-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OOayMnb8PNCfKhW9Aa8rbi3vqpZ5JuNpDbAqg/JOytPd06w+hOqJDd43Zf/QvU7/ f77Xnw2NcNDSYekzONpV/w== 0000914062-06-000304.txt : 20060510 0000914062-06-000304.hdr.sgml : 20060510 20060510172230 ACCESSION NUMBER: 0000914062-06-000304 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060508 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060510 DATE AS OF CHANGE: 20060510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRG SCHULTZ INTERNATIONAL INC CENTRAL INDEX KEY: 0001007330 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 582213805 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-28000 FILM NUMBER: 06827446 BUSINESS ADDRESS: STREET 1: 600 GALLERIA PARKWAY STREET 2: STE 100 CITY: ATLANTA STATE: GA ZIP: 30339-5949 BUSINESS PHONE: 7707793311 MAIL ADDRESS: STREET 1: 600 GALLERIA PARKWAY STREET 2: STE 100 CITY: ATLANTA STATE: GA ZIP: 30339-5949 FORMER COMPANY: FORMER CONFORMED NAME: PROFIT RECOVERY GROUP INTERNATIONAL INC DATE OF NAME CHANGE: 19960207 8-K 1 prg8k50806.txt FORM 8-K - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------------- FORM 8-K -------------------------------- CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 8, 2006 ----------------------- PRG-SCHULTZ INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) -------------------------
GEORGIA 000-28000 58-2213805 - ---------------------------------------- -------------------------------------- -------------------------------------- (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.)
600 GALLERIA PARKWAY, SUITE 100, ATLANTA, GEORGIA 30339-5949 (Address of principal executive office) (zip code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 779-3900 ------------------------------------------------------------- (Former name or former address, if changed since last report) ------------------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) - -------------------------------------------------------------------------------- ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION The information provided pursuant to this Item 2.02 is to be considered "furnished" and not "filed" under the Securities Exchange Act of 1934 and not incorporated by reference into those filings of PRG-Schultz International, Inc. (the "Company"). On May 8, 2006, the Company issued a press release announcing its preliminary results for the quarter ended March 31, 2006, a copy of which is attached as Exhibit 99.1. Except as otherwise provided in the press release, the press release speaks only as of the date of such press release and shall not create any implication that the affairs of the Company have continued unchanged since such date. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements N/A (b) Pro Forma Financial Information N/A (c) Exhibits Exhibit Number Description 99.1* Press Release dated May 8, 2006 * This exhibit is furnished not filed. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, PRG-Schultz International, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PRG-SCHULTZ INTERNATIONAL, INC. Date: May 9, 2006 By: /s/ Victor A. Allums -------------------- Victor A. Allums Senior Vice President 3 EX-99.1 2 prg8k50806ex99.txt PRESS RELEASE EXHIBIT 99.1 PRG-SCHULTZ ANNOUNCES PRELIMINARY FIRST QUARTER 2006 FINANCIAL RESULTS ATLANTA--(BUSINESS WIRE)--May 8, 2006--PRG-Schultz International, Inc. (Nasdaq: PRGX), the world's largest recovery audit firm, today announced its preliminary unaudited financial results for first quarter ended March 31, 2006. Highlights of Financial Results o Net loss for the first quarter was $10.6 million or ($.17) per basic and diluted share, subject to the final calculation of the fair value of the new securities issued in connection with the exchange of the Company's 4.75% Convertible Subordinated Notes due 2006. Using preliminary fair value calculations, the net loss for the quarter includes a non-cash charge of $10.3 million resulting from the exchange. Any change to the preliminary fair value calculations will result in a non-cash adjustment to the reported net loss for the quarter. The net loss for the quarter also includes a non-cash charge of $0.3 million related to stock option compensation and a charge of $0.4 million for severance and other charges related to the previously announced operational restructuring. This preliminary net loss for the first quarter 2006 compares to a net loss of $4.9 million, or ($.08) per basic and diluted share for the same period in 2005, which included a charge of $0.2 million related to the Company's evaluation of its strategic alternatives. o Adjusted EBITDA for the first quarter was $6.6 million compared to $1.9 million in the first quarter of 2005. The 2006 first quarter adjusted EBITDA is earnings before interest, taxes, depreciation and amortization (EBITDA) excluding a $0.3 million non-cash charge related to stock option expense, and a $0.4 million charge for severance and other charges associated with the operational restructuring. Adjusted EBITDA for the first quarter of 2005 excludes a loss of $0.4 million related to discontinued operations (Schedule 3 provides a reconciliation of net earnings (loss) to each of EBITDA and adjusted EBITDA). o Consolidated revenue for the first quarter of 2006 was $65.5 million, a decline of 12.8% compared to $75.1 million for the first quarter of 2005. Cost of Revenue and SG&A expenses combined were $62.2 million for the first quarter, down 19.5% compared to the same period in 2005. Other Key First Quarter Events o The Company successfully completed an exchange offer for its $125 million of 4.75% Convertible Subordinated Notes due 2006. As a result of the Exchange Offer, virtually all of the outstanding convertible notes were exchanged for (a) $51.6 million in principal amount of 11.0% Senior Notes Due 2011, (b) $59.8 million in principal amount of 10.0% Senior Convertible Notes Due 2011, and (c) 124,530 shares, or $14.9 million liquidation preference, of 9.0% Senior Series A Convertible Participating Preferred Stock. o The Company entered into a new senior secured credit facility which includes a $25 million term loan and up to $20 million in revolving loan borrowings. A portion of the net proceeds of the term loan were used to repay all outstanding borrowings under the Company's prior senior credit facility with Bank of America, which were approximately $1.6 million, and all outstanding amounts under a prior bridge loan between the Company and certain holders of its Convertible Subordinated Notes, which were approximately $10.1 million. "The first quarter of 2006 was a turning point for our company," said James B. McCurry, chairman, president and chief executive officer. "The operational restructuring we initiated last fall began to show dividends, allowing us to significantly increase our quarterly EBITDA compared to last year. The successful completion of the exchange offer and the closing of a new credit facility provide us with the liquidity we need to run our business. New projects, such as the contract to audit Medicare spending in California, began to gain significant traction. The turnaround at PRG-Schultz is definitely off and running." Liquidity At March 31, 2006 the Company had cash and cash equivalents of $18.3 million and had no borrowings against its revolving credit facility. Total debt at quarter end included the $25 million variable rate term loan due 2010, $0.5 million of the 4.75% convertible notes due 2006, $51.6 million in principal amount of 11.0% Senior Notes Due 2011, and $59.8 in principal amount of 10.0% Senior Convertible Notes Due 2011. About PRG-Schultz International, Inc. Headquartered in Atlanta, PRG-Schultz International, Inc. (PRG) is the world's leading recovery audit firm, providing clients throughout the world with insightful value to optimize and expertly manage their business transactions. Using proprietary software and expert audit methodologies, PRG industry specialists review client purchases and payment information to identify and recover overpayments. Preliminary Net Loss Results As noted above, the first quarter 2006 net loss results contained in this press release are preliminary, as the Company is still in the process of finalizing the calculation of the fair value, and related accounting treatment, of the new securities issued during the first quarter in connection with the exchange of the Company's 4.75% Convertible Subordinated Notes due 2006 and completing its customary quarterly closing and review procedures, including the completion of a review of its quarterly results by its independent accountants. At the time of this release, the Company cannot determine the likelihood of a change to the preliminary fair value of the new securities issued in the exchange, or related accounting treatment, and therefore the final first quarter net loss. Any change in the preliminary non-cash charge associated with the Company's exchange of its 4.75% Convertible Subordinated Notes due 2006 will change the Company's reported net loss, but is not expected to impact EBITDA or adjusted EBITDA. The Company expects that its final first quarter 2006 net loss results will be announced on or before May 15, 2006. Non-GAAP Financial Measures EBITDA and adjusted EBITDA are both "non-GAAP financial measures" presented as supplemental measures of our performance. They are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. The Company believes these measures provide additional meaningful information in evaluating the Company's performance over time, and that the rating agencies and a number of lenders use EBITDA and similar measures for similar purposes. In addition, a number of restrictive covenants related to the Company's credit facilities use measures similar to adjusted EBITDA. However, EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. In addition, in evaluating EBITDA and adjusted EBITDA, you should be aware that in the future we will incur expenses such as those used in calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. Schedule 3 provides a reconciliation of net earnings (loss) to each of EBITDA and adjusted EBITDA. Forward Looking Statements This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, in addition to historical information. Such statements include both implied and express statements regarding the Company's financial position and liquidity, potential success of the Company's operational restructuring plan, expected savings resulting therefrom and the ability to successfully complete the Company's operational turnaround (including plans to streamline the Company's organization). If the Company is unable to successfully complete its operational restructuring and turnaround plans, the Company may be unable to pay its debts as they come due or continue funding its operations and may be forced to seek protection from its creditors. Other risks that could affect the Company's future performance include the Company's ability to retain personnel, changes in the market for the Company's services, client bankruptcies, loss of major clients, and other risks generally applicable to the Company's business. For a discussion of other risk factors that may impact the Company's business and the success of its restructuring plan, please see the Company's Form 10-K filed with the Securities and Exchange Commission on March 23, 2006. The Company disclaims any obligation or duty to update or modify these forward-looking statements.
SCHEDULE 1 PRG-Schultz International, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Amounts in thousands, except per share data) (Unaudited) Three Months Ended March 31, ---------------------- 2006 2005 ---------- ---------- Revenues $ 65,538 $ 75,147 Cost of revenues 46,279 48,595 ---------- ---------- Gross margin 19,259 26,552 Selling, general and administrative expenses 15,872 28,578 Operational restructuring expenses 408 0 ---------- ---------- Operating income (loss) 2,979 (2,026) Interest expense, net (2,602) (1,810) Loss on financial restructuring (10,343) 0 ---------- ---------- Earnings (loss) from continuing operations before income taxes and discontinued operations (9,966) (3,836) Income tax expense (benefit) 650 687 ---------- ---------- Earnings (loss) from continuing operations before discontinued operations (10,616) (4,523) Discontinued operations: Earnings (loss) from discontinued operations, net of taxes 49 (373) ---------- ---------- Net earnings (loss) $ (10,567) $ (4,896) ========== ========== Basic and diluted earnings (loss) per share: Loss from continuing operations before discontinued operations $ (0.17) $ (0.07) Discontinued operations - (0.01) ---------- ---------- Net earnings (loss) $ (0.17) $ (0.08) ========== ========== Weighted average shares outstanding: Basic 62,113 61,976 ========== ========== Diluted 62,113 61,976 ========== ==========
Certain reclassifications have been made to the 2005 amounts to conform to the presentation in 2006. These reclassifications include the reclassification of certain business units as discontinued operations.
SCHEDULE 2 PRG-Schultz International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Amounts in thousands) (Unaudited) March 31, December 31, 2006 2005 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 18,265 $ 11,848 Restricted cash 3,495 3,096 Receivables: Contract receivables 42,045 53,199 Employee advances and miscellaneous receivables 2,400 2,737 ------------ ------------ Total receivables 44,445 55,936 Funds held for client obligations 31,701 32,479 Prepaid expenses and other current assets 3,561 3,180 ------------ ------------ Total current assets 101,467 106,539 Property and equipment 15,311 17,453 Goodwill 4,600 4,600 Intangible assets 24,100 24,447 Other assets 13,083 9,023 ------------ ------------ $ 158,561 $ 162,062 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Convertible notes $ 467 $ 466 Obligation for client payables 31,701 32,479 Accounts payable and accrued expenses 32,671 34,103 Accrued payroll and related expenses 35,058 44,031 Deferred revenue 4,958 4,583 ------------ ------------ Total current liabilities 104,855 115,662 Convertible notes - 123,601 Senior notes 45,394 - Senior convertible notes 50,699 - Other debt obligations 25,000 16,800 Deferred compensation 990 1,388 Other long-term liabilities 6,934 6,976 ------------ ------------ Total liabilities 233,872 264,427 ------------ ------------ Mandatorily redeemable participating preferred stock 14,987 - Shareholders' equity (deficit): Common stock 68 68 Additional paid-in capital 517,590 494,826 Accumulated deficit (561,286) (550,719) Accumulated other comprehensive income 2,243 2,400 Less treasury stock at cost (48,710) (48,710) Unamortized portion of compensation expense (203) (230) ------------ ------------ Total shareholders' equity (deficit) (90,298) (102,365) ------------ ------------ $ 158,561 $ 162,062 ============ ============
SCHEDULE 3 PRG-Schultz International, Inc. and Subsidiaries Reconciliation of Net Earnings (Loss) to Adjusted EBITDA (Amounts in thousands) (Unaudited) Three Months Ended March 31, ---------------------- 2006 2005 ---------- ---------- Reconciliation of net loss to adjusted EBITDA: - ---------------------------------------------- Net earnings (loss) $(10,567) $(4,896) Adjust for: Earnings (loss) from discontinued operations 49 (373) ---------- ---------- Earnings (loss) from continuing operations (10,616) (4,523) Adjust for: Income taxes 650 687 Interest 2,602 1,810 Loss on financial restructuring 10,343 - Depreciation and amortization 2,856 3,937 ---------- ---------- EBITDA 5,835 1,911 ---------- ---------- Operational restructuring expenses 408 - Non-cash FAS 123R compensation 340 - ---------- ---------- Adjusted EBITDA $6,583 $1,911 ========== ==========
EBITDA and adjusted EBITDA are both "non-GAAP financial measures" presented as supplemental measures of our performance. They are not required by, or presented in accordance with, accounting principles generally accepted in the United States, or GAAP. The company believes these measures provide additional meaningful information in evaluating the company's performance over time, and that the rating agencies and a number of lenders use EBITDA and similar measures for similar purposes. In addition, a number of restrictive covenants related to the company's credit facilities use measures similar to EBITDA. However, EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. In addition, in evaluating EBITDA and adjusted EBITDA, you should be aware that in the future we will incur expenses such as those used in calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. CONTACT: PRG-Schultz International, Inc., Atlanta Peter Limeri, 770-779-6464 www.prgx.com SOURCE: PRG-Schultz International, Inc. -----END PRIVACY-ENHANCED MESSAGE-----