EXHIBIT 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE
PRG-SCHULTZ REPORTS FOURTH QUARTER AND
FULL-YEAR 2004 FINANCIAL RESULTS
RESULTS REFLECT CONTINUING SIGNIFICANT REDUCTIONS IN
COST OF REVENUE AS A PERCENTAGE OF REVENUES;
QUARTERLY IMPROVEMENT OVER BOTH FOURTH QUARTER 2003 AND THIRD QUARTER 2004
ATLANTA, MARCH 3, 2005 - PRG-Schultz International, Inc. (Nasdaq: PRGX) today
announced financial results for the fourth quarter and full-year 2004, and
provided outlook for the first quarter and full-year 2005.
FOURTH QUARTER 2004 HIGHLIGHTS
o Revenues totaled $93.7 million
- Revenues from Accounts Payable Services totaled $84.1 million
- Revenues from Meridian VAT Reclaim totaled $9.6 million
o Diluted loss per share from continuing operations was ($1.19) for the
quarter compared with diluted loss per share from continuing operations of
($2.74) during the fourth quarter of 2003
o Included in the results from continuing operations were:
- $1.23 per share -- Non-cash charge of $76.0 million to provide a
valuation allowance on substantially all of the Company's remaining
deferred tax assets
- $0.02 per share -- Costs relating to the Company's Sarbanes-Oxley
compliance initiative of $2.5 million before-tax, or $1.5 million
after-tax
- $0.02 per share -- Costs relating to the Company's strategic cost
reduction initiatives of $2.1 million before-tax, or $1.3 million
after-tax
- $0.01 per share -- One-time income tax charge of $700,000 resulting
from the Company's decision to repatriate approximately $10 million of
cash to the U.S., pursuant to a recent tax law change
- $0.01 per share -- $390,000 of before-tax costs relating to the
Company's analysis of strategic alternatives and a before-tax charge
of $247,000 reflecting an offer to settle a preference claim in a
client bankruptcy
o Cost of revenue was approximately 60% of revenues as compared to
approximately 63% in the fourth quarter of 2003 and 64% in the third
quarter of 2004. U.S. cost of revenue was approximately 56% of U.S.
revenues, as compared to approximately 61% in the fourth quarter of 2003.
(See attached Schedule 7 for a reconciliation of total revenues and cost of
revenue)
o Net loss was (81%) of revenues for the quarter compared to a net loss that
was (175%) of revenues a year ago
o Earnings before interest, taxes, depreciation and amortization (EBITDA) was
12.2% of revenues for the quarter, compared to 6.3% a year ago (see
Schedule 6 for a reconciliation of net earnings (loss) to EBITDA, a
non-GAAP financial measure)
o 27 new international clients were signed in the fourth quarter, bringing
the Company's total new international client signings to 44 since June 2004
John Cook, Chairman and Chief Executive Officer of PRG-Schultz stated, "We are
pleased that we continue to make significant progress in improving the Company's
fundamentals. Our improved operating performance continues to reflect the
strategic initiatives we began in 2003. This is our best cost of revenue
performance since the completion of our merger with Howard Schultz & Associates
three years ago. The continued improvements in our cost of revenue, together
with the 44 new international clients added during the last six months of 2004,
provide a solid base for 2005 and give us confidence in our future growth.
"We believe that demand for PRG-Schultz's comprehensive recovery audit services
continues to grow. Our recent contract with the State of Arizona, which includes
our first audit of Medicare claims, demonstrates the new opportunities for audit
recovery services that exist in the U.S. We are aggressively working to secure
audits in additional states and expect to be successful in obtaining more in the
near future.
"Additionally, we are constantly looking for opportunities to enhance the
product and service offerings we provide to our clients. Examples include our
freight rate audit program, which is starting to deliver exciting results; our
alliance with a national state and local tax consulting firm that offers our
clients additional expertise on state and local tax issues; and pharmacy
third-party payment review. In addition, we have developed a business process to
manage credit card receipts for retail clients, which facilitates automated
processing of requests from financial institutions for proof of signature and
fraud detection, among other things."
The Company today announced that it was recently awarded a multi-year contract
for the management of credit card receipts from an existing client, one of the
largest grocery companies in the U.S. PRG-Schultz expects the contract to
produce annual revenue of approximately $2 million.
NON-CASH ACTIVITIES - INCREASE IN DEFERRED TAX VALUATION ALLOWANCE
The Company recorded a non-cash charge of $76.0 million, or $1.23 per share, to
provide a valuation allowance on substantially all of its remaining net deferred
tax assets at December 31, 2004. Statement of Financial Accounting Standards
(SFAS) No. 109 requires an assessment of a company's current and previous
performance and other relevant factors when determining the need for a valuation
allowance. Companies are required to place significant weight on objective
negative facts such as recent cumulative losses, and substantially less weight,
if any, on subjective positive facts, such as future income projections.
Therefore, factors such as current and previous operating losses, including the
Company's goodwill impairment of $207 million in 2003, are given substantially
more weight than the outlook for future profitability.
Jim Moylan, Chief Financial Officer of PRG-Schultz, said, "Recording this
non-cash charge is the result of a strict interpretation of SFAS 109, a
technical accounting standard for income taxes. We do not believe that this
non-cash charge reflects on our underlying fundamentals, our operating
performance, or our future prospects. Over time, we believe we will fully
utilize these assets as our results continue to improve, and future results will
benefit from a significantly lower tax provision as a result of the charge."
FOURTH QUARTER 2004 FINANCIAL RESULTS
Revenues for the fourth quarter of 2004 totaled $93.7 million, compared to $95.9
million in the fourth quarter of 2003. Revenues from Accounts Payable Services
totaled $84.1 million for the quarter compared to $87.2 million a year ago.
Revenues from the Company's U.S. Accounts Payable Services operations were $53.0
million, compared to $53.5 million in the fourth quarter of 2003. Revenues from
the Company's international Accounts Payable service operations were $31.1
million, a reduction of 8% compared to the fourth quarter 2003. Revenues from
Meridian VAT Reclaim for the fourth quarter of 2004 were $9.6 million, compared
to $8.7 million a year ago, reflecting an 11% improvement year-over-year.
Cost of revenue was $56.2 million, or approximately 60% of revenues for the
fourth quarter of 2004, compared to $59.9 million, or approximately 63% of
revenues in the same period last year and $54.2 million, or approximately 64% of
revenues in the third quarter of 2004. The Company's cost of revenue performance
reflects the continued success of the Company's strategic initiatives.
Net loss for the fourth quarter of 2004 was ($75.7) million, or ($1.23) per
share, compared to a net loss of ($168.1) million, or ($2.73) per share in the
2003 period. Net loss from continuing operations for the fourth quarter of 2004
was ($73.5) million, or ($1.19) per diluted share, compared to a net loss of
($168.3) million, or ($2.74) per diluted share, during the fourth quarter of
2003. Included in the fourth quarter 2004 results was a ($76.0) million, or
($1.23) per share, non-cash valuation allowance to reduce the recorded value of
deferred tax assets and a charge of ($0.7) million, or ($0.01) per share,
reflecting a cash income tax provision related to a distribution of
approximately $10 million from a foreign subsidiary in accordance with the
American Jobs Creation Act of 2004. The prior year period included impairment
charges totaling ($206.9) million (($168.0) million after-tax), or ($2.73) per
diluted share, relating to goodwill and other intangible assets.
Results in the fourth quarter of 2004 included after-tax charges of ($1.5)
million, or ($0.02) per diluted share, relating to the Company's compliance
costs for Sarbanes-Oxley Section 404 compliance and ($1.3) million, or ($0.02)
per diluted share, relating to previously disclosed strategic cost reduction
initiatives. Also included in the quarter's results was ($0.01) per share for
two items totaling $637,000 ($395,000 after-tax) -- $390,000 ($242,000
after-tax) for costs relating to the Company's analysis of strategic
alternatives, and $247,000 ($153,000 after-tax) reflecting an offer to settle a
preference claim in a client bankruptcy.
EBITDA for the fourth quarter of 2004 totaled $11.4 million, or 12.2% of
revenues, compared to $6.0 million, or 6.3% of revenues, in the fourth quarter
of 2003. (See Schedule 6 for a reconciliation of net earnings (loss) to EBITDA,
a non-GAAP financial measure).
Schedule 4 provides summary financial results from continuing operations for the
fourth quarters of 2004 and 2003 by operating segment.
CASH FLOW, DSOS AND CAPITAL EXPENDITURES
Net cash provided by operating activities for the fourth quarter of 2004 was
$8.5 million, compared to $6.4 million in the fourth quarter of 2003. Higher
EBITDA was partially offset by increased working capital needs, accounting for
the difference in net operating cash results.
Company-wide, Days Sales Outstanding (DSOs) at the end of the fourth quarter of
2004 stood at 55 days, compared to 50 days a year ago.
Capital expenditures totaled approximately $2.2 million for the fourth quarter
of 2004, compared to $4.3 million in the same period a year ago.
FULL-YEAR 2004 FINANCIAL RESULTS
Revenues for full-year 2004 totaled $356.9 million, compared to $375.7 million
in 2003. Revenues from Accounts Payable Services and Meridian VAT totaled $315.5
million and $41.4 million, respectively, for full-year 2004, compared to $335.3
million and $40.4 million, respectively, for 2003.
Cost of revenue for 2004 was $224.5 million or approximately 63% of revenues for
full-year 2004, as compared to $233.7 million or 62% of revenues in 2003.
Net loss for full-year 2004 was ($72.3) million, or ($1.18) per diluted share,
compared to a net loss of ($160.8) million, or ($2.60) per diluted share, in
2003. Net loss from continuing operations for full-year 2004 was ($77.5)
million, or ($1.26) per diluted share. This compares to net loss from continuing
operations of ($162.6) million, or ($2.63) per diluted share, in 2003. Fiscal
2004 included the valuation allowance on deferred tax assets of ($76.0) million,
or ($1.23) per share. Fiscal 2003 included impairment charges totaling $206.9
million (($168.0) million after-tax), or ($2.72) per diluted share, relating to
goodwill and other intangible assets.
EBITDA for full-year 2004 totaled $23.3 million, or 6.5% of revenues, compared
to $34.1 million, or 9.1% of revenues, in 2003 (See Schedule 6 for a
reconciliation of net earnings (loss) to EBITDA, a non-GAAP financial measure).
2004 EBITDA was reduced by $12.4 million of costs associated with the Company's
strategic initiatives and 2003 EBITDA was reduced by $11.0 million of related
costs.
Schedule 5 provides summary financial results from continuing operations for
full-year 2004 and 2003 by operating segment.
CASH FLOW AND CAPITAL EXPENDITURES
Net cash provided by operating activities for the full-year ended December 31,
2004 was approximately $10.0 million, compared to $28.0 million in the same
period of 2003. 2003 earnings from continuing operations, before the $168
million after-tax non-cash goodwill impairment charge, were higher than 2004
earnings from continuing operations. In addition, working capital increased in
2004.
Capital expenditures totaled approximately $11.5 million for full-year 2004,
compared to $11.7 million in the same period a year ago. Amounts for both years
exclude capital expenditures related to the Company's Communications Services
operations, which were declared discontinued operations during the fourth
quarter of 2003 and subsequently sold on January 16, 2004.
BANK CREDIT FACILITY
As previously announced on November 30, 2004, the Company signed a new $30
million credit facility with Bank of America through May 26, 2006. This new
credit facility replaces a previously structured three-bank syndicated facility,
led by Bank of America, which expired per its original terms on December 31,
2004. The new facility funds the Company's working capital requirements and
provides liquidity for the Company's normal operations. The facility currently
offers total availability of $25 million, and an additional $5 million becomes
available on July 1, 2005 if certain financial performance milestones are
achieved. There were no amounts borrowed under the facility at December 31,
2004, and the Company was using $5 million in the form of a letter of credit as
collateral in its VAT business. There was $20 million of availability under the
facility as of December 31, 2004.
PRELIMINARY SETTLEMENT IN CLASS ACTION LAWSUIT
On February 8, 2005, the Company entered into a Stipulation of Settlement of the
shareholder lawsuit (most recently disclosed on Form 10-Q on November 5, 2004).
On February 10, 2005, the United States District Court for the Northern District
of Georgia, Atlanta Division, preliminarily approved the terms of the Settlement
and, if approved by the Court, is not expected to require any further financial
contribution by the Company. Consistent with the Federal Rules of Civil
procedure, the class will be provided notice of the Settlement and given the
right to object or opt-out of the Settlement. The Court will hold a final
approval hearing on May 26, 2005. Final settlement of the consolidated class
action is subject to final approval by the Court.
DISCONTINUED OPERATIONS
Results from Discontinued Operations for the quarter ended December 31, 2004
were a loss of ($2.2) million, or ($0.04) per share after-tax, compared to a
gain of $0.2 million, or $0.01 per share after-tax, in the year earlier period.
As part of the December 2001 sale of the Company's French Taxation Services
business ("ALMA"), certain warranties were provided to the buyer. On December
30, 2004, the Company entered into an agreement with the buyer requiring a
payment of approximately $4.7 million to resolve the buyer's warranty claims and
a commission dispute with one of the Company's subsidiaries. The $2.2 million
expense recorded in the fourth quarter represents the amount not previously
accrued to provide for these claims. This settlement agreement discharges all
future obligations relative to the sale of ALMA. The $0.2 million gain in the
quarter ended December 31, 2003 was related to earnings from the Company's
Communications Services Operations, which was sold on January 16, 2004. For the
full-year 2004, Discontinued Operations showed a gain of $5.2 million, or $0.08
per share after-tax, compared to a gain of $1.8 million, or $0.03 per share
after-tax, for 2003. For 2004, an after-tax gain of $8.3 million on the sale of
the Communications Services Operations was partially offset by the $3.1 million
accrued for the ALMA settlement during the year. In 2003, the gain resulted from
earnings attributable to the Company's Communications Services Operations of
$1.3 million in addition to $0.5 million in royalties from the sale of the
Logistics Management Services business.
SARBANES-OXLEY COMPLIANCE UPDATE
Management, with the oversight of the Audit Committee of the Board of Directors,
is continuing its work, which would allow it to make certification of compliance
under Section 404 of the Sarbanes-Oxley Act of 2002. In its work to date, the
Company has identified a number of deficiencies in its internal control over
financial reporting, some of which are deemed significant, but has not yet
concluded whether these deficiencies individually or in the aggregate would
constitute a "material weakness" in its internal control over financial
reporting. The Company expects to rely upon the S.E.C.'s exemptive order
permitting companies to file the Section 404 compliance report and
certifications within 45 days of March 16.
OUTLOOK FOR THE FIRST QUARTER OF 2005, FULL-YEAR 2005
For the first quarter of 2005, consolidated revenues are expected to be
approximately 10% below revenue in the first quarter of 2004, due primarily to
several non-recurring audits that took place in the first quarter of last year
and, to a lesser extent, the timing of audit starts this year. However, earnings
before tax from continuing operations in the first quarter are expected to be
flat to slightly better than the first quarter of 2004, due to the Company's
expectation of continued significant reductions in cost of revenue.
Consolidated revenues for the full year 2005 are expected to increase in the
mid-single digit range over full year 2004 results. The Company noted that it
expects a substantial improvement in earnings in 2005, as compared to 2004
results, due to growth in international operations and in new claims categories
in the U.S, as well as expected significant reductions in cost of revenue, and
an expected reduction of its effective tax rate as a result of the previously
mentioned deferred tax impairment taken during the fourth quarter of 2004. The
Company expects EBITDA to improve substantially in 2005, due to growth in
international operations and in new claims categories in the U.S, as well as
expected significant reductions in costs related to the Company's strategic
initiatives. The costs related to these strategic initiatives are expected to be
approximately $10 million less in 2005 than they were in 2004. 2005 results will
not be burdened by much of the non-operations cost incurred during the fourth
quarter, and will be improved by the annualized impact of the cost reductions
achieved during 2004; the improvement attributable to these combined items is
expected to be approximately $5-6 million in 2005. Depreciation expense,
interest expense and capital expenditures are expected to be approximately the
same in 2005 as the corresponding amounts in 2004. The company expects its
effective tax rate to be approximately 10% for the full year 2005.
EVALUATION OF STRATEGIC ALTERNATIVES UPDATE
As previously announced on October 21, 2004, as a result of several inquiries
received by the Company, PRG-Schultz's Board of Directors decided to explore the
Company's strategic alternatives and determine the course of action that is in
the best interests of the Company and its shareholders. The Company noted that
the Board's process is actively ongoing and that no decision with respect to any
specific alternative has been reached. On February 8, 2005, at a regularly
scheduled meeting of the Board of Directors, the Board created a new special
committee of the independent directors for the purpose of analyzing the
Company's strategic alternatives and to evaluate and approve such potential
alternatives. The Board, together with its financial advisor, CIBC World Markets
Corp., continues to evaluate the Company's strategic options, which include
among other things a possible sale. The Company noted that there can be no
assurance that any transaction or other corporate action will result from this
effort.
CONFERENCE CALL AND WEBCAST INFORMATION
PRG-Schultz will hold a conference call today, March 3, 2005, at 10:00 a.m. ET.
Listeners in the U.S. and Canada should dial 888-396-0289 at least 5-10 minutes
prior to the start of the conference. Listeners outside the U.S. or Canada
should dial 773-799-3995. To be admitted to the call, verbally supply the
passcode 'PRGX.' A playback of the call will be available one hour after the
conclusion of the live call, extending until midnight on March 17, 2005. To
directly access the replay, dial 866-386-1322 (US / Canadian participants) or
203-369-0408 (international participants).
The live teleconference will also be audiocast on the Internet at www.prgx.com
(go to the Investor Relations home page). Please note that the audiocast is
'listen-only.' Microsoft Windows Media Player is required to access the
audiocast and can be downloaded from www.microsoft.com/windows/mediaplayer.
A copy of this press release is also available at www.prgx.com under the heading
"Investor Relations - News."
ABOUT PRG-SCHULTZ INTERNATIONAL, INC.
Headquartered in Atlanta, PRG-Schultz International, Inc. (PRG-Schultz) is the
world's leading profit improvement firm. PRG-Schultz employs approximately 2,800
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.
FORWARD LOOKING STATEMENTS
Statements made in this news release that look forward in time, including
statements regarding expected 2005 performance, 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) until the Board has completed the process of exploring strategic
alternatives, the Company will incur additional expense, and management's time
and attention could be diverted from the operation of the business, (ii) our
strategic business initiatives may not provide expected benefits, (iii) we have
violated our debt covenants in the past and may inadvertently do so in the
future, which could result in an acceleration of our outstanding debt, (iv) the
potential bankruptcy of any of our larger clients, or of any such clients'
larger customers or suppliers could adversely affect our operations and
liquidity, (v) a representative of a former client currently in bankruptcy has
demanded repayment of a portion of the $5.5 million received from a bankrupt
client during the quarter ended March 31, 2003; these payments may be
recoverable as "preference payments" under United States bankruptcy laws, (vi)
proposed legislative and regulatory initiatives with respect to European value
added taxation could reduce material portions of the revenues of Meridian VAT
Reclaim, (vii) our Accounts Payable Services businesses may not grow as
expected, and we may not be able to increase the number of clients, particularly
commercial clients, utilizing contract compliance audits, (viii) our
international expansion may prove unprofitable or may take longer to accomplish
than we anticipate, (ix) in the Company's pending shareholder derivative
litigation, a preliminary settlement between the parties which has been accepted
by the judge in the case, may not receive final court approval, (x) future
weakness in the currencies of countries in which we transact business could
adversely affect the profitability of our international operations, (xi) our new
service providing management of credit card signature receipts may not provide
expected revenues, (xii) expected revenues from new international clients may be
delayed for reasons beyond the Company's control, and other risk factors
discussed in our Securities and Exchange Commission filings, including the
Company's Form 10-K as filed with the Securities and Exchange Commission on
March 5, 2004, and Form 10-Q as filed with the Securities and Exchange
Commission on November 5, 2004. The Company disclaims any obligation or duty to
update or modify these forward-looking statements.
# # #
CONTACT: James E. Moylan, Jr.
Executive Vice President
and Chief Financial Officer
(770) 779-6605
SCHEDULE 1
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS TWELVE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------------------- ------------------------------
2004 2003 2004 2003
-------------- -------------- -------------- -------------
Revenues $ 93,681 $ 95,864 $ 356,873 $ 375,701
Cost of revenues 56,155 59,934 224,527 233,689
Selling, general and administrative expenses 30,238 33,858 125,113 124,240
Impairment charges - 206,923 - 206,923
-------------- -------------- -------------- -------------
Operating income (loss) 7,288 (204,851) 7,233 (189,151)
Interest (expense), net (2,172) (2,284) (8,549) (8,948)
-------------- -------------- -------------- -------------
Earnings (loss) from continuing operations before income taxes
and discontinued operations 5,116 (207,135) (1,316) (198,099)
Income tax expense (benefit) 78,651 (38,793) 76,206 (35,484)
-------------- -------------- -------------- -------------
Loss from continuing operations before discontinued
operations (73,535) (168,342) (77,522) (162,615)
Discontinued operations:
Earnings from discontinued operations, net of income taxes - 240 - 1,267
Gain (loss) on disposal of discontinued operations including
operating results for phase-out period, net of income taxes (2,172) - 5,177 530
-------------- -------------- -------------- -------------
Earnings (loss) from discontinued operations (2,172) 240 5,177 1,797
-------------- -------------- -------------- -------------
Net loss $ (75,707) $ (168,102) $ (72,345) $ (160,818)
============== ============== ============== =============
Basic loss per share:
Loss from continuing operations before discontinued operations $ (1.19) $ (2.74) $ (1.26) $ (2.63)
Discontinued operations (0.04) 0.01 0.08 0.03
-------------- -------------- -------------- -------------
Net loss $ (1.23) $ (2.73) $ (1.18) $ (2.60)
============== ============== ============== =============
Diluted loss per share:
Loss from continuing operations before discontinued operations $ (1.19) $ (2.74) $ (1.26) $ (2.63)
Discontinued operations (0.04) 0.01 0.08 0.03
-------------- -------------- -------------- -------------
Net loss $ (1.23) $ (2.73) $ (1.18) $ (2.60)
============== ============== ============== =============
Weighted average shares outstanding:
Basic 61,837 61,513 61,760 61,751
============== ============== ============== =============
Diluted 61,837 61,513 61,760 61,751
============== ============== ============== =============
SCHEDULE 2
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
DECEMBER 31, DECEMBER 31,
2004 2003
------------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 12,596 $ 26,658
Restricted cash 120 5,758
Receivables:
Contract receivables 57,514 53,185
Employee advances and miscellaneous receivables 3,490 3,573
------------------- ------------------
Total receivables 61,004 56,758
------------------- ------------------
Funds held for client obligations 30,920 18,690
Prepaid expenses and other current assets 3,267 3,779
Deferred income taxes 1,951 9,211
Current assets of discontinued operations - 3,179
------------------- ------------------
Total current assets 109,858 124,033
Property and equipment 26,473 29,466
Goodwill 170,684 170,619
Intangible assets 30,232 31,617
Deferred income taxes - 65,370
Other assets 3,827 3,152
Long-term assets of discontinued operations - 1,792
------------------- ------------------
Total assets $ 341,074 $ 426,049
=================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ - $ 31,600
Obligation for client payables 30,920 18,690
Accounts payable and accrued expenses 24,395 25,780
Accrued payroll and related expenses 41,791 40,256
Deferred revenue 6,466 4,601
Current liabilities of discontinued operations - 1,391
------------------- ------------------
Total current liabilities 103,572 122,318
Convertible notes, net of unamortized discount of $1,714 in 2004 and
$2,605 in 2003 123,286 122,395
Deferred compensation 2,195 3,695
Deferred income taxes 4,201 -
Other long-term liabilities 5,098 4,511
------------------- ------------------
Total liabilities 238,352 252,919
------------------- ------------------
Shareholders' equity:
Preferred stock - -
Common stock 68 67
Additional paid-in capital 493,532 492,878
Accumulated deficit (343,841) (271,496)
Accumulated other comprehensive income 1,740 616
Less treasury stock at cost (48,710) (48,710)
Unearned portion of restricted stock (67) (225)
------------------- ------------------
Total shareholders' equity 102,722 173,130
------------------- ------------------
Total liabilities and shareholders' equity $ 341,074 $ 426,049
=================== ==================
SCHEDULE 3
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
YEAR ENDED
DECEMBER 31,
------------------------------------
2004 2003
--------------- ----------------
Cash flows from operating activities:
Net loss $ (72,345) $ (160,818)
Earnings from discontinued operations - (1,267)
Gain on disposal of discontinued operations (5,177) (530)
--------------- ----------------
Loss from continuing operations (77,522) (162,615)
Adjustments to reconcile loss from continuing operations to
net cash provided by operating activities:
Impairment charges - 206,923
Increase in deferred tax valuation allowance 76,006 -
Depreciation and amortization 18,094 17,827
Restricted stock compensation expense 4 246
Loss on sale of property and equipment 187 258
Deferred compensation expense (1,500) (316)
Deferred income taxes (4,014) (38,377)
Income tax benefit relating to stock option exercises 17 155
Changes in operating assets and liabilities:
Restricted cash securing letter of credit obligation 6,203 (5,758)
Receivables (2,563) 16,467
Prepaid expenses and other current assets (418) 197
Other assets (411) 699
Accounts payable and accrued expenses (7,103) (343)
Accrued payroll and related expenses 735 (9,872)
Deferred revenue 1,682 2,111
Other long-term liabilities 587 396
--------------- ----------------
Net cash provided by operating activities 9,984 27,998
--------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment, net of sale proceeds (11,532) (11,695)
Proceeds from sale of certain discontinued operations 19,116 -
--------------- ----------------
Net cash provided by (used in) investing activities 7,584 (11,695)
--------------- ----------------
Cash flows from financing activities:
Net repayments of debt (31,600) (290)
Payments for issuance costs on convertible notes (21) (12)
Payments for deferred loan costs (430) -
Net proceeds from common stock issuances 792 973
Purchase of treasury shares - (7,528)
--------------- ----------------
Net cash used in financing activities (31,259) (6,857)
--------------- ----------------
Net cash (used in) provided by discontinued operations (1,146) 703
Effect of exchange rate changes on cash and cash equivalents 775 1,649
--------------- ----------------
Net change in cash and cash equivalents (14,062) 11,798
Cash and cash equivalents at beginning of period 26,658 14,860
--------------- ----------------
Cash and cash equivalents at end of period $ 12,596 $ 26,658
=============== ================
SCHEDULE 4
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
SUMMARY OPERATING SEGMENT RESULTS FROM CONTINUING OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31,
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
2004 2003
------------------------------ ---------------------------
$ % REV. $ % REV.
---------------- ----------- --------------- ---------
ACCOUNTS PAYABLE SERVICES
- -------------------------
Revenues $84,045 $87,143
Operating income (loss) $15,814 18.8% ($180,949) -207.6%
- ----------------------------------------------------------------------------------------------------------
MERIDIAN VAT RECLAIM
- --------------------
Revenues $9,636 $8,721
Operating income (loss) $961 10.0% ($7,233) -82.9%
- ----------------------------------------------------------------------------------------------------------
CORPORATE SUPPORT
- -----------------
Operating loss ($9,487) -10.1% ($16,669) -17.4%
- ----------------------------------------------------------------------------------------------------------
TOTAL
- -----
Revenues $93,681 $95,864
Operating income (loss) $7,288 7.8% ($204,851) -213.7%
Loss from continuing operations ($73,535) -78.5% ($168,342) -175.6%
Diluted loss per share from continuing operations ($1.19) ($2.74)
Diluted shares 61,837 61,513
- ----------------------------------------------------------------------------------------------------------
Notes:
Corporate Support Operating Loss % shown as a % of Total Revenues
Loss from Continuing Operations and Diluted Loss Per Share from Continuing
Operations are prior to Earnings (Loss) from Discontinued Operations.
SCHEDULE 5
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
SUMMARY OPERATING SEGMENT RESULTS FROM CONTINUING OPERATIONS
(UNAUDITED)
TWELVE MONTHS ENDED DECEMBER 31,
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
2004 2003
------------------------------ ---------------------------
$ % REV. $ % REV.
---------------- ----------- --------------- ---------
ACCOUNTS PAYABLE SERVICES
- -------------------------
Revenues $315,505 $335,328
Operating income (loss) $45,667 14.5% ($137,977) -41.1%
- -----------------------------------------------------------------------------------------------------------
MERIDIAN VAT RECLAIM
- --------------------
Revenues $41,368 $40,373
Operating income $8,987 21.7% $3,702 9.2%
- -----------------------------------------------------------------------------------------------------------
CORPORATE SUPPORT
- -----------------
Operating loss ($47,421) -13.3% ($54,876) -14.6%
- -----------------------------------------------------------------------------------------------------------
TOTAL
- -----
Revenues $356,873 $375,701
Operating income (loss) $7,233 2.0% ($189,151) -50.3%
Loss from continuing operations ($77,522) -21.7% ($162,615) -43.3%
Diluted loss per share from continuing operations ($1.26) ($2.63)
Diluted shares 61,760 61,751
- -----------------------------------------------------------------------------------------------------------
Notes:
Corporate Support Operating Loss % shown as a % of Total Revenues
Loss from Continuing Operations and Diluted Loss Per Share from Continuing
Operations are prior to Earnings (Loss) from Discontinued Operations.
SCHEDULE 6
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF NET LOSS TO EBITDA
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS TWELVE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
----------------------------- ------------------------------
2004 2003 2004 2003
------------- ------------- ------------- -------------
Reconciliation of net loss to EBITDA:
- ------------------------------------
Net loss $ (75,707) $(168,102) $ (72,345) $ (160,818)
Adjust for:
Earnings (loss) from discontinued operations (2,172) 240 5,177 1,797
------------- ------------- ------------- -------------
Earnings (loss) from continuing operations (73,535) (168,342) (77,522) (162,615)
Adjust for:
Income taxes 78,651 (38,793) 76,206 (35,484)
Interest 2,172 2,284 8,549 8,948
Depreciation and amortization 4,157 3,952 16,091 16,336
Impairment charges - 206,923 - 206,923
------------- ------------- ------------- -------------
EBITDA $ 11,445 $ 6,024 $ 23,324 $ 34,108
============= ============= ============= =============
Total revenues $ 93,681 $ 95,864 $ 356,873 $ 375,701
EBITDA as % of Revenues 12.2% 6.3% 6.5% 9.1%
In this press release, the Company has provided a financial measure, EBITDA,
defined as earnings from continuing operations before taxes, interest,
depreciation and amortization, as well as impairment charges disclosed herein.
EBITDA is considered a 'non-GAAP' financial measure within the meaning of
Regulation G and may not be similar to EBITDA measures employed by other
companies. EBITDA is presented solely as a supplemental disclosure because
management believes it to be an effective measure of the operating performance
of the Company's core business activities. EBITDA is not provided as a measure
of liquidity and should not be viewed as such. EBITDA should not be considered
in isolation of, or as a substitute for, other measures for determining
operating performance that are calculated in accordance with GAAP. This schedule
provides a reconciliation of net loss to EBITDA in accordance with Securities
and Exchange Commission guidance.
SCHEDULE 7
PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF TOTAL REVENUES AND COST OF REVENUES
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS TWELVE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
--------------------------------- --------------------------------
2004 2003 2004 2003
--------------- --------------- -------------- --------------
Revenues:
U.S. Accounts Payable Services $ 52,945 $ 53,521 $ 203,193 $ 218,395
International Accounts Payable Services 31,100 33,622 112,312 116,933
Meridian VAT Reclaim 9,636 8,721 41,368 40,373
--------------- --------------- -------------- --------------
Total revenues $ 93,681 $ 95,864 $ 356,873 $ 375,701
=============== =============== ============== ==============
Cost of revenues:
U.S. Accounts Payable Services $ 29,609 $ 32,402 $ 121,451 $ 135,438
International Accounts Payable Services 20,747 21,777 78,931 75,988
Meridian VAT Reclaim 5,799 5,755 24,145 22,263
--------------- --------------- -------------- --------------
Total cost of revenues $ 56,155 $ 59,934 $ 224,527 $ 233,689
=============== =============== ============== ==============
Cost of revenues as a percentage of revenue:
U.S. Accounts Payable Services 55.9% 60.5% 59.8% 62.0%
International Accounts Payable Services 66.7% 64.8% 70.3% 65.0%
Meridian VAT Reclaim 60.2% 66.0% 58.4% 55.1%
--------------- --------------- -------------- --------------
Total cost of revenues as a percentage of revenue 59.9% 62.5% 62.9% 62.2%
=============== =============== ============== ==============