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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, 2009

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 check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    YES   ̈    NO   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. (See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act). (Check one):



|                        |  |                                                 |  |                           |  |  
|----------------------- |  | ----------------------------------------------- |  | ------------------------- |  | -
|Large Accelerated Filer |  |  ̈                                               |  | Accelerated Filer         |  | x
|                        |  |                                                 | 
|Non-accelerated Filer   |  |  ̈ (Do not check if a smaller reporting company) |  | Smaller Reporting Company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)    YES   ̈    NO  x

As of November 3, 2009, there were 16,077,795 outstanding shares of common stock, par value $0.01 per share, of the registrant.









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ICT GROUP, INC.

INDEX



|           |  |                                                                                                |  |     
|---------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                |  | PAGE
|PART I     |  | FINANCIAL INFORMATION                                                                          |  |     
|           |  |                                                                                               
|Item 1     |  | FINANCIAL STATEMENTS (unaudited)                                                               |  |     
|           |  |                                                                                               
|           |  | Consolidated Balance Sheets -September 30, 2009 and December 31, 2008                          |  | 4   
|           |  |                                                                                               
|           |  | Consolidated Statements of Operations -Three and nine months ended September 30, 2009 and 2008 |  | 5   
|           |  |                                                                                               
|           |  | Consolidated Statements of Cash Flows -Nine months ended September 30, 2009 and
2008           |  | 6   
|           |  |                                                                                               
|           |  | Notes to Consolidated Financial Statements                                                     |  | 7   
|           |  |                                                                                               
|Item 2     |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS          |  | 18  
|           |  |                                                                                               
|Item 3     |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                     |  | 27  
|           |  |                                                                                               
|Item 4     |  | CONTROLS AND PROCEDURES                                                                        |  | 28  
|           |  |                                                                                               
|PART II    |  | OTHER INFORMATION                                                                              |  |     
|           |  |                                                                                               
|Item 1     |  | LEGAL PROCEEDINGS                                                                              |  | 28  
|           |  |                                                                                               
|Item 1A    |  | RISK FACTORS                                                                                   |  | 29  
|           |  |                                                                                               
|Item 6     |  | EXHIBITS                                                                                       |  | 30  
|           |  |                                                                                               
|SIGNATURES |  |                                                                                                |  | 30  



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INTRODUCTORY NOTE

On October 5, 2009, ICT Group entered into a merger agreement with Sykes Enterprises, Incorporated (Sykes) and two wholly owned subsidiaries of Sykes. Unless stated otherwise, all forward-looking
information contained in this report does not take into account or give any effect to the impact of the proposed merger. For additional details regarding the proposed merger, see Note 12 to our consolidated financial statements, Merger
Agreement with Sykes Enterprises, contained in Part I, Item 1, of this report and Managements Discussion and Analysis of Financial Condition and Results of Operations contained in Part I, Item 2, of this report.



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PART I: FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

ICT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)



|                                                                                                         |  |                   |         |   |                  |   |         |  
|-------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                         |  | September 30,2009 |         |   | December 31,2008 |  
|ASSETS                                                                                                   |  |                   |         |   |                  |   |         |  
|CURRENT ASSETS:                                                                                          |  |                   |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                |  | $                 | 48,677  |   |                  | $ | 31,283  |  
|Accounts receivable, net of allowance for doubtful accounts of $499 and $541                             |  |                   | 74,595  |   |                  |   | 65,156  |  
|Prepaid expenses and other current assets                                                                |  |                   | 11,207  |   |                  |   | 9,258   |  
|Income taxes receivable                                                                                  |  |                   |        |   |                  |   | 2,994   |  
|Deferred income taxes                                                                                    |  |                   | 196     |   |                  |   | 196     |  
|                                                                                                         |  |                   |         |   |                  |   |         |  
|Total current assets                                                                                     |  |                   | 134,675 |   |                  |   | 108,887 |  
|                                                                                                         |  |                   |         |   |                  |   |         |  
|PROPERTY AND EQUIPMENT, NET                                                                              |  |                   | 49,018  |   |                  |   | 57,841  |  
|DEFERRED INCOME TAXES                                                                                    |  |                   | 4,012   |   |                  |   | 3,946   |  
|OTHER ASSETS                                                                                             |  |                   | 5,855   |   |                  |   | 6,887   |  
|                                                                                                         |  |                   |         |   |                  |   |         |  
|                                                                                                         |  | $                 | 193,560 |   |                  | $ | 177,561 |  
|                                                                                                         |  |                   |         |   |                  |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                     |  |                   |         |   |                  |   |         |  
|CURRENT LIABILITIES:                                                                                     |  |                   |         |   |                  |   |         |  
|Accounts payable                                                                                         |  | $                 | 13,445  |   |                  | $ | 11,640  |  
|Accrued expenses and other current liabilities                                                           |  |                   | 41,431  |   |                  |   | 33,432  |  
|Income taxes payable                                                                                     |  |                   | 809     |   |                  |   | 885     |  
|Deferred income taxes                                                                                    |  |                   | 1,552   |   |                  |   | 1,548   |  
|                                                                                                         |  |                   |         |   |                  |   |         |  
|Total current liabilities                                                                                |  |                   | 57,237  |   |                  |   | 47,505  |  
|                                                                                                         |  |                   |         |   |                  |   |         |  
|OTHER LIABILITIES                                                                                        |  |                   | 8,271   |   |                  |   | 10,390  |  
|DEFERRED INCOME TAXES                                                                                    |  |                   | 134     |   |                  |   | 165     |  
|                                                                                                         |  |                   |         |   |                  |   |         |  
|SHAREHOLDERS EQUITY:                                                                                    |  |                   |         |   |                  |   |         |  
|Preferred stock, $0.01 par value 5,000 shares authorized, none issued                                    |  |                   |        |   |                  |   |        |  
|Common stock, $0.01 par value, 40,000 shares authorized, 16,073 and 15,932 shares issued and outstanding |  |                   | 161     |   |                  |   | 159     |  
|Additional paid-in capital                                                                               |  |                   | 121,450 |   |                  |   | 119,949 |  
|Retained earnings                                                                                        |  |                   | 10,160  |   |                  |   | 8,689   |  
|Accumulated other comprehensive loss                                                                     |  |                   | (3,853  | ) |                  |   | (9,296  | )
|                                                                                                         |  |                   |         |   |                  |   |         |  
|Total shareholders equity                                                                               |  |                   | 127,918 |   |                  |   | 119,501 |  
|                                                                                                         |  |                   |         |   |                  |   |         |  
|                                                                                                         |  | $                 | 193,560 |   |                  | $ | 177,561 |  
|                                                                                                         |  |                   |         |   |                  |   |         |  

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



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ICT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                           |  | Three Months EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |  
|                                                           |  | 2009                            |         |   | 2008                           |   |         | 2009 |  |   | 2008    |  
|REVENUE                                                    |  | $                               | 102,560 |   |                                | $ | 108,296 |      |  | $ | 296,968 |   |  | $ | 326,565 |  
|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|OPERATING EXPENSES:                                        |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Cost of services                                           |  |                                 | 60,405  |   |                                |   | 65,103  |      |  |   | 175,968 |   |  |   | 202,868 |  
|Selling, general and administrative                        |  |                                 | 39,054  |   |                                |   | 42,110  |      |  |   | 116,849 |   |  |   | 125,148 |  
|Asset impairments                                          |  |                                 | 583     |   |                                |   |        |      |  |   | 583     |   |  |   |        |  
|Merger costs                                               |  |                                 | 554     |   |                                |   |        |      |  |   | 554     |   |  |   |        |  
|Restructuring charge                                       |  |                                 |        |   |                                |   | 2,334   |      |  |   | 1,234   |   |  |   | 2,334   |  
|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|                                                           |  |                                 | 100,596 |   |                                |   | 109,547 |      |  |   | 295,188 |   |  |   | 330,350 |  
|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Operating income (loss)                                    |  |                                 | 1,964   |   |                                |   | (1,251  | )    |  |   | 1,780   |   |  |   | (3,785  | )
|INTEREST INCOME (EXPENSE)                                  |  |                                 | (24     | ) |                                |   | 48      |      |  |   | (67     | ) |  |   | 237     |  
|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Income (loss) before income taxes                          |  |                                 | 1,940   |   |                                |   | (1,203  | )    |  |   | 1,713   |   |  |   | (3,548  | )
|INCOME TAX PROVISION (BENEFIT)                             |  |                                 | (138    | ) |                                |   | (657    | )    |  |   | 242     |   |  |   | (1,634  | )
|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|NET INCOME (LOSS)                                          |  | $                               | 2,078   |   |                                | $ | (546    | )    |  | $ | 1,471   |   |  | $ | (1,914  | )
|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|EARNINGS (LOSS) PER SHARE:                                 |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Basic earnings (loss) per share                            |  | $                               | 0.13    |   |                                | $ | (0.03   | )    |  | $ | 0.09    |   |  | $ | (0.12   | )
|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Diluted earnings (loss) per share                          |  | $                               | 0.13    |   |                                | $ | (0.03   | )    |  | $ | 0.09    |   |  | $ | (0.12   | )
|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Shares used in computing basic earnings (loss) per share   |  |                                 | 16,070  |   |                                |   | 15,902  |      |  |   | 16,030  |   |  |   | 15,866  |  
|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Shares used in computing diluted earnings (loss) per share |  |                                 | 16,219  |   |                                |   | 15,902  |      |  |   | 16,072  |   |  |   | 15,866  |  
|                                                           |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  

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



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ICT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                         |  |                                |        |   |      |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------- | -
|                                                                                         |  | Nine Months EndedSeptember 30, |       
|                                                                                         |  | 2009                           |        |   | 2008 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                                |        |   |      |   |         |  
|Net income (loss)                                                                        |  | $                              | 1,471  |   |      | $ | (1,914  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                |        |   |      |   |         |  
|Depreciation and amortization                                                            |  |                                | 17,304 |   |      |   | 20,013  |  
|Share-based compensation                                                                 |  |                                | 2,622  |   |      |   | 1,609   |  
|Deferred income tax (benefit) provision                                                  |  |                                | 191    |   |      |   |        |  
|Amortization of deferred financing costs                                                 |  |                                | 278    |   |      |   | 135     |  
|Asset impairment                                                                         |  |                                | 684    |   |      |   | 346     |  
|(Increase) decrease in:                                                                  |  |                                |        |   |      |   |         |  
|Accounts receivable                                                                      |  |                                | (6,490 | ) |      |   | 828     |  
|Prepaid expenses and other current assets                                                |  |                                | 7,577  |   |      |   | (6,837  | )
|Other assets                                                                             |  |                                | 567    |   |      |   | (888    | )
|Increase (decrease) in:                                                                  |  |                                |        |   |      |   |         |  
|Accounts payable                                                                         |  |                                | 1,408  |   |      |   | (2,686  | )
|Accrued expenses, income taxes and other liabilities                                     |  |                                | 2,972  |   |      |   | 5,361   |  
|                                                                                         |  |                                |        |   |      |   |         |  
|Net cash provided by operating activities                                                |  |                                | 28,584 |   |      |   | 15,967  |  
|                                                                                         |  |                                |        |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                                |        |   |      |   |         |  
|Purchases of property and equipment                                                      |  |                                | (8,669 | ) |      |   | (17,105 | )
|Settlement on derivatives                                                                |  |                                | 85     |   |      |   | 792     |  
|                                                                                         |  |                                |        |   |      |   |         |  
|Net cash used in investing activities                                                    |  |                                | (8,584 | ) |      |   | (16,313 | )
|                                                                                         |  |                                |        |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |                                |        |   |      |   |         |  
|Borrowings under line of credit                                                          |  |                                |       |   |      |   | 12,000  |  
|Payments on line of credit                                                               |  |                                |       |   |      |   | (7,000  | )
|Payment of debt issuance costs                                                           |  |                                | (225   | ) |      |   |        |  
|Proceeds from exercise of stock options                                                  |  |                                | 32     |   |      |   | 259     |  
|Withholding of restricted share units for minimum tax obligations                        |  |                                | (114   | ) |      |   | (135    | )
|                                                                                         |  |                                |        |   |      |   |         |  
|Net cash (used in) provided by financing activities                                      |  |                                | (307   | ) |      |   | 5,124   |  
|                                                                                         |  |                                |        |   |      |   |         |  
|EFFECT OF FOREIGN EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS                      |  |                                | (2,299 | ) |      |   | (3,340  | )
|                                                                                         |  |                                |        |   |      |   |         |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                                |  |                                | 17,394 |   |      |   | 1,438   |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                           |  |                                | 31,283 |   |      |   | 30,244  |  
|                                                                                         |  |                                |        |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                 |  | $                              | 48,677 |   |      | $ | 31,682  |  
|                                                                                         |  |                                |        |   |      |   |         |  

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



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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 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,
2009 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, 2008. 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: CREDIT FACILITY

On December 31, 2008, we entered into a Third Amendment (the Third Amendment) to our secured revolving credit facility (as amended by the Third Amendment, the Credit
Facility), for which Bank of America, N.A., serves as Administrative Agent. Also party to the Third Amendment are several of our subsidiaries, which are guarantors of the Credit Facility, and the various lenders under the Credit Facility.

Under the Third Amendment, the total commitment under the Credit Facility was reduced from $125.0 million to $75.0 million. The Credit
Facility continues to have a $5.0 million sub-limit for swing line loans and a $30.0 million sub-limit for multicurrency borrowings, as well as a $50.0 million accordion feature, which provides a mechanism for us to seek to increase the total
commitment with new incremental commitments from existing or new lenders. The Credit Facility continues to have a maturity date of June 24, 2010. Borrowings under the Credit Facility remain collateralized with substantially all of our assets,
as well as the capital stock of our subsidiaries.

Borrowings under the Credit Facility can bear interest at various rates, depending upon the
type of loan. Various aspects of the manner in which these rates are determined have been modified by the Third Amendment. We have two borrowing options, either (1) a Base Rate option, under which the interest rate is calculated
using the highest of (a) the federal funds rate plus 0.50%, (b) the Bank of America prime rate, or (c) the Eurocurrency Rate, as defined below, plus 1.50%, in each case plus a spread ranging from 0.25% to 1.50%, or (2) a
Eurocurrency Rate option, under which the interest rate is calculated using LIBOR plus a spread ranging from 1.75% to 3.00%. The amount of the spread under each borrowing option depends on the ratio of consolidated funded debt to EBITDA
(which, for purposes of the Credit Facility, is defined as income before interest expense, income taxes, depreciation and amortization, certain restructuring charges and certain other charges). At September 30, 2009, we had no outstanding
borrowings.

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. Several of these covenants have
been modified by the Third Amendment. In addition, the Third Amendment adds a financial covenant that requires us to maintain certain minimum EBITDA levels. We are also required to pay a quarterly commitment fee which, as modified by the Third
Amendment, ranges from 0.35% to 0.65% of the unused amount. Upon the occurrence of an event of default under the Credit Facility, 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. As of September 30, 2009, we were in compliance with all covenants.

For the
three and nine months ended September 30, 2009, we did not have outstanding borrowings and consequently no interest expense, except for the amortization of debt issuance costs. For the three and nine months ended September 30, 2008,
interest expense on outstanding borrowings, exclusive of the amortization of debt issuance costs, was $26,000 and $38,000, respectively.



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ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



At September 30, 2009, we had $279,000 of unamortized debt issuance costs associated with the
Credit Facility that are being amortized over the remaining term of the Credit Facility. At September 30, 2009, there were no outstanding letters of credit. The amount of available capacity under the Credit Facility at September 30, 2009
was $75.0 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 with substantially all of our assets, as well as the
capital stock of our subsidiaries.

Note 3: EARNINGS PER SHARE

Basic earnings (loss) per share (Basic EPS) is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share
(Diluted EPS) is computed by dividing net income (loss) 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 and
restricted stock units (RSUs), into shares of common stock as if those securities were exercised. A reconciliation of shares used to compute EPS is shown below:



|                                                            |  |                                 |        |      |                                |        |      |  |      |        |  |   |        |  
|----------------------------------------------------------- |  | ------------------------------- | ------ | ---- | ------------------------------ | ------ | ---- |  | ---- | ------ |  | - | ------ | -
|                                                            |  | Three Months EndedSeptember 30, |        |      | Nine Months EndedSeptember 30, |       
|(in thousands, except per share amounts)                    |  | 2009                            |        | 2008 |                                |        | 2009 |  | 2008 |       
|Net income (loss)                                           |  | $                               | 2,078  |      | $                              | (546   | )    |  | $    | 1,471  |  | $ | (1,914 | )
|                                                            |  |                                 |        |      |                                |        |      |  |      |        |  |   |        |  
|Basic income (loss) per share:                              |  |                                 |        |      |                                |        |      |  |      |        |  |   |        |  
|Weighted average shares outstanding                         |  |                                 | 16,070 |      |                                | 15,902 |      |  |      | 16,030 |  |   | 15,866 |  
|                                                            |  |                                 |        |      |                                |        |      |  |      |        |  |   |        |  
|Basic income (loss) per share                               |  | $                               | 0.13   |      | $                              | (0.03  | )    |  | $    | 0.09   |  | $ | (0.12  | )
|                                                            |  |                                 |        |      |                                |        |      |  |      |        |  |   |        |  
|Diluted income (loss) per share:                            |  |                                 |        |      |                                |        |      |  |      |        |  |   |        |  
|Weighted average shares outstanding                         |  |                                 | 16,070 |      |                                | 15,902 |      |  |      | 16,030 |  |   | 15,866 |  
|Dilutive shares resulting from common stock equivalents (1) |  |                                 | 149    |      |                                |       |      |  |      | 42     |  |   |       |  
|                                                            |  |                                 |        |      |                                |        |      |  |      |        |  |   |        |  
|Shares used in computing diluted income (loss) per share    |  |                                 | 16,219 |      |                                | 15,902 |      |  |      | 16,072 |  |   | 15,866 |  
|                                                            |  |                                 |        |      |                                |        |      |  |      |        |  |   |        |  
|Diluted income (loss) per share                             |  | $                               | 0.13   |      | $                              | (0.03  | )    |  | $    | 0.09   |  | $ | (0.12  | )
|                                                            |  |                                 |        |      |                                |        |      |  |      |        |  |   |        |  



|(1) | Given our net loss for the three and nine months ended September 30, 2008, all common stock equivalents were excluded from the calculation of diluted shares as the
result would be antidilutive. Accordingly, the dilutive effects of options to purchase 41,000 and 107,000 shares of common stock and 307,000 and 30,000 restricted stock units, were not included in the computation of Diluted EPS for the three and
nine months ended September 30, 2008, respectively. For the three and nine months ended September 30, 2009, the dilutive effects of options to purchase 264,000 and 374,000 shares of common stock and 45,000 and 110,000 restricted stock
units, were not included in the computation of Diluted EPS as the result would be antidilutive.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 4: SHARE-BASED
COMPENSATION

We have share-based compensation plans covering a variety of employee groups, including executive management, the Board of
Directors and other full-time employees. Our share-based compensation, by category, is shown below.



8



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##### Table of Contents

ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



|                                |      |                                 |       |                                |      |     |      |   |       |  |   |      
|------------------------------- | ---- | ------------------------------- | ----- | ------------------------------ | ---- | --- | ---- | - | ----- |  | - | -----
|(in thousands)                  |      | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                                | 2009 |                                 | 2008  |                                | 2009 |     | 2008
|Share-based compensation:       |      |                                 |       |                                |      |     |      |   |       |  |   |      
|Stock options                   |      | $                               | 17    |                                | $    | 23  |      | $ | 60    |  | $ | 60   
|Restricted stock units (RSUs) |      |                                 | 465   |                                |      | 358 |      |   | 1,245 |  |   | 1,137
|Long-term incentive plan        |      |                                 | 568   |                                |      | 170 |      |   | 1,317 |  |   | 412  
|                                |      |                                 |       |                                |      |     |      |   |       |  |   |      
|Total share-based compensation  |      | $                               | 1,050 |                                | $    | 551 |      | $ | 2,622 |  | $ | 1,609
|                                |      |                                 |       |                                |      |     |      |   |       |  |   |      

Stock Option Awards:

Stock option awards are available under our current existing equity plans. We recognize compensation expense based on the grant date fair value of the award
on a straight-line basis over the requisite service period, which for these awards is the vesting period. None of the stock options granted to date have performance-based or market-based vesting conditions.

Aggregated information regarding stock options outstanding is summarized below.



|                                             |  |         |   |  |                               |       |                                           |           |                          |   |        
|-------------------------------------------- |  | ------- | - |  | ----------------------------- | ----- | ----------------------------------------- | --------- | ------------------------ | - | -------
|                                             |  | Shares  |   |  | WeightedAverage ExercisePrice |       | WeightedAverage RemainingContractual Term |           | AggregateIntrinsic Value
|Outstanding, January 1, 2009                 |  | 405,330 |   |  | $                             | 12.10 |                                           |           |                          |   |        
|Granted                                      |  |        |   |  |                               |      |                                           |           |                          |   |        
|Exercised                                    |  | (9,000  | ) |  |                               | 3.58  |                                           |           |                          |   |        
|Canceled                                     |  | (14,640 | ) |  |                               | 13.88 |                                           |           |                          |   |        
|                                             |  |         |   |  |                               |       |                                           |           |                          |   |        
|Outstanding, September 30, 2009              |  | 381,690 |   |  |                               | 12.23 |                                           | 2.7 years |                          | $ | 194,945
|                                             |  |         |   |  |                               |       |                                           |           |                          |   |        
|Vested and exercisable at September 30, 2009 |  | 377,440 |   |  |                               | 12.11 |                                           | 2.7 years |                          | $ | 194,945
|Expected to vest as of September 30, 2009    |  | 381,478 |   |  |                               | 12.22 |                                           | 2.7 years |                          | $ | 194,945

Restricted Stock Units:

For RSU awards with a gradedvesting schedule and with only service conditions, we recognize compensation expense based on the grantdate fair
value of the award on a straight-line basis over the vesting period. The fair value of an RSU is the fair value of the Companys common stock (closing market price) on the date of grant.

To the extent an RSU award has performance conditions and graded-vesting, we treat each vesting tranche as an individual award and recognize compensation
expense on a straight-line basis over the requisite service period for each tranche. The requisite service period over which we will record compensation expense is a combination of the performance period and subsequent vesting period based on
continued service. The following table summarizes the changes in non-vested RSUs that have only service conditions for the nine months ended September 30, 2009.



|                                      |  |          |   |  |                                     |       |                          |   |          
|------------------------------------- |  | -------- | - |  | ----------------------------------- | ----- | ------------------------ | - | ---------
|                                      |  | Shares   |   |  | WeightedAverageGrant DateFair Value |       | AggregateIntrinsic Value
|Non-vested RSUs at January 1, 2009    |  | 494,931  |   |  | $                                   | 13.01 |                          |   |          
|Granted                               |  | 165,544  |   |  |                                     | 5.84  |                          |   |          
|Vested                                |  | (171,557 | ) |  |                                     | 14.69 |                          |   |          
|Canceled/Forfeited                    |  | (17,498  | ) |  |                                     | 9.60  |                          |   |          
|                                      |  |          |   |  |                                     |       |                          |   |          
|Non-vested RSUs at September 30, 2009 |  | 471,420  |   |  | $                                   | 10.00 |                          | $ | 4,949,910
|                                      |  |          |   |  |                                     |       |                          |   |          



9



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##### Table of Contents

ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



In addition to the RSUs shown in the table above are 150,000 RSUs that have performance conditions
associated with them. These performance conditions are based on the Companys financial performance in fiscal years 2009 and 2010. The maximum number of RSUs that can be earned is represented by the 150,000 RSUs; to the extent the performance
targets associated with these RSUs are not achieved, a lesser number of RSUs will be earned. Any shortfall in RSUs earned, as compared to the maximum number, will be considered a forfeiture at the time the actual achievement is known. Also, in
addition to the RSUs listed above are 75,000 RSUs that require cash settlement; consequently, these RSUs are excluded from the table above as they will not result in the issuance of shares of stock.

Included in the vested number of RSUs for the nine months ended September 30, 2009, were 26,802 RSUs that employees surrendered to the Company in
payment of minimum tax obligations upon vesting. During the nine months ended September 30, 2009, we valued the stock at the closing market price on the date of surrender for an aggregate value of approximately $114,000, or $4.25 per share.
Also included in the vested number of RSUs were 12,500 RSUs that were cash settled at $4.45 per share, which was the closing price of our stock on the vesting date.

Long-Term Incentive Plan:

The ICT Group, Inc. Long-Term Incentive Plan
(LTIP) provides for both a performance-based incentive and an executive retention incentive. The first establishes a performance-based incentive by requiring achievement of specific annual financial targets over a three-year period in
order to determine the ultimate value of an award under the LTIP. The second establishes a service-based incentive whereby an RSU is awarded to the participants with time vesting conditions. The Compensation Committee determines what portion of an
award is payable in cash and what portion is payable through an RSU award. Because the number of RSUs to be awarded for the performance-based incentive depends on the price of the Companys common stock at the date the performance level is
determined and the award, if any, is made by the Compensation Committee, we do not have a grant date for accounting purposes until the number of RSUs is known. Therefore, the performance-based LTIP will be liability-classified until the RSUs are
awarded and a grant date is established. The Compensation Committee may impose a vesting schedule with respect to any award under the LTIP, which provides an additional executive retention incentive. Additionally, the service-based incentive
associated with the 2009 LTIP is also liability-classified, as the Compensation Committee has retained discretion with respect to this award to determine whether this award will be distributed in cash or RSUs at a later date. On October 5,
2009, the Compensation Committee elected to cash-settle all awards under the 2009 LTIP in cash, in contemplation of the proposed merger with Sykes Enterprises Incorporated (see Note 12). For the three and nine months ended September 30, 2009,
we recognized compensation expense based on managements best estimate at that time as to what financial targets will be achieved. For the three and nine months ended September 30, 2009, we recognized $206,000 and $391,000, respectively,
of compensation expense associated with our performance-based LTIP awards and $362,000 and $926,000, respectively, associated with our service-based LTIP awards.

Change-In-Control Provisions:

All awards granted under our equity plans have
provisions which modify outstanding awards upon a change-in-control, as defined in our plan documents. On October 5, 2009, Sykes Enterprises Incorporated and ICT entered into a merger agreement under which ICT will become a wholly-owned subsidiary
of Sykes. Consummation of this transaction will trigger a change-in-control, which will cause any unvested awards to become fully vested and will result in accelerated compensation expense to be recorded in the period when the consummation occurs.
Please refer to Note 12 for more information on how our outstanding awards will be treated under the merger.

Note 5: COMPREHENSIVE INCOME
(LOSS)

We follow the guidance in the Comprehensive Income Topic of the FASB Accounting Standards Codification (ASC Topic 220), which
requires companies to classify items of other comprehensive income (loss) by their nature in financial statements and display the accumulated balance of other comprehensive income (loss) separately from retained earnings and additional paid-in
capital in the equity section of the consolidated balance sheet.



|                                         |      |                                 |       |  |                                |        |   |  |      |       |   |  |   |         |  
|---------------------------------------- | ---- | ------------------------------- | ----- |  | ------------------------------ | ------ | - |  | ---- | ----- | - |  | - | ------- | -
|(in thousands)                           |      | Three Months EndedSeptember 30, |       |  | Nine Months EndedSeptember 30, |       
|                                         | 2009 |                                 | 2008  |  |                                | 2009   |   |  | 2008 |      
|Net income (loss)                        |      | $                               | 2,078 |  | $                              | (546   | ) |  | $    | 1,471 |   |  | $ | (1,914  | )
|Derivative instruments, net of tax       |      |                                 | 3,158 |  |                                | (1,352 | ) |  |      | 6,435 |   |  |   | (12,761 | )
|Foreign currency translation adjustments |      |                                 | 530   |  |                                | (2,689 | ) |  |      | (992  | ) |  |   | (6,890  | )
|                                         |      |                                 |       |  |                                |        |   |  |      |       |   |  |   |         |  
|Comprehensive income (loss)              |      | $                               | 5,766 |  | $                              | (4,587 | ) |  | $    | 6,914 |   |  | $ | (21,565 | )
|                                         |      |                                 |       |  |                                |        |   |  |      |       |   |  |   |         |  



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##### Table of Contents

ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



Note 6: OPERATING AND GEOGRAPHIC INFORMATION

According to guidance in the Segment Reporting Topic of the FASB Accounting Standards Codification (ASC Topic 280), we believe that we have one reportable
segment. Our services are provided through operations centers located throughout the world and include customer care management services as well as 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 operations center by routing customer call lists to different
centers depending on capacity. An operations center and the technology assets utilized by that operations center may reside in different geographic locations. Accordingly, many of our operations 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.



|                             |      |                                 |         |                                |      |         |      |   |         |  |   |        
|---------------------------- | ---- | ------------------------------- | ------- | ------------------------------ | ---- | ------- | ---- | - | ------- |  | - | -------
|(in thousands)               |      | Three Months EndedSeptember 30, |         | Nine Months EndedSeptember 30,
|                             | 2009 |                                 | 2008    |                                | 2009 |         | 2008
|Revenue:                     |      |                                 |         |                                |      |         |      |   |         |  |   |        
|United States                |      | $                               | 67,591  |                                | $    | 68,915  |      | $ | 202,453 |  | $ | 205,461
|Canada                       |      |                                 | 21,908  |                                | $    | 25,901  |      |   | 63,931  |  |   | 80,451 
|Other foreign countries      |      |                                 | 13,061  |                                | $    | 13,480  |      |   | 30,584  |  |   | 40,653 
|                             |      |                                 |         |                                |      |         |      |   |         |  |   |        
|                             |      | $                               | 102,560 |                                | $    | 108,296 |      | $ | 296,968 |  | $ | 326,565
|                             |      |                                 |         |                                |      |         |      |   |         |  |   |        
|                             |      |                                 |         |                               
|(in thousands)               |      | September 30,2009               |         | December 31,2008               |      |         |      |  
|Property and equipment, net: |      |                                 |         |                                |      |         |      |   |         |  |   |        
|United States                |      | $                               | 21,544  |                                | $    | 24,795  |      |   |         |  |   |        
|Philippines                  |      |                                 | 17,991  |                                |      | 23,067  |      |   |         |  |   |        
|Canada                       |      |                                 | 5,186   |                                |      | 5,727   |      |   |         |  |   |        
|Other foreign countries      |      |                                 | 4,297   |                                |      | 4,252   |      |   |         |  |   |        
|                             |      |                                 |         |                                |      |         |      |   |         |  |   |        
|                             |      | $                               | 49,018  |                                | $    | 57,841  |      |   |         |  |   |        
|                             |      |                                 |         |                                |      |         |      |   |         |  |   |        

Note 7: DERIVATIVE INSTRUMENTS AND FAIR VALUE

We have operations in Canada, Ireland, the United Kingdom, Australia, Mexico, Argentina, Costa Rica, India 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 (USD) affects period-to-period 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 areas of exposure have been with the Philippines operations. In the Philippines revenue is typically earned in USD, but operating costs are denominated in Philippine pesos
(PHP).

The foreign currency 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 (loss) in shareholders equity until settlement of the contract occurs or until the hedge is de-designated. Depending
on the type of hedge strategy we are using, settlement of the contract occurs in the same period that the hedged item affects earnings or occurs in the same period that hedged item is settled with cash. Gains or losses 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, are recognized immediately in the consolidated statement of operations. 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.



11



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##### Table of Contents

ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



We had derivative assets and liabilities related to outstanding forward exchange contracts and options
maturing within 12 months designated as accounting hedges with notional values of $81.2 million and $93.4 million at September 30, 2009 and December 31, 2008, respectively. At September 30, 2009, we had $1.3 million of net gains
included in accumulated other comprehensive income that is expected to be reclassified into earnings as a result of expected contract settlements or hedge de-designations, of which $1.1 million is expected to be reclassified into earnings in the
next 12 months. We are hedging the exposure to the variability in future cash flows for forecasted foreign currency transactions through April 30, 2011.

On a recurring basis, we also enter into foreign exchange forward contracts to mitigate the effects of the foreign currency remeasurement of balance sheet accounts that are denominated in currencies other
than the functional currency of a subsidiary. Gains and losses based on the fair value estimated on the balance sheet date through the ultimate settlement date are recognized in earnings as we elect not to designate these contracts as accounting
hedges.

Fair value measurements of assets and liabilities are assigned a level within the fair value hierarchy based on the lowest level of
any input that is significant to the fair value measurement in its entirety, as prescribed by the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification (ASC Topic 820).

The three levels of the fair value hierarchy under ASC Topic 820 are:

Level 1  Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that we have the ability to access at the measurement date.

Level 2  Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or
indirectly. Fair values for our derivative financial instruments are based on pricing models or formulas using current market data. Variables used in the calculations include forward points and spot rates at the time of valuation.

Level 3  Unobservable inputs used in valuations in which there is little market activity for the asset or liability at the
measurement date.

The following table summarizes our assets and liabilities measured and reported in our financial statements at fair value
on a recurring basis as of September 30, 2009 and indicates the fair value technique used to determine the fair value. We manage the credit risks associated with our derivatives through the evaluation and monitoring of the creditworthiness of
the counterparties. Although we may be exposed to losses in the event of nonperformance by the counterparties, we do not expect such losses, if any, to be significant. The valuation adjustments we recorded against the derivative assets to reflect
counterparty credit risk are not significant. The counterparties of our derivative instruments are the same group of banks that are lenders under the Credit Facility described in Note 2. As such, we have not been required to maintain additional
collateralization on our derivative instruments in net liability positions.



|                                                                                               |  |                   |       |                  |   |                     |  |        
|---------------------------------------------------------------------------------------------- |  | ----------------- | ----- | ---------------- | - | ------------------- |  | -------
|(in thousands)                                                                                 |  | September 30,2009 |       | December 31,2008 |   | Fair ValueHierarchy
|Forward exchange contracts and options designated as accounting hedges under ASC Topic 815     |  |                   |       |                  |   |                     |  |        
|Prepaid and other current assets                                                               |  | $                 | 1,694 |                  | $ |                    |  | Level 2
|Other assets                                                                                   |  |                   | 244   |                  |   |                    |  | Level 2
|Accrued expenses and other current liabilities                                                 |  |                   | 935   |                  |   | 5,071               |  | Level 2
|Other liabilities                                                                              |  |                   | 8     |                  |   | 524                 |  | Level 2
|Forward exchange contracts and options not designated as accounting hedges under ASC Topic 815 |  |                   |       |                  |   |                     |  |        
|Accrued expenses and other current liabilities                                                 |  | $                 | 1,581 |                  | $ |                    |  | Level 2
|Prepaid and other current assets                                                               |  |                   | 218   |                  |   | 623                 |  | Level 2



12



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##### Table of Contents

ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



Effective January 1, 2009, we adopted new pronouncement requirements included in ASC Topic 820 for
all nonfinancial assets and liabilities that are measured at fair value on a non-recurring basis, such as goodwill and identifiable intangible assets. The adoption of ASC Topic 820 for nonfinancial assets and liabilities that are measured at fair
value on a non-recurring basis did not impact our financial position or results of operations for the three and nine months ended September 30, 2009.

The following table summarizes the pre-tax gains (losses) recognized on our derivative financial instruments. Gains and losses are recorded as a component of selling, general and administrative costs in
our consolidated statement of operations.



|                                                                                               |  |                                 |        |   |                                |   |       |      |  |   |        |   |  |   |      
|---------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ----- | ---- |  | - | ------ | - |  | - | -----
|                                                                                               |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30,
|(in thousands)                                                                                 |  | 2009                            |        |   | 2008                           |   |       | 2009 |  |   | 2008  
|Forward exchange contracts and options designated as accounting hedges under ASC Topic 815     |  | $                               | (1,029 | ) |                                | $ | (266  | )    |  | $ | (4,237 | ) |  | $ | 3,275
|Forward exchange contracts and options not designated as accounting hedges under ASC Topic 815 |  | $                               | (1,515 | ) |                                | $ | 2,195 |      |  | $ | (1,900 | ) |  | $ | 1,444

The following table summarizes the pre-tax aggregate unrealized net gain and loss in other
comprehensive income (OCI) recognized on our derivative financial instruments for the three and nine months ended September 30, 2009 and 2008. Gains and losses reclassified into earnings are included as a component of selling,
general and administrative costs in our consolidated statement of operations.



|                                                                                                                                                                            |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------- | -
|                                                                                                                                                                            |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|(in thousands)                                                                                                                                                              |  | 2009                            |        |   | 2008                           |   |        | 2009 |  |   | 2008   |  
|Gain (loss) recognized in OCI for effective portion of forward exchange contracts and options designated as accounting hedges
under ASC Topic 815                           |  | $                               | 4,187  |   |                                | $ | (1,086 | )    |  | $ | 10,672 |   |  | $ | (16,036 | )
|Gain (loss) reclassified from accumulated OCI to income for effective portion of forward exchange contracts and options
designated as accounting hedges under ASC Topic 815 |  | $                               | (1,029 | ) |                                | $ | (266   | )    |  | $ | (4,237 | ) |  | $ | 3,275   |  
|                                                                                                                                                                            |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |         |  
|Comprehensive income (loss) from derivative instruments                                                                                                                     |  | $                               | 3,158  |   |                                | $ | (1,352 | )    |  | $ | 6,435  |   |  | $ | (12,761 | )
|                                                                                                                                                                            |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |         |  

Other financial instruments consist primarily of cash and cash equivalents, accounts receivable,
accounts payable and a line of credit. Management believes that the carrying value of these assets and liabilities are representative of their respective fair values due to the short-term nature of those instruments. To the extent we have any
outstanding borrowings under our line of credit, the fair value would approximate its reported value because our interest rate is variable and reflects current market rates.

Note 8: INCOME TAXES

Provision for Income Taxes

We calculate our provision for income taxes during interim periods in accordance with the guidance in the Income Taxes Topic of the FASB Accounting
Standards Codification (ASC Topic 740). Our effective tax rates vary from period to period as separate calculations are performed for those countries where our operations are profitable and whose results continue to be tax-effected and for those
countries where full deferred tax valuation allowances exist and are maintained. We recorded an income tax benefit of $138,000 for the three months ended September 30, 2009 and income tax expense of $242,000 for the nine months ended
September 30, 2009. These amounts reflect our overall estimate of taxable income in the jurisdictions that are included in our effective rate calculation. The income tax benefit of $657,000 and $1,634,000 recorded for the three and nine-month
periods ended September 30, 2008 reflected income tax benefits related to those countries where operating losses can be used to offset taxable income in prior years or can be carried forward to future taxable years and ongoing assessments
related to the recognition and measurement of unrecognized tax benefits.



13



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##### Table of Contents

ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



The need to maintain valuation allowances against deferred tax assets in the U.S., Canada, Australia,
Ireland and Argentina will continue to cause variability in our quarterly and annual effective tax rates. Valuation allowances against deferred tax assets in these locations will be maintained until sufficient positive evidence exists to reduce or
eliminate them.

Unrecognized Tax Benefits

We are subject to income taxes in the U.S. and various foreign jurisdictions. Accordingly, we are subject to a variety of examinations by taxing authorities in these locations. Our gross unrecognized
tax benefit at September 30, 2009 and December 31, 2008 was approximately $3.8 million and $4.4 million, respectively. The amount, if recognized, that would affect the effective tax rate, was approximately $2.6 million at
September 30, 2009.

During the third quarter the statute of limitations expired on various positions taken in prior years income
tax returns in various jurisdictions. The overall adjustment of these items, including any estimated interest and penalties, totaled $825,000 in the quarter, partially offset by the reversal of valuation allowances, resulting in a net reduction to
our income tax expense of $264,000. We record interest and penalties as a component of income tax expense. As of September 30, 2009 and December 31, 2008, we have recorded approximately $718,000 and $755,000, respectively, of estimated
interest and penalties.

As of September 30, 2009, we do not expect the liability for unrecognized tax benefits to change significantly
during the next 12 months. It is possible, however, that the amount of the our unrecognized tax benefits may change within the next 12 months as a result of routine audits or of changes in judgment as new information becomes available related to our
tax return positions. An estimate of the range of reasonably possible outcomes cannot be made at this time.

Note 9: CORPORATE
RESTRUCTURING

During the nine months ended September 30, 2009, we recorded $1.2 million of restructuring charges, net of
restructuring charge reversals. Our restructuring charges included site closure costs of $925,000 which are primarily ongoing lease and other contractual obligations, the impairment of $101,000 of leasehold improvements and certain fixed
assets, and severance costs of $705,000. These charges were partially offset by $497,000 of restructuring charge reversals, as we negotiated a lease termination agreement for a facility that was part of our 2007 restructuring
plan. Accordingly, we reduced our outstanding accrual by $418,000 in connection with this agreement. We also reversed $79,000 of severance estimates that were recorded as part of our 2008 restructuring plan.



|                                          |  |                            |       |                     |   |              |  |   |                 |   |  |           |      |   |                            |   |                             |   |  |   |     |  |   |      
|----------------------------------------- |  | -------------------------- | ----- | ------------------- | - | ------------ |  | - | --------------- | - |  | --------- | ---- | - | -------------------------- | - | --------------------------- | - |  | - | --- |  | - | -----
|(in thousands)                            |  | Accrual atDecember 31,2008 |       | RestructuringCharge |   | CashPayments |  |   | AssetImpairment |   |  | Reversals |      |   | ForeignCurrencyTranslation |   | Accrual atSeptember 30,2009
|Lease obligations and facility exit costs |  | $                          | 6,204 |                     | $ | 925          |  | $ | (3,278          | ) |  | $         |     |   |                            | $ | (418                        | ) |  | $ | 370 |  | $ | 3,803
|Property and equipment                    |  |                            |      |                     |   | 101          |  |   |                |   |  |           | (101 | ) |                            |   |                            |   |  |   |    |  |   |     
|Severance                                 |  |                            | 1,386 |                     |   | 705          |  |   | (1,532          | ) |  |           |     |   |                            |   | (79                         | ) |  |   | 14  |  |   | 494  
|                                          |  |                            |       |                     |   |              |  |   |                 |   |  |           |      |   |                            |   |                             |   |  |   |     |  |   |      
|                                          |  | $                          | 7,590 |                     | $ | 1,731        |  | $ | (4,810          | ) |  | $         | (101 | ) |                            | $ | (497                        | ) |  | $ | 384 |  | $ | 4,297
|                                          |  |                            |       |                     |   |              |  |   |                 |   |  |           |      |   |                            |   |                             |   |  |   |     |  |   |      

During the nine months ended September 30, 2009, we did not enter into any sublease
arrangements. All cash payments made were related to the ongoing lease obligations and severance arrangements. We continue to evaluate and update our estimate of the remaining liabilities. At September 30, 2009 and December 31,
2008, $2.0 million and $2.7 million, respectively, of the restructuring accrual is recorded in other liabilities in the consolidated balance sheet, which represents lease obligation payments and estimated facility exit cost payments to be made
beyond one year. The remaining balance is included in accrued expenses and other current liabilities in our consolidated balance sheet at September 30, 2009 and December 31, 2008.



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##### Table of Contents

ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



Note 10: ASSET IMPAIRMENTS

During the three and nine months ended September 30, 2009, we recorded $583,000 of asset impairments as a result of Typhoon Ondoy, which struck the Philippines during September 2009. The storm
flooded a floor of one of our leased facilities in Manila and damaged communications and computer equipment, furniture and fixtures, and leasehold improvements to the space. This charge represents the fixed assets which we deemed to be unusable and
unsalvageable. While we do have responsive insurance, no estimate of insurance recoveries has been recorded. We will record any insurance recoveries at the time they are realizable, which would typically be at the time our pending claim has been
reviewed and approved by our insurance carrier.

Note 11: CLIENT CONCENTRATION AND CREDIT RISK

The following table summarizes our revenue by industry. The loss of one or more of our major clients or an economic downturn in the financial services,
technology and communications, or healthcare industries could have a material adverse effect on our business.



|                                |  |                                 |   |  |                                |   |  |      |   |  |      |  
|------------------------------- |  | ------------------------------- | - |  | ------------------------------ | - |  | ---- | - |  | ---- | -
|                                |  | Three Months EndedSeptember 30, |   |  | Nine Months EndedSeptember 30, |  
|                                |  | 2009                            |   |  | 2008                           |   |  | 2009 |   |  | 2008 |  
|Financial services              |  | 45                              | % |  | 50                             | % |  | 45   | % |  | 49   | %
|Technology & Telecommunications |  | 37                              | % |  | 31                             | % |  | 36   | % |  | 31   | %
|Healthcare                      |  | 11                              | % |  | 10                             | % |  | 11   | % |  | 11   | %
|Other                           |  | 7                               | % |  | 9                              | % |  | 8    | % |  | 9    | %

For the three and nine months ended September 30, 2009, we had one client, GMAC LLC, whose
revenue exceeded at least 10% of our consolidated revenue for each period. For the three and nine months ended September 30, 2008, we had one client, Rogers Communications, Inc., whose revenue exceeded 10% of our consolidated revenue for each
period. For the three and nine months ended September 30, 2009, our top ten clients accounted for 56% and 57% of our total revenue, respectively, as compared to 50% and 47% for the three and nine months ended September 30, 2008,
respectively. Timely collection of our accounts receivable is dependent upon the financial condition of our clients. We continually evaluate the financial condition of our clients and generally do not require collateral. Although we are an
international business, much of our client base is located in North America and not necessarily in the offshore locations where we operate. We believe our allowance for doubtful accounts reflects the collectibility of our receivables, taking into
account current market conditions in the various verticals in which we operate. Although our accounts receivable remains sensitive to the current economic downturn, particularly in the financial services industry, we believe that we have adequately
addressed credit risk as of September 30, 2009. If we determine that risk of non-payment with any of our client base increases in the future, we would take appropriate actions to mitigate that risk.

Note 12: MERGER AGREEMENT WITH SYKES ENTERPRISES

On October 5, 2009, Sykes Enterprises, Incorporated (Sykes), a Florida corporation, and ICT entered into a merger agreement, pursuant to which, subject to the terms and conditions set forth in the merger agreement, ICT will
become a wholly-owned subsidiary of Sykes. As a result of the merger, each outstanding share of the Companys common stock will be converted into the right to receive consideration valued at $15.38, subject to adjustment as described below.
Such consideration shall be payable (i) in cash, without interest, in the amount of $7.69 per share of the Companys common stock, and (ii) the remainder payable in shares of Sykes common stock, with the number of shares of
Sykes common stock to be equal to an exchange ratio determined by the formula set forth below, divided by two.

The exchange ratio for
calculating the number of shares of Sykes common stock to be issued in exchange for each share of the Companys common stock as a result of the merger, subject to the terms and conditions of the merger agreement, shall, subject to
adjustment as set forth in the next paragraph, equal the number determined by dividing $15.38 by the volume weighted average of the per share prices of Sykes common stock as listed in The Nasdaq Stock Market, LLC transaction reporting system
for the ten consecutive trading days ending on (and including) the third trading day immediately prior the effective time of the Merger (the Measurement Value).



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ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



The exchange ratio is subject to a 7.5% symmetrical collar with respect to changes in the Measurement
Value as compared to $20.8979 (the Initial Sykes Share Value), which is the volume weighted average of the per share prices of Sykes common stock as listed in The Nasdaq Stock Market, LLC transaction reporting system for the ten
consecutive trading days ending on October 2, 2009, the last trading day immediately prior to the date of the merger agreement. Within this collar, the exchange ratio will be determined in accordance with the previous paragraph. If, however,
the Measurement Value is equal to or less than $19.3306 (representing 92.5% of the Initial Sykes Share Value), then the exchange ratio will be 0.7956 and 0.3978 shares of Sykes common stock will be issued for each share of the Companys
common stock. On the other hand, if the Measurement Value is equal to or greater than $22.4652 (representing 107.5% of the Initial Sykes Share Value), then the exchange ratio will be 0.6846 and 0.3423 shares of Sykes common stock will be
issued for each share of the Companys common stock.

ICT and Sykes currently expect to complete the merger around the end of the fourth
quarter of 2009, subject to receipt of ICT shareholder approval, governmental and regulatory approvals, and other usual and customary closing conditions. Upon consummation of the merger, each outstanding RSU award will become fully vested. Rather
than conversion into ICT common stock, the holder of each RSU award will be entitled to receive $15.38 in cash for each RSU award, without interest and less any applicable tax to be withheld. Also upon consummation, any unvested stock option awards
will become fully vested. Similar to the RSUs, each stock option will be cash-settled for the difference between the option exercise price and $15.38. Any stock options whose exercise price exceeds $15.38 are deemed to have no value.

We incurred $554,000 of merger-related costs in the three and nine months ended September 30, 2009. These costs included fees for our legal advisers,
financial advisers, and accountants. We also expect to incur additional merger-related costs in the fourth quarter.

Note 13: COMMITMENTS
AND CONTINGENCIES

As of September 30, 2009, we are 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 on hand and cash flows generated from operations. We
would also consider accessing capital markets to meet our needs, however, we can give no assurances that this type of financing would be available in the future. 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 year ended December 31, 2008.

If the proposed merger with Sykes, as described in
Note 12, is consummated, it will trigger change-in-control provisions in a variety of our contracts and commitments, including employment contracts, equity award programs, facility lease contracts and customer contracts. These changes include
provisions for employee severance and the acceleration of the vesting of awards granted under our equity plans, but the full impact of these changes is currently being evaluated.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, assessments under government grant programs and other sources are recorded when it is probable that a
liability has been incurred and the amount of the assessment can be reasonably estimated. Legal costs associated with loss contingencies are recorded as they are incurred.

Litigation Relating to the Merger

On October 9, 2009, a shareholder class action and
derivative suit was filed by two shareholders in the Court of Common Pleas of Bucks County, Pennsylvania, against ICT and its directors, styled as United Union of Roofers, Waterproofers and Allied Workers Local Union No. 8 Annuity Fund and
United Union of Roofers, Waterproofers and Allied Workers Local Union No. 8 Pension Fund vs. John J. Brennan, Donald P. Brennan, Gordon Coburn, Bernard Somers, John Stoops, Richard R. Roscitt, Eileen S. Fusco,Case
No. 2009-10761, also naming ICT as a nominal defendant. On October 13, 2009, a shareholder derivative suit was filed by an individual shareholder in the Court of Common Pleas of Bucks County, Pennsylvania, against ICTs directors and
Sykes, styled as Christopher Green vs. John J. Brennan, Donald P. Brennan, Gordon Coburn, Bernard Somers, John Stoops, Richard R. Roscitt, Eileen S. Fusco & Sykes Enterprises, Inc.,Case No. 2009-10827, also naming ICT as
a nominal defendant. On October 29, 2009, a shareholder class action and derivative suit was filed by an individual shareholder in the Court of Common Pleas of Bucks County, Pennsylvania, against ICTs directors and Sykes, styled as
Mitesh Patel vs. John Brennan, Donald Brennan, Bernard Somers, John Stoops, Gordon Coburn, Richard Roscitt, Eileen Fusco, Sykes Enterprises, Incorporated, SH Merger Subsidiary I, Inc., and SH Merger Subsidiary II, LLC,Case
No. 2009-11514, also naming ICT as a nominal defendant.

Collectively, these complaints allege claims for breach of fiduciary duty, gross
mismanagement and corporate waste against the named defendants and seek to enjoin the proposed acquisition of ICT by Sykes and recovery of certain costs allegedly incurred by the plaintiffs. We believe that all of these claims are without merit and
we intend to vigorously defend the lawsuits. Because these lawsuits are related to the proposed merger of ICT Group, Inc. and Sykes Enterprises Incorporated, we believe they will ultimately be consolidated into one proceeding.

Note 14: RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the Financial Accounting Standards Board (the FASB) issued guidance changing the accounting for mergers and acquisitions. It requires the acquiring entity in a business combination to recognize all
(and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions
of this standard will, among other things, impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration); exclude transaction costs from acquisition accounting; and
change accounting practices for acquired contingencies, acquisition-related restructuring costs, in-process research and development, indemnification assets and tax benefits. This guidance is effective for business combinations which are
consummated after January 1, 2009. The adoption of this pronouncement did not have any impact on our results of operations or financial condition.



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ICT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(UNAUDITED)



In December 2007, the FASB issued guidance establishing new standards governing the accounting for
and reporting of noncontrolling interests (NCIs) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as
minority interests) be treated as a separate component of equity, not as a liability; that increases and decrease in the parents ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions
or dilution gains or losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This guidance is effective beginning January 1, 2009. The
adoption of this pronouncement did not have any impact on our results of operations or financial condition.

In April 2009, the FASB issued
guidance changing fair value accounting. This pronouncement requires disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements and requires those disclosures in summarized
financial information in interim financial statements. We adopted this guidance on June 30, 2009 and have provided the necessary additional disclosures.

In May 2009, the FASB issued guidance establishing general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are
available to be issued, otherwise known as subsequent events. This guidance is effective for interim or annual financial periods ending after June 15, 2009, the quarter ending June 30, 2009 for the Company. The adoption
did not materially impact the Company. We considered all subsequent events through November 5, 2009, the date the financial statements were available to be issued.

In June 2009, the FASB issued changes to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards
CodificationTM(the Codification) to become
the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification did not change GAAP but reorganizes the literature. This guidance is effective for interim and annual
periods ending after September 15, 2009, the quarter ending September 30, 2009 for the Company. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the financial statements.



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

On October 5, 2009, ICT Group entered into a merger agreement with Sykes Enterprises, Incorporated (Sykes) and two wholly owned subsidiaries of Sykes. Unless
stated otherwise, all forward-looking information contained in this report does not take into account or give any effect to the impact of the proposed merger. For additional details regarding the proposed merger, see Note 12 to our consolidated
financial statements, Merger Agreement with Sykes Enterprises, contained in Part I, Item 1, of this report.

Overview

We are a leading global provider of outsourced customer management and business process outsourcing solutions. Our primary services
include:



| |  |  | Customer Care Services(including customer care/retention, and technical support);
| | - |  | ---------------------------------------------------------------------------------



| |  |  | Marketing, Technology and Business Process Outsourcing(BPO) Solutions(including database marketing, data entry/management, e-mail
response management, remittance processing and other back-office business processing services).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We also continue to provide
telesales to our clients. However, as part of a realignment of our services we have limited our U.S. and Canadian telesales efforts to accommodate demand from large strategic clients. Also, we have ceased providing our market research service
offerings as part of this realignment.

We provide our services through operations centers located throughout the world, including the U.S.,
Ireland, the U.K., Canada, Australia, Mexico, the Philippines, Costa Rica, India and Argentina. As of September 30, 2009, we had 38 operating centers from which we support clients primarily in the financial services, healthcare,
telecommunications, information technology, business and consumer services, Government and energy services sectors.

Our domestic sales force
is organized by specific industry verticals, which enables our sales personnel to develop in-depth industry and product knowledge. We also have sales operations in the U.K., Canada, Mexico, Australia and Argentina.

We invest in systems and software technologies designed to improve productivity in order to lower the effective cost per contact made or received. Our
systems and software technologies are also designed to improve our effectiveness by providing our agents with real-time access to customer and product information. We currently offer and/or utilize a comprehensive suite of business process
outsourcing (BPO) technologies, 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 centers. Our technologies include automatic call
distribution (ACD) voice processing, interactive voice response (IVR), advanced speech recognition (ASR), Voice over Internet Protocol (VoIP), contact management, automated e-mail management and processing, sales force and marketing automation,
alert notification and Web self-help.

We believe that we were one of the first fully automated outsourced customer management services
companies, and we were among the first such companies to provide collaborative Web browsing services and utilize VoIP capabilities. Through our global implementation of VoIP, we have established a redundant voice and data network infrastructure that
can seamlessly route voice traffic to our centers worldwide. We do not provide telecommunications or VoIP services to the general public.

Our
clients typically enter into multi-year, contractual relationships with us that may contain provisions for early contract terminations. 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 performance. The nature of our business is such that we generally compete with
other outsourced service providers as well as the retained in-house 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, and is generally based on hours or minutes of work performed; however, certain types of revenue relating to upfront project set-up costs are deferred
and recognized over a period of time, typically the length of the customer contract. The incremental direct cost associated with this revenue is also deferred over the same period of time. Some of our client contracts have performance standards,
which can result in service penalties and other adjustments to monthly billings if the standards are not met. Any required adjustments to our monthly billings are reflected in our revenue on an as-incurred basis.

We refer to our revenue as either Core revenue or Non-Core revenue. Core revenue encompasses customer care, help desk support, technical support, database
marketing, lead qualification, technology hosting, data processing, data entry, receivables management and other BPO activities. Non-Core revenue includes financial telesales for U.S. and Canadian clients along with market research services. As of
December 31, 2008, we decided no longer to provide market research services.



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Results for the three and nine months ended September 30, 2009 reflect the following:



| |  |  | Decreased revenue, which dropped 5% and 9%, respectively, compared to the three and nine months ended September 30, 2008.
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | Core revenue increased in each period by 6% and 3%, respectively, while Non-core revenue decreased in each period by 79% and 77%, respectively.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our Core production volume increased in the three and nine months ended September 30, 2009 by 9% and 12%, respectively, as compared to the prior
year.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our cost of services, as a percentage of revenue, declined to 59% for the three and nine months ended September 30, 2009 from 60% and 62%,
respectively, in the prior year periods.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our Philippines operations handled approximately 45% of total production for the third quarter of 2009 as compared to 44% of total production for the
third quarter of 2008.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We recorded restructuring charges of $1.2 million, net of restructuring reversals, during the nine months ended September 30, 2009, none of which
were incurred during the third quarter of 2009. The gross charges of $1.7 million for the nine months ended September 30, 2009 were partially offset by $497,000 of restructuring charge reversals in the first quarter of 2009.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The impact of foreign exchange rates continues to be a factor in our operating results. Foreign exchange had a negative impact on the pretax net income
of $400,000 and a positive impact of $3.5 million, respectively, for the three and nine months ended September 30, 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Costs incurred during the third quarter of 2009 for the proposed merger with Sykes Enterprises, Incorporated were $554,000 and included amounts for our
legal and financial advisors as well as our tax and accounting advisors.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We recorded $583,000 of asset impairments during the third quarter of 2009 as a result of Typhoon Ondoy, which damaged some of our fixed assets
associated with leased office space in Manila. Because of the business interruption caused by the typhoon, we lost approximately 47,000 hours of production, which we estimated would have contributed approximately $600,000 in revenue and $400,000 in
operating income to the third quarter of 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

From the third quarter of 2007 and continuing into 2009, our operations have
been impacted by various adverse economic events including the current economic downturn as well as the consumer credit crisis and the mortgage crisis, both of which had a significant impact on the decline in our revenue. We do not believe that our
operating results from this timeframe are indicative of our future operating results. We are beginning to see stability in the markets we serve, which is an improvement from the significant uncertainty that existed at the end of 2008. We are thus
optimistic, subject to macroeconomic conditions, as to our prospects for improved profitability and liquidity, particularly with respect to our customer support services.

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 and grow new vertical
markets. Our profitability is also impacted by our ability to manage our costs, perform in accordance with contract requirements to avoid service penalties 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 moving many of our domestic operations to near-shore and offshore operations centers, which typically have lower labor
costs. Our success is dependent upon our ability to perform work in locations where we can find qualified labor at cost-effective rates and effectively manage that labor in the most profitable manner.

Some of these benefits, however, may be offset by the expanded training and associated costs we have incurred in the past and may continue to incur because
of our service mix. Many of our customer service programs require more complex and costly training processes and to the extent we cannot bill these amounts to our clients, our profitability will be impacted. It is also important for us to manage our
employee attrition relating to these programs due to the significant investment in training the employees for these programs.



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We believe that our 2009 performance will be largely dependent on our ability to continue capturing new
business, leveraging the investment we have made in our infrastructure and expanding our business service offerings. We believe that major corporations will continue to utilize the skills of companies like ours and that the services outsourced will
continue to expand beyond the contact center services that currently comprise the large majority of our business. We plan to leverage our existing strength in the financial services, telecommunications and healthcare markets and provide additional
business services to our customers.

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 Note 2 of our audited consolidated financial statements, which are included in our
Annual Report on Form 10-K for the year ended December 31, 2008.

Our critical accounting policies 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. The accounting policies we consider critical include revenue recognition; allowance for doubtful accounts; impairment of long-lived
assets, goodwill and other intangible assets; accounting for income taxes; restructuring; accounting for contingencies; and share-based compensation.

During the nine months ended September 30, 2009, we did not make any material changes to our critical accounting policies. For additional discussion of our critical accounting policies, please refer to Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2008. We have included expanded disclosure of our critical accounting policy for the impairment of
goodwill that was recorded during fiscal year 2008.

Impairment of Goodwill and Other Intangible Assets

Goodwill and other intangible assets are recorded as a result of business combinations. Prior to impairment, as of December 31, 2007, we
had $13.1 million of goodwill. Although goodwill is no longer required to be amortized, we are required to perform an annual impairment review of our goodwill. This impairment review, which is performed in the fourth quarter of each year, is a
discounted cash flow analysis using projected cash flows of the Company. 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. During the fourth
quarter of 2008, we recorded an impairment charge of $12.2 million against our goodwill, which resulted in a full impairment of our goodwill. The primary driver behind this impairment was the significant decline in our market capitalization during
the fourth quarter of 2008, which we believe was largely a result of the general economic conditions during that period, as well as the markets view of our operating results in light of the significant portion of our customer base that is
associated with the financial services industry, as discussed below. The impairment was computed using a valuation of the Company that was performed in the fourth quarter of 2008. This valuation was based on a discounted cash flow analysis and
resulted in a fair valuation of the Company that was significantly below the book value of our shareholders equity at December 31, 2008. Our discounted cash flow analysis reflected a decline in management forecasts and assumptions from
prior periods. As described in Note 15 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2008, we had at the time of the impairment analysis and continue to have a significant
concentration in the financial services industry. Almost 50% of our revenue is derived from mortgage companies and banking institutions. From the third quarter of 2007 and continuing into 2009, our operations were negatively impacted by various
adverse economic events affecting this industry, including the credit crisis and the mortgage crisis. At the time of our year-end 2008 assessment of goodwill, our revenue forecasts and projected cash flow from this market segment were lower than
amounts used in the preceding year and reflected a higher level of uncertainty and accordingly resulted in a lower valuation of the Company, which resulted in our recording an impairment charge against goodwill.



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RESULTS OF OPERATIONS

Three and Nine Months Ended September 30, 2009 and 2008:



|                                         |  |                                 |         |      |   |          |                                |       |      |  |      |         |          |   |         |  |       |  
|---------------------------------------- |  | ------------------------------- | ------- | ---- | - | -------- | ------------------------------ | ----- | ---- |  | ---- | ------- | -------- | - | ------- |  | ----- | -
|                                         |  | Three months endedSeptember 30, |         |      |   |          | Nine months endedSeptember 30, |       |      | 
|(dollars in thousands)                   |  | 2009                            |         | 2008 |   | % change |                                |       | 2009 |  | 2008 |         | % change |  
|Revenue:                                 |  | $                               | 102,560 |      | $ | 108,296  |                                | -5.3  | %    |  | $    | 296,968 |          | $ | 326,565 |  | -9.1  | %
|Core                                     |  |                                 | 99,602  |      |   | 94,022   |                                | 5.9   | %    |  |      | 285,523 |          |   | 277,639 |  | 2.8   | %
|Non-Core                                 |  |                                 | 2,958   |      |   | 14,274   |                                | -79.3 | %    |  |      | 11,445  |          |   | 48,926  |  | -76.6 | %
|Core Production Hours (in thousands)     |  |                                 | 4,738   |      |   | 4,355    |                                |       |      |  |      | 13,998  |          |   | 12,449  |  |       |  
|Non-Core Production Hours (in thousands) |  |                                 | 183     |      |   | 805      |                                |       |      |  |      | 680     |          |   | 2,732   |  |       |  
|Average Number of Workstations           |  |                                 | 12,371  |      |   | 13,567   |                                |       |      |  |      | 12,443  |          |   | 13,667  |  |       |  

There are two primary factors which have impacted our revenue during the three and nine months ended
September 30, 2009, as compared to the three and nine months ended September 30, 2008. The first factor is the overall economic environment, which has had a significant impact on our Non-Core services. Our Non-Core production hours
comprised approximately 4% and 5% of our total production hours for the three and nine months ended September 30, 2009, respectively, as compared to 16% and 18%, respectively, for the three and nine months ended September 30, 2008.
Overall, our Non-Core production decreased by over 75% during the three and nine months ended September 30, 2009, over the comparable prior year periods. This reduction in non-core revenue is due to reduced production volumes associated with
our clients in the financial services industry.

The other factor impacting our revenue is changes in foreign currency rates. The changes in
foreign exchange rates during the three and nine months ended September 30, 2009 as compared to the foreign exchange rates during the comparable prior year period had a negative impact of $3.5 million and $16.3 million on total revenue,
respectively. The impact was primarily due to changes in the Canadian dollar and the Mexican peso, which combined had a negative impact of $2.2 million and $12.4 million for the three and nine months ended September 30, 2009, respectively.

Total annualized revenue per average workstation for the three months ended September 30, 2009 increased to $33,160 as compared to
$31,930 for the three months ended September 30, 2008, while total annualized revenue per average workstation for the nine months ended September 30, 2009 decreased to $31,820 as compared to $31,860 for the nine months ended
September 30, 2008. Changes were primarily due to the impact of foreign exchange rates offset by an increase in production hours per average number of workstations. On an annualized basis, foreign exchange rates had a negative impact on our
revenue per workstation of $1,120 for the three months ended September 30, 2009 and $1,750 for the nine months ended September 30, 2009.



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|                                                  |  |                                 |        |   |      |   |        |                                |  |       |      |  |   |         |   |  |          |         |   |  |       |  
|------------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------ | ------------------------------ |  | ----- | ---- |  | - | ------- | - |  | -------- | ------- | - |  | ----- | -
|                                                  |  | Three months endedSeptember 30, |        |   |      |   |        | Nine months endedSeptember 30, |  |       |      | 
|(dollars in thousands)                            |  | 2009                            |        |   | 2008 |   |        | % change                       |  |       | 2009 |  |   | 2008    |   |  | % change |        
|Cost of Services:                                 |  | $                               | 60,405 |   |      | $ | 65,103 |                                |  | -7.2  | %    |  | $ | 175,968 |   |  | $        | 202,868 |   |  | -13.3 | %
|Direct labor costs                                |  |                                 | 46,133 |   |      |   | 48,117 |                                |  | -4.1  | %    |  |   | 133,199 |   |  |          | 150,957 |   |  | -11.8 | %
|Telecom costs                                     |  |                                 | 4,189  |   |      |   | 5,291  |                                |  | -20.8 | %    |  |   | 12,186  |   |  |          | 15,491  |   |  | -21.3 | %
|Other costs of services                           |  |                                 | 10,083 |   |      |   | 11,695 |                                |  | -13.8 | %    |  |   | 30,583  |   |  |          | 36,420  |   |  | -16.0 | %
|Total Cost of Services as a Percentage of Revenue |  |                                 | 58.9   | % |      |   | 60.1   | %                              |  |       |      |  |   | 59.3    | % |  |          | 62.1    | % |  |       |  
|Production Hours (in thousands)                   |  |                                 | 4,921  |   |      |   | 5,160  |                                |  |       |      |  |   | 14,678  |   |  |          | 15,181  |   |  |       |  

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

For the three and nine months ended September 30, 2009, the decline in our cost of services over the comparable periods in 2009 was driven primarily by
the impact of changes in foreign currency exchange rates. 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 and nine months
ended September 30, 2009 was $9.37 and $9.07, respectively, compared to $9.33 and $9.94, respectively, for the comparable periods in 2008. This significant drop for the nine months ended September 30, 2009 versus the nine months ended
September 30, 2008 reflects the impact of foreign exchange rates, which we estimate to have reduced our labor costs by $11.9 million as compared to what the costs would have been by applying the foreign exchange rates in effect during nine
months ended September 30, 2008. The production mix of hours in lower wage contact centers in the Philippines and Latin America versus higher cost centers in the U.S. and Canada also impacted our labor costs, as offshore production hours
increased to 48% and 49% of total production hours during the three and nine months ended September 30, 2009, respectively, as compared to 46% and 45% in the comparable prior year periods.

The decrease in telecom costs for the three and nine months ended September 30, 2009 was primarily rate-driven as our telephony cost per production
hour decreased by 17% and 19%, respectively, as compared to the comparable prior year periods. Our telecom costs are also impacted by the decrease in production hour volume.

Other costs of services include billable third party labor costs, training costs and our internal quality assurance costs. The decrease is primarily due to decreased internal quality assurance and
billable third party labor costs, both of which are impacted by the decrease in production hour volume.

Overall, our cost of services will
continue to be impacted by fluctuations in foreign currency exchange rates. The changes in foreign exchange rates during the three and nine months ended September 30, 2009 as compared to the foreign exchange rates during the comparable prior
year periods reduced our total cost of services by $3.0 million and $15.7 million, respectively. The impact was primarily due to changes in the Philippine peso, Canadian dollar and the Mexican peso.



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|                                                     |  |                                 |        |   |      |   |        |                                |  |       |      |  |   |         |   |  |          |         |   |  |       |  
|---------------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------ | ------------------------------ |  | ----- | ---- |  | - | ------- | - |  | -------- | ------- | - |  | ----- | -
|                                                     |  | Three months endedSeptember 30, |        |   |      |   |        | Nine months endedSeptember 30, |  |       |      | 
|(dollars in thousands)                               |  | 2009                            |        |   | 2008 |   |        | % change                       |  |       | 2009 |  |   | 2008    |   |  | % change |        
|Selling, General and Administrative Expenses:        |  | $                               | 39,054 |   |      | $ | 42,110 |                                |  | -7.3  | %    |  | $ | 116,849 |   |  | $        | 125,148 |   |  | -6.6  | %
|Salaries, benefits and other personnel-related costs |  |                                 | 17,180 |   |      |   | 17,879 |                                |  | -3.9  | %    |  |   | 48,258  |   |  |          | 53,919  |   |  | -10.5 | %
|Facilities and equipment costs                       |  |                                 | 12,266 |   |      |   | 14,458 |                                |  | -15.2 | %    |  |   | 37,906  |   |  |          | 44,792  |   |  | -15.4 | %
|Depreciation and amortization                        |  |                                 | 5,604  |   |      |   | 6,583  |                                |  | -14.9 | %    |  |   | 17,304  |   |  |          | 20,013  |   |  | -13.5 | %
|Other SG&A costs                                     |  |                                 | 4,004  |   |      |   | 3,190  |                                |  | 25.5  | %    |  |   | 13,381  |   |  |          | 6,424   |   |  | 108.3 | %
|Total SG&A as a Percentage of Revenue                |  |                                 | 38.1   | % |      |   | 38.9   | %                              |  |       |      |  |   | 39.3    | % |  |          | 38.3    | % |  |       |  

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 costs. Other SG&A costs includes gains or losses on our hedging instruments as well as expenses
relating to the various forms of business-related insurance we maintain, the expenses we incur for third party service providers including our independent accountants, outside legal counsel, and payroll processing providers.

Our salaries, benefits and other personnel-related costs were lower during the three and nine months ended September 30, 2009, primarily as a result of
our 2008 restructuring efforts undertaken to adapt to the current economic environment, which resulted in the elimination of various management personnel. Our facilities costs consist primarily of rental fees, which decreased, also as a result of
the restructuring efforts undertaken in 2008. Our depreciation and amortization declines reflect a lower level of utilized assets, as a result of asset impairment charges recorded in December 2008.

Included within Other SG&A costs are gains and losses associated with our currency hedging programs and transactional gains and losses associated with
foreign exchange. For the three and nine months ended September 30, 2009, we recognized $1.2 million and $3.3 million, respectively, of net losses from hedging activities and foreign exchange transactions as compared to $271,000 and $4.2
million of net gains for the three and nine months ended September 30, 2008, respectively.

As we continue to expand our operations
outside of the United States, our SG&A expenses will continue to be impacted by fluctuations in foreign currency exchange rates. Approximately 42% and 44% of our SG&A expenses for the three and nine months ended September 30, 2009,
respectively, were incurred in foreign locations, as compared to 48% and 49% in the comparable prior year periods. The changes in foreign exchange rates during the three and nine months ended September 30, 2009 as compared to the foreign
exchange rates during the comparable prior year period had the effect of decreasing our SG&A costs by $1.3 million and $7.4 million. The impact was primarily due to changes in the Philippine peso, Canadian dollar and the British pound sterling.



|                       |  |                                 |     |          |   |       |                                |        |          |  |   |       |  |   |       |  |       |  
|---------------------- |  | ------------------------------- | --- | -------- | - | ----- | ------------------------------ | ------ | -------- |  | - | ----- |  | - | ----- |  | ----- | -
|                       |  | Three months endedSeptember 30, |     | % change |   |       | Nine months endedSeptember 30, |        | % change | 
|(dollars in thousands) |  | 2009                            |     | 2008     |   |       | 2009                           |        | 2008     | 
|Asset Impairments:     |  | $                               | 583 |          | $ |      |                                | N/A    |          |  | $ | 583   |  | $ |      |  | N/A   |  
|Merger Costs:          |  |                                 | 554 |          |   |      |                                | N/A    |          |  |   | 554   |  |   |      |  | N/A   |  
|Restructuring Charge:  |  |                                 |    |          |   | 2,334 |                                | -100.0 | %        |  |   | 1,234 |  |   | 2,334 |  | -47.1 | %

During the three and nine months ended September 30, 2009, we recorded $583,000 of asset
impairments as a result of Typhoon Ondoy, which struck the Philippines during September 2009. The storm flooded a floor of one of our leased facilities in Manila and damaged communications and computer equipment, furniture and fixtures, and
leasehold improvements to the space. This charge represents the fixed assets which we deemed to be unusable and unsalvageable.



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During the three and nine months ended September 30, 2009, we recorded $554,000 in merger costs related
to our proposed merger with Sykes Enterprises, Incorporated. These costs represent legal, accounting, and consulting costs borne by ICT for the merger incurred through September 30, 2009.

During the nine months ended September 30, 2009, we recorded $1.2 million of restructuring charges, net of restructuring reversals. The total charges
for the nine months ended September 30, 2009 reflect $925,000 for lease obligations and other contractual obligations, $705,000 of severance charges and $101,000 of asset impairments. Of these total charges, $1.1 million related to our
operations in the U.K and Ireland. Our results for the nine months ended September 30, 2009 also reflect restructuring charge reversals of $497,000, primarily the reversal of a facility lease accrual during the first quarter of 2009 for which
we able to negotiate a lease termination for a facility that we had vacated in 2007.

At September 30, 2009, $4.3 million in
restructuring liabilities remain outstanding. Of this, $2.3 million expects to be paid within one year, while the remaining $2 million will be paid through 2011. The long-term portion represents lease obligation payments and estimated facility exit
cost payments to be made through the lease termination dates.



|                       |  |                                 |     |   |      |   |     |                                |  |       |      |  |   |      |   |  |          |      |   |  |       |  
|---------------------- |  | ------------------------------- | --- | - | ---- | - | --- | ------------------------------ |  | ----- | ---- |  | - | ---- | - |  | -------- | ---- | - |  | ----- | -
|                       |  | Three months endedSeptember 30, |     |   |      |   |     | Nine months endedSeptember 30, |  |       |      | 
|(dollars in thousands) |  | 2009                            |     |   | 2008 |   |     | % change                       |  |       | 2009 |  |   | 2008 |   |  | % change |     
|Interest Expense:      |  | $                               | (94 | ) |      | $ | (73 | )                              |  | 28.8  | %    |  | $ | (287 | ) |  | $        | (189 | ) |  | 51.9  | %
|Interest Income:       |  |                                 | 70  |   |      |   | 121 |                                |  | -42.1 | %    |  |   | 220  |   |  |          | 426  |   |  | -48.4 | %

Our net interest costs increased primarily because of lower interest rates on invested cash and cash
equivalent balances and an increase in interest expense due to higher levels of debt issuance cost amortization. In December 2008, we amended our Credit Facility in connection with which we incurred $397,500 of issuance costs, which are being
amortized over an 18-month period and resulted in a higher interest expense in 2009.



|                                |  |                                 |      |   |      |   |      |                                |  |       |      |  |      |     |  |          |        |   |  |        |  
|------------------------------- |  | ------------------------------- | ---- | - | ---- | - | ---- | ------------------------------ |  | ----- | ---- |  | ---- | --- |  | -------- | ------ | - |  | ------ | -
|                                |  | Three months endedSeptember 30, |      |   |      |   |      | Nine months endedSeptember 30, |  |       |      | 
|(dollars in thousands)          |  | 2009                            |      |   | 2008 |   |      | % change                       |  |       | 2009 |  | 2008 |     |  | % change |       
|Income Tax Provision (Benefit): |  | $                               | (138 | ) |      | $ | (657 | )                              |  | -79.0 | %    |  | $    | 242 |  | $        | (1,634 | ) |  | -114.8 | %

Our provision for income taxes for the three and nine months ended September 30, 2009 is based
on our current estimate for the fiscal year, as limited by our ability to recognize income tax benefits in the tax jurisdictions for which we are expecting operating losses. Included in our income tax benefit for the three months ended
September 30, 2009 are adjustments made to various income tax positions taken in prior years for which the statute of limitations have expired and resulted in $264,000 being recorded as a reduction to income tax expense. Included in our tax
expense for the three and nine months ended September 30, 2009 is a $191,000 valuation allowance placed on a deferred tax asset we have recorded in Canada. Included in our tax benefit during the nine months ended September 30, 2008 was
$275,000 that we recognized due to an expiring statute for tax credits that we received in a prior period. Based on quarterly changes in our estimated income or loss in each tax jurisdiction, particularly in jurisdictions where we have tax holidays,
our effective tax rate can fluctuate from period to period and experience more volatility than in recent years. Our effective income tax rate will also continue to be impacted by our ability to realize the tax benefit of any deferred tax assets
recorded.

Quarterly Results and Seasonality

We have experienced, and expect to continue to experience, quarterly variations in operating results, principally as a result of the timing of programs conducted by new and existing clients (particularly
programs with substantial amounts of upfront project set-up costs), and selling, general and administrative expenses to support the growth and development of existing and new business units.



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Historically, our business tended to be strongest in the second half of the year due to higher call volumes
in anticipation of the holiday season, while the first quarter often reflected a slowdown relating to the cessation of that activity. Our operating margins in the first quarter are typically lower due to higher payroll-related taxes with our
workforce and other seasonal costs.

Liquidity and Capital Resources

At September 30, 2009, we had $48.7 million of cash and cash equivalents compared to $31.3 million at December 31, 2008. 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 costs of operations, capital expenditures, payments of principal and interest on amounts owed under our
Credit Facility to the extent we have outstanding borrowings, costs of operations and business combinations.

Cash From Operations

Cash provided by operations for the nine months ended September 30, 2009 was $28.6 million, compared to cash provided by operations of
$16.0 million for the nine months ended September 30, 2008.

Cash provided by operations for the nine months ended September 30,
2009 reflects net income of $1.5 million and non-cash adjustments of $21.1 million, primarily depreciation and amortization. Net working capital changes and changes in non-current assets and liabilities increased cash flow from operations by $6.0
million, largely driven by the decrease in prepaid expenses and other current assets and the increase in accrued expenses and which generated $7.6 million and $3.0 million of cash flow, respectively, partially offset by increases in our accounts
receivable of $6.5 million.

Cash provided by operations for the nine months ended September 30, 2008 reflects a net loss of $1.9
million, offset by non-cash adjustments of $22.1 million, primarily depreciation and amortization. Net working capital changes had a negative impact of $4.2 million on our cash flow from operations.

Credit Facility

During the nine months
ended September 30, 2009, we had no borrowings under the Credit Facility. During the nine months ended September 30, 2008, we had $5.0 million of borrowings under the Credit Facility, which was repaid in July 2008. Our Credit Facility is a
$75.0 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 could allow us to increase
our borrowing capacity to $125.0 million, subject to obtaining commitments for the incremental capacity from existing or new lenders. As of September 30, 2009, we were in compliance with all of the covenants contained in the Credit Facility.
During the first nine months of 2009, we paid $225,000 of costs associated with our December 2008 amendment.

Equity Transactions

During the nine months ended September 30, 2009 and 2008, we received $32,000 and $259,000, respectively, in proceeds from the
exercise of employee stock options. Also, during the nine months ended September 30, 2009 and 2008, we paid $114,000 and $135,000, respectively, to satisfy the minimum tax withholding obligations for the vesting of RSUs for which we withheld
the issuance of shares.

Capital Expenditures

For the nine months ended September 30, 2009, we spent $8.7 million on capital expenditures as compared to $17.1 million for the nine months ended September 30, 2008. A portion of our capital
expenditures is reflected in our new workstations. There were 12,341 workstations in operation at September 30, 2009, compared to 12,509 workstations in operation at December 31, 2008 and 13,340 at September 30, 2008.



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During the nine months ended September 30, 2009, we decreased by 168 our net workstations in
production. This included 548 workstations eliminated from various operations centers both domestically and abroad, including 321 workstations that were rendered unusable by the Philippines typhoon. These eliminations were partially offset by the
addition of 380 seats that were placed in various onshore and offshore locations. We spent approximately $3.6 million on workstation expansion during the first nine months of 2009. The remainder of our capital expenditures related primarily to
upgrades of information technology and software purchases.

During the nine months ended September 30, 2008, we reduced our capacity by a
net total of 370 workstations, primarily as a result of closing on-shore facilities and transitioning capacity to offshore locations. This net reduction includes 899 workstations associated with facilities included in the restructuring charge that
was taken in the third quarter or facilities for which we did not renew expiring leases. These reductions were partially offset by the addition of 529 seats in various locations globally. We spent approximately $9.9 million on workstation expansion
during the first nine months of 2008, primarily through our expansion in the Philippines. The remainder of our capital expenditures related primarily to upgrades of information technology and software purchases totaling $7.2 million.

We expect our operations to 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 our cash equivalents, the cash flow generated from operations, the ability to acquire equipment through 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 Contingencies

As of September 30, 2009, 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 on hand and cash flows
generated from operations. We would also consider accessing capital markets to meet our needs, however, we can give no assurances that this type of financing would be available in the future. 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 year ended December 31, 2008.

If the proposed
merger with Sykes, as described in Note 12 to the consolidated financial statements, is consummated, it will trigger change-in-control provisions in a variety of our contracts and commitments, including employment contracts, equity award programs,
facility lease contracts and customer contracts. These changes include provisions for employee severance and the acceleration of the vesting of awards granted under our equity plans, but the full impact of these changes is currently being evaluated.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, assessments under government grant
programs and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Legal costs associated with loss contingencies are recorded as they are incurred. Refer to
Note 13 to the consolidated financial statements and Item 3 of this Quarterly Report on Form 10-Q for litigation matters.

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 current outlook of our business, the appropriateness of our reserves for contingencies, the realizability of our deferred tax assets, our ability to finance our operations and capital requirements for
the next twelve months, 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, our ability to comply with the terms of our customer agreements without being impacted by penalty provisions set
forth therein, 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) global economic
conditions; (ii) customer demand for a clients product or service, the clients budgets and plans and political, economic and other conditions affecting the clients industry; (iii) our dependence on a few industries for a
majority of our revenue; (iv) risks associated with investments and operations in foreign countries including, but



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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) 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; (vi) 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; (vii) our ability to offer value-added services to businesses in our targeted industries and our ability to benefit from our industry
specialization strategy; (viii) technology risks, including our ability to select or develop new and enhanced technology on a timely basis, mitigate interruptions or failures of our infrastructure, 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 commencement and expiration of
contracts, the ability to perform in accordance with the terms of the contracts, the timing and amount of new business generated by us, our revenue mix, the timing of additional selling, general and administrative expenses, demand for labor,
unanticipated labor difficulties, and the general competitive conditions in the outsourced business services industry; (x) equity market conditions; (xi) our capital and financing needs; (xii) the cost to prosecute, defend or settle
litigation by or against us, judgments, orders, rulings and other developments in or affecting litigation by or against us; (xiii) an influenza pandemic or the threat of a pandemic, which may adversely impact our ability to perform our services
or may adversely impact client and consumer demand; (xiv) terrorist attacks and their aftermath; (xv) the outbreak of war and (xvi) our proposed merger with Sykes Enterprises Incorporated, including the merger costs to be incurred,
the distraction to management, and the retaining of key personnel and customers.

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 has historically related to our Credit Facility as well as investments in short-term, interest-bearing securities such as money market accounts. A change in market interest rates exposes us to the risk of earnings
or cash flow loss but would not impact the fair value of the related underlying instrument. Borrowings under our Credit Facility are subject to variable LIBOR or prime base rate pricing. Interest earned on our cash balances is based on current
market rates. Accordingly, a 1.0% change (100 basis points) in these rates would have resulted in net interest income and expense changing by approximately $114,000 and $300,000 for the three and nine months ended September 30, 2009,
respectively and $48,000 and $102,000 for the three and nine months ended September 30, 2008, respectively. Interest expense for the three and nine months ended September 30, 2009 and 2008, consists primarily of amortization of debt
issuance costs associated with our Credit Facility. The interest rates in effect for the Credit Facility at any point in time approximate market rates; thus, the fair value of any outstanding borrowings approximates its reported value. In the past,
Management has not entered into financial instruments such as interest rate swaps or interest rate lock agreements. However, we may consider using these instruments to manage the impact of changes in interest rates based on 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, Mexico, the Philippines, India,
Argentina and Costa Rica that are subject to foreign currency fluctuations. Our most significant foreign currency exposures occur when revenue is generated in one currency and corresponding expenses are generated in another currency. Currently, our
most significant exposure has been with our Philippine operations, where revenue is generated in U.S. dollars (USD) and the corresponding expenses are generated in Philippine pesos (PHP). We mitigate a portion of these exposures through foreign
currency derivative contracts.



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As our offshore production continues to increase, so does our exposure to the effects of changes in foreign
currency rates. 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 $0.9 million and $3.2 million on our pretax earnings for the three and nine months ended September 30, 2009 and an impact of approximately $1.2 million and $3.6 million for three and nine months ended September 30, 2008.



|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.

(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
|------- | -----------------

On October 9,
2009, a shareholder class action and derivative suit was filed by two shareholders in the Court of Common Pleas of Bucks County, Pennsylvania, against ICT and its directors, styled as United Union of Roofers, Waterproofers and Allied Workers
Local Union No. 8 Annuity Fund and United Union of Roofers, Waterproofers and Allied Workers Local Union No. 8 Pension Fund vs. John J. Brennan, Donald P. Brennan, Gordon Coburn, Bernard Somers, John Stoops, Richard R. Roscitt,
Eileen S. Fusco,Case No. 2009-10761, also naming ICT as a nominal defendant. On October 13, 2009, a shareholder derivative suit was filed by an individual shareholder in the Court of Common Pleas of Bucks County, Pennsylvania, against
ICTs directors and Sykes, styled as Christopher Green vs. John J. Brennan, Donald P. Brennan, Gordon Coburn, Bernard Somers, John Stoops, Richard R. Roscitt, Eileen S. Fusco & Sykes Enterprises, Inc.,Case
No. 2009-10827, also naming ICT as a nominal defendant. On October 29, 2009, a shareholder class action and derivative suit was filed by an individual shareholder in the Court of Common Pleas of Bucks County, Pennsylvania, against
ICTs directors and Sykes, styled as Mitesh Patel vs. John Brennan, Donald Brennan, Bernard Somers, John Stoops, Gordon Coburn, Richard Roscitt, Eileen Fusco, Sykes Enterprises, Incorporated, SH Merger Subsidiary I, Inc., and SH Merger
Subsidiary II, LLC,Case No. 2009-11514, also naming ICT as a nominal defendant.

Collectively, these complaints allege claims for
breach of fiduciary duty, gross mismanagement and corporate waste against the named defendants and seek to enjoin the proposed acquisition of ICT by Sykes and recovery of certain costs allegedly incurred by the plaintiffs. We believe that all of
these claims are without merit and we intend to vigorously defend the lawsuits. Because these lawsuits are related to the proposed merger of ICT Group, Inc. and Sykes Enterprises Incorporated, we believe they will ultimately be consolidated into one
proceeding.



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|Item 1A. | Risk Factors
|-------- | ------------

Our proposed merger with
Sykes may cause disruption in our business and, if the proposed merger does not occur, we will have incurred significant expenses, our stock price may decline, and we may need to pay a termination fee under the merger agreement and our stock price
may decline.

On October 5, 2009, we entered into a definitive merger agreement with Sykes and two wholly owned subsidiaries of
Sykes, pursuant to which one of the Sykes subsidiaries will merge with and into ICT Group, with ICT Group being the surviving corporation. Immediately thereafter, ICT Group will merge into the other Sykes subsidiary, with that subsidiary surviving
as a wholly owned subsidiary of Sykes. We refer to these mergers together as the Merger.

As a result of the Merger, each
outstanding share of our common stock will be converted into the right to receive consideration valued at $15.38, subject to adjustment as described below. Such consideration shall be payable (i) in cash, without interest, in the amount of
$7.69 per share of our common stock, and (ii) the remainder payable in shares of the common stock of Sykes, with the number of shares of Sykes common stock to be equal to an exchange ratio determined by the formula set forth below, divided by
two.

The exchange ratio for calculating the number of shares of Sykes common stock to be issued in exchange for each share of our common
stock as a result of the Merger, subject to the terms and conditions of the merger agreement, shall, subject to adjustment as set forth in the next paragraph, equal the number determined by dividing $15.38 by the volume weighted average of the per
share prices of Sykes common stock as listed in The Nasdaq Stock Market, LLC transaction reporting system for the ten consecutive trading days ending on (and including) the third trading day immediately prior to the effective time of the Merger (the
Measurement Value).

The exchange ratio is subject to a 7.5% symmetrical collar with respect to changes in the Measurement Value
as compared to $20.8979 (the Initial Sykes Share Value), which is the volume weighted average of the per share prices of Sykes common stock as listed in The Nasdaq Stock Market, LLC transaction reporting system for the ten consecutive
trading days ending on October 2, 2009, the last trading day immediately prior to the date of the merger agreement. Within this collar, the exchange ratio will be determined in accordance with the previous paragraph. If, however, the
Measurement Value is equal to or less than $19.3306 (representing 92.5% of the Initial Sykes Share Value), then the exchange ratio will be 0.7956 and 0.3978 shares of Sykes common stock will be issued for each share of our common stock. On the other
hand, if the Measurement Value is equal to or greater than $22.4652 (representing 107.5% of the Initial Sykes Share Value), then the exchange ratio will be 0.6846 and 0.3423 shares of Sykes common stock will be issued for each share of our common
stock.

The announcement of the proposed Merger, whether or not consummated, may result in a loss of key personnel and may disrupt our sales
and other key business activities, which may have an impact on our financial performance. The merger agreement generally requires us to operate our business in the ordinary course pending consummation of the proposed merger, but includes certain
contractual restrictions on the conduct of our business that may affect our ability to execute on our business strategies and attain our financial goals. Additionally, the announcement of the proposed merger, whether or not consummated, may impact
our relationships with third parties, including customers, suppliers and others.

As more fully described in our Current Report on Form 8-K,
filed with the Securities and Exchange Commission on October 9, 2009, the completion of the proposed Merger is subject to certain conditions, including, among others (i) adoption of the merger agreement by our shareholders, (ii) the
absence of certain legal impediments to the consummation of the Merger, (iii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and obtaining antitrust
approvals in any other jurisdictions, if necessary, (iv) subject to certain materiality exceptions, the accuracy of the representations and warranties made by us and Sykes, respectively, and compliance by us and Sykes with our respective
obligations under the Merger Agreement, (v) declaration of the effectiveness by the Securities and Exchange Commission of the Registration Statement on Form S-4 to be filed by Sykes, (vi) approval by The Nasdaq Stock Market, LLC for the
listing of Sykes Common Stock; and (vii) delivery of customary opinions from counsel to us and counsel to Sykes to the effect that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code.



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The merger agreement contains specified termination rights for each of us and Sykes and further provides
that, upon termination of the merger agreement by Sykes or us under certain circumstances, we may be obligated to pay Sykes a termination fee of $7.5 million and to reimburse Sykes for up to $4.5 million of expenses actually incurred by Sykes in
connection with the Merger. In addition, if Sykes or we terminate the merger agreement as a result of the failure of our shareholders to approve the Merger, we will be required to reimburse Sykes for up to $4.5 million of expenses actually incurred
by Sykes in connection with the Merger.

We cannot predict whether the closing conditions for the proposed Merger set forth in the merger
agreement will be satisfied. As a result, we cannot assure you that the proposed Merger will be completed. If the closing conditions for the proposed Merger set forth in the merger agreement are not satisfied or waived pursuant to the merger
agreement, or if the transaction is not completed for any other reason, the market price of our common stock may decline. In addition, if the proposed Merger does not occur, we will nonetheless remain liable for significant expenses that we have
incurred related to the transaction.

Several lawsuits have been brought against us and the outcome of these lawsuits is uncertain.

Several lawsuits have been brought against us that allege claims for breach of fiduciary duty, gross mismanagement and corporate waste against
the named defendants and seek to enjoin the proposed acquisition of ICT Group by Sykes and recovery of certain costs incurred by the plaintiffs. We believe that these claims against the named defendants are without merit and we intend to vigorously
defend the claims raised in the lawsuits. In addition, other lawsuits may be brought against us. We may be required to defend such lawsuits, thus incurring expenses which we may not be able to bear, or which we may not be successful in defending.



|Item 6. | Exhibits
|------- | --------

|     |  |                                                                   
|---- |  | ------------------------------------------------------------------
|     | 
|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 5, 2009 |  |  |  | By:             |  | /s/    JOHN J.
BRENNAN                         
|                       |  |  |  |                 |  | John J. Brennan                                
|                       |  |  |  |                 |  | Chairman, President and Chief Executive Officer
|                       |  |  | 
|Date: November 5, 2009 |  |  |  | By:             |  | /s/    VINCENT A.
PACCAPANICCIA                
|                       |  |  |  |                 |  | Vincent A. Paccapaniccia                       
|                       |  |  |  |                 |  | Executive Vice President, Corporate Finance,   
|                       |  |  |  |                 |  | Chief Financial Officer and Assistant Secretary



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