##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 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
 
 PRG-Schultz International, 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
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer
þ
    
    Non-accelerated filer o
    
    Smaller reporting company
o(Do not check if a smaller reporting company)
 o þ




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##### 



PRG-SCHULTZ INTERNATIONAL, INC.
 FORM 10-Q
For the Quarter Ended September 30, 2009
 INDEX
 Page No.Part I.Financial Information
    
    
    1Item 1. Financial Statements
    
    
    1Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2009 and 2008 (Unaudited)
    
    
    1Condensed Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and
December 31, 2008
    
    
    2Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2009 and 2008 (Unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    25Part II.Other Information
    
    
    26Item 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 5. Other Information
    
    
    27Item 6. Exhibits
    
    
    28Signatures
    
    
    29EX-31.1EX-31.2EX-32.1




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PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    45,321
    
    
    $
    49,182
    
    
    $
    130,044
    
    
    $
    147,093Cost of revenues
    
    
    28,482
    
    
    
    31,169
    
    
    
    82,701
    
    
    
    94,362Gross margin
    
    
    16,839
    
    
    
    18,013
    
    
    
    47,343
    
    
    
    52,731Selling, general and administrative expenses
    
    
    11,893
    
    
    
    12,139
    
    
    
    32,911
    
    
    
    36,006Operating income
    
    
    4,946
    
    
    
    5,874
    
    
    
    14,432
    
    
    
    16,725Gain on bargain purchase (Note J)
    
    
    2,788
    
    
    
    
    
    
    
    2,788
    
    
    
    Income before interest and income taxes
    
    
    7,734
    
    
    
    5,874
    
    
    
    17,220
    
    
    
    16,725Interest expense, net
    
    
    728
    
    
    
    789
    
    
    
    2,154
    
    
    
    2,545Earnings before income taxes
    
    
    7,006
    
    
    
    5,085
    
    
    
    15,066
    
    
    
    14,180Income taxes
    
    
    605
    
    
    
    879
    
    
    
    1,767
    
    
    
    1,872Net earnings
    
    $
    6,401
    
    
    $
    4,206
    
    
    $
    13,299
    
    
    $
    12,308Basic earnings per common share (Note B)
    
    $
    0.27
    
    
    $
    0.19
    
    
    $
    0.59
    
    
    $
    0.57Diluted earnings per common share (Note B)
    
    $
    0.27
    
    
    $
    0.18
    
    
    $
    0.57
    
    
    $
    0.54Weighted-average common shares outstanding
(Note B):Basic
    
    
    23,404
    
    
    
    21,919
    
    
    
    22,735
    
    
    
    21,726Diluted
    
    
    23,833
    
    
    
    23,002
    
    
    
    23,453
    
    
    
    22,942
 See accompanying Notes to Condensed Consolidated Financial Statements.
 1




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 September 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents (Notes F and I)
    
    $
    27,329
    
    
    $
    26,688Restricted cash
    
    
    317
    
    
    
    61Receivables:Contract receivables, less allowances of $887 in 2009 and $921 in 2008:Billed
    
    
    27,068
    
    
    
    28,143Unbilled
    
    
    4,683
    
    
    
    5,56831,751
    
    
    
    33,711Employee advances and miscellaneous receivables, less allowances of
$261 in 2009 and $311 in 2008
    
    
    544
    
    
    
    285Total receivables
    
    
    32,295
    
    
    
    33,996Prepaid expenses and other current assets
    
    
    2,743
    
    
    
    2,264Total current assets
    
    
    62,684
    
    
    
    63,009Property and equipment, at cost
    
    
    31,231
    
    
    
    30,041Less accumulated depreciation and amortization
    
    
    (23,712
    )
    
    
    (22,140
    )Property and equipment, net
    
    
    7,519
    
    
    
    7,901Goodwill (Note I)
    
    
    4,600
    
    
    
    4,600Intangible assets, less accumulated amortization of $12,452 in 2009 and
$10,932 in 2008 (Note I)
    
    
    24,866
    
    
    
    18,968Unbilled receivables
    
    
    1,483
    
    
    
    1,789Other assets
    
    
    1,883
    
    
    
    2,516$
    103,035
    
    
    $
    98,783LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    11,170
    
    
    $
    16,275Accrued payroll and related expenses
    
    
    18,397
    
    
    
    22,536Refund liabilities
    
    
    7,169
    
    
    
    7,870Deferred revenue
    
    
    1,424
    
    
    
    502Current portions of debt and capital lease obligations (Note G)
    
    
    5,342
    
    
    
    5,314Business acquisition obligations
    
    
    2,560
    
    
    
    Total current liabilities
    
    
    46,062
    
    
    
    52,497Long-term debt and capital lease obligations (Note G)
    
    
    10,320
    
    
    
    14,331Deferred income taxes
    
    
    8
    
    
    
    234Noncurrent compensation obligations
    
    
    1,233
    
    
    
    2,849Refund liabilities
    
    
    758
    
    
    
    897Other long-term liabilities
    
    
    6,342
    
    
    
    5,265Total liabilities
    
    
    64,723
    
    
    
    76,073Commitments and contingencies (Note H)Shareholders equity (Note B):Common stock, no par value; $.01 stated value per share. Authorized
50,000,000 shares;
23,160,760 shares issued and outstanding as of September 30, 2009
and 21,789,645 shares
issued and outstanding as of December 31, 2008
    
    
    232
    
    
    
    218Additional paid-in capital
    
    
    561,770
    
    
    
    559,359Accumulated deficit
    
    
    (526,689
    )
    
    
    (539,988
    )Accumulated other comprehensive income
    
    
    2,999
    
    
    
    3,121Total shareholders equity
    
    
    38,312
    
    
    
    22,710$
    103,035
    
    
    $
    98,783
 See accompanying Notes to Condensed Consolidated Financial Statements.
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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Nine Months EndedSeptember 30,2009
    
    
    2008Cash flows from operating activities:Net earnings
    
    $
    13,299
    
    
    $
    12,308Adjustments to reconcile net earnings to net cash provided
by operating activities:Gain on bargain purchase
    
    
    (2,788
    )
    
    
    Depreciation and amortization
    
    
    4,342
    
    
    
    3,897Amortization of deferred loan costs
    
    
    591
    
    
    
    588Stock-based compensation expense
    
    
    2,500
    
    
    
    4,961Loss on sale of property and equipment
    
    
    92
    
    
    
    84Deferred income taxes
    
    
    (226
    )
    
    
    109Changes in assets and liabilities:Restricted cash
    
    
    (256
    )
    
    
    (262
    )Billed receivables
    
    
    1,712
    
    
    
    4,022Unbilled receivables
    
    
    1,191
    
    
    
    492Prepaid expenses and other current assets
    
    
    329
    
    
    
    279Other assets
    
    
    55
    
    
    
    24Accounts payable and accrued expenses
    
    
    (7,112
    )
    
    
    (2,498
    )Accrued payroll and related expenses
    
    
    (4,701
    )
    
    
    (6,864
    )Refund liabilities
    
    
    (840
    )
    
    
    (3,844
    )Deferred revenue
    
    
    915
    
    
    
    (197
    )Noncurrent compensation obligations
    
    
    (1,363
    )
    
    
    (4,561
    )Other long-term liabilities
    
    
    (500
    )
    
    
    (608
    )Net cash provided by operating activities
    
    
    7,240
    
    
    
    7,930Cash flows from investing activities:Business acquisition
    
    
    (1,629
    )
    
    
    Purchases of property and equipment, net of disposal proceeds
    
    
    (2,065
    )
    
    
    (2,211
    )Net cash used in investing activities
    
    
    (3,694
    )
    
    
    (2,211
    )Cash flows from financing activities:Repayments of debt
    
    
    (3,983
    )
    
    
    (24,956
    )Repurchases of common stock
    
    
    (246
    )
    
    
    Restricted stock remitted by employees for taxes
    
    
    (50
    )
    
    
    Proceeds from option exercises
    
    
    26
    
    
    
    Payments for deferred loan costs
    
    
    
    
    
    
    (59
    )Net cash used in financing activities
    
    
    (4,253
    )
    
    
    (25,015
    )Effect of exchange rates on cash and cash equivalents
    
    
    1,348
    
    
    
    (280
    )Net change in cash and cash equivalents
    
    
    641
    
    
    
    (19,576
    )Cash and cash equivalents at beginning of period
    
    
    26,688
    
    
    
    42,364Cash and cash equivalents at end of period
    
    $
    27,329
    
    
    $
    22,788Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    1,517
    
    
    $
    2,564Cash paid during the period for income taxes, net of refunds
    
    $
    3,434
    
    
    $
    1,918Liabilities assumed in a business acquisition (Note J)
    
    $
    4,210
    
    
    $
    
 See accompanying Notes to Condensed Consolidated Financial Statements.
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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note A  Basis of Presentation
     New Accounting Standards
 FASB ASC 105-10-65 The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
 FASB ASC 718. Business
Combinations
 FASB ASC 810-10-65. Noncontrolling Interests in
Consolidated Financial Statements
 4




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  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
 FASB ASC 860 Accounting for Transfers of
Financial Assets, an amendment of SFAS No. 140
 FASB ASC 810-10-25 Amendments to FASB
Interpretation No. 46(R)
 FASB ASC 470-20. Accounting for
Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash
Settlement)
 FASB ASC 260-10-45. Determining
Whether Instruments Granted in Share-Based Transactions Are Participating Securities
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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note B  Earnings Per Common Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Basic
earnings per common share:Numerator for earnings per common share calculations:Net earnings
    
    $
    6,401
    
    
    $
    4,206
    
    
    $
    13,299
    
    
    $
    12,308Denominator:Denominator for basic earnings per common share
 weighted-average common shares outstanding
during the period
    
    
    23,404
    
    
    
    21,919
    
    
    
    22,735
    
    
    
    21,726Basic earnings per common share
    
    $
    0.27
    
    
    $
    0.19
    
    
    $
    0.59
    
    
    $
    0.57
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Diluted
earnings per common share:Numerator for earnings per common share calculations:Net earnings
    
    $
    6,401
    
    
    $
    4,206
    
    
    $
    13,299
    
    
    $
    12,308Denominator:Denominator for basic earnings per common share
 weighted-average common shares outstanding
during the period
    
    
    23,404
    
    
    
    21,919
    
    
    
    22,735
    
    
    
    21,726Incremental shares from stock-based compensation
plans
    
    
    429
    
    
    
    1,083
    
    
    
    718
    
    
    
    1,216Denominator for diluted earnings per common share
    
    
    23,833
    
    
    
    23,002
    
    
    
    23,453
    
    
    
    22,942Diluted earnings per common share
    
    $
    0.27
    
    
    $
    0.18
    
    
    $
    0.57
    
    
    $
    0.54
  Note C  Stock-Based Compensation
  6




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2009 Grants
          7




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2008 Grants
      2006 MIP Performance Units
    8




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Note D  Operating Segments and Related Information
  Domestic Accounts Payable Services
  International Accounts Payable Services
  Corporate Support
  9




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Domestic
    
    
    InternationalAccounts
    
    
    AccountsPayable
    
    
    Payable
    
    
    CorporateServices
    
    
    Services
    
    
    Support
    
    
    TotalThree Months Ended September 30, 2009Revenues
    
    $
    24,435
    
    
    $
    20,886
    
    
    $
    
    
    
    $
    45,321EBITDA
    
    $
    6,458
    
    
    $
    7,904
    
    
    $
    (4,994
    )
    
    $
    9,368Foreign currency (gains) losses on
intercompany balances
    
    
    
    
    
    
    (678
    )
    
    
    
    
    
    
    (678
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,496
    
    
    
    1,496Gain on bargain purchase
    
    
    
    
    
    
    (2,788
    )
    
    
    
    
    
    
    (2,788
    )Adjusted EBITDA
    
    $
    6,458
    
    
    $
    4,438
    
    
    $
    (3,498
    )
    
    $
    7,398Three Months Ended September 30, 2008Revenues
    
    $
    27,853
    
    
    $
    21,329
    
    
    $
    
    
    
    $
    49,182EBITDA
    
    $
    8,167
    
    
    $
    2,850
    
    
    $
    (3,962
    )
    
    $
    7,055Foreign currency (gains) losses on
intercompany balances
    
    
    
    
    
    
    1,801
    
    
    
    
    
    
    
    1,801Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    377
    
    
    
    377Adjusted EBITDA
    
    $
    8,167
    
    
    $
    4,651
    
    
    $
    (3,585
    )
    
    $
    9,233Nine Months Ended September 30, 2009Revenues
    
    $
    74,113
    
    
    $
    55,931
    
    
    $
    
    
    
    $
    130,044EBITDA
    
    $
    21,579
    
    
    $
    14,439
    
    
    $
    (14,456
    )
    
    $
    21,562Foreign currency (gains) losses on
intercompany balances
    
    
    
    
    
    
    (1,752
    )
    
    
    
    
    
    
    (1,752
    )Litigation settlement
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    650Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,500
    
    
    
    2,500Gain on bargain purchase
    
    
    
    
    
    
    (2,788
    )
    
    
    
    
    
    
    (2,788
    )Adjusted EBITDA
    
    $
    21,579
    
    
    $
    9,899
    
    
    $
    (11,306
    )
    
    $
    20,172Nine Months Ended September 30, 2008Revenues
    
    $
    84,347
    
    
    $
    62,746
    
    
    $
    
    
    
    $
    147,093EBITDA
    
    $
    26,310
    
    
    $
    9,752
    
    
    $
    (15,440
    )
    
    $
    20,622Foreign currency (gains) losses on
intercompany balances
    
    
    
    
    
    
    1,335
    
    
    
    
    
    
    
    1,335Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    4,961
    
    
    
    4,961Adjusted EBITDA
    
    $
    26,310
    
    
    $
    11,087
    
    
    $
    (10,479
    )
    
    $
    26,918
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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net earnings
    
    $
    6,401
    
    
    $
    4,206
    
    
    $
    13,299
    
    
    $
    12,308Income taxes
    
    
    605
    
    
    
    879
    
    
    
    1,767
    
    
    
    1,872Interest, net
    
    
    728
    
    
    
    789
    
    
    
    2,154
    
    
    
    2,545Depreciation and amortization
    
    
    1,634
    
    
    
    1,181
    
    
    
    4,342
    
    
    
    3,897EBITDA
    
    
    9,368
    
    
    
    7,055
    
    
    
    21,562
    
    
    
    20,622Foreign currency (gains) losses on
intercompany balances
    
    
    (678
    )
    
    
    1,801
    
    
    
    (1,752
    )
    
    
    1,335Litigation settlement
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    Stock-based compensation
    
    
    1,496
    
    
    
    377
    
    
    
    2,500
    
    
    
    4,961Gain on bargain purchase
    
    
    (2,788
    )
    
    
    
    
    
    
    (2,788
    )
    
    
    Adjusted EBITDA
    
    $
    7,398
    
    
    $
    9,233
    
    
    $
    20,172
    
    
    $
    26,918
 Note E  Comprehensive Income
 Comprehensive Income
 Note F  Cash Equivalents
   Note G  Long Term Debt
   11




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Note H - Commitments and Contingencies
 Legal Proceedings
    Note I - Fair Value Measurements
 Fair Value Measurements and
Disclosures
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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Fair Value Measurements at Reporting DateUsingQuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableReporting
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)As of September 30, 2009Assets:Cash and cash equivalents
    
    $
    27,329
    
    
    $
    27,329
    
    
    $
    
    
    
    $
    As of December 31, 2008Assets:Cash and cash equivalents
    
    $
    26,688
    
    
    $
    26,688
    
    
    $
    
    
    
    $
    
  Fair Value Measurements UsingQuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableReporting
    
    
    Assets
    
    
    Inputs
    
    
    InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)As of September 30, 2009Assets:Goodwill
    
    $
    4,600
    
    
    $
    
    
    
    $
    
    
    
    $
    4,600Intangible assets, net
    
    
    24,866
    
    
    
    
    
    
    
    
    
    
    
    24,866$
    29,466
    
    
    $
    
    
    
    $
    
    
    
    $
    29,466Liabilities:Business acquisition
obligations
    
    $
    2,064
    
    
    
    
    
    
    
    
    
    
    $
    2,064As of December 31, 2008Assets:Goodwill
    
    $
    4,600
    
    
    $
    
    
    
    $
    
    
    
    $
    4,600Intangible assets, net
    
    
    18,968
    
    
    
    
    
    
    
    
    
    
    
    18,968$
    23,568
    
    
    $
    
    
    
    $
    
    
    
    $
    23,568
 IntangiblesGoodwill and Other
  13




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Note J - Business Acquisition
    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
    
    $
    2,788
  14




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
      15




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16




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##### Table of Contents



Results of Operations
  Three Months
    
    Nine MonthsEnded
    
    EndedSeptember 30,
    
    September 30,2009
    
    2008
    
    2009
    
    2008Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    62.8
    
    
    
    63.4
    
    
    
    63.6
    
    
    
    64.1Gross margin
    
    
    37.2
    
    
    
    36.6
    
    
    
    36.4
    
    
    
    35.9Selling, general and administrative expenses
    
    
    26.3
    
    
    
    24.7
    
    
    
    25.3
    
    
    
    24.5Operating income
    
    
    10.9
    
    
    
    11.9
    
    
    
    11.1
    
    
    
    11.4Gain on bargain purchase
    
    
    6.2
    
    
    
    
    
    
    
    2.1
    
    
    
    Income before interest and income taxes
    
    
    17.1
    
    
    
    11.9
    
    
    
    13.2
    
    
    
    11.4Interest expense, net
    
    
    1.6
    
    
    
    1.6
    
    
    
    1.6
    
    
    
    1.7Earnings before income taxes
    
    
    15.5
    
    
    
    10.3
    
    
    
    11.6
    
    
    
    9.7Income taxes
    
    
    1.3
    
    
    
    1.8
    
    
    
    1.4
    
    
    
    1.3Net earnings
    
    
    14.2
    %
    
    
    8.5
    %
    
    
    10.2
    %
    
    
    8.4
    %
 Three and Nine Months Ended September 30, 2009 Compared to the Corresponding Periods of the Prior
Year
 Accounts Payable Services
 Revenue
 Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Domestic Accounts Payable Services
    
    $
    24.4
    
    
    $
    27.9
    
    
    $
    74.1
    
    
    $
    84.3International Accounts Payable Services
    
    
    20.9
    
    
    
    21.3
    
    
    
    55.9
    
    
    
    62.8Total Accounts Payable Services
    
    $
    45.3
    
    
    $
    49.2
    
    
    $
    130.0
    
    
    $
    147.1
   17




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##### Table of Contents



Cost of Revenues (COR).
  Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Domestic Accounts Payable Services
    
    $
    14.6
    
    
    $
    16.8
    
    
    $
    43.7
    
    
    $
    49.3International Accounts Payable Services
    
    
    13.9
    
    
    
    14.3
    
    
    
    39.0
    
    
    
    45.1Total Accounts Payable Services
    
    $
    28.5
    
    
    $
    31.1
    
    
    $
    82.7
    
    
    $
    94.4
  18




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##### Table of Contents



Selling, General and Administrative Expenses (SG&A).
  Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Domestic Accounts Payable Services
    
    $
    4.6
    
    
    $
    3.9
    
    
    $
    12.5
    
    
    $
    12.2International Accounts Payable Services
    
    
    2.2
    
    
    
    4.3
    
    
    
    5.9
    
    
    
    8.4Total Accounts Payable Services
    
    $
    6.8
    
    
    $
    8.2
    
    
    $
    18.4
    
    
    $
    20.6
    Corporate Support
   19




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##### Table of Contents



Three Months
    
    Nine MonthsEnded
    
    EndedSeptember 30,
    
    September 30,2009
    
    2008
    
    2009
    
    2008Corporate Support
    
    $
    5.0
    
    
    $
    4.0
    
    
    $
    14.5
    
    
    $
    15.4
  Other Items
 Interest Expense.
 Income Tax Expense.
 20




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##### Table of Contents



Liquidity and Capital Resources
   Operating Activities.
 Investing Activities and Depreciation Expense.
  Financing Activities and Interest Expense.
   Credit Facility
  21




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##### Table of Contents



Stock Repurchase Program
  2006 Management Incentive Plan
   22




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##### Table of Contents



Off Balance Sheet Arrangements
  Critical Accounting Policies
   Forward-Looking Statements
   23




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Market Risk.
 Interest Rate Risk
 Stock-Based Compensation.
 24




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##### Table of Contents



Item 4. Controls and Procedures
   25




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Total Number of
    
    Maximum ApproximateShares Purchased
    
    Dollar Value of SharesTotal Number
    
    Average
    
    as Part of Publicly
    
    that May Yet Beof Shares
    
    Price Paid
    
    Announced Plans
    
    Purchased Under the2009
    
    Purchased (a)
    
    per Share
    
    or Programs
    
    Plans or Programs(millions of dollars)July 1 
July 31
    

    

    
    $
    
    
    

    

    
    $
    August 1  August
31
    

    

    
    $
    
    
    

    

    
    $
    September 1 
September 30
    

    8,979

    
    $
    5.65
    
    

    

    
    $
    8,979

    
    $
    5.65
    

    
    
 
 (a)
    
    All shares reported during the quarter were surrendered by employees to satisfy tax
withholding obligations upon vesting of restricted stock. 26




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Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  27




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Description3.1
    
    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).3.2
    
    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).4.3.4
    
    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).4.4
    
    Indenture dated as of March 17, 2006 governing 10% Senior
Convertible Notes due 2011, with Form of Note appended
(incorporated by reference to Exhibit 4.1 to the Registrants Form
8-K filed on March 23, 2006).4.4.1
    
    Supplemental Indenture to 10% Senior Convertible Notes Indenture
dated September 4, 2007 (incorporated by reference to Exhibit 10.2
to the Registrants Form 8-K filed on September 5, 2007).4.5
    
    Indenture dated as of March 17, 2006 governing 11% Senior Notes
due 2011, with Form of Note appended (incorporated by reference to
Exhibit 4.2 to the Registrants Form 8-K filed on March 23, 2006).4.5.1
    
    Supplemental Indenture to 11% Senior Notes Indenture dated
September 4, 2007 (incorporated by reference to Exhibit 10.1 to
the Registrants Form 8-K filed on September 5, 2007).31.1
    
    Certification of the Chief Executive Officer, pursuant to Rule
13a-14(a) or 15d-14(a), for the quarter ended September 30, 2009.31.2
    
    Certification of the Chief Financial Officer, pursuant to Rule
13a-14(a) or 15d-14(a), for the quarter ended September 30, 2009.32.1
    
    Certification of the Chief Executive Officer and Chief Financial
Officer, pursuant to 18 U.S.C. Section 1350, for the quarter ended
September 30, 2009.
 28




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SIGNATURES
  PRG-SCHULTZ INTERNATIONAL, INC.November 9, 2009
    By:
    /s/ Romil BahlRomil BahlPresident, Chief Executive Officer, Director
(Principal Executive Officer)November 9, 2009
    By:
    /s/ Robert B. LeeRobert B. LeeChief Financial Officer and Treasurer
(Principal Financial Officer) 29