##### 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 June 30, 2008
 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
  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 June 30, 2008
 INDEX
 Page No.Part I.Financial InformationItem 1. Financial Statements
    
    1Condensed Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 2008 and 2007
    
    1Condensed Consolidated Balance Sheets as of June 30, 2008 and
December 31, 2007
    
    2Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2008 and 2007
    
    3Notes to Condensed Consolidated Financial Statements
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    23Item 4. Controls and Procedures
    
    24Part II.Other InformationItem 1. Legal Proceedings
    
    25Item 1A. Risk Factors
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    25Item 3. Defaults Upon Senior Securities
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    25Item 5. Other Information
    
    25Item 6. Exhibits
    
    26Signatures
    
    28EX-31.1 SECTION 302, CERTIFICATION OF THE CEOEX-31.2 SECTION 302, CERTIFICATION OF THE CFOEX-32.1 SECTION 906, CERTIFICATION OF THE CEO AND CFO




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##### Table of Contents



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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    49,648
    
    
    $
    53,315
    
    
    $
    97,911
    
    
    $
    110,345Cost of revenues
    
    
    32,941
    
    
    
    34,872
    
    
    
    63,193
    
    
    
    72,113Gross margin
    
    
    16,707
    
    
    
    18,443
    
    
    
    34,718
    
    
    
    38,232Selling, general and administrative expenses
    
    
    11,024
    
    
    
    14,486
    
    
    
    23,867
    
    
    
    28,168Operational restructuring expense (Note I)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income
    
    
    5,683
    
    
    
    3,957
    
    
    
    10,851
    
    
    
    10,064Interest expense, net
    
    
    765
    
    
    
    4,749
    
    
    
    1,756
    
    
    
    8,890Loss on financial restructuring (Note H)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Earnings (loss) from continuing operations
before income taxes and discontinued
operations
    
    
    4,918
    
    
    
    (792
    )
    
    
    9,095
    
    
    
    1,174Income taxes
    
    
    400
    
    
    
    344
    
    
    
    993
    
    
    
    875Earnings (loss) from continuing operations
before discontinued operations
    
    
    4,518
    
    
    
    (1,136
    )
    
    
    8,102
    
    
    
    299Discontinued operations (Note B):Earnings from discontinued operations, net of
income taxes
    
    
    
    
    
    
    19,687
    
    
    
    
    
    
    
    19,775Net earnings
    
    $
    4,518
    
    
    $
    18,551
    
    
    $
    8,102
    
    
    $
    20,074Basic earnings (loss) per common share (Note C):Earnings (loss) from continuing operations
before discontinued operations
    
    $
    0.21
    
    
    $
    (0.15
    )
    
    $
    0.37
    
    
    $
    0.00Earnings from discontinued operations
    
    
    
    
    
    
    2.17
    
    
    
    
    
    
    
    2.26Net earnings
    
    $
    0.21
    
    
    $
    2.02
    
    
    $
    0.37
    
    
    $
    2.26Diluted earnings (loss) per common share (Note C):Earnings (loss) from continuing operations
before discontinued operations
    
    $
    0.20
    
    
    $
    (0.15
    )
    
    $
    0.35
    
    
    $
    0.00Earnings from discontinued operations
    
    
    
    
    
    
    2.17
    
    
    
    
    
    
    
    2.26Net earnings
    
    $
    0.20
    
    
    $
    2.02
    
    
    $
    0.35
    
    
    $
    2.26Weighted-average common shares outstanding (Note
C ):Basic
    
    
    21,734
    
    
    
    9,093
    
    
    
    21,629
    
    
    
    8,733Diluted
    
    
    22,942
    
    
    
    9,093
    
    
    
    22,823
    
    
    
    8,733
 See accompanying Notes to Condensed Consolidated Financial Statements.
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##### Table of Contents



PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
 June 30,2008
    
    
    December 31,(Unaudited)
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents (Note G)
    
    $
    20,152
    
    
    $
    42,364Restricted cash
    
    
    168
    
    
    
    Receivables:Contract receivables, less allowances of $718 in 2008 and $826 in 2007Billed
    
    
    23,959
    
    
    
    30,251Unbilled
    
    
    5,510
    
    
    
    6,44029,469
    
    
    
    36,691Employee advances and miscellaneous receivables, less allowances of $2,347 in 2008 and
$1,831 in 2007
    
    
    261
    
    
    
    1,118Total receivables
    
    
    29,730
    
    
    
    37,809Prepaid expenses and other current assets
    
    
    2,611
    
    
    
    2,676Deferred income taxes
    
    
    
    
    
    
    64Total current assets
    
    
    52,661
    
    
    
    82,913Property and equipment, at cost
    
    
    40,973
    
    
    
    41,148Less accumulated depreciation and amortization
    
    
    (33,426
    )
    
    
    (33,113
    )Property and equipment, net
    
    
    7,547
    
    
    
    8,035Goodwill
    
    
    4,600
    
    
    
    4,600Intangible assets, less accumulated amortization of $9,830 in 2008 and $8,728 in 2007
    
    
    20,070
    
    
    
    21,172Unbilled receivables
    
    
    1,758
    
    
    
    2,072Deferred income taxes
    
    
    20
    
    
    
    279Other assets
    
    
    3,061
    
    
    
    3,367$
    89,717
    
    
    $
    122,438LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    12,144
    
    
    $
    16,117Accrued payroll and related expenses
    
    
    20,049
    
    
    
    31,435Refund liabilities
    
    
    7,406
    
    
    
    9,897Deferred revenue
    
    
    516
    
    
    
    620Current portions of debt obligations
    
    
    5,297
    
    
    
    7,846Total current liabilities
    
    
    45,412
    
    
    
    65,915Long term debt (Note H)
    
    
    16,992
    
    
    
    38,078Noncurrent compensation obligations
    
    
    8,373
    
    
    
    8,548Refund liabilities
    
    
    1,012
    
    
    
    1,676Other long-term liabilities
    
    
    5,433
    
    
    
    5,872Total liabilities
    
    
    77,222
    
    
    
    120,089Shareholders equity (Notes D and H):Common stock, no par value; $.01 stated value per share. Authorized 50,000,000 shares;
issued 22,421,294 in 2008 and 22,100,090 in 2007
    
    
    224
    
    
    
    221Additional paid-in capital
    
    
    608,435
    
    
    
    605,592Accumulated deficit
    
    
    (550,916
    )
    
    
    (559,018
    )Accumulated other comprehensive income
    
    
    3,462
    
    
    
    4,264Treasury stock, at cost; 576,453 shares in 2008 and 2007
    
    
    (48,710
    )
    
    
    (48,710
    )Total shareholders equity
    
    
    12,495
    
    
    
    2,349Commitments and contingencies (Note I)
    
    $
    89,717
    
    
    $
    122,438
 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)
 Six Months EndedJune 30,2008
    
    
    2007Cash flows from operating activities:Net earnings
    
    $
    8,102
    
    
    $
    20,074Earnings from discontinued operations
    
    
    
    
    
    
    19,775Earnings from continuing operations
    
    
    8,102
    
    
    
    299Adjustments to reconcile earnings from continuing operations to
net cash provided by operating activities:Depreciation and amortization
    
    
    2,716
    
    
    
    3,564Amortization of debt discount, premium and deferred loan costs
    
    
    390
    
    
    
    2,003Stock-based compensation costs
    
    
    4,584
    
    
    
    5,429(Gain) loss on sale of property, plant and equipment
    
    
    (5
    )
    
    
    223Deferred income taxes
    
    
    323
    
    
    
    320Changes in assets and liabilities:Restricted cash
    
    
    (164
    )
    
    
    (34
    )Billed receivables
    
    
    7,431
    
    
    
    4,843Unbilled receivables
    
    
    1,244
    
    
    
    2,096Prepaid expenses and other current assets
    
    
    108
    
    
    
    (1,091
    )Other assets
    
    
    (13
    )
    
    
    116Accounts payable and accrued expenses
    
    
    (4,849
    )
    
    
    1,456Accrued payroll and related expenses
    
    
    (12,041
    )
    
    
    (11,980
    )Refund liabilities
    
    
    (3,155
    )
    
    
    (376
    )Deferred revenue
    
    
    (117
    )
    
    
    261Noncurrent compensation obligations
    
    
    (1,676
    )
    
    
    (437
    )Other long-term liabilities
    
    
    (439
    )
    
    
    (255
    )Net cash provided by operating activities
    
    
    2,439
    
    
    
    6,437Cash flows from investing activities:Purchases of property and equipment, net of disposal proceeds
    
    
    (1,102
    )
    
    
    (1,139
    )Net cash used in investing activities
    
    
    (1,102
    )
    
    
    (1,139
    )Cash flows from financing activities:Net repayments of debt
    
    
    (23,635
    )
    
    
    (25,148
    )Payments for deferred loan cost
    
    
    (59
    )
    
    
    (221
    )Net cash used in financing activities
    
    
    (23,694
    )
    
    
    (25,369
    )Cash flows from discontinued operations:Operating cash flows
    
    
    
    
    
    
    (2,064
    )Investing cash flows
    
    
    
    
    
    
    21,133Net cash provided by discontinued operations
    
    
    
    
    
    
    19,069Effect of exchange rates on cash and cash equivalents
    
    
    145
    
    
    
    356Net change in cash and cash equivalents
    
    
    (22,212
    )
    
    
    (646
    )Cash and cash equivalents at beginning of period
    
    
    42,364
    
    
    
    30,228Cash and cash equivalents at end of period
    
    $
    20,152
    
    
    $
    29,582Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    1,955
    
    
    $
    7,670Cash paid during the period for income taxes, net of refunds
    
    $
    1,311
    
    
    $
    482
 See accompanying Notes to Condensed Consolidated Financial Statements.
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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 June 30, 2008 and 2007
 (Unaudited)
 Note A  Basis of Presentation
      New Accounting Standards
 Fair Value Measurements
      4




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  The Fair Value Option for Financial Assets
and Financial Liabilities  Including an amendment of FASB Statement No. 115
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
 Note B  Discontinued Operations
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    
    
    
    $
    7,505
    
    
    $
    
    
    
    $
    17,386Operating income
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    724Gain on sale or disposal
    
    
    
    
    
    
    19,460
    
    
    
    
    
    
    
    19,460
    
    
    
    19,572
    
    
    
    
    
    
    
    20,184Income tax expense (benefit)
    
    
    
    
    
    
    (115
    )
    
    
    
    
    
    
    409Earnings from discontinued operations
    
    $
    
    
    
    $
    19,687
    
    
    $
    
    
    
    $
    19,775
 5




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Note C  Earnings Per Common Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Basic earnings per common share:Numerator for earnings per common share calculations:Earnings (loss) from continuing operations
before discontinued operations
    
    $
    4,518
    
    
    $
    (1,136
    )
    
    $
    8,102
    
    
    $
    299Preferred dividends
    
    
    
    
    
    
    (178
    )
    
    
    
    
    
    
    (336
    )Earnings (loss) for purposes of computing
basic earnings per common share from
continuing operations
    
    
    4,518
    
    
    
    (1,314
    )
    
    
    8,102
    
    
    
    (37
    )Earnings from discontinued operations
    
    
    
    
    
    
    19,687
    
    
    
    
    
    
    
    19,775Earnings for purposes of computing basic
net earnings per common share
    
    $
    4,518
    
    
    $
    18,373
    
    
    $
    8,102
    
    
    $
    19,738Denominator:Denominator for basic earnings per common share
 weighted-average common shares outstanding
during the period
    
    
    21,734
    
    
    
    9,093
    
    
    
    21,629
    
    
    
    8,733Basic earnings per common share:Earnings (loss) from continuing operations
before discontinued operations
    
    $
    0.21
    
    
    $
    (0.15
    )
    
    $
    0.37
    
    
    $
    0.00Earnings from discontinued operations
    
    
    
    
    
    
    2.17
    
    
    
    
    
    
    
    2.26Net earnings
    
    $
    0.21
    
    
    $
    2.02
    
    
    $
    0.37
    
    
    $
    2.26
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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Diluted earnings per common share:Numerator for earnings per common share calculations:Earnings (loss) from continuing operations before
discontinued operations
    
    $
    4,518
    
    
    $
    (1,136
    )
    
    $
    8,102
    
    
    $
    299Preferred dividends
    
    
    
    
    
    
    (178
    )
    
    
    
    
    
    
    (336
    )Earnings (loss) for purposes of computing
diluted earnings (loss) per common share from
continuing operations
    
    
    4,518
    
    
    
    (1,314
    )
    
    
    8,102
    
    
    
    (37
    )Earnings from discontinued operations
    
    
    
    
    
    
    19,687
    
    
    
    
    
    
    
    19,775Earnings for purposes of computing diluted net
earnings per common share
    
    $
    4,518
    
    
    $
    18,373
    
    
    $
    8,102
    
    
    $
    19,738Denominator:Denominator for basic earnings per common share 
weighted-average common shares outstanding during the
period
    
    
    21,734
    
    
    
    9,093
    
    
    
    21,629
    
    
    
    8,733Incremental shares from stock-based compensation plans
    
    
    1,208
    
    
    
    
    
    
    
    1,194
    
    
    
    Denominator for diluted earnings per common share
    
    
    22,942
    
    
    
    9,093
    
    
    
    22,823
    
    
    
    8,733Diluted earnings per common share:Earnings (loss) from continuing operations before
discontinued operations
    
    $
    0.20
    
    
    $
    (0.15
    )
    
    $
    0.35
    
    
    $
    0.00Earnings from discontinued operations
    
    
    
    
    
    
    2.17
    
    
    
    
    
    
    
    2.26Net earnings
    
    $
    0.20
    
    
    $
    2.02
    
    
    $
    0.35
    
    
    $
    2.26
  Note D  Stock-Based Compensation
   7




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
       Note E - Operating Segments and Related Information
  Domestic Accounts Payable Services
  International Accounts Payable Services
  8




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Corporate Support
   Domestic
    
    
    InternationalAccounts
    
    
    AccountsPayable
    
    
    Payable
    
    
    CorporateServices
    
    
    Services
    
    
    Support
    
    
    TotalThree Months Ended June 30, 2008Revenues
    
    $
    28,280
    
    
    $
    21,368
    
    
    $
    3⁄4
    
    
    $
    49,648EBITDA
    
    $
    8,759
    
    
    $
    3,118
    
    
    $
    (4,879
    )
    
    $
    6,998Stock-based compensation
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1,550
    
    
    
    1,550Adjusted EBITDA
    
    $
    8,759
    
    
    $
    3,118
    
    
    $
    (3,329
    )
    
    $
    8,548Three Months Ended June 30, 2007Revenues
    
    $
    32,695
    
    
    $
    20,620
    
    
    $
    3⁄4
    
    
    $
    53,315EBITDA
    
    $
    10,257
    
    
    $
    2,601
    
    
    $
    (7,348
    )
    
    $
    5,510Stock-based compensation
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    2,695
    
    
    
    2,695Adjusted EBITDA
    
    $
    10,257
    
    
    $
    2,601
    
    
    $
    (4,653
    )
    
    $
    8,205Six Months Ended June 30, 2008Revenues
    
    $
    56,494
    
    
    $
    41,417
    
    
    $
    3⁄4
    
    
    $
    97,911EBITDA
    
    $
    18,143
    
    
    $
    6,902
    
    
    $
    (11,478
    )
    
    $
    13,567Stock-based compensation
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    4,584
    
    
    
    4,584Adjusted EBITDA
    
    $
    18,143
    
    
    $
    6,902
    
    
    $
    (6,894
    )
    
    $
    18,151Six Months Ended June 30, 2007Revenues
    
    $
    69,699
    
    
    $
    40,646
    
    
    $
    3⁄4
    
    
    $
    110,345EBITDA
    
    $
    23,279
    
    
    $
    4,952
    
    
    $
    (14,603
    )
    
    $
    13,628Stock-based compensation
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    5,429
    
    
    
    5,429Adjusted EBITDA
    
    $
    23,279
    
    
    $
    4,952
    
    
    $
    (9,174
    )
    
    $
    19,057
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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Earnings (loss) from continuing
operations
before discontinued operations
    
    $
    4,518
    
    
    $
    (1,136
    )
    
    $
    8,102
    
    
    $
    299Income taxes
    
    
    400
    
    
    
    344
    
    
    
    993
    
    
    
    875Interest, net
    
    
    765
    
    
    
    4,749
    
    
    
    1,756
    
    
    
    8,890Depreciation and amortization
    
    
    1,315
    
    
    
    1,553
    
    
    
    2,716
    
    
    
    3,564EBITDA
    
    
    6,998
    
    
    
    5,510
    
    
    
    13,567
    
    
    
    13,628Stock-based compensation
    
    
    1,550
    
    
    
    2,695
    
    
    
    4,584
    
    
    
    5,429Adjusted EBITDA
    
    $
    8,548
    
    
    $
    8,205
    
    
    $
    18,151
    
    
    $
    19,057
  Note F  Comprehensive Income
 Reporting Comprehensive Income
 Note G - Cash Equivalents
   Note H - Long Term Debt
   10




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##### Table of Contents



PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Note I - Commitments and Contingencies
 Legal Proceedings
   11




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PRG-SCHULTZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Retirement Obligations
  Operational Restructuring Obligations
  12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
    Medicare
    13




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Critical Accounting Policies
  14




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New Accounting Standards
 Fair Value Measurements
       The Fair Value Option for Financial Assets
and Financial Liabilities  Including an amendment of FASB Statement No. 115
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
 15




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##### Table of Contents



Results of Operations
  Three Months
    
    Six MonthsEnded
    
    EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    66.4
    
    
    
    65.4
    
    
    
    64.5
    
    
    
    65.4Gross margin
    
    
    33.6
    
    
    
    34.6
    
    
    
    35.5
    
    
    
    34.6Selling, general and administrative expenses
    
    
    22.2
    
    
    
    27.2
    
    
    
    24.4
    
    
    
    25.5Operating income
    
    
    11.4
    
    
    
    7.4
    
    
    
    11.1
    
    
    
    9.1Interest expense, net
    
    
    1.5
    
    
    
    8.9
    
    
    
    1.8
    
    
    
    8.0Earnings (loss) from continuing
operations before income taxes and
discontinued operations
    
    
    9.9
    
    
    
    (1.5
    )
    
    
    9.3
    
    
    
    1.1Income taxes
    
    
    0.8
    
    
    
    0.6
    
    
    
    1.0
    
    
    
    0.8Earnings (loss) from continuing
operations before discontinued
operations
    
    
    9.1
    
    
    
    (2.1
    )
    
    
    8.3
    
    
    
    0.3Earnings from discontinued operations
    
    
    3⁄4
    
    
    
    36.9
    
    
    
    3⁄4
    
    
    
    17.9Net earnings
    
    
    9.1
    %
    
    
    34.8
    %
    
    
    8.3
    %
    
    
    18.2
    %
  16




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Three and Six Months Ended June 30, 2008 Compared to the Corresponding Periods of the Prior Year
 Accounts Payable Services
 Revenue
 Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Domestic Accounts Payable Services revenues
    
    $
    28.3
    
    
    $
    32.7
    
    
    $
    56.5
    
    
    $
    69.7International Accounts Payable Services revenues
    
    
    21.3
    
    
    
    20.6
    
    
    
    41.4
    
    
    
    40.6Total Accounts Payable Services revenues
    
    $
    49.6
    
    
    $
    53.3
    
    
    $
    97.9
    
    
    $
    110.3
    Cost of Revenues ( ).
 17




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##### Table of Contents



Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Domestic Accounts Payable Services COR
    
    $
    16.8
    
    
    $
    19.0
    
    
    $
    32.5
    
    
    $
    40.8International Accounts Payable Services COR
    
    
    16.2
    
    
    
    15.9
    
    
    
    30.8
    
    
    
    31.3Total Accounts Payable Services COR
    
    $
    33.0
    
    
    $
    34.9
    
    
    $
    63.3
    
    
    $
    72.1
   Selling, General, and Administrative Expenses .
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Domestic Accounts Payable Services SG&A
    
    $
    4.0
    
    
    $
    4.9
    
    
    $
    8.3
    
    
    $
    8.5International Accounts Payable Services SG&A
    
    
    2.2
    
    
    
    2.3
    
    
    
    4.1
    
    
    
    5.1Total Accounts Payable Services SG&A
    
    $
    6.2
    
    
    $
    7.2
    
    
    $
    12.4
    
    
    $
    13.6
  18




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##### Table of Contents



Corporate Support
 SG&A
 Three Months
    
    Six MonthsEnded
    
    EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Corporate Support SG&A
    
    $
    4.8
    
    
    $
    7.3
    
    
    $
    11.4
    
    
    $
    14.6
  Discontinued Operations
   Other Items
 Interest Expense.
 Income Tax Expense.
 19




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Liquidity and Capital Resources
    .
 Executive Severance Payments
  Bankruptcy Litigation
  20




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##### Table of Contents



Secured Credit Facility
    Stock Repurchase Program
  2006 Management Incentive Plan
  21




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##### Table of Contents



Off Balance Sheet Arrangements
  Forward Looking Statements
   22




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Market Risk.
 Interest Rate Risk
 Stock-Based Compensation.
 23




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##### Table of Contents



Item 4. Controls and Procedures
    24




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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
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
        
 Item 5. Other Information
  25




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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 November 26, 2001 by and between Registrant and
Sun Trust Bank (incorporated by reference to Exhibit 4.3 to the
Registrants Registration Statement No. 333-76018 on Form S-3
filed December 27, 2001).4.5
    
    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).4.5.1
    
    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).4.6
    
    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).4.6.1
    
    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 June 30, 2008.31.2
    
    Certification of the Chief Financial Officer, pursuant to Rule
13a-14(a) or 15d-14(a), for the quarter ended June 30, 2008.
 26




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##### Table of Contents



ExhibitNumber
    
    Description32.1
    
    Certification of the Chief Executive Officer and Chief Financial
Officer, pursuant to 18 U.S.C. Section 1350, for the quarter ended
June 30, 2008.
 27




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SIGNATURES
  PRG-SCHULTZ INTERNATIONAL, INC.August 6, 2008
    By:
    /s/ James B. McCurryJames B. McCurryPresident, Chairman of the Board and 
Chief Executive Officer(Principal Executive Officer)August 6, 2008
    By:
    /s/ Peter LimeriPeter LimeriChief Financial Officer and Treasurer
(Principal Financial Officer) 28