Exhibit Number 99.2
Press Release
PRG-Schultz Announces Closing of HS&A Transaction; Preliminary Q4 2001 Results;
Board Decision to Reclassify Remaining Discontinued Operations As Continuing;
and 2002 Outlook
Company Expects to Report Q4 2001 Earnings Per Diluted Share From Continuing
Operations of $0.08 Prior to Special Charges and Revenue Growth of 12.6% Over
Prior Year Period; 2002 Pro-Forma Earnings Per Diluted Share Expected To be
Approximately $0.65
ATLANTA, Jan. 24 /PRNewswire-FirstCall/ -- PRG-Schultz (Nasdaq: PRGX - news)
announced earlier today that the Company's shareholders approved the Company's
issuance of shares and options to acquire Howard Schultz & Associates, as well
as the election of four new members of the Company's board of directors. The
transaction closed earlier today.
"PRG-Schultz represents the very best in the industry's human talent and
sophisticated technologies," said John Cook, chief executive officer of
PRG-Schultz. "Together, we will expand the scope of our audits, audit more
closely to the time of transactions, and provide an enhanced service offering.
The combined capabilities of PRG-Schultz will enable us to deliver superior
results and maximize findings for our clients, while at the same time driving
profitability."
Preliminary Fourth Quarter 2001 Results
For the fourth quarter of 2001, the Company expects to report approximately $73
million in revenues from continuing operations, representing 12.6% growth over
the prior year period. Prior to special charges, the Company expects to report
earnings per diluted share from continuing operations of $0.08. Continuing
operations in the fourth quarter of 2001 consisted solely of the Accounts
Payable segment. Special charges for the fourth quarter of 2001 are expected to
include costs associated with realignment and integration activities of
approximately $0.03 per diluted share, in line with previous Company guidance; a
non-cash charge of approximately $0.03 per diluted share representing remaining
deferred loan costs associated with the cancellation of the Company's previous
bank credit facility, as previously disclosed; and up to approximately $0.02 per
diluted share associated with a write-down of accounts receivable in connection
with the Chapter 11 filing of one of its clients, Kmart.
The Company's financial results for the fourth quarter of 2001 are still
undergoing both internal verification and external audit by the Company's
independent auditors and, as such, are subject to change. The Company expects to
report complete and final financial results for the fourth quarter and full-year
ended December 31, 2001 on February 18, 2002.
"I am very pleased with our preliminary financial results for the fourth
quarter," commented John Cook, chief executive officer of PRG-Schultz. "Revenue
growth in our Accounts Payable business of approximately 13% was driven
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primarily by strong performance in our US Retail business, which was up
approximately 20% over the fourth quarter of last year. This level of growth in
the current environment is highly encouraging and confirms that the value
proposition we offer our clients remains strong. It also says a great deal about
our management and people, all of whom have worked very hard to deliver strong
operating results during incredibly dynamic times for both the market as a whole
and our company."
Status of Discontinued Operations
The remaining discontinued operations have been for sale since the first quarter
of 2001 and, as such, the one-year period typically provided for under generally
accepted accounting principles to classify operations as discontinued and to
complete divestment is nearly complete. Furthermore, the Company has concluded
that the current negative market conditions are not conducive to receiving a
fair price for these businesses. As such, the newly reconstituted Board of
Directors, which met earlier today, has approved a proposal to take the
Company's three remaining discontinued operations off the market. As a result,
beginning in the first quarter of 2002, the financial results of these three
businesses, Meridian VAT Reclaim, the Communications Division, and the Ship and
Debit business, will be classified as part of the Company's continuing
operations and reported in a separate operating segment called Other Ancillary
Services.
As previously disclosed, the Company realized a net loss on the sale of the
French Taxation Services Business of approximately $54 million in the fourth
quarter 2001.
Outlook
Cook continued, "Management team members from both PRG and HS&A have spent
approximately six months working hand-in-hand to develop a detailed 2002
financial plan for our combined company. Our approach throughout has been to
thoughtfully construct a `zero-based' cost structure to maximize the long-term
growth of the combined companies' revenue and earnings base. We believe we have
successfully identified this steady-state cost structure and developed a
methodical and time-sequenced series of work plans to achieve it by the end of
2002. We have identified for each quarter those anticipated expenses that are
either non-recurring or transitional in nature and we will be measuring these
and discussing them during our regular quarterly financial reporting. We believe
that this process will provide our shareholders with greater insight into our
earnings run-rate going into 2003."
Full-year 2002
Revenues for 2002 are expected to approximate $470 million. Revenues from
Accounts Payable Services are expected to be approximately $420 million and
revenues from Other Ancillary Services are expected to be approximately $50
million.
For 2002, the Company expects to report, prior to non-recurring and transition
expenses, earnings per diluted share of approximately $0.65. Approximately $0.63
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per diluted share, prior to non-recurring and transition expenses, is expected
to be generated from Accounts Payable Services, with the balance of
approximately $0.02 expected to be generated from Other Ancillary Services.
Non-recurring expenses estimated at up to $10 million (or approximately $0.08
per diluted share after-tax) consist of one-time charges related to realignment
and integration activities and include primarily severance and costs associated
with the elimination of duplicate facilities and facilities relocation.
Transition expenses, which represent costs in the process of being eliminated
over the course of the year, are estimated at up to $18 million (or
approximately $0.14 per diluted share after-tax) and relate primarily to
centralization of IT, employment of duplicate personnel for a transition period,
and consultancy services related to integration execution.
First Quarter 2002
Revenues for the first quarter of 2002 are expected to approximate $104 million.
Revenues from Accounts Payable Services are expected to be approximately $90
million, and revenues from Other Ancillary services are expected to be
approximately $14 million.
For the first quarter of 2002, the Company expects to report, prior to
non-recurring and transition expenses, earnings per diluted share of
approximately $0.13. Non-recurring expenses and transition expenses for the
first quarter are estimated at $0.08 per diluted share.
The Company became subject to FAS 142, "Goodwill and Other Intangible Assets,"
effective January 1, 2002. FAS 142 requires that an intangible asset be
amortized over its useful life and that goodwill not be amortized but evaluated
periodically for impairment. Accordingly, the 2002 outlook does not include any
goodwill amortization expense. The 2002 outlook also does not include goodwill
impairment charges, if any, which may be required under FAS 142. To date, the
Company has not made an evaluation or assessment of future potential goodwill
impairment under the rules prescribed in FAS 142.
During 2001, the Company classified Meridian VAT Reclaim, the Communications
Division, and the Ship and Debit business as discontinued operations and
recorded them on the balance sheet at net realizable value. In the first quarter
of 2002, when the Company reclassifies them as continuing operations, a non-cash
gain or loss may result which has not yet been calculated and is not reflected
in the above outlook.
Conference Call and Webcast Information
As previously announced, PRG-Schultz will hold a conference call tomorrow,
January 25, 2002 at 9:00 AM EST to further discuss the information in this press
release and to provide an update with respect to other company developments. To
access the conference call, listeners in the US should dial 888.396.0289 at
least 5 minutes prior to the start of the conference. Listeners outside the US
should dial 712.257.2285. To be admitted to the call, provide the leader's name
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`John Cook' and the passcode `PRGX.' The teleconference will also be audiocast
on the Internet at www.prgx.com . Microsoft Windows Media Player is required to
access the audiocast. Media Player can be downloaded from
www.microsoft.com/windows/mediaplayer .
About PRG-Schultz International, Inc.
Headquartered in Atlanta, PRG-Schultz International, Inc. (PRG-Schultz) is the
world's leading provider of recovery audit services. PRG-Schultz employs
approximately 3,500 employees in 34 countries providing clients with insightful
value to optimize and expertly manage their business transactions. PRG-Schultz's
clients represent a variety of industries including retailing, wholesale
distribution, manufacturing, government, high-tech, and healthcare
organizations. Shares of PRG-Schultz are traded on the NASDAQ National Market
under the symbol PRGX. For additional information visit our web site at
www.prgx.com.
Forward Looking Statements
Statements made in this news release which look forward in time involve risks
and uncertainties and are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such risks and uncertainties
include the following: (i) we may not be able to successfully integrate Howard
Schultz and Associates and achieve the planned post- acquisition synergy cost
savings due to unexpected costs, loss of former Schultz auditors and other
personnel, loss of revenue with respect to shared clients and other reasons,
(ii) if the current economic slowdown continues, our clients may not return to
previous purchasing levels, and as a result we may be unable to recognize
anticipated revenues, (iii) the bankruptcy of any of our larger clients,
including without limitation, potential negative effects of the recent K-Mart
bankruptcy filing could impair then-existing accounts receivable and reduce
expected future revenues from such clients, (iv) since the businesses comprising
the other ancillary services segment have been operated during the last year
primarily for the purpose of preparing them for sale, they may require
additional time and effort of Company executives and additional Company
resources to help them achieve profitability and may distract management from
its focus on the Company's core accounts payable business, and there is no
guaranty that the Company can operate these businesses efficiently and
profitably, (v) the previously announced intention to dispose of the
discontinued operations has in some instances resulted in the loss of key
personnel and diminished operating results in such operations which may be
difficult to reverse going forward, (vi) we may not achieve anticipated expense
savings, (vii) our past and future investments in technology and e-commerce may
not benefit our business, (viii) our Accounts Payable businesses may not grow as
expected, and (ix) our international expansion may prove unprofitable. Other
risks and uncertainties that may affect our business include (i) our ability to
effectively manage our business during our business integration with Howard
Schultz and Associates, (ii) the possibility of an adverse judgment in pending
securities litigation, (iii) the impact of certain accounting pronouncements by
the Financial Accounting Standards Board or the United States Securities and
Exchange Commission, (iv) potential timing issues that could delay revenue
recognition, (v) the effect of strikes, (vi) future weakness in the currencies
of countries in which we transact business, (vii) changes in economic cycles,
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(viii) competition from other companies, (ix) changes in governmental
regulations applicable to us, and other risk factors, detailed in our Securities
and Exchange Commission filings, including the Company's definitive proxy
statement filed December 19, 2001. The Company disclaims any obligation or duty
to update or modify these forward-looking statements.
SOURCE: Profit Recovery Group International, Inc.
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