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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, 1997
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

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

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GEORGIA 58-2213805
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)

2300 WINDY RIDGE PARKWAY
SUITE 100 NORTH
ATLANTA, GEORGIA 30339-8426
(770) 955-3815
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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 [ ]

The number of outstanding shares of the issuer's class of capital stock as
of May 2, 1997, the latest practicable date, was as follows: 18,155,151 shares
of Common Stock, no par value.
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2

THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

FORM 10-Q
QUARTER ENDED MARCH 31, 1997

INDEX

PAGE NO.
--------

PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations --
Three months ended March 31, 1997 and March 31, 1996... 1
Condensed Consolidated Balance Sheets --
March 31, 1997 and December 31, 1996................... 2
Condensed Consolidated Statements of Cash Flows --
Three months ended March 31, 1997 and March 31, 1996... 3
Notes to Condensed Consolidated Financial Statements...... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 6
Item 3. Quantitative and Qualitative Disclosures about
Market Risk......................................... 9
PART II. Other Information........................................... 10
Signatures............................................................ 11

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 PER SHARE DATA)
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
-------- --------

Revenues.................................................... $20,960 $15,615
Cost of revenues............................................ 11,529 8,623
Selling, general and administrative expenses................ 8,196 6,031
------- -------
Operating income.......................................... 1,235 961
Interest income (expense), net.............................. 63 (495)
------- -------
Earnings before income taxes.............................. 1,298 466
Income taxes (Note C)....................................... 506 3,700
------- -------
Net earnings (loss)....................................... $ 792 $(3,234)
======= =======
Pro Forma information:
Historical earnings before income taxes................... $ 1,298 $ 466
Pro forma income taxes (Note C)........................... 506 182
------- -------
Pro forma net earnings................................. $ 792 $ 284
======= =======
Pro forma earnings per common and common equivalent share
(Note D)............................................... $ .04 $ .03
======= =======
Weighted average common and common equivalent shares
outstanding............................................ 18,610 15,138
======= =======

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 DATA)
(UNAUDITED)

MARCH 31, DECEMBER 31,
1997 1996
--------- ------------

ASSETS
Current assets:
Cash and cash equivalents (Note F)........................ $12,252 $16,891
Receivables:
Billed contract receivables............................ 3,124 3,864
Unbilled contract receivables.......................... 34,754 30,734
Employee advances...................................... 1,451 1,363
------- -------
Total receivables................................. 39,329 35,961
------- -------
Refundable income taxes................................... -- 2,049
Prepaid expenses and other current assets................. 1,005 528
------- -------
Total current assets.............................. 52,586 55,429
------- -------
Property and equipment:
Computer and other equipment.............................. 7,277 5,753
Furniture and fixtures.................................... 1,755 1,569
Leasehold improvements.................................... 1,274 1,183
------- -------
10,306 8,505
Less accumulated depreciation and amortization............ 2,943 2,272
------- -------
7,363 6,233
------- -------
Noncompete agreements, less accumulated amortization........ 4,251 4,509
Deferred loan costs, less accumulated amortization.......... 48 56
Goodwill, less accumulated amortization..................... 4,256 393
Deferred income taxes....................................... 1,174 1,174
Other assets................................................ 573 524
------- -------
$70,251 $68,318
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt.................... $ 86 $ 79
Accounts payable and accrued expenses..................... 1,330 1,383
Accrued payroll and related expenses...................... 15,171 16,356
Deferred income taxes..................................... 7,607 7,607
------- -------
Total current liabilities......................... 24,194 25,425
Long-term debt, excluding current installments.............. 698 692
Deferred compensation....................................... 1,980 1,642
------- -------
Total liabilities................................. 26,872 27,759
------- -------
Shareholders' equity (Note B):
Preferred stock, no par value. Authorized 1,000,000
shares; no shares issued or outstanding in 1997 and
1996................................................... -- --
Common stock, no par value; stated value $.001 per share.
Authorized 60,000,000 shares; issued and outstanding
18,155,151 in 1997 and 17,649,152 in 1996.............. 18 18
Additional paid-in capital................................ 36,219 34,188
Cumulative translation adjustments........................ (34) (31)
Retained earnings......................................... 7,176 6,384
------- -------
Total shareholders' equity........................ 43,379 40,559
------- -------
$70,251 $68,318
======= =======

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,
-------------------
1997 1996
------- --------

Cash flows from operating activities:
Net earnings (loss)....................................... $ 792 $ (3,234)
Adjustments to reconcile net earnings (loss) to net cash
used in operating activities:
Depreciation and amortization.......................... 980 476
Deferred compensation expense.......................... 151 126
Deferred income taxes.................................. -- 3,700
Foreign translation adjustments........................ (3) 51
Changes in assets and liabilities, net of effects of
acquisitions:
Receivables.......................................... (2,967) (3,703)
Refundable income taxes.............................. 2,049 --
Prepaid expenses and other current assets............ (456) 126
Other assets......................................... (72) (714)
Accounts payable and accrued expenses................ (105) 229
Accrued payroll and related expenses................. (1,282) 1,975
------- --------
Net cash used in operating activities............. (913) (968)
------- --------
Cash flows from investing activities:
Purchases of property and equipment....................... (1,627) (820)
Acquisition of Accounts Payable Recovery Services, Inc.
(Note E)............................................... (2,115) --
------- --------
Net cash used in investing activities............. (3,742) (820)
------- --------
Cash flows from financing activities:
Net increase in note payable to bank...................... -- 167
Proceeds from loans from shareholders..................... -- 2,600
Repayment of long-term debt............................... -- (609)
Capital contributions, net................................ 16 58
------- --------
Net cash provided by financing activities......... 16 2,216
------- --------
Net change in cash and cash equivalents........... (4,639) 428
Cash and cash equivalents at beginning of period............ 16,891 642
------- --------
Cash and cash equivalents at end of period.................. $12,252 $ 1,070
======= ========
Supplemental disclosures of cash flow information:
Cash paid (refunds received), net during the period for
Interest............................................... $ 12 $ 186
======= ========
Income taxes........................................... $ (974) $ --
======= ========

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, 1997
(UNAUDITED)

NOTE A -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of
The Profit Recovery Group International, Inc. and its wholly owned subsidiaries
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles 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, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Form 10-K for the fiscal year ended December
31, 1996.

NOTE B -- INITIAL PUBLIC OFFERING

The Company's initial public offering of its common stock was declared
effective by the United States Securities and Exchange Commission on March 26,
1996, and public trading in the registered shares commenced March 27, 1996. The
initial public offering consisted of 4.6 million shares priced at $11 per share
with the Company selling 3.4 million newly issued shares and certain selling
shareholders selling 1.2 million existing shares. The proceeds from the offering
(net of underwriting discounts and commissions) were not distributed by the
underwriting syndicate until April 1, 1996.

On April 18, 1996, the Company received notification from its underwriting
syndicate that the syndicate had exercised its full over-allotment option to
purchase an additional 690,000 shares of Company common stock. All of these
shares were then sold to the syndicate by certain selling shareholders. The
Company received no proceeds from the sale of such shares.

NOTE C -- INCOME TAXES

The Company's predecessor entities prior to its initial public offering on
March 26, 1996 generally were either corporations electing to be taxed as
Subchapter S corporations or partnerships. As a result, any income tax
liabilities were the responsibilities of the respective shareholders and
partners. In connection with the 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. The results of operations for the
quarter ended March 31, 1996 have been adjusted on a pro forma basis to reflect
federal and state income taxes at a combined effective rate of 39% as if the
Company's predecessors had been C corporations throughout the entire quarter.

NOTE D -- PRO FORMA EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

For the quarter ended March 31, 1997, the weighted average number of common
and common equivalent shares has been derived pursuant to requirements of
Accounting Principles Board Opinion No. 15, Earnings per Share. Common
equivalent shares consist of dilutive stock options, calculated using the
treasury stock method. Fully diluted earnings per share is not significantly
different from the primary earnings per share presented.

For the quarter ended March 31, 1996, pro forma earnings per common and
common equivalent share has been computed by dividing the pro forma net
earnings, which gives effect to pro forma income taxes, by the weighted average
number of common and common equivalent shares outstanding during the period,
after giving effect to the reorganization enacted at the time of the Company's
March 1996 initial public offering.

4
7

THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

For purposes of determining the weighted average number of common and common
equivalent shares for all periods prior to April 1, 1996, the Company has
followed required supplementary guidance contained in Securities and Exchange
Commission Staff Accounting Bulletin Topic 4D and has treated all common shares,
warrants, options and convertible debentures issued within one year prior to its
initial public offering as exercised and outstanding, using the treasury stock
method, regardless of whether the effect were antidilutive. In addition, the
aforementioned computation includes the equivalent number of common shares
derived from dividing the distributions payable by $11.00 per share.

NOTE E -- ACQUISITIONS

On January 2, 1997, the Company acquired the net operating assets of Shaps
Group, Inc., a California-based company providing recovery audit services to
manufacturers, and distributors of high technology products. The Company issued
375,000 shares of its common stock in the transaction which was accounted for as
a pooling-of-interests. Since prior years' financial positions and results of
operations of Shaps Group, Inc. are not material in relation to the Company's
historical financial statements, the Company has not restated its prior years'
consolidated financial statements.

On February 11, 1997, the Company acquired all of the common stock of
Accounts Payable Recovery Services, Inc., a Texas-based company providing
recovery audit services to healthcare entities and energy companies. This
transaction was accounted for as a purchase with consideration of $2,000,000 in
cash and 130,599 shares of the Company's common stock valued at $15.25 per
share.

NOTE F -- CASH EQUIVALENTS

Cash equivalents at March 31, 1997 and December 31, 1996 consisted of $6.5
million and $11.9 million, respectively, of reverse repurchase agreements with
NationsBank, N.A. (South) which were fully collateralized by United States of
America Treasury Notes in the possession of such bank. The reverse repurchase
agreements in effect on March 31, 1997 and December 31, 1996 matured and were
settled on April 1, 1997 and January 2, 1997, respectively.

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.

5
8

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

The following discussion and analysis should be read in conjunction with
the condensed consolidated financial statements and notes thereto included
elsewhere herein.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, certain items in
the condensed consolidated statements of operations as a percentage of revenues.

THREE MONTHS
ENDED
MARCH 31,
-------------
1997 1996
----- -----

HISTORICAL
Revenues.................................................. 100.0% 100.0%
Cost of revenues.......................................... 55.0 55.2
Selling, general and administrative expenses.............. 39.1 38.6
----- -----
Operating income.................................. 5.9 6.2
Interest income (expense), net............................ .3 (3.2)
----- -----
Earnings before income taxes...................... 6.2 3.0
Income taxes.............................................. 2.4 23.7
----- -----
Net earnings (loss)............................... 3.8% (20.7)%
===== =====
PRO FORMA
Historical earnings before income taxes................... 6.2% 3.0%
Pro forma income taxes.................................... 2.4% 1.2%
----- -----
Pro forma net earnings............................ 3.8% 1.8%
===== =====

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31,
1996

Revenues. The Company's revenues consist principally of contractual
percentages of overpayments recovered for clients that are primarily in the
retailing industry. Revenues increased 34.2% to $21.0 million for the first
quarter of 1997, up from $15.6 million in the first quarter of 1996.

Domestic revenues were $16.3 million in the first quarter of 1997, up 25.4%
from $13.0 million in the first quarter of 1996. Of this increase, $1.2 million
resulted from the operations of two companies acquired during the first quarter
of 1997, and the remaining $2.1 million related to new clients signed in 1996.

International revenues were $4.7 million in the first quarter of 1997, up
80.8% from $2.6 million in the first quarter of 1996. International revenue
increases for the first quarter of 1997 over the comparable period of 1996 were
primarily attributable to new clients. Company operations in almost all
international markets experienced significant revenue growth in the first
quarter of 1997 compared to the first quarter of 1996. The Company continues to
believe that the rate of revenue growth for its international operations will
significantly exceed its rate of domestic revenue growth for the foreseeable
future. There can be no assurance, however, that recent international growth
trends will continue. See "Forward-looking Statements."

Cost of Revenues. Cost of revenues consists principally of commissions
paid or payable to the Company's auditors based upon the level of overpayment
recoveries, and salaries and bonuses paid or payable to divisional and regional
managers. Also included are other direct costs incurred by these personnel
including rental of field offices, travel and entertainment, telephone,
utilities, maintenance and supplies, and clerical assistance. Cost of revenues
was 55.0% of revenues for the first quarter of 1997, substantially unchanged
from 55.2% for the comparable quarter of 1996.

Domestically, cost of revenues as a percentage of revenues decreased
slightly to 55.1% in the first quarter of 1997, from 55.9% in the first quarter
of 1996.

6
9

The Company has developed a revised compensation program for its
non-management domestic field auditors which it believes will more equitably
compensate these individuals for their unique experience, skills and
contributions in meeting Company objectives. The revised program has been
designed with considerable input from auditor focus groups, has been subjected
to thorough in-house testing, and has undergone extensive field tests in the
first quarter of 1997. The revised program will be implemented in May 1997. The
Company has attempted to design the revised program such that future aggregate
domestic auditor compensation expense will be unchanged from aggregate amounts
which would otherwise be paid under the existing program. Although the Company
and certain of its domestic auditors have expended considerable time and
resources to design the revised program, there can be no assurance that it will
meet its design objectives when implemented. If the design objectives of the
revised compensation program are not achieved, the Company's domestic costs and
revenues could be materially and adversely affected. See "Forward-looking
Statements."

Internationally, cost of revenues as a percentage of revenues increased to
54.6% in the first quarter of 1997, up from 51.6% in the comparable quarter of
1996. This increase resulted primarily from initial auditor compensation
guarantees associated with the Company's rapidly growing contingent of
international auditors.

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, headquarters-related depreciation of
property and equipment and amortization of intangibles. Selling, general and
administrative expenses as a percentage of revenues increased slightly to 39.1%
for the quarter ended March 31, 1997, from 38.6% in the first quarter of 1996.

On a domestic basis, selling, general and administrative expenses as a
percentage of revenues was 35.8% in the first quarter of 1997, up from 34.5% in
the first quarter of 1996. Excluding the effect of $100,000 of business
combination expenses incurred in the first quarter of 1997 in connection with
the Company's acquisition of Shaps Group, Inc., domestic selling, general and
administrative expenses would have been 35.2% of revenues for the first quarter
of 1997.

Internationally, selling, general and administrative expenses as a
percentage of revenues improved significantly to 50.8% for the quarter ended
March 31, 1997, compared to 59.6% in the 1996 first quarter. The 1997
improvement related primarily to various components of fixed costs being spread
over a rapidly growing international revenue base.

In connection with acquired businesses, the previous owners have agreed to
enter into agreements not to compete with the Company. The intangible assets
resulting from non-compete obligations are amortized on a straight-line basis
over the respective non-compete periods. Amortization of deferred non-compete
assets totaled $259,000 in both the first quarter of 1997 and the first quarter
of 1996.

During the quarter ended March 31, 1997, the Company acquired Accounts
Payable Recovery Services, Inc. in a transaction accounted for as a purchase. In
connection with this acquisition, the Company recorded goodwill of $3.9 million
on its consolidated balance sheet which is being amortized over an estimated
recovery period of 15 years. Goodwill amortization of $46,000 was charged to
operations during the first quarter of 1997 with respect to this acquisition.

Operating Income. Operating income was 5.9% of revenues for the quarter
ended March 31, 1997, down from 6.2% during the comparable quarter of 1996.
Excluding the effect of $100,000 in business combination expenses incurred in
the first quarter of 1997 in connection with the Company's acquisition of Shaps
Group, Inc., operating income would have been 6.4% of revenues for the first
quarter of 1997.

Interest Income (Expense), Net. The Company reported net interest income
of $63,000 during the first quarter of 1997, compared to net interest expense of
$495,000 during the first quarter of 1996. Immediately subsequent to the
Company's initial public offering in March 1996, substantially all of its
interest bearing obligations were repaid in full. Net interest income in the
first quarter of 1997 consisted of interest earnings on the remaining proceeds
from the initial public offering, as reduced for interest expense incurred in
connection with the Company's deferred compensation obligations and remaining
long-term debt.

7
10

Earnings Before Income Taxes. Earnings before income taxes increased to
6.2% of revenues in the first quarter of 1997, up from 3.0% for the first
quarter of 1996. Changes in interest income (expense), net, as discussed above,
accounted for the vast majority of the difference. Excluding the effect of
$100,000 in business combination expenses incurred in the first quarter of 1997
in connection with the Company's acquisition of Shaps Group, Inc., earnings
before income taxes would have been 6.7% for the first quarter of 1997.

Income Taxes. The Company's predecessor entities prior to its initial
public offering on March 26, 1996 generally were either corporations electing to
be taxed as Subchapter S Corporations or partnerships. As a result, any income
tax liabilities were the responsibilities of the respective shareholders and
partners. In connection with the 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.

The provision for income taxes for the quarter ended March 31, 1997
consisted of federal and state income taxes at the Company's combined effective
rate of 39.0%. The provision for income taxes for the quarter ended March 31,
1996 consisted of the above-described $3.7 million charge for cumulative
deferred income taxes.

Pro Forma Income Taxes. The results of operations for the quarter ended
March 31, 1996 have been adjusted on a pro forma basis to reflect federal and
state income taxes at a combined effective rate of 39.0% as if the Company's
predecessors had been C corporations throughout the entire quarter.

LIQUIDITY AND CAPITAL RESOURCES

Through December 31, 1996, the Company's predecessors had acquired and
assimilated three operating companies and financed these acquisitions primarily
through a combination of bank and seller financing. Ongoing Company operations
and capital requirements prior to the Company's initial public offering were met
primarily with cash flows provided by operating activities and, to a lesser
extent, with the proceeds from bank and shareholder loans. On March 26, 1996,
the Company's initial public offering of its common stock was declared effective
by the United States Securities and Exchange Commission. On April 1, 1996, the
Company received its $34.8 million portion of the proceeds (net of underwriting
discounts and commissions) from the offering. Of these proceeds, approximately
$1.1 million was subsequently utilized to pay expenses of the offering,
approximately $4.9 million was used to pay previously declared and unpaid
Subchapter S shareholder distributions and partnership distributions, and
approximately $14.6 million was used to pay principal and accrued interest on
substantially all outstanding interest-bearing debt (other than that portion of
certain convertible debt that was converted to common stock concurrent with the
initial public offering). A substantial portion of the remaining $14.2 million
continued to be available as of March 31, 1997 to expand international
operations, to acquire complementary businesses and for general corporate
purposes, including working capital.

In September 1996, the Company executed a $20.0 million credit facility
with NationsBank N.A. (South). The facility permits the Company to borrow up to
$20.0 million on a term loan basis to finance mergers and acquisitions.
Alternatively, the Company, at its option, may utilize up to $10.0 million as a
revolving line of credit for working capital and employ the remaining $10.0
million for mergers and acquisitions. Through May 2, 1997, the Company had made
no draws against this credit facility, pursuant to which borrowings can be made
through September 1998.

Net cash used in operating activities was $913,000 and $968,000 for the
quarters ended March 31, 1997 and 1996, respectively. The first quarter of each
year has historically produced the lowest level of quarterly cash collections
for the entire year. This trend is expected to continue and reflects the
inherent purchasing and operational cycles of the retailing industry, which is
the principal industry served by the Company.

During the first quarter of 1997, the Company received a $2.0 million
refund in connection with overpayment of its estimated taxes for 1996.
Additionally, the Company paid annual bonuses pertaining to 1996 in the first
quarter of 1997. Annual bonuses pertaining to 1995 were paid in the fourth
quarter of 1995.

8
11

These factors affected the comparability of cash flows from operating activities
for the quarters ended March 31, 1997 and March 31, 1996.

Net cash used in investing activities was $3.7 million in the first quarter
of 1997, and $820,000 in the first quarter of 1996. In the 1997 first quarter,
$1.6 million was used to acquire property and equipment (primarily
computer-related equipment) and $2.1 million was paid in connection with the
February 1997 acquisition of Accounts Payable Recovery Services, Inc. (including
$2.0 million paid to the previous owners at closing).

The Company acquired two recovery audit firms in the first quarter of 1997.
See Note E of Notes To Condensed Consolidated Financial Statements. The Company
is pursuing, and intends to continue to pursue, the acquisition of domestic and
international businesses including both direct competitors and businesses
providing other types of recovery services. Future acquisitions may include much
larger businesses than those acquired to date. 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. See "Forward-looking Statements."

Net cash provided by financing activities was $16,000 in the first quarter
of 1997 and $2.2 million in the comparable quarter of 1996. During the first
quarter of 1996, the Company borrowed additional amounts from its bank and
certain shareholders to meet working capital needs while it prepared for the
March 1996 initial public offering of its common stock. All such additional
borrowings together with substantially all other interest bearing debt of the
Company were repaid in April 1996 with a portion of the net proceeds from the
initial public offering.

The Company believes that its current working capital, its existing line of
credit and cash flow generated from future operations will be sufficient to meet
the Company's working capital and capital expenditure requirements through March
31, 1998.

NEW ACCOUNTING STANDARD

The Company has determined that the adoption of Statement of Financial
Accounting Standards No. 128, "Earning per Share", will not have a material
impact on the Company's reported per share results of operations. This
pronouncement is effective for periods ending after December 15, 1997, including
interim periods; earlier application is not permitted. Once effective, this
pronouncement requires restatement of all prior-period earnings per share data
presented.

FORWARD-LOOKING STATEMENTS

Statements made in this Form 10-Q for the quarter ended March 31, 1997 that
state the Company's or management's intentions, hopes, beliefs, expectations or
predictions of the future are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. It is important to note
that the Company's actual results could differ materially from those contained
in such forward-looking statements. Additional information concerning factors
that could cause actual results to differ materially from those in
forward-looking statements is contained from time to time in the Company's SEC
filings including the Risk Factors section of the Company's Prospectus dated
March 26, 1996 included in registration statement number 333-1086 on Form S-1.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

9
12

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES

On January 2, 1997, in connection with the acquisition of the net operating
assets of Shaps Group, Inc., the Company issued 375,000 shares of its Common
Stock to the former Shaps Group, Inc. shareholders. The shares were issued
pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act of 1933, as amended.

On February 11, 1997, in connection with the acquisition of all of the
outstanding Common Stock of Accounts Payable Recovery Services, Inc. ("APRSI"),
the Company paid $2 million and issued 130,599 shares of the Company's common
stock to the former APRSI shareholders. The shares were issued pursuant to the
exemption from registration provided by Rule 506 of Regulation D promulgated
pursuant to the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 -- Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 to Registrant's March 26, 1996
registration statement number 333-1086 on Form S-1).
3.2 -- Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 to Registrant's March 26, 1996 registration
statement number 333-1086 on Form S-1).
11.1 -- Statement Re: Computation of pro forma earnings per share.
27.1 -- Financial Data Schedule (for SEC use only).

(b) Reports on Form 8-K

The Company did not file a report on Form 8-K during the quarter ended
March 31, 1997.

10
13

SIGNATURES

Pursuant to the requirements 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.

Dated: May 12, 1997 By: /s/ DONALD E. ELLIS, JR.
--------------------------------------------
Donald E. Ellis, Jr.
Senior Vice President,
Treasurer and
Chief Financial Officer
(principal financial officer)

Dated: May 12, 1997 By: /s/ JORGE E. CORA
--------------------------------------------
Jorge E. Cora
Vice President -- Finance
(principal accounting officer)