THE PROFIT RECOVERY GROUP INTERNATIONAL REPORTS RESULTS FOR QUARTER ENDED JUNE 30, 1997 July 14, 1997 4:08 PM EDT COMPARABLE EARNINGS UP 52% ATLANTA, July 14 /PRNewswire/ -- The Profit Recovery Group International, Inc. (Nasdaq: PRGX) (the "Company") reported today that its net earnings for the second quarter ended June 30, 1997 increased 52% to $2.4 million, or $0.13 per share. Net earnings for the second quarter of 1996 were $1.6 million, or $0.09 per share. Per share amounts are based on 18.6 million shares for the second quarter of 1997 and 18.3 million shares for the second quarter of 1996. The Company's total revenues for the 1997 second quarter increased 44% to $25.9 million, compared with $18.0 million a year earlier. Operating income for the second quarter increased 56% to $3.8 million, compared with $2.4 million in the second quarter of the prior year. Several factors contributed to the increased earnings, including a significant rise in international business, and revenues derived from new healthcare, technology and retailing clients in the U.S. During the quarter, the Company's revenues also benefited from its May 1997 acquisition of The Hale Group, a California-based firm specializing in providing recovery audit services to the healthcare industry. "By almost any measure the Company had a banner second quarter," said John M. Cook, Chairman and Chief Executive. "The Company exceeded all of its principal operating objectives both domestically and internationally, including a reduction of the number of days revenue in accounts receivable to 155 from 167. We are entering the all important second half of the year from a position of particular strength, confident that we can continue to grow earnings and revenues significantly while also achieving additional reductions in our number of days revenue in accounts receivable." For the six months ended June 30, 1997, the Company's net earnings increased 72% to $3.2 million, or $0.17 per share, up from pro forma net earnings of $1.8 million, or $0.12 per share. The 1996 net earnings are stated on a pro forma basis to include an estimated provision for income taxes since the Company's earnings were taxed directly to its individual owners prior to the March 1996 initial public offering. Revenues for the six months ended June 30, 1997 increased 39% to $46.8 million, compared with $33.6 million in the year ago period. Operating income for the current six months increased 48% to $5.0 million, up from $3.4 million in the first six months of 1996. Statements in this release which look forward in time involve risks and uncertainties, including the ability of the Company to successfully implement its operating strategy and acquisition strategy, the Company's ability to manage rapid expansion, changes in economic cycles, competition from other companies, changes in the laws and government regulations applicable to the Company and other risk factors detailed in the Company's Securities and Exchange Commission filings. The Profit Recovery Group International, Inc. is a leading provider of accounts payable and other recovery audit services to large retailers and other transaction-intensive companies. The Company has over 800 employees worldwide and conducts its operations in North America, Europe, Asia and the Pacific. 458073.1 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) Three Months Ended June 30, 1997 1996 -------- ------- Revenues $ 25,858 $ 17,963 Cost of revenues 13,331 9,480 Selling, general and administrative expenses 8,723 6,040 Operating income 3,804 2,443 Interest income, net 55 106 Earnings before income taxes 3,859 2,549 Income taxes - (1) 1,491 994 Net earnings $ 2,368 $ 1,555 Pro Forma Information: Historical earnings before income taxes $ 3,859 $ 2,549 Pro forma income taxes - (2) 1,491 994 Pro forma net earnings $ 2,368 $ 1,555 Pro forma earnings per common and common equivalent share - (3) $ 0.13 $ 0.09 Weighted average common and common equivalent shares outstanding 18,639 18,268 Six Months Ended June 30, 1997 1996 -------- ------- Revenues $ 46,818 $ 33,578 Cost of revenues 24,860 18,103 Selling, general and administrative expenses 16,919 12,071 Operating income 5,039 3,404 Interest income (expense), net 118 (389) Earnings before income taxes 5,157 3,015 Income taxes - (1) 1,997 4,694 Net earnings (loss) $ 3,160 $ (1,679) Pro Forma Information: Historical earnings before income taxes $ 5,157 $ 3,015 Pro forma income taxes - (2) 1,997 1,176 Pro forma net earnings $ 3,160 $ 1,839 Pro forma earnings per common and common equivalent share - (3) $ 0.17 $ 0.12 Weighted average common and common equivalent shares outstanding 18,625 16,703 (1)--The Company's predecessor business entities generally were either Subchapter S corporations or partnerships. As a result, income tax liabilities were the responsibilities of the respective shareholders and partners. In connection with the Company's March 26, 1996 initial public offering, all domestic entities became C corporations. As a result of these conversions to C corporations, the Company incurred a charge to operations of $3.7 million in the first quarter of 1996 for cumulative deferred income taxes. (2)--The results of operations for the six months ended June 30, 1996, have been adjusted on a pro forma basis to reflect federal and state income taxes as if the Company's predecessors had been C corporations throughout. (3)--All per share results give effect to a 2-for-1 stock split (effected in the form of a stock dividend) at the time of the initial public offering. For the six months ended June 30, the initial public offering. For the six months ended June 30, 1996, $97,000 of interest on convertible debt, net of income taxes, must be combined with pro forma net earnings when calculating per share results. 458073.1 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS) June 30, Dec. 31, 1997 1996 ---------- --------- ASSETS Current assets: Cash and cash equivalents $ 14,189 $ 16,891 Receivables: Billed contract receivables 3,424 3,864 Unbilled contract receivables 35,100 30,734 Employee advances 1,711 1,363 Total receivables 40,235 35,961 Refundable income taxes --- 2,049 Prepaid expenses and other current assets 1,594 528 Total current assets 56,018 55,429 Property and equipment: Computer and other equipment 8,255 5,753 Furniture and fixtures 1,830 1,569 Leasehold improvements 1,309 1,183 Total 11,394 8,505 Less accumulated depreciation and amortization 3,562 2,272 Total 7,832 6,233 Noncompete agreements, less accumulated amortization 3,992 4,509 Deferred loan costs, less accumulated amortization 40 56 Goodwill, less accumulated amortization 6,300 393 Deferred income taxes 1,174 1,174 Other assets 578 524 Total $ 75,934 $ 68,318 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 84 $ 79 Accounts payable and accrued expenses 1,968 1,383 Accrued payroll and related expenses 16,714 16,356 Deferred income taxes 7,607 7,607 Total current, liabilities 26,373 25,425 Long-term debt, excluding current installments 702 692 Deferred compensation 2,134 1,642 Total liabilities 29,209 27,759 Shareholders' equity Common stock 18 18 Additional paid-in capital 37,228 34,188 Cumulative translation adjustments (65) (31) Retained earnings 9,544 6,384 Total shareholders' equity 46,725 40,559 Total $ 75,934 $ 68,318 SOURCE The Profit Recovery Group International, Inc. 458073.1