Exhibit 99.1
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
On May 30, 2007, PRG-Schultz International, Inc. (the “Company”) sold its Meridian VAT business (“Meridian”) to Averio Holdings Limited, a Dublin, Ireland based company affiliated with management of Meridian (the “Purchaser”). The following unaudited pro forma condensed consolidated balance sheet as of March 31, 2007 is presented as if the sale transaction had been completed as of such date. The following unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2006 and the three month period ended March 31, 2007 are presented as if the sale transaction had been completed as of January 1, 2006. A nonrecurring gain on sale of approximately $20 million has not been included in the unaudited pro forma condensed consolidated statements of operations but is expected to be reflected in the Company’s Condensed Consolidated Statement of Operations to be included in the Company’s Form 10-Q for the quarter ending June 30, 2007.
The unaudited pro forma condensed consolidated financial statements include specific assumptions and adjustments related to the sale of Meridian. The pro forma adjustments have been made to illustrate the estimated financial effect of the sale transaction as if the sale transaction had occurred on the dates set forth above. The adjustments are based upon available information and assumptions that the Company believes are reasonable as of the date of this Form 8-K filing. Assumptions underlying the pro forma adjustments are described in the notes accompanying the pro forma condensed consolidated financial information presented and should be read in conjunction with the Company’s historical financial statements and related notes contained in the Company’s quarterly report on Form 10-Q for the period ended March 31, 2007 and the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2006. In the opinion of management, the accompanying unaudited pro forma condensed consolidated balance sheet and statements of operation include all material adjustments necessary to reflect, on a pro forma basis, the impact of the sale transaction on the historical financial information of the Company.
The unaudited pro forma condensed consolidated financial information has been presented for informational purposes only and is not indicative of any future results of operation or results that might have occurred if the sale transaction had actually been completed on the indicated dates.
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands)
(Unaudited)
(In thousands)
As of March 31, 2007 | ||||||||||||
Pro Forma | ||||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 21,359 | $ | 17,760 | (a) | $ | 39,119 | |||||
Restricted cash | 3,413 | (3,339) | (b) | 74 | ||||||||
Receivables: | ||||||||||||
Contract receivables, less allowances | ||||||||||||
Billed | 30,930 | (1,629) | (b) | 29,301 | ||||||||
Unbilled | 7,790 | 7,790 | ||||||||||
38,720 | (1,629 | ) | 37,091 | |||||||||
Employee advances and miscellaneous receivables, less allowances | 769 | 1,856 | (c) | 2,625 | ||||||||
Total receivables | 39,489 | 227 | 39,716 | |||||||||
Funds held for client obligations | 42,104 | (42,104) | (b) | — | ||||||||
Prepaid expenses and other current assets | 2,488 | (876) | (b) | 1,612 | ||||||||
Total current assets | 108,853 | (28,332 | ) | 80,521 | ||||||||
Property and equipment, at cost | 66,211 | (13,840) | (b) | 52,371 | ||||||||
Less accumulated depreciation and amortization | (56,737 | ) | 12,393 | (b) | (44,344 | ) | ||||||
Property and equipment, net | 9,474 | (1,447 | ) | 8,027 | ||||||||
Goodwill | 4,600 | 4,600 | ||||||||||
Intangible assets, less accumulated amortization | 22,715 | 22,715 | ||||||||||
Unbilled receivables | 1,557 | 1,557 | ||||||||||
Deferred income taxes | 171 | 171 | ||||||||||
Other assets | 9,806 | (2,549) | (b) | 7,257 | ||||||||
$ | 157,176 | $ | (32,328 | ) | $ | 124,848 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||||||
Current liabilities: | ||||||||||||
Obligations for client payables | $ | 42,104 | (42,104) | (b) | $ | — | ||||||
Accounts payable and accrued expenses | 19,082 | (4,769) | (b) | 14,313 | ||||||||
Accrued payroll and related expenses | 29,777 | (2,924) | (b) | 26,853 | ||||||||
Refund liabilities | 10,207 | 10,207 | ||||||||||
Deferred revenue | 3,631 | (2,888) | (b) | 743 | ||||||||
Current portions of debt obligations | 1,434 | 1,434 | ||||||||||
Total current liabilities | 106,235 | (52,685 | ) | 53,550 | ||||||||
Senior notes, net of unamortized discount | 44,117 | 44,117 | ||||||||||
Senior convertible notes, including unamortized premium | 67,108 | 67,108 | ||||||||||
Other debt obligations | 15,457 | 15,457 | ||||||||||
Noncurrent compensation obligations | 7,426 | 7,426 | ||||||||||
Refund liabilities | 1,772 | 1,772 | ||||||||||
Other long-term liabilities | 5,602 | 5,602 | ||||||||||
Total liabilities | 247,717 | (52,685 | ) | 195,032 | ||||||||
Mandatorily redeemable participating preferred stock | 8,916 | 8,916 | ||||||||||
Shareholders’ equity (deficit): | ||||||||||||
Common stock | 93 | 93 | ||||||||||
Additional paid-in capital | 517,612 | 517,612 | ||||||||||
Accumulated deficit Additional paid-in capital Common stock, no par value; $.001 stated value per share. Authorized 200,000,000 shares; issued 68,069,114x shares in 2005-6 and 67,658,65668,069,114 shares in 2005-4 | (570,625 | ) | 20,357 | (d) | (550,268 | ) | ||||||
Accumulated other comprehensive income Accumulated deficit Additional paid-in capital | 2,173 | 2,173 | ||||||||||
Treasury stock, at cost Accumulated other comprehensive income Accumulated deficit | (48,710 | ) | (48,710 | ) | ||||||||
Total shareholders’ equity (deficit) Unearned amortized portion of restricted stock compensation expense Treasury stock at cost; 5,764,525 shares in 2006-5 and 2005-4 | (99,457 | ) | 20,357 | (79,100 | ) | |||||||
$ | 157,176 | $ | (32,328 | ) | $ | 124,848 | ||||||
See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
(Unaudited)
(In thousands, except per share data)
Year Ended December 31, 2006 | ||||||||||||
Pro Forma | ||||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
Revenues | $ | 266,095 | $ | (40,197 | )(e) | $ | 225,898 | |||||
Cost of revenues | 193,747 | (31,920 | )(e) | 161,827 | ||||||||
Gross margin | 72,348 | (8,277 | ) | 64,071 | ||||||||
Selling, general and administrative expenses | 60,199 | (3,699 | )(e) | 56,500 | ||||||||
Operational restructuring expense | 4,130 | 4,130 | ||||||||||
Operating income | 8,019 | (4,578 | ) | 3,441 | ||||||||
Interest expense, net | 16,219 | 92 | (f) | 16,311 | ||||||||
Loss on financial restructuring | 10,047 | 10,047 | ||||||||||
Loss from continuing operations before income taxes | (18,247 | ) | (4,670 | ) | (22,917 | ) | ||||||
Income taxes | 2,019 | (854 | )(g) | 1,165 | ||||||||
Loss from continuing operations | $ | (20,266 | ) | $ | (3,816 | ) | $ | (24,082 | ) | |||
Loss per common share from continuing operations: | ||||||||||||
Basic | $ | (3.20 | ) | $ | (3.78 | ) | ||||||
Diluted | $ | (3.20 | ) | $ | (3.78 | ) | ||||||
Weighted-average common shares outstanding: | ||||||||||||
Basic | 6,616 | 6,616 | ||||||||||
Diluted | 6,616 | 6,616 | ||||||||||
See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
(Unaudited)
(In thousands, except per share data)
Three Months Ended March 31, 2007 | ||||||||||||
Pro Forma | ||||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
Revenues | $ | 66,908 | $ | (9,878 | )(e) | $ | 57,030 | |||||
Cost of revenues | 45,464 | (8,223 | )(e) | 37,241 | ||||||||
Gross margin | 21,444 | (1,655 | ) | 19,789 | ||||||||
Selling, general and administrative expenses | 14,740 | (1,058 | )(e) | 13,682 | ||||||||
Operating income | 6,704 | (597 | ) | 6,107 | ||||||||
Interest expense, net | 4,115 | 26 | (f) | 4,141 | ||||||||
Earnings from continuing operations before income taxes | 2,589 | (623 | ) | 1,966 | ||||||||
Income taxes | 1,055 | (524 | )(g) | 531 | ||||||||
Earnings from continuing operations | $ | 1,534 | $ | (99 | ) | $ | 1,435 | |||||
Earnings per common share from continuing operations: | ||||||||||||
Basic | $ | 0.16 | $ | 0.15 | ||||||||
Diluted | $ | 0.13 | $ | 0.12 | ||||||||
Weighted-average common shares outstanding: | ||||||||||||
Basic | 8,373 | 8,373 | ||||||||||
Diluted | 12,164 | 12,164 | ||||||||||
See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Unaudited)
(a) | Adjustment represents the cash proceeds received at closing net of professional fees and less Meridian’s cash and cash equivalents as of March 31, 2007. | |
(b) | Adjustment represents the removal of Meridian’s assets and liabilities included in the March 31, 2007 historical balance sheet. | |
(c) | Adjustment represents non-contingent payment due from Purchaser due December 2007 less professional fees. This adjustment excludes contingent payments due in December 2008 and 2009. | |
(d) | Adjustment represents approximate gain which would have been recognized had the transaction been completed on March 31, 2007. | |
(e) | Adjustment represents Meridian’s revenues and expenses for the period presented. | |
(f) | Adjustment represents Meridian’s interest income for the period presented. | |
(g) | Adjustment represents income tax expense recognized during the period presented attributable to Meridian’s operations. |