PRG-Schultz Announces Third Quarter 2009 Financial Results

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ATLANTA--(Business Wire)--
PRG-Schultz International, Inc. (Nasdaq: PRGX), the world's largest recovery
audit firm, today announced its unaudited financial results for the third
quarter and nine months ended September 30, 2009.

Third Quarter Results

Net earnings for the 2009 third quarter were $6.4 million, or $0.27 per basic
and diluted share, compared to net earnings of $4.2 million, or $0.19 per basic
share and $0.18 per diluted share for the same period in 2008. The third quarter
2009 net earnings included before tax charges of $1.5 million related to
stock-based compensation, $0.7 million of foreign currency gains on intercompany
balances and a $2.8 million bargain purchase gain on the previously reported
acquisition of First Audit Partners LLP completed on July 16, 2009. The third
quarter 2008 net earnings included before tax charges of $0.4 million for
stock-based compensation and $1.8 million of foreign currency losses on
intercompany balances.

Adjusted EBITDA for the 2009 third quarter was $7.4 million compared to $9.2
million of adjusted EBITDA for the same period in 2008. The 2009 third quarter
adjusted EBITDA is earnings before interest, taxes, depreciation and
amortization (EBITDA) excluding the $1.5 million charge related to stock-based
compensation, the $0.7 million of foreign currency gains on intercompany
balances and the $2.8 bargain purchase gain on the acquisition of First Audit
Partners LLP. The comparable adjusted EBITDA amount for the third quarter of
2008 excludes from EBITDA for such period the $0.4 million charge for
stock-based compensation and the $1.8 million of foreign currency losses on
intercompany balances. (Schedule 3 attached to this press release provides a
reconciliation of net earnings to each of EBITDA and adjusted EBITDA).

Consolidated revenue for the third quarter of 2009 was $45.3 million, a decrease
of $3.9 million, or 7.9%, compared to $49.2 million for the same period in 2008.
On a constant dollar basis, adjusted for changes in foreign currency exchange
rates, 2009 third quarter revenue declined 4.3% compared to the same period in
2008.

"We were pleased with our ability to perform relatively well during the third
quarter despite the trying economic circumstances impacting the majority of our
retail clients," said Romil Bahl, president and chief executive officer. "As we
initiate execution of our recently announced growth strategy, we are excited
about the possibilities for the future."

Year to Date Results

Net earnings for the first nine months of 2009 were $13.3 million, or $0.59 per
basic share and $0.57 per diluted share, compared to net earnings of $12.3
million, or $0.57 per basic share and $0.54 per diluted share for the same
period in 2008. The first nine months of 2009 net earnings included before tax
charges of $2.5 million related to stock-based compensation, $0.7 million
related to a previously reported litigation settlement, $1.8 million of foreign
currency gains on intercompany balances and the $2.8 million bargain purchase
gain. The first nine months of 2008 net earnings included before tax charges of
$5.0 million for stock-based compensation and $1.3 million of foreign currency
losses on intercompany balances.

Adjusted EBITDA for the nine months ended September 30, 2009 was $20.2 million
compared to $26.9 million of adjusted EBITDA for the same period in 2008. The
2009 nine-month adjusted EBITDA excludes the $2.5 million charge for stock-based
compensation, the $0.7 million charge related to the litigation settlement, the
$1.8 million of foreign currency gains on intercompany balances and the $2.8
million bargain purchase gain. The comparable adjusted EBITDA amount for the
first nine months of 2008 excludes the $5.0 million stock-based compensation
charge and the $1.3 million of foreign currency losses on intercompany balances.

Consolidated revenue in the first nine months of 2009 was $130.0 million, a
decrease of $17.1 million, or 11.6%, compared to $147.1 million for the same
period in 2008. On a constant dollar basis, adjusted for changes in foreign
currency exchange rates, revenue in the first three quarters of 2009 declined
4.7% compared to the same period in 2008.

Liquidity

At September 30, 2009, the Company had cash and cash equivalents of $27.3
million and had no borrowings against its revolving credit facility. Total debt
outstanding at quarter-end was $15.7 million, which included a $15.4 million
outstanding balance on a variable rate term loan due 2011 and a $0.3 million
capital lease obligation.

Third Quarter Earnings Call

As previously announced, management will hold a conference call tomorrow morning
at 8:30 AM (Eastern Time) to discuss the Company`s third quarter 2009 financial
results. To access the conference call, listeners in the U.S. and Canada should
dial 866-825-3308 at least 5 minutes prior to the start of the conference.
Listeners outside the U.S. and Canada should dial 617-213-8062. To be admitted
to the call, listeners should use passcode 84149506. A replay of the call will
be available approximately two hours after the conclusion of the live call,
extending through December 3, 2009. To directly access the replay, dial
888-286-8010 (U.S. and Canada) or 617-801-6888 (outside the U.S. and Canada).
The passcode for the replay is 57411485.

This teleconference will also be audiocast on the Internet at www.prgx.com
(click on "Events" under "Investor Relations"). A replay of the audiocast will
be available at the same location on www.prgx.com beginning approximately two
hours after the conclusion of the live audiocast, extending through December 3,
2009. Please note that the Internet audiocast is "listen-only." Microsoft
Windows Media Player is required to access the live audiocast and the replay and
can be downloaded from www.microsoft.com/windows/mediaplayer.

About PRG-Schultz International, Inc.

Headquartered in Atlanta, PRG-Schultz International, Inc. is the world's leading
recovery audit firm, providing clients throughout the world with insightful
value to optimize and expertly manage their business transactions. Using
proprietary software and expert audit methodologies, PRG industry specialists
review client purchases and payment information to identify and recover
overpayments.

Non-GAAP Financial Measures

EBITDA and adjusted EBITDA are both "non-GAAP financial measures" presented as
supplemental measures of our performance. They are not presented in accordance
with accounting principles generally accepted in the United States, or GAAP. The
Company believes these measures provide additional meaningful information in
evaluating the Company's performance over time, and that the rating agencies and
a number of lenders use EBITDA and similar measures for similar purposes. In
addition, a measure similar to adjusted EBITDA is used in the restrictive
covenants contained in the Company`s secured credit facility. However, EBITDA
and adjusted EBITDA have limitations as analytical tools, and you should not
consider them in isolation, or as substitutes for analysis of our results as
reported under GAAP. In addition, in evaluating EBITDA and adjusted EBITDA, you
should be aware that, as described above, the adjustments may vary from period
to period and in the future we will incur expenses such as those used in
calculating these measures. Our presentation of these measures should not be
construed as an inference that our future results will be unaffected by unusual
or nonrecurring items. Schedule 3 to this press release provides a
reconciliation of net earnings to each of EBITDA and adjusted EBITDA.

Forward Looking Statements

In addition to historical information, this press release includes certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements include both implied and express
statements regarding the Company`s financial condition, its outlook on the
economic environment and its growth strategy and possibilities for the
future.Such forward looking statements are not guarantees of future performance
and are subject to risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to differ materially
from the historical results or from any results expressed or implied by such
forward-looking statements. Risks that could affect the Company`s future
performance include revenues that do not meet expectations or justify costs
incurred, the Company`s ability to develop material sources of new revenue in
addition to revenues from its core accounts payable services, changes in the
market for the Company`s services, the Company`s ability to retain existing
personnel, potential legislative and regulatory changes applicable to the
Medicare recovery audit contractor program, uncertainty in the credit markets,
client bankruptcies, loss of major clients, and other risks generally applicable
to the Company`s business. For a discussion of other risk factors that may
impact the Company's business, please see the Company`s filings with the
Securities and Exchange Commission, including its Form 10-K filed on March 16,
2009. The Company disclaims any obligation or duty to update or modify these
forward-looking statements.

SCHEDULE 1
PRG-Schultz International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)

Three Months Nine Months
Ended September 30, Ended September 30,
2009 2008 2009 2008

Revenues $ 45,321 $ 49,182 $ 130,044 $ 147,093
Cost of revenues 28,482 31,169 82,701 94,362
Gross margin 16,839 18,013 47,343 52,731

Selling, general and administrative expenses 11,893 12,139 32,911 36,006

Operating income 4,946 5,874 14,432 16,725

Gain on bargain purchase 2,788 - 2,788 -
Income before interest and taxes 7,734 5,874 17,220 16,725

Interest expense, net 728 789 2,154 2,545

Earnings before income taxes 7,006 5,085 15,066 14,180

Income taxes 605 879 1,767 1,872

Net earnings $ 6,401 $ 4,206 $ 13,299 $ 12,308

Basic earnings per common share $ 0.27 $ 0.19 $ 0.59 $ 0.57

Diluted earnings per common share $ 0.27 $ 0.18 $ 0.57 $ 0.54

Weighted average common shares outstanding:
Basic 23,404 21,919 22,735 21,726
Diluted 23,833 23,002 23,453 22,942

SCHEDULE 2
PRG-Schultz International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)

September 30, December 31,
2009 2008
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 27,329 $ 26,688
Restricted cash 317 61
Receivables:
Contract receivables 31,751 33,711
Employee advances and miscellaneous receivables 544 285
Total receivables 32,295 33,996

Prepaid expenses and other current assets 2,743 2,264
Total current assets 62,684 63,009

Property and equipment, net 7,519 7,901
Goodwill 4,600 4,600
Intangible assets, net 24,866 18,968
Other assets 3,366 4,305
Total assets $ 103,035 $ 98,783

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portions of debt obligations $ 5,342 $ 5,314
Accounts payable and accrued expenses 11,170 16,275
Accrued payroll and related expenses 18,397 22,536
Refund liabilities and deferred revenue 8,593 8,372
Acquisition obligations 2,560 -
Total current liabilities 46,062 52,497

Debt obligations 10,320 14,331
Noncurrent compensation obligations 1,233 2,849
Other long-term liabilities 7,108 6,396
Total liabilities 64,723 76,073

Shareholders' equity:
Common stock 232 218
Additional paid-in capital 561,770 559,359
Accumulated deficit (526,689 ) (539,988 )
Accumulated other comprehensive income 2,999 3,121
Total shareholders' equity 38,312 22,710

Total liabilities and shareholders' equity $ 103,035 $ 98,783

SCHEDULE 3
PRG-Schultz International, Inc. and Subsidiaries
Reconciliation of Net Earnings to EBITDA and Adjusted EBITDA
(Amounts in thousands)
(Unaudited)

Three Months Nine Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
Reconciliation of net earnings to EBITDA
and to adjusted EBITDA:

Net earnings $ 6,401 $ 4,206 $ 13,299 $ 12,308

Adjust for:
Income taxes 605 879 1,767 1,872
Interest 728 789 2,154 2,545
Depreciation and amortization 1,634 1,181 4,342 3,897

EBITDA 9,368 7,055 21,562 20,622

Foreign currency (gains) losses on
intercompany balances (678 ) 1,801 (1,752 ) 1,335
Litigation settlement - - 650 -
Stock-based compensation 1,496 377 2,500 4,961
Gain on bargain purchase (2,788 ) - (2,788 ) -

Adjusted EBITDA $ 7,398 $ 9,233 $ 20,172 $ 26,918

EBITDA and adjusted EBITDA are both "non-GAAP financial measures" presented as supplemental measures of our performance. They are not presented in accordance with accounting principles generally accepted in the United States, or GAAP. The Company believes these measures provide additional meaningful information in evaluating the Company's performance over time, and that the rating agencies and a number of lenders use EBITDA and similar measures for similar purposes. In addition, a measure similar to adjusted EBITDA is used in the restrictive covenants contained in the Company`s secured credit facility. However, EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. In addition, in evaluating EBITDA and adjusted EBITDA, you should be aware that in the future we will incur expenses such as those used in calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by
unusual or nonrecurring items.

SCHEDULE 4
PRG-Schultz International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)

Three Months Nine Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
Cash flows from operating activities:

Net earnings $ 6,401 $ 4,206 $ 13,299 $ 12,308
Adjustments to reconcile net earnings to net cash provided by operating activities:
Gain on bargain purchase (2,788 ) - (2,788 ) -
Depreciation and amortization 1,634 1,181 4,342 3,897
Amortization of debt discounts and deferred costs 197 198 591 588
Stock-based compensation expense 1,496 377 2,500 4,961
(Increase) decrease in receivables (3,168 ) (4,161 ) 2,903 4,514
(Decrease) increase in accounts payable, accrued payroll and other accrued expenses (1,381 ) 6,759 (11,738 ) (13,403 )
Other, primarily changes in assets and liabilities (611 ) (3,069 ) (1,869 ) (4,935 )
Net cash provided by operating activities 1,780 5,491 7,240 7,930

Cash flows used in investing activities:
Business acquisition (1,629 ) - (1,629 ) -
Purchases of property and equipment, net of disposals (656 ) (1,109 ) (2,065 ) (2,211 )
Net cash used in investing activities (2,285 ) (1,109 ) (3,694 ) (2,211 )

Net cash used in financing activities (1,354 ) (1,321 ) (4,253 ) (25,015 )

Effect of exchange rates on cash and cash equivalents 706 (425 ) 1,348 (280 )

Net increase (decrease) in cash and cash equivalents (1,153 ) 2,636 641 (19,576 )

Cash and cash equivalents at beginning of period 28,482 20,152 26,688 42,364

Cash and cash equivalents at end of period $ 27,329 $ 22,788 $ 27,329 $ 22,788

PRG-Schultz International, Inc.
Robert Lee, 770-779-6464

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