EXHIBIT 99.1
PRG-SCHULTZ ANNOUNCES SECOND QUARTER 2006 FINANCIAL RESULTS
ATLANTA--(BUSINESS WIRE)--Aug. 7, 2006--PRG-Schultz International, Inc. (Nasdaq:
PRGX), the world's largest recovery audit firm, today announced its unaudited
financial results for second quarter ended June 30, 2006.
Highlights of Financial Results
-- Net loss for the 2006 second quarter was $3.6 million or ($.06) per
basic and diluted share, including a loss on discontinued operations
of $0.8 million, a non-cash charge of $0.3 million related to stock
option compensation and a charge of $1.6 million for severance and
other charges related to the previously announced operational
restructuring. This compares to a net loss of $6.3 million, or ($.10)
per basic and diluted share for the same period in 2005, which
included earnings from discontinued operations of $0.3 million, a
charge of $0.3 million related to the Company's evaluation of its
strategic alternatives, a charge of $0.5 million for costs related to
the Company's strategic cost reduction initiative, and accruals of
$3.5 million for the retirement benefits of the Company's former
Chairman and CEO, John Cook, and its former Vice Chairman, Jack Toma.
-- Adjusted EBITDA for the 2006 second quarter was $6.5 million compared
to $3.0 million for the same period in 2005. The 2006 second quarter
adjusted EBITDA is earnings from continuing operations before
interest, taxes, depreciation and amortization (EBITDA) excluding a
$0.3 million non-cash charge related to stock option compensation
expense, and a $1.6 million charge for severance and other charges
associated with the operational restructuring. Adjusted EBITDA for the
second quarter of 2005 excludes the $3.5 million retirement accrual
for Messrs. Cook and Toma. (Schedule 3 provides a reconciliation of
net earnings (loss) to each of EBITDA and adjusted EBITDA.)
-- Consolidated revenue for the second quarter of 2006 was $65.3 million,
a decline of 16.5% compared to $78.2 million for the same period in
2005. Cost of Revenue and SG&A expenses combined were $62.0 million
for the second quarter, which were lower by $20.3 million, or 24.6%,
compared to the same period in 2005.
-- Net loss for the first six months of 2006 was $13.9 million or ($.23)
per basic and diluted share, including a non-cash charge of $10.1
million resulting from the Company's previously announced successful
financial restructuring, a loss on discontinued operations of $0.7
million, a non-cash charge of $0.7 million related to stock option
compensation and a charge of $2.0 million for severance and other
charges related to the operational restructuring. This compares to a
net loss of $11.2 million, or ($.18) per basic and diluted share for
the same period in 2005, which included a loss on discontinued
operations of $0.1 million, a charge of $0.5 million related to the
Company's evaluation of its strategic alternatives, a charge of $0.5
million for costs relating to the Company's strategic cost reduction
initiative, and accruals of $3.5 million for the retirement benefits
of Mr. Cook and Mr. Toma.
-- Adjusted EBITDA for the first six months of 2006 was $13.1 million
compared to $4.9 million in the first six months of 2005. Adjusted
EBITDA for this period excludes a $0.7 million non-cash charge related
to stock option compensation expense and a $2.0 million charge for
severance and other charges associated with the operational
restructuring. Adjusted EBITDA for the first half of 2005 excludes the
$3.5 million retirement accrual for Messrs. Cook and Toma.
-- Consolidated revenue for the first six months of 2006 was $130.8
million, a decline of 14.7% as compared to $153.3 million for the
first six months of 2005. Cost of Revenue and SG&A expenses combined
were $124.1 million for the first half, which were lower by $35.3
million, or 22.1%, compared to the same period in 2005.
-- Cash generated from operations for the six months ended June 30, 2006
was $7.5 million compared to a usage of cash of $9.0 million for the
same period in 2005, a year over year improvement of $16.5 million.
Liquidity
At June 30, 2006 the Company had cash and cash equivalents of $18.6 million and
had no borrowings against its revolving credit facility. Debt outstanding at
quarter end included a $25 million variable rate term loan due 2010, $0.5
million of 4.75% convertible notes due 2006, $51.6 million in principal amount
of 11.0% Senior Notes Due 2011, and $59.8 in principal amount of 10.0% Senior
Convertible Notes Due 2011. As of June 30, 2005, the Company had cash and cash
equivalents of $12.2 million and $12.5 million of borrowings against its
revolving credit facility. Debt outstanding at June 30, 2005 also included the
$125 million in principal amount of 4.75% convertible notes due 2006.
"Our turnaround continued to gain momentum in the second quarter, our first full
quarter after the successful restructuring of our balance sheet and the third
consecutive quarter of positive operating EBITDA and cash flow," said James B.
McCurry, chairman, president and chief executive officer. "We have a newly
reconstituted board of directors and an entirely new senior management team in
place, and we are aggressively attacking opportunities to continue the
improvement of our financial performance by helping our clients improve their
performance. We are especially excited by the promising early results shown by
our audit of Medicare payments in California."
About PRG-Schultz International, Inc.
Headquartered in Atlanta, PRG-Schultz International, Inc. (PRG) 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 required by, or 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 number of restrictive covenants related to
the Company's credit facilities use measures similar to adjusted EBITDA.
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 3 provides a
reconciliation of net earnings (loss) to each of EBITDA and adjusted EBITDA.
Forward Looking Statements
This press release includes certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, in addition to
historical information. Such statements include both implied and express
statements regarding the Company's financial position and liquidity, the results
of its Medicare payments audit in California and the ability to successfully
complete the Company's operational turnaround (including plans to streamline the
Company's organization). 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. If the Company is unable to
successfully complete its operational restructuring and turnaround plans, the
Company may be unable to pay its debts as they come due or continue funding its
operations and may be forced to seek protection from its creditors. Other risks
that could affect the Company's future performance include the Company's ability
to retain personnel, Medicare audit revenues that do not meet expectations or
justify costs incurred, changes in the market for the Company's services, client
bankruptcies, loss of major clients, and other risks generally applicable to the
Company's business. For a discussion of other risk factors that may impact the
Company's business and the success of its restructuring plan, please see the
Company's Form 10-K filed with the Securities and Exchange Commission on March
23, 2006. 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 Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Revenues $ 65,308 $ 78,162 $130,846 $153,309
Cost of revenues 47,267 50,997 93,546 99,592
-------- -------- -------- --------
Gross margin 18,041 27,165 37,300 53,717
Selling, general and
administrative expenses 14,713 31,259 30,585 59,837
Operational restructuring
expense 1,580 - 1,988 -
-------- -------- -------- --------
Operating income (loss) 1,748 (4,094) 4,727 (6,120)
Interest expense, net (4,269) (2,061) (6,812) (3,871)
Loss on financial restructuring - - (10,129) -
-------- -------- -------- --------
Loss from continuing
operations before income
taxes and discontinued
operations (2,521) (6,155) (12,214) (9,991)
Income taxes 338 412 988 1,099
-------- -------- -------- --------
Loss from continuing
operations before
discontinued operations (2,859) (6,567) (13,202) (11,090)
Discontinued operations:
Earnings (loss) from
discontinued operations (786) 275 (737) (98)
-------- -------- -------- --------
Net loss $ (3,645) $ (6,292) $(13,939) $(11,188)
======== ======== ======== ========
Basic and diluted earnings
(loss) per common share:
Loss from continuing
operations before
discontinued operations $ (0.05) $ (0.10) $ (0.22) $ (0.18)
Discontinued operations (0.01) - (0.01) -
-------- -------- -------- --------
Net loss $ (0.06) $ (0.10) $ (0.23) $ (0.18)
======== ======== ======== ========
Weighted average common shares
outstanding:
Basic 63,879 61,997 62,996 61,987
======== ======== ======== ========
Diluted 63,879 61,997 62,996 61,987
======== ======== ======== ========
Certain reclassifications have been made to the 2005 amounts to
conform to the presentation in 2006.
These reclassifications include the reclassification of certain
business units as discontinued operations.
SCHEDULE 2
PRG-Schultz International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
June 30, December 31,
2006 2005
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 18,595 $ 11,848
Restricted cash 3,718 3,096
Receivables:
Contract receivables 43,663 53,199
Employee advances and miscellaneous
receivables 2,050 2,737
----------- -----------
Total receivables 45,713 55,936
Funds held for client obligations 43,836 32,479
Prepaid expenses and other current assets 3,486 3,180
----------- -----------
Total current assets 115,348 106,539
Property and equipment 13,220 17,453
Goodwill 4,600 4,600
Intangible assets 23,754 24,447
Other assets 13,945 9,023
----------- -----------
$ 170,867 $ 162,062
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Convertible notes $ 468 $ 466
Current portion of other debt obligations 250 -
Obligation for client payables 43,836 32,479
Accounts payable and accrued expenses 32,273 34,103
Accrued payroll and related expenses 38,097 44,031
Deferred revenue 4,542 4,583
----------- -----------
Total current liabilities 119,466 115,662
Convertible notes - 123,601
Senior notes 43,316 -
Senior convertible notes 64,871 -
Other debt obligations 24,750 16,800
Deferred compensation 841 1,388
Other long-term liabilities 6,726 6,976
----------- -----------
Total liabilities 259,970 264,427
----------- -----------
Mandatorily redeemable participating preferred
stock 14,460 -
Shareholders' equity (deficit):
Common stock 71 68
Additional paid-in capital 506,567 494,826
Accumulated deficit (564,658) (550,719)
Accumulated other comprehensive income 3,167 2,400
Treasury stock, at cost (48,710) (48,710)
Unamortized portion of stock compensation
expense - (230)
----------- -----------
Total shareholders' equity (deficit) (103,563) (102,365)
----------- -----------
$ 170,867 $ 162,062
=========== ===========
SCHEDULE 3
PRG-Schultz International, Inc. and Subsidiaries
Reconciliation of Net Earnings (Loss) to Adjusted EBITDA
(Amounts in thousands)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Reconciliation of net loss to
adjusted EBITDA:
- -------------------------------
Net earnings (loss) $ (3,645) $ (6,292) $(13,939) $(11,188)
Adjust for:
Earnings (loss) from
discontinued operations (786) 275 (737) (98)
-------- -------- -------- --------
Loss from continuing
operations (2,859) (6,567) (13,202) (11,090)
Adjust for:
Income taxes 338 412 988 1,099
Interest 4,269 2,061 6,812 3,871
Loss on financial
restructuring - - 10,129 -
Depreciation and amortization 2,868 3,579 5,724 7,516
-------- -------- -------- --------
EBITDA 4,616 (515) 10,451 1,396
-------- -------- -------- --------
Messrs. Cook & Toma
retirement/severance - 3,529 - 3,529
Operational restructuring
expense 1,580 - 1,988 -
Non-cash FAS 123R
compensation 340 - 680 -
-------- -------- -------- --------
Adjusted EBITDA $ 6,536 $ 3,014 $ 13,119 $ 4,925
======== ======== ======== ========
EBITDA and adjusted EBITDA are both "non-GAAP financial measures" presented as
supplemental measures of our performance. They are not required by, or 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 number of restrictive covenants related to
the company's credit facilities use measures similar to EBITDA. 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.
CONTACT: PRG-Schultz International, Inc.
Peter Limeri, 770-779-6464
SOURCE: PRG-Schultz International, Inc.