Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE
PRG-SCHULTZ REPORTS STRONG FIRST QUARTER 2002 FINANCIAL RESULTS
REVENUES OF $110.3 MILLION AND PRO-FORMA DILUTED EPS OF $0.15;
2002 FULL-YEAR OUTLOOK UPDATED
ATLANTA, May 2 /PRNewswire/ -- PRG-Schultz International, Inc. (Nasdaq: PRGX -
news) today announced financial results for the first-quarter 2002 which
exceeded the Company's previously provided outlook.
First Quarter 2002 Financial Highlights
o Diluted EPS from continuing operations was $0.08.
o Diluted EPS from continuing operations excluding non-recurring and
transition expenses of $0.01 and $0.06 per diluted share after-tax,
respectively, was $0.15.
o Revenues totaled $110.3 million:
o Revenues from Accounts Payable Services totaled $97.5 million.
o Revenues from Other Ancillary Services totaled $12.8 million.
o Operating Income margin was 9.9% of revenues. Excluding non-
recurring and transition expenses, operating income margin was
18.2%.
o EBITDA margin was 14.5% of revenues. Excluding non-recurring and
transition expenses, EBITDA margin was 21.2%.
"We are off to a great start this year," commented John Cook, chief executive
officer of PRG-Schultz. "The performance of our Accounts Payable operations in
the U.S. and internationally exceeded expectations, an impressive accomplishment
in our first quarter as a combined company. Our strong first quarter results
were a product of extensive integration preparation, solid execution and the
dedication and focus of our entire team of outstanding professionals. Our
integration process to date has progressed better than we had anticipated, and I
am pleased that we come out of this quarter in a strong position as we continue
to execute on critical aspects of integration throughout this year."
FIRST QUARTER 2002 FINANCIAL RESULTS
Total revenues for the first quarter of 2002 totaled $110.3 million, compared to
$73.8 million in first quarter of 2001. Revenues from Accounts Payable Services
and Other Ancillary Services totaled $97.5 million and $12.8 million,
respectively, for the quarter, compared to $57.7 million and $16.1 million,
respectively, a year ago.
Reported earnings from continuing operations for the first quarter of 2002 were
$5.4 million or $0.08 per diluted share, compared to $0.3 million, or
approximately breakeven, in the first quarter of 2001.
As required under generally accepted accounting principles, interest and
amortization expense related to the Company's convertible notes of approximately
$1.0 million on an after-tax basis has been added back to earnings from
continuing operations for the first quarter of 2002 for the purpose of
calculating diluted earnings per share. Correspondingly, the approximately 16.1
million common shares into which the convertible notes can be exchanged have
been added to the diluted share count.
Operating income (EBIT) totaled $10.9 million, or 9.9 percent of revenues,
compared to $3.0 million, or 4.1 percent of revenues, in the same period a year
ago. Earnings before interest, taxes, depreciation and amortization (EBITDA)
totaled $16.0 million, or 14.5 percent of revenues, compared to $8.6 million, or
11.7 percent of revenues in the first quarter of 2001.
Excluding non-recurring expenses of $1.5 million, or $0.01 per diluted share
after-tax, earnings from continuing operations for the first quarter of 2002
were $6.3 million, or $0.09 per diluted share. The analysts' consensus estimate
as published on May 1, 2002 by First Call, which also excluded non- recurring
charges, was $0.07 per diluted share. Excluding these non-recurring expenses,
and also excluding transition expenses of $7.7 million, or $0.06 per diluted
share after-tax, earnings from continuing operations for the first quarter of
2002 were $11.1 million, or $0.15 per diluted share. Excluding both
non-recurring and transition expenses, operating income totaled $20.1 million,
or 18.2 percent of revenues and EBITDA totaled $23.4 million or 21.2 percent of
revenues.
Schedule 3 provides summary financial results for continuing operations for the
first quarter of 2002 and 2001 by operating segment on both a reported and
pro-forma basis.
On January 24, 2002, the Company announced that it would take its remaining
discontinued operations, consisting of Meridian VAT Reclaim, the Communications
business and the Ship & Debit business, off the market. As a result, beginning
January 1, 2002, the financial results of these three businesses were again
classified as part of the Company's continuing operations and reported in a
separate segment called "Other Ancillary Services." The comparative prior year
operating results of these businesses have also been reclassified to continuing
operations. During the first quarter of 2002, the Company recorded a non-cash,
after-tax gain from discontinued operations of $2.3 million, as required by
generally accepted accounting principles, to return the accounting for these
businesses to the historical cost basis.
CASH FLOW, DSO'S AND CAPITAL EXPENDITURES
Net cash from operating activities for the three months ended March 31, 2002 was
approximately $8.2 million, compared to a net use of cash of approximately $6.1
million in 2001.
Company-wide, DSO's (Days Sales Outstanding) as of March 31, 2002 stood at 53
days, compared to 63 days a year ago. DSO's for Accounts Payable Services were
56 days, compared to 66 days a year ago. Company-wide DSO's were lower than
those for Accounts Payable Services, as two of the three business units which
comprise the Other Ancillary Services reporting segment are on the cash- basis
of revenue recognition in accordance with SAB 101.
Capital expenditures totaled $5.7 million for the first quarter of 2002.
NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 2002, the Company became subject to SFAS 142, "Goodwill and
Other Intangible Assets." SFAS 142 requires that an intangible asset with a
finite life be amortized over its useful life and that an intangible asset with
an infinite life and goodwill not be amortized but evaluated for impairment.
Accordingly, results for the first quarter 2002 do not include any goodwill
amortization. For purposes of comparison, goodwill amortization expense totaled
$2.3 million, or $0.02 per diluted share after- tax, in the first quarter of
2001.
SFAS 142 also provides for mandatory transitional impairment testing of the
Company's recorded goodwill balances as they existed on January 1, 2002, using a
prescribed and complex testing methodology. As of January 1, 2002, the Company
had a consolidated goodwill asset of $196.8 million, consisting of $160.2
million relating to the Accounts Payable Services segment and $36.6 million
relating to the Other Ancillary Services segment. The Company and its valuation
advisors have initiated transitional impairment testing and currently expect to
complete all required transitional testing in the second quarter of 2002. Based
on tentative and preliminary indications, the Company does not believe that
goodwill pertaining to its Accounts Payable Services segment was impaired as of
January 1, 2002, but does believe it is possible that goodwill pertaining to the
Other Ancillary Services Segment may have been impaired as of such date under
the new rules. The extent of such impairment, if any, cannot be currently
estimated and would be recorded as the cumulative effect of a change in
accounting principle, retroactive to January 1, 2002, if finalized testing
subsequently confirms an impairment. Neither the Company's reported results for
the first quarter of 2002 nor the outlook set forth in this press release
include any provision for impaired goodwill.
2002 OUTLOOK
The Company updated its outlook for the full-year 2002 and provided its outlook
for the second quarter 2002 as follows:
Full-year 2002
Revenues for 2002 are expected to be in the range of $472 - $476 million.
Revenues from Accounts Payable Services are expected to be in the range from
$422 - $424 million, and revenues from Other Ancillary Services are expected to
be in the range of $50 - $52 million.
For 2002, the Company expects to report, prior to non-recurring and transition
expenses, earnings per diluted share in the range of $0.66 - $0.69. On a
reported basis, earnings per diluted share are expected to approximate $0.44 -
$0.47.
Non-recurring expenses currently estimated at up to $10.0 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 currently estimated at up
to $18.0 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.
Second Quarter 2002
Revenues for the second quarter of 2002 are expected to be in the range of $111
- - $114 million. Revenues from Accounts Payable Services are expected to be in
the range of $99 - $101 million, and revenues from Other Ancillary services are
expected to be in the range of $12 - $13 million.
For the second quarter of 2002, the Company expects to report, prior to
non-recurring and transition expenses, earnings per diluted share of
approximately $0.13 - $0.15. Non-recurring expenses and transition expenses for
the second quarter are estimated at $0.01 and $0.04 per diluted share after-tax,
respectively. As such, on a reported basis, earnings per diluted share are
expected to be in the range of $0.08 - $0.10.
The Company's outlook for diluted earnings per share for the second quarter and
full-year 2002 is summarized in the following table:
- -------------------------- ------------------ ---------------------------------
Company Outlook: Q2 2002 Full Year 2002
- -------------------------- ------------------ ---------------------------------
Reported Diluted EPS $0.08 - $0.10 $0.44 - $0.47
- -------------------------- ------------------ ---------------------------------
Non-Recurring Expenses $0.01 $0.08
- -------------------------- ------------------ ---------------------------------
Transition Expenses $0.04 $0.14
- -------------------------- ------------------ ---------------------------------
Pro-Forma Diluted EPS $0.13 - $0.15 $0.66 - $0.69
- -------------------------- ------------------ ---------------------------------
CONFERENCE CALL AND WEBCAST INFORMATION
PRG will hold a conference call today, May 2, 2002 at 10 a.m. EDT. Listeners in
the U.S. and Canada should dial 800.374.0518 at least 5 minutes prior to the
start of the conference. Listeners outside the U.S. or Canada should dial
706.643.1837. To access the conference call, provide the leader's name 'John
Cook', reference the Company, and provide 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 and 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, providing clients in over 40 countries with
insightful value to optimize and expertly manage their business transactions.
Using proprietary software and expert audit methodologies, PRG-Schultz industry
specialists review client invoices, purchase orders, receiving documents,
databases, and correspondence files to recover lost profits due to overpayments
or under-deductions. PRG-Schultz is retained on a pay-for- performance basis,
receiving a percentage of each dollar recovered.
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 (HS&A) and achieve the planned post- acquisition synergy
cost savings due to unexpected costs, loss of former HS&A 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 Kmart
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 were operated prior to January 24, 2002
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 desired 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 we may not be able to increase the number of clients utilizing
broad-scope audits, 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
HS&A, (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, including, without limitation, the potential impact of any
goodwill impairment that may be revealed by ongoing transitional impairment
testing under SFAS 142, (iv) potential timing issues that could delay revenue
recognition, (v) future weakness in the currencies of countries in which we
transact business, (vi) changes in economic cycles, (vii) competition from other
companies, (viii) changes in governmental regulations applicable to us, and
other risk factors detailed in our Securities and Exchange Commission filings,
including the Company's prospectus dated April 24, 2002, as filed with the
Securities and Exchange Commission on April 25, 2002. 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,
------------------------------------
2002 2001
---------------- ----------------
Revenues $ 110,286 $ 73,770
Cost of revenues 63,248 41,709
Selling, general and administrative expenses 36,141 29,015
---------------- ----------------
Operating income 10,897 3,046
Interest (expense), net (2,245) (2,498)
---------------- ----------------
Earnings from continuing operations before income taxes and
discontinued operations 8,652 548
Income taxes 3,287 290
---------------- ----------------
Earnings from continuing operations before discontinued
operations 5,365 258
Discontinued operations:
Loss from discontinued operations, net of income taxes - (979)
Gain on disposal from discontinued operations including
operating results for phase-out period, net of income taxes 2,310 -
---------------- ----------------
Gain (loss) from discontinued operations 2,310 (979)
---------------- ----------------
Net earnings (loss) $ 7,675 $ (721)
================ ================
Basic earnings (loss) per share:
Earnings from continuing operations before discontinued
operations $ 0.09 $ -
Discontinued operations 0.04 (0.02)
---------------- ----------------
Net earnings (loss) $ 0.13 $ (0.02)
================ ================
Diluted earnings (loss) per share:
Earnings from continuing operations before discontinued
operations $ 0.08 $ -
Discontinued operations 0.03 (0.02)
---------------- ----------------
Net earnings (loss) $ 0.11 $ (0.02)
================ ================
Weighted average shares outstanding:
Basic 59,531 48,025
================ ================
Diluted 76,612 48,210
================ ================
SCHEDULE 2
PRG-Schultz International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
March 31, December 31,
2002 2001
---------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 20,996 $ 33,334
Receivables:
Contract receivables 65,137 52,851
Employee advances and miscellaneous receivables 4,596 3,921
---------------- -----------------
Total receivables 69,733 56,772
---------------- -----------------
Funds held for client obligations 5,232 8,784
Prepaid expenses and other current assets 5,358 4,860
Deferred income taxes 25,109 21,271
---------------- -----------------
Total current assets 126,428 125,021
Property and equipment 28,387 24,529
Noncompete agreements 165 188
Deferred loan costs 1,280 875
Goodwill 401,554 196,820
Intangible assets 37,403 -
Deferred income taxes 5,118 20,048
Other assets 3,134 10,838
---------------- -----------------
Total assets $ 603,469 $ 378,319
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 11,108 $ 11,564
Current installments of long-term debt 11,352 20
Obligation for client payables 5,232 8,784
Accounts payable and accrued expenses 29,566 22,996
Accrued payroll and related expenses 57,152 37,089
Deferred revenue 2,454 4,581
---------------- -----------------
Total current liabilities 116,864 85,034
Long-term debt, excluding current installments 19,541 -
Convertible notes, net of unamortized discount of $3,874 121,126 121,166
Deferred compensation 4,180 4,024
Other long-term liabilities 1,514 -
---------------- -----------------
Total liabilities 263,225 210,224
---------------- -----------------
Shareholders' equity:
Preferred stock - -
Common stock 66 51
Additional paid-in capital 481,995 320,126
Accumulated deficit (116,071) (123,746)
Accumulated other comprehensive loss (3,904) (6,385)
Less treasury stock at cost (21,024) (21,024)
Unearned portion of restricted stock (818) (927)
---------------- -----------------
Total shareholders' equity 340,244 168,095
---------------- -----------------
Total liabilities and shareholders' equity $ 603,469 $ 378,319
================ =================
SCHEDULE 3
PRG-Schultz International, Inc.
Summary Reported and Pro-Forma Operating Segment Results
(Unaudited)
Quarters Ended March 31
(in millions except earnings per share data)
------------------------------------------------------------------
2002
------------------------------------------------------------------
Non-Recurring Transition
As Reported Expenses Expenses Pro-Forma
------------------ -------------- -------------- -----------------
$ % Rev. $ $ $ % Rev.
- ----------------------- --------- -------- -------------- -------------- --------- -------
Accounts Payable
Services
Revenues $ 97.5 $ - $ - $ 97.5
EBITDA 27.1 27.8% 1.2 1.2 29.5 30.3%
Operating Income 25.4 26.1% 1.2 1.2 27.8 28.5%
- ----------------------- --------- -------- -------------- -------------- --------- -------
Other Ancillary
Services
Revenues $ 12.8 $ - $ - $ 12.8
EBITDA 2.9 22.8% - - 2.9 22.8%
Operating Income 2.6 20.0% - - 2.6 20.0%
- ----------------------- --------- -------- -------------- -------------- --------- -------
Corporate Support
EBITDA $ (14.0) -12.7% $ 0.1 $ 4.9 $ (9.0) -8.1%
Operating Income (17.1) -15.5% 0.3 6.5 (10.3) -9.3%
- ----------------------- --------- -------- -------------- -------------- --------- -------
Total
Revenues $ 110.3 $ - $ - $ 110.3
EBITDA 16.0 14.5% 1.3 6.1 23.4 21.2%
Operating Income 10.9 9.9% 1.5 7.7 20.1 18.2%
Net Income $ 5.4 4.9% $ 0.9 $ 4.8 $ 11.1 10.0%
Diluted Earnings
Per Share $ 0.08 $ 0.01 $ 0.06 $ 0.15
Diluted Shares 76.6 76.6 76.6 76.6
- -------------------- -- --------- -------- -------------- -------------- --------- -------
SCHEDULE 3 (cont.)
PRG-Schultz International, Inc.
Summary Reported and Pro-Forma Operating Segment Results
(Unaudited)
Quarters Ended March 31
(in millions except earnings per share data)
-----------------------------------------------------------------------
2001
-----------------------------------------------------------------------
Non-Recurring Goodwill
As Reported Expenses Amortization Pro-Forma
------------------ ---------------- ----------------- -----------------
$ % Rev. $ $ $ % Rev.
- ----------------------- --------- -------- ---------------- ----------------- --------- -------
Accounts Payable
Services
Revenues $ 57.7 $ - $ - $ 57.7
EBITDA 13.5 23.4% 0.2 - 13.7 23.7%
Operating Income 10.1 17.4% 0.2 1.9 12.2 21.1%
- ----------------------- --------- -------- ---------------- ----------------- --------- -------
Other Ancillary
Services
Revenues $ 16.1 $ - $ - $ 16.1
EBITDA 3.4 21.1% 0.2 - 3.6 22.3%
Operating Income 2.6 16.4% 0.2 0.4 3.2 19.8%
- ----------------------- --------- -------- ---------------- ----------------- --------- -------
Corporate Support
EBITDA $ (8.3) -11.3% $ 0.6 $ - $ (7.7) -10.4%
Operating Income (9.7) -13.1% 0.6 - (9.1) -12.4%
- ----------------------- --------- -------- ---------------- ----------------- --------- -------
Total
Revenues $ 73.8 $ - $ - $ 73.8
EBITDA 8.6 11.7% 1.0 - 9.6 13.0%
Operating Income 3.0 4.1% 1.0 2.3 6.3 8.5%
Net Income $ 0.3 0.4% $ 0.5 $ 1.1 $ 1.9 2.6%
Diluted Earnings
Per Share $ - $ 0.01 $ 0.02 $ 0.03
Diluted Shares 48.2 48.2 48.2 48.2
- -------------------- -- --------- -------- ---------------- ----------------- --------- -------
SOURCE: PRG-Schultz International, Inc.
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