-----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, DO7izjIDc8kzK91JJ5dHmVWSyq3b+KSw84j04Lq6fDBxr9lM9JVA7p1X7Vw0QrDN daZVAQquzFeJpVboDES4PQ== 0000914062-06-000456.txt : 20060809 0000914062-06-000456.hdr.sgml : 20060809 20060808175903 ACCESSION NUMBER: 0000914062-06-000456 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060807 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060809 DATE AS OF CHANGE: 20060808 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: 061014436 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 prg8k80706.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): AUGUST 7, 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 August 7, 2006, the Company issued a press release announcing its unaudited results for the quarter ended June 30, 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 August 7, 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: August 8, 2006 By: /s/ Victor A. Allums ---------------------------------- Victor A. Allums Senior Vice President 3 EX-99.1 2 prg8k80706ex99.txt PRESS RELEASE EXHIBIT 99.1 PRG-SCHULTZ ANNOUNCES SECOND QUARTER 2006 FINANCIAL RESULTS ATLANTA--(BUSINESS WIRE)--Aug. 7, 2006--PRG-Schultz International, Inc. (Nasdaq: PRGX), the world's largest recovery audit firm, today announced its unaudited financial results for second quarter ended June 30, 2006. Highlights of Financial Results -- Net loss for the 2006 second quarter was $3.6 million or ($.06) per basic and diluted share, including a loss on discontinued operations of $0.8 million, a non-cash charge of $0.3 million related to stock option compensation and a charge of $1.6 million for severance and other charges related to the previously announced operational restructuring. This compares to a net loss of $6.3 million, or ($.10) per basic and diluted share for the same period in 2005, which included earnings from discontinued operations of $0.3 million, a charge of $0.3 million related to the Company's evaluation of its strategic alternatives, a charge of $0.5 million for costs related to the Company's strategic cost reduction initiative, and accruals of $3.5 million for the retirement benefits of the Company's former Chairman and CEO, John Cook, and its former Vice Chairman, Jack Toma. -- Adjusted EBITDA for the 2006 second quarter was $6.5 million compared to $3.0 million for the same period in 2005. The 2006 second quarter adjusted EBITDA is earnings from continuing operations before interest, taxes, depreciation and amortization (EBITDA) excluding a $0.3 million non-cash charge related to stock option compensation expense, and a $1.6 million charge for severance and other charges associated with the operational restructuring. Adjusted EBITDA for the second quarter of 2005 excludes the $3.5 million retirement accrual for Messrs. Cook and Toma. (Schedule 3 provides a reconciliation of net earnings (loss) to each of EBITDA and adjusted EBITDA.) -- Consolidated revenue for the second quarter of 2006 was $65.3 million, a decline of 16.5% compared to $78.2 million for the same period in 2005. Cost of Revenue and SG&A expenses combined were $62.0 million for the second quarter, which were lower by $20.3 million, or 24.6%, compared to the same period in 2005. -- Net loss for the first six months of 2006 was $13.9 million or ($.23) per basic and diluted share, including a non-cash charge of $10.1 million resulting from the Company's previously announced successful financial restructuring, a loss on discontinued operations of $0.7 million, a non-cash charge of $0.7 million related to stock option compensation and a charge of $2.0 million for severance and other charges related to the operational restructuring. This compares to a net loss of $11.2 million, or ($.18) per basic and diluted share for the same period in 2005, which included a loss on discontinued operations of $0.1 million, a charge of $0.5 million related to the Company's evaluation of its strategic alternatives, a charge of $0.5 million for costs relating to the Company's strategic cost reduction initiative, and accruals of $3.5 million for the retirement benefits of Mr. Cook and Mr. Toma. -- Adjusted EBITDA for the first six months of 2006 was $13.1 million compared to $4.9 million in the first six months of 2005. Adjusted EBITDA for this period excludes a $0.7 million non-cash charge related to stock option compensation expense and a $2.0 million charge for severance and other charges associated with the operational restructuring. Adjusted EBITDA for the first half of 2005 excludes the $3.5 million retirement accrual for Messrs. Cook and Toma. -- Consolidated revenue for the first six months of 2006 was $130.8 million, a decline of 14.7% as compared to $153.3 million for the first six months of 2005. Cost of Revenue and SG&A expenses combined were $124.1 million for the first half, which were lower by $35.3 million, or 22.1%, compared to the same period in 2005. -- Cash generated from operations for the six months ended June 30, 2006 was $7.5 million compared to a usage of cash of $9.0 million for the same period in 2005, a year over year improvement of $16.5 million. Liquidity At June 30, 2006 the Company had cash and cash equivalents of $18.6 million and had no borrowings against its revolving credit facility. Debt outstanding at quarter end included a $25 million variable rate term loan due 2010, $0.5 million of 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. As of June 30, 2005, the Company had cash and cash equivalents of $12.2 million and $12.5 million of borrowings against its revolving credit facility. Debt outstanding at June 30, 2005 also included the $125 million in principal amount of 4.75% convertible notes due 2006. "Our turnaround continued to gain momentum in the second quarter, our first full quarter after the successful restructuring of our balance sheet and the third consecutive quarter of positive operating EBITDA and cash flow," said James B. McCurry, chairman, president and chief executive officer. "We have a newly reconstituted board of directors and an entirely new senior management team in place, and we are aggressively attacking opportunities to continue the improvement of our financial performance by helping our clients improve their performance. We are especially excited by the promising early results shown by our audit of Medicare payments in California." 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. 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, the results of its Medicare payments audit in California and the ability to successfully complete the Company's operational turnaround (including plans to streamline the Company's organization). Such forward looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to differ materially from the historical results or from any results expressed or implied by such forward-looking statements. 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, Medicare audit revenues that do not meet expectations or justify costs incurred, 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 Six Months Ended June 30, Ended June 30, ------------------ ------------------ 2006 2005 2006 2005 -------- -------- -------- -------- Revenues $ 65,308 $ 78,162 $130,846 $153,309 Cost of revenues 47,267 50,997 93,546 99,592 -------- -------- -------- -------- Gross margin 18,041 27,165 37,300 53,717 Selling, general and administrative expenses 14,713 31,259 30,585 59,837 Operational restructuring expense 1,580 - 1,988 - -------- -------- -------- -------- Operating income (loss) 1,748 (4,094) 4,727 (6,120) Interest expense, net (4,269) (2,061) (6,812) (3,871) Loss on financial restructuring - - (10,129) - -------- -------- -------- -------- Loss from continuing operations before income taxes and discontinued operations (2,521) (6,155) (12,214) (9,991) Income taxes 338 412 988 1,099 -------- -------- -------- -------- Loss from continuing operations before discontinued operations (2,859) (6,567) (13,202) (11,090) Discontinued operations: Earnings (loss) from discontinued operations (786) 275 (737) (98) -------- -------- -------- -------- Net loss $ (3,645) $ (6,292) $(13,939) $(11,188) ======== ======== ======== ======== Basic and diluted earnings (loss) per common share: Loss from continuing operations before discontinued operations $ (0.05) $ (0.10) $ (0.22) $ (0.18) Discontinued operations (0.01) - (0.01) - -------- -------- -------- -------- Net loss $ (0.06) $ (0.10) $ (0.23) $ (0.18) ======== ======== ======== ======== Weighted average common shares outstanding: Basic 63,879 61,997 62,996 61,987 ======== ======== ======== ======== Diluted 63,879 61,997 62,996 61,987 ======== ======== ======== ======== 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) June 30, December 31, 2006 2005 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 18,595 $ 11,848 Restricted cash 3,718 3,096 Receivables: Contract receivables 43,663 53,199 Employee advances and miscellaneous receivables 2,050 2,737 ----------- ----------- Total receivables 45,713 55,936 Funds held for client obligations 43,836 32,479 Prepaid expenses and other current assets 3,486 3,180 ----------- ----------- Total current assets 115,348 106,539 Property and equipment 13,220 17,453 Goodwill 4,600 4,600 Intangible assets 23,754 24,447 Other assets 13,945 9,023 ----------- ----------- $ 170,867 $ 162,062 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Convertible notes $ 468 $ 466 Current portion of other debt obligations 250 - Obligation for client payables 43,836 32,479 Accounts payable and accrued expenses 32,273 34,103 Accrued payroll and related expenses 38,097 44,031 Deferred revenue 4,542 4,583 ----------- ----------- Total current liabilities 119,466 115,662 Convertible notes - 123,601 Senior notes 43,316 - Senior convertible notes 64,871 - Other debt obligations 24,750 16,800 Deferred compensation 841 1,388 Other long-term liabilities 6,726 6,976 ----------- ----------- Total liabilities 259,970 264,427 ----------- ----------- Mandatorily redeemable participating preferred stock 14,460 - Shareholders' equity (deficit): Common stock 71 68 Additional paid-in capital 506,567 494,826 Accumulated deficit (564,658) (550,719) Accumulated other comprehensive income 3,167 2,400 Treasury stock, at cost (48,710) (48,710) Unamortized portion of stock compensation expense - (230) ----------- ----------- Total shareholders' equity (deficit) (103,563) (102,365) ----------- ----------- $ 170,867 $ 162,062 =========== =========== SCHEDULE 3 PRG-Schultz International, Inc. and Subsidiaries Reconciliation of Net Earnings (Loss) to Adjusted EBITDA (Amounts in thousands) (Unaudited) Three Months Six Months Ended June 30, Ended June 30, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Reconciliation of net loss to adjusted EBITDA: - ------------------------------- Net earnings (loss) $ (3,645) $ (6,292) $(13,939) $(11,188) Adjust for: Earnings (loss) from discontinued operations (786) 275 (737) (98) -------- -------- -------- -------- Loss from continuing operations (2,859) (6,567) (13,202) (11,090) Adjust for: Income taxes 338 412 988 1,099 Interest 4,269 2,061 6,812 3,871 Loss on financial restructuring - - 10,129 - Depreciation and amortization 2,868 3,579 5,724 7,516 -------- -------- -------- -------- EBITDA 4,616 (515) 10,451 1,396 -------- -------- -------- -------- Messrs. Cook & Toma retirement/severance - 3,529 - 3,529 Operational restructuring expense 1,580 - 1,988 - Non-cash FAS 123R compensation 340 - 680 - -------- -------- -------- -------- Adjusted EBITDA $ 6,536 $ 3,014 $ 13,119 $ 4,925 ======== ======== ======== ======== 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. Peter Limeri, 770-779-6464 SOURCE: PRG-Schultz International, Inc. -----END PRIVACY-ENHANCED MESSAGE-----