EX-99.2 3 dex992.htm RECONCILIATION TABLES FOR INVESTOR PRESENTATION Reconciliation Tables for Investor Presentation

Exhibit 99.2

ICT Group, Inc.

Reconciliation Tables for Investor Presentation on March 1, 2006

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, EBIT, adjusted EBIT, adjusted diluted earnings per share, free cash flow, adjusted free cash flow and adjusted income tax effective rate. Reconciliation tables for the other non-GAAP measures are presented below.

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 and recoveries.

The reconciliation of operating cash flows to free cash flow and adjusted free cash flow is as follows:

 

For the year ended December 31, 2005

(in thousands)

(unaudited)

           

Cash flows provided by operating activities

    $ 26,093    

Less: Purchases of property and equipment

      (21,132 )  
          

Free Cash Flow

      $ 4,961

Cash flows associated with litigation settlement payments (1)

        7,865

Adjusted Free Cash Flow

      $ 12,826

 

(1) Cash flows associated with the litigation settlement payments reflect the $14,750 settlement amount paid less the $6,885 of insurance proceeds received.

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. The adjusted net income and adjusted diluted earnings per share excludes the effects of litigation costs (recoveries) as well as certain tax adjustments.

 

(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     9/30/2005     12/31/2005  

Net income (loss), as reported

    $ 224     $ 350     $ 276     $ (3,543 )   $ 1,064     $ 1,744     $ 5,472     $ 3,895  

Addback:

                 

Litigation costs (recoveries)

      560       445       887       8,446       477       91       (4,064 )     (115 )

Tax effect of litigation costs (recoveries), and income tax adjustments

      (184 )     (146 )     (293 )     (2,995 )     (143 )     (27 )     873       28  
                                                                

Adjusted net income

    $ 600     $ 649     $ 870     $ 1,908     $ 1,398     $ 1,808     $ 2,281     $ 3,808  

Shares used to compute diluted earnings per share

      12,953       12,918       12,849       12,873       12,911       12,897       12,981       13,098  

Adjusted diluted earnings per share

    $ 0.05     $ 0.05     $ 0.07     $ 0.15     $ 0.11     $ 0.14     $ 0.18     $ 0.29  

Adjusted Net Income, Adjusted EBIT and Adjusted Diluted Earnings per Share

The following table shows a reconciliation of net income and EBIT to adjusted net income and adjusted EBIT, both of which exclude litigation costs and recoveries. The calculation of adjusted diluted earnings per share and adjusted income tax effective rate is also shown. Management uses these measurements to evaluate the profitability of the business.

Adjusted EBIT, 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 EBIT and ICT’s definition may differ from other definitions.

 

     Three months ended
December 31,		     Years ended
December 31,		  

(in thousands, except per share data)

(unaudited)

    2005     2004     2005     2004  

Net income (loss)

    $ 3,895     $ (3,543 )   $ 12,175     $ (2,693 )

Addback:

         

Income tax provision ( benefit)

      1,297       (2,054 )     4,133       (1,634 )

Interest expense, net

      662       524       2,464       1,594  
                                

EBIT

    $ 5,854     $ (5,073 )   $ 18,772     $ (2,733 )

Addback litigation costs (recoveries)

      (115 )     8,446       (3,611 )     10,338  

Adjusted EBIT

    $ 5,739     $ 3,373     $ 15,161     $ 7,605  

Less:

         

Interest expense, net

      662       524       2,464       1,594  

Income tax provision, adjusted for the tax effect of the addback for litigation costs (recoveries)

      1,269       941       3,402       1,984  

Adjusted net income

    $ 3,808     $ 1,908     $ 9,295     $ 4,027  

Adjusted diluted earnings per share

    $ 0.29     $ 0.15     $ 0.72     $ 0.31  

Shares used in computing adjusted diluted earnings per share

      13,098       12,873       12,964       12,886  
                                

Adjusted EBIT

    $ 5,739     $ 3,373     $ 15,161     $ 7,605  

Less: Interest expense, net

      662       524       2,464       1,594  
                                

Adjusted earnings before tax

      5,077       2,849       12,697       6,011  

Adjusted income tax provision

      1,269       941       3,402       1,984  

Adjusted net income

    $ 3,808     $ 1,908     $ 9,295     $ 4,027  

Effective income tax rate, as adjusted

      25 %     33 %     27 %     33 %

Annualized Return on Equity:

The following chart shows the calculation of the annualized fourth quarter of 2005 return on equity. Net income used in the calculation is adjusted to exclude the effects of litigation costs and recoveries.

 

(in thousands)

(unaudited)

            

Total Shareholders’ Equity at 9/30/05

    $ 76,180   

Total Shareholders’ Equity at 12/31/05

    $ 81,012   

Average Shareholders’ Equity

       $ 78,596  

Adjusted Net Income

    $ 3,808   

Annualized Adjusted Net Income

       $ 15,232  

Annualized Return on Equity

         19.4 %

Annualized Revenue per Average Workstation:

The following chart shows the calculation of quarterly annualized revenue per average workstation. Management uses this metric to evaluate ongoing utilization of the workstations in our contact centers.

 

(in thousands, except workstation data)    3/31/2003    6/30/2003    9/30/2003    12/31/2003    3/31/2004    6/30/2004    9/30/2004    12/31/2004

Revenue

    $ 76,579    $ 70,543    $ 73,320    $ 77,700    $ 77,098    $ 75,511    $ 80,395    $ 92,525

Annualized Revenue

      306,316      282,172      293,280      310,800      308,392      302,044      321,580      370,100

Average Workstations

      8,172      7,980      8,032      8,248      8,398      8,540      8,677      9,006

Annualized Revenue per Average Workstation

      37.48      35.36      36.51      37.68      36.72      35.37      37.06      41.09
      3/31/2005    6/30/2005    9/30/2005    12/31/2005

Revenue

    $ 94,019    $ 96,991    $ 99,921    $ 110,403

Annualized Revenue

      376,076      387,964      399,684      441,612

Average Workstations

      9,272      9,447      9,911      10,435

Annualized Revenue per Average Workstation

      40.56      41.07      40.33      42.32

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 (reversals).

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:

 

(in thousands)

For fiscal years:

    1994    1995    1996     1997     1998    1999    2000    2001    2002

Net income (loss), as reported

    $ 898    $ 1,570    $ (7,517 )   $ 2,672     $ 2,427    $ 4,745    $ 6,729    $ 7,978    $ 2,968

Addback:

                         

Interest expense, net

      511      833      180       (398 )     406      801      1,207      1,079      828

Income tax provision or benefit

      —        —        (2,998 )     1,708       1,549      3,033      4,302      4,506      1,398

Depreciation and Amortization

      1,243      1,877      2,792       3,560       5,667      8,004      9,621      11,279      15,443
                                                                

EBITDA

    $ 2,652    $ 4,280    $ (7,543 )   $ 7,542     $ 10,049    $ 16,583    $ 21,859    $ 24,842    $ 20,637

Addback:

                         

Charge related to stock compensation at time of IPO

      —        —        12,690       —         —        —        —        —        —  

Restructuring charge (reversals)

      —        —        —         —         —        —        —        —        8,894

Client claim

      —        —        —         —         —        —        —        —        1,409

Litigation costs

      —        —        —         —         —        —        —        —        1,673

Writeoff of deferred offering costs

      —        —        —         —         —        —        —        —        581

Adjusted EBITDA

    $ 2,652    $ 4,280    $ 5,147     $ 7,542     $ 10,049    $ 16,583    $ 21,859    $ 24,842    $ 33,194

 

(in thousands)

For fiscal years:

    2003     2004     2005  

Net income (loss), as reported

    $ (1,144 )   $ (2,693 )   $ 12,175  

Addback:

       

Interest expense, net

      1,183       1,594       2,464  

Income tax provision or benefit

      (856 )     (1,634 )     4,133  

Depreciation and Amortization

      17,855       17,822       20,790  
                        

EBITDA

    $ 17,038     $ 15,089     $ 39,562  

Addback:

       

Charge related to stock compensation at time of IPO

      —         —         —    

Restructuring charge (reversals)

      (686 )     —         —    

Client claim

      —         —         —    

Litigation costs

      4,693       10,338       (3,611 )

Writeoff of deferred offering costs

      —         —         —    

Adjusted EBITDA

    $ 21,045     $ 25,427     $ 35,951  

 

For fiscal quarters ended:    12/31/04     12/31/05  

Net income (loss), as reported

    $ (3,543 )   $ 3,895  

Addback:

     

Interest expense, net

      524       662  

Income tax provision or (benefit)

      (2,054 )     1,297  

Depreciation and Amortization

      4,975       5,365  
                

EBITDA

    $ (98 )   $ 11,219  

Addback:

     

Litigation costs (recoveries)

      8,446       (115 )

Adjusted EBITDA

    $ 8,348     $ 11,104