 4,713,387
Diluted....................................... 4,170,255 4,663,786 4,183,205 4,817,295
</Table>
See accompanying notes to consolidated financial statements.
4
<Page>
THOMAS GROUP,INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
-------------------
2001 2000
-------- --------
Cash Flows From Operating Activities:
Income from continuing operations........................... $ 1,461 $ 628
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Depreciation............................................ 656 781
Amortization............................................ 9 186
Allowance for doubtful accounts......................... 168 550
Amortization of stock option grants..................... 21 146
Other................................................... 113 (206)
Change in operating assets and liabilities:
(Increase) decrease in trade accounts receivable...... 2,224 1,874
(Increase) decrease in unbilled receivables........... 84 (1,340)
(Increase) decrease in other assets................... (695) (491)
Increase (decrease) in accounts payable and accrued
liabilities......................................... (1,293) (1,835)
Increase (decrease) in advance payments............... -- 167
Increase (decrease) in income taxes payable........... (390) (502)
------- -------
Net Cash Provided by (Used In) Operating Activities......... 2,358 (42)
Cash Flows From Investing Activities:
Capital expenditures........................................ (348) (1,316)
------- -------
Net Cash Used In Investing Activities....................... (348) (1,316)
Cash Flows From Financing Activities:
Purchase of treasury stock.................................. (455) (2,009)
Proceeds from exercise of stock options..................... 87 386
Payment of other long-term obligations...................... -- (354)
Net advances (repayments) - line of credit.................. (1,005) 1,082
------- -------
Net Cash Used In Financing Activities....................... (1,373) (895)
Effect of Exchange Rate Changes on Cash..................... 650 (814)
------- -------
Net Cash Provided by (Used In) Continuing Operations........ 1,287 (3,067)
Discontinued Operations:
Net Cash Provided by Operating Activities................... -- 249
Cash and Cash Equivalents:
Beginning of period......................................... 6,631 9,698
------- -------
End of period............................................... $ 7,918 $ 6,880
======= =======
</Table>
See accompanying notes to consolidated financial statements.
5
<Page>
THOMAS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The unaudited consolidated financial statements of Thomas Group, Inc.
(the "Company") include all adjustments, which include only normal recurring
adjustments, which are, in the opinion of management, necessary to present
fairly the results of operations of the Company for the interim periods
presented. The unaudited financial statements should be read in conjunction with
the consolidated financial statements and notes thereto in the Company's
Form 10-K for the 2000 fiscal year filed with the Securities and Exchange
Commission. The results of operations for the three and six month periods ended
June 30, 2001 are not necessarily indicative of the results of operations for
the entire year ending December 31, 2001. Certain amounts from prior periods
have been reclassified to conform with the 2001 presentation.
2. EARNINGS PER SHARE--Basic earnings per share is based on the number of
weighted average shares outstanding. Diluted earnings per share includes the
effect of dilutive securities such as stock options and warrants. The following
table reconciles basic earnings per share to diluted earnings per share under
the provisions of Statement of Financial Accounting Standards No. 128, "Earnings
Per Share."
<Table>
<Caption>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------- -------------------
IN THOUSANDS, EXCEPT PER SHARE DATA 2001 2000 2001 2000
- ----------------------------------- -------- -------- -------- --------
NUMERATOR:
Net income................................................ $1,051 $ 11 $1,461 $ 777
====== ====== ====== ======
DENOMINATOR:
Weighted Average Shares Outstanding:
Basic..................................................... 4,158 4,664 4,171 4,713
Effect of Dilutive Securities:
Common Stock Options...................................... 12 -- 12 104
------ ------ ------ ------
Diluted................................................... 4,170 4,664 4,183 4,817
====== ====== ====== ======
EARNINGS (LOSS) PER SHARE:
Basic..................................................... $ .25 $ -- $ .35 $ .16
Diluted................................................... $ .25 $ -- $ .35 $ .16
</Table>
3. SIGNIFICANT CLIENTS--The Company recorded revenue from one client of
$7.6 million and $13.6 million or 48% and 42% of revenue for the three and six
month periods ended June 30, 2001. Revenue for the same client totaled
$4.0 million and $7.7 million or 27% and 25% of revenue for the three and six
month periods ended June 30, 2000.
Revenue from a second client totaled $2.3 million or 14% of revenue for the
three month period ended June 30, 2001. Revenue for the same client totaled
$2.9 million and $7.1 million or 20% and 23% of revenue for the three and six
month periods ended June 30, 2000.
Revenue from a third client totaled $2.3 million and $4.5 million or 15% and
14% of revenue for the three and six month periods ended June 30, 2000.
6
<Page>
THOMAS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. COMPREHENSIVE INCOME--Comprehensive income includes all changes in
equity (foreign currency translation) except those resulting from investments by
owners and distributions to owners.
<Table>
<Caption>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------------- -------------------
IN THOUSANDS OF DOLLARS 2001 2000 2001 2000
- ----------------------- -------- -------- -------- --------
Net income............................................. $1,051 $11 $1,461 $ 777
Other comprehensive income (loss)...................... -- 48 -- (261)
------ --- ------ -----
Comprehensive income................................... $1,051 $59 $1,461 $ 516
====== === ====== =====
</Table>
5. REVOLVING CREDIT AGREEMENT--The Company maintains a $15 million
revolving credit agreement with Comerica Bank. The agreement is in place to
provide funding for potential future operating cash requirements or business
expansion purposes. Loans under this agreement bear interest at the prime rate
or other similar interest options. At June 30, 2001 the Company had no amounts
outstanding on this agreement. The Company utilized the credit line during the
first six months of 2001 to meet working capital requirements when transferring
funds between subsidiaries was not efficient.
6. LEGAL PROCEEDINGS--On March 16, 2001, the Company received notice of a
claim from Balanced Scorecard Collaborative, Inc. ("BSCol"), to
mediate/arbitrate a dispute regarding BSCol's claim for unpaid fees under the
parties' March 2000 agreement. The matter was not settled during an April 26
mediation, and consequently will be resolved by a proceeding before a neutral
arbitration panel in Dallas, Texas, during the week of August 20, 2001, pursuant
to an arbitration provision in the parties' agreement. BSCol has made claim for
the payment of $2.9 million. The Company believes BSCol's claim has no merit,
will seek a determination that BSCol is owed nothing further, and has asserted a
counterclaim against BSCol.
The Company has become subject to various other claims and other legal
matters, such as collection matters initiated by the Company, in the course of
conducting its business. The Company believes that neither such claims and other
legal matters nor the cost of prosecuting and/or defending such claims and other
legal matters will have a material adverse effect on the Company's consolidated
results of operations, financial condition or cash flows.
7. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<Table>
<Caption>
SIX MONTHS
ENDED
JUNE 30,
-------------------
2001 2000
-------- --------
Interest paid............................................... $ 114 $ 39
Taxes paid.................................................. $1,306 $569
</Table>
8. RECENT ACCOUNTING STANDARDS--The Company adopted the provisions of
Statement of Financial Accounting Standard No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") effective January 1, 2001. This
statement standardized the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, requiring that an
entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. The statement generally
provides for matching the timing of gain or loss recognition on the hedging
instrument with the recognition of (a) the changes in fair value of hedged
assets or liabilities that are attributable to the hedged risk or, (b) the
earnings effect of the hedged transaction. Derivatives that are not hedges must
be adjusted to fair value through income. Adoption of SFAS 133 had no effect on
the Company's financial statements.
7
<Page>
ITEM 2-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company derives the majority of its revenue from monthly fixed and
incentive fees for the implementation of TOTAL CYCLE TIME and other business
improvement programs. Incentive fees are tied to improvements in a variety of
client performance measures typically involving response time, asset utilization
and productivity. Due to the Company's use of incentive fee contracts,
variations in revenue levels may cause fluctuations in quarterly results.
Factors such as a client's commitment to a TOTAL CYCLE TIME program, general
economic and industry conditions, and other issues could affect a client's
business performance, thereby affecting the Company's incentive fee revenue and
quarterly earnings. Quarterly revenue and earnings of the Company may also be
impacted by the size and timing of starts and completions of individual
contracts.
The following table sets forth the percentages which items in the statement
of operations bear to revenue:
<Table>
<Caption>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- -------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenue................................................ 100.0% 100.0% 100.0% 100.0%
Cost of sales.......................................... 50.8 59.2 55.0 56.9
----- ------ ----- -----
Gross profit........................................... 49.2 40.8 45.0 43.1
Selling, general and administrative.................... 38.7 42.7 37.7 40.1
----- ------ ----- -----
Operating income (loss)................................ 10.5 (1.9) 7.3 3.0
Other income, net...................................... 0.6 0.4 0.2 0.3
----- ------ ----- -----
Income (loss) from continuing operations before income
taxes................................................ 11.1 (1.5) 7.5 3.3
Income taxes (benefit)................................. 4.4 (0.6) 3.0 1.3
----- ------ ----- -----
Income (loss) from continuing operations............... 6.7% (0.9)% 4.5% 2.0%
===== ====== ===== =====
</Table>
The following table sets forth the Company's revenue by geographic
distribution:
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2001 2000 2001 2000
-------- -------- -------- --------
United States................................... $ 1,472 $ 6,916 $ 6,802 $16,011
Europe.......................................... 10,964 6,561 18,722 12,446
Asia/Pacific.................................... 3,376 1,539 6,648 2,834
------- ------- ------- -------
Total Revenue................................. $15,812 $15,016 $32,172 $31,291
======= ======= ======= =======
</Table>
THREE MONTH PERIOD ENDED JUNE 30, 2001 COMPARED TO THREE MONTH PERIOD ENDED
JUNE 30, 2000
REVENUE--Revenue increased $0.8 million or 5% in the second quarter of 2001
when compared to the second quarter of 2000.
United States region revenue decreased $5.4 million or 79% to $1.5 million
in 2001 from $6.9 million in 2000. The decrease in United States region revenue
was primarily due to the completion of three significant contracts, which
accounted for revenue of $4.7 million in 2000. The Company was unable to replace
these contracts with contracts of a similar magnitude.
8
<Page>
ITEM 2-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
European region revenue increased $4.4 million or 68% to $10.9 million in
2001 from $6.5 million in 2000. This increase resulted primarily from a
$4.8 million revenue increase from two major contracts, when compared to 2000.
Asia/Pacific region revenue increased $1.8 million or 120% to $3.3 million
in 2001 from $1.5 million in 2000. The improvement in the Asia/Pacific region
resulted from increased revenue on existing contracts of $1.0 million. In
addition, revenue from new contract start-ups, during 2001, exceeded revenue
from completed contracts by $0.8 million.
Fixed fee and incentive fee contracts accounted for 66% and 34% of revenue,
respectively, for the second quarter of 2001 and 99% and 1% of revenue,
respectively, for the second quarter of 2000.
GROSS PROFIT--Gross profit was 49% of revenue in the second quarter of 2001
compared to 41% during the second quarter of 2000. The increase in gross profit
relates to efficiencies gained through reduced cost of sales, primarily due to
lower personnel cost resulting from staff reductions in the first quarter of
2001, combined with increased revenue of $0.8 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES--Selling, general and
administrative expenses decreased to $6.1 million or 39% of revenue in the
second quarter of 2001 from $6.4 million or 43% of revenue in the second quarter
of 2000. The decrease in selling, general and administrative expenses can be
attributed to the Company's global effort to control costs by more directly
aligning expenses with near-term business levels and essential growth
initiatives. Part of this global effort was staff reductions during the first
quarter of 2001. These staff reductions have resulted in personnel related costs
decreasing $0.7 million. In addition, advertising and marketing costs have been
reduced $0.2 million. These cost reductions were offset by increases in lease
expense for new laptop computers of $0.2 million, office rent of $0.2 million,
bad debt write-off of $0.1 million and executive recruiting cost of
$0.1 million.
DISCONTINUED OPERATIONS--Gain from discontinued operations, during the
second quarter of 2000, resulted from a $0.2 million reimbursement of legal fees
in connection with prior litigation.
RESULTS OF OPERATIONS--Income from continuing operations in the second
quarter of 2001 was $1.1 million, or $.25 per diluted share ($.25 per basic
share) compared to a loss from continuing operations of $0.1 million, or $(.03)
per diluted share ($(.03) per basic share), in the second quarter of 2000.
SIX MONTH PERIOD ENDED JUNE 30, 2001 COMPARED TO SIX MONTH PERIOD ENDED
JUNE 30, 2000
REVENUE--Revenue increased $0.9 million or 3% to $32.2 million during the
first half of 2001 compared to $31.3 million during the first half of 2000.
United States region revenue decreased $9.2 million or 58% to $6.8 million
in 2001 from $16.0 million in 2000. The decrease in United States region revenue
resulted from completion of three significant contracts without replacing these
contracts with contracts of a similar magnitude.
European region revenue increased $6.3 million or 50% to $18.7 million in
2001 from $12.4 million in 2000. This increase resulted primarily from increased
revenue from two major contracts, which produced revenue of $16.7 million in
2001 compared to $7.1 million in 2000.
Asia/Pacific region revenue increased $3.8 million or 135% to $6.6 million
in 2001 from $2.8 million in 2000. The growth in the Asia/Pacific region
reflects a $2.4 million revenue increase related to a full six-month period of
revenue on contracts, which were in the start-up phase during
9
<Page>
ITEM 2-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
2000. Also, revenue on new contract start-ups exceeded revenue on contract
completions by $1.4 million.
Fixed fee and incentive fee contracts accounted for 74% and 26% of revenue
for the first half of 2001 and 99% and 1% for the first half of 2000.
GROSS PROFIT--Gross profit was 45% of revenue in the first half of 2001
compared to 43% of revenue in the first half of 2000. The slight improvement in
gross profit resulted from increased revenue of $0.9 million on relatively the
same level of cost of sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES--Selling, general and
administrative expenses decreased to $12.1 million or 38% of revenue during the
first half of 2001 from $12.6 million or 40% of revenue during the first half of
2000. The decrease in selling, general and administrative expenses reflects cost
savings related to the Company's staff reductions, during the first quarter of
2001, and tighter spending controls on the Company's internal strategic
initiatives and external strategic partnerships. Selling, general and
administrative expenses were positively impacted by decreased advertising and
marketing costs of $0.8 million and the absence of a $0.6 million bad debt
write-off related to litigation in 2000. These cost savings were offset by
increased lease expense of $0.4 million for new laptop computers and increased
office rent expense of $0.3 million.
DISCONTINUED OPERATIONS--Gain from discontinued operations, during the
second quarter of 2000, resulted from a $0.2 million reimbursement of legal fees
in connection with prior litigation.
RESULTS OF OPERATIONS--Income from continuing operations in the first half
of 2001 was $1.5 million, or $.35 per diluted share ($.35 per basic share),
compared to income from continuing operations of $0.6 million, or $.13 per
diluted share ($.13 per basic share) in the first half of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $1.3 million in the first half of
2001 compared to a $2.8 million decrease in the first half of 2000. The major
components of these changes are discussed below:
CASH FLOWS FROM OPERATING ACTIVITIES--Operating activities provided cash of
$2.4 million in the first half of 2001 compared to cash used in operations of
$42,000 in the first half of 2000. The increase in cash provided by operating
activities is due primarily to collection of accounts receivable.
CASH FLOWS FROM INVESTING ACTIVITIES--Cash flows used in investing
activities totaled $0.3 million in the first half of 2001 and were attributable
primarily to purchases of leasehold improvements and automobiles to facilitate
program support in the European region. Capital expenditures for the comparable
period of the prior year were $1.3 million and were primarily for the purchase
of computer software, office and miscellaneous equipment.
CASH FLOWS FROM FINANCING ACTIVITIES--Cash flows used in financing
activities were $1.4 million compared to $0.9 million when comparing the first
half of 2001 to the first half of 2000. The use of cash is attributable to net
repayments of $1.0 million on the Company's line of credit and the purchase of
treasury stock.
In January and October of 1999, the Company announced two stock repurchase
plans for up to 250,000 and 500,000 shares, respectively. In August of 2000, the
Company announced an additional stock repurchase plan of up to 750,000 shares.
10
<Page>
ITEM 2-- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
During 1999, the Company purchased 289,150 shares at an average price of
$8.41 per share. During 2000, the Company purchased 596,300 shares at an average
price of $7.96 per share. Through August 9, 2001, the Company had purchased
77,400 shares at an average price of $5.88 per share.
The Company maintains a $15 million revolving credit agreement with Comerica
Bank. The agreement is in place to provide funding for potential future
operating cash requirements or business expansion purposes. Loans under this
agreement bear interest at the prime rate or other similar interest options. At
June 30, 2001 the Company had no amounts outstanding on this agreement. The
Company utilized the credit line during the first six months of 2001 to meet
working capital requirements when transferring funds between subsidiaries was
not efficient.
FINANCIAL CONDITION
The Company believes that its financial condition remains strong and that it
has the financial resources necessary to meet its needs. Cash provided by
operating activities and the Company's credit facility should be sufficient to
meet short and long-term operational needs.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT:
With the exception of historical information, the matters discussed in this
report are "forward looking statements" as that term is defined in Section 21E
of the Securities Exchange Act of 1934.
While the Company believes that its strategic plan is on target and its
business outlook remains strong, several important factors have been identified,
which could cause actual results to differ materially from those predicted,
included by way of example:
- The competitive nature of the management consulting industry, in light of
new entrants into the industry and the difficulty of differentiating the
services offered to potential clients.
- The time required by prospective clients to fully understand the value and
complexity of a typical Total Cycle Time (TCT) program may result in an
extended lead time to close new business.
- Performance-oriented fees are earned upon the achievement of improvements
in a client's business. The client's commitment to a TCT program and
general economic/industry conditions could impact a client's business
performance and consequently the Company's ability to forecast the timing
and ultimate realization of performance-oriented fees.
- The ability of the Company to productively re-deploy personnel during
program transition periods.
- The ability of the Company to create alliances and make acquisitions that
are accretive to earnings.
11
<Page>
THOMAS GROUP, INC.
PART II--OTHER INFORMATION
Item 6--Exhibits and Reports on Form 8-K
(a) Exhibits:
3.2 Amended and Restated By-Laws dated May 30, 2001
(b) Reports on Form 8-K for the Quarter Ending June 30, 2001:
<Table>
<Caption>
DATE OF FILING SUBJECT
-------------- -------
There were no reports filed on Form
8-K.
</Table>
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.
THOMAS GROUP, INC.
Registrant
<Table>
<Caption>
August 10, 2001 /s/ John R. Hamann
Date John R. Hamann
President and Chief Executive Officer
August 10, 2001 /s/ James T. Taylor
Date James T. Taylor
Vice President and Chief Financial Officer
</Table>
12