FOOL CONFERENCE CALL SYNOPSIS*
By Debra Tidwell (MF Debit)

ATC Communications Group, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATCT)") else Response.Write("(Nasdaq: ATCT)") end if %>
5950 Berkshire Lane, Suite 1650
Dallas, TX 75225
(214) 361-9870

UNION CITY, CA (February 10, 1997)/FOOLWIRE/ --- ATC Communications Group released results for Q2 1997 on February 6th and held their conference call for analysts on February 7th. Net income for the quarter was $850,000, or $0.04 per share, down from $1,069,000, or $0.05 per share, for the same period a year earlier. Revenues increased 9% to $25.1 million from $23.0 million in the second quarter a year ago.

SIX MONTH RESULTS. For the six month period, revenues increased 26% to $51.6 million from $41.0 million in the comparable period a year earlier. Earnings for the current six months were $2,972,000, or $0.12 per share, up from $1,889,000, or $0.08 per share, in the comparable period in fiscal 1996.

SHIFTS IN ORDERS AND SEASONALITY. There were some activities that occurred during this quarter that impacted their revenue. One of their major customers delayed implementing some of their calling, but did move the calling volume into this current quarter. That was one big change. Another is that the end of the last quarter was truly a seasonal business for one of their other customers. Rather than just remove the business, they came to an agreement with this customer to take some data entry work, which was lower margin but allowed them to maintain the workforce so they could pick up the volume again in January.

CUSTOMERS DELAY GROWTH IN ORDERS. Probably the biggest impact was from large customers who wanted to see how the new ATC management would perform and how ATC would perform for their customers. The good news is that ATC has performed quite well which has led them into some good trends for January. It is not an issue of losing clients or having clients not coming back, but the growth one would normally anticipate with these customers slowed down. They have additional opportunities on the table they can and want to pick up with these customers, but the customers wanted to delay a decision to see how the management team was going to perform. This involved two or three of the company's 12-15 major accounts.

WHAT OTHER MANAGEMENT CHANGES HAVE OCCURRED? They were asked, aside from the new CEO, what other new management did customers have to get used to. They responded that they have known for some time that their chief operating officer, Ward Flora, would be leaving in March. To prepare for that, they brought in a new gentleman named Bob Allen who has been on board for 60 days. Bob has been brought up to speed and introduced to their customer base and customers are comfortable with him in the operating role. That is the only other major change in the management team that has occurred.

WERE EXPECTATIONS BASED ON LAST YEAR'S RESULTS REASONABLE? One of the analysts suggested that it looked like ATC is in a situation where they had a former executive who basically maxed out the numbers last year, got the best margins possible, got the stock up, exited the company, and now they have to go back and rebuild some level of profitability where maybe the numbers and the margins we were looking at last year were not sustainable. They responded that they can't fully agree with that, but they admitted that they were operating the company wide open last year -- straining at the seams. One of the things that the fourth quarter last year made them aware of was that they needed to implement some of the systems and programs discussed in more detail below. They would couch it a little differently in that the rapid growth and the size they got to opened their eyes a bit and led them to make some of the changes they have. They feel comfortable by the end of the year they can return to the margins of last year. That is a progressive thing, though.

AT&T CLIENT STATUS. Another question was asked about who ATC's major clients are now. They indicated that AT&T is a major client. They said if you look at what ATC did for AT&T in their first fiscal quarter and looked at what they did for AT&T in the second fiscal quarter, they flattened out. It was virtually identical. AT&T took a wait-and-see attitude and slowed the growth. ATC is seeing new opportunities with them again now. Currently AT&T represents about 45% of ATC's revenues. AT&T is concerned about the portion of revenue they have. ATC has shared with AT&T that they plan to grow through acquisition and AT&T responded favorably, indicating they would like to give ATC more business, but it is all dependent on ATC growing their base business outside of AT&T.

OTHER MAJOR CLIENTS. They were asked about American Express and indicated it was the same story as AT&T. They were asked about GTE and indicated they are doing some limited work for GTE, but they have not been a major account last year or this year. Pacific Bell continues to be a major account. Citibank is not a major client. America Online is a major client and they continue to grow. Bell South is still a significant customer as is Visa, US West, and Western Union. ATC hopes to see a considerable increase in revenue from current customers, but they are really focusing on the new markets discussed below, and they see that as the major contributor of growth.

NEW SYSTEMS IMPACTED MARGINS. In regards to the margin, in the last conference call they noted that the board of directors wanted to take a look at building for the future. A necessary aspect of this involved implementing some new systems -- from the timekeeping system to payroll and accounting. The systems they had were not functional for growth and were kind of busting at the seams. They weren't providing ATC with the tools necessary to be a proactive management team and make good management decisions. Worst of all, they weren't really integrated which was causing ATC a lot of costly management time to respond to some of the issues. The net of all this is that ATC decided to take the bite this quarter and they estimate that implementing these systems for productivity and growth cost them about $0.02-$0.03 per share. These aren't recurring expenses, but they are actions that had to be taken care of today in order for them to be able to set themselves up for long-term sustainable growth. That is really the biggest piece that impacted on the margin side.

PRODUCTIVITY TRACKING. They installed an automated system called Timekeeper that they designed, developed, and implemented themselves because they couldn't find anything adequate in the market that would allow them to track the performance of all their agents as well as they would like to. Timekeeper helps the supervisor focus on people and productivity. They are getting a lot of productivity reports out of the system that track trends down to each seat in each group and allows them to track productivity of the supervisors more closely.

PAYROLL SYSTEM. There was another issue that the new payroll system addressed. As they explained -- when you get to a staff of 4000 people, you have to make sure you adequately pay those people on time and accurately. If not, that will contribute to turnover. The turnover impacts productivity. The accounting systems they are implementing are simply to help them grow in the future from a management perspective so they can become more proactive in responding to any economic situation they need to address. Most of these systems are already implemented.

CURRENT QUARTER. Trends in January show that customer confidence is coming because of the growth in their major accounts. They have seen major growth in that area. They are in negotiations today with some new contracts. The new systems also are helping them improve a great deal on the margin side. The trends for the current quarter are more positive. In terms of the contracts they are bidding on this quarter versus last quarter, they are at a 100% higher level this quarter.

FUTURE GROWTH. They have been looking at the strategy for the long term and the business plan. They have implemented a plan today that focuses them on moving away from the commodity business, the butts in the seat. Although they know it is a necessary part of the engine, they know that the margin and growth in the industry is going to come from facilities management and full outsourcing in higher value services. Once they developed their strategy and business plan, they hired a third-party marketing communications company to do some primary and secondary research to see if there is growth in the industry and, particularly, in facilities management and outsourcing. They came back and told ATC that prospective customers are looking to move in that area and they also noted that those are areas where additional margin will be available because of the higher value added services. This solidified their plans and convinced them that the market is viable and there. So, they currently have that underway.

WHY FACILITIES MANAGEMENT? In terms of facilities management, this is something they want to get into because, while it may involve some margin sacrifice, the business is more stable and the deals tend to be longer-term and more reliable.

REALIGNED SALES FORCE TO FOCUS ON VERTICAL MARKETS. They have realigned their sales organization to focus on high growth vertical markets such as the communications industry, the utilities industry, financial services, healthcare, and other commercial segments. In each of the vertical markets is the opportunity for facilities management and the outsourcing piece, so they are not mutually exclusive. They have done that in preparation for future growth. They are not creating different organizations or infrastructure to service their customers for any of these. They are not creating overhead. They are not creating a facilities management group or an outsourcing group. It is simply better leveraging of the resources they currently have today. The thing they have not done in the past is market themselves proactively for these type of services. The only area that will increase is the number of salespeople in the marketplace that will be focusing on these industries.

CAPACITY. That also brings up the question of what they are going to do for capacity. They currently have a capacity plan underway and are taking a look at facilities outside the Dallas/Ft. Worth area.

ACQUISITION TO HELP WITH VERTICAL MARKET FOCUS IS COMING. They have an acquisition strategy underway. The acquisition is to do a couple of things. It is preparing them to create critical mass for some of these larger opportunities in facilities management and full outsourcing -- revenue streams within the vertical markets that help them put a stake in the ground in the markets and better position themselves competitively. The acquisitions they are looking at today will also provide them with physical capacity growth and will give them the ability to bring on some additional management capacity. They will not do any acquisition that is going to be dilutive. There won't be any extra debt taken on to do the acquisition, they will do it as a pooling of interest involving a stock swap. The acquisition they are currently working on involves a company about one-third their size and they hope to complete it by the end of this month.

STRATEGIC ALLIANCE FOR CONSULTATIVE SELLING IS COMING. As they were developing their strategic business plans, they saw they lacked the ability to do consultative selling. They are in the process today and will probably, by the end of the month, announce a strategic alliance with a current player in the market that is involved with consulting in the call center business. They will partner with this company to put in a full-service consulting arm. That will be another large avenue of revenue for the future. They don't believe it will be an exclusive relationship because they may end up having a number of alliances, but certainly no more than two. The purpose of the alliance is really to help drive ATC as the engine of telecenters. They don't really see that the consultancy is going to be the big revenue driver. But they want to get involved with customers on the front end who are contemplating the evaluation between the facilities management or outsourcing or taking a look at comparing themselves to an internal operation. They are trying to get in on the front end of the business rather than the tail end.

RUMOR RELATED TO INSTITUTIONAL HOLDER. The company was asked about a money manager with a large position in the company who filed to sell $1 million of his $1.3 million stake. The company said that any sell order is news to them and they couldn't really offer any information on why, if it is true. They were then asked about insider buying by one of the company executives of 650,000 shares of stock and why he was buying it. They then asked why, as money managers, given the drop in the stock price they should hold or consider buying more at this point. The executive answered that, when he looks at the company he thinks that fundamentally it is in better condition than it has ever been in its existence. He likes the management group and thinks it is the best in the business. He thinks their technology is superior. He thinks the segment of the market they have been in and want to pursue is the segment with significant growth opportunity in the future. He likes the industry and thinks that we are in the very infancy of the outsourcing wave. And, he thinks it is a good investment for the long term.

WHAT HAVE THEY DONE TECHNOLOGY-WISE? As a follow-on question, they were asked how their technology is superior. They answered that the technology they have today that allows for integration of the new platforms into old legacy systems is something that they have concluded should be patented. A number of customers have said that the speed and accuracy in getting to their legacy systems is something they have not seen in the marketplace. They have increased their capacity simply by changing from an old Motorola platform to an Intel platform that will carry them for another 50% growth. Those are some of the technical issues they have seen and have done in the past that they feel will help them in the future.

COMMUNICATE THINGS THAT WILL IMPACT RESULTS. They were asked if they were going to come out with some sort of news or explanation given the big surprise in results and the drop in the stock price. They answered that, in the past they have adhered to a policy where they really didn't talk about Street estimates, forecasts, or projections. That is a policy that has been re-addressed and certainly going forward they intend to alter that policy. That is not to say that they intend to go overboard here. They pointed out that one of the benefits of the new systems they have put in place is that they do give ATC better capability in monitoring and figuring out where they are and where they are going. Moving forward, they are going to be more proactive in communicating the activities that are going on within ATC.

MORE ON COMMUNICATING WITH INVESTORS/ANALYSTS. Another analyst indicated that he had just talked to the company 3 weeks ago and really felt blind-sided by the results. He commented that there really wasn't a need for this to come out as such a surprise, that they must have had some inkling that this was coming. They responded that they have stuck with a policy of being very cautious about addressing expectations on the Street. They think as a management team, they have never been more positive about where this company is positioned right now. They feel that the things they have done are going to allow them to really jump out there and grow. They have never, in the history of the company, commented on expectations. It is a policy that, as a company, they are changing.

DOWNGRADES & ANALYST COVERAGE. They are interested in getting more analyst coverage and are pursuing opportunities to do that. They were asked about the downgrade by Oppenheimer to $0.30 EPS for the year. They responded that this sounded okay to them for now and, as they know more about how they expect to do, they will communicate it to the Street.

BUYBACK SHARES? They were asked if there was a buyback in effect or one that would be put in place with the stock where it is now. They responded that there is not a buyback in effect at this time. They are in a working-capital-intensive growth industry and they don't know that that's the best use of cash, but is something they could explore.

SUMMARY REMARKS. They closed the call by saying that one of the overwhelming things they heard on the call was the need to continue to communicate more proactively with the market and they are dead set on doing that. They understand the concern about surprises and they don't want to have that hanging over them. So, they will react to that quickly. They emphasized again that they have gone through a period of having to change the oil filter on an engine that has been overrun at 120 miles per hour. But, the thing they have done to this engine is really create a new fuel and gas line system such that they can add new revenue growth. At the same time, they've also put some exhaust systems in so they have a better tuned engine for future growth and so information comes out. They feel they have a good basis for moving forward. They paid the price for making the changes in the infrastructure and the future looks bright.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.