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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2003

or

For the transition period from              to             

Commission File Number 0-20807

ICT GROUP, INC.

(Exact name of registrant as specified in its charter.)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.01

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)    YES  x    NO  ¨

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2003 was approximately $62,205,097. Such aggregate market value was computed by reference to the closing price of the Common Stock as reported on the National Market of The Nasdaq Stock Market on June 30, 2003. For purposes of this calculation only, the registrant has defined affiliates as consisting solely of all directors and executive officers. In making such calculation, registrant is not making a determination of the affiliate or non-affiliate status of any holders of shares of Common Stock.

The number of shares of the registrant’s Common Stock outstanding as of March 8, 2004 was 12,532,791.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s definitive Proxy Statement relating to the 2004 Annual Meeting of Shareholders are incorporated by reference into Part III hereof.

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ICT GROUP, INC.

FORM 10-K ANNUAL REPORT

For Fiscal Year Ended December 31, 2003

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This document contains certain forward-looking statements that are subject to risks and uncertainties. Forward-looking statements include statements relating to the appropriateness of the Company’s reserves for contingencies, the realizability of the Company’s deferred tax assets, the Company’s ability to finance its operations and capital requirements into 2005, the Company’s ability to finance its 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, the Company’s business strategy including the markets in which it operates, the services it provides, its ability to attract new clients and the customers it targets, the benefits of certain technologies the Company has acquired or plans to acquire and the investment it plans to make in technology, the Company’s plans regarding international expansion, the implementation of quality standards, the seasonality of the Company’s business, variations in operating results and liquidity, as well as information contained elsewhere in this document where statements are preceded by, followed by or include the words “will,” “should,” “believes,” “plans,” “intends,” “expects,” “anticipates” or similar expressions. For such statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document are subject to risks and uncertainties that could cause the assumptions underlying such forward-looking statements and the actual results to differ materially from those expressed in or implied by the statements.

Some factors that could prevent the Company from achieving its goals—and cause the assumptions underlying the forward-looking statements and the Company’s 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) the competitive nature of the outsourced business services industry and the ability of the Company to continue to distinguish its services from other outsourced business services companies and other marketing activities on the basis of quality, effectiveness, reliability and value; (ii) economic, political or other conditions which could alter the desire of businesses to outsource certain sales and service functions and the ability of the Company to obtain additional contracts to manage outsourced sales and service functions; (iii) the cost to defend or settle litigation against the Company or judgments, orders, rulings and other developments in litigation against the Company; (iv) government regulation of the telemarketing industry, such as the Do-Not-Call legislation; (v) the ability of the Company to offer value-added services to businesses in its targeted industries and the ability of the Company to benefit from its industry specialization strategy; (vi) risks associated with investments and operations in foreign countries including, but not limited to, those related to relevant local economic conditions, exchange rate fluctuations, relevant local regulatory requirements, political factors, generally higher telecommunications costs, barriers to the repatriation of earnings and potentially adverse tax consequences (vii) equity market conditions; (viii) technology risks, including the ability of the Company to select or develop new and enhanced technology on a timely basis, anticipate and respond to technological shifts and implement new technology to remain competitive as well as costs to implement these new technologies; (ix) the results of the Company’s operations which depend on numerous factors including, but not limited to, the timing of clients’ teleservices campaigns, the commencement and expiration of contracts, the timing and amount of new business generated by the Company, the Company’s revenue mix, the timing of additional selling, general and administrative expenses and the general competitive conditions in the outsourced business services industry and the overall economy, (x) terrorist attacks and their aftermath, (xi) the outbreak of war, (xii) the Company’s capital and financing needs and

PART I

ITEM 1. BUSINESS

ICT Group, Inc. (the Company or ICT) is a leading global provider of outsourced business services solutions. The Company provides a comprehensive mix of sales, service, marketing and business services outsourcing solutions. ICT’s comprehensive, balanced mix of outsourced solutions includes customer care and retention, inbound and outbound sales and customer acquisition, cross-selling/up-selling, and technical support/help desk services as well as market research, database marketing and analysis.

ICT also offers a comprehensive suite of CRM (Customer Relationship Management) technologies, which are available on a hosted basis, for use by clients at their own in-house facilities, or on a co-sourced basis, in conjunction with the Company’s fully compatible, Web-enabled customer contact centers. These technologies include: automatic call distribution (ACD), interactive voice response (IVR) and advanced speech recognition, contact management, automated e-mail management and processing, sales force and marketing automation, alert notification and Web self-help, for the delivery of consistent, quality customer care across multiple channels.

ICT was incorporated in the Commonwealth of Pennsylvania in 1987. The Company’s internet address is www.ictgroup.com. Quarterly reports on Form 10-Q, current reports on Form 8-K and Annual Reports on Form 10-K are available at no charge through the Company’s website. Such reports are available as soon as reasonably practical after they are filed with the SEC.

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Industry Overview:

The portion of the outsourced business services solutions market that ICT currently competes in includes activities such as inbound and outbound telesales, marketing research services, database marketing services, technology hosting services and ongoing customer care management services. Outsourced business services have evolved significantly in recent years. Competitive pressures, advancements in technology and an accelerating trend toward outsourcing have resulted in the demand for more complex, interactive and highly customized CRM solutions, using a combination of onshore, near-shore and offshore facilities. Outsourced service providers are now expected to serve more as a business “partner,” offering clients value-added strategies rather than traditional commodity-based sales and service applications.

ICT Approach:

ICT believes that it has distinguished itself in the industry by having a balanced growth strategy, vertical market and customer-centric focus, comprehensive portfolio of services, and substantial resources to support future expansion. The Company continues to expand its worldwide network of state-of-the-art operations centers in order to deliver globally integrated, multi-channel sales, service and administrative support solutions to meet the specific needs of its clients.

With extensive experience providing outsourced business services, the Company is well-positioned for continued growth in a large and growing market. By leveraging its experienced management team, proven business model, global infrastructure, operating and technology investments, and expertise in target industries, ICT intends to advance its position as a leading global supplier of integrated outsourced services solutions by:

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ICT’s Services

ICT delivers its customer management solutions through two business segments that are supported by the Company-wide sales, marketing, IT and corporate support units. The Domestic segment provides inbound and outbound telesales as well as marketing research services, database marketing services, technology hosting services and ongoing customer care management services on behalf of customers operating in the Company’s target industries. The International segment provides the same services to Europe, Canada, Mexico and Australia, and includes operations supporting the U.S. Hispanic and Latin American markets. This segment also includes business from ICT’s operations centers in Barbados and the Philippines, which provide cost-effective, near-shore and offshore sales and service support for clients. A portion of the International segment’s assets and capital expenditures are used to provide services and generate revenue for the Domestic segment. The operating income of the Domestic segment is also impacted as the depreciation and amortization of these assets remains with the International segment. ICT’s sales force and operating units are organized according to geography and vertical industry sectors, enabling the Company to provide highly specialized sales, service and marketing support for their clients’ full range of outsourced customer management needs and administrative business services. A further discussion of the Domestic and International segments are set forth in Note 9 to the consolidated financial statements.

Domestic Segment

The Company’s Domestic segment is comprised of the following business units. These units are supported by facilities in the U.S., which are managed directly as well as from facilities managed by operations in the International segment.

TeleServices. TeleServices provides telesales support activities primarily for clients in the insurance, financial services and telecommunications industries. This unit is supported by contact centers located throughout the United States, Canada, Mexico, Barbados and the Philippines.

Customer Care Management Services. This business unit was established to pursue outsourcing opportunities for customer care management across a broad range of industry markets. Depending on client needs, ICT will assume sole or shared responsibilities for the management of a client’s customer care operations. As of December 31, 2003, this business unit operated contact centers in Lakeland, Florida, Spokane, Washington and Colorado Springs, Colorado and was supported by contact centers located in Canada and the Philippines.

Financial Marketing Services. This business unit’s management team consists of professionals who have client-side banking experience. As of December 31, 2003, ICT Financial Marketing Services operated dedicated inbound/outbound contact centers in Amherst, New York, Morrilton, Arkansas and Conway, Arkansas and was supported by contact centers located in Canada and the Philippines.

Medical Marketing Services. Through this business unit, ICT provides service for the increasingly complex needs of healthcare and pharmaceutical clients. This unit is staffed by dedicated personnel to meet the sophisticated product and customer profiles of specific clients. As of December 31, 2003, ICT Medical Marketing Services operated dedicated contact centers in Allentown, Pennsylvania and Langhorne, Pennsylvania.

Research and Database Marketing Services. This business unit provides businesses across a wide range of industries with value added market research and database marketing services. As of December 31, 2003, this unit conducted surveys primarily from its center in Depew, New York and was supported by a research center in Canada.

Technology Services. This business unit provides a comprehensive suite of CRM technologies including IVR and advanced speech recognition solutions. This unit’s services are available on a hosted basis for use by clients at their own in-house facilities or on a co-sourced basis in conjunction with ICT’s fully compatible, state-of-the-art customer contact centers.

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International Segment

The Company offers multilingual sales and customer care support services through six business units comprising ICT International Services. These units include:

Eurotel. Eurotel provides pan-European, multilingual teleservices and customer care services to Europe from its contact centers in Athlone, Ireland, Dublin, Ireland and London, England.

Spantel. Spantel provides bi-lingual English and Spanish teleservices from its Nogales, Arizona contact centers to the rapidly growing marketplace of Spanish-speaking American consumers and businesses and provides similar services from its contact center in Mexico City to the Mexican market.

Canada. Canada provides telesales and customer care support via service representatives who are fluent in French and/or English. As of December 31, 2003, Canada has contact centers located in Miramichi, Moncton and Riverview, New Brunswick, Canada; Lower Sackville, New Glasgow and Sydney, Nova Scotia, Canada; Cornerbrook, Carbonear and St. John’s, Newfoundland, Canada; and Lindsay, Woodstock and Peterborough, Ontario, Canada.

Australia. This unit provides telesales and customer care support for multinational companies in the Pacific Rim. As of December 31, 2003, Australia operated two contact centers in Sydney, Australia.

Barbados. This unit provides telesales support for existing and prospective clients serving consumers in the U.S. and the U.K. from its contact center in Bridgetown, Barbados.

Philippines. This unit provides sales and service support for existing and prospective clients serving consumers in the U.S., Canada, Europe and Australia from its contact center in Manila, Philippines.

Operations Facilities

The following table lists the Company’s operating facilities as of December 31, 2003

Target Industries

ICT’s domestic sales force is assigned to specific industry sectors, which enables its sales personnel to develop in-depth industry and product knowledge. Several of the industries that ICT serves are undergoing deregulation and consolidation, which provides the Company with additional opportunities as businesses search for low cost solutions for their marketing, sales and customer support needs. The industries targeted by the Company and the principal services provided are described below.

Financial Services

ICT provides banks and other financial services clients with a wide range of services, including card-holder acquisition, active account generation, account balance transfer, account retention and customer service. ICT’s Financial Marketing Services operations offers banking services, such as marketing and servicing home equity loans, lines of credit, loan-by-phone, checking and deposit account acquisition, mortgage loans and other traditional banking products. Among ICT’s financial services clients in 2003 are GMAC Mortgage, Capital One, Bank of America, Chase, Citibank, Wells Fargo, Barclays and Lloyds.

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Insurance

ICT works with large insurance companies to market and provide sales and customer support services for products such as life, accident, health, and property and casualty insurance. The Company has a full-service agent-licensing department and a continuing education department, which enables the Company and its agents to obtain licenses in 50 states as well as the District of Columbia and 8 Canadian provinces and to maintain their compliance with insurance regulations. Insurance clients in 2003 include, but are not limited to, Aegon, Prudential and Sears Life Alliance.

Telecommunications

ICT provides teleservices and customer care management services for major telecommunications companies for long distance, cellular and cable products and services, regional telecommunications companies, and companies which provide billing support services to telecommunications carriers. Within the telecommunications industry, ICT clients in 2003 include, but are not limited to, Verizon, Integretel, Virgin Mobile USA, Rogers Wireless/AT&T and SBC.

Pharmaceuticals and Health Care Services

The Company, through its Medical Marketing Services business unit, serves pharmaceutical manufacturers, health insurance companies, and other health care related suppliers, for the sale and marketing of products to both health care professionals (hospitals, physicians, pharmacists and nurses) and health care consumers (patients and prospective patients). The services the Company offers in this market segment consist of business-to-business, business-to-professional and business-to-consumer, utilizing inbound and outbound services to sell products, to conduct market research, develop marketing databases and provide customer care service. Clients in this category in 2003 include, but are not limited to, Pfizer, Blue Cross/Blue Shield and Therasense.

Computer Technology and Consumer Electronics Products and Services

ICT provides sales and service support for clients in the computer technology and consumer electronics industries. These applications include, but are not limited to, customer service, first-level customer technical support and customer retention. Clients within this vertical industry in 2003 include, but are not limited to, AOL, VTech and Panasonic.

Technology

ICT invests heavily in system and software technologies designed to improve operations center production thereby lowering the effective cost per contact made or received, and to improve sales and customer service effectiveness by providing its sales and service representatives with real-time access to customer and product information. ICT believes it was one of the first fully automated teleservices companies and among the first to implement predictive dialing equipment for outbound telemarketing and market research, to provide collaborative web browsing services and to provide VOIP (Voice-Over-Internet Protocol) capabilities.

The Company utilizes a scalable set of UNIX and NT processors to support its outbound and inbound contact center operations. The term scalable in the computer industry generally means that a system or product line is configured to work cost-effectively at both low and high volume. Dedicated UNIX and NT processors are used for inbound contact centers while predictive dialing systems, networked to UNIX and NT processors at the Company’s corporate data center, are used for outbound contact centers. The predictive dialing systems support call and data management: the UNIX and NT processors provide centralized list management, data consolidation, report generation and interfaces with client order processing systems.

ICT uses software to prepare outbound and inbound scripts, manage, update and reference client data files, collect statistical transaction and performance data and assist in the preparation of internal and client reports. This software includes ICT’s proprietary list management system (LMS) as well as Siebel’s Contact Management system. The use of the Siebel software as well as Oracle’s database management system provides a scalable and robust suite of applications to support its client’s business needs.

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Quality Assurance, Personnel and Training

ICT emphasizes quality service and extensive employee training as a way to compete effectively and invests heavily in quality assurance personnel and practices. ICT’s quality assurance and training departments are responsible for the development and enforcement of operations center policies and procedures, the selection and training of telephone service representatives, the training and professional development of operations center management personnel, monitoring of calls and verification and editing of all sales. Through the Company’s quality assurance department, headquartered in Bellmullet, Ireland with other offices in Miramichi, Canada and Langhorne, Pennsylvania, both the Company and its clients are able to perform real time on-site and remote call monitoring to maintain quality and efficiency. Sales confirmations are recorded (with the customer’s consent) in order to verify the accuracy and authenticity of transactions. Additionally, ICT is able to provide to its clients immediate updates on the progress of an ongoing program. Access to this data allows ICT and its clients to identify potential campaign shortfalls and to immediately modify or enhance the program. Digital recording technology has been installed in all outbound centers in the United States, Canada, Europe, Barbados, the Philippines and Australia. This installation allows the consolidation of all verification activities into geographically centralized locations and effectively creates a “third party” verification center. Verification results are available to Operations and Client Services by the end of each calling day. Also, each center can access the recordings for review with supervisory staff or the service representative.

ICT continued this commitment to excellence by piloting digital recording for verification purposes in its inbound centers. As a result of this implementation, digital recording was rolled out to all inbound sales programs. As with outbound data, inbound sales data will be consolidated into an existing Central Verification Center. The Company’s commitment to providing quality service is further illustrated by its certification with ISO 9001:2000 standards, which are administered by the International Organization for Standardization and represent an international consensus on the essential features of a quality system to ensure the effective operation of a business. With the exception of Mexico and Australia, all domestic and international sales and service focused business units are ISO 9001:2000 compliant. Prior to the fall of 2003, ICT had been certified as an ISO 9002 company. The ISO 9001:2000 is the most recent form of the certification and replaced the ISO 9002 certification in 2003. The newest certification focuses on process improvement and customer satisfaction. It mandates that a company has documented processes in place, as well as a means to measure, monitor and validate results, and to implement changes where needed.

Management believes that a key driver of ICT’s success is the quality of its employees. The Company tailors its recruiting and training techniques toward the industries it serves. As part of the setup of each client program, service representatives receive a detailed review of each program in which they are to participate along with training regarding the background, structure and philosophy of the client that is sponsoring the program. As is typical in the CRM services industry, over 90% of the Company’s service representatives are part-time employees. As of December 31, 2003, ICT employed approximately 11,600 people, of which approximately 11,000 were service representatives. None of ICT’s employees are currently represented by a labor union. The Company considers its relations with its employees to be good.

Clients

The Company generally operates under month-to-month contractual relationships with its teleservices clients. The pricing component of a contract is often comprised of a base service charge and separate charges for ancillary services. Services are generally based upon an hourly rate for outbound calls and per-minute rates for inbound calls. On occasion, the Company performs services for which it is paid incentives based on completed sales. ICT’s customer care clients typically enter into longer term, contractual relationships that may contain provisions for early contract terminations.

ICT targets those companies which it believes have the greatest potential to generate recurring revenue to the Company based on their ongoing direct sales and customer service needs. At December 31, 2003, ICT provided direct sales, market research and customer service to approximately 170 clients.

Competition

The CRM services industry is very competitive and the Company’s principal competition in its primary markets comes from large service organizations, including, but not limited to, Convergys Corporation, SITEL Corporation, Sykes Enterprises, TeleTech Holdings, Inc., APAC TeleService, Inc. and West Corporation. The Company competes with numerous independent firms, some of which are as large or larger than ICT, as well as the

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in-house operations of many of its clients or potential clients. In addition, many businesses that are significant consumers of these services utilize more than one service firm at a time and may reallocate work among various firms from time to time. Some of this work is contracted on an individual project basis, with the effect that the Company and other firms seeking such business are required to compete with each other frequently as individual projects are initiated. Furthermore, the Company believes there is a trend among businesses toward outsourcing the management of their contact centers to new competitors, some of which may be substantially larger and better capitalized than ICT.

Government Regulation

Both the federal and state governments regulate telemarketing sales practices. The Federal Telephone Consumer Protection Act of 1991 (the TCPA), enforced by the Federal Communications Commission (the FCC), imposes restrictions on unsolicited telephone calls to residential telephone subscribers. Under the TCPA, it is unlawful to initiate telephone solicitations to residential telephone subscribers before 8:00 a.m or after 9:00 p.m. local time at the subscriber’s location, or to use automated telephone dialing systems or artificial or prerecorded voices to certain subscribers. Additionally, the TCPA requires telemarketing firms to develop a written policy implementing a “do-not-call” registry, and to train its telemarketing personnel to comply with these restrictions. The TCPA creates a right of action for both consumers and state attorneys general. A court may award actual damages or minimum statutory damages of $500 for certain violations, which may be trebled for willful or knowing violations. Currently, the Company trains its service representatives to comply with the regulations of the TCPA and programs its call management system to avoid initiating telephone calls during restricted hours or to individuals maintained on an applicable do-not-call list.

The Federal Trade Commission (the FTC) regulates both general sales practices and telemarketing specifically. Under the Federal Trade Commission Act (the FTC Act), the FTC has broad authority to prohibit a variety of advertising or marketing practices that may constitute “unfair or deceptive acts and practices.” Pursuant to its general enforcement powers, the FTC can obtain a variety of types of equitable relief, including injunctions, refunds, disgorgement, the posting of bonds, and bars from continuing to do business, for a violation of the acts and regulations it enforces.

The FTC also administers the Federal Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 (the TCFAPA). Under the TCFAPA, the FTC adopted the Telemarketing Sales Rule (TSR) whose regulations prohibit deceptive, unfair or abusive practices in telemarketing sales. Generally, these rules prohibit misrepresentations of the cost, quantity, terms, restrictions, performance or characteristics of products or services offered by telephone solicitation or of refund, cancellation or exchange policies. The regulations also regulate the use of prize promotions in telemarketing to prevent deception and require that a telemarketer identify promptly and clearly the seller on whose behalf the telemarketer is calling, the purpose of the call, the nature of the goods or services offered and, if applicable, that no purchase or payment is necessary to win a prize. The regulations also require that telemarketers maintain records on various aspects of their business. Analogous restrictions apply to industries regulated by the SEC.

The FTC amended the TSR with changes that became effective on March 31, 2003. The changes to the TSR imposed new limits on the use of predictive dialers, the technology that automatically dials a certain number of telephone numbers and routes the connected calls to telephone sales representatives as they become available. Although this technology utilizes complex algorithms in an attempt to ensure that no consumers are contacted without available telephone sales representatives to handle the calls, this situation occasionally occurs, resulting in what is known as an “abandoned” call. The new regulations place limits on the permissible numbers of such abandoned calls, and requires that telemarketers play a recorded message to all consumers who receive such calls. The new regulations also create new limitations on the use of credit card account numbers and other consumer information, and require telemarketers to transmit caller identification information to consumers. The new regulations also require the transmission of a telephone number and when made available by the telemarketer’s carrier, the name of the telemarketer or seller.

In March 2003 the Do-Not-Call Implementation Act (the Act) was signed into law. In response to the requirements set forth by the Act, the FCC amended its TCPA rules. The amended rules became effective on June 26, 2003. The amendments, which were similar to the changes made to the TSR, authorized the creation of a National Do-Not-Call registry, placed a limit on the number of calls abandoned by the predictive dialer and required the transmission of a telephone number to be shown by caller ID.

In response to these changes in the TSR and the TCPA, the Company has appointed a Compliance Manager who is responsible for managing the Compliance Committee that ensures the Company’s compliance with the new regulations. The regulations associated with the National Do-Not-Call registry were enforced by the Federal Government beginning October 1, 2003.

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Most states have enacted statutes similar to the FTC Act generally prohibiting unfair or deceptive acts and practices. Additionally, some states have enacted laws and others are considering enacting laws targeted directly at telemarketing practices. For example, telephone sales in certain states are not final until a written contract is delivered to and signed by the buyer, and such a contract often may be canceled within three business days. At least one state also prohibits telemarketers from requiring credit card payment, and several other states require certain telemarketers to obtain licenses, post bonds or submit sales scripts to the state’s attorney general. Under the more general statutes, depending on the willfulness and severity of the violation, penalties can include imprisonment, fines and a range of equitable remedies such as consumer redress or the posting of bonds before continuing in business. Many of the statutes directed specifically at telemarketing practices provide for a private right of action for the recovery of damages or provide for enforcement by state agencies permitting the recovery of significant civil or criminal penalties, costs and attorneys’ fees. There can be no assurance that any such laws, if enacted, will not adversely affect or limit the Company’s current or future operations.

Activity at the state and federal level regarding laws that impact the teleservices industry has intensified over the past several years. States have enacted a variety of laws regulating marketing via telephone. Do-Not-Call Lists, restricted hours or days, registration, request to continue solicitation and no rebuttal laws are common in many states. ICT has developed a system to ensure compliance with all of these laws. The Company’s Compliance Committee, comprised of members from the Quality Assurance, Operations, Client Services, Legal and IT departments, is responsible for compliance. Participation on the Direct Marketing Association and the American Telemarketing Associates Legislative Committees ensure timely notification of proposed legislation.

ITEM 2. PROPERTIES

As of December 31, 2003, the Company’s corporate headquarters were located in Newtown, Pennsylvania in leased facilities consisting of approximately 105,000 square feet of office space rented under a lease that expires in 2017. In addition to the corporate headquarters staff, certain other divisional and operations personnel are located in the facility. The Company also leases all of the facilities used in its operations. The leases for the Company’s other facilities expire generally between February 2004 and March 2017 and typically contain renewal options. Management believes that its existing facilities are suitable and adequate for its current operations, but additional facilities will be required to support growth. Management believes that suitable additional or alternative space will be available as needed on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation incidental to its business. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. Management believes that the Company has defenses in the case set forth below in which it is named as a defendant and is vigorously contesting this matter. Costs incurred by the Company in defense of this matter have been significant, and future defense costs and/or an unfavorable resolution of the matter could adversely affect the Company’s business, results of operations and financial condition.

In 1998, William Shingleton filed a class action lawsuit against the Company in the Circuit Court of Berkeley County, West Virginia (the Court). The lawsuit alleges that the Company and twelve current and former members of Company management had violated the West Virginia Wage Payment and Collection Act (the Act) for failure to pay promised signing and incentive bonuses and wage increases, failure to compensate employees for short breaks or “transition” periods, production hours worked and improper deductions for the cost of purchasing telephone headsets. The complaint also included a count of fraud, alleging that the failure to pay for short break and transition time violated specific representations made by the Company to its employees. The Court entered two separate orders granting partial summary judgment against the Company and, in the case of one of the orders, against three of the individual defendants, finding that employees were not paid for all hours attributable to short breaks and idle time of less than 30 minutes in duration.

In addition to compensatory claims for unpaid wages, the plaintiffs are seeking liquidated damages under the Act and punitive damages for allegedly fraudulent conduct on the part of the Company and the individual defendants. The method of calculating liquidated damages under the Act is one of the matters in dispute between the parties, and there is a significant difference in the amount of potential liquidated damages using the methods the plaintiffs and the Company contend apply.

In 2002, the plaintiffs filed a Motion For Sanctions requesting the Court to find certain evidentiary presumptions and to order the defendants to obtain a surety bond in the amount of approximately $21.0 million, reflecting the plaintiffs’ contention of the amount of compensatory and liquidated damages due. On March 28, 2003, the Court entered an order denying the plaintiffs’ motion that the Company be required to post such bond. As of December 31, 2002, the Company had accrued $1.35 million related to the Shingleton litigation, the computation of which reflected a West Virginia Supreme Court ruling that any liquidated damages awarded under the Act must be proportionate to the compensatory damages awarded.

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On a quarterly basis, the Company has re-evaluated and adjusted its accrual, as required by SFAS No. 5, “Accounting for Contingencies,” to reflect management’s then current estimate of the low end of the most likely range of possible losses.

On April 16, 2003, the Court entered an order granting the plaintiffs’ motion for summary judgment on the method of calculation of liquidated damages under the Act. The Court ruled that, under the Act, every class member who was not paid transition time, short breaks or other wages is owed liquidated damages equal to a day’s wages for every day the amounts due remain unpaid up to 30 days. As a result of this order, the Company increased its estimate of this loss contingency and increased its accrual as of March 31, 2003 to $12.85 million. Thereafter, the Company engaged additional counsel, who specialize in labor issues and related contract law.

During the second quarter of 2003, the Company became aware that the United States Supreme Court (the Supreme Court) had recently ruled that the United States Constitution limited an award of punitive damages relative to the compensatory damages awarded in the same matter. The ruling stated “few awards exceeding a single-digit ratio between punitive and compensatory damages...will satisfy due process.” Subsequent to this initial decision, in two other cases before it, the Supreme Court vacated the trial courts’ decisions and directed the trial courts in those cases to reconsider their previous rulings in light of the Supreme Court ruling to limit punitive damages awards. While the liquidated damages calculated under the Act are not considered to be a punitive damage under West Virginia law, the Supreme Court has ruled in other cases that liquidated damages imposed for violations of law are subject to constitutional limitations similar to those applicable to punitive damage awards. In view of these Supreme Court cases the Company reduced the accrual for this litigation from $12.85 million to $7.85 million as of June 30, 2003.

During the fourth quarter of 2003, the Company continued to evaluate the facts and circumstances supporting the estimates made for probable losses in this litigation. The trial court in one of the cases previously remanded by the Supreme Court amended its prior judgment to significantly reduce the ratio of punitive damages to compensatory damages. The Company also became aware of two other recent cases in which trial court judgments with significant ratios of punitive damages to compensatory damages were vacated by appellate courts. As of December 31, 2003, the Company reduced the accrual to $4.4 million, as required by SFAS No. 5 and reflecting management’s understanding of the matter at that time. In view of the above mentioned Supreme Court cases, the subsequent vacated and amended trial court judgments and the apparent trend for vacated judgments in response to the Supreme Court ruling on excessive punitive damages, the Company believes that its estimate of probable losses under SFAS No. 5 reflects management’s current estimate of the low end of the most likely range of possible losses.

Because the claims in this case have been asserted against certain officers of the Company, there may be insurance coverage for some or all of the claims available under the Company’s director and officer liability policy. The primary level insurance carrier has notified the Company that it will apply coverage to certain legal costs. However, the carrier has denied coverage for any liquidated damages under the Act as the carrier considers liquidated damages to be penalties and thus not covered by the policy. The Company has disputed this position and has commenced a declaratory judgment action against its carrier in the Circuit Court of Berkeley County, West Virginia to resolve the situation. The sole question to be resolved is the insurability of liquidated damages. The Court recently denied the carrier’s motion to dismiss the complaint. Ultimately, however, the Company may not be successful in obtaining coverage for these claims.

The Company intends to continue its vigorous defense of the Shingleton matter and, at the appropriate time, seek an appeal of the Court’s April 16, 2003 order on the issue of the method of calculating liquidated damages. As a result, the Company will continue to incur significant additional litigation defense costs, which are expensed as incurred, net of responsive insurance coverage. The Company believes it has meritorious arguments that, if successful on appeal (if an appeal is granted), would significantly reduce the amount of any liquidated damages and that it has meritorious defenses to the fraud allegations. If, however, the plaintiffs’ method of calculating liquidated damages is upheld, or if there is a finding that the Company is liable for punitive damages as a result of engaging in fraudulent conduct, the Company could incur a loss which significantly exceeds the $4.4 million accrual that the Company has recorded in its consolidated financial statements as of December 31, 2003. It is likely that punitive damages would be covered by insurance. Such an event would have a material adverse impact on the Company’s financial position and on its operating results for the period in which such actual loss becomes known. If the Company were to agree to an out-of-court settlement of this matter for an amount greater than its accrual for the matter at that time, the Company would incur a related expense for the period in which such settlement occurs. The Company is unable at this time to determine whether such settlement will occur, the amount of any such potential settlement or whether there will be insurance coverage for any damages.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock trades on the National Market segment of The Nasdaq Stock Market under the symbol “ICTG.” The following table sets forth, for the periods indicated, the high and low sales prices as quoted on The Nasdaq Stock Market.

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As of March 8, 2004, there were 45 holders of record of the Company’s common stock, which excludes shareholders whose shares are held in nominee or “street” name by brokers. On March 8, 2004, the closing sale price of the common stock as reported by The Nasdaq Stock Market was $13.01.

The Company has never declared or paid any cash dividends on its capital stock. The Company currently intends to retain its earnings to finance future growth and working capital needs and, therefore, does not anticipate paying any cash dividends in the foreseeable future. Additionally, the Company’s bank agreement limits the payment of dividends.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data are derived from the consolidated financial statements of the Company. The data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and the consolidated financial statements and related notes thereto included in Item 8.