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

May 6, 2008
Date of Report (Date of earliest event reported)

PRG-Schultz International, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Georgia
(State or Other Jurisdiction of Incorporation)

0-28000	58-2213805
(Commission File Number)	(IRS Employer Identification No.)

600 Galleria Parkway, Suite 100, Atlanta, Georgia	30339-5949
(Address of Principal Executive Offices)	(Zip Code)

770-779-3900

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(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):

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     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 following information is being furnished pursuant to Item 2.02 of Form 8-K. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

     On May 6, 2008, PRG-Schultz International, Inc. issued a press release announcing its unaudited results for the quarter ended March 31, 2008, a copy of which is furnished herewith as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits

(d)   Exhibits

     The following exhibit is furnished herewith:

     99.1   Press Release, dated May 6, 2008.

SIGNATURES

     Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PRG-Schultz International, Inc.
By:	/s/ Victor A. Allums
	Victor A. Allums
	Senior Vice President, Secretary and General Counsel

Dated: May 6, 2008

EXHIBIT INDEX

Exhibit
Number	Description of Exhibits
99.1	Press Release, dated May 6, 2008.

EX-99.1

Exhibit 99.1

PRESS RELEASE

FOR IMMEDIATE RELEASE

PRG-Schultz Announces First Quarter 2008 Financial Results

ATLANTA, May 6, 2008 — PRG-Schultz International, Inc. (Nasdaq: PRGX), the world’s largest recovery audit firm, today announced its unaudited financial results for the first quarter ended March 31, 2008.

Highlights of Financial Results

• Net earnings for the 2008 first quarter were $3.6 million or $0.17 per basic share and $0.16 per diluted share, compared to net earnings of $1.5 million, or $0.16 per basic share and $0.13 per diluted share for the same period in 2007. The first quarter 2008 net income included a charge of $3.0 million related to stock-based compensation. The first quarter 2007 net income included a charge of $2.7 million related to stock-based compensation.

• Adjusted EBITDA for the 2008 first quarter was $9.6 million compared to $10.9 million of adjusted EBITDA for the same period in 2007. The 2008 first quarter adjusted EBITDA is earnings from continuing operations before interest, taxes, depreciation and amortization (EBITDA) excluding the $3.0 million charge for stock-based compensation. The comparable adjusted EBITDA amount for the first quarter of 2007 is EBITDA for the period excluding the charge of $2.7 million related to stock-based compensation. (Schedule 3 attached to this press release provides a reconciliation of net earnings to each of EBITDA and adjusted EBITDA).

• Consolidated revenue for the first quarter of 2008 was $48.3 million, a decrease of 15.4% compared to $57.0 million for the same period in 2007. Cost of Revenue and SG&A expenses combined were $43.1 million for the 2008 first quarter, down $7.8 million, or 15.4%, compared to the same period in 2007.

Liquidity

At March 31, 2008 the Company had cash and cash equivalents of $19.4 million and had no borrowings against its revolving credit facility. Total debt outstanding at quarter-end was $23.6 million and included a $22.8 million outstanding balance on a variable rate term loan due 2011 and a $0.8 million capital lease obligation.

The Company reduced the balance on its term loan by $22.3 million during the quarter. This pay down included $7.3 million of mandatory payments as well as a voluntary payment of $15 million. During the quarter the Company completed a reconfiguration of its credit facility, permitting up to $15 million of the term loan

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balance to be pre-paid without penalty and increasing the borrowing capacity under the revolver portion of the facility by $10 million.

“We have a very strong balance sheet, a continuing record of positive EBITDA and a value proposition focused on increasing the earnings and cash flow of the companies and government agencies that utilize our services” said James B. McCurry, chairman, president and chief executive officer. “As a result, we are well-positioned to assist our clients in meeting the challenges of a weakening world economy.”

First Quarter Earnings Call

As previously announced, management will hold a conference call tomorrow morning at 8:30 AM (EDT) to discuss the Company’s first quarter 2008 financial results. To access the conference call, listeners in the U.S. and Canada should dial 866-770-7129 at least 5 minutes prior to the start of the conference. Listeners outside the U.S. and Canada should dial 617-213-8067. To be admitted to the call, listeners should use passcode 74283611. A replay of the call will be available approximately one hour after the conclusion of the live call, extending through June 6, 2008. To directly access the replay, dial 888-286-8010 (U.S. and Canada) or 617-801-6888 (outside the U.S. and Canada). The passcode for the replay is 67767693.

This teleconference will also be audiocast on the Internet at www.prgx.com (click on “(NASDAQ: PRGX)” under “Investor Relations”). A replay of the audiocast will be available at the same location on www.prgx.com beginning approximately one hour after the conclusion of the live audiocast, extending through June 6, 2008. Please note that the Internet audiocast is “listen-only.” Microsoft Windows Media Player is required to access the live audiocast and the replay and can be downloaded from www.microsoft.com/windows/mediaplayer.

About PRG-Schultz International, Inc.

Headquartered in Atlanta, PRG-Schultz International, Inc. 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 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

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similar measures for similar purposes. In addition, a measure similar to adjusted EBITDA is used in the restrictive covenants contained in the Company’s secured credit facility. 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, as described above, the adjustments may vary from period to period and 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 to this press release provides a reconciliation of net earnings (loss) to each of EBITDA and adjusted EBITDA.

Forward Looking Statements

In addition to historical information, this press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include both implied and express statements regarding the Company’s financial condition and position, the strength of the Company’s balance sheet and its continuing record of positive EBITDA. 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. Risks that could affect the Company’s future performance include the Company’s ability to retain personnel, revenues that do not meet expectations or justify costs incurred, the Company’s ability to replace the declining revenues from its core accounts payable services, changes in the market for the Company’s services, client bankruptcies, loss of major clients, the risk that the Company may not participate in the proposed national rollout of the Medicare recovery audit program or that the national rollout will be significantly delayed, and other risks generally applicable to the Company’s business. For a discussion of other risk factors that may impact the Company’s business, please see the Company’s filings with the Securities and Exchange Commission, including its Form 10-K filed on March 12, 2008. The Company disclaims any obligation or duty to update or modify these forward-looking statements.

Contact: PRG-Schultz International, Inc.
Peter Limeri
770-779-6464

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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,
	2008			2007
Revenues	$	48,263		$	57,030
Cost of revenues		30,252			37,241
Gross margin		18,011			19,789
Selling, general and administrative expenses		12,843			13,682
Operating income		5,168			6,107
Interest expense, net		(991	)		(4,141	)
Earnings from continuing operations before income taxes and discontinued operations		4,177			1,966
Income tax expense		593			531
Earnings from continuing operations before discontinued operations		3,584			1,435
Discontinued operations:
Earnings from discontinued operations, net of taxes		—			88
Net earnings	$	3,584		$	1,523
Basic earnings per common share:
Earnings from continuing operations	$	0.17		$	0.15
Earnings from discontinued operations		—			0.01
Net earnings	$	0.17		$	0.16
Diluted earnings per common share:
Earnings from continuing operations	$	0.16		$	0.12
Earnings from discontinued operations		—			0.01
Net earnings	$	0.16		$	0.13
Weighted average shares outstanding:
Basic		21,524			8,373
Diluted		22,843			12,164

SCHEDULE 2
PRG-Schultz International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)

	March 31,			December 31,
	2008			2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	19,440		$	42,364
Restricted cash		83			—
Receivables:
Contract receivables		49,815			36,691
Employee advances and miscellaneous receivables		366			1,118
Total receivables		50,181			37,809
Prepaid expenses and other current assets		2,461			2,740
Total current assets		72,165			82,913
Property and equipment		7,594			8,035
Goodwill		4,600			4,600
Intangible assets		20,621			21,172
Other assets		4,977			5,718
Total assets	$	109,957		$	122,438
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portions of debt obligations	$	5,289		$	7,846
Accounts payable and accrued expenses		13,046			16,117
Accrued payroll and related expenses		41,079			31,435
Refund liabilities and deferred revenue		9,126			10,517
Total current liabilities		68,540			65,915
Debt obligations		18,320			38,078
Noncurrent compensation obligations		8,967			8,548
Other long-term liabilities		6,959			7,548
Total liabilities		102,786			120,089
Shareholders’ equity (deficit):
Common stock		221			221
Additional paid-in capital		607,831			605,592
Accumulated deficit		(555,434	)		(559,018	)
Accumulated other comprehensive income		3,263			4,264
Treasury stock at cost		(48,710	)		(48,710	)
Total shareholders’ equity (deficit)		7,171			2,349
Total liabilities and shareholders’ equity (deficit)	$	109,957		$	122,438

SCHEDULE 3
PRG-Schultz International, Inc. and Subsidiaries
Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA
(Amounts in thousands)
(Unaudited)

	Three Months
	Ended March 31,
	2008		2007
Reconciliation of net earnings to adjusted EBITDA:
Net earnings	$	3,584	$	1,523
Adjust for:
Earnings from discontinued operations		—		88
Earnings from continuing operations		3,584		1,435
Adjust for:
Income taxes		593		531
Interest		991		4,141
Depreciation and amortization		1,401		2,011
EBITDA		6,569		8,118
Stock-based compensation		3,034		2,734
Adjusted EBITDA	$	9,603	$	10,852

EBITDA and adjusted EBITDA are both “non-GAAP financial measures” presented as supplemental measures of our performance. They are not 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 measure similar to adjusted EBITDA is used in the restrictive covenants contained in the Company’s secured credit facility. 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 4
PRG-Schultz International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)

	Three Months
	Ended March 31,
	2008			2007
Cash flows from operating activities:
Net earnings	$	3,584		$	1,523
Earnings from discontinued operations		—			88
Earnings from continuing operations		3,584			1,435
Adjustments to reconcile earnings from continuing operations to net cash used in operations:
Depreciation and amortization		1,401			2,011
Stock-based compensation expense		3,034			2,734
Amortization of debt discounts and deferred costs		194			492
(Increase) decrease in receivables		(11,525	)		6,189
Increase (decrease) in accounts payable, accrued payroll and other accrued expenses		2,217			(15,315	)
Other, primarily changes in assets and liabilities		652			463
Net cash used in operating activities		(443	)		(1,991	)
Cash flows from investing activities — purchases of property and equipment, net of disposals		(417	)		(358	)
Net cash used in financing activities		(22,345	)		(9,783	)
Cash flows from discontinued operations		—			(83	)
Effect of exchange rates on cash and cash equivalents		281			188
Net decrease in cash and cash equivalents		(22,924	)		(12,027	)
Cash and cash equivalents at beginning of period		42,364			30,228
Cash and cash equivalents at end of period	$	19,440		$	18,201