UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001 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
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ICT GROUP, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2458937
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
800 Town Center Drive, Langhorne PA 19047
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(Address of principal executive offices) (Zip Code)
215-757-0200
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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 the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Common Shares, $0.01 par value, 12,117,550 shares outstanding as of May
4, 2001.
ICT GROUP, INC.
INDEX
PART 1 FINANCIAL INFORMATION PAGE
Item 1 CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Consolidated Balance Sheets -
March 31, 2001 and December 31, 2000 3
Consolidated Statements of Operations -
Three months ended March 31, 2001 and 2000 5
Consolidated Statements of Cash Flows -
Three months ended March 31, 2001 and 2000 6
Notes to Consolidated Financial Statements 7
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
PART II OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS 14
Item 6 EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
2
ICT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, December 31,
2001 2000
--------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,129 $ 8,539
Accounts receivable, net 42,274 42,411
Prepaid expenses and other 2,678 3,074
Deferred income taxes 307 307
-------- --------
Total current assets 55,388 54,331
-------- --------
PROPERTY AND EQUIPMENT
Communications and computer equipment 54,378 54,023
Furniture and fixtures 12,018 11,838
Leasehold improvements 6,764 6,614
-------- --------
73,160 72,475
Less: Accumulated depreciation and amortization (38,635) (36,315)
-------- --------
34,525 36,160
-------- --------
DEFERRED INCOME TAXES 1,689 1,689
OTHER ASSETS 1,762 1,557
-------- --------
$ 93,364 $ 93,737
======== ========
The accompanying notes are an integral part of these statements.
3
ICT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, December 31,
2001 2000
--------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 8,500 $ 8,500
Current portion of long-term debt 4,000 4,000
Current portion of capitalized lease obligations 209 292
Accounts payable 9,433 10,433
Accrued expenses 8,567 7,829
-------- --------
Total current liabilities 30,709 31,054
-------- --------
LONG-TERM DEBT 5,000 6,000
-------- --------
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value 5,000 shares
authorized, none issued -- --
Common Stock, $0.01 par value, 40,000 shares
authorized, 12,085 and 12,074 shares issued
and outstanding 121 121
Additional paid-in capital 49,802 49,797
Retained earnings 10,316 8,283
Accumulated other comprehensive loss (2,584) (1,518)
-------- --------
Total shareholders' equity 57,655 56,683
-------- --------
$ 93,364 $ 93,737
======== ========
The accompanying notes are an integral part of these statements.
4
ICT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
----------------------
2001 2000
--------- ----------
NET REVENUES $57,772 $41,285
OPERATING EXPENSES:
Cost of services 32,059 23,450
Selling, general and administrative 22,128 15,681
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54,187 39,131
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Operating income 3,585 2,154
INTEREST EXPENSE, NET 358 167
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Income before income taxes 3,227 1,987
INCOME TAXES 1,194 775
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NET INCOME $ 2,033 $ 1,212
======= =======
EARNINGS PER SHARE:
Basic earnings per share $0.17 $0.10
======= =======
Diluted earnings per share $0.16 $0.10
======= =======
Shares used in computing basic earnings per share 12,077 11,814
======= =======
Shares used in computing diluted earnings per share 12,538 12,406
======= =======
The accompanying notes are an integral part of these statements.
5
ICT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
-------------------------
2001 2000
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,033 $ 1,212
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 2,342 2,116
(Increase) decrease in:
Accounts receivable 137 (6,575)
Prepaid expenses and other 396 19
Other assets (227) (33)
Increase (decrease) in:
Accounts payable (1,000) (118)
Accrued expenses 738 826
------- -------
Net cash provided by (used in) operating activities 4,419 (2,553)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (685) (7,634)
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Net cash used in investing activities (685) (7,634)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - 7,000
Payments on long-term debt (1,000) (1,000)
Payments on capitalized lease obligations (83) (165)
Proceeds from exercise of stock options 5 -
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Net cash (used in) provided by financing activities (1,078) 5,835
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EFFECT OF FOREIGN EXCHANGE RATE CHANGE ON CASH
AND CASH EQUIVALENTS (1,066) (160)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,590 (4,512)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,539 12,239
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CASH AND CASH EQUIVALENTS, END OF PERIOD $10,129 $ 7,727
======= =======
The accompanying notes are an integral part of these statements.
6
ICT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month periods ended March 31,
2001 and 2000 are not necessarily indicative of the results that may be expected
for the complete fiscal year. For additional information, refer to the
consolidated financial statements and footnotes thereto included in the Form
10-K for the year ended December 31, 2000.
Note 2: EARNINGS PER SHARE
The Company has presented earnings per share pursuant to Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share," and the Securities
and Exchange Commission Staff Accounting Bulletin No. 98. Basic earnings per
share ("Basic EPS") is computed by dividing the net income for each period by
the weighted average number of shares of Common stock outstanding for each
period. Diluted earnings per share ("Diluted EPS") is computed by dividing the
net income for each period by the weighted average number of shares of Common
stock and Common stock equivalents outstanding for each period. For the three
months ended March 31, 2001 and 2000, Common stock equivalents outstanding used
in computing Diluted EPS were 461,000 and 592,000, respectively. For the three
months ended March 31, 2001 and 2000, options to purchase 342,000 and 243,000
shares of Common stock were outstanding, but not included in the computation of
Diluted EPS as the result would be antidilutive.
Note 3: COMPREHENSIVE INCOME (LOSS)
The Company follows SFAS No. 130, "Reporting Comprehensive Income". This
statement requires companies to classify items of other comprehensive income by
their nature in a financial statement and display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the balance sheet.
Three Months Ended
March 31,
-------------------------
2001 2000
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Net Income $2,033,000 $1,212,000
Foreign currency translation adjustments ( 672,000) (98,000)
---------- ----------
Comprehensive income $1,361,000 $1,114,000
========== ==========
Note 4: OPERATING AND GEOGRAPHIC INFORMATION
Under the disclosure requirements of SFAS No. 131, the Company classifies its
operations into two business segments: Domestic CRM Services and International
CRM Services. Previously, the Company reported disclosure for three operating
segments. The Company reassessed its operating segments and determined that two
operating segments more appropriately reflect the Company's business operations.
Specifically, the Company has combined the previously reported Domestic
TeleServices and Customer Management Services segments of its business into a
7
single segment called Domestic CRM Services. The Company has also renamed the
International Services segment as International CRM Services. The operating
segments are managed separately because each operating segment represents a
strategic business unit that offers its services in different geographic
markets. Segment assets include amounts specifically identified to each segment.
Corporate assets consist primarily of property and equipment. The Domestic CRM
Services segment provides inbound and outbound telesales, database marketing,
marketing research, contact center consulting, technology hosting, and ongoing
customer care management services on behalf of customers operating in the
Company's target industries. The International CRM Services segment provides the
same services in Europe, Canada, and Australia and includes business conducted
by Spantel for the US Hispanic market.
Three Months Ended
March 31,
----------------------------
2001 2000
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Net Revenues:
Domestic CRM Services $ 40,756 $ 31,980
International CRM Services 17,016 9,305
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$ 57,772 $ 41,285
========== ==========
Operating Income:
Domestic CRM Services $ 1,798 $ 2,140
International CRM Services 1,787 14
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$ 3,585 $ 2,154
========== ==========
Total Assets:
Domestic CRM Services $ 58,989 $ 62,867
International CRM Services 29,544 17,652
Corporate 4,831 5,149
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$ 93,364 $ 85,668
========== ==========
Depreciation and Amortization:
Domestic CRM Services $ 1,368 $ 1,194
International CRM Services 524 578
Corporate 450 344
---------- ----------
$ 2,342 $ 2,116
========== ==========
Capital Expenditures:
Domestic CRM Services $ 1,441 $ 6,800
International CRM Services (1,011)* 209
Corporate 255 625
---------- ----------
$ 685 $ 7,634
========== ==========
* -- Gross property and equipment in International operations did increase
during the quarter when measured in local currencies. However, due to declines
in the values of those currencies from December 31, 2000 to March 31, 2001
compared to the US dollar, the US$ equivalent of gross property and equipment is
lower at March 31, 2001 than it was at December 31, 2000.
8
The following table represents information about the Company by geographic area:
Three Months Ended
March 31,
----------------------------
2001 2000
---------- ----------
Revenues:
United States $ 43,983 $ 33,704
Canada 7,902 4,582
Europe 5,042 2,411
Australia 845 588
--------- ---------
$ 57,772 $ 41,285
========= =========
Operating income (loss):
United States $ 2,331 $ 2,451
Canada 1,029 22
Europe 359 (234)
Australia (134) (85)
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$ 3,585 $ 2,154
========= =========
Identifiable assets:
United States $ 63,810 $ 68,016
Canada 13,727 7,584
Europe 13,705 9,250
Australia 2,112 818
--------- ---------
$ 93,364 $ 85,668
========= =========
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 2001
GENERAL
ICT Group, Inc. (the "Company" or "ICT") is a leading global supplier
of customer relationship management (CRM) solutions. The Company provides
integrated telesolutions, e-solutions and market solutions helping its clients
identify, acquire, retain, service, measure, and maximize the lifetime value of
their customer relationships. ICT's telesolutions offering includes outbound
telesales and inbound customer support for sales and service applications,
domestically and internationally. Its e-solutions offering provides real-time
interaction-driven customer support for Internet sales and service applications
through Web-enabled customer contact center services, e-mail management and
processing, and multi-channel CRM services. Market research, database marketing,
and data mining capabilities are available through its market solutions
offering, including questionnaire design, telephone interviewing, and data
coding, tabulating, and analysis services.
The Company's customer management services experience, Internet and CRM
technology capabilities and expertise in select target industries enables it to
provide its clients with high quality cost-effective solutions. These solutions
have been available from the Company on an outsourced basis, using ICT's
customer contact centers, and now the Company believes that there is also a
trend by businesses to purchase or lease them on a hosted or co-sourced basis.
Accordingly, ICT has begun offering these services through a hosted arrangement,
using the client's staff and facility, or on a co-sourced basis, using both the
client's operation and ICT's technologically compatible customer contact
centers. To accomplish this, the Company launched iCT ConnectedTouch, LLC in
2000. This wholly-owned subsidiary provides hosted technology solutions and
consultative services for in-house CRM sales and service operations.
The Company's growth strategy includes the following key elements:
|_| Target the In-Sourced CRM Market
|_| Pursue e-Commerce Opportunities
|_| Expand Value-Added Services
|_| Develop Strategic Alliances and Acquisitions
|_| Increase International Presence
|_| Focus on Industry Specialization
|_| Maintain Technology Investment
|_| Continue Commitment to Quality Service
10
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 and 2000:
- -------------------------------------------
Net Revenues. Net revenues increased 40% to $57.8 million for the three
months ended March 31, 2001 from $41.3 million for the three months ended March
31, 2000. Revenues from the Domestic CRM Services segment increased 27% to $40.8
million from $32.0 million in the three months ending March 31, 2000 and
accounted for 71% of company revenues versus 77% for the same period in the
prior year. Business from existing clients was flat as growth from certain
existing customers was offset by declines with other existing clients. As a
result, all of the net growth was from new customers due to the addition of
several new contracts. International CRM Services revenues grew 83% to $17.0
million from $9.3 million in the three months ending March 31, 2000 and
accounted for 29% of Company revenues versus 23% for the same period in the
prior year. Most of the increase was from expanded business with existing
customers.
Cost of Services. Cost of services, which consist primarily of direct
labor and telecommunications costs, increased 37% to $32.1 million for the three
months ended March 31, 2001 from $23.5 million in the three months ended March
31, 2000. This increase is primarily the result of increased direct labor and
telecommunication costs required to support the increased revenue volume. As a
percentage of revenues, cost of services decreased to 55% in the first quarter
of 2001 from 57% in the same quarter of 2000 which was primarily the result of a
decrease in labor cost per production hour due to productivity improvements and
the migration of contact centers to lower cost labor areas.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 41% to $22.1 million for the three months
ended March 31, 2001 from $15.7 million for the three months ended March 31,
2000 due to increased numbers of contact centers and workstation capacity and
additional sales and systems support implemented to support business growth. As
a percentage of revenues, selling, general and administrative expenses were 38%
for both the three months ended March 31, 2001 and the three months ended March
31, 2000.
Interest Expense, net. Net interest expense of $358,000 versus $167,000
in the first quarter of 2001 and 2000, respectively, reflects the interest
expense related to capital leases and borrowings against the Company's line of
credit for capital expansion partially offset by investment income. The increase
in net interest expense is primarily the result of increased average outstanding
balances on line of credit borrowings during the first quarter of 2001 as
compared to the first quarter of 2000.
Provision for Income Taxes. Provision for income taxes increased
$419,000 to $1.2 million for the first quarter of 2001 from $775,000 in the
first quarter of 2000. For the first quarter of 2001, the provision for income
taxes was approximately 37% of income before taxes. For the first quarter of
2000, the provision for income taxes was approximately 39% of income before
taxes.
Quarterly Results and Seasonality
The Company has experienced and expects to continue to experience
significant quarterly variations in operating results, principally as a result
of the timing of client programs, the commencement and expiration of contracts,
the timing and amount of new business generated by the Company, the Company's
revenue mix, the timing of additional selling, general and administrative
expenses to support the growth and development of existing and new business
units and competitive industry conditions.
Historically, the Company's business tends to be strongest in the
second and fourth quarters due to the high level of client sales activity in the
spring and prior to the holiday season. In the first quarter, Domestic CRM
Services business generally levels off or slows from the previous quarter as a
result of reduced client sales activity and client transitions to new marketing
programs during the first quarter of the calendar year. Historically, the
11
Company has expanded its operations in the first quarter to support anticipated
business growth beginning in the second quarter. Demand for the Company's
services typically slows or decreases in the third quarter as the volume of
business decreases during the summer months. In addition, the Company's
operating expenses increase during the third quarter in anticipation of higher
demand for its services during the fourth quarter.
Liquidity and Capital Resources
Cash provided by operating activities was $4.4 million for the three
months ended March 31, 2001 versus $2.6 million of cash used in operating
activities for the three months ended March 31, 2000. The approximate $7.0
million increase is primarily attributable to the management of accounts
receivable. In the first quarter of 2000, a 6% increase in revenue compared to
the fourth quarter of 1999 and temporary billing issues with a major customer
resulted in a $6.6 million increase in accounts receivable. In the first quarter
of 2001, revenues were flat compared to the fourth quarter of 2000 and there
were no significant billing issues with any clients. Consequently, accounts
receivable decreased slightly as of March 31, 2001 when compared to the balance
at December 31, 2000.
Cash used in investing activities was $685,000 for the three months
ended March 31, 2001 compared to $7.6 million for the first quarter of 2000. The
decrease over the prior year is attributable to a lower investment in capital
expenditures and the decision to utilize operating leases as a means to finance
capital additions. Approximately $3.1 million of capital expenditures were
financed by an operating lease in the first quarter of 2001 versus no operating
leases in the first quarter of 2000. Also, in the first quarter of 2000 a
significant investment was made in software licenses for iCT ConnectedTouch,
LLC, the Company's wholly owned subsidiary that provides hosted technology
solutions and consultative services for in-house CRM service operations. The
Company added 135 workstations in the first quarter of 2001, and operates 6,056
workstations at March 31, 2001. In the first quarter of 2000 the Company added
158 workstations, and operated 4,326 workstations at March 31, 2000.
Cash used in financing activities was $1.1 million for the three months
ended March 31, 2001 versus cash provided by financing activities of $5.8
million for the comparable 2000 period. The Company made no borrowings under its
line of credit in the first quarter of 2001. In the first quarter of 2000, the
Company borrowed $7.0 million under its line of credit to fund capital
expenditures and to meet working capital requirements.
The Company's operations will continue to require significant capital
expenditures. Historically, equipment purchases have been financed through the
Company's line of credit, operating leases, and through capitalized lease
obligations with various equipment vendors and lending institutions. The
capitalized lease obligations are payable in varying installments through 2001.
Outstanding obligations under capitalized leases at March 31, 2001 were
$209,000. At March 31, 2001, term debt obligations were $9.0 million and
borrowings under the line of credit were $8.5 million.
On April 26, 2001, the Company announced it had secured a new
three-year $85 million revolving credit facility from five banks. This facility
replaced the existing $45 million credit facility which was due to expire in the
third quarter of 2001. The term debt obligations and line of credit borrowings
mentioned above were paid off with proceeds from this new facility. The Company
believes that cash on hand, together with cash flow generated from operations,
the availability of operating leases, and funds available under the new credit
facility will be sufficient to finance its current operations and planned
capital expenditures at least into 2002.
In January 2001, the Company signed a lease for a new corporate
headquarters facility. The lease is scheduled to commence in February 2002, is
for approximately 105,000 square feet, and has a term of 15 years. Minimum
annual rent in the first year of the lease is $2,325,600 and increases by 2% per
year throughout the lease term.
12
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133, as amended by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133", which was adopted by the Company on
January 1, 2001, provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. The Company
does not currently hold derivative instruments or engage in hedging activities,
and as such, the adoption of this pronouncement did not have any impact on the
Company's financial position or results of operations.
In December 1999, the U.S. Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 ("SAB 101"). This pronouncement provides the
staff's views in applying generally accepted accounting principles to selected
revenue recognition issues. Accordingly, guidance is provided with respect to
the recognition, presentation and disclosure of revenue in the financial
statements. Adoption of SAB 101, as amended by SAB Nos. 101A and 101B, was
effective in the fourth quarter of 2000. The adoption had no effect on the
Company's financial condition or results of operations.
FORWARD LOOKING STATEMENTS
This document contains certain forward-looking statements that are
subject to risks and uncertainties. Forward-looking statements include certain
information relating to outsourcing trends as well as other trends in the CRM
services and the overall domestic economy, the Company's business strategy
including the markets in which it operates, the services it provides, its
ability to attract new clients and the customers it targets, the benefits of
certain technologies the Company has acquired or plans to acquire and the
investment it plans to make in technology, the Company's plans regarding
international expansion, the implementation of quality standards, the
seasonality of the Company's business, variations in operating results and
liquidity, as well as information contained elsewhere in this document where
statements are preceded by, followed by or include the words "believes,"
"plans," "intends," "expects," "anticipates" or similar expressions. For such
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. The forward-looking statements in this document are subject to
risks and uncertainties that could cause the assumptions underlying such
forward-looking statements and the actual results to differ materially from
those expressed in or implied by the statements.
The most important factors that could prevent the Company from
achieving its goals--and cause the assumptions underlying the forward-looking
statements and the actual results of the Company to differ materially from those
expressed in or implied by those forward-looking statements--include, but are
not limited to, the following: (i) the competitive nature of the CRM services
industry and the ability of the Company to continue to distinguish its services
from other CRM service companies and other marketing activities on the basis of
quality, effectiveness, reliability and value; (ii) economic conditions which
could alter the desire of businesses to outsource certain sales and service
functions and the ability of the Company to obtain additional contracts to
manage outsourced sales and service functions; (iii) the ability of the Company
to offer value-added services to businesses in its targeted industries and the
ability of the Company to benefit from its industry specialization strategy;
(iv) risks associated with investments and operations in foreign countries
including, but not limited to, those related to relevant local economic
conditions, exchange rate fluctuations, relevant local regulatory requirements,
political factors, generally higher telecommunications costs, barriers to the
repatriation of earnings and potentially adverse tax consequences; (v)
technology risks including the ability of the Company to select or develop new
and enhanced technology on a timely basis, anticipate and respond to
technological shifts and implement new technology to remain competitive; (vi)
the ability of the Company to successfully identify, complete and integrate
strategic acquisitions that expand or complement its business; and (vii) the
results of operations which depend on numerous factors including, but not
limited to, the timing of clients' teleservices campaigns, the commencement and
expiration of contracts, the timing and amount of new business generated by the
Company, the Company's revenue mix, the timing of additional selling, general
and administrative expenses and the general competitive conditions in the CRM
services industry and the overall economy.
13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is involved in litigation incidental to
its business. In the opinion of management, no litigation to which the Company
is currently a party is likely to have a material adverse effect on the
Company's results of operations, financial condition or liquidity, if decided
adversely to the Company.
As previously reported by the Company, on October 23, 1997, a
shareholder, purporting to act on behalf of a class of ICT shareholders filed a
complaint in the United States District Court for the Eastern District of
Pennsylvania against the Company and certain of its directors. The complaint
alleges that the defendants violated the federal securities laws, and seeks
compensatory and other damages, including rescission of stock purchases made by
the plaintiff and other class members in connection with the Company's initial
public offering effective June 14, 1996. The defendants believe the complaint is
without merit, deny all of the allegations of wrongdoing and are vigorously
defending the suit. On February 2, 1998, the defendants filed a motion to
dismiss the complaint. On May 19, 1998, the complaint was dismissed by a judge
for the United States District Court for the Eastern District of Pennsylvania
with leave to plaintiff to file an amended complaint on narrow accounting
allegations. On June 22, 1998, plaintiffs filed a First Amended Class Action
Complaint purporting to bring negligence claims in connection with the Company's
initial public offering. The defendants continue to deny all allegations of
wrongdoing, believe the amended complaint is without merit and are vigorously
defending the suit. On November 3, 1998, the court granted a motion appointing
Rowan Klein and Michael Mandat as lead plaintiffs. On February 2, 1999, the
court dismissed the case without prejudice, directing that the case remain in
status quo, that the statute of limitations be tolled and that the parties
continue with discovery and advise the court if assistance by the court is
needed. Since that time the defendants filed a motion for summary judgement
seeking to have the case dismissed on the grounds that there is no material
issue of fact. Plaintiffs filed a response in opposition to defendant's motion
and also filed a motion to have the matter certified as a class action. In
September 2000, the Court entered orders dismissing the defendants motion for
summary judgement and plaintiffs motion for class certification without
prejudice, with leave to re-file such motions upon the completion of discovery.
The Company anticipates that further discovery will be conducted.
On July 12, 1996, Main Street Marketing of America Incorporated ("Main
Street Marketing") brought a demand for arbitration against the Company in the
Commonwealth of Pennsylvania claiming damages as a result of the Company's
alleged breach of a service agreement under which the Company agreed to provide
Main Street Marketing with various data entry and data processing services
relating to Main Street Marketing's magazine subscription program. Main Street
Marketing alleges that the Company committed various breaches of the service
agreement and has demanded an award in excess of $15 million. The Company has
responded to this demand for arbitration by denying liability and
counterclaiming in an amount in excess of $125,000. Discovery has progressed in
this matter, and the arbitration is expected to be completed in August 2001. It
is not possible at this stage of the proceeding to evaluate the probable outcome
of this matter.
Item 6. Exhibits and Reports on Form 8-K
(a) The following document is furnished as an exhibit and numbered
pursuant to Item 601 of Regulation S-K:
10.24 Credit Agreement dated as of April 25, 2001 among the
Registrant, certain subsidiaries of the Registrant, Bank
of America, N.A., Fleet National Bank, Sovereign Bank,
LaSalle Bank National Association, and Bank Leumi USA.
(b) The registrant was not required to file any reports on Form 8-K for
the three months ended March 31, 2001.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
ICT GROUP, INC.
Date: May 10, 2001 By: /s/ John J. Brennan
--------------------------------
John J. Brennan
Chairman, President and
Chief Executive Officer
Date: May 10, 2001 By: /s/ Vincent A. Paccapaniccia
--------------------------------
Vincent A. Paccapaniccia
Senior Vice President,
Finance and Administration,
Chief Financial Officer and
Assistant Secretary