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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-Q

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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO____________

COMMISSION FILE NUMBER 0-28000

---------------------

THE PROFIT RECOVERY GROUP
INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

---------------------

GEORGIA 58-2213805
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 WINDY RIDGE PARKWAY 30339-8426
SUITE 100 NORTH (Zip Code)
ATLANTA, GEORGIA
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 779-3900

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Common shares of the registrant outstanding at April 30, 2001 were
47,434,841.

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2

THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.

FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001

INDEX

PAGE NO.
--------

PART I. Financial Information
Item 1. Financial Statements (Unaudited).................... 1
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2001 and 2000............. 1
Condensed Consolidated Balance Sheets as of March 31, 2001
and December 31, 2000.................................. 2
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2001 and 2000............. 3
Notes to Condensed Consolidated Financial Statements...... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk......................................... 16
PART II. Other Information
Item 1. Legal Proceedings................................... 17
Item 2. Changes in Securities and Use of Proceeds........... 17
Item 3. Defaults Upon Senior Securities..................... 17
Item 4. Submission of Matters to a Vote of Security
Holders............................................. 17
Item 5. Other Information................................... 17
Item 6. Exhibits and Reports on Form 8-K.................... 18
Signature.............................................................. 19

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
------------------
2001 2000
------- --------

Revenues.................................................... $65,527 $ 63,894
Cost of revenues............................................ 34,999 35,350
Selling, general and administrative expenses................ 30,994 25,910
------- --------
Operating income (loss)................................... (466) 2,634
Interest (expense), net..................................... (2,021) (1,570)
------- --------
Earnings (loss) from continuing operations before income
taxes and discontinued operations...................... (2,487) 1,064
Income tax expense (benefit)................................ (995) 447
------- --------
Earnings (loss) from continuing operations before
discontinued operations................................ (1,492) 617
Discontinued operations (Note B):
Loss from discontinued operations, net of income taxes of
$(427) in 2000 and including cumulative effect of
accounting change of $(26,145) in 2000................. -- (24,413)
Gain (loss) on disposal from discontinued operations
including operating results for phase-out period, net
of income taxes........................................ -- --
------- --------
Loss from discontinued operations......................... -- (24,413)
------- --------
Net loss.......................................... $(1,492) $(23,796)
======= ========
Basic loss per share (Note C):
Earnings (loss) from continuing operations before
discontinued operations................................ $ (0.03) $ 0.01
Discontinued operations................................... -- (0.49)
------- --------
Net loss.......................................... $ (0.03) $ (0.48)
======= ========
Diluted loss per share (Note C):
Earnings (loss) from continuing operations before
discontinued operations................................ $ (0.03) $ 0.01
Discontinued operations................................... -- (0.48)
------- --------
Net loss.......................................... $ (0.03) $ (0.47)
======= ========
Weighted-average shares outstanding (Note C):
Basic..................................................... 48,025 49,433
======= ========
Diluted................................................... 48,025 50,942
======= ========

See accompanying Notes to Condensed Consolidated Financial Statements.

1
4

THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

MARCH 31, DECEMBER 31,
2001 2000
--------- ------------

ASSETS
Current assets:
Cash and cash equivalents (Note F)........................ $ 14,516 $ 23,870
Receivables:
Contract receivables, less allowance for doubtful
accounts of $6,641 in 2001 and $5,243 in 2000.......... 58,771 67,399
Employee advances and miscellaneous receivables......... 4,978 5,073
-------- --------
Total receivables................................... 63,749 72,472
-------- --------
Prepaid expenses and other current assets................. 3,213 3,470
Deferred income taxes..................................... 12,565 12,565
Net assets of discontinued operations..................... 86,658 80,682
-------- --------
Total current assets................................ 180,701 193,059
-------- --------
Property and equipment:
Computer and other equipment.............................. 42,044 49,708
Furniture and fixtures.................................... 3,474 3,755
Leasehold improvements.................................... 5,610 5,957
-------- --------
51,128 59,420
Less accumulated depreciation and amortization............ 26,986 32,516
-------- --------
Property and equipment, net............................. 24,142 26,904
-------- --------
Noncompete agreements, less accumulated amortization of
$6,940 in 2001 and $6,707 in 2000......................... 704 937
Deferred loan costs, less accumulated amortization of $1,507
in 2001 and $1,341 in 2000................................ 1,935 1,701
Goodwill, less accumulated amortization of $25,544 in 2001
and $23,469 in 2000....................................... 227,413 235,153
Deferred income taxes....................................... 6,096 6,236
Other assets................................................ 883 841
-------- --------
$441,874 $464,831
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt.................... $ 384 $ 391
Accounts payable and accrued expenses..................... 14,875 17,284
Accrued business acquisition consideration (Note H)....... 5,722 7,567
Accrued payroll and related expenses...................... 26,562 38,017
Deferred tax recovery audit revenue....................... 708 694
-------- --------
Total current liabilities........................... 48,251 63,953
Long-term debt, excluding current installments.............. 154,991 154,563
Deferred compensation....................................... 4,036 5,615
Other long-term liabilities................................. 1,346 1,544
-------- --------
Total liabilities................................... 208,624 225,675
-------- --------
Shareholders' equity (Notes G and I):
Preferred stock, no par value. Authorized 500,000 shares;
no shares issued or outstanding in 2001 and 2000........ -- --
Participating preferred stock, no par value. Authorized
500,000 shares; no shares issued or outstanding in 2001
and 2000................................................ -- --
Common stock, no par value; $.001 stated value per share.
Authorized 200,000,000 shares; issued 49,929,631 shares
in 2001 and 49,912,231 shares in 2000................... 50 50
Additional paid-in capital................................ 315,857 316,127
Accumulated deficit....................................... (41,527) (40,035)
Accumulated other comprehensive loss...................... (18,536) (14,237)
Treasury stock at cost, 2,435,990 shares in 2001 and
2000.................................................... (21,024) (21,024)
Unearned portion of restricted stock...................... (1,570) (1,725)
-------- --------
Total shareholders' equity.......................... 233,250 239,156
-------- --------
Commitments and contingencies (Notes H and I)
$441,874 $464,831
======== ========

See accompanying Notes to Condensed Consolidated Financial Statements.

2
5

THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------

Cash flows from operating activities:
Net loss.................................................. $ (1,492) $(23,796)
Less loss from discontinued operations.................... -- 24,413
-------- --------
Earnings (loss) from continuing operations................ (1,492) 617
Adjustments to reconcile net earnings (loss) from
continuing operations to net cash used in operating
activities:
Depreciation and amortization........................... 6,025 6,075
Loss on sale of property and equipment.................. 33 --
Restricted stock compensation expense................... 83 --
Deferred compensation expense........................... (1,579) 307
Deferred income taxes................................... 154 706
Changes in assets and liabilities:
Receivables............................................. 5,716 (300)
Prepaid expenses and other current assets............... 310 (185)
Other assets............................................ 173 (530)
Accounts payable and accrued expenses................... (3,005) (1,633)
Accrued payroll and related expenses.................... (10,775) (8,096)
Deferred tax recovery audit revenue..................... 68 (191)
Other long-term liabilities............................. (12) (859)
-------- --------
Net cash used in operating activities.............. (4,301) (4,089)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment....................... (306) (1,854)
Acquisitions of businesses (net of cash acquired)......... (1,425) (40,000)
-------- --------
Net cash used in investing activities.............. (1,731) (41,854)
-------- --------
Cash flows from financing activities:
Net repayments of notes payable to bank................... -- (193)
Proceeds from issuance of long-term debt.................. 1,794 47,583
Payments for deferred loan costs.......................... (400) --
Net proceeds from common stock issuances.................. 155 3,139
-------- --------
Net cash provided by financing activities.......... 1,549 50,529
-------- --------
Net cash used in discontinued operations.................... (6,075) (5,552)
Effect of exchange rates on cash and cash equivalents....... 1,204 535
-------- --------
Net change in cash and cash equivalents............ (9,354) (431)
Cash and cash equivalents at beginning of period............ 23,870 22,315
-------- --------
Cash and cash equivalents at end of period.................. $ 14,516 $ 21,884
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.................. $ 2,013 $ 1,106
======== ========
Cash paid during the period for income taxes, net of
refunds received........................................ $ 92 $ 3,279
======== ========
Supplemental disclosure of noncash investing and financing
activities:
During the three months ended March 31, 2001 and 2000, the
Company made payments for further purchase consideration
related to two previously acquired companies as follows:
Fair value of assets acquired............................. $ 1,425 $ 40,000
Cash paid for the acquisitions (net of cash acquired)..... (1,425) (40,000)
-------- --------
Liabilities assumed..................................... $ -- $ --
======== ========

See accompanying Notes to Condensed Consolidated Financial Statements.

3
6

THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)

NOTE A -- BASIS OF PRESENTATION

The accompanying Condensed Consolidated Financial Statements (Unaudited) of
The Profit Recovery Group International, Inc., and its wholly owned subsidiaries
(the "Company") have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three month
period ended March 31, 2001 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2001. For further information,
refer to the Consolidated Financial Statements and Footnotes thereto included in
the Company's Form 10-K for the year ended December 31, 2000.

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities" establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
pronouncement, as amended by Statements of Financial Accounting Standards No.
137 and No. 138, is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000 although earlier application is encouraged. The Company
adopted this pronouncement effective with its fiscal year beginning January 1,
2001. The adoption of this pronouncement had no material effect on the Company's
reported results of operations or financial condition.

Disclosures included herein pertain to the Company's continuing operations
unless otherwise noted.

Certain reclassifications have been made to 2000 amounts to conform to the
presentation in 2001.

NOTE B -- DISCONTINUED OPERATIONS

In March 2001, the Company formalized a strategic realignment initiative
designed to enhance the Company's financial position and clarify its investment
and operating strategy by focusing primarily on its core Accounts Payable
business. Under this strategic realignment initiative, the Company will divest
the following non-core businesses: Meridian VAT Reclaim ("Meridian") within the
former Taxation Services segment, the Logistics Management Services segment, the
Communications Services segment and the Ship and Debit ("Ship & Debit") division
within the Accounts Payable Services segment.

The non-core businesses to be divested are comprised of various
acquisitions completed by the Company during the periods 1997 through 2000. The
acquisition of Meridian was accounted for as a pooling-of-interests in which the
Company issued 6,114,375 unregistered shares of the Company's common stock. The
other acquisitions which comprise the remainder of non-core businesses to be
divested were accounted for as purchases with collective consideration paid of
$61.5 million in cash and 2,044,206 restricted, unregistered shares of the
Company's common stock.

The Company's Condensed Consolidated Financial Statements (Unaudited)
reflect Meridian, Logistics Management Services, Communications Services, and
Ship & Debit as discontinued operations for all periods presented. Operating
results of the discontinued operations are summarized below. The amounts exclude
general corporate overhead previously allocated to Meridian, Logistics
Management Services and Communications Services for segment reporting purposes.
The amounts include interest on debt and an allocation of the interest on the
Company's general credit facility. Interest allocated to discontinued operations
was $0.6 million and $0.2 million for the three months ended March 31, 2001 and
2000, respectively.

4
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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During the quarters ended March 31, 2001 and 2000, revenues from
discontinued operations were $21.8 million and $18.2 million, respectively. The
Company generated a loss from discontinued operations in the first quarter of
2001 of $0.2 million, which has been deferred as required under accounting
principles generally accepted in the United States of America, since it is
expected to be recovered upon ultimate sale of these businesses. Summarized
balance sheet information for the discontinued operations is as follows:

MARCH 31, DECEMBER 31,
2001 2000
--------- ------------
(IN THOUSANDS)

Current assets.............................................. $ 46,551 $ 43,069
Total assets................................................ 130,938 125,936
Total current liabilities................................... 44,120 45,052
Total liabilities........................................... 44,280 45,254
Net assets of discontinued operations....................... 86,658 80,682

Revenue Recognition -- Conversion to Cash Basis for Certain Discontinued
Operations

In consideration of guidance issued by the Securities and Exchange
Commission under Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"), the Company changed its method of accounting
for revenues for Meridian retroactively to January 1, 2000. Based upon the
guidance in SAB 101, the Company defers recognition of revenues to the
accounting period when cash received from the foreign governments reimbursing
value-added tax claims is transferred to Meridian's clients. In 1999 and prior
periods, under the prior method of accounting, revenues were recognized at the
time refund claims containing all required documentation were filed with
appropriate governmental agencies in those instances where historical refund
disallowance rates could be accurately estimated. The Company recorded a
one-time, non-cash, after-tax charge as of January 1, 2000, of $24.1 million
related to Meridian's cumulative effect of a change in accounting principle as
part of the loss from discontinued operations.

Additionally, in consideration of the guidance under SAB 101, the Company
changed it method of accounting for revenues for Ship & Debit retroactively to
January 1, 2000. Based upon the guidance in SAB 101, the Company defers
recognition of revenues to the accounting period when cash is received by the
client. In 1999 and prior periods, under the prior method of accounting,
revenues were recognized at the time that the Company invoiced clients for its
fee. The Company recorded a one-time, non-cash, after-tax charge as of January
1, 2000 of $2.0 million related to Ship & Debit's cumulative effect of a change
in accounting principle as part of the loss from discontinued operations.

5
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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE C -- LOSS PER SHARE

The following table sets forth the computations of basic and diluted loss
per share for the three months ended March 31, 2001 and 2000 (in thousands):

THREE MONTHS ENDED
MARCH 31,
------------------
2001 2000
------- --------

Numerator:
Earnings (loss) from continuing operations before
discontinued operations................................ $(1,492) $ 617
Discontinued operations................................... -- (24,413)
------- --------
Net loss............................................... $(1,492) $(23,796)
======= ========
Denominator:
Denominator for basic earnings per
share -- weighted-average shares outstanding........... 48,025 49,433
Effect of dilutive securities:
Employee stock options................................. -- 1,509
------- --------
Denominator for diluted earnings....................... 48,025 50,942
======= ========

NOTE D -- OPERATING SEGMENTS AND RELATED INFORMATION

The Company has two reportable operating segments consisting of Accounts
Payable Services and French Taxation Services. Each segment represents a
strategic business unit that offers a different type of recovery audit service.
These business units are managed separately because each business requires
different technology and marketing strategies.

The Accounts Payable Services segment consists of the review of client
accounts payable disbursements to identify and recover overpayments. This
operating segment includes accounts payable services provided to retailers and
wholesale distributors (the Company's historical client base) and accounts
payable services provided to various other types of business entities by the
Company's Commercial Division. The Accounts Payable Services operating segment
conducts business in North America, South America, Europe, Australia, Africa and
Asia.

The French Taxation Services segment consists of audits of related
disbursements to identify and recover overpayments (primarily within France),
and assisting business entities throughout Europe in securing available grants.
While no final determinations have yet been made, the Company is exploring
strategic alternatives with respect to its French Taxation Services operations.

Corporate support represents the unallocated portion of corporate general
and administrative expenses not specifically attributable to Accounts Payable
Services or French Taxation Services.

The Company evaluates the performance of its operating segments based upon
revenues and operating income. Intersegment revenues are not significant.

6
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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Segment information for the three months ended March 31, 2001 and 2000 is
as follows (in thousands):

ACCOUNTS FRENCH
PAYABLE TAXATION CORPORATE
SERVICES SERVICES SUPPORT TOTAL
-------- -------- --------- -------

Three Months Ended March 31, 2001
Revenues....................................... $57,640 $7,887 $ -- $65,527
Operating income (loss)........................ 10,920 (851) (10,535) (466)
Three Months Ended March 31, 2000
Revenues....................................... $57,528 $6,366 $ -- $63,894
Operating income (loss)........................ 12,268 (854) (8,780) 2,634

NOTE E -- COMPREHENSIVE LOSS

The Company applies the provisions of SFAS No. 130, "Reporting
Comprehensive Income." This statement establishes items that are required to be
recognized under accounting standards as components of comprehensive income.
SFAS No. 130 requires, among other things, that an enterprise report a total for
comprehensive income (loss) in condensed financial statements of interim periods
issued to shareholders. For the three month periods ended March 31, 2001 and
2000, the Company's consolidated comprehensive loss was $(5.8) million and
$(27.0) million, respectively. The difference between consolidated comprehensive
loss, as disclosed here, and traditionally determined consolidated net earnings
(loss), as set forth on the accompanying Condensed Consolidated Statements of
Operations (Unaudited), results from foreign currency translation adjustments.

NOTE F -- CASH EQUIVALENTS

Cash equivalents at March 31, 2001 and December 31, 2000 included $2.2
million and $0.9 million, respectively, of temporary investments held at U.S.
banks. Cash equivalents at March 31, 2001 and December 31, 2000 also included
$5.3 million and $7.1 million, respectively, held at a French bank by certain of
the Company's French subsidiaries.

From time to time, the Company invests excess cash in reverse repurchase
agreements with Bank of America, which are fully collateralized by United States
of America Treasury Notes in the possession of such bank. The Company does not
intend to take possession of collateral securities on future reverse repurchase
agreement transactions conducted with banking institutions of national standing.
The Company does insist, however, that all such agreements provide for full
collateralization using obligations of the United States of America having a
current market value equivalent to or exceeding the reverse repurchase agreement
amount. No reverse repurchase agreements were outstanding at March 31, 2001 or
December 31, 2000.

NOTE G -- SHAREHOLDER'S EQUITY

On August 14, 2000, the Company issued 286,000 restricted shares of its
common stock to certain employees (the "Stock Awards"). Of the total restricted
shares issued, 135,000 restricted shares vest on a ratable basis over five years
of continued employment. The remaining 151,000 restricted shares vest at the end
of five years of continued employment. At March 31, 2001, 99,500 shares of the
restricted common stock had been forfeited by former employees. Until vested,
the restricted stock is nontransferable. The holders of the restricted shares
are entitled to all other rights as a shareholder. Over the life of the Stock
Awards, the Company will recognize $1.8 million in compensation expense. For the
quarter ended March 31, 2001, the Company has recognized $0.1 million of
compensation expense related to the Stock Awards.

7
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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On August 1, 2000, the Company's Board of Directors (the "Board")
authorized a shareholder protection plan designed to protect Company
shareholders from coercive or unfair takeover techniques through the use of a
shareholder protection rights agreement approved by the Board (the "Agreement").
The terms of the Agreement provide for a dividend of one right (collectively,
the "Rights") to purchase a fraction of a share of participating preferred stock
for each share owned. This dividend was declared for each share of common stock
outstanding at the close of business on August 14, 2000. The Rights, which
expire on August 14, 2010, may be exercised only if certain conditions are met,
such as the acquisition (or the announcement of a tender offer the consummation
of which would result in the acquisition) of 15% or more of the Company's common
stock by a person or affiliated group. Issuance of the Rights does not affect
the finances of the Company, interfere with the Company's operations or business
plans or affect earnings per share. The dividend is not taxable to the Company
or its shareholders and does not change the way in which the Company's shares
may be traded.

Effective July 31, 2000, the Board amended the Company's Articles of
Incorporation to establish a new class of stock, the participating preferred
stock. The Board authorized 500,000 shares of the participating preferred stock,
none of which have been issued.

On July 26, 2000, the Board approved a share repurchase program. Under the
share repurchase program, the Company can buy up to $40.0 million of its
outstanding common stock. On October 24, 2000, the Board approved an increase of
$10.0 million to the share repurchase plan, bringing the total the Company is
authorized to spend to repurchase shares of its outstanding common stock in the
open market to $50.0 million. As of March 31, 2001 and December 31, 2000, the
Company had repurchased approximately 2.4 million shares under the program at a
cost of approximately $21.0 million. As part of a May 9, 2001 amendment to the
Company's $200.0 million senior bank credit facility, the Company relinquished
its contractual rights to effect future repurchases of its common stock.

The Company has issued no preferred stock through March 31, 2001, and has
no present intentions to issue any preferred stock, except for any potential
issuance of participating preferred stock (500,000 shares authorized) pursuant
to the shareholders protection rights agreement. The remaining 500,000
authorized shares of the Company's preferred stock may be issued at any time or
from time to time in one or more series with such designations, powers,
preferences, rights, qualifications, limitations and restrictions (including
dividend, conversion and voting rights) as may be determined by the Company's
Board of Directors, without any further votes or action by the shareholders.

NOTE H -- ACQUISITIONS

On August 6, 1998, the Company acquired substantially all the assets and
assumed certain liabilities of Loder, Drew & Associates, Inc. ("Loder Drew"), a
California-based international recovery auditing firm primarily serving clients
in the manufacturing, financial services and other non-retail sectors. The
transaction was accounted for as a purchase with initial consideration of $70.0
million in cash and 1.2 million restricted, unregistered shares of the Company's
common stock valued at $11.05 per share. Additionally, the prior owners of Loder
Drew received further purchase price consideration in March 1999 of $30.0
million in cash based on the financial performance of Loder Drew for the nine
month period ended December 31, 1998, and purchase price consideration of $40.0
million in cash in the first quarter of 2000 based on the financial performance
of Loder Drew for the year ended December 31, 1999. This acquisition resulted in
final goodwill at December 31, 1999 of $153.6 million which is being amortized
over 25 years using the straight-line method.

On October 14, 1999, the Company signed a definitive agreement with certain
private shareholders to acquire approximately 89% of the total outstanding
shares of AP SA and its subsidiaries (collectively, "Groupe AP"), a tax recovery
audit firm which operates primarily within France. At the time the definitive
agreement was signed, Groupe AP was publicly traded on the French
over-the-counter market with approximately 11% of its total outstanding shares
publicly held. The Company initiated a cash tender for all
8
11
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

publicly-traded shares of Groupe AP in November 1999 and substantially all of
the publicly-held shares were subsequently tendered as of December 31, 1999.
Acquisition of the 89% portion of Groupe AP shares held by private shareholders
was closed on November 15, 1999. The acquisition of Groupe AP was accounted for
as a purchase with aggregate initial consideration paid to public and private
shareholders combined of $18.6 million in cash and 356,718 restricted,
unregistered shares of the Company's common stock valued at $23.91 per share. In
addition to the initial consideration received by the private shareholders of
Groupe AP, these shareholders satisfied the criteria to receive additional
purchase price consideration based upon the profitability of Groupe AP for the
two year period ended December 31, 2000 of 88.7 million French Francs
(approximately $11.9 million at March 31, 2001) payable no later than April 30,
2001 using a prescribed combination of cash and restricted, unregistered shares
of the Company's common stock. During the first quarter of 2001, the Company
made a partial payment of 10.1 million French Francs (approximately $1.4 million
at the time of the payment). On April 11, 2001, the Company paid the remaining
78.6 million French Francs (approximately $10.7 million at the time of payment).
Using the prescribed combination of cash and restricted, unregistered shares of
the Company's common stock this amount was paid as a combination of $5.9 million
in cash and $4.8 million or 815,038 restricted, unregistered shares of the
Company's common stock. The acquisition resulted in final goodwill through
December 31, 2000 of $38.4 million which is being amortized over 20 years using
the straight-line method.

NOTE I -- COMMITMENTS AND CONTINGENCIES

Beginning on June 6, 2000, three putative class action lawsuits were filed
against the Company and certain of its present and former officers in the United
States District Court for the Northern District of Georgia, Atlanta Division.
These cases were subsequently consolidated into one proceeding styled: In re
Profit Recovery Group International, Inc. Sec. Litig., Civil Action File No.
1:00-CV-1416-CC (the "Securities Class Action Litigation"). On November 13,
2000, the Plaintiffs in these cases filed a Consolidated and Amended Complaint
(the "Complaint"). In that Complaint, Plaintiffs allege in general terms that
the Company, John M. Cook, Scott L. Colabuono, and Michael A. Lustig (the
"Defendants") violated Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934 and Rule 10b-5 promulgated thereunder by allegedly disseminating
materially false and misleading information about a change in the Company's
method of recognizing revenue and in connection with revenue reported for a
division. Plaintiffs purport to bring this action on behalf of a putative class
of persons who purchased the Company's stock between July 19, 1999 and July 26,
2000. Plaintiffs seek an unspecified amount of compensatory damages, payment of
litigation fees and expenses, and equitable and/or injunctive relief. On January
24, 2001, Defendants filed a Motion to Dismiss the Complaint for failure to
state a claim under the Private Securities Litigation Reform Act, 15 U.S.C. sec.
78u-4 et seq., which is currently pending before the Court. The Company believes
the alleged claims in this lawsuit are without merit. The Company intends to
defend this lawsuit vigorously. Due to the inherent uncertainties of the
litigation process and the judicial system, the Company is unable to predict the
outcome of this litigation. If the outcome of this litigation is adverse to the
Company, it could have a material adverse effect on the Company's business,
financial condition, and results of operations.

In the normal course of business, the Company is involved in and subject to
other claims, contractual disputes and other uncertainties. Management, after
reviewing with legal counsel all of these actions and proceedings, believes that
the aggregate losses, if any, will not have a material adverse effect on the
Company's financial position or results of operations.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

The Profit Recovery Group International, Inc. and subsidiaries (the
"Company") is a leading provider of recovery audit, expense containment and
knowledge application services to large and mid-size businesses having numerous
payment transactions with many vendors.

In businesses with large purchase volumes and continuously fluctuating
prices, some small percentage of erroneous overpayments to vendors is
inevitable. Although these businesses process the vast majority of payment
transactions correctly, a small number of errors do occur. In the aggregate,
these transaction errors can represent meaningful "lost profits" that can be
particularly significant for businesses with relatively narrow profit margins.
The Company's trained, experienced industry specialists use sophisticated
proprietary technology and advanced recovery techniques and methodologies to
identify overpayments to vendors and tax authorities. In addition, these
specialists review clients' current practices and processes related to
procurement and other expenses in order to identify solutions to manage and
reduce expense levels, as well as apply knowledge and expertise of industry best
practices to assist clients in improving their business efficiencies.

RESULTS OF OPERATIONS

The following table sets forth the percentage of revenues represented by
certain items in the Company's Consolidated Statements of Operations (Unaudited)
for the periods indicated:

THREE MONTHS ENDED
MARCH 31,
------------------
2001 2000
------ ------

STATEMENTS OF OPERATIONS DATA:
Revenues.................................................... 100.0% 100.0%
Cost of revenues............................................ 53.4 55.3
Selling, general and administrative expenses................ 47.3 40.6
----- -----
Operating income (loss)................................... (0.7) 4.1
Interest (expense), net..................................... (3.1) (2.4)
----- -----
Earnings (loss) from continuing operations before income
taxes and discontinued operations...................... (3.8) 1.7
Income tax expense (benefit)................................ (1.5) 0.7
----- -----
Earnings (loss) from continuing operations before
discontinued operations................................ (2.3) 1.0
Discontinued operations:
Loss from discontinued taxes, net of income taxes and
including cumulative effect of accounting change in
2000................................................... -- (38.2)
Gain (loss) on disposal from discontinued operations
including operating results for phase-out period, net
of income taxes........................................ -- --
----- -----
Loss from discontinued operations........................... -- (38.2)
----- -----
Net loss.......................................... (2.3)% (37.2)%
===== =====

Quarter Ended March 31, 2001 Compared to Corresponding Period of Prior Year

Revenues. The Company's revenues consist principally of contractual
percentages of overpayments recovered for clients. The Company's services from
continuing operations are currently grouped into two distinct operating
segments: Accounts Payable Services and French Taxation Services (see Note D of
Notes to Condensed Consolidated Financial Statements (Unaudited) included in
Item 1. of this Form 10-Q).

Revenues from continuing operations increased 2.6% to $65.5 million in the
first quarter of 2001, up from $63.9 million in the first quarter of 2000. This
period-over-period change was comprised primarily of an increase of $1.5 million
from the Company's French Taxation Services segment.

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International revenues from continuing operations grew 11.9% to $22.3
million in the first quarter of 2001, up from $19.9 million in the first quarter
of 2000. Revenues from the international portion of the Company's Accounts
Payable Services segment increased 6.3% to $14.4 million in the first quarter of
2001, up from $13.5 million in the first quarter of 2000. This growth in the
Accounts Payable Services segment was driven by new clients and by an expansion
of services to existing clients, with the majority of the growth generated in
Europe and Canada. Revenues generated by the Company's French Taxation Services
segment increased 23.9% to $7.9 million in the first quarter of 2001, up from
$6.4 million in the first quarter of 2000.

Domestic revenues from continuing operations, generated entirely by the
Company's Accounts Payable Services segment, decreased slightly to $43.2 million
in the first quarter of 2001, down from $44.0 million in the first quarter of
2000.

Cost of Revenues. Cost of revenues consists principally of commissions
paid or payable to the Company's auditors based primarily upon the level of
overpayment recoveries, and compensation paid to various types of hourly workers
and salaried operational managers. Also included in cost of revenues are other
direct costs incurred by these personnel including rental of non-headquarters
offices, travel and entertainment, telephone, utilities, maintenance and
supplies and clerical assistance.

Cost of revenues as a percentage of revenues from continuing operations
decreased to 53.4% of revenues in the first quarter of 2001, down from 55.3% of
revenues in the first quarter of 2000.

Internationally, cost of revenues as a percentage of international revenues
from continuing operations improved to 51.5% in the first quarter of 2001, down
from 56.2% in the first quarter of 2000. This year-over-year reduction in the
cost of revenues as a percentage of revenues was primarily driven by
improvements in the cost structure of the Company's international component of
the Accounts Payable Services segment, most notably in the European, Canadian
and Pacific operations. Cost of revenues as a percentage of segment revenues in
the Company's French Taxation Services segment improved to 47.6% in the first
quarter of 2001, down from 56.6% in the first quarter of 2000. The higher cost
of revenues as a percentage of segment revenues for the French Taxation Services
in the first quarter of 2000 was primarily due to fixed costs being spread over
a lower revenue base as a result of the French government strike.

Domestically, cost of revenues as a percentage of domestic revenues from
continuing operations remained fairly consistent at 54.4% in the first quarter
of 2001, compared to 54.9% for the same period of 2000 for the Company's
domestic Accounts Payable Services operations.

Selling, General, and Administrative Expenses. Selling, general and
administrative expenses include the expenses of sales and marketing activities,
information technology services and the corporate data center, human resources,
legal and accounting, administration, currency translation, headquarters-related
depreciation of property and equipment and amortization of intangibles.

Selling, general and administrative expenses, as a percentage of revenues
from continuing operations increased to 47.3% in the first quarter of 2001, up
from 40.6% in the first quarter of 2000. A portion of the year-over-year
increase in selling, general and administrative expenses is due to expenditures
resulting from the Company's investment in infrastructure to support anticipated
future growth, an increase in accounts receivable reserves, implementation of
the Company's strategic realignment plan, the impact of currency transaction
losses on the Company's international divisions, and research and development
costs related to the Company's e-commerce business initiatives.

Internationally, excluding corporate overhead, selling, general and
administrative expenses as a percentage of international revenues from
continuing operations increased to 42.3% in the first quarter of 2001, up from
33.1% the first quarter of in 2000. Overall, French Taxation Services
experienced an increase in selling, general, and administrative expenses as a
percentage of segment revenues to 63.1% in the first quarter of 2001 versus
56.8% in the first quarter of 2000. The year-over-year increase for French
Taxation Services was due primarily to an increase in accounts receivable
reserves for a particular revenue claim type, full implementation of the 35 hour
work week in France and increased investment in sales infrastructure to support
anticipated
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14

future growth. Selling, general and administrative expenses as a percentage of
segment revenues for international Accounts Payable Services increased to 30.9%
in the first quarter of 2001, up from 22.0% in the first quarter of 2000, due
primarily to investments in infrastructure to support anticipated future growth,
particularly in Europe and Latin America.

Domestically, excluding corporate overhead, selling, general and
administrative expenses as a percentage of revenues from continuing operations
was 25.5% in the first quarter of 2001, up slightly from the 24.0% level during
the same period last year. Contributing to this increase was the portion of
non-recurring charges for severance and other personnel costs related to the
implementation of the Company's strategic realignment plan incurred by the
domestic Accounts Payable Services operations.

Corporate overhead selling, general, and administrative expenses as a
percentage of revenue from continuing operations increased to 16.1% in the first
quarter of 2001 up from 13.7% the first quarter of in 2000. Excluding
non-recurring charges incurred by the Company during the first quarter of 2001
for severance and other personnel costs related to the implementation of its
strategic realignment plan, corporate selling, general and administrative
expenses as a percentage of revenues from continuing operations was 15.1% in the
first quarter of 2001 compared to 13.7% for the same period of 2000. This
increase is due in part to increased investment in both the continuing and
discontinued operations in areas such as infrastructure and research and
development in e-commerce initiatives. Additionally, during the first quarter of
2001, the Company incurred significant consulting fees related to the
implementation of its strategic realignment plan. The Company continues to incur
corporate overhead expenses to support its discontinued operations and expects
to do so until they are sold. Under accounting principles generally accepted in
the United States of America, no allocation of general corporate overhead can be
made to discontinued operations with the exception of applicable interest
expense.

In connection with acquired businesses, the Company has recorded intangible
assets including goodwill and deferred non-compete costs. Amortization of these
intangible assets totaled $3.1 million in the first quarter of 2001 and $3.0
million in the first quarter of 2000.

Operating Income (Loss). Operating loss as a percentage of revenues from
continuing operations was (0.7)% in the first quarter of 2001, compared to
operating income as a percentage of revenues from continuing operations of 4.1%
in the first quarter of 2000. Excluding non-recurring charges incurred by the
Company during the first quarter of 2001, operating income as a percentage of
revenues from continuing operations was 0.5% in the first quarter of 2001,
compared to 4.1% in the first quarter of 2000.

Internationally, operating income as a percentage of international revenues
from continuing operations, excluding corporate overhead, decreased to 6.2% in
the first quarter of 2001, from 10.7% in the first quarter of 2000. This decline
was driven by a decrease in operating income in international Accounts Payable
Services to 15.5% in the first quarter of 2001, down from 22.0% in the first
quarter of 2000, for reasons outlined above. This decline was partially offset
by an improvement in operating loss percentages for the French Taxation Services
segment. Operating loss for the French Taxation Services segment as a percentage
of segment revenues was (10.8)% in the first quarter of 2001, an improvement
from a loss of (13.4)% in the first quarter of 2000.

Domestically, operating income as a percentage of domestic revenues from
continuing operations, excluding corporate overhead, decreased to 20.1% in 2001,
down from 21.1% in the first quarter of 2000, for reasons outlined above.

Interest (Expense), Net. Interest (expense), net for the first quarter of
2001 was $2.0 million, up from $1.6 million in the first quarter of 2000. Most
of the Company's interest expense pertains to its $200.0 million senior credit
facility with a banking syndicate. The Company makes periodic borrowings under
its credit facility primarily to finance the cash portion of consideration paid
for businesses it acquires (see Note H of Notes to Condensed Consolidated
Financial Statements (Unaudited) included in Item 1. of this Form 10-Q). Without
these acquisitions, the Company's need for bank borrowings would have been
minimal.

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15

Earnings (Loss) From Continuing Operations Before Income Taxes and
Discontinued Operations. The Company had a loss from continuing operations
before income taxes and discontinued operations of $(2.5) million in the first
quarter of 2001 compared to earnings from continuing operations before income
taxes and discontinued operations of $1.1 million in the first quarter of 2000.
As a percentage of total revenues, the loss from continuing operations before
income taxes and discontinued operations was (3.8)% in the first quarter of
2001. Earnings from continuing operations before income taxes and discontinued
operations as a percentage of revenues was 1.7% in the first quarter of 2000.
The decrease in earnings (loss) from continuing operations before income taxes
and discontinued operations was the result of the factors noted above.

Income Tax Expense (Benefit). The provisions for income taxes for 2001 and
2000 consist of federal, state and foreign income taxes at the Company's
effective tax rate which approximated 40% for the first quarter of 2001 and 42%
for the first quarter of 2000.

Loss From Discontinued Operations. In March 2001, the Company formalized a
strategic realignment initiative designed to enhance the Company's financial
position and clarify its investment and operating strategy by focusing on its
core Accounts Payable Services business. Under this strategic realignment
initiative, the Company will divest the following non-core businesses: Meridian
within the former Taxation Services segment, the Logistics Management Services
segment, the Communications Services segment and the Ship & Debit division
within the Accounts Payable Services segment.

The Company generated a loss from discontinued operations in the first
quarter of 2001 of $0.2 million, which has been deferred as required under
accounting principles generally accepted in the United States of America, since
it is expected to be recovered upon ultimate sale of these businesses. This
compares to a loss of $24.4 million for the first quarter of 2000. Approximately
$26.1 million of this loss was due to the Company's decision to retroactively
change its method of accounting for revenue recognition for the Meridian and
Ship & Debit divisions, in consideration of guidance issued by the Securities
and Exchange Commission under Staff Accounting Bulletin No. 101 "Revenue
Recognition in Financial Statements" (See Note B of Notes to Condensed
Consolidated Financial Statements (Unaudited) included in Item 1. of this Form
10-Q).

If the Company does not divest of the non-core businesses within one year,
their results may be reconsolidated with the results from continuing operations.

Weighted-Average Shares Outstanding -- Basic. The Company's
weighted-average shares outstanding for purposes of calculating basic earnings
per share decreased to 48.0 million for 2001, down from 49.4 million for 2000.
This decrease was comprised primarily of outstanding shares repurchased in the
open market under the Company's publicly announced share repurchase program in
2000 offset by restricted, unregistered shares to be issued by the Company in
connection with the Groupe AP earnout (see Note H of Notes to Condensed
Consolidated Financial Statements (Unaudited) included in Item 1. of this Form
10-Q).

LIQUIDITY AND CAPITAL RESOURCES

The Company maintains a $200.0 million senior bank credit facility that is
syndicated between nine banking institutions led by Bank of America as agent for
the group (the "Banks"). Subject to adherence to standard loan covenants,
borrowings under the credit facility are available for working capital,
acquisitions of other companies in the recovery audit industry, capital
expenditures and general corporate purposes. As of March 31, 2001, the Company
had $154.1 million in outstanding principal borrowings under its credit
facility.

As of March 31, 2001, the Company was not in compliance with the fixed
charge coverage financial ratio covenant in its bank credit facility agreement
(the "Credit Agreement"). Under the current Credit Agreement, as amended,
financial ratio covenants are calculated on a trailing four-quarter basis
without giving effect to SEC Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" ("SAB 101"). During the first quarter of
2001, Meridian, one of the Company's discontinued operations, achieved revenues
and earnings on a pre-SAB 101 basis which were significantly below expectations
and were the principal causes of the non-compliance. The existing covenant
violation was waived by the Banks effective

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16

March 31, 2001 through the execution, on May 9, 2001, of an amendment to the
Credit Agreement. In connection with the waiver of this covenant violation, the
Banks and the Company also amended the Credit Agreement to relax certain
financial ratio covenants applicable to the second and third quarters of 2001.
The Company currently forecasts that it will satisfy the revised financial ratio
covenants of the Credit Agreement for at least the next four calendar quarters.
Notwithstanding the Company's current forecasts, no assurances can be provided
that these or other violations of the Credit Agreement will not occur in the
future or that, if such violations occur, that the Banks will not elect to
pursue their contractual remedies under the Credit Agreement, including
requiring the immediate repayment in full of all amounts outstanding. There can
also be no assurance that the Company can secure adequate or timely replacement
financing to repay its Banks in the event of an unanticipated repayment demand.

In addition to waiving and revising certain financial ratio covenants, the
May 9, 2001 amendment to the Company's Credit Agreement also eliminated the
Company's right to repurchase its common stock, increased applicable interest
rates to more closely reflect current rates being charged in the syndicated loan
market, and provided for permanent future reductions to the $200.0 million
facility size as net proceeds from future sales of the discontinued operations
are applied to reduce outstanding bank borrowings. If maximum future permanent
credit facility reductions are achieved, the credit facility will have a revised
capacity of $125.0 million.

Net cash used in operating activities was $4.3 million in the first quarter
of 2001 and $4.1 million in the first quarter of 2000.

Net cash used in investing activities was $1.7 million in the first quarter
of 2001 and $41.9 million in the first quarter of 2000. Cash used in investing
activities during the first quarter of 2000 related primarily to additional
purchase price consideration (earnout) paid to the former owners of an acquired
business.

Net cash provided by financing activities was $1.5 million in the first
quarter of 2001 and $50.5 million in the first quarter of 2000. The net cash
provided by financing activities during the three months ended March 31, 2000
related primarily to proceeds from the Company's $200.0 million credit facility.
The Company borrowed $43.0 million under its credit facility in March 2000 and
simultaneously paid this amount to the former owners of two acquired recovery
audit firms.

Net cash used in discontinued operations was $6.1 million in the first
quarter of 2001 and $5.6 million in the first quarter of 2000.

The former private shareholders of Groupe AP satisfied the criteria to
receive additional purchase price consideration based upon the profitability of
Groupe AP for the two year period ended December 31, 2000 of 88.7 million French
Francs (approximately $11.9 million at March 31, 2001) payable no later than
April 30, 2001 using a prescribed combination of cash and restricted,
unregistered shares of the Company's common stock. During the first quarter of
2001, the Company made a partial payment on the earnout of 10.1 million French
Francs (approximately $1.4 million at the time of the payment). On April 11,
2001, the Company paid the remaining 78.6 million French Francs (approximately
$10.7 million at the time of payment). Using the prescribed combination of cash
and restricted, unregistered shares of the Company's common stock, this amount
was paid as a combination of $5.9 million in cash and $4.8 million or 815,038
restricted, unregistered shares of the Company's common stock.

Through April 30, 2001, the Company acquired 23 recovery audit firms. The
Company intends to significantly limit future business acquisitions to those
having compelling strategic importance. There can be no assurance, however, that
the Company will be successful in consummating further acquisitions due to
factors such as receptivity of potential acquisition candidates and valuation
issues. Additionally, there can be no assurance that future acquisitions, if
consummated, can be successfully assimilated into the Company.

The Company from time to time issues common stock in partial consideration
for the business entities it acquires. The timing and quantity of any future
securities issuances are not susceptible to estimation. Additionally, if the
Company is successful in arranging for future acquisitions which individually or

14
17

collectively are large relative to the Company's size, it may need to secure
additional debt or equity financing. There can be no assurance that the Company
can secure such additional financing if needed.

As discussed in Note B of Notes to Condensed Consolidated Financial
Statements (Unaudited) included in Item 1. of this Form 10-Q, the Company
formalized a strategic realignment initiative designed to enhance the Company's
financial position and clarify its investment and operating strategy by focusing
primarily on its core Accounts Payable business. Under this strategic
realignment initiative, the Company will divest the following non-core
businesses: Meridian VAT Reclaim ("Meridian") within the former Taxation
Services segment, the Logistics Management Services segment, the Communications
Services segment and the Ship and Debit ("Ship & Debit") division within the
Accounts Payable Services segment. Proceeds from the divestiture of these
businesses are contractually required to be used to pay down outstanding
principal borrowings under the Company's credit facility.

The Company believes that its current working capital, availability
remaining under its $200.0 million credit facility and cash flow generated from
future operations will be sufficient to meet the Company's working capital and
capital expenditure requirements through March 31, 2002 unless one or more
acquisitions are consummated which require the Company to seek additional debt
or equity financing.

FORWARD LOOKING STATEMENTS

Some of the information in this Form 10-Q contains forward-looking
statements which look forward in time and involve substantial risks and
uncertainties including without limitation, (1) statements that contain
projections of the Company's future results of operations or of the Company's
financial condition, (2) statements regarding the adequacy of the Company's
current working capital and other available sources of funds, and (3) statements
regarding goals and plans for the future. All statements that cannot be assessed
until the occurrence of a future event or events should be considered
forward-looking. These statements are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and can be
identified by the use of forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. Such risk
and uncertainties include, without limitation, the following:

- the Company's ability to effectively manage during the divestitures;

- the possibility of an adverse judgment in pending securities litigation;

- the risk that the Company may be unsuccessful in complying with the
financial ratio covenants of its Credit Agreement, as amended;

- the impact of certain accounting pronouncements by the Securities and
Exchange Commission;

- potential timing issues that could delay revenue recognition;

- the effect of strikes;

- future weakness in the currencies of countries in which the Company
transacts business;

- changes in economic cycles;

- competition from other companies;

- the effect of bankruptcies of the Company's larger clients;

- changes in governmental regulations applicable to the Company; and

- other risk factors detailed in the Company's Form 10-K for the year ended
December 31, 2000.

There may be events in the future, however, that we are not accurately able
to predict or over which we have no control. The risk factors listed in this
section, as well as any cautionary language in this Form 10-Q, provide examples
of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
You should be aware that the occurrence of

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18

any of the events denoted as risk factors above and elsewhere in this Form 10-Q
could have a material adverse effect on our business, financial condition and
results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

On August 19, 1999, the Company acquired Meridian VAT Corporation Limited
("Meridian"). Meridian is based in Dublin, Ireland and specializes in the
recovery of value-added taxes paid on business expenses by corporate clients.
Meridian periodically utilizes derivative financial instruments to hedge against
adverse currency fluctuations since it must transact business using a variety of
European and Asian currencies. Meridian had no derivative financial instruments
outstanding at March 31, 2001 or December 31, 2000. None of the Company's
operating units other than Meridian have historically utilized derivative
financial instruments although future use of these types of instruments is
presently under consideration.

The Company has not conducted any additional transactions, established
commitments or entered into relationships requiring disclosures beyond those
provided elsewhere in this Form 10-Q.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

At March 31, 2001, the Company was not in compliance with the fixed charge
coverage financial ratio covenant of its bank credit facility. This violation
was waived by the Company's lenders on May 9, 2001. (See Liquidity and Capital
Resources under Item 2. of this Form 10-Q.)

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

3.1 -- Restated Articles of Incorporation of the Registrant
(incorporated by reference to Exhibit 4.2 to Registrant's
Form 8-A/A filed August 9, 2000).
3.2 -- Restated Bylaws of the Registrant (incorporated by reference
to Exhibit 4.3 to Registrant's Form 8-A/A filed August 9,
2000).
4.1 -- Specimen Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to Registrant's March 26, 1996 registration
statement number 333-1086 on Form S-1).
4.2 -- See Restated Articles of Incorporation and Bylaws of the
Registrant, filed as Exhibits 3.1 and 3.2, respectively.
10.1 -- Separation Agreement between Mr. Michael A. Lustig and the
Registrant, dated February 2, 2001.
10.2 -- Separation Agreement between Mr. Scott L. Colabuono and the
Registrant, dated January 31, 2001.
10.3 -- Non-qualified Stock Option Agreement between Mr. John Cook
and the Registrant dated March 26, 2001.
10.4 -- Non-qualified Stock Option Agreement between Mr. John M.
Toma and the Registrant dated March 26, 2001.
10.5 -- Non-qualified Stock Option Agreement between Mr. Mark C.
Perlberg and the Registrant dated March 26, 2001.
10.6 -- Non-qualified Stock Option Agreement between Mr. James L.
Dinkins and the Registrant dated March 26, 2001.

(b) Reports on Form 8-K

No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended March 31, 2001.

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

THE PROFIT RECOVERY GROUP
INTERNATIONAL, INC.

May 10, 2001 By: /s/ DONALD E. ELLIS, JR.
------------------------------------
Executive Vice President -- Finance,
Chief Financial Officer and Treasurer
(Principal Financial Officer)