##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 OR
 o
    
    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
 PRGX Global, Inc.
  Georgia
    
    58-2213805(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)600 Galleria Parkway
    
    30339-5986Suite 100
    
    (Zip Code)Atlanta, Georgia(Address of principal executive offices)
 Registrants telephone number, including area code : (770) 779-3900
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, No Par Value
    
    The NASDAQ Stock Market LLC (The Nasdaq Global Market)Preferred Stock Purchase Rights
    
    The NASDAQ Stock Market LLC (The Nasdaq Global Market)
 Securities registered pursuant to Section 12(g) of the Act: None
 o þ
 o þ
 Note
 þ o
 þ
 o o
  o Large accelerated filer
    
    o Accelerated filer
    
    þ Non-accelerated filer
    
    o Small reporting company(Do not check if a smaller reporting company)
 o þ
   Documents Incorporated by Reference




---



##### 



PRGX Global, Inc.
 FORM 10-K
December 31, 2009
 PagePart IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    12Item 1B. Unresolved Staff Comments
    
    
    19Item 2. Properties
    
    
    19Item 3. Legal Proceedings
    
    
    19Item 4. [Reserved]
    
    
    19Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    20Item 6. Selected Financial Data
    
    
    22Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 8. Financial Statements and Supplementary Data
    
    
    42Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    81Item 9A. Controls and Procedures
    
    
    81Item 9B. Other Information
    
    
    81Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    82Item 11. Executive Compensation
    
    
    82Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    83Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    84Item 14. Principal Accounting Fees and Services
    
    
    84Part IVItem 15. Exhibits, Financial Statement Schedules
    
    
    85Signatures
    
    
    90EX-2.1EX-10.26EX-10.31EX-10.32EX-10.32.1EX-10.33EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1




---



##### Table of Contents



PART I
 
 ITEM 1. Business
 Risk Factors
     1




---



##### Table of Contents



The
PRGX Recovery Audit Service Line
  
    
    retailers such as discount, department, specialty, grocery and drug stores, and
wholesalers who sell to these retailers;
    
    business enterprises other than retailers/wholesalers such as manufacturers, financial
services firms, and pharmaceutical companies;
    
    healthcare payers, both private sector health insurance companies and state and federal
government payers such as the Centers for Medicare and Medicaid Services (CMS); and
    
    federal and state government agencies other than government healthcare payers.
   Note 5
   The Recovery Audit Industry
 2




---



##### Table of Contents




    
    Data Capture and Availability.Businesses are increasingly using technology to
manage complex procurement and accounts payable systems and realize greater operating
efficiencies. Many businesses worldwide communicate with vendors electronically  whether
by Electronic Data Interchange (EDI) or the Internet  to exchange inventory and sales
data, transmit purchase orders, submit invoices, forward shipping and receiving information
and remit payments. These systems capture more detailed data and enable the cost effective
review of more transactions by recovery auditors.
    
    Increasing Number of Auditable Claim Categories.Traditionally, the recovery
audit industry identified simple, or disbursement, claim types such as the duplicate
payment of invoices. Enhancements to accounts payable software, particularly large
enterprise software solutions used by many large companies, have reduced the extent to
which these companies make simple disbursement errors. However, the introduction of
creative vendor discount programs, complex pricing arrangements and activity-based
incentives has led to an increase in auditable transactions and potential sources of error.
These transactions are complicated to audit as the underlying transaction data is difficult
to access and recognizing mistakes is complex. Recovery audit firms such as the Company
with significant industry-specific expertise and sophisticated technology are best equipped
to audit these complicated, or contract compliance, claim categories.
    
    Globalization.As the operations of major retailers and other business
enterprises become increasingly global, they often seek service providers with a global
reach.
    
    Consolidation in the Retail Industry.Retailer consolidation continues in both
the U.S. and internationally. As retailers grow larger, vendors become more reliant on a
smaller number of customers and, as a result, the balance of power favors retailers rather
than their vendors. This dynamic creates an environment that allows retailers to assert
overpayment claims more easily.
 3




---



##### Table of Contents




    
    Significant Promotional Activity.Trade promotion spending is substantial
within the retail trade and significant sums are being spent in categories with numerous
transactions and a high potential for errors, such as scan downs, or discounts at the point
of sale. Because of the high volume of trade promotion within retail, there are significant
opportunities for mistakes and, therefore, auditable claims.
 
    
    Move Toward Standard Auditing Practices. Increasingly, vendors to the
Companys clients are insisting on the satisfaction of certain conditions, such as clearer
post-audit procedures, better documentation and electronic communication of claims, before
accepting the validity of a claim.
  The PRGX Recovery Audit Solution
    The PRGX Strategy
  1.
    
    grow the accounts payable recovery audit business;2.
    
    grow the healthcare recovery audit business;3.
    
    expand data mining for profitability;4.
    
    grow the advisory services business; and5.
    
    build a strong team with a high-performance culture.
 Profit Discovery
 Grow the Accounts Payable Recovery Audit Business
 4




---



##### Table of Contents



Grow the Healthcare Recovery Audit Business
   Expand Data Mining for Profitability
 Note 19
 5




---



##### Table of Contents



Grow the Advisory Services Business
  Build a Strong Team with a High-Performance Culture
  PRGX Services
 Accounts Payable Recovery Audit Services
   Retail/Wholesale
  Commercial
  6




---



##### Table of Contents



Healthcare Recovery Audit Services
   
    
    Administrative compliance  analysis of paid claims data to determine if services were
provided based on contractual, policy and procedural standards;
    
    Coding and billing  analysis of paid claims data and corresponding medical records to
determine payment accuracy; and
    
    Medical necessity  analysis of paid claims data and review of medical records to
determine if services were reasonable and necessary.
  Business Analytics and Advisory Services
    Clients
  7




---



##### Table of Contents



Sales and Marketing
   Client Contracts
   Technology
   8




---



##### Table of Contents



Auditor Hiring, Training and Compensation
  Proprietary Rights
 PRGX SM , Discover Your Hidden Profits SM , PRG-Schultz®, imDex®, AuditPro,
SureF!nd Direct F!nd and claimDex.
 Competition
 Accounts Payable Recovery Audit
 9




---



##### Table of Contents



Client Internal Recovery Audit Departments
 Other Accounts Payable Recovery Audit Firms
 
    
    Full-service accounts payable recovery audit firms. The Company believes that only one
other company also offers a full suite of U.S. and international recovery audit services;
    
    A large number of smaller accounts payable recovery firms which have a limited client
base and which use less sophisticated tools to mine disbursement claim categories at low
contingency rates. These firms are most common in the U.S. market. Competition in most
international markets, if any, typically comes from small niche providers;
    
    Firms that offer a hybrid of audit software tools and training for use by internal audit
departments, and/or general accounts payable process improvement enablers; and
    
    Firms with specialized skills focused on recovery audit services for discrete sectors
such as sales and use tax or real estate.
 Other Providers of Recovery Audit Services
 Healthcare Recovery Audit Services
  
    
    Firms that provide recovery audit services across multiple industries
including healthcare;
    
    Firms that provide healthcare IT solutions and services to both the government
and private payers; and
 10




---



##### Table of Contents




    
    Firms that contract with federal and state governments integrity programs.
 Business Analytics Services
  Advisory Services
  Regulation
  Employees
  Website
 www.prgx.com
 11




---



##### Table of Contents



ITEM 1A. Risk Factors
 Revenues from our accounts payable recovery audit business have declined over the last several
years. We must successfully execute our recovery audit growth strategy in order to reverse this
trend.
  We depend on our largest clients for significant revenues, so losing a major client could adversely
affect our revenues and liquidity.
  We have a history of losses and may not be able to sustain profitability.
  Client and vendor bankruptcies and financial difficulties could reduce our earnings.
    Our growth strategy may not be successful.
  12




---



##### Table of Contents



We have incurred significant costs in establishing the necessary resources to provide services for
Medicare audit recovery work and we will continue to incur significant costs as a subcontractor in
the national RAC program. Furthermore, revenues from our Medicare audit recovery work lag
significantly behind these costs and may not justify the costs incurred.
  Recovery auditing of Medicare spending is subject to a number of pressures and uncertainties that
could impact our future opportunities and revenues from this business.
  Our participation in the national Medicare recovery audit program is as a subcontractor, and
consequently, is subject to being reduced or eliminated should the prime contractors with whom we
have contracted have their prime contracts with CMS terminated or should those contracts expire.
  13




---



##### Table of Contents



We may be unable to protect and maintain the competitive advantage of our proprietary technology
and intellectual property rights.
   Security breaches or computer viruses could harm our business by disrupting our delivery of
services, damaging our reputation or exposing us to liability.
  Operational failures in our data processing facilities could harm our business and reputation.
  Our failure to retain the services of key members of management and highly skilled personnel could
adversely impact our operations and financial performance.
   14




---



##### Table of Contents



We rely on operations outside the U.S. for a significant portion of our revenues.
  
    
    political and economic instability in the international markets we serve;
    
    difficulties in staffing and managing foreign operations and in collecting accounts
receivable;
    
    fluctuations in currency exchange rates, particularly weaknesses in the British
pound, the euro, the Canadian dollar, the Mexican peso, and the Brazilian real and
other currencies of countries in which we transact business, which could result in
currency translations that materially reduce our revenues and earnings;
    
    costs associated with adapting our services to our foreign clients needs;
    
    unexpected changes in regulatory requirements and laws;
    
    expenses and legal restrictions associated with transferring earnings from our
foreign subsidiaries to us;
    
    burdens of complying with a wide variety of foreign laws and labor practices;
    
    business interruptions due to widespread disease, potential terrorist activities, or
other catastrophes;
    
    reduced or limited protection of our intellectual property rights; and
    
    longer accounts receivable cycles.
  Our
revenues from providing accounts payable recovery audit services to commercial clients have
been declining.
  Our recovery audit services, business analytics and advisory services businesses operate in highly
competitive environments and are subject to pricing pressure.
   15




---



##### Table of Contents



Generally our client contracts contain provisions under which the client may terminate the
agreement prior to the completion of the agreement.
  Our failure to comply with applicable governmental privacy laws and regulations could substantially
impact our business, operations and financial condition.
  The ownership change that occurred as a result of our 2006 exchange offer limits our ability to use
our net operating losses.
  Certain of our tax positions may be subject to challenge by the Internal Revenue Service and other
tax authorities, and if successful, these challenges could increase our future tax liabilities and
expense.
    16




---



##### Table of Contents



Future impairment of goodwill, other intangible assets and long-lived assets would reduce our
future earnings.
 Intangibles  Goodwill and Other
 Our articles of incorporation, bylaws, shareholder rights plan and Georgia law may inhibit a change
of control that shareholders may favor.
  
    
    a classified Board of Directors;
    
    the requirement that our shareholders may only remove directors for cause;
    
    specified requirements for calling special meetings of shareholders; and
    
    the ability of the Board of Directors to consider the interests of various
constituencies, including our employees, clients and creditors and the local community,
in making decisions.
  The terms of our credit facility place restrictions on us, which create risks of default and reduce
our flexibility.
   Our stock price has been and may continue to be volatile.
 17




---



##### Table of Contents




    
    future announcements concerning us, key clients or competitors;
    
    quarterly variations in operating results and liquidity;
    
    changes in financial estimates and recommendations by securities analysts;
    
    developments with respect to technology or litigation;
    
    the operating and stock price performance of other companies that investors may deem
comparable to our company;
    
    acquisitions and financings; and
    
    sales and purchases of blocks of stock by insiders.
  18




---



##### Table of Contents



ITEM 1B. Unresolved Staff Comments
  
 ITEM 2. Properties
  Note 9
 
 ITEM 3. Legal Proceedings
  
 ITEM 4. [Reserved
 19




---



##### Table of Contents



ITEM 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
  High
    
    Low2009 Calendar Quarter1st Quarter
    
    $
    4.91
    
    
    $
    2.742nd Quarter
    
    
    4.04
    
    
    
    2.483rd Quarter
    
    
    6.01
    
    
    
    2.604th Quarter
    
    
    6.98
    
    
    
    4.50
 High
    
    Low2008 Calendar Quarter1st Quarter
    
    $
    9.57
    
    
    $
    6.772nd Quarter
    
    
    10.72
    
    
    
    8.453rd Quarter
    
    
    12.30
    
    
    
    8.294th Quarter
    
    
    9.02
    
    
    
    3.22
  20




---



##### Table of Contents



Performance Graph
  
 VALUE OF $100 INVESTED ON DECEMBER 31, 2004 AT:
 Cumulative Total Return
 12/04
    
    12/05
    
    12/06
    
    12/07
    
    12/08
    
    12/09PRGX Global, Inc.
    
    
    100.00
    
    
    
    12.13
    
    
    
    15.90
    
    
    
    17.04
    
    
    
    8.11
    
    
    
    11.75NASDAQ Composite
    
    
    100.00
    
    
    
    101.33
    
    
    
    114.01
    
    
    
    123.71
    
    
    
    73.11
    
    
    
    105.61RDG Technology Composite
    
    
    100.00
    
    
    
    102.13
    
    
    
    111.45
    
    
    
    127.27
    
    
    
    71.89
    
    
    
    115.97
 21




---



##### Table of Contents



ITEM 6. Selected Financial Data
   Managements Discussion and Analysis of Financial
Condition and Results of Operations
 Years Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(In thousands, except per share data)Statements of Operations Data:Revenues
    
    $
    179,583
    
    
    $
    195,706
    
    
    $
    227,369
    
    
    $
    225,898
    
    
    $
    251,527Cost of revenues
    
    
    116,718
    
    
    
    125,901
    
    
    
    140,877
    
    
    
    161,827
    
    
    
    167,886Gross margin
    
    
    62,865
    
    
    
    69,805
    
    
    
    86,492
    
    
    
    64,071
    
    
    
    83,641Selling, general and administrative
expenses (1)
    
    
    43,873
    
    
    
    44,028
    
    
    
    67,063
    
    
    
    56,500
    
    
    
    104,760Impairment charges (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170,375Operational restructuring expense
    
    
    
    
    
    
    
    
    
    
    1,644
    
    
    
    4,130
    
    
    
    11,167Operating income (loss)
    
    
    18,992
    
    
    
    25,777
    
    
    
    17,785
    
    
    
    3,441
    
    
    
    (202,661
    )Gain on bargain purchase, net (3)
    
    
    2,388
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense, net
    
    
    3,025
    
    
    
    3,245
    
    
    
    13,815
    
    
    
    16,311
    
    
    
    8,278Loss on debt extinguishment and
financial restructuring
    
    
    
    
    
    
    
    
    
    
    9,397
    
    
    
    10,047
    
    
    
    Income (loss) from continuing
operations before income taxes and
discontinued operations
    
    
    18,355
    
    
    
    22,532
    
    
    
    (5,427
    )
    
    
    (22,917
    )
    
    
    (210,939
    )Income tax expense (4)
    
    
    3,028
    
    
    
    3,502
    
    
    
    1,658
    
    
    
    1,165
    
    
    
    63Income (loss) from continuing
operations before discontinued
operations
    
    
    15,327
    
    
    
    19,030
    
    
    
    (7,085
    )
    
    
    (24,082
    )
    
    
    (211,002
    )Discontinued operations:Earnings from discontinued
operations, net of income taxes
    
    
    
    
    
    
    
    
    
    
    20,215
    
    
    
    2,983
    
    
    
    3,262Net earnings (loss)
    
    $
    15,327
    
    
    $
    19,030
    
    
    $
    13,130
    
    
    $
    (21,099
    )
    
    $
    (207,740
    )Basic earnings (loss) per common share:Earnings (loss) from continuing
operations before discontinued
operations
    
    $
    0.67
    
    
    $
    0.87
    
    
    $
    (0.62
    )
    
    $
    (3.77
    )
    
    $
    (34.03
    )Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    1.66
    
    
    
    0.45
    
    
    
    0.53Net earnings (loss)
    
    $
    0.67
    
    
    $
    0.87
    
    
    $
    1.04
    
    
    $
    (3.32
    )
    
    $
    (33.50
    )Diluted earnings (loss) per common share:Earnings (loss) from continuing
operations before discontinued
operations
    
    $
    0.65
    
    
    $
    0.83
    
    
    $
    (0.62
    )
    
    $
    (3.77
    )
    
    $
    (34.03
    )Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    1.66
    
    
    
    0.45
    
    
    
    0.53Net earnings (loss)
    
    $
    0.65
    
    
    $
    0.83
    
    
    $
    1.04
    
    
    $
    (3.32
    )
    
    $
    (33.50
    )
 22




---



##### Table of Contents



December 31,2009
    
    2008
    
    2007
    
    2006
    
    2005(In thousands)Balance Sheet Data:Cash and cash equivalents
    
    $
    33,026
    
    
    $
    26,688
    
    
    $
    42,364
    
    
    $
    30,228
    
    
    $
    8,361Working capital
    
    
    18,479
    
    
    
    10,512
    
    
    
    16,998
    
    
    
    5,218
    
    
    
    (9,123
    )Total assets
    
    
    110,513
    
    
    
    98,783
    
    
    
    122,438
    
    
    
    178,667
    
    
    
    162,062Long-term debt, excluding
current installments
    
    
    11,070
    
    
    
    14,331
    
    
    
    38,078
    
    
    
    136,922
    
    
    
    140,401Redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,199
    
    
    
    Total shareholders equity (deficit)
    
    $
    41,439
    
    
    $
    22,710
    
    
    $
    2,349
    
    
    $
    (104,483
    )
    
    $
    (102,365
    )
 
 (1)
    
    The Company adopted the provisions of FASB ASC 718, Compensation  Stock Compensation
(FASB ASC 718) in 2006 and recognized $3.3 million, $2.2 million, $21.0 million and $6.4
million of stock-based compensation charges during the years ended December 31, 2009, 2008,
2007 and 2006, respectively. See Note 1(k)and Note 14of Notes to Consolidated Financial
Statements included in Item 8 of this Form 10-K.(2)
    
    During 2005, the Company recognized impairment charges related to goodwill and intangible
assets. See Note 1(f)and Note 7of Notes to Consolidated Financial Statements included in
Item 8 of this Form 10-K.(3)
    
    In July 2009, the Company acquired the business and certain assets of First Audit Partners
LLP. The excess of the fair value of assets acquired over the purchase price resulted in a
gain on bargain purchase. See Note 17of Notes to Consolidated Financial Statements
included in Item 8 of this Form 10-K.(4)
    
    Low effective tax rates in 2009 and 2008 are primarily attributable to reductions in the
deferred tax asset valuation allowance. Low effective tax rates in 2007, 2006 and 2005 are
primarily attributable to the non-recognition of loss carry-forward benefits. See Note (h)
and Note 10of Notes to Consolidated Financial Statements included in Item 8 of this Form
10-K. 23




---



##### Table of Contents



ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
 Note 5
     24




---



##### Table of Contents



25




---



##### Table of Contents



Results of Operations
  Years Ended December 31,2009
    
    2008
    
    2007Statements of Operations Data:Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    65.0
    
    
    
    64.3
    
    
    
    62.0Gross margin
    
    
    35.0
    
    
    
    35.7
    
    
    
    38.0Selling, general and administrative expenses
    
    
    24.4
    
    
    
    22.5
    
    
    
    29.5Operational restructuring expenses
    
    
    
    
    
    
    
    
    
    
    0.7Operating income
    
    
    10.6
    
    
    
    13.2
    
    
    
    7.8Gain on bargain purchase, net
    
    
    1.3
    
    
    
    
    
    
    
    Interest expense, net
    
    
    1.7
    
    
    
    1.7
    
    
    
    6.1Loss on debt extinguishment and financial restructuring
    
    
    
    
    
    
    
    
    
    
    4.1Earnings (loss) from continuing operations before
income taxes and discontinued operations
    
    
    10.2
    
    
    
    11.5
    
    
    
    (2.4
    )Income tax expense
    
    
    1.7
    
    
    
    1.8
    
    
    
    0.7Earnings (loss) from continuing operations before
discontinued operations
    
    
    8.5
    
    
    
    9.7
    
    
    
    (3.1
    )Discontinued operations:Earnings from discontinued operations, net of
income taxes
    
    
    
    
    
    
    
    
    
    
    8.9Net earnings
    
    
    8.5
    %
    
    
    9.7
    %
    
    
    5.8
    %
 Recovery Audit and New Services
 Revenues.
 2009
    
    
    2008
    
    
    2007Recovery Audit Services  Americas
    
    $
    121.6
    
    
    $
    138.2
    
    
    $
    143.6Recovery Audit Services  Europe/Asia-Pacific
    
    
    52.5
    
    
    
    53.6
    
    
    
    59.1New Services
    
    
    5.5
    
    
    
    3.9
    
    
    
    24.7Total
    
    $
    179.6
    
    
    $
    195.7
    
    
    $
    227.4
   26




---



##### Table of Contents



Cost of Revenues (COR).
  27




---



##### Table of Contents



2009
    
    
    2008
    
    
    2007Recovery Audit Services  Americas
    
    $
    68.0
    
    
    $
    76.3
    
    
    $
    84.7Recovery Audit Services  Europe/Asia-Pacific
    
    
    40.3
    
    
    
    41.3
    
    
    
    47.7New Services
    
    
    8.4
    
    
    
    8.3
    
    
    
    8.5Total
    
    $
    116.7
    
    
    $
    125.9
    
    
    $
    140.9
       Selling, General and Administrative Expenses (SG&A).
  2009
    
    
    2008
    
    
    2007Recovery Audit Services  Americas
    
    $
    17.6
    
    
    $
    16.7
    
    
    $
    20.1Recovery Audit Services  Europe/Asia-Pacific
    
    
    5.3
    
    
    
    8.4
    
    
    
    6.4New Services
    
    
    1.2
    
    
    
    1.9
    
    
    
    2.4Total
    
    $
    24.1
    
    
    $
    27.0
    
    
    $
    28.9
  28




---



##### Table of Contents



Note 17
  Corporate Support
   2009
    
    
    2008
    
    
    2007Selling, general and administrative expenses
    
    $
    19.8
    
    
    $
    17.0
    
    
    $
    38.2
 2006 Management Incentive Plan
 Note 13
 29




---



##### Table of Contents



Interest Expense and Income
 - Financing Activities and Interest Expense
 Loss on Debt Extinguishment
 - 2007 Financial Restructuring
 Income Tax Expense
      30




---



##### Table of Contents



Discontinued Operations
   31




---



##### Table of Contents



Liquidity and Capital Resources
   Operating Activities.
    Investing Activities and Depreciation and Amortization Expense.
  Note 17
 32




---



##### Table of Contents



Financing Activities and Interest Expense.
  New Credit Facility
      Former Credit Facility
  33




---



##### Table of Contents



2007 Financial Restructuring
   34




---



##### Table of Contents



Discontinued Operations
  Stock Repurchase Program
  35




---



##### Table of Contents



Contractual Obligations and Other Commitments
  Payments Due by Period (in thousands)Less
    
    
    
    
    
    
    
    
    
    
    MoreThan
    
    
    
    
    
    
    3-5
    
    
    ThanContractual obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    Years
    
    
    5 YearsLong-term debt obligations (1)
    
    $
    15,000
    
    
    $
    3,000
    
    
    $
    9,000
    
    
    $
    3,000
    
    
    $
    Operating lease obligations
    
    
    32,193
    
    
    
    6,958
    
    
    
    19,090
    
    
    
    5,822
    
    
    
    323Capital lease obligations (2)
    
    
    273
    
    
    
    273
    
    
    
    
    
    
    
    
    
    
    
    Cash portions of stock-based compensation (3)
    
    
    635
    
    
    
    424
    
    
    
    211
    
    
    
    
    
    
    
    Purchase price payments to former FAP owners
(4)
    
    
    5,733
    
    
    
    2,701
    
    
    
    3,032
    
    
    
    
    
    
    
    Payments to Messrs. Cook and Toma (5)
    
    
    2,256
    
    
    
    1,182
    
    
    
    180
    
    
    
    894
    
    
    
    Purchase price payments to Etesius Limited
shareholders (6)
    
    
    4,000
    
    
    
    2,800
    
    
    
    500
    
    
    
    700
    
    
    
    Severance
    
    
    1,126
    
    
    
    1,126
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    61,216
    
    
    $
    18,464
    
    
    $
    32,013
    
    
    $
    10,416
    
    
    $
    323
 
 (1)
    
    Represents amounts payable under the Companys new credit facility effective January 19,
2010; excludes variable rate interest (LIBOR plus
2.25% to 3.50% per annum) payable monthly.(2)
    
    Includes interest imputed at 11.3%(3)
    
    Represents the portions of Performance Units outstanding under the 2006 MIP payable in cash.
Amounts presented are based on
the market price of the Companys common stock at December 31, 2009. Actual payments are due to
be made on April 30 of each year and will be based on the market price of the Companys common
stock at the settlement dates  see 2006 Management Incentive Plan below.(4)
    
    Represents deferred payments due under the FAP asset purchase agreement  see Acquisitions
below. The amounts above include variable
consideration which may be due based on cash flows generated by the acquired business over the
next four years. The obligations are denominated in British pounds sterling. The U.S. dollar
amounts above are based on December 31, 2009 foreign exchange rates.(5)
    
    In connection with the Companys 2006 financial restructuring, required payments to Messrs.
Cook and Toma were revised  see Executive Severance Payments below.(6)
    
    Represents deferred payments due under the Etesius Limited share purchase agreement  see
Acquisitions below. The above does not include
variable consideration which may be due based on the financial performance of certain Companys
service lines over the next four years. Management has not completed its analysis of the
variable consideration payable. 2006 Management Incentive Plan
   36




---



##### Table of Contents



Acquisitions
   Executive Severance Payments
  Off Balance Sheet Arrangements
  Critical Accounting Policies
 Note 1
 37




---



##### Table of Contents




    
    Revenue Recognition.The Company recognizes revenues on the accrual basis except with
respect to certain International units where revenues are recognized on the cash basis in
accordance with FASB ASC 605 Revenue Recognition". Revenues are generally recognized for a
contractually specified percentage of amounts recovered when it has been determined that
our clients have received economic value (generally through credits taken against existing
accounts payable due to the involved vendors or refund checks received from those vendors),
and when the following criteria are met: (a) persuasive evidence of an arrangement exists;
(b) services have been rendered; (c) the fee billed to the client is fixed or determinable;
and (d) collectibility is reasonably assured. Additionally, for purposes of determining
appropriate timing of recognition and for internal control purposes, the Company relies on
customary business practices and processes for documenting that the criteria described in
(a) through (d) above have been met. Such customary business practices and processes may
vary significantly by client. On occasion, it is possible that a transaction has met all of
the revenue recognition criteria described above but revenues are not recognized, unless
management can otherwise determine that criteria (a) through (d) above have been met,
because the Companys customary business practices and processes specific to that client
have not been completed. The determination that each of the aforementioned criteria has
been met, particularly the determination of the timing of economic benefit received by the
client and the determination that collectibility is reasonably assured, requires the
application of significant judgment by management and a misapplication of this judgment
could result in inappropriate recognition of revenues.
    
    Unbilled Receivables & Refund Liabilities. Unbilled receivables are usually contractual
and relate to claims for which our client has received economic value. Unbilled receivables
arise when a portion of the Companys fee is deferred at the time of the initial invoice.
At a later date (which can be up to a year after the original invoice, or a year after
completion of the audit period), the unbilled receivable amount is invoiced.
Notwithstanding the deferred due date, the Company and the client acknowledge that this
unbilled receivable has been earned at the time of the original invoice, it just has a
deferred due date.Refund liabilities result from reductions in the economic value previously received by the
Companys clients with respect to vendor claims identified by the Company and for which the
Company has previously recognized revenues. Such refund liabilities are recognized by either
offsets to amounts otherwise due from clients or by cash refunds to clients. The Company
computes the estimate of its refund liabilities at any given time based on actual historical
refund data.
 38




---



##### Table of Contents



Periodic changes in unbilled receivables and refund liabilities are recorded as adjustments
to revenues.During the first quarter of 2008, management revised its estimate of expected refund rates
in its Recovery Audit Services  Americas. Such change in estimate resulted from a decline
in actual Recovery Audit Services  Americas refund rates observed during 2007. The impact
of this change in estimate resulted in a $0.8 million increase in first quarter 2008 income
from continuing operations. During the fourth quarter of 2008, management changed its method
of estimating the refund liability related to its Recovery Audit Services 
Europe/Asia-Pacific segment to be more consistent with the methodology used in the Recovery
Audit Services  Americas. The impact of the change in estimate resulted in a $0.9 million
decrease in fourth quarter 2008 income from continuing operations. The combined impact of
the 2008 refund liability estimate changes was to decrease income from continuing operations
by $0.1 million, or less than $0.01 per basic and diluted share. Management does not expect
that these changes in estimate will have a material impact on future period results.
    
    Goodwill and Other Intangible Assets. During each of the fourth quarters of 2009, 2008
and 2007, the Company completed the required annual impairment testing of goodwill and
other intangible assets in accordance with FASB ASC 350. As a result of this testing, the
Company concluded that there was no impairment of goodwill and other intangible assets.During the third quarter of 2007, management re-evaluated its policy related to the
amortization of its customer relationships intangible asset. The customer relationships
intangible asset had been amortized since its acquisition in 2002 using the straight-line
method over a twenty year expected life. Managements re-evaluation concluded that the
original twenty year life continued to be a reasonable expectation. However, because of the
expectation that revenues and profits from these customers will likely decline in future
years, management concluded that an accelerated method of amortization of the customer
relationships intangible asset would be more appropriate. The accelerated method results in
amortization of the net unamortized June 30, 2007 balance over the remaining 14.5 year life
at a rate that declines at approximately 8% per year. The Company adopted the new method in
the third quarter of 2007 and the resulting change in amortization is being accounted for on
a prospective basis in accordance with FASB ASC 350. Amortization expense in 2007 increased
by $0.5 million as a result of this change in method.
    
    Income Taxes.The Companys effective tax rate is based on historical and anticipated
future taxable income, statutory tax rates and tax planning opportunities available to the
Company in the various jurisdictions in which it operates. Significant judgment is required
in determining the effective tax rate and in evaluating the Companys tax positions. Tax
regulations require items to be included in the tax returns at different times than the
items are reflected in the financial statements. As a result, the Companys effective tax
rate reflected in its Consolidated Financial Statements included in Item 8 of this Form
10-K is different than that reported in its tax returns. Some of these differences are
permanent, such as expenses that are not deductible on the Companys tax returns, and some
are temporary differences, such as depreciation expense. Temporary differences create
deferred tax assets and liabilities. Deferred tax assets generally represent items that can
be used as a tax deduction or credit in the Companys tax returns in future years for which
it has already recorded the tax benefit in the statement of operations. The Company
establishes valuation allowances to reduce net deferred tax assets to the amounts that it
believes are more likely than not to be realized. These valuation allowances are adjusted
in light of changing facts and circumstances. Deferred tax liabilities generally represent
tax expense recognized in the Companys consolidated financial statements for which payment
has been deferred, or expense for which a deduction has already been taken on the Companys
tax returns but has not yet been recognized as an expense in its consolidated financial
statements.FASB ASC 740, Income Taxes", requires that deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some portion or all of a deferred tax asset
will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary differences
are deductible. In making this determination, management considers all available positive
and negative evidence affecting specific deferred tax assets, including the Companys past
and anticipated future performance, the reversal of deferred tax liabilities, the length of
carry-back and carry-forward periods, and the implementation of tax planning strategies.
 39




---



##### Table of Contents



Objective positive evidence is necessary to support a conclusion that a valuation allowance
is not needed for all or a portion of deferred tax assets when significant negative evidence
exists. Cumulative losses in recent years are the most compelling form of negative evidence
considered by management in this determination.FASB ASC 740 prescribes a more-likely-than-not recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. The Interpretation also offers guidance on
derecognition, classification, interest and penalties, accounting in interim periods,
disclosure, and transition. In accordance with FASB ASC 740, the Companys policy for
recording interest and penalties associated with tax positions is to record such items as a
component of income before taxes. As a result of the implementation of FASB ASC 740 in
2007, the Company recognized a $0.3 million increase in liability for unrecognized tax
benefits, which was accounted for as an increase to the January 1, 2007 accumulated deficit
balance.
    
    Stock-Based Compensation.The Company accounts for stock-based compensation in accordance
with the requirements of FASB ASC 718, Share Compensation(FASB ASC 718). FASB ASC 718
requires that companies account for awards of equity instruments issued to employees under the
fair value method of accounting and recognize such amounts in their statements of operations.
Under FASB ASC 718, the Company is required to measure compensation cost for all stock-based
awards at fair value on the date of grant and recognize compensation expense in its
consolidated statements of operations over the service period over which the awards are
expected to vest. The Company recognizes compensation expense over the indicated vesting
periods using the straight-line method.The fair value of all time-vested options is estimated as of the date of grant using the
Black-Scholes option valuation model. The Black-Scholes option valuation model was developed
for use in estimating the fair value of traded options that have no vesting restrictions and
are fully transferable. Option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility. Because the Companys employee
stock options have characteristics significantly different from those of traded options and
because changes in the subjective input assumptions can materially affect the fair value
estimate, it is managements opinion that existing models do not necessarily provide a
reliable single measure of the fair value of the Companys employee stock options.The Company estimates the fair value of awards of restricted shares and nonvested shares, as
defined in FASB ASC 718, as being equal to the market value of the common stock on the date
of the award. Also, under FASB ASC 718, companies must classify their share-based payments
as either liability-classified awards or as equity-classified awards. Liability-classified
awards are remeasured to fair value at each balance sheet date until the award is settled.
Equity-classified awards are measured at grant date fair value and are not subsequently
remeasured. The Company has classified its share-based payments which are settled in Company
common stock as equity-classified awards and its share-based payments that are settled in
cash as liability-classified awards. Compensation costs related to equity-classified awards
are generally equal to the fair value of the award at grant-date amortized over the vesting
period of the award. The liability for liability-classified awards is generally equal to the
fair value of the award as of the balance sheet date times the percentage vested at the
time. The change in the liability amount from one balance sheet date to another is charged
(or credited) to compensation cost.During the years ended December 31, 2009, 2008 and 2007, stock-based compensation charges
aggregated $3.3 million, $2.2 million and $21.0 million, respectively. Stock-based
compensation is discussed in more detail in Note1(l) and Note 14of Notes to Consolidated
Financial Statements included in Item 8 of this Form 10-K.
 New Accounting Standards
  40




---



##### Table of Contents



ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Market Risk.
 Interest Rate Risk
 Stock-Based Compensation.
 41




---



##### Table of Contents



ITEM 8.
    
    Financial Statements and Supplementary Data
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageNumberReport of Independent Registered Public Accounting Firm
    
    
    43Consolidated Statements of Operations for the Years ended December 31, 2009, 2008 and 2007
    
    
    44Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    45Consolidated Statements of Shareholders Equity (Deficit) for the Years ended December
31, 2009, 2008 and 2007
    
    
    46Consolidated Statements of Cash Flows for the Years ended December 31, 2009, 2008 and 2007
    
    
    47Notes to Consolidated Financial Statements
    
    
    48
 42




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
   ,
  Income Taxes Accounting for Uncertainty in
Income Taxes  an Interpretation of FASB Statement No. 109
 Atlanta, Georgia
    
    /s/ BDO Seidman, LLP
  43




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 Years Ended December 31,2009
    
    
    2008
    
    
    2007Revenues
    
    $
    179,583
    
    
    $
    195,706
    
    
    $
    227,369Cost of revenues
    
    
    116,718
    
    
    
    125,901
    
    
    
    140,877Gross margin
    
    
    62,865
    
    
    
    69,805
    
    
    
    86,492Selling, general and administrative expenses
    
    
    43,873
    
    
    
    44,028
    
    
    
    67,063Operational restructuring expense (Note 16) )
    
    
    
    
    
    
    
    
    
    
    1,644Operating income
    
    
    18,992
    
    
    
    25,777
    
    
    
    17,785Gain on bargain purchase, net (Note 17)
    
    
    2,388
    
    
    
    
    
    
    
    Interest expense
    
    
    (3,229
    )
    
    
    (4,090
    )
    
    
    (15,071
    )Interest income
    
    
    204
    
    
    
    845
    
    
    
    1,256Loss on debt extinguishment (Note 8)
    
    
    
    
    
    
    
    
    
    
    (9,397
    )Earnings (loss) from continuing operations before
income taxes and discontinued operations
    
    
    18,355
    
    
    
    22,532
    
    
    
    (5,427
    )Income tax expense (Note 10)
    
    
    3,028
    
    
    
    3,502
    
    
    
    1,658Earnings (loss) from continuing operations before
discontinued operations
    
    
    15,327
    
    
    
    19,030
    
    
    
    (7,085
    )Discontinued operations (Note 2):Earnings from discontinued operations, net of
income tax expense of $408
    
    
    
    
    
    
    
    
    
    
    347Gain on sale of discontinued operations
    
    
    
    
    
    
    
    
    
    
    19,868Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    20,215Net earnings
    
    $
    15,327
    
    
    $
    19,030
    
    
    $
    13,130Basic earnings per common share (Note 6):Earnings (loss) from continuing operations before
discontinued operations
    
    $
    0.67
    
    
    $
    0.87
    
    
    $
    (0.62
    )Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    1.66Net earnings
    
    $
    0.67
    
    
    $
    0.87
    
    
    $
    1.04Diluted earnings per common share (Note 6):Earnings (loss) from continuing operations before
discontinued operations
    
    $
    0.65
    
    
    $
    0.83
    
    
    $
    (0.62
    )Earnings from discontinued operations
    
    
    
    
    
    
    
    
    
    
    1.66Net earnings
    
    $
    0.65
    
    
    $
    0.83
    
    
    $
    1.04Weighted-average common shares outstanding (Note 6):Basic
    
    
    22,915
    
    
    
    21,829
    
    
    
    12,204Diluted
    
    
    23,560
    
    
    
    23,008
    
    
    
    12,204
 See accompanying Notes to Consolidated Financial Statements.
 44




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 December 31,2009
    
    
    2008ASSETS (Note 8)Current assets:Cash and cash equivalents
    
    $
    33,026
    
    
    $
    26,688Restricted cash
    
    
    256
    
    
    
    61Receivables:Contract receivables, less allowances of $1,032 in 2009 and $921 in 2008:Billed
    
    
    28,034
    
    
    
    28,143Unbilled
    
    
    4,481
    
    
    
    5,56832,515
    
    
    
    33,711Employee advances and miscellaneous receivables, less allowances of $351 in 2009 and $311
in 2008
    
    
    276
    
    
    
    285Total receivables
    
    
    32,791
    
    
    
    33,996Prepaid expenses and other current assets
    
    
    2,306
    
    
    
    2,264Deferred income taxes (Note 10)
    
    
    29
    
    
    
    Total current assets
    
    
    68,408
    
    
    
    63,009Property and equipment:Computer and other equipment
    
    
    28,583
    
    
    
    24,164Furniture and fixtures
    
    
    2,888
    
    
    
    2,885Leasehold improvements
    
    
    2,975
    
    
    
    2,99234,446
    
    
    
    30,041Less accumulated depreciation and amortization
    
    
    (24,443
    )
    
    
    (22,140
    )Property and equipment, net
    
    
    10,003
    
    
    
    7,901Goodwill (Note 7)
    
    
    4,600
    
    
    
    4,600Intangible assets, less accumulated amortization of $13,573 in 2009 and $10,932 in 2008 (Note 7)
    
    
    24,104
    
    
    
    18,968Unbilled receivables
    
    
    1,410
    
    
    
    1,789Deferred loan costs, net of accumulated amortization (Note 8)
    
    
    1,431
    
    
    
    2,170Deferred income taxes (Note 10)
    
    
    253
    
    
    
    Other assets
    
    
    304
    
    
    
    346$
    110,513
    
    
    $
    98,783LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    15,707
    
    
    $
    16,275Accrued payroll and related expenses
    
    
    19,884
    
    
    
    22,536Refund liabilities
    
    
    7,467
    
    
    
    7,870Deferred revenues
    
    
    916
    
    
    
    502Current portions of debt and capital lease obligations (Note 8)
    
    
    3,260
    
    
    
    5,314Business acquisition obligations (Note 17)
    
    
    2,695
    
    
    
    Total current liabilities
    
    
    49,929
    
    
    
    52,497Long-term debt and capital lease obligations (Note 8)
    
    
    11,070
    
    
    
    14,331Deferred income taxes (Note 10)
    
    
    
    
    
    
    234Noncurrent compensation obligations (Note 13(b))
    
    
    978
    
    
    
    2,849Refund liabilities
    
    
    733
    
    
    
    897Other long-term liabilities
    
    
    6,364
    
    
    
    5,265Total liabilities
    
    
    69,074
    
    
    
    76,073Commitments and contingencies (Notes 3, 8, 9, 12 and 13)Shareholders equity (Notes 12 and 14):Common stock, no par value; $.01 stated value per share. Authorized 50,000,000 shares;
23,272,892 shares issued and outstanding in 2009 and 21,789,645 shares issued and
outstanding in 2008
    
    
    233
    
    
    
    218Additional paid-in capital
    
    
    562,563
    
    
    
    559,359Accumulated deficit
    
    
    (524,661
    )
    
    
    (539,988
    )Accumulated other comprehensive income
    
    
    3,304
    
    
    
    3,121Total shareholders equity
    
    
    41,439
    
    
    
    22,710$
    110,513
    
    
    $
    98,783
 See accompanying Notes to Consolidated Financial Statements.
 45




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)
Years Ended December 31, 2009, 2008 and 2007
(In thousands, except share data)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Treasury
    
    
    Shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Stock
    
    
    Equity (Deficit)
    
    
    Income (Loss)Balance at December 31, 2006
    
    
    8,398,770
    
    
    $
    84
    
    
    $
    513,920
    
    
    $
    (571,818
    )
    
    $
    2,041
    
    
    $
    (48,710
    )
    
    $
    (104,483
    )FASB ASC 740 tax liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (330
    )
    
    
    
    
    
    
    
    
    
    
    (330
    )Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,130
    
    
    
    
    
    
    
    
    
    
    
    13,130
    
    
    $
    13,130Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,223
    
    
    
    
    
    
    
    2,223
    
    
    
    2,223Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    15,353Issuances of common stock:Conversions of Series A preferred stock
    
    
    4,098,541
    
    
    
    41
    
    
    
    11,601
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,642Conversions of convertible senior notes
    
    
    9,593,779
    
    
    
    96
    
    
    
    65,104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,200Stock option exercises
    
    
    9,000
    
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57Issuance costs of common stock
    
    
    
    
    
    
    
    
    
    
    (72
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72
    )Accumulated dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    (487
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (487
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    15,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,469Balance at December 31, 2007
    
    
    22,100,090
    
    
    
    221
    
    
    
    605,592
    
    
    
    (559,018
    )
    
    
    4,264
    
    
    
    (48,710
    )
    
    
    2,349Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,030
    
    
    
    
    
    
    
    
    
    
    
    19,030
    
    
    $
    19,030Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,143
    )
    
    
    
    
    
    
    (1,143
    )
    
    
    (1,143
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,887Issuances of common stock:Restricted share awards
    
    
    399,507
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2006 MIP Performance Unit settlements
    
    
    295,879
    
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,687
    )
    
    
    (1,687
    )Retirement of treasury stock
    
    
    (1,005,831
    )
    
    
    (10
    )
    
    
    (50,387
    )
    
    
    
    
    
    
    
    
    
    
    50,397
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    4,161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,161Balance at December 31, 2008
    
    
    21,789,645
    
    
    
    218
    
    
    
    559,359
    
    
    
    (539,988
    )
    
    
    3,121
    
    
    
    
    
    
    
    22,710Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,327
    
    
    
    
    
    
    
    
    
    
    
    15,327
    
    
    $
    15,327Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183
    
    
    
    
    
    
    
    183
    
    
    
    183Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    15,510Issuances of common stock:Restricted share awards
    
    
    817,905
    
    
    
    8
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares remitted by employees
for taxes
    
    
    
    
    
    
    
    
    
    
    (116
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116
    )Stock option exercises
    
    
    9,375
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    262006 MIP Performance Unit settlements
    
    
    884,473
    
    
    
    9
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited restricted share awards
    
    
    (149,752
    )
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (246
    )
    
    
    (246
    )Retirement of treasury stock
    
    
    (78,754
    )
    
    
    (1
    )
    
    
    (245
    )
    
    
    
    
    
    
    
    
    
    
    246
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    3,555
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,555Balance at December 31, 2009
    
    
    23,272,892
    
    
    $
    233
    
    
    $
    562,563
    
    
    $
    (524,661
    )
    
    $
    3,304
    
    
    $
    
    
    
    $
    41,439
 See accompanying Notes to Consolidated Financial Statements.
 46




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Years Ended December 31,2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net earnings
    
    $
    15,327
    
    
    $
    19,030
    
    
    $
    13,130Earnings from discontinued operations
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    20,215Earnings (loss) from continuing operations
    
    
    15,327
    
    
    
    19,030
    
    
    
    (7,085
    )Adjustments to reconcile earnings (loss) from continuing operations
to net cash provided by operating activities:Loss on debt extinguishment and financial restructuring
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    9,397Impairment charges included in operational restructuring
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    344Gain on bargain purchase, net
    
    
    (2,388
    )
    
    
    3⁄4
    
    
    
    3⁄4Depreciation and amortization
    
    
    6,140
    
    
    
    5,194
    
    
    
    6,769Amortization of debt discount, premium and deferred loan costs
    
    
    789
    
    
    
    786
    
    
    
    3,257Stock-based compensation expense
    
    
    3,345
    
    
    
    2,207
    
    
    
    20,956Loss on disposals of property, plant and equipment, net
    
    
    109
    
    
    
    101
    
    
    
    298Deferred income taxes
    
    
    (516
    )
    
    
    577
    
    
    
    187Changes in assets and liabilities:Restricted cash
    
    
    (195
    )
    
    
    (61
    )
    
    
    139Billed receivables
    
    
    1,092
    
    
    
    423
    
    
    
    3,495Unbilled receivables
    
    
    1,466
    
    
    
    1,155
    
    
    
    3,120Prepaid expenses and other current assets
    
    
    775
    
    
    
    186
    
    
    
    (651
    )Other assets
    
    
    55
    
    
    
    3
    
    
    
    343Accounts payable and accrued expenses
    
    
    (2,531
    )
    
    
    1,634
    
    
    
    (1,047
    )Accrued payroll and related expenses
    
    
    (3,163
    )
    
    
    (7,561
    )
    
    
    (6,425
    )Refund liabilities
    
    
    (567
    )
    
    
    (2,806
    )
    
    
    (198
    )Deferred revenues
    
    
    405
    
    
    
    (63
    )
    
    
    22Noncurrent compensation obligations
    
    
    (1,589
    )
    
    
    (3,508
    )
    
    
    (2,798
    )Other long-term liabilities
    
    
    (388
    )
    
    
    (607
    )
    
    
    165Net cash provided by operating activities
    
    
    18,166
    
    
    
    16,690
    
    
    
    30,288Cash flows from investing activities:Business acquisition
    
    
    (2,029
    )
    
    
    3⁄4
    
    
    
    3⁄4Purchases of property and equipment, net of disposal proceeds
    
    
    (5,511
    )
    
    
    (3,298
    )
    
    
    (4,002
    )Net cash used in investing activities
    
    
    (7,540
    )
    
    
    (3,298
    )
    
    
    (4,002
    )Cash flows from financing activities:Payments on senior and convertible notes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (52,637
    )Repayments of debt
    
    
    (5,315
    )
    
    
    (26,279
    )
    
    
    (25,524
    )Term loan borrowings
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    45,000Payments for deferred loan costs
    
    
    (50
    )
    
    
    (59
    )
    
    
    (2,999
    )Repurchases of common stock
    
    
    (246
    )
    
    
    (1,687
    )
    
    
    3⁄4Restricted stock remitted by employees for taxes
    
    
    (116
    )
    
    
    3⁄4
    
    
    
    3⁄4Net proceeds from common stock issuances
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    57Net proceeds from stock option exercises
    
    
    26
    
    
    
    3⁄4
    
    
    
    3⁄4Preferred stock redemptions
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (44
    )Issuance costs on common and preferred stock
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (72
    )Net cash used in financing activities
    
    
    (5,701
    )
    
    
    (28,025
    )
    
    
    (36,219
    )Cash flows from discontinued operations:Operating cash flows
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (2,044
    )Investing cash flows
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    23,151Net cash provided by discontinued operations
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    21,107Effect of exchange rates on cash and cash equivalents
    
    
    1,413
    
    
    
    (1,043
    )
    
    
    962Net change in cash and cash equivalents
    
    
    6,338
    
    
    
    (15,676
    )
    
    
    12,136Cash and cash equivalents at beginning of year
    
    
    26,688
    
    
    
    42,364
    
    
    
    30,228Cash and cash equivalents at end of year
    
    $
    33,026
    
    
    $
    26,688
    
    
    $
    42,364Supplemental cash flow statement information:Cash paid during the year for interest
    
    $
    1,939
    
    
    $
    3,191
    
    
    $
    14,388Cash paid during the year for income taxes, net of refunds received
    
    $
    4,247
    
    
    $
    2,475
    
    
    $
    1,029Deferred and contingent business acquisition consideration (Note 17)
    
    $
    4,210
    
    
    $
    3⁄4
    
    
    $
    3⁄4
 See accompanying Notes to Consolidated Financial Statements.
 47




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a) Description of Business and Basis of Presentation
 Description of Business
  
    
    retailers such as discount, department, specialty, grocery and drug stores, and
wholesalers who sell to these retailers;
 
    
    business enterprises other than retailers/wholesalers such as manufacturers, financial
services firms, and pharmaceutical companies;
 
    
    healthcare payers, both private sector health insurance companies and state and federal
government payers such as the Centers for Medicare and Medicaid Services (CMS); and
 
    
    federal and state government agencies.
  Basis of Presentation
 (see Note 2).
  (b) Revenue Recognition
   48




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       (c) Cash and Cash Equivalents
   49




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (d) Property and Equipment
  Impairment or Disposal of Long-Lived Assets
 (e) Internally Developed Software
 Internal-Use Software
  (f) Goodwill and Other Intangible Assets
 Intangibles  Goodwill and Other
   50




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (g) Direct Expenses
  (h) Income Taxes
  Income Taxes
 Accounting for Uncertainty in
Income Taxes  an Interpretation of FASB Statement No. 109
 (i) Foreign Currency
  (j) Earnings Per Common Share
 Earnings Per Share 
 51




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (k) Stock-Based Compensation
 Compensation - Stock Compensation
   2009
    
    2008
    
    2007Risk-free interest rates
    
    1.60% - 2.71%
    
    2.37% - 3.08%
    
    4.05% - 4.17%Dividend yields
    
    
    
    
    
    Volatility factor of expected market price
    
    .950 - 1.081
    
    .876 - .919
    
    .856 - .889Weighted-average expected term of option
    
    4 - 5 years
    
    4 - 4.5 years
    
    4 - 4.5 years
  (l) Comprehensive Income (Loss)
 Comprehensive Income 
 52




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (m) Segment Reporting
 Segment Reporting
 Note 5
 Note 5
 (n) New Accounting Standards
 FASB ASC 105-10-65 The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
 FASB ASC 260-10-45. Determining
Whether Instruments Granted in Share-Based Transactions Are Participating Securities
 53




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FASB ASC 470-20. Accounting for
Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash
Settlement)
 FASB ASC 805. Business
Combinations Note 17
 FASB ASC 810-10-25 Amendments to FASB
Interpretation No. 46(R)
 FASB ASC 810-10-65. Noncontrolling Interests
in Consolidated Financial Statements
 FASB ASC 815 Disclosures about Derivative
Instruments and Hedging Activities  an amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities
 FASB ASC 855 Subsequent Events
 54




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FASB ASC 860 Accounting for Transfers of
Financial Assets, an amendment of SFAS No. 140
 (2) DISCONTINUED OPERATIONS
   Years Ended December 31,2009
    
    2008
    
    2007Revenues
    
    $
    
    
    
    $
    
    
    
    $
    17,386Operating income
    
    $
    
    
    
    $
    
    
    
    $
    755
  (3) RETIREMENT OBLIGATIONS
  (4) MAJOR CLIENTS
  55




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (5) OPERATING SEGMENTS AND RELATED INFORMATION
  56




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Recovery
    
    
    Recovery AuditAudit
    
    
    Services Services
    
    
    Europe/Asia-
    
    
    New
    
    
    CorporateAmericas
    
    
    Pacific
    
    
    Services
    
    
    Support
    
    
    Total2009Revenues
    
    $
    121,561
    
    
    $
    52,489
    
    
    $
    5,533
    
    
    $
    3⁄4
    
    
    $
    179,583Earnings (loss) from continuing operations
before discontinued operations
    
    $
    36,013
    
    
    $
    9,055
    
    
    $
    (4,017
    )
    
    $
    (25,724
    )
    
    $
    15,327Income taxes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3,028
    
    
    
    3,028Interest, net
    
    
    (99
    )
    
    
    184
    
    
    
    3⁄4
    
    
    
    2,940
    
    
    
    3,025Depreciation and amortization expense
    
    
    4,798
    
    
    
    911
    
    
    
    431
    
    
    
    3⁄4
    
    
    
    6,140EBITDA
    
    $
    40,712
    
    
    $
    10,150
    
    
    $
    (3,586
    )
    
    $
    (19,756
    )
    
    $
    27,520Foreign currency gains on intercompany
balances
    
    
    (360
    )
    
    
    (1,235
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (1,595
    )Litigation settlement
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    650
    
    
    
    650Stock-based compensation
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3,345
    
    
    
    3,345Gain on bargain purchase, net
    
    
    3⁄4
    
    
    
    (2,388
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (2,388
    )Adjusted EBITDA
    
    $
    40,352
    
    
    $
    6,527
    
    
    $
    (3,586
    )
    
    $
    (15,761
    )
    
    $
    27,532Capital expenditures, net of disposals
    
    $
    4,281
    
    
    $
    266
    
    
    $
    964
    
    
    $
    3⁄4
    
    
    $
    5,511Allocated assets
    
    $
    47,263
    
    
    $
    21,421
    
    
    $
    2,814
    
    
    $
    3⁄4
    
    
    $
    71,498Unallocated assets:Cash and cash equivalents
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    33,026
    
    
    
    33,026Restricted cash
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    256
    
    
    
    256Deferred loan costs
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1,431
    
    
    
    1,431Deferred income taxes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    282
    
    
    
    282Prepaid expenses and other assets
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    4,020
    
    
    
    4,020Total assets
    
    $
    47,263
    
    
    $
    21,421
    
    
    $
    2,814
    
    
    $
    39,015
    
    
    $
    110,513
 57




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Recovery
    
    
    Recovery AuditAudit
    
    
    Services Services 
    
    
    Europe/Asia-
    
    
    New
    
    
    CorporateAmericas
    
    
    Pacific
    
    
    Services
    
    
    Support
    
    
    Total2008Revenues
    
    $
    138,168
    
    
    $
    53,600
    
    
    $
    3,938
    
    
    $
    3⁄4
    
    
    $
    195,706Earnings (loss) from continuing operations
before discontinued operations
    
    $
    45,305
    
    
    $
    3,900
    
    
    $
    (6,222
    )
    
    $
    (23,953
    )
    
    $
    19,030Income taxes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3,502
    
    
    
    3,502Interest, net
    
    
    (178
    )
    
    
    (45
    )
    
    
    3⁄4
    
    
    
    3,468
    
    
    
    3,245Depreciation and amortization expense
    
    
    4,657
    
    
    
    308
    
    
    
    229
    
    
    
    3⁄4
    
    
    
    5,194EBITDA
    
    
    49,784
    
    
    
    4,163
    
    
    
    (5,993
    )
    
    
    (16,983
    )
    
    
    30,971Foreign currency (gains) losses on
intercompany balances
    
    
    (181
    )
    
    
    3,464
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3,283Stock-based compensation
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    2,207
    
    
    
    2,207Adjusted EBITDA
    
    $
    49,603
    
    
    $
    7,627
    
    
    $
    (5,993
    )
    
    $
    (14,776
    )
    
    $
    36,461Capital expenditures, net of disposals
    
    
    2,441
    
    
    
    302
    
    
    
    555
    
    
    $
    3⁄4
    
    
    $
    3,298Allocated assets
    
    $
    51,184
    
    
    $
    13,150
    
    
    $
    1,130
    
    
    $
    3⁄4
    
    
    $
    65,464Unallocated assets:Cash and cash equivalents
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    26,688
    
    
    
    26,688Restricted cash
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    61
    
    
    
    61Deferred loan costs
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    2,170
    
    
    
    2,170Prepaid expenses and other assets
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    4,400
    
    
    
    4,400Total assets
    
    $
    51,184
    
    
    $
    13,150
    
    
    $
    1,130
    
    
    $
    33,319
    
    
    $
    98,7832007Revenues
    
    $
    143,568
    
    
    $
    59,055
    
    
    $
    24,746
    
    
    $
    3⁄4
    
    
    $
    227,369Earnings (loss) from continuing operations
before discontinued operations
    
    $
    39,274
    
    
    $
    5,070
    
    
    $
    13,926
    
    
    $
    (65,355
    )
    
    $
    (7,085
    )Income taxes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1,658
    
    
    
    1,658Interest, net
    
    
    (666
    )
    
    
    (21
    )
    
    
    3⁄4
    
    
    
    14,502
    
    
    
    13,815Loss on financial restructuring
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    9,397
    
    
    
    9,397Depreciation and amortization expense
    
    
    5,999
    
    
    
    742
    
    
    
    28
    
    
    
    3⁄4
    
    
    
    6,769EBITDA
    
    $
    44,607
    
    
    $
    5,791
    
    
    $
    13,954
    
    
    $
    (39,798
    )
    
    $
    24,554Operational restructuring expenses
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1,644
    
    
    
    1,644Foreign currency gains on
intercompany balances
    
    
    (130
    )
    
    
    (1,022
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (1,152
    )Stock-based compensation
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    20,956
    
    
    
    20,956Adjusted EBITDA
    
    $
    44,477
    
    
    $
    4,769
    
    
    $
    13,954
    
    
    $
    (17,198
    )
    
    $
    46,002Capital expenditures, net of disposals
    
    $
    2,400
    
    
    $
    594
    
    
    $
    1,008
    
    
    $
    3⁄4
    
    
    $
    4,002
 58




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2009
    
    
    2008
    
    
    2007United States
    
    $
    97,141
    
    
    $
    111,954
    
    
    $
    140,388United Kingdom
    
    
    25,111
    
    
    
    26,556
    
    
    
    30,548Canada
    
    
    20,560
    
    
    
    21,099
    
    
    
    18,707France
    
    
    12,055
    
    
    
    11,438
    
    
    
    12,084Mexico
    
    
    3,740
    
    
    
    4,697
    
    
    
    5,225Spain
    
    
    2,547
    
    
    
    3,319
    
    
    
    3,270Brazil
    
    
    4,320
    
    
    
    3,339
    
    
    
    3,211Germany
    
    
    1,224
    
    
    
    2,445
    
    
    
    2,459Australia
    
    
    1,424
    
    
    
    1,113
    
    
    
    2,428Sweden
    
    
    2,158
    
    
    
    2,459
    
    
    
    1,806Belgium
    
    
    2,186
    
    
    
    885
    
    
    
    1,089Other
    
    
    7,117
    
    
    
    6,402
    
    
    
    6,154$
    179,583
    
    
    $
    195,706
    
    
    $
    227,369
  2009
    
    
    2008United States
    
    $
    31,678
    
    
    $
    32,424United Kingdom
    
    
    7,701
    
    
    
    554All Other
    
    
    1,063
    
    
    
    1,007$
    40,442
    
    
    $
    33,985
  (6) EARNINGS PER COMMON SHARE
  2009
    
    
    2008
    
    
    2007Basic earnings per common share:Numerator for earnings per common share calculations:Earnings (loss) from continuing operations before
discontinued operations
    
    $
    15,327
    
    
    $
    19,030
    
    
    $
    (7,085
    )Preferred dividends
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (487
    )Earnings (loss) for purposes of computing
basic earnings per common share from
continuing operations
    
    
    15,327
    
    
    
    19,030
    
    
    
    (7,572
    )Earnings from discontinued operations
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    20,215Earnings for purposes of computing basic
net earnings per common share
    
    $
    15,327
    
    
    $
    19,030
    
    
    $
    12,643
 59




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2009
    
    
    2008
    
    
    2007Denominator:Denominator for basic earnings per common share 
weighted-average common shares outstanding
    
    
    22,915
    
    
    
    21,829
    
    
    
    12,204Basic earnings per common share:Earnings (loss) from continuing operations before
discontinued operations
    
    $
    0.67
    
    
    $
    0.87
    
    
    $
    (0.62
    )Earnings from discontinued operations
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1.66Net earnings
    
    $
    0.67
    
    
    $
    0.87
    
    
    $
    1.04
 60




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2009
    
    
    2008
    
    
    2007Diluted earnings per common share:Numerator for earnings per common share calculations:Earnings (loss) from continuing operations before
discontinued operations
    
    $
    15,327
    
    
    $
    19,030
    
    
    $
    (7,085
    )Preferred dividends
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (487
    )Earnings (loss) for purposes of computing
diluted earnings per common share from
continuing operations
    
    
    15,327
    
    
    
    19,030
    
    
    
    (7,572
    )Earnings from discontinued operations
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    20,215Earnings for purposes of computing diluted net
earnings per common share
    
    $
    15,327
    
    
    $
    19,030
    
    
    $
    12,643Denominator:Denominator for basic earnings per common share 
weighted-average common shares outstanding
    
    
    22,915
    
    
    
    21,829
    
    
    
    12,204Incremental shares from stock-based compensation plans
    
    
    645
    
    
    
    1,179
    
    
    
    3⁄4Denominator for diluted earnings per common share
    
    
    23,560
    
    
    
    23,008
    
    
    
    12,204Diluted earnings per common share:Earnings (loss) from continuing operations before
discontinued operations
    
    $
    0.65
    
    
    $
    0.83
    
    
    $
    (0.62
    )Earnings from discontinued operations
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1.66Net earnings
    
    $
    0.65
    
    
    $
    0.83
    
    
    $
    1.04
 (Note 14)
 61




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (7) GOODWILL AND OTHER INTANGIBLE ASSETS
 (a) Goodwill
     (b) Other Intangible Assets
  Estimated
    
    
    December 31,
    
    
    December 31,Useful Life
    
    
    2009
    
    
    2008Amortized intangible assets:Customer relationships:
    
    6-20 yearsGross carrying amount
    
    
    
    
    
    $
    34,181
    
    
    $
    27,700Accumulated amortization
    
    
    
    
    
    
    (13,454
    )
    
    
    (10,932
    )Net carrying amount
    
    
    
    
    
    
    20,727
    
    
    
    16,768Trademarks:
    
    6 yearsGross carrying amount
    
    
    
    
    
    
    523
    
    
    
    3⁄4Accumulated amortization
    
    
    
    
    
    
    (40
    )
    
    
    3⁄4Net carrying amount
    
    
    
    
    
    
    483
    
    
    
    3⁄4Non-compete agreements:
    
    4.5 yearsGross carrying amount
    
    
    
    
    
    
    773
    
    
    
    3⁄4Accumulated amortization
    
    
    
    
    
    
    (79
    )
    
    
    3⁄4Net carrying amount
    
    
    
    
    
    
    694
    
    
    
    3⁄4Unamortized intangible assets:Trade name
    
    Indefinite
    
    
    2,200
    
    
    
    2,200Total intangible assets
    
    
    
    
    
    $
    24,104
    
    
    $
    18,968
  62




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (8) DEBT, CAPITAL LEASES AND MANDATORILY REDEEMABLE PARTICIPATING PREFERRED STOCK
 2006 Financial Restructuring
   10% Senior
    
    
    9% Series A11% Senior
    
    
    Convertible
    
    
    PreferredNotes
    
    
    Notes
    
    
    StockImputed borrowing rates used for valuation
    
    
    16
    %
    
    
    17
    %
    
    
    18
    %Fair values of cash flows based on imputed rates
    
    $
    42,795
    
    
    $
    42,891
    
    
    $
    10,109Fair values of conversion features
    
    
    
    
    
    
    21,993
    
    
    
    16,777Total estimated fair value
    
    
    42,795
    
    
    
    64,884
    
    
    
    26,886Face value of instruments issued
    
    
    51,455
    
    
    
    59,566
    
    
    
    14,891Excess of face value over fair value
    
    $
    8,660Excess of fair value over face value
    
    
    
    
    
    $
    5,318
    
    
    $
    11,995
 63




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     2007 Repayments, Conversions, Redemptions and New Credit Facility
      64




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10% Senior11% Senior
    
    
    ConvertibleNotes
    
    
    NotesCarrying value December 31, 2006
    
    $
    43,796
    
    
    $
    68,030Amortization of discount (premium)
    
    
    1,016
    
    
    
    (853
    )Carrying value of notes converted into common
stock prior to redemption (Face value of
$62,360)
    
    
    
    
    
    
    (67,015
    )Carrying value of notes redeemed in October 2007
    
    
    (44,812
    )
    
    
    (162
    )Balance December 31, 2007
    
    $
    
    
    
    $
    
  9% Series APreferred StockLiquidation value at December 31, 2006 (accrual basis)
    
    $
    11,199Accumulated dividends (accrual basis)
    
    
    487Liquidation value of preferred shares converted to common
shares prior to redemption
    
    
    (11,642
    )Liquidation value of preferred shares redeemed in October 2007
    
    
    (44
    )Balance at December 31, 2007
    
    $
    
  2008 and 2009 Repayments
    65




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2010 New Credit Facility
    Capital Lease Obligation
  Future Minimum Payments
  Year Ending December 31,2010
    
    $
    3,2602011
    
    
    3,0002012
    
    
    3,0002013
    
    
    3,0002014
    
    
    3,000Thereafter
    
    
    $
    15,260
 66




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (9) LEASE COMMITMENTS
  Exit or Disposal Cost Obligations
 Operating Leases,
   Operating
    
    
    CapitalYear Ending December 31,
    
    Leases
    
    
    Leases2010
    
    $
    6,958
    
    
    $
    2732011
    
    
    6,442
    
    
    
    3⁄42012
    
    
    6,446
    
    
    
    3⁄42013
    
    
    6,202
    
    
    
    3⁄42014
    
    
    5,822
    
    
    
    3⁄4Thereafter
    
    
    323
    
    
    
    3⁄4Total payments
    
    $
    32,193
    
    
    
    273Less amounts representing interest
    
    
    
    
    
    
    (13
    )Principal balance at December 31, 2009
    
    
    
    
    
    $
    260
 (10) INCOME TAXES
 Income Taxes
 2009
    
    
    2008
    
    
    2007Earnings (loss) from continuing operations
    
    $
    3,028
    
    
    $
    3,502
    
    
    $
    1,658Earnings (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    408Effect of cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    $
    3,028
    
    
    $
    3,502
    
    
    $
    2,066
  67




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2009
    
    
    2008
    
    
    2007United States
    
    $
    4,369
    
    
    $
    18,300
    
    
    $
    (9,775
    )Foreign
    
    
    13,986
    
    
    
    4,232
    
    
    
    4,348$
    18,355
    
    
    $
    22,532
    
    
    $
    (5,427
    )
  2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    40
    
    
    $
    (130
    )
    
    $
    130State
    
    
    85
    
    
    
    
    
    
    
    Foreign
    
    
    3,419
    
    
    
    3,055
    
    
    
    1,3413,544
    
    
    
    2,925
    
    
    
    1,471Deferred:Federal
    
    
    
    
    
    
    130
    
    
    
    (130
    )State
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    (516
    )
    
    
    447
    
    
    
    317(516
    )
    
    
    577
    
    
    
    187Total
    
    $
    3,028
    
    
    $
    3,502
    
    
    $
    1,658
 68




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2009
    
    
    2008
    
    
    2007Statutory federal income tax rate
    
    $
    6,424
    
    
    $
    7,886
    
    
    $
    (1,899
    )State income taxes, net of federal benefit
    
    
    90
    
    
    
    362
    
    
    
    (571
    )Change in deferred tax asset valuation allowance
    
    
    (6,093
    )
    
    
    (13,058
    )
    
    
    239First Audit Partners acquisition  basis difference
    
    
    668
    
    
    
    
    
    
    
    Foreign loss carry-forward adjustment
    
    
    
    
    
    
    5,115
    
    
    
    Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    2,325Foreign taxes
    
    
    586
    
    
    
    1,930
    
    
    
    1,207Compensation deduction limitation
    
    
    1,104
    
    
    
    
    
    
    
    Other, net
    
    
    249
    
    
    
    1,267
    
    
    
    357$
    3,028
    
    
    $
    3,502
    
    
    $
    1,658
  2009
    
    
    2008Deferred income tax assets:Accounts payable and accrued expenses
    
    $
    2,165
    
    
    $
    2,582Accrued payroll and related expenses
    
    
    3,052
    
    
    
    2,967Stock  based compensation
    
    
    8,060
    
    
    
    9,507Depreciation
    
    
    3,482
    
    
    
    2,744Noncompete agreements
    
    
    122
    
    
    
    341Unbilled receivables and refund liabilities
    
    
    1,426
    
    
    
    1,147Foreign operating loss carry-forwards of foreign subsidiary
    
    
    2,071
    
    
    
    2,842Federal operating loss carry-forwards
    
    
    16,597
    
    
    
    14,981Intangible assets
    
    
    23,832
    
    
    
    29,103State operating loss carry-forwards
    
    
    2,624
    
    
    
    2,665Other
    
    
    4,003
    
    
    
    4,134Gross deferred tax assets
    
    
    67,434
    
    
    
    73,013Less valuation allowance
    
    
    58,304
    
    
    
    64,307Gross deferred tax assets net of valuation allowance
    
    
    9,130
    
    
    
    8,706Deferred income tax liabilities:Intangible assets
    
    
    7,340
    
    
    
    7,293Capitalized software
    
    
    1,206
    
    
    
    1,204Other
    
    
    303
    
    
    
    443Gross deferred tax liabilities
    
    
    8,849
    
    
    
    8,940Net deferred tax assets (liabilities)
    
    $
    281
    
    
    $
    (234
    )
   69




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        (11) EMPLOYEE BENEFIT PLANS
  70




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (12) SHAREHOLDER RIGHTS PLAN
   (13) COMMITMENTS AND CONTINGENCIES
 Legal Proceedings
    71




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (14) STOCK-BASED COMPENSATION
    72




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  # of
    
    
    
    
    
    WeightedOptions
    
    Vesting
    
    Average
    
    Grant DateGranted
    
    Period
    
    Exercise Price
    
    Fair Value2009296,296
    
    
    4 years (1)
    
    $
    3.57
    
    
    $
    763,52942,730
    
    
    1 year (2)
    
    
    2.82
    
    
    
    88,011505,755
    
    
    3 years (3)
    
    
    2.92
    
    
    
    1,088,334200860,135
    
    
    1 year (4)
    
    
    9.87
    
    
    
    393,722211,460
    
    
    3 years (3)
    
    
    9.51
    
    
    
    1,338,3302007104,346
    
    
    1 year (5)
    
    
    12.89
    
    
    
    881,275514,500
    
    
    3 years (6)
    
    
    13.54
    
    
    
    4,659,363
 
 (1)
    
    During the first quarter of 2009, in connection with his joining the Company as its
President and Chief Executive Officer, the Company made inducement grants outside its existing
stock-based compensation plans to Mr. Romil Bahl. Mr. Bahl received an option to purchase 296,296
shares of the common stock of the Company. Mr. Bahls options were granted in two tranches, the
first of which consists of 111,111 shares that vest in four equal annual installments beginning in
January 2010. The second tranche consists of 185,185 shares and vests 50% on each of the second and
fourth anniversaries of the grant date.(2)
    
    Non-qualified stock options were granted under the 2008 EIP to the Companys five non-employee
directors. The options vest in full upon the earlier of (i) May 26, 2010, and (ii) the date of, and
immediately prior to, the Companys 2010 annual meeting of shareholders, provided the director has
been continuously serving as a member of the Board from the date of grant until the earlier of such
dates. Unvested options are forfeited when a director leaves the Board. The options terminate on
May 25, 2016, except that vested options held by a director who leaves the Board before a change of
control will terminate three years after termination of Board service, if such date occurs before
May 25, 2016.(3)
    
    Non-qualified options were granted to executive and non-executive employees of the Company
pursuant to the 2008 EIP. The options vest in three equal annual installments beginning on the
first anniversary of the grant date.(4)
    
    Non-qualified stock options were granted under the 2008 EIP to the Companys five non-employee
directors. The options became fully vested on May 27, 2009, the date of the Companys 2009 annual
meeting of the shareholders.(5)
    
    Non-qualified stock options were granted to the Companys six non-employee directors. The
options became fully vested on May 29, 2008, the date of the Companys 2008 annual meeting of the
shareholders.(6)
    
    Non-qualified options were granted to executive and non-executive employees of the Company. The
options vest in three equal annual installments beginning on the first anniversary of the grant
date. 73




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  # ofShares
    
    Vesting
    
    Grant DateGranted
    
    Period
    
    Fair Value2009344,445
    
    
    4 years (1)
    
    $
    1,229,66942,730
    
    
    1 year (2)
    
    
    120,49920,000
    
    
    3 years (3)
    
    
    57,400522,832
    
    
    3 years (4)
    
    
    1,546,63625,000
    
    
    3 years (5)
    
    
    168,500200825,325
    
    
    1 year (6)
    
    
    249,958171,323
    
    
    3 years (7)
    
    
    1,629,282317,192
    
    
    3 years (8)
    
    
    3,016,4962007
    
    
    
    
    
    
    
    
 
 (1)
    
    During the first quarter of 2009, in connection with his joining the Company as its President
and Chief Executive Officer, the Company made inducement grants outside its existing stock-based
compensation plans to Mr. Romil Bahl. Mr. Bahl received nonvested stock awards (restricted stock)
representing 344,445 shares of the Companys common stock. Mr. Bahls nonvested stock awards were
granted in two tranches, the first of which consists of 233,334 shares that vest in four equal
annual installments beginning in January 2010. The second tranche consists of 111,111 shares and
vests 50% on each of the second and fourth anniversaries of the grant date. During the vesting
period, Mr. Bahl will be entitled to receive dividends with respect to the nonvested shares, if
any, and to vote the shares.(2)
    
    Nonvested stock awards (restricted stock) were granted to the Companys five non-employee
directors pursuant to the 2008 EIP. The shares of restricted stock will vest upon the earlier of
(i) May 26, 2010, and (ii) the date of, and immediately prior to, the Companys 2010 annual meeting
of shareholders, provided the director has been continuously serving as a member of the Board from
the date of grant until the earlier of such dates. Unvested shares of restricted stock will be
forfeited when a director leaves the Board. The shares are generally nontransferable until vesting.
During the vesting period, the grantees of the restricted stock will be entitled to receive
dividends with respect to the nonvested shares and to vote the shares.(3)
    
    Nonvested stock awards (restricted stock) granted to an employee of the Company pursuant to the
Companys 2008 EIP. The shares of restricted stock vest 50% on each of the first and third
anniversaries of the grant date. During the vesting period, the restricted stock grantee will be
entitled to receive dividends, if any, with respect to the nonvested shares and to vote the shares.(4)
    
    Nonvested stock awards (restricted stock and restricted stock units) granted to executive and
non-executive employees of the Company pursuant to the Companys 2008 EIP. The shares of restricted
stock and the restricted stock units vest in three equal annual installments beginning on the first
anniversary of the grant date. During the vesting period, the restricted stock grantees will be
entitled to receive dividends, if any, with respect to the nonvested shares and to vote the shares.
During the vesting period, grantees of restricted stock units will be entitled to receive
dividends, if any, with respect to the nonvested shares, but will not be entitled to vote the shares underlying the units. 74




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 (5)
    
    Nonvested stock awards (restricted stock units) granted to 3 employees of the Company pursuant
to the Companys 2008 EIP. The shares of restricted stock units vest on the third anniversary of
the grant date. During the vesting period, grantees of restricted stock units will be entitled to
receive dividends, if any, with respect to the nonvested shares, but will not be entitled to vote
the shares underlying the units.(6)
    
    Nonvested stock awards (restricted stock) were granted to the Companys five non-employee
directors pursuant to the 2008 EIP. The shares of restricted stock vested on May 27, 2009, the date
of the Companys 2009 annual meeting of shareholders.(7)
    
    Nonvested stock awards (restricted stock and restricted stock units) were granted to 68
executive and non-executive employees of the Company pursuant to the 2008 EIP. These shares of
restricted stock and restricted stock units vest in three equal annual installments beginning on
the first anniversary of the grant date. During the vesting period, the award recipients of
restricted stock will be entitled to receive dividends with respect to the nonvested shares and to
vote the shares. During the vesting period, award recipients of restricted stock units will be
entitled to receive dividends with respect to the nonvested shares, but will not be entitled to
vote the shares underlying the units.(8)
    
    Nonvested stock awards (restricted stock and restricted stock units) were granted to 68
executive and non-executive employees of the Company pursuant to the Companys 2008 EIP. These
shares of restricted stock and restricted stock units will vest on December 31, 2011 provided that
Company performance goals outlined in the stock award agreements are met for the three-year period
ending December 31, 2011. During the vesting period, the award recipients of restricted stock will
be entitled to receive dividends with respect to the nonvested shares and to vote the shares.
During the vesting period, award recipients of restricted stock units will be entitled to receive
dividends with respect to the nonvested shares, but will not be entitled to vote the shares
underlying the units.  Weighted-
    
    
    Weighted-Average
    
    
    Average
    
    
    AggregateExercise
    
    
    Remaining
    
    
    IntrinsicPrice
    
    
    Contractual
    
    
    ValueOptions
    
    Shares
    
    
    (Per Share)
    
    
    Term
    
    

($ 000s)Outstanding at January 1, 2009
    
    
    1,060,596
    
    
    $
    17.39Granted
    
    
    844,821
    
    
    
    3.14Exercised
    
    
    (9,375
    )
    
    
    2.80Forfeited
    
    
    (140,768
    )
    
    
    28.26Expired
    
    
    (14,705
    )
    
    
    99.79Outstanding at December 31, 2009
    
    
    1,740,569
    
    
    $
    8.98
    
    
    5.18 years
    
    $
    2,284Exercisable at December 31, 2009
    
    
    710,407
    
    
    $
    14.79
    
    
    3.92 years
    
    $
    47
   75




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 WeightedAverage GrantDate Fair ValueNonvested Stock
    
    Shares
    
    
    (Per Share)Nonvested at January 1, 2009
    
    
    194,759
    
    
    $
    9.56Granted
    
    
    955,007
    
    
    
    3.27Vested
    
    
    (108,767
    )
    
    
    8.67Forfeited
    
    
    (45,846
    )
    
    
    6.67Nonvested at December 31, 2009
    
    
    995,153
    
    
    $
    3.75
  2006 MIP Performance Units
      76




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (15) FAIR VALUE OF FINANCIAL INSTRUMENTS
 Fair Value Measurements and
Disclosures
  Fair Value Measurements at Reporting DateUsingQuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableReporting
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)As of
December 31, 2009Assets:Cash and cash equivalents
    
    $
    33,026
    
    
    $
    33,026
    
    
    $
    3⁄4
    
    
    $
    3⁄4Liabilities:Business acquisition
obligations
    
    $
    2,695
    
    
    $
    3⁄4
    
    
    $
    3⁄4
    
    
    $
    2,695As of
December 31, 2008Assets:Cash and cash equivalents
    
    $
    26,688
    
    
    $
    26,688
    
    
    $
    3⁄4
    
    
    $
    3⁄4
   (16) WORKFORCE REDUCTION AND RESTRUCTURING
 77




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Recovery
    
    
    RecoveryAudit
    
    
    Audit ServicesServices
    
    
     Europe
    
    
    New
    
    
    Corporate
    
    
    RestructuringAmericas
    
    
    Asia-Pacific
    
    
    Services
    
    
    Support
    
    
    LiabilitiesBalance as of December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,9282007 Accruals:Lease termination costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,300
    
    
    
    1,300Non cash impairment charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    344
    
    
    
    3442007 Payments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,015
    )2007 Allocations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    872Balance as of December 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,4292008 Payments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (427
    )Balance as of December 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,0022009 Payments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (430
    )Balance as of December 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,572
  (17) BUSINESS ACQUISTION
    78




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fair values of assets acquired:Equipment
    
    $
    56Current assets, primarily work in progress
    
    
    741Intangible assets, primarily customer relationships
    
    
    7,8308,627Fair value of purchase price
    
    
    5,839Gain on bargain purchase
    
    $
    2,788Transaction costs
    
    
    (400
    )Gain on bargain purchase, net
    
    $
    2,388
  (18) QUARTERLY RESULTS
  2009 Quarter Ended
    
    
    2008 Quarter EndedMar. 31*
    
    
    June 30*
    
    
    Sept. 30*
    
    
    Dec. 31
    
    
    Mar. 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 31(In thousands, except per share data)Revenues
    
    $
    39,252
    
    
    $
    45,471
    
    
    $
    45,321
    
    
    $
    49,539
    
    
    $
    48,263
    
    
    $
    49,648
    
    
    $
    49,182
    
    
    $
    48,613Cost of revenues
    
    
    26,413
    
    
    
    28,328
    
    
    
    28,974
    
    
    
    33,003
    
    
    
    30,252
    
    
    
    32,941
    
    
    
    31,169
    
    
    
    31,539Gross margin
    
    
    12,839
    
    
    
    17,143
    
    
    
    16,347
    
    
    
    16,536
    
    
    
    18,011
    
    
    
    16,707
    
    
    
    18,013
    
    
    
    17,074Selling, general and
administrative expenses
    
    
    9,723
    
    
    
    10,773
    
    
    
    11,001
    
    
    
    12,376
    
    
    
    12,843
    
    
    
    11,024
    
    
    
    12,139
    
    
    
    8,022Operating income
    
    
    3,116
    
    
    
    6,370
    
    
    
    5,346
    
    
    
    4,160
    
    
    
    5,168
    
    
    
    5,683
    
    
    
    5,874
    
    
    
    9,052Gain on bargain purchase, net
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    2,388
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4Interest expense, net
    
    
    699
    
    
    
    727
    
    
    
    728
    
    
    
    871
    
    
    
    991
    
    
    
    765
    
    
    
    789
    
    
    
    700Earnings before income taxes
    
    
    2,417
    
    
    
    5,643
    
    
    
    7,006
    
    
    
    3,289
    
    
    
    4,177
    
    
    
    4,918
    
    
    
    5,085
    
    
    
    8,352Income tax expense
    
    
    544
    
    
    
    618
    
    
    
    605
    
    
    
    1,261
    
    
    
    593
    
    
    
    400
    
    
    
    879
    
    
    
    1,630Net earnings
    
    $
    1,873
    
    
    $
    5,025
    
    
    $
    6,401
    
    
    $
    2,028
    
    
    $
    3,584
    
    
    $
    4,518
    
    
    $
    4,206
    
    
    $
    6,722Basic earnings per common share
    
    $
    0.08
    
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.09
    
    
    $
    0.17
    
    
    $
    0.21
    
    
    $
    0.19
    
    
    $
    0.30Diluted earnings per common share
    
    $
    0.08
    
    
    $
    0.21
    
    
    $
    0.27
    
    
    $
    0.08
    
    
    $
    0.16
    
    
    $
    0.20
    
    
    $
    0.18
    
    
    $
    0.29
 79




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 *
    
    Certain reclassifications were recorded during the fourth quarter of 2009, thus, cost of revenues, selling, general and administrative expenses and gain on bargain
purchase, net line items will not agree with previously filed Form 10-Qs. Income before interest and income taxes did not change for any period previously reported. (19) SUBSEQUENT EVENTS
 Note 8
   80




---



##### Table of Contents



ITEM 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 ITEM 9A.
    
    Controls and Procedures
        
 ITEM 9B.
    
    Other Information.
  81




---



##### Table of Contents



PART III
 
 ITEM 10.
    
    Directors, Executive Officers and Corporate Governance
  www.prgx.com
 
 ITEM 11.
    
    Executive Compensation
  82




---



##### Table of Contents



ITEM 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Securities Authorized for Issuance Under Equity Compensation Plans
     Weighted-averageNumber of securities to be
    
    
    exercise
    
    
    Number of securities remainingissued
    
    
    price of outstanding
    
    
    available for future issuance underupon exercise of outstanding
    
    
    options, warrants and
    
    
    equity compensation plans (excludingPlan category
    
    options, warrants and rights
    
    
    rights
    
    
    securities reflected in column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation plans
approved by security
holders:Stock Incentive Plan
    
    
    677,149
    
    
    $
    15.86
    
    
    
    2008 Equity Incentive Plan
    
    
    1,653,400
    
    
    
    4.99
    
    
    
    237,833Share awards (1)
    
    
    161,391
    
    
    
    
    
    
    
    77,794Equity compensation plans
not approved by security
holders (2)
    
    
    640,741
    
    
    
    3.57
    
    
    
    Total
    
    
    3,132,681
    
    
    $
    8.98
    
    
    
    315,627
 
 (1)
    
    Amounts presented represent 60% of Performance Unit awards under the Companys 2006
Management Incentive Plan. Performance Unit awards are required to be settled 60% in common
stock and 40% in cash.(2)
    
    Inducement Option Grant  during the first quarter of 2009, in connection with his joining
the Company as its President and Chief Executive Officer, the Company made inducement grants
outside its existing stock-based compensation plans to Mr. Romil Bahl. Mr. Bahl received 83




---



##### Table of Contents



an
option to purchase 296,296 shares of the common stock of the Company and nonvested stock
awards (restricted stock) representing 344,445 shares of the Companys common stock. 
 ITEM 13.
    
    Certain Relationships and Related Transactions, and Director Independence
 -
 
 ITEM 14.
    
    Principal Accounting Fees and Services
  84




---



##### Table of Contents



PART IV
 
 ITEM 15.
    
    Exhibits, Financial Statement Schedules
    PageReport of Independent Registered Public Accounting Firm
    
    
    43Consolidated Statements of Operations for the Years ended December
31, 2009, 2008 and 2007
    
    
    44Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    45Consolidated Statements of Shareholders Equity (Deficit) for the
Years ended December 31, 2009, 2008 and 2007
    
    
    46Consolidated Statements of Cash Flows for the Years ended December
31, 2009, 2008 and 2007
    
    
    47Notes to Consolidated Financial Statements
    
    
    48
  Schedule II  Valuation and Qualifying Accounts
    
    
    S-1
  ExhibitNumber
    
    Description2.1
    
    Share Purchase Agreement dated February 25, 2010 by and between PRGX U.K. Limited and
Etesius Limited.3.1
    
    Restated Articles of Incorporation of the Registrant, as amended and corrected through
August 11, 2006 (restated solely for the purpose of filing with the Commission)
(incorporated by reference to Exhibit 3.1 to the Registrants Report on Form 8-K filed
on August 17, 2006).3.1.1
    
    Articles of Amendment of the Registrant dated January 20, 2010 (incorporated by
reference to Exhibit 3.1 to the Registrants Form 8-K filed on January 25, 2010).3.2
    
    Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.1
to the Registrants Form 8-K filed on December 11, 2007).4.1
    
    Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the
Registrants Form 10-K for the year ended December 31, 2001).4.2
    
    See Restated Articles of Incorporation and Bylaws of the Registrant, filed as Exhibits
3.1 and 3.2, respectively.4.3
    
    Shareholder Protection Rights Agreement, dated as of August 9, 2000, between the
Registrant and Rights Agent, effective May 1, 2002 (incorporated by reference to Exhibit
4.3 to the Registrants Form 10-Q for the quarterly period ended June 30, 2002).4.3.1
    
    First Amendment to Shareholder Protection Rights Agreement, dated as of March 12, 2002,
between the Registrant and Rights Agent (incorporated by reference to Exhibit 4.3 to the
Registrants Form 10-Q for the quarterly period ended September 30, 2002).4.3.2
    
    Second Amendment to Shareholder Protection Rights Agreement, dated as of August 16,
2002, between the Registrant and Rights Agent (incorporated by reference to Exhibit 4.3
to the Registrants Form 10-Q for the quarterly period ended September 30, 2002).4.3.3
    
    Third Amendment to Shareholder Protection Rights Agreement, dated as of November 7,
2006, between the Registrant and Rights Agent (incorporated by reference to Exhibit 4.1
to the Registrants Form 8-K filed on November 14, 2005).
 85




---



##### Table of Contents



ExhibitNumber
    
    Description4.3.4
    
    Fourth Amendment to Shareholder Protection Rights Agreement, dated as of November 14,
2006, between the Registrant and Rights Agent (incorporated by reference to Exhibit 4.1
to the Registrants Form 8-K filed on November 30, 2005).4.3.5
    
    Fifth Amendment to Shareholder Protection Rights Agreement, dated as of March 9, 2006,
between the Registrant and Rights Agent (incorporated by reference to Exhibit 4.9 to the
Registrants Form 10-K for the year ended December 31, 2005).4.3.6
    
    Sixth Amendment to Shareholder Protection Rights Agreement, dated as of September 17,
2007, between the Registrant and Rights Agent (incorporated by reference to Exhibit 4.1
to the Registrants Form 8-K filed on September 21, 2007).+10.1
    
    1996 Stock Option Plan, dated as of January 25, 1996, together with Forms of
Non-qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the
Registrants March 26, 1996 Registration Statement No. 333-1086 on Form S-1).+10.2
    
    Form of Indemnification Agreement between the Registrant and Directors and certain
officers, including named executive officers, of the Registrant (incorporated by
reference to Exhibit 10.4 to the Registrants Form 10-K for the year ended December 31,
2003).+10.3
    
    Form of the Registrants Non-Qualified Stock Option Agreement (incorporated by reference
to Exhibit 10.2 to the Registrants Form 10-Q for the quarterly period ended June 30,
2001).10.4
    
    Noncompetition, Nonsolicitation and Confidentiality Agreement among The Profit Recovery
Group International, Inc., Howard Schultz & Associates International, Inc., Howard
Schultz, Andrew Schultz and certain trusts, dated January 24, 2002 (incorporated by
reference to Exhibit 10.34 to the Registrants Form 10-K for the year ended December 31,
2001).10.5
    
    Office Lease Agreement between Galleria 600, LLC and PRG-Schultz International, Inc.
(incorporated by reference to Exhibit 10.43 to the Registrants Form 10-K for the year
ended December 31, 2001).10.5.1
    
    First Amendment to Office Lease Agreement between Galleria 600, LLC and PRG-Schultz
International, Inc. (incorporated by reference to Exhibit 10.65 to the Registrants Form
10-K for the year ended December 31, 2002).+10. 6
    
    Amended Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the
Registrants Form 10-Q for the quarterly period ended June 30, 2002).+10.7
    
    Amended HSA-Texas Stock Option Plan (incorporated by reference to Exhibit 10.4 to the
Registrants Form 10-Q for the quarterly period ended June 30, 2002).10.8
    
    Investor Rights Agreement, dated as of August 27, 2002, among PRG-Schultz International,
Inc., Berkshire Fund V, LP, Berkshire Investors LLC and Blum Strategic Partners II, L.P.
(incorporated by reference to Exhibit 10.7 to the Registrants Form 10-Q for the
quarterly period ended September 30, 2002).10.8.1
    
    Amendment to Investor Rights Agreement dated March 28, 2006 (incorporated by reference
to Exhibit 10.8 to the Registrants Form 10-Q for the quarter ended March 31, 2006).+10.9
    
    Form of Non-employee Director Option Agreement (incorporated by reference to Exhibit
99.1 to the Registrants Report on Form 8-K filed on February 11, 2005).+10.10
    
    Amended and Restated Employment Agreement between Registrant and Mr. James B. McCurry,
dated as of December 17, 2007 (incorporated by reference to Exhibit 10.1 to the
Registrants Form 8-K filed on December 19, 2007).+10.10.1
    
    Release Agreement dated December 1, 2008 between the Registrant and Mr. McCurry
(incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed on
December 4, 2008).+10.11
    
    Separation and Release Agreement between Registrant and Mr. John M. Cook, dated as of
August 2, 2005 (incorporated by reference to Exhibit 99.1 to Registrants Form 8-K filed
on August 8, 2005).+10.11.1
    
    First Amendment to Separation and Release Agreement with John M. Cook dated March 16,
2006 (incorporated by reference to Exhibit 99.1 to the registrants Form 8-K filed on
March 22, 2006).+10.12
    
    Separation and Release Agreement between Registrant and Mr. John M. Toma, dated as of
August 2, 2005 (incorporated by reference to Exhibit 99.2 to Registrants Form 8-K filed
on August 8, 2005).
 86




---



##### Table of Contents



ExhibitNumber
    
    Description+10.12.1
    
    First Amendment to Separation and Release Agreement with John M. Toma dated March 16,
2006 (incorporated by reference to Exhibit 99.2 to the registrants Form 8-K filed on
March 22, 2006).+10.13
    
    Employment Agreement between the Registrant and Peter Limeri entered into on November
28, 2008 (incorporated by reference to Exhibit 10.2 to the Registrants Form 8-K filed
on December 4, 2008).10.14
    
    Amended and Restated Standstill Agreement, dated as of July 16, 2007, between Registrant
and Blum Capital Partners, L.P. and certain of its affiliates (incorporated by reference
to Exhibit 10.1 to the Registrants Form 8-K filed on July 16, 2007).10.15
    
    Restructuring Support Agreement dated December 23, 2005 (incorporated by reference to
Exhibit 10.66 to the Registrants Form 10-K for the year ended December 31, 2005).10.15.1
    
    Amended and Restated Restructuring Support Agreement (incorporated by reference to
Exhibit 10.1 to the Registrants Form 10-Q for the quarter ended March 31, 2006).+10.16
    
    Employment Agreement between the Registrant and Larry Robinson dated November 28, 2008
(incorporated by reference to Exhibit 10.3 to the Registrants Form 8-K filed on
December 4, 2008).+10.17
    
    Employment Agreement between the Registrant and Brad Roos dated November 28, 2008
(incorporated by reference to Exhibit 10.4 to the Registrants Form 8-K filed on
December 4, 2008).+10.18
    
    Expatriate Assignment Agreement with Brad Roos (incorporated by reference to Exhibit
10.1 to the Registrants Form 8-K filed on February 14, 2008).+10.18.1
    
    Separation Agreement between the Registrant and Brad Roos dated May 29, 2009
(incorporated by reference to Exhibit 10.2 to the Registrants Form 8-K filed on June 1,
2009).10.19
    
    Registration Rights Agreement dated March 17, 2006 (incorporated by reference to Exhibit
10.2 to the Registrants Form 10-Q for the quarter ended March 31, 2006).10.20
    
    Amended and Restated Financing Agreement dated September 17, 2007 (incorporated by
reference to Exhibit 10.1 to the Registrants Form 8-K filed on September 21, 2007).10.20.1
    
    Amendment Number One to Amended and Restated Financing Agreement (incorporated by
reference to Exhibit 10.1 to the Registrants Form 8-K filed on April 3, 2008).10.20.2
    
    Amendment Number Two to Amended and Restated Financing Agreement (incorporated by
reference to Exhibit 10.1 to the Registrants Form 8-K filed on April 3, 2009)10.21
    
    Security Agreement dated March 17, 2006 (incorporated by reference to Exhibit 10.4 to
the Registrants Form 10-Q for the quarter ended March 31, 2006).+10.22
    
    Amended and Restated 2006 Management Incentive Plan (incorporated by reference to
Exhibit 10.1 to the Registrants Form 10-Q for the quarter ended September 30, 2006).+10.22.1
    
    Form of Performance Unit Agreement under 2006 Amended and Restated Management Incentive
Plan (incorporated by reference to Exhibit 10.2 to the Registrants Form 10-Q for the
quarter ended September 30, 2006).+10.22.2
    
    Form of Amendment to Performance Unit Agreement (incorporated by reference to Exhibit
10.1 to the Registrants Form 8-K filed on December 11, 2007).+10.23
    
    Employment Agreement with Norman Lee White dated June 19, 2006 (incorporated by
reference to Exhibit 10.1 to the Registrants Report on Form 8-K filed on June 20,
2006).+10.23.1
    
    Separation Agreement dated November 30, 2008 between PRG-Schultz USA and Mr. White
(incorporated by reference to Exhibit 10.5 to the Registrants Form 8-K filed on
December 4, 2008).+10.24
    
    Form of Non-Employee Director Stock Option Agreement (incorporated by reference to
Exhibit 10.1 to the Registrants Report on Form 8-K filed on September 18, 2007).+*10.25
    
    2008 PRG-Schultz Performance Bonus Plan (incorporated by reference to Exhibit 10.1 to
the Registrants Report on Form 10-Q for the quarter ended March 31, 2008).+10.26
    
    2009 PRG-Schultz Performance Bonus Plan+10.27
    
    PRG-Schultz International, Inc. 2008 Equity Incentive Plan (incorporated by reference to
Exhibit 10.1 to the Registrants Form 8-K filed on June 4, 2008).
 87




---



##### Table of Contents



ExhibitNumber
    
    Description+10.27.1
    
    Form of Restricted Stock Agreement for Non-Employee Directors (incorporated by reference
to Exhibit 10.2 to the Registrants Form 8-K filed on June 4, 2008).+10.27.2
    
    Form of Non-Qualified Stock Option Agreement for Non-Employee Directors (incorporated by
reference to Exhibit 10.3 to the Registrants Form 8-K filed on June 4, 2008).+10.28
    
    Employment Agreement dated January 8, 2009, by and between Mr. Romil Bahl and the
Registrant (incorporated by reference to Exhibit 10.1 to the Registrants Report on Form
8-K filed on January 14, 2009).+10.28.1
    
    Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.2
to the Registrants Report on Form 8-K filed on January 14, 2009).+10.28.2
    
    Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.3 to the
Registrants Report on Form 8-K filed on January 14, 2009).+10.29
    
    Employment Agreement dated May 26, 2009 by and between the Registrant and Robert B. Lee
(incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed on June 1,
2009).10.30
    
    Revolving Credit and Term Loan Agreement dated as of January 19, 2010, by and among PRGX
Global, Inc. (formerly PRG-Schultz International, Inc), and PRGX USA, Inc. (formerly
PRG-Schultz USA, Inc.), as co-borrowers, the lenders from time to time party thereto,
SunTrust Bank, as issuing bank, and SunTrust Bank, as administrative agent (incorporated
by reference to Exhibit 10.1 to the Registrants Form 8-K filed on January 25, 2010).10.30.1
    
    Subsidiary Guaranty Agreement dated as of January 19, 2010 by and among PRGX Global,
Inc. (formerly PRG-Schultz International, Inc), and PRGX USA, Inc. (formerly PRG-Schultz
USA, Inc.), as borrowers, each of the subsidiaries of PRGX Global, Inc. listed on
schedule I thereto, as guarantors, and SunTrust Bank, as administrative agent
(incorporated by reference to Exhibit 10.2 to the Registrants Form 8-K filed on January
25, 2010).10.30.2
    
    Security Agreement dated January 19, 2010 among PRGX Global, Inc. (formerly PRG-Schultz
International, Inc), PRGX USA, Inc. (formerly PRG-Schultz USA, Inc.), and the other
direct and indirect subsidiaries of PRGX Global, Inc. signatory thereto, as grantors, in
favor of SunTrust Bank, as administrative agent (incorporated by reference to Exhibit
10.3 to the Registrants Form 8-K filed on January 25, 2010).10.30.3
    
    Equity Pledge Agreement dated as of January 19, 2010, made by PRGX Global, Inc.
(formerly PRG-Schultz International, Inc), PRGX USA, Inc. (formerly PRG-Schultz USA,
Inc.), and the other direct and indirect subsidiaries of PRGX Global, Inc. signatory
thereto, as grantors, in favor of SunTrust Bank, as administrative agent (incorporated
by reference to Exhibit 10.4 to the Registrants Form 8-K filed on January 25, 2010).+10.31
    
    Employment Agreement between the Registrant and Victor A. Allums dated November 28, 2008+10.32
    
    Employment Agreement between the Registrant and Jennifer G. Moore dated November 28,
2008+10.32.1
    
    Separation Agreement between the Registrant and Jennifer G. Moore dated October 26, 2009.+10.33
    
    Employment Agreement between the Registrant and James Shand dated March 12, 2009.14.1
    
    Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14.1
to the Registrants Form 10-K for the year ended December 31, 2003).21.1
    
    Subsidiaries of the Registrant.23.1
    
    Consent of BDO Seidman, LLP31.1
    
    Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
for the year ended December 31, 2009.31.2
    
    Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
for the year ended December 31, 2009.32.1
    
    Certification of the Chief Executive Officer and Chief Financial Officer, pursuant to 18
U.S.C. Section 1350, for the year ended December 31, 2009.
 88




---



##### Table of Contents



*
    
    Confidential treatment, pursuant to 17 CFR §§ 200.80 and 240.24b-2, has been granted
regarding certain portions of the indicated Exhibit, which portions have been filed
separately with the Commission.+
    
    Designates management contract or compensatory plan or arrangement. 89




---



##### Table of Contents



SIGNATURES
  PRGX GLOBAL, INC.By:

/s/ ROMIL BAHLRomil BahlPresident, Chief Executive Officer, Director
(Principal Executive Officer)Date: March 29, 2010   Signature
    
    Title
    
    Date/s/ ROMIL BAHL
    
    President, Chief Executive
Officer and
Director
    
    March 29, 2010Romil Bahl
    
    (Principal Executive Officer)/s/ ROBERT B. LEE
    
    Chief Financial Officer and Treasurer
    
    March 29, 2010Robert B. Lee
    
    (Principal
Financial Officer)/s/ LEE GENTRY
    
    Controller
    
    March 29, 2010Lee Gentry
    
    (Principal
Accounting Officer)/s/ DAVID A. COLE
    
    Director
    
    March 29, 2010David A. Cole/s/ PATRICK G. DILLS
    
    Chairman of the Board
    
    March 29, 2010Patrick G. Dills/s/ N. COLIN LIND
    
    Director
    
    March 29, 2010N. Colin Lind/s/ PHILIP J. MAZZILLI, JR.
    
    Director
    
    March 29, 2010Philip J. Mazzilli, Jr./s/ STEVEN P. ROSENBERG
    
    Director
    
    March 29, 2010Steven P. Rosenberg
 90




---



##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(In thousands)
 Additions
    
    DeductionsChargeBalance at
    
    (Credit) to
    
    Credit to
    
    Balance atBeginning
    
    Costs and
    
    the respective
    
    End ofDescription
    
    of Year
    
    Expenses
    
    receivable (1)
    
    Year2009Allowance for doubtful accounts receivable
    
    $
    921
    
    
    
    137
    
    
    
    (26
    )
    
    $
    1,032Allowance for doubtful employee advances
and miscellaneous receivables
    
    $
    311
    
    
    
    235
    
    
    
    (195
    )
    
    $
    351Deferred tax valuation allowance
    
    $
    64,307
    
    
    
    (6,003
    )
    
    
    
    
    
    $
    58,3042008Allowance for doubtful accounts receivable
    
    $
    826
    
    
    
    319
    
    
    
    (224
    )
    
    $
    921Allowance for doubtful employee advances
and miscellaneous receivables
    
    $
    1,831
    
    
    
    
    
    
    
    (1,520
    )
    
    $
    311Deferred tax valuation allowance
    
    $
    79,805
    
    
    
    (15,498
    )
    
    
    
    
    
    $
    64,3072007Allowance for doubtful accounts receivable
    
    $
    1,795
    
    
    
    (961
    )
    
    
    (8
    )
    
    $
    826Allowance for doubtful employee advances
and miscellaneous receivables
    
    $
    1,306
    
    
    
    525
    
    
    
    
    
    
    $
    1,831Deferred tax valuation allowance
    
    $
    79,240
    
    
    
    565
    
    
    
    
    
    
    $
    79,805
 
 (1)
    
    Write-offs, net of recoveries S-1