##### 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, 2010
 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(State or other jurisdiction of 
incorporation or organization)
    
    58-2213805(I.R.S. Employer
Identification No.)600 Galleria ParkwaySuite 100Atlanta, Georgia
    
    30339-5986(Address of principal executive offices)
    
    (Zip Code)
 Registrant s telephone number, including area code: (770) 779-3900
 þ o
 o o
  o Large accelerated filer
o Accelerated filer
þ Non-accelerated filer (Do not check if a smaller reporting company)
o Smaller reporting company o þ




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##### 



PRGX GLOBAL, INC.
 FORM 10-Q
For the Quarter Ended June 30, 2010
 INDEX
 Page No.Part I.Financial InformationItem 1. Financial Statements
    
    
    1Condensed Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 2010 and 2009 (Unaudited)
    
    
    1Condensed Consolidated Balance Sheets as of June 30, 2010
(Unaudited) and December 31, 2009
    
    
    2Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2010 and 2009 (Unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    14Item 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. [Reserved]
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    26Signatures
    
    
    27EX-31.1EX-31.2EX-32.1




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PRGX GLOBAL, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    45,507
    
    
    $
    45,471
    
    
    $
    86,836
    
    
    $
    84,723Cost of revenues
    
    
    31,363
    
    
    
    28,328
    
    
    
    61,271
    
    
    
    54,741Gross margin
    
    
    14,144
    
    
    
    17,143
    
    
    
    25,565
    
    
    
    29,982Selling, general and administrative expenses
    
    
    13,211
    
    
    
    10,773
    
    
    
    25,866
    
    
    
    20,496Operating income (loss)
    
    
    933
    
    
    
    6,370
    
    
    
    (301
    )
    
    
    9,486Interest expense, net
    
    
    271
    
    
    
    727
    
    
    
    2,036
    
    
    
    1,426Earnings (loss) before income taxes
    
    
    662
    
    
    
    5,643
    
    
    
    (2,337
    )
    
    
    8,060Income taxes
    
    
    627
    
    
    
    618
    
    
    
    1,063
    
    
    
    1,162Net earnings (loss)
    
    $
    35
    
    
    $
    5,025
    
    
    $
    (3,400
    )
    
    $
    6,898Basic earnings (loss) per common share (Note B)
    
    $
    0.00
    
    
    $
    0.22
    
    
    $
    (0.14
    )
    
    $
    0.31Diluted earnings (loss) per common share (Note B)
    
    $
    0.00
    
    
    $
    0.21
    
    
    $
    (0.14
    )
    
    $
    0.30Weighted-average common shares outstanding (Note B):Basic
    
    
    23,624
    
    
    
    22,641
    
    
    
    23,575
    
    
    
    22,395Diluted
    
    
    23,806
    
    
    
    23,382
    
    
    
    23,575
    
    
    
    23,260
 See accompanying Notes to Condensed Consolidated Financial Statements.
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PRGX GLOBAL, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 June 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents (Notes F and I)
    
    $
    22,309
    
    
    $
    33,026Restricted cash
    
    
    170
    
    
    
    256Receivables:Contract receivables, less allowances of $687 in 2010 and $1,032 in 2009:Billed
    
    
    25,400
    
    
    
    28,034Unbilled
    
    
    4,106
    
    
    
    4,48129,506
    
    
    
    32,515Employee advances and miscellaneous receivables, less allowances of $235 in 2010
and $351 in 2009
    
    
    685
    
    
    
    276Total receivables
    
    
    30,191
    
    
    
    32,791Prepaid expenses and other current assets
    
    
    2,888
    
    
    
    2,335Total current assets
    
    
    55,558
    
    
    
    68,408Property and equipment, at cost
    
    
    39,764
    
    
    
    34,446Less accumulated depreciation and amortization
    
    
    (25,073
    )
    
    
    (24,443
    )Property and equipment, net
    
    
    14,691
    
    
    
    10,003Goodwill (Note I)
    
    
    4,600
    
    
    
    4,600Intangible assets, less accumulated amortization of $15,445 in 2010 and $13,573 in 2009
(Note I)
    
    
    23,170
    
    
    
    24,104Unbilled receivables
    
    
    1,290
    
    
    
    1,410Other assets
    
    
    887
    
    
    
    1,988$
    100,196
    
    
    $
    110,513LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    13,165
    
    
    $
    15,707Accrued payroll and related expenses
    
    
    15,857
    
    
    
    19,884Refund liabilities
    
    
    7,171
    
    
    
    7,467Deferred revenue
    
    
    1,702
    
    
    
    916Current portions of debt and capital lease obligations (Note G)
    
    
    3,089
    
    
    
    3,260Business acquisition obligations
    
    
    1,571
    
    
    
    2,695Total current liabilities
    
    
    42,555
    
    
    
    49,929Long-term debt and capital lease obligations (Note G)
    
    
    10,500
    
    
    
    11,070Deferred income taxes
    
    
    358
    
    
    
    Noncurrent compensation obligations
    
    
    123
    
    
    
    978Refund liabilities
    
    
    698
    
    
    
    733Other long-term liabilities
    
    
    5,984
    
    
    
    6,364Total liabilities
    
    
    60,218
    
    
    
    69,074Commitments and contingencies (Note H)Shareholders equity (Note B):Common stock, no par value; $.01 stated value per share. Authorized 50,000,000 shares;
23,861,063 shares issued and outstanding as of June 30, 2010 and 23,272,892 shares
issued and outstanding as of December 31, 2009
    
    
    239
    
    
    
    233Additional paid-in capital
    
    
    564,211
    
    
    
    562,563Accumulated deficit
    
    
    (528,061
    )
    
    
    (524,661
    )Accumulated other comprehensive income
    
    
    3,589
    
    
    
    3,304Total shareholders equity
    
    
    39,978
    
    
    
    41,439$
    100,196
    
    
    $
    110,513
 See accompanying Notes to Condensed Consolidated Financial Statements.
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PRGX GLOBAL, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Six Months EndedJune 30,2010
    
    
    2009Cash flows from operating activities:Net earnings (loss)
    
    $
    (3,400
    )
    
    $
    6,898Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    4,312
    
    
    
    2,708Amortization of deferred loan costs (Note G)
    
    
    1,451
    
    
    
    394Stock-based compensation expense
    
    
    1,876
    
    
    
    1,004Loss on sale of property and equipment
    
    
    2
    
    
    
    28Deferred income taxes
    
    
    (540
    )
    
    
    10Changes in assets and liabilities:Restricted cash
    
    
    86
    
    
    
    (327
    )Billed receivables
    
    
    1,951
    
    
    
    5,200Unbilled receivables
    
    
    495
    
    
    
    871Prepaid expenses and other current assets
    
    
    (641
    )
    
    
    (256
    )Other assets
    
    
    20
    
    
    
    45Accounts payable and accrued expenses
    
    
    (1,348
    )
    
    
    (3,748
    )Accrued payroll and related expenses
    
    
    (3,258
    )
    
    
    (5,535
    )Refund liabilities
    
    
    (331
    )
    
    
    (1,022
    )Deferred revenue
    
    
    267
    
    
    
    (52
    )Noncurrent compensation obligations
    
    
    (855
    )
    
    
    (578
    )Other long-term liabilities
    
    
    (421
    )
    
    
    (180
    )Net cash provided by (used in) operating activities
    
    
    (334
    )
    
    
    5,460Cash flows from investing activities:Business acquisitions
    
    
    (3,841
    )
    
    
    Purchases of property and equipment, net of disposal proceeds
    
    
    (3,978
    )
    
    
    (1,409
    )Net cash used in investing activities
    
    
    (7,819
    )
    
    
    (1,409
    )Cash flows from financing activities:Repayment of former credit facility (Note G)
    
    
    (14,154
    )
    
    
    (2,653
    )Repayments of debt
    
    
    (1,587
    )
    
    
    Proceeds from term loan (Note G)
    
    
    15,000
    
    
    
    Repurchases of common stock
    
    
    
    
    
    
    (246
    )Restricted stock remitted by employees for taxes
    
    
    (201
    )
    
    
    Payments for deferred loan costs
    
    
    (619
    )
    
    
    Net cash used in financing activities
    
    
    (1,561
    )
    
    
    (2,899
    )Effect of exchange rates on cash and cash equivalents
    
    
    (1,003
    )
    
    
    642Net change in cash and cash equivalents
    
    
    (10,717
    )
    
    
    1,794Cash and cash equivalents at beginning of period
    
    
    33,026
    
    
    
    26,688Cash and cash equivalents at end of period
    
    $
    22,309
    
    
    $
    28,482Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    380
    
    
    $
    1,059Cash paid during the period for income taxes, net of refunds
    
    $
    942
    
    
    $
    2,425
 See accompanying Notes to Condensed Consolidated Financial Statements.
 3




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PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note A  Basis of Presentation
     New Accounting Standards
 FASB ASC 985-605. Revenue
Arrangements with Multiple Deliverables Issue
08-1 Software-Revenue Recognition
 4




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PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note B  Earnings Per Common Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,Basic earnings (loss) per common share:
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator for earnings (loss) per common share calculations:Net earnings (loss)
    
    $
    35
    
    
    $
    5,025
    
    
    $
    (3,400
    )
    
    $
    6,898Denominator:Denominator for basic earnings (loss) per common share
 weighted-average common shares outstanding during
the period
    
    
    23,624
    
    
    
    22,641
    
    
    
    23,575
    
    
    
    22,395Basic earnings (loss) per common share
    
    $
    0.00
    
    
    $
    0.22
    
    
    $
    (0.14
    )
    
    $
    0.31
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,Diluted earnings (loss) per common share:
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator for earnings (loss) per common share calculations:Net earnings (loss)
    
    $
    35
    
    
    $
    5,025
    
    
    $
    (3,400
    )
    
    $
    6,898Denominator:Denominator for basic earnings (loss) per common share
 weighted-average common shares outstanding during
the period
    
    
    23,624
    
    
    
    22,641
    
    
    
    23,575
    
    
    
    22,395Incremental shares from stock-based compensation plans
    
    
    182
    
    
    
    741
    
    
    
    
    
    
    
    865Denominator for diluted earnings (loss) per common share
    
    
    23,806
    
    
    
    23,382
    
    
    
    23,575
    
    
    
    23,260Diluted earnings (loss) per common share
    
    $
    0.00
    
    
    $
    0.21
    
    
    $
    (0.14
    )
    
    $
    0.30
  Note C  Stock-Based Compensation
  5




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PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   # of
    
    
    
    
    
    WeightedOptions
    
    Vesting
    
    Average
    
    Grant DateGranted
    
    Period
    
    Exercise Price
    
    Fair Value201042,730
    
    
    1 year (1)
    
    $
    3.96
    
    
    $
    103,184595,010
    
    
    3 years (2)
    
    
    4.00
    
    
    
    1,542,9512009296,296
    
    
    4 years (3)
    
    
    3.57
    
    
    
    763,52942,730
    
    
    1 year (4)
    
    
    2.82
    
    
    
    88,011483,255
    
    
    3 years (2)
    
    
    2.82
    
    
    
    1,003,866
 
 (1)
    
    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) June 23, 2011, and (ii)
the date of, and immediately prior to, the Companys 2011 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 expire on June 22, 2017, 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 June 22, 2017.(2)
    
    Non-qualified stock 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.(3)
    
    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.(4)
    
    Non-qualified stock options were granted under the 2008 EIP to the Companys five non-employee
directors. The options vested in full on May 26, 2010.  # ofShares
    
    Vesting
    
    Grant DateGranted
    
    Period
    
    Fair Value201042,730
    
    
    1 year (1)
    
    $
    169,211595,010
    
    
    3 years (2)
    
    
    2,381,4652009344,445
    
    
    4 years (3)
    
    
    1,229,66942,730
    
    
    1 year (4)
    
    
    120,49920,000
    
    
    3 years (5)
    
    
    57,400485,332
    
    
    3 years (2)
    
    
    1,368,636
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PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 
 (1)
    
    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) June 23, 2011, and (ii) the date of, and immediately prior to, the Companys 2011 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.(2)
    
    Nonvested stock awards (restricted stock and restricted stock units) were 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.(3)
    
    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.(4)
    
    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 in full on May 26, 2010.(5)
    
    Nonvested stock awards (restricted stock) were 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. 2006 MIP Performance Units
     7




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PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note D  Operating Segments and Related Information
  Recovery Audit Services  Americas
  Recovery Audit Services  Europe/Asia-Pacific
  New Services
  Corporate Support
   8




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PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Recovery
    
    
    Recovery AuditAudit
    
    
    Services Services 
    
    
    Europe/Asia 
    
    
    New
    
    
    CorporateAmericas
    
    
    Pacific
    
    
    Services
    
    
    Support
    
    
    TotalThree Months Ended June 30, 2010Revenues
    
    $
    29,870
    
    
    $
    12,957
    
    
    $
    2,680
    
    
    $
    
    
    
    $
    45,507EBITDA
    
    $
    7,887
    
    
    $
    855
    
    
    $
    (1,694
    )
    
    $
    (3,914
    )
    
    $
    3,134Foreign currency (gains)
losses on intercompany
balances
    
    
    78
    
    
    
    1,013
    
    
    
    
    
    
    
    
    
    
    
    1,091Acquisition obligations
classified as compensation
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    106Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,058
    
    
    
    1,058Adjusted EBITDA
    
    $
    7,965
    
    
    $
    1,974
    
    
    $
    (1,694
    )
    
    $
    (2,856
    )
    
    $
    5,389Three Months Ended June 30, 2009Revenues
    
    $
    32,070
    
    
    $
    11,951
    
    
    $
    1,450
    
    
    $
    
    
    
    $
    45,471EBITDA
    
    $
    11,641
    
    
    $
    2,439
    
    
    $
    (625
    )
    
    $
    (5,668
    )
    
    $
    7,787Foreign currency (gains)
losses on intercompany
balances
    
    
    (320
    )
    
    
    (1,359
    )
    
    
    
    
    
    
    
    
    
    
    (1,679
    )Litigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    650Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    989
    
    
    
    989Adjusted EBITDA
    
    $
    11,321
    
    
    $
    1,080
    
    
    $
    (625
    )
    
    $
    (4,029
    )
    
    $
    7,747
 9




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PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Recovery AuditRecovery Audit
    
    
    Services Services 
    
    
    Europe/Asia 
    
    
    New
    
    
    CorporateAmericas
    
    
    Pacific
    
    
    Services
    
    
    Support
    
    
    TotalSix Months Ended June 30, 2010Revenues
    
    $
    54,843
    
    
    $
    27,695
    
    
    $
    4,298
    
    
    $
    
    
    
    $
    86,836EBITDA
    
    $
    13,471
    
    
    $
    2,372
    
    
    $
    (2,891
    )
    
    $
    (8,941
    )
    
    $
    4,011Foreign currency
(gains) losses on
intercompany balances
    
    
    72
    
    
    
    1,640
    
    
    
    
    
    
    
    
    
    
    
    1,712Acquisition obligations
classified as
compensation
    
    
    
    
    
    
    158
    
    
    
    
    
    
    
    
    
    
    
    158Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,876
    
    
    
    1,876Adjusted EBITDA
    
    $
    13,543
    
    
    $
    4,170
    
    
    $
    (2,891
    )
    
    $
    (7,065
    )
    
    $
    7,757Six Months Ended June 30, 2009Revenues
    
    $
    60,211
    
    
    $
    21,959
    
    
    $
    2,553
    
    
    $
    
    
    
    $
    84,723EBITDA
    
    $
    20,895
    
    
    $
    2,199
    
    
    $
    (1,438
    )
    
    $
    (9,462
    )
    
    $
    12,194Foreign currency
(gains) losses on
intercompany balances
    
    
    (321
    )
    
    
    (753
    )
    
    
    
    
    
    
    
    
    
    
    (1,074
    )Litigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    650Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,004
    
    
    
    1,004Adjusted EBITDA
    
    $
    20,574
    
    
    $
    1,446
    
    
    $
    (1,438
    )
    
    $
    (7,808
    )
    
    $
    12,774
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net earnings (loss)
    
    $
    35
    
    
    $
    5,025
    
    
    $
    (3,400
    )
    
    $
    6,898Income taxes
    
    
    627
    
    
    
    618
    
    
    
    1,063
    
    
    
    1,162Interest, net
    
    
    271
    
    
    
    727
    
    
    
    2,036
    
    
    
    1,426Depreciation and amortization
    
    
    2,201
    
    
    
    1,417
    
    
    
    4,312
    
    
    
    2,708EBITDA
    
    
    3,134
    
    
    
    7,787
    
    
    
    4,011
    
    
    
    12,194Foreign currency (gains) losses on intercompany balances
    
    
    1,091
    
    
    
    (1,679
    )
    
    
    1,712
    
    
    
    (1,074
    )Litigation settlement
    
    
    
    
    
    
    650
    
    
    
    
    
    
    
    650Acquisition obligations classified as compensation
    
    
    106
    
    
    
    
    
    
    
    158
    
    
    
    Stock-based compensation
    
    
    1,058
    
    
    
    989
    
    
    
    1,876
    
    
    
    1,004Adjusted EBITDA
    
    $
    5,389
    
    
    $
    7,747
    
    
    $
    7,757
    
    
    $
    12,774
 Note E  Comprehensive Income
 Comprehensive Income
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PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Note F - Cash Equivalents
   Note G - Long Term Debt
     
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PRGX GLOBAL, 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
  Fair Value Measurements at Reporting Date UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantReporting
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsValue
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)As of June 30, 2010Assets:Cash and cash equivalents
    
    $
    22,309
    
    
    $
    22,309
    
    
    $
    
    
    
    $
    Liabilities:Business acquisition obligations
    
    $
    3,449
    
    
    $
    
    
    
    $
    
    
    
    $
    3,449As of December 31, 2009Assets:Cash and cash equivalents
    
    $
    33,026
    
    
    $
    33,026
    
    
    $
    
    
    
    $
    Liabilities:Business acquisition obligations
    
    $
    4,369
    
    
    $
    
    
    
    $
    
    
    
    $
    4,369
   12




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##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note J - Business Acquisition
     Fair values of net assets acquired:Equipment
    
    $
    18Software
    
    
    3,207Intangible assets, primarily customer relationships
    
    
    1,565Deferred tax liabilities
    
    
    (1,168
    )Working capital
    
    
    (489
    )Fair value of net assets acquired
    
    $
    3,133Fair value of purchase price
    
    $
    3,133
  13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
      14




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Results of Operations
  Three Months
    
    Six MonthsEnded
    
    EndedJune 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    68.9
    
    
    
    62.3
    
    
    
    70.6
    
    
    
    64.6Gross margin
    
    
    31.1
    
    
    
    37.7
    
    
    
    29.4
    
    
    
    35.4Selling, general and administrative expenses
    
    
    29.0
    
    
    
    23.7
    
    
    
    29.8
    
    
    
    24.2Operating income (loss)
    
    
    2.1
    
    
    
    14.0
    
    
    
    (0.4
    )
    
    
    11.2Interest expense, net
    
    
    0.6
    
    
    
    1.6
    
    
    
    2.3
    
    
    
    1.7Earnings (loss) before income taxes
    
    
    1.5
    
    
    
    12.4
    
    
    
    (2.7
    )
    
    
    9.5Income taxes
    
    
    1.4
    
    
    
    1.4
    
    
    
    1.2
    
    
    
    1.4Net earnings (loss)
    
    
    0.1
    %
    
    
    11.0
    %
    
    
    (3.9
    )%
    
    
    8.1
    %
 Three and Six Months Ended June 30, 2010 Compared to the Corresponding Periods of the Prior Year
 Revenues.
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Recovery Audit Services  Americas
    
    $
    29.9
    
    
    $
    32.1
    
    
    $
    54.8
    
    
    $
    60.2Recovery Audit Services  Europe/Asia-Pacific
    
    
    12.9
    
    
    
    12.0
    
    
    
    27.7
    
    
    
    22.0New Services
    
    
    2.7
    
    
    
    1.4
    
    
    
    4.3
    
    
    
    2.5Total
    
    $
    45.5
    
    
    $
    45.5
    
    
    $
    86.8
    
    
    $
    84.7
    16




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Cost of Revenues (COR).
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Recovery Audit Services  Americas
    
    $
    17.6
    
    
    $
    17.0
    
    
    $
    33.7
    
    
    $
    33.8Recovery Audit Services  Europe/Asia-Pacific
    
    
    10.2
    
    
    
    9.4
    
    
    
    21.5
    
    
    
    17.4New Services
    
    
    3.6
    
    
    
    1.9
    
    
    
    6.1
    
    
    
    3.5Total
    
    $
    31.4
    
    
    $
    28.3
    
    
    $
    61.3
    
    
    $
    54.7
    17




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##### Table of Contents



Selling, General and Administrative Expenses (SG&A).
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Recovery Audit Services  Americas
    
    $
    5.8
    
    
    $
    4.5
    
    
    $
    10.6
    
    
    $
    7.8Recovery Audit Services  Europe/Asia-Pacific
    
    
    2.3
    
    
    
    0.2
    
    
    
    4.7
    
    
    
    2.5New Services
    
    
    1.2
    
    
    
    0.4
    
    
    
    1.7
    
    
    
    0.7Total
    
    $
    9.3
    
    
    $
    5.1
    
    
    $
    17.0
    
    
    $
    11.0
    See Note J  Business
Acquisition)
 18




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##### Table of Contents



Corporate Support
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009Selling, general and administrative expenses
    
    $
    3.9
    
    
    $
    5.7
    
    
    $
    8.9
    
    
    $
    9.5
   Other Items
 Interest Expense.
 Income Tax Expense.
 19




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##### Table of Contents



Liquidity and Capital Resources
   Operating Activities.
 Investing Activities and Depreciation and Amortization Expense.
  Note J
 Financing Activities and Interest Expense.
 New Credit Facility
  20




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Stock Repurchase Program
  2006 Management Incentive Plan
   21




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##### Table of Contents



Off Balance Sheet Arrangements
  Critical Accounting Policies
  Forward-Looking Statements
   22




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Market Risk.
 Interest Rate Risk
 23




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##### Table of Contents



Item 4. Controls and Procedures
   24




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Maximum ApproximateTotal Number of
    
    Dollar Value ofShares Purchased as
    
    Shares that May YetTotal Number of
    
    
    
    
    
    Part of Publicly
    
    Be Purchased UnderShares Purchased
    
    Average Price Paid
    
    Announced Plans or
    
    the Plans or2010
    
    (a)
    
    per Share
    
    Programs
    
    Programs(millions of dollars)April 1 
April 30
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    May 1  May 31
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    June 1  June 30
    
    
    19,667
    
    
    $
    4.03
    
    
    
    
    
    
    $
    19,667
    
    
    $
    4.03
    
    
    
    
 
 (a)
    
    All shares reported during the quarter were surrendered by employees to satisfy tax
withholding obligations upon vesting of restricted stock. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. [Reserved]
 
 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).3.1.1
    
    Articles of Amendment to the Registrant dated January 20, 2010
(incorporated by reference to Exhibit 3.1 to the Registrants Form
8-K filed on January 15, 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).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).10.1
    
    PRGX Global, Inc. 2008 Equity Incentive Plan, as amended and
restated effective April 27, 2010 (incorporated by reference to
Exhibit 10.1 to the Registrants Form 8-K filed on June 21, 2010).31.1
    
    Certification of the Chief Executive Officer, pursuant to Rule
13a-14(a) or 15d-14(a), for the quarter ended June 30, 2010.31.2
    
    Certification of the Chief Financial Officer, pursuant to Rule
13a-14(a) or 15d-14(a), for the quarter ended June 30, 2010.32.1
    
    Certification of the Chief Executive Officer and Chief Financial
Officer, pursuant to 18 U.S.C. Section 1350, for the quarter ended
June 30, 2010.
 26




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SIGNATURES
  PRGX GLOBAL, INC.August 13, 2010
    By:
    /s/ Romil BahlRomil BahlPresident, Chief Executive Officer, Director
(Principal Executive Officer)August 13, 2010
    By:
    /s/ Robert B. LeeRobert B. LeeChief Financial Officer, Treasurer and Controller
(Principal Financial and Accounting Officer) 27