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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

| |  |                                                                                        
| |  | ---------------------------------------------------------------------------------------
| |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2002

OR

| |  |                                                                                         
| |  | ----------------------------------------------------------------------------------------
| |  | 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: 333-49821

MSX International, Inc.
(Exact name of registrant as specified in its charter)

|                                                                                    |  |                                                
|----------------------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction
of incorporation or organization)             |  | 38-3323099
(I.R.S. Employer Identification No.)
|                                                                                    |  |                                                
|22335 W. Eleven Mile, Southfield, Michigan
(Address of principal executive offices) |  | 48034
(Zip Code)                               

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes     No



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TABLE OF CONTENTS



|                              |                                                                                               |                                                                                                                  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. Financial Statements                                                                 
|                              |                                                                                               | Consolidated Balance Sheets as of March 31, 2002 (Unaudited) and December 30, 2001                              
|                              |                                                                                               | Consolidated Statements of Operations (Unaudited) for the Fiscal Quarters Ended March 31, 2002 and April 1, 2001
|                              |                                                                                               | Consolidated Statements of Cash Flows (Unaudited) for the Fiscal Quarters Ended March 31, 2002 and April 1, 2001
|                              |                                                                                               | Notes to Consolidated Financial Statements (Unaudited)                                                          
|                              | ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|PART II. OTHER INFORMATION   
|                              | ITEM 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                    



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MSX INTERNATIONAL, INC.
INDEX

PART I.FINANCIAL INFORMATION

|                          |                                                                                              |                                                                                                                  |    |    |   | 
|------------------------- | -------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | -- | -- | - | 
|                          | ITEM 1. Financial Statements:                                                                | Pages                                                                                                            |   
|                          |                                                                                              |                                                                                                                  |    |   
|                          |                                                                                              | Consolidated Balance Sheets as of March 31, 2002 (Unaudited) and
December 30, 2001                               |    |    | 2 | 
|                          |                                                                                              |                                                                                                                  |    |   
|                          |                                                                                              | Consolidated Statements of Operations (Unaudited) for the Fiscal Quarters
Ended March 31, 2002 and April 1, 2001 |    |    | 3 | 
|                          |                                                                                              |                                                                                                                  |    |   
|                          |                                                                                              | Consolidated Statements of Cash Flows (Unaudited) for the Fiscal Quarters
Ended March 31, 2002 and April 1, 2001 |    |    | 4 | 
|                          |                                                                                              |                                                                                                                  |    |   
|                          |                                                                                              | Notes to Consolidated Financial Statements (Unaudited)                                                           |    |    | 5 | 
|                          |                                                                                              |                                                                                                                  |    |   
|                          | ITEM 2.Managements Discussion and Analysis of Financial Condition and
Results of Operations |                                                                                                                  |    | 14 |  
|                          |                                                                                              |                                                                                                                  |    |   
|PART II.OTHER INFORMATION |                                                                                              |                                                                                                                  |    |   
|                          |                                                                                              |                                                                                                                  |    |   
|                          | ITEM 6.Exhibits and Reports on Form 8-K                                                      |                                                                                                                  |    | 17 |  
|                          |                                                                                              |                                                                                                                  |    |   
|SIGNATURE                 |                                                                                              |                                                                                                                  | 18 |   

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

MSX INTERNATIONAL, INC.




CONSOLIDATED BALANCE SHEETSas of March 31, 2002 and December 30, 2001

|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         |                        |         |         |              |         |         |  
|----------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | -------------------- | ------------------------------------------- | ------- | ---------------------- | ------- | ------- | ------------ | ------- | ------- | -
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         | March 31,              |         |         |              |         |        
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         | 2002                   |         |         | December 30, |        
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         | (Unaudited)            |         |         | 2001         |        
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         |                        |         |         |              |        
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         | (dollars in thousands) |        
|ASSETS                                                |                                                                                                                                                                                                          |              |                      |                                             |         |                        |         |        
|Current assets:                                       |                                                                                                                                                                                                          |              |                      |                                             |         |                        |         |        
|                                                      | Cash and cash equivalents                                                                                                                                                                                |              | $                    | 4,502                                       |         |                        | $       | 4,924   |             
|                                                      | Accounts receivable, net (Note 4)                                                                                                                                                                        |              |                      | 252,718                                     |         |                        |         | 252,008 |             
|                                                      | Inventory                                                                                                                                                                                                |              |                      | 9,005                                       |         |                        |         | 6,916   |             
|                                                      | Prepaid expenses and other assets                                                                                                                                                                        |              |                      | 10,504                                      |         |                        |         | 8,011   |             
|                                                      | Deferred income taxes, net                                                                                                                                                                               |              |                      | 3,724                                       |         |                        |         | 3,477   |             
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         |                       
|                                                      |                                                                                                                                                                                                          |              | Total current assets |                                             |         | 280,453                |         |         |              | 275,336 |        
|Property and equipment, net                           |                                                                                                                                                                                                          |              | 44,161               |                                             |         |                        | 42,977  |        
|Goodwill, net (Note 3)                                |                                                                                                                                                                                                          |              | 128,362              |                                             |         |                        | 170,491 |        
|Other assets                                          |                                                                                                                                                                                                          |              | 15,743               |                                             |         |                        | 22,608  |        
|Deferred income taxes, net                            |                                                                                                                                                                                                          |              | 13,192               |                                             |         |                        | 2,970   |        
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         |                       
|                                                      |                                                                                                                                                                                                          | Total assets |                      | $                                           | 481,911 |                        |         | $       | 514,382      |        
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         |                       
|LIABILITIES AND SHAREHOLDERS DEFICIT                 |                                                                                                                                                                                                          |              |                      |                                             |         |                        |         |        
|Current liabilities:                                  |                                                                                                                                                                                                          |              |                      |                                             |         |                        |         |        
|                                                      | Notes payable and current portion of long-term debt (Note 5)                                                                                                                                             |              | $                    | 17,544                                      |         |                        | $       | 15,785  |             
|                                                      | Accounts payable and drafts                                                                                                                                                                              |              |                      | 151,049                                     |         |                        |         | 153,645 |             
|                                                      | Accrued payroll and benefits                                                                                                                                                                             |              |                      | 22,105                                      |         |                        |         | 23,946  |             
|                                                      | Other accrued liabilities                                                                                                                                                                                |              |                      | 54,389                                      |         |                        |         | 55,450  |             
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         |                       
|                                                      |                                                                                                                                                                                                          |              |                      | Total current liabilities                   |         |                        | 245,087 |         |              |         | 248,826 |  
|Long-term debt (Note 5)                               |                                                                                                                                                                                                          |              | 243,864              |                                             |         |                        | 230,869 |        
|Long-term deferred compensation and other liabilities |                                                                                                                                                                                                          |              | 11,769               |                                             |         |                        | 12,977  |        
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         |                       
|                                                      | Total liabilities                                                                                                                                                                                        |              |                      | 500,720                                     |         |                        |         | 492,672 |             
|Minority interests                                    |                                                                                                                                                                                                          |              | 805                  |                                             |         |                        | 1,197   |        
|Redeemable Series A Preferred Stock (Note 6)          |                                                                                                                                                                                                          |              | 35,945               |                                             |         |                        | 36,000  |        
|Shareholders deficit:                                |                                                                                                                                                                                                          |              |                      |                                             |         |                        |         |        
|                                                      | Common Stock, $.01 par value, 200,000,000 aggregate shares
of Class A and Class B Common Stock authorized; 20,054,000
and 20,080,800 shares of Class A Common Stock issued and
outstanding, respectively |              |                      | 201                                         |         |                        |         | 201     |             
|                                                      | Additional paid-in-capital                                                                                                                                                                               |              |                      | (21,879                                     | )       |                        |         | (21,769 | )           
|                                                      | Note receivable from officer                                                                                                                                                                             |              |                      | (3,000                                      | )       |                        |         | (3,000  | )           
|                                                      | Accumulated other comprehensive loss                                                                                                                                                                     |              |                      | (17,329                                     | )       |                        |         | (15,603 | )           
|                                                      | Retained earnings (deficit)                                                                                                                                                                              |              |                      | (13,552                                     | )       |                        |         | 24,684  |             
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         |                       
|                                                      |                                                                                                                                                                                                          |              |                      | Total shareholders deficit                 |         |                        | (55,559 | )       |              |         | (15,487 | )
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         |                       
|                                                      |                                                                                                                                                                                                          |              |                      | Total liabilities and shareholders deficit |         | $                      | 481,911 |         |              | $       | 514,382 |  
|                                                      |                                                                                                                                                                                                          |              |                      |                                             |         |                       

The accompanying notes are an integral part of the consolidated financial statements

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MSX INTERNATIONAL, INC.




CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)for the fiscal quarters ended March 31, 2002 and April 1, 2001

|                                                                                                |                                                                                       |                                                                                     |         |                      |     |   |          |        |       | 
|----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------- | -------------------- | --- | - | -------- | ------ | ----- | 
|                                                                                                |                                                                                       |                                                                                     |         | Fiscal Quarter Ended |    
|                                                                                                |                                                                                       |                                                                                     |         |                      |    
|                                                                                                |                                                                                       |                                                                                     |         | March 31,            |     |   | April 1, |       
|                                                                                                |                                                                                       |                                                                                     |         | 2002                 |     |   | 2001     |       
|                                                                                                |                                                                                       |                                                                                     |         |                      |     |   |          |       
|                                                                                                |                                                                                       |                                                                                     |         | (in thousands)       |    
|Net sales                                                                                       |                                                                                       | $                                                                                   | 205,473 |                      |     | $ | 256,637  |       
|Cost of sales                                                                                   |                                                                                       |                                                                                     | 179,235 |                      |     |   | 224,445  |       
|                                                                                                |                                                                                       |                                                                                     |         |                      |     |  
|                                                                                                | Gross profit                                                                          |                                                                                     |         | 26,238               |     |   |          | 32,192 |      
|Selling, general and administrative expenses                                                    |                                                                                       |                                                                                     | 19,728  |                      |     |   | 21,243   |       
|Amortization of goodwill (Note 3)                                                               |                                                                                       |                                                                                     |        |                      |     |   | 1,604    |       
|                                                                                                |                                                                                       |                                                                                     |         |                      |     |  
|                                                                                                | Operating income                                                                      |                                                                                     |         | 6,510                |     |   |          | 9,345  |      
|Interest expense, net                                                                           |                                                                                       |                                                                                     | 6,261   |                      |     |   | 6,928    |       
|                                                                                                |                                                                                       |                                                                                     |         |                      |     |  
|                                                                                                | Income before income taxes, minority interests and equity in
net losses of affiliates |                                                                                     |         | 249                  |     |   |          | 2,417  |      
|Income tax provision                                                                            |                                                                                       |                                                                                     | 101     |                      |     |   | 1,015    |       
|Less minority interests and equity in net losses
of affiliates, net of taxes                    |                                                                                       |                                                                                     | 238     |                      |     |   | 202      |       
|                                                                                                |                                                                                       |                                                                                     |         |                      |     |  
|                                                                                                |                                                                                       | Income (loss) before cumulative effect of accounting
change for goodwill impairment |         |                      | (90 | ) |          |        | 1,200 | 
|Cumulative effect of accounting change for goodwill impairment,
net of taxes of $9,745 (Note 3) |                                                                                       |                                                                                     | (38,102 | )                    |     |   |         |       
|                                                                                                |                                                                                       |                                                                                     |         |                      |     |  
|                                                                                                | Net income (loss)                                                                     |                                                                                     | $       | (38,192              | )   |   | $        | 1,200  |      
|                                                                                                |                                                                                       |                                                                                     |         |                      |     |  

The accompanying notes are an integral part of the consolidated financial statements

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MSX INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)for the fiscal quarters ended March 31, 2002 and April 1, 2001

|                                                                     |                                                                                                     |                                                                |        |                      |        |   |          |         |         |  
|-------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ------ | -------------------- | ------ | - | -------- | ------- | ------- | -
|                                                                     |                                                                                                     |                                                                |        | Fiscal Quarter Ended |       
|                                                                     |                                                                                                     |                                                                |        |                      |       
|                                                                     |                                                                                                     |                                                                |        | March 31,            |        |   | April 1, |        
|                                                                     |                                                                                                     |                                                                |        | 2002                 |        |   | 2001     |        
|                                                                     |                                                                                                     |                                                                |        |                      |        |   |          |        
|                                                                     |                                                                                                     |                                                                |        | (in thousands)       |       
|Cash flows from operating activities:                                |                                                                                                     |                                                                |        |                      |        |   |          |        
|                                                                     | Net income (loss)                                                                                   |                                                                | $      | (38,192              | )      |   | $        | 1,200   |        
|                                                                     | Adjustments to reconcile net income (loss)
to net cash provided by (used for) operating activities: |                                                                |        |                      |        |   |          |         |        
|                                                                     |                                                                                                     | Cumulative effect of accounting change for goodwill impairment |        |                      | 38,102 |   |          |         |        |  
|                                                                     |                                                                                                     | Minority interests and equity in net losses of affiliates      |        |                      | 238    |   |          |         | 202     |  
|                                                                     |                                                                                                     | Depreciation                                                   |        |                      | 4,517  |   |          |         | 3,920   |  
|                                                                     |                                                                                                     | Amortization, including goodwill                               |        |                      | 382    |   |          |         | 1,882   |  
|                                                                     |                                                                                                     | Deferred taxes                                                 |        |                      | (790   | ) |          |         | (870    | )
|                                                                     |                                                                                                     | Loss on sale/disposal of property and equipment                |        |                      | 148    |   |          |         |        |  
|                                                                     |                                                                                                     | (Increase) decrease in receivables, net                        |        |                      | 5,351  |   |          |         | 14,650  |  
|                                                                     |                                                                                                     | (Increase) decrease in inventory                               |        |                      | (2,089 | ) |          |         | (252    | )
|                                                                     |                                                                                                     | (Increase) decrease in prepaid expenses and other assets       |        |                      | (2,421 | ) |          |         | (3,491  | )
|                                                                     |                                                                                                     | Increase (decrease) in current liabilities                     |        |                      | (3,354 | ) |          |         | (25,347 | )
|                                                                     |                                                                                                     | Other, net                                                     |        |                      | (1,016 | ) |          |         | 237     |  
|                                                                     |                                                                                                     |                                                                |        |                      |        |  
|Net cash provided by (used for) operating activities                 |                                                                                                     |                                                                | 876    |                      |        |   | (7,869   | )      
|                                                                     |                                                                                                     |                                                                |        |                      |        |  
|Cash flows from investing activities:                                |                                                                                                     |                                                                |        |                      |        |   |          |        
|                                                                     | Capital expenditures                                                                                |                                                                |        | (2,030               | )      |   |          | (4,999  | )      
|                                                                     | Acquisition of businesses, net of cash acquired                                                     |                                                                |        | (2,714               | )      |   |          | (11,348 | )      
|                                                                     | Proceeds from sale/disposal of equipment                                                            |                                                                |        | 61                   |        |   |          | 4       |        
|                                                                     | Other, net                                                                                          |                                                                |        | 1,925                |        |   |          | (14     | )      
|                                                                     |                                                                                                     |                                                                |        |                      |        |  
|Net cash used for investing activities                               |                                                                                                     |                                                                | (2,758 | )                    |        |   | (16,357  | )      
|                                                                     |                                                                                                     |                                                                |        |                      |        |  
|Cash flows from financing activities:                                |                                                                                                     |                                                                |        |                      |        |   |          |        
|                                                                     | Repayment of debt                                                                                   |                                                                |        | (3,003               | )      |   |          | (1,313  | )      
|                                                                     | Debt issuance costs                                                                                 |                                                                |        | (11                  | )      |   |          | (7      | )      
|                                                                     | Changes in revolving debt, net                                                                      |                                                                |        | 14,108               |        |   |          | 18,677  |        
|                                                                     | Changes in book overdrafts, net                                                                     |                                                                |        | (8,152               | )      |   |          | 5,657   |        
|                                                                     | Repurchase of common and preferred stock                                                            |                                                                |        | (209                 | )      |   |          | (4,178  | )      
|                                                                     | Sale of common and preferred stock                                                                  |                                                                |        |                     |        |   |          | 3,612   |        
|                                                                     |                                                                                                     |                                                                |        |                      |        |  
|Net cash provided by financing activities                            |                                                                                                     |                                                                | 2,733  |                      |        |   | 22,448   |        
|                                                                     |                                                                                                     |                                                                |        |                      |        |  
|Effect of foreign exchange rate changes on cash and cash equivalents |                                                                                                     |                                                                | (1,273 | )                    |        |   | 1,663    |        
|                                                                     |                                                                                                     |                                                                |        |                      |        |  
|Cash and cash equivalents:                                           |                                                                                                     |                                                                |        |                      |        |   |          |        
|                                                                     | Decrease for the period                                                                             |                                                                |        | (422                 | )      |   |          | (115    | )      
|                                                                     | Balance, beginning of period                                                                        |                                                                |        | 4,924                |        |   |          | 4,686   |        
|                                                                     |                                                                                                     |                                                                |        |                      |        |  
|                                                                     | Balance, end of period                                                                              |                                                                | $      | 4,502                |        |   | $        | 4,571   |        
|                                                                     |                                                                                                     |                                                                |        |                      |        |  

The accompanying notes are an integral part of the consolidated financial statements

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)
(dollars in thousands unless otherwise stated)

1. Organization and Basis of Presentation:

The accompanying financial statements present the consolidated assets
and liabilities and results of operations of MSX International, Inc. and its
majority owned subsidiaries (MSXI). MSXI is a holding company owned by
Citicorp and affiliates and certain members of management. We are principally
engaged in providing collaborative enterprise services to automobile
manufacturers and suppliers and other industries primarily in North
America and Europe. We utilize a 52-53 week fiscal year, which ends on the Sunday
nearest December 31.

All intercompany transactions and balances have been eliminated. In the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting of only normal recurring items,
which are necessary for a fair presentation. The operating results for the
fiscal quarters ended March 31, 2002 and April 1, 2001 are not necessarily indicative of the results
of operations for the entire year. Reference should be made to the consolidated
financial statements and notes thereto included in our Annual Report on Form
10-K for the fiscal year ended December 30, 2001. Certain prior year amounts
have been reclassified to conform to the presentation adopted during the
current period.

2. Acquisitions of Businesses:

Effective January 1, 2002, we completed the acquisition of selected assets
and liabilities of Draupner Associates AB in Gottenberg, Sweden for a total
purchase price at closing of about $2.4 million, with an additional amount
payable contingent on the achievement of an annual earnings target. Draupners
principal business is digital documentation and translation services for the
automotive and related industries. Upon completion, the Draupner business was
integrated with our custom communication service offerings. Also effective
January 1, 2002, we exercised our option to acquire an additional 16% of the
outstanding common stock of Cadform-MSX Engineering GmbH for about $0.3
million. Prior to the transaction, we owned 49% of the outstanding common
stock of Cadform. The purchase price for both of these transactions was funded
with borrowings under our credit facility.

The terms of certain of our prior acquisition agreements provided for
additional contingent consideration to be paid over a period of up to two years
if the acquired entitys future operating results exceed targeted levels.
Contingent consideration is earned when the acquired entitys financial
performance grows in excess of the targeted levels established at the time of
acquisition. Such additional consideration is recorded, when earned. In this
regard, we recorded additional consideration during fiscal 2001, related to
prior year acquisitions, which resulted in additional goodwill capitalization.

The operating results of acquired companies have been included in our
consolidated operating results from the effective date of acquisition. The proforma
effects of the above transactions would not be materially different from
reported results for the periods presented.

3. Goodwill and Intangible Assets:

Effective January 1, 2002, we adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 142. Under the new standard,
goodwill is no longer amortized but is tested periodically for impairment.
Additionally, SFAS No. 142 changes the methodology of assessing goodwill
impairment. Under the new standard, goodwill is considered impaired if the
book value of an operating unit exceeds its estimated fair value. Upon
adoption of SFAS No. 142 we recorded a one-time, non-cash charge of about $47.8
million, before related tax benefits, to reduce the carrying value of goodwill.
The charge is reflected as a cumulative effect of an accounting change in our
consolidated results of operations, net of taxes. In calculating the
impairment charge, the fair value of the operating units underlying our
business was estimated using a discounted cash flow methodology.

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
(dollars in thousands unless otherwise stated)

The following summarizes our comparable income (loss) before the
cumulative effect of this change in accounting principle, assuming SFAS No. 142
was adopted effective January 1, 2001.

|                                                                                               |  |                      |     |   |          |   |       | 
|---------------------------------------------------------------------------------------------- |  | -------------------- | --- | - | -------- | - | ----- | 
|                                                                                               |  | Fiscal Quarter Ended |    
|                                                                                               |  |                      |    
|                                                                                               |  | March 31,            |     |   | April 1, |  
|                                                                                               |  | 2002                 |     |   | 2001     |  
|                                                                                               |  |                      |     |   |          |  
|Reported income (loss) before cumulative
effect of accounting change for goodwill
impairment   |  | $                    | (90 | ) |          | $ | 1,200 | 
|Amortization of goodwill, net of taxes                                                         |  |                      |    |   |          |   | 1,604 | 
|Amortization of equity method investee goodwill                                                |  |                      |    |   |          |   | 62    | 
|                                                                                               |  |                      |     |   |          |  
|Comparable income (loss) before cumulative
effect of accounting change for goodwill
impairment |  | $                    | (90 | ) |          | $ | 2,866 | 
|                                                                                               |  |                      |     |   |          |  

The following summarizes the changes in our goodwill balances during the
three months ended March 31, 2002:

|                                  |                                            |   |         |         |  
|--------------------------------- | ------------------------------------------ | - | ------- | ------- | -
|Balance at December 30, 2001, net |                                            | $ | 170,491 |        
|                                  | Goodwill acquired during the period        |   |         | 5,925   |  
|                                  | Impairment losses recognized, before taxes |   |         | (47,847 | )
|                                  | Other, including translation changes       |   |         | (207    | )
|                                  |                                            |   |        
|Balance at March 31, 2002, net    |                                            | $ | 128,362 |        
|                                  |                                            |   |        

Goodwill acquired during the period was generated from the purchase of
additional shares of Cadform-MSX Engineering as disclosed in Note 2. A
substantial portion of the goodwill generated was previously included in the
carrying amount of our investment in Cadform-MSX Engineering as of December 30,
2001.

4. Accounts Receivable:

Accounts receivable
include the portion of our billings for certain master vendor and
supply chain management services attributable to services provided by our vendors which are
passed on to our customers. These amounts totaled $58.6 million as of March 31,
2002 and $49.7 million as of December 30, 2001. A corresponding liability to
our vendors for these amounts is recorded in accounts payable at the time the
receivable is recognized.

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
(dollars in thousands unless otherwise stated)

5. Debt:

Debt is comprised of the following:

|                                          |                                |  |                   |            |   |                |           |           |           |   |         |              |  |   |         |        | 
|----------------------------------------- | ------------------------------ |  | ----------------- | ---------- | - | -------------- | --------- | --------- | --------- | - | ------- | ------------ |  | - | ------- | ------ | 
|                                          |                                |  | Interest Rates at |            |   | Outstanding at |          
|                                          |                                |  |                   |            |   |                |          
|                                          |                                |  | March 31,         |            |   | December 30,   |           |           | March 31, |   |         | December 30, | 
|                                          |                                |  | 2002              |            |   | 2001           |           |           | 2002      |   |         | 2001         | 
|                                          |                                |  |                   |            |   |                |           |           |           |   |         |              | 
|Senior Subordinated Notes                 |                                |  | 11.375            | %          |   |                | 11.375    | %         |           | $ | 130,000 |              |  | $ | 130,000 |       
|Credit Facility, as amended and restated: |                                |  |                   |            |   |                |           |           |           |   |         |              |  |   |         |       
|                                          | Revolving line of credit notes |  |                   | 6.41       | % |                |           | n/a       |           |   |         | 4,978        |  |   |         |       | 
|                                          | Swingline notes                |  |                   | 4.10-10.25 | % |                |           | 4.23-7.00 | %         |   |         | 21,700       |  |   |         | 9,931  | 
|                                          | Term notes                     |  |                   | 4.62-5.88  | % |                |           | 5.34-6.10 | %         |   |         | 94,312       |  |   |         | 97,313 | 
|Satiz Facility                            |                                |  | 4.52              | %          |   |                | 4.55      | %         |           |   | 6,169   |              |  |   | 8,750   |       
|Other                                     |                                |  | 6.75-9.00         | %          |   |                | 7.00-7.25 | %         |           |   | 4,249   |              |  |   | 660     |       
|                                          |                                |  |                   |            |   |                |           |           |           |   |         |              |  |  
|                                          |                                |  |                   |            |   |                |           |           |           |   | 261,408 |              |  |   | 246,654 |       
|Less current portion                      |                                |  |                   |            |   |                |           |           |           |   | 17,544  |              |  |   | 15,785  |       
|                                          |                                |  |                   |            |   |                |           |           |           |   |         |              |  |  
|Total long-term debt                      |                                |  |                   |            |   |                |           |           |           | $ | 243,864 |              |  |   | 230,869 |       
|                                          |                                |  |                   |            |   |                |           |           |           |   |         |              |  |  

As of March 31, 2002, $26.7 million was outstanding under the revolving
credit portions of our credit facility and has been classified as long-term
debt as we have both the ability and intent to refinance such amounts under the
credit facility.

Other debt represents balances outstanding on lines of credit maintained
by certain foreign subsidiaries with local banks. As of March 31, 2002, other
debt includes $3.2 million outstanding under the BHF Bank Credit Facility
maintained by Cadform-MSX Engineering GmbH. This facility provides for
borrowings up to 4.7 million euro at both fixed and floating interest rates.
The agreement expires on July 31, 2002 and is partially secured by a guarantee
and letter of credit provided by MSX International, Inc.

6. Redeemable Series A Preferred Stock:

We are authorized to issue up to 1,500,000 shares of Preferred Stock,
divided into two classes: 500,000 shares of Redeemable Series A Preferred
Stock, par value $0.01, and 1,000,000 shares of New Preferred Stock, par value
$0.01. As of March 31, 2002 and December 30, 2001, 359,448 and 360,000
shares of our Redeemable Series A Preferred Stock were issued and outstanding,
respectively. Dividends on preferred stock are payable in cash at a rate per
annum equal to 12 percent of the stated value plus an amount equal to any
accrued and unpaid dividends. As of March 31, 2002, we have not declared or
paid any dividends except in connection with the repurchase of
related shares from management. Dividends accumulated but not declared totaled about $30.5
million as of March 31, 2002.

7. Comprehensive Income (Loss):

Our comprehensive
income (loss) was:

|                                                                             |  |                      |         |   |          |   |       | 
|---------------------------------------------------------------------------- |  | -------------------- | ------- | - | -------- | - | ----- | 
|                                                                             |  | Fiscal Quarter Ended |        
|                                                                             |  |                      |        
|                                                                             |  | March 31,            |         |   | April 1, |  
|                                                                             |  | 2002                 |         |   | 2001     |  
|                                                                             |  |                      |         |   |          |  
|Net income (loss)                                                            |  | $                    | (38,192 | ) |          | $ | 1,200 | 
|Other
comprehensive income (loss) -
foreign currency translation adjustments |  |                      | (1,726  | ) |          |   | 1,465 | 
|                                                                             |  |                      |         |   |          |  
|Comprehensive income (loss)                                                  |  | $                    | (39,918 | ) |          | $ | 2,665 | 
|                                                                             |  |                      |         |   |          |  

7



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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
(dollars in thousands unless otherwise stated)

8. Segment Information:

MSXI is a global provider of collaborative enterprise services to the
automotive and other industries. We group our services by type of service as
follows: collaborative engineering management, human capital management, and
other collaborative services. Due to the similar characteristics of our
service lines, including the nature of our service offerings, processes
supporting the delivery of our services, our customers, and our marketing and
sales processes, our operations have been aggregated following the provisions
of Statement of Financial Accounting Standards (SFAS) No. 131 for segment
reporting purposes.

The following is a summary of our net sales by service line:

|                                     |                 |   |                      |         |  |          |         |         | 
|------------------------------------ | --------------- | - | -------------------- | ------- |  | -------- | ------- | ------- | 
|                                     |                 |   | Fiscal Quarter Ended |        
|                                     |                 |   |                      |        
|                                     |                 |   | March 31,            |         |  | April 1, |        
|                                     |                 |   | 2002                 |         |  | 2001     |        
|                                     |                 |   |                      |         |  |          |        
|Collaborative Engineering
Management |                 | $ | 56,979               |         |  | $        | 71,239  |        
|Human Capital Management Services    |                 |   | 84,858               |         |  |          | 121,023 |        
|Other Collaborative Services         |                 |   | 63,636               |         |  |          | 64,375  |        
|                                     |                 |   |                      |         |  |          |        
|                                     | Total net sales |   | $                    | 205,473 |  |          | $       | 256,637 | 
|                                     |                 |   |                      |         |  |         

We evaluate performance based on earnings before interest and taxes
(EBIT), including the Michigan Single Business Tax and other similar
taxes, as defined. A
reconciliation of consolidated EBIT to consolidated income before income taxes,
minority interests and equity in net losses of affiliates is as follows:

|                                                                                            |  |                      |        |   |          |   |        |  
|------------------------------------------------------------------------------------------- |  | -------------------- | ------ | - | -------- | - | ------ | -
|                                                                                            |  | Fiscal Quarter Ended |       
|                                                                                            |  |                      |       
|                                                                                            |  | March 31,            |        |   | April 1, |  
|                                                                                            |  | 2002                 |        |   | 2001     |  
|                                                                                            |  |                      |        |   |          |  
|Total EBIT before minority interests and equity in
net losses of affiliates                 |  | $                    | 7,401  |   |          | $ | 10,384 |  
|Interest expense                                                                            |  |                      | (6,261 | ) |          |   | (6,928 | )
|Michigan Single Business Tax and other similar taxes                                        |  |                      | (891   | ) |          |   | (1,039 | )
|                                                                                            |  |                      |        |   |          |  
|Consolidated income before taxes, minority interests
and equity in net losses of affiliates |  | $                    | 249    |   |          | $ | 2,417  |  
|                                                                                            |  |                      |        |   |          |  

9. Guarantor and Non-Guarantor Subsidiaries:

In connection with our $130 million of senior subordinated notes
outstanding, each of our significant domestic restricted subsidiaries, as
defined in the related bond indenture (the Guarantor Subsidiaries),
irrevocably and unconditionally guarantee MSXIs performance as primary
obligor. The following condensed consolidating financial data provides
information regarding the financial position, results of operations and cash
flows of the Guarantor Subsidiaries as set forth below. Separate financial
statements of the Guarantor Subsidiaries are not presented because management
has determined those would not be material to the holders of the senior
subordinated notes.

The Guarantor Subsidiaries account for their investments in the
non-guarantor subsidiaries, if any, on the equity method. The principal
elimination entries are to eliminate the investments in subsidiaries and
intercompany balances and transactions.

8



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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
(dollars in thousands unless otherwise stated)

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEETas of March 31, 2002

|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |         |         | 
|----------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------- | -------- | -------- | ------- |  | ------------ | ------- | ------- | ------------- | ------ | ------- | ------------ |  | -------- | ------------ | -------- | - | ------- | ------- | ------- | 
|                                                      |                                                     |                                                      |          | MSXI     |         |  | Guarantor    |         |         | Non-Guarantor |        |         |              |  |          |              | MSXI     |  
|                                                      |                                                     |                                                      |          | (Issuer) |         |  | Subsidiaries |         |         | Subsidiaries  |        |         | Eliminations |  |          | Consolidated |         
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |         
|ASSETS                                                |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |        
|Current assets:                                       |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |        
|                                                      | Cash and cash equivalents                           |                                                      | $        |         |         |  | $            | 273     |         |               | $      | 4,229   |              |  | $        |             |          |   | $       | 4,502   |        
|                                                      | Accounts receivable, net                            |                                                      |          | 221      |         |  |              | 136,818 |         |               |        | 115,679 |              |  |          |             |          |   |         | 252,718 |        
|                                                      | Inventory                                           |                                                      |          |         |         |  |              | 6,194   |         |               |        | 2,811   |              |  |          |             |          |   |         | 9,005   |        
|                                                      | Prepaid expenses and other assets                   |                                                      |          | 103      |         |  |              | 4,277   |         |               |        | 6,124   |              |  |          |             |          |   |         | 10,504  |        
|                                                      | Deferred income taxes, net                          |                                                      |          |         |         |  |              | 2,836   |         |               |        | 888     |              |  |          |             |          |   |         | 3,724   |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total current assets                                 |          |          | 324     |  |              |         | 150,398 |               |        |         | 129,731      |  |          |              |         |   |         |         | 280,453 | 
|Property and equipment, net                           |                                                     |                                                      |         |          |         |  | 22,909       |         |         |               | 21,252 |         |              |  |         |              |          |   | 44,161  |        
|Goodwill, net                                         |                                                     |                                                      |         |          |         |  | 104,089      |         |         |               | 24,273 |         |              |  |         |              |          |   | 128,362 |        
|Investment in subsidiaries                            |                                                     |                                                      | 117,481  |          |         |  | 61,748       |         |         |               | 1,628  |         |              |  | (175,108 | )            |          |   | 5,749   |        
|Other assets                                          |                                                     |                                                      | 5,635    |          |         |  | 4,091        |         |         |               | 268    |         |              |  |         |              |          |   | 9,994   |        
|Deferred income taxes, net                            |                                                     |                                                      | 1,373    |          |         |  | 8,996        |         |         |               | 2,823  |         |              |  |         |              |          |   | 13,192  |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total assets                                         |          | $        | 124,813 |  |              | $       | 352,231 |               |        | $       | 179,975      |  |          | $            | (175,108 | ) |         | $       | 481,911 | 
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)        |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |        
|Current liabilities:                                  |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |        
|                                                      | Notes payable and current portion of
long-term debt |                                                      | $        | 7,125    |         |  | $            |        |         |               | $      | 10,419  |              |  | $        |             |          |   | $       | 17,544  |        
|                                                      | Accounts payable and drafts                         |                                                      |          |         |         |  |              | 94,188  |         |               |        | 56,861  |              |  |          |             |          |   |         | 151,049 |        
|                                                      | Accrued liabilities                                 |                                                      |          | 2,014    |         |  |              | 46,341  |         |               |        | 28,139  |              |  |          |             |          |   |         | 76,494  |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total current liabilities                            |          |          | 9,139   |  |              |         | 140,529 |               |        |         | 95,419       |  |          |              |         |   |         |         | 245,087 | 
|Long-term debt                                        |                                                     |                                                      | 237,687  |          |         |  |             |         |         |               | 6,177  |         |              |  |         |              |          |   | 243,864 |        
|Intercompany accounts                                 |                                                     |                                                      | (102,394 | )        |         |  | 89,712       |         |         |               | 12,682 |         |              |  |         |              |          |   |        |        
|Long-term deferred compensation and
other liabilities |                                                     |                                                      |         |          |         |  | 4,509        |         |         |               | 7,260  |         |              |  |         |              |          |   | 11,769  |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total liabilities                                    |          |          | 144,432 |  |              |         | 234,750 |               |        |         | 121,538      |  |          |              |         |   |         |         | 500,720 | 
|Minority interests                                    |                                                     |                                                      |         |          |         |  |             |         |         |               | 805    |         |              |  |         |              |          |   | 805     |        
|Redeemable Series A Preferred Stock                   |                                                     |                                                      | 35,945   |          |         |  |             |         |         |               |       |         |              |  |         |              |          |   | 35,945  |        
|Shareholders equity (deficit)                        |                                                     |                                                      | (55,564  | )        |         |  | 117,481      |         |         |               | 57,632 |         |              |  | (175,108 | )            |          |   | (55,559 | )      
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total liabilities and shareholders
equity (deficit) |          | $        | 124,813 |  |              | $       | 352,231 |               |        | $       | 179,975      |  |          | $            | (175,108 | ) |         | $       | 481,911 | 
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         

9



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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
(dollars in thousands unless otherwise stated)

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEETas of December 30, 2001

|                                                      |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |         |         | 
|----------------------------------------------------- | --------------------------------- | ---------------------------------------------------- | ------- | -------- | ------- |  | ------------ | ------- | ------- | ------------- | ------ | ------- | ------------ |  | -------- | ------------ | -------- | - | ------- | ------- | ------- | 
|                                                      |                                   |                                                      |         | MSXI     |         |  | Guarantor    |         |         | Non-Guarantor |        |         |              |  |          |              | MSXI     |  
|                                                      |                                   |                                                      |         | (Issuer) |         |  | Subsidiaries |         |         | Subsidiaries  |        |         | Eliminations |  |          | Consolidated |         
|                                                      |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |              |         
|ASSETS                                                |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |        
|Current assets:                                       |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |        
|                                                      | Cash and cash equivalents         |                                                      | $       |         |         |  | $            | 638     |         |               | $      | 4,286   |              |  | $        |             |          |   | $       | 4,924   |        
|                                                      | Accounts receivable, net          |                                                      |         | 171      |         |  |              | 137,694 |         |               |        | 114,143 |              |  |          |             |          |   |         | 252,008 |        
|                                                      | Inventory                         |                                                      |         |         |         |  |              | 5,885   |         |               |        | 1,031   |              |  |          |             |          |   |         | 6,916   |        
|                                                      | Prepaid expenses and other assets |                                                      |         | 134      |         |  |              | 5,118   |         |               |        | 2,759   |              |  |          |             |          |   |         | 8,011   |        
|                                                      | Deferred income taxes, net        |                                                      |         |         |         |  |              | 2,836   |         |               |        | 641     |              |  |          |             |          |   |         | 3,477   |        
|                                                      |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                   | Total current assets                                 |         |          | 305     |  |              |         | 152,171 |               |        |         | 122,860      |  |          |              |         |   |         |         | 275,336 | 
|Property and equipment, net                           |                                   |                                                      |        |          |         |  | 23,447       |         |         |               | 19,530 |         |              |  |         |              |          |   | 42,977  |        
|Goodwill, net                                         |                                   |                                                      |        |          |         |  | 131,909      |         |         |               | 38,582 |         |              |  |         |              |          |   | 170,491 |        
|Investment in subsidiaries                            |                                   |                                                      | 155,563 |          |         |  | 83,439       |         |         |               | 6,342  |         |              |  | (232,783 | )            |          |   | 12,561  |        
|Other assets                                          |                                   |                                                      | 6,006   |          |         |  | 3,824        |         |         |               | 217    |         |              |  |         |              |          |   | 10,047  |        
|Deferred income taxes, net                            |                                   |                                                      | 1,373   |          |         |  | (748         | )       |         |               | 2,345  |         |              |  |         |              |          |   | 2,970   |        
|                                                      |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                   | Total assets                                         |         | $        | 163,247 |  |              | $       | 394,042 |               |        | $       | 189,876      |  |          | $            | (232,783 | ) |         | $       | 514,382 | 
|                                                      |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)        |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |        
|Current liabilities:                                  |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |        
|                                                      | Notes payable and current portion |                                                      | $       | 6,375    |         |  | $            |        |         |               | $      | 9,410   |              |  | $        |             |          |   | $       | 15,785  |        
|                                                      |                                   | of long-term debt
Accounts payable and drafts        |         |          |        |  |              |         | 102,910 |               |        |         | 50,735       |  |          |              |         |   |         |         | 153,645 | 
|                                                      | Accrued liabilities               |                                                      |         | 7,604    |         |  |              | 50,844  |         |               |        | 20,948  |              |  |          |             |          |   |         | 79,396  |        
|                                                      |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                   | Total current liabilities                            |         |          | 13,979  |  |              |         | 153,754 |               |        |         | 81,093       |  |          |              |         |   |         |         | 248,826 | 
|Long-term debt                                        |                                   |                                                      | 225,187 |          |         |  |             |         |         |               | 5,682  |         |              |  |         |              |          |   | 230,869 |        
|Intercompany accounts                                 |                                   |                                                      | (96,432 | )        |         |  | 79,771       |         |         |               | 16,661 |         |              |  |         |              |          |   |        |        
|Long-term deferred compensation and
other liabilities |                                   |                                                      |        |          |         |  | 4,959        |         |         |               | 8,018  |         |              |  |         |              |          |   | 12,977  |        
|                                                      |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                   | Total liabilities                                    |         |          | 142,734 |  |              |         | 238,484 |               |        |         | 111,454      |  |          |              |         |   |         |         | 492,672 | 
|Minority interests                                    |                                   |                                                      |        |          |         |  |             |         |         |               | 1,197  |         |              |  |         |              |          |   | 1,197   |        
|Redeemable Series A Preferred Stock                   |                                   |                                                      | 36,000  |          |         |  |             |         |         |               |       |         |              |  |         |              |          |   | 36,000  |        
|Shareholders equity (deficit)                        |                                   |                                                      | (15,487 | )        |         |  | 155,558      |         |         |               | 77,225 |         |              |  | (232,783 | )            |          |   | (15,487 | )      
|                                                      |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                   | Total liabilities and shareholders
equity (deficit) |         | $        | 163,247 |  |              | $       | 394,042 |               |        | $       | 189,876      |  |          | $            | (232,783 | ) |         | $       | 514,382 | 
|                                                      |                                   |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         

10



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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
(dollars in thousands unless otherwise stated)

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONSFor the fiscal quarters ended March 31, 2002 and April 1, 2001

|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |              |        |   |   |         |         |  
|---------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | - | -------- | ------- | - | ------------ | ------- | ------- | ------------- | - | ------- | ------------ | - | - | ------------ | ------ | - | - | ------- | ------- | -
|                                                                             |                                                                                              |   | MSXI     |         |   | Guarantor    |         |         | Non-Guarantor |   |         |              |   |   |              | MSXI   |  
|                                                                             |                                                                                              |   | (Issuer) |         |   | Subsidiaries |         |         | Subsidiaries  |   |         | Eliminations |   |   | Consolidated |       
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |              |       
|Fiscal Quarter Ended March 31, 2002:                                         |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |              |        |   |   |         |        
|Net sales                                                                    |                                                                                              | $ |         |         |   | $            | 114,481 |         |               | $ | 94,155  |              |   | $ | (3,163       | )      |   | $ | 205,473 |        
|Cost of sales                                                                |                                                                                              |   |         |         |   |              | 100,021 |         |               |   | 82,377  |              |   |   | (3,163       | )      |   |   | 179,235 |        
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Gross profit                                                                                 |   |          |        |   |              |         | 14,460  |               |   |         | 11,778       |   |   |              |       |   |   |         | 26,238  |  
|Selling, general and administrative expenses                                 |                                                                                              |   |         |         |   |              | 11,696  |         |               |   | 8,032   |              |   |   |             |        |   |   | 19,728  |        
|Amortization of goodwill                                                     |                                                                                              |   |         |         |   |              |        |         |               |   |        |              |   |   |             |        |   |   |        |        
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Operating income                                                                             |   |          |        |   |              |         | 2,764   |               |   |         | 3,746        |   |   |              |       |   |   |         | 6,510   |  
|Interest income (expense), net                                               |                                                                                              |   | (3,120   | )       |   |              | (2,662  | )       |               |   | (479    | )            |   |   |             |        |   |   | (6,261  | )      
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Income (loss) before income taxes,
minority interests and equity in net losses
of affiliates |   |          | (3,120  | ) |              |         | 102     |               |   |         | 3,267        |   |   |              |       |   |   |         | 249     |  
|Income tax provision (benefit)                                               |                                                                                              |   | (1,279   | )       |   |              | 42      |         |               |   | 1,338   |              |   |   |             |        |   |   | 101     |        
|Minority interests and equity earnings                                       |                                                                                              |   | (36,351  | )       |   |              | (18,313 | )       |               |   | (100    | )            |   |   | 54,526       |        |   |   | (238    | )      
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Income (loss) before cumulative effect of
accounting change for goodwill impairment          |   |          | (38,192 | ) |              |         | (18,253 | )             |   |         | 1,829        |   |   |              | 54,526 |   |   |         | (90     | )
|Cumulative effect of accounting change for goodwill
impairment, net of taxes |                                                                                              |   |         |         |   |              | (18,098 | )       |               |   | (20,004 | )            |   |   |             |        |   |   | (38,102 | )      
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Net income (loss)                                                                            |   | $        | (38,192 | ) |              | $       | (36,351 | )             |   | $       | (18,175      | ) |   | $            | 54,526 |   |   | $       | (38,192 | )
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|Fiscal Quarter Ended April 1, 2001:                                          |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |              |        |   |   |         |        
|Net sales                                                                    |                                                                                              | $ |         |         |   | $            | 160,250 |         |               | $ | 100,957 |              |   | $ | (4,570       | )      |   | $ | 256,637 |        
|Cost of sales                                                                |                                                                                              |   |         |         |   |              | 137,998 |         |               |   | 91,017  |              |   |   | (4,570       | )      |   |   | 224,445 |        
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Gross profit                                                                                 |   |          |        |   |              |         | 22,252  |               |   |         | 9,940        |   |   |              |       |   |   |         | 32,192  |  
|Selling, general and administrative expenses                                 |                                                                                              |   |         |         |   |              | 15,422  |         |               |   | 5,821   |              |   |   |             |        |   |   | 21,243  |        
|Amortization of goodwill                                                     |                                                                                              |   |         |         |   |              | 1,170   |         |               |   | 434     |              |   |   |             |        |   |   | 1,604   |        
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Operating income                                                                             |   |          |        |   |              |         | 5,660   |               |   |         | 3,685        |   |   |              |       |   |   |         | 9,345   |  
|Interest income (expense), net                                               |                                                                                              |   | (6,898   | )       |   |              | 73      |         |               |   | (103    | )            |   |   |             |        |   |   | (6,928  | )      
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Income (loss) before income taxes,
minority interests and equity in net losses
of affiliates |   |          | (6,898  | ) |              |         | 5,733   |               |   |         | 3,582        |   |   |              |       |   |   |         | 2,417   |  
|Income tax provision (benefit)                                               |                                                                                              |   | (2,538   | )       |   |              | 2,121   |         |               |   | 1,432   |              |   |   |             |        |   |   | 1,015   |        
|Minority interests and equity earnings                                       |                                                                                              |   | 5,560    |         |   |              | 1,948   |         |               |   | (202    | )            |   |   | (7,508       | )      |   |   | (202    | )      
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Income (loss) before cumulative effect of
accounting change for goodwill impairment          |   |          | 1,200   |   |              |         | 5,560   |               |   |         | 1,948        |   |   |              | (7,508 | ) |   |         | 1,200   |  
|Cumulative effect of accounting change for goodwill
impairment, net of taxes |                                                                                              |   |         |         |   |              |        |         |               |   |        |              |   |   |             |        |   |   |        |        
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Net income                                                                                   |   | $        | 1,200   |   |              | $       | 5,560   |               |   | $       | 1,948        |   |   | $            | (7,508 | ) |   | $       | 1,200   |  
|                                                                             |                                                                                              |   |          |         |   |              |         |         |               |   |         |              |   |   |             

11



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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
(dollars in thousands unless otherwise stated)

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSfor the fiscal quarter ended March 31, 2002

|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |        |              |         |   |        |         |        |  
|-------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ------ | -------- | ------ | - | ------------ | ------- | ------ | ------------- | ------ | ------- | ------------ | - | ------ | ------------ | ------- | - | ------ | ------- | ------ | -
|                                                                     |                                                                                                     |                                                                |        | MSXI     |        |   | Guarantor    |         |        | Non-Guarantor |        |         |              |   |        |              | MSXI    |  
|                                                                     |                                                                                                     |                                                                |        | (Issuer) |        |   | Subsidiaries |         |        | Subsidiaries  |        |         | Eliminations |   |        | Consolidated |        
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |        |              |        
|Cash flows from operating activities:                                |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |        |              |         |   |        |        
|                                                                     | Net income (loss)                                                                                   |                                                                | $      | (38,192  | )      |   | $            | (36,351 | )      |               | $      | (18,175 | )            |   | $      | 54,526       |         |   | $      | (38,192 | )     
|                                                                     | Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating activities: |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |        |              |         |   |        |         |       
|                                                                     |                                                                                                     | Cumulative effect of accounting change for
goodwill impairment |        |          |       |   |              |         | 18,098 |               |        |         | 20,004       |   |        |              |        |   |        |         | 38,102 |  
|                                                                     |                                                                                                     | Equity in earnings of subsidiaries                             |        |          | 36,351 |   |              |         | 18,313 |               |        |         | 100          |   |        |              | (54,526 | ) |        |         | 238    |  
|                                                                     |                                                                                                     | Depreciation                                                   |        |          |       |   |              |         | 2,144  |               |        |         | 2,373        |   |        |              |        |   |        |         | 4,517  |  
|                                                                     |                                                                                                     | Amortization, including goodwill                               |        |          | 382    |   |              |         |       |               |        |         |             |   |        |              |        |   |        |         | 382    |  
|                                                                     |                                                                                                     | Deferred taxes                                                 |        |          |       |   |              |         |       |               |        |         | (790         | ) |        |              |        |   |        |         | (790   | )
|                                                                     |                                                                                                     | Loss on sale/disposal of property and
equipment                |        |          |       |   |              |         | 8      |               |        |         | 140          |   |        |              |        |   |        |         | 148    |  
|                                                                     |                                                                                                     | (Increase) decrease in receivables, net                        |        |          | (51    | ) |              |         | 877    |               |        |         | 4,525        |   |        |              |        |   |        |         | 5,351  |  
|                                                                     |                                                                                                     | (Increase) decrease in inventory                               |        |          |       |   |              |         | (310   | )             |        |         | (1,779       | ) |        |              |        |   |        |         | (2,089 | )
|                                                                     |                                                                                                     | (Increase) decrease in prepaid expenses
and other assets       |        |          | 32     |   |              |         | 841    |               |        |         | (3,294       | ) |        |              |        |   |        |         | (2,421 | )
|                                                                     |                                                                                                     | Increase (decrease) in current liabilities                     |        |          | (5,590 | ) |              |         | (5,089 | )             |        |         | 7,325        |   |        |              |        |   |        |         | (3,354 | )
|                                                                     |                                                                                                     | Other, net                                                     |        |          |       |   |              |         | (784   | )             |        |         | (232         | ) |        |              |        |   |        |         | (1,016 | )
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |       
|Net cash provided by (used for) operating activities                 |                                                                                                     |                                                                | (7,068 | )        |        |   | (2,253       | )       |        |               | 10,197 |         |              |   |       |              |         |   | 876    |        
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |       
|Cash flows from investing activities:                                |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |        |              |         |   |        |        
|                                                                     | Capital expenditures                                                                                |                                                                |        |         |        |   |              | (1,539  | )      |               |        | (491    | )            |   |        |             |         |   |        | (2,030  | )     
|                                                                     | Acquisition of businesses, net of cash acquired                                                     |                                                                |        |         |        |   |              | (23     | )      |               |        | (2,691  | )            |   |        |             |         |   |        | (2,714  | )     
|                                                                     | Proceeds from sale/disposal of equipment                                                            |                                                                |        |         |        |   |              | 29      |        |               |        | 32      |              |   |        |             |         |   |        | 61      |       
|                                                                     | Other, net                                                                                          |                                                                |        |         |        |   |              | 1,925   |        |               |        |        |              |   |        |             |         |   |        | 1,925   |       
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |       
|Net cash provided by (used for) investing activities                 |                                                                                                     |                                                                |       |          |        |   | 392          |         |        |               | (3,150 | )       |              |   |       |              |         |   | (2,758 | )      
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |       
|Cash flows from financing activities:                                |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |        |              |         |   |        |        
|                                                                     | Intercompany                                                                                        |                                                                |        | (5,962   | )      |   |              | 9,943   |        |               |        | (3,981  | )            |   |        |             |         |   |        |        |       
|                                                                     | Transactions with subsidiaries                                                                      |                                                                |        | 1,726    |        |   |              | 1,418   |        |               |        | 291     |              |   |        | (3,435       | )       |   |        |        |       
|                                                                     | Repayment of debt                                                                                   |                                                                |        | (3,000   | )      |   |              | (3      | )      |               |        |        |              |   |        |             |         |   |        | (3,003  | )     
|                                                                     | Debt issuance costs                                                                                 |                                                                |        | (11      | )      |   |              |        |        |               |        |        |              |   |        |             |         |   |        | (11     | )     
|                                                                     | Changes in revolving debt, net                                                                      |                                                                |        | 16,250   |        |   |              |        |        |               |        | (2,142  | )            |   |        |             |         |   |        | 14,108  |       
|                                                                     | Changes in book overdrafts, net                                                                     |                                                                |        |         |        |   |              | (8,136  | )      |               |        | (16     | )            |   |        |             |         |   |        | (8,152  | )     
|                                                                     | Repurchase of common and preferred stock                                                            |                                                                |        | (209     | )      |   |              |        |        |               |        |        |              |   |        |             |         |   |        | (209    | )     
|                                                                     | Sale of common and preferred stock                                                                  |                                                                |        |         |        |   |              |        |        |               |        |        |              |   |        |             |         |   |        |        |       
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |       
|Net cash provided by (used for) financing activities                 |                                                                                                     |                                                                | 8,794  |          |        |   | 3,222        |         |        |               | (5,848 | )       |              |   | (3,435 | )            |         |   | 2,733  |        
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |       
|Effect of foreign exchange rate changes on cash and
cash equivalents |                                                                                                     |                                                                | (1,726 | )        |        |   | (1,726       | )       |        |               | (1,256 | )       |              |   | 3,435  |              |         |   | (1,273 | )      
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |       
|Cash and cash equivalents:                                           |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |        |              |         |   |        |        
|                                                                     | Decrease for the period                                                                             |                                                                |        |         |        |   |              | (365    | )      |               |        | (57     | )            |   |        |             |         |   |        | (422    | )     
|                                                                     | Balance, beginning of period                                                                        |                                                                |        |         |        |   |              | 638     |        |               |        | 4,286   |              |   |        |             |         |   |        | 4,924   |       
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |       
|                                                                     | Balance, end of period                                                                              |                                                                | $      |         |        |   | $            | 273     |        |               | $      | 4,229   |              |   | $      |             |         |   | $      | 4,502   |       
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |        |               |        |         |              |   |       

12



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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
(dollars in thousands unless otherwise stated)

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSfor the fiscal quarter ended April 1, 2001

|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |        |              |       |  |         |         |         |  
|-------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------- | -------- | ------ | - | ------------ | ------- | ------- | ------------- | ------ | ------ | ------------ | - | ------ | ------------ | ----- |  | ------- | ------- | ------- | -
|                                                                     |                                                                                              |                                                          |         | MSXI     |        |   | Guarantor    |         |         | Non-Guarantor |        |        |              |   |        |              | MSXI  | 
|                                                                     |                                                                                              |                                                          |         | (Issuer) |        |   | Subsidiaries |         |         | Subsidiaries  |        |        | Eliminations |   |        | Consolidated |      
|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |        |              |      
|Cash flows from operating activities:                                |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |        |              |       |  |         |        
|                                                                     | Net income                                                                                   |                                                          | $       | 1,200    |        |   | $            | 5,560   |         |               | $      | 1,948  |              |   | $      | (7,508       | )     |  | $       | 1,200   |        
|                                                                     | Adjustments to reconcile net income to
net cash provided by (used for) operating
activities: |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |        |              |       |  |         |         |        
|                                                                     |                                                                                              | Equity in earnings of subsidiaries                       |         |          | (5,560 | ) |              |         | (1,948  | )             |        |        | 202          |   |        |              | 7,508 |  |         |         | 202     |  
|                                                                     |                                                                                              | Depreciation                                             |         |          |       |   |              |         | 2,002   |               |        |        | 1,918        |   |        |              |      |  |         |         | 3,920   |  
|                                                                     |                                                                                              | Amortization, including goodwill                         |         |          | 278    |   |              |         | 1,170   |               |        |        | 434          |   |        |              |      |  |         |         | 1,882   |  
|                                                                     |                                                                                              | Deferred taxes                                           |         |          |       |   |              |         |        |               |        |        | (870         | ) |        |              |      |  |         |         | (870    | )
|                                                                     |                                                                                              | Loss on sale/disposal of property and
equipment          |         |          |       |   |              |         |        |               |        |        |             |   |        |              |      |  |         |         |        |  
|                                                                     |                                                                                              | (Increase) decrease in receivables, net                  |         |          | 153    |   |              |         | 7,750   |               |        |        | 6,747        |   |        |              |      |  |         |         | 14,650  |  
|                                                                     |                                                                                              | (Increase) decrease in inventory                         |         |          |       |   |              |         | (475    | )             |        |        | 223          |   |        |              |      |  |         |         | (252    | )
|                                                                     |                                                                                              | (Increase) decrease in prepaid expenses
and other assets |         |          | 32     |   |              |         | (1,159  | )             |        |        | (2,364       | ) |        |              |      |  |         |         | (3,491  | )
|                                                                     |                                                                                              | Increase (decrease) in current liabilities               |         |          | (6,256 | ) |              |         | (17,418 | )             |        |        | (1,673       | ) |        |              |      |  |         |         | (25,347 | )
|                                                                     |                                                                                              | Other, net                                               |         |          |       |   |              |         | 347     |               |        |        | (110         | ) |        |              |      |  |         |         | 237     |  
|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |       
|Net cash provided by (used for) operating activities                 |                                                                                              |                                                          | (10,153 | )        |        |   | (4,171       | )       |         |               | 6,455  |        |              |   |       |              |       |  | (7,869  | )      
|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |       
|Cash flows from investing activities:                                |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |        |              |       |  |         |        
|                                                                     | Capital expenditures                                                                         |                                                          |         |         |        |   |              | (2,249  | )       |               |        | (2,750 | )            |   |        |             |       |  |         | (4,999  | )      
|                                                                     | Acquisition of businesses, net of cash acquired                                              |                                                          |         |         |        |   |              | (10,902 | )       |               |        | (446   | )            |   |        |             |       |  |         | (11,348 | )      
|                                                                     | Proceeds from sale/disposal of equipment                                                     |                                                          |         |         |        |   |              | 4       |         |               |        |       |              |   |        |             |       |  |         | 4       |        
|                                                                     | Other, net                                                                                   |                                                          |         |         |        |   |              | (14     | )       |               |        |       |              |   |        |             |       |  |         | (14     | )      
|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |       
|Net cash used for investing activities                               |                                                                                              |                                                          |        |          |        |   | (13,161      | )       |         |               | (3,196 | )      |              |   |       |              |       |  | (16,357 | )      
|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |       
|Cash flows from financing activities:                                |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |        |              |       |  |         |        
|                                                                     | Intercompany                                                                                 |                                                          |         | (10,466  | )      |   |              | 11,400  |         |               |        | (934   | )            |   |        |             |       |  |         |        |        
|                                                                     | Transactions with subsidiaries                                                               |                                                          |         | (1,460   | )      |   |              | (1,616  | )       |               |        | 148    |              |   |        | 2,928        |       |  |         |        |        
|                                                                     | Repayment of debt                                                                            |                                                          |         | (1,313   | )      |   |              |        |         |               |        |       |              |   |        |             |       |  |         | (1,313  | )      
|                                                                     | Debt issuance costs                                                                          |                                                          |         | (7       | )      |   |              |        |         |               |        |       |              |   |        |             |       |  |         | (7      | )      
|                                                                     | Changes in revolving debt, net                                                               |                                                          |         | 22,501   |        |   |              |        |         |               |        | (3,824 | )            |   |        |             |       |  |         | 18,677  |        
|                                                                     | Changes in book overdrafts, net                                                              |                                                          |         |         |        |   |              | 5,830   |         |               |        | (173   | )            |   |        |             |       |  |         | 5,657   |        
|                                                                     | Repurchase of common and preferred stock                                                     |                                                          |         | (566     | )      |   |              | (3,612  | )       |               |        |       |              |   |        |             |       |  |         | (4,178  | )      
|                                                                     | Sale of common and preferred stock                                                           |                                                          |         |         |        |   |              | 3,612   |         |               |        |       |              |   |        |             |       |  |         | 3,612   |        
|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |       
|Net cash provided by (used for) financing activities                 |                                                                                              |                                                          | 8,689   |          |        |   | 15,614       |         |         |               | (4,783 | )      |              |   | 2,928  |              |       |  | 22,448  |        
|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |       
|Effect of foreign exchange rate changes on cash and
cash equivalents |                                                                                              |                                                          | 1,464   |          |        |   | 1,464        |         |         |               | 1,663  |        |              |   | (2,928 | )            |       |  | 1,663   |        
|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |       
|Cash and cash equivalents:                                           |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |        |              |       |  |         |        
|                                                                     | Increase (decrease) for the period                                                           |                                                          |         |         |        |   |              | (254    | )       |               |        | 139    |              |   |        |             |       |  |         | (115    | )      
|                                                                     | Balance, beginning of period                                                                 |                                                          |         |         |        |   |              | 569     |         |               |        | 4,117  |              |   |        |             |       |  |         | 4,686   |        
|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |       
|                                                                     | Balance, end of period                                                                       |                                                          | $       |         |        |   | $            | 315     |         |               | $      | 4,256  |              |   | $      |             |       |  | $       | 4,571   |        
|                                                                     |                                                                                              |                                                          |         |          |        |   |              |         |         |               |        |        |              |   |       

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Outlook.

As reflected in our first quarter operating results, our business
continues to be challenged by softness in demand within the industries that we
provide services. As a result of weakened economic conditions, we took steps
during the fourth quarter of 2001 and first quarter of 2002 to reduce our cost
structure commensurate with current levels of business. At the same time, we
are also investing in new product initiatives and realigning our infrastructure
along our service lines to position the company to grow business with existing
customers and to expand our services to new customers. Although we cannot
provide assurance about our future prospects, we believe we are well positioned
to achieve our strategic growth objectives.

Net Sales

Consolidated net sales decreased $51.1 million, or 19.9%, from $256.6
million during the first quarter of fiscal 2001 to $205.5 million during the
first quarter of fiscal 2002. Overall, the decline in sales reflects weak
demand for automotive engineering and human capital management services. Sales
of our collaborative engineering services decreased $14.3 million, or 20.0%,
compared to fiscal 2001. Engineering sales during the first quarter of 2002
include about $4.0 million of incremental sales from the consolidation of
Cadform-MSX Engineering GmbH effective January 1, 2002. Excluding the
incremental sales from Cadform, collaborative engineering sales declined 25.7%
compared to the first quarter of 2001. The decrease reflects weak demand for
automotive design and specialty work in substantially all of our geographic
markets. Sales of our human capital management services during the first
quarter of 2002 decreased $36.2 million, or 29.9%, compared to 2001. The
decline in human capital services reflects reduced volumes in our engineering
staffing in North America and Europe and reduced volumes of IT staffing
services in our North American markets. Our master vendor programs have also
been subject to price reductions mandated by customers. Sales of our other
collaborative services decreased $0.7 million, or 1.1%, compared to fiscal
2001. Sales of other collaborative services include $1.9 million of
incremental sales from the acquisition of Draupner Associates AB effective
January 1, 2002. The decline in sales of other collaborative services includes
about $1.2 million related to declines in foreign currency exchange rates
compared to the first quarter of 2002 and a decline in volume of our North
American services.

Operating Profit

Our consolidated gross profit and operating income for the periods
presented were:

|                 |                |   |                      |      |   |          |                        |      |   |   |        |     |  |  |       |     | 
|---------------- | -------------- | - | -------------------- | ---- | - | -------- | ---------------------- | ---- | - | - | ------ | --- |  |  | ----- | --- | 
|                 |                |   | Fiscal Quarter Ended |      |   |          |                        |      |   |   |        |    
|                 |                |   |                      |      |   | Change   |                       
|                 |                |   | March 31,            |      |   | April 1, |                        |      |   |  
|                 |                |   | 2002                 |      |   | 2001     |                        |      | $ |   |        | %   | 
|                 |                |   |                      |      |   |          |                        |      |   |   |        |     | 
|                 |                |   |                      |      |   |          | (dollars in thousands) |      |   |   |        |    
|Gross profit     |                | $ | 26,238               |      |   | $        | 32,192                 |      |   | $ | (5,954 | )   |  |  | (18.5 | %) 
|                 | % of net sales |   |                      | 12.8 | % |          |                        | 12.5 | % |   |        | n/a |  |  |       | n/a | 
|Operating income |                | $ | 6,510                |      |   | $        | 9,345                  |      |   | $ | (2,835 | )   |  |  | (30.3 | %) 
|                 | % of net sales |   |                      | 3.2  | % |          |                        | 3.6  | % |   |        | n/a |  |  |       | n/a | 

Overall, gross profit declined year over year as a result of reduced
volumes and pricing pressures, primarily in our collaborative engineering and
human capital management services. Gross profit, as a percentage of sales,
improved to 12.8% for the first quarter of fiscal 2002 compared to 12.5% for
the first quarter of fiscal 2001. The improvement resulted primarily from cost
reduction efforts that were implemented during the fourth quarter of 2001. Our
cost reduction programs resulted in overall first quarter improvements in
excess of $6 million, primarily in direct and indirect labor, related fringe
and benefit costs, and other operating costs. Savings from cost reduction
efforts were offset by the impact of declining volumes and price reductions
from customers.

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Selling, general and administrative expenses decreased $1.5 million
compared to the first quarter of 2001. Selling, general and administrative
expenses, as a percentage of net sales, were 9.6% during the first quarter of
fiscal 2002 compared to 8.3% in the comparable period of fiscal 2001. The
overall decrease in cost reflects reductions in incentive compensation of $0.8
million and savings from our cost reduction efforts implemented during the
fourth quarter of 2001. Cost savings were partially offset by additional
severance costs and costs incurred to develop our marketing, sales, and product
portfolio to support and grow our service offerings. Operating income also
reflects a $1.6 million reduction in goodwill amortization as a result of the
adoption of Statement of Financial Accounting Standards (SFAS) No. 142 during
the first quarter of 2002. See below for additional information on the
adoption of these new accounting rules.

Interest expense

Interest expense decreased from $6.9 million during the first quarter 2001
to $6.3 million during the first quarter of 2002, a $0.6 million improvement.
Average borrowings outstanding were generally consistent compared to 2001 while
the average interest rates on our aggregate variable rate debt outstanding
improved almost 300 basis points year over year.

Income taxes and minority interest/equity losses

Our effective income tax rate improved from 42.0% during the first quarter
of 2001 to 40.6% during 2002. The improvement primarily reflects improvements
in our European and state effective income tax rates during 2002. Minority
interests and equity losses increased slightly over 2001 and primarily includes
our portion of losses from MTE groups, an equity investee, and the minority
interest portion of earnings from Satiz Srl, a consolidated subsidiary. MTE is
experiencing the same pricing pressures and volume reductions that are
impacting our business.

Cumulative effect of accounting change for goodwill impairment

During the first quarter of fiscal 2002 we adopted the provisions of SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires that
goodwill be evaluated for impairment charges based on a market value approach
instead of amortizing such intangibles over specified periods. Upon adoption,
we evaluated the market value of our operating units as of December 30, 2001
based on a discounted cash flow methodology as prescribed by the standard. The
result of this analysis was a net charge after taxes of $38.1 million. The
impairment charge relates to our collaborative engineering and human capital
management service lines. Both of these areas experienced significant
downturns in recent fiscal quarters due to reduced demand for selected services
and price reductions implemented by certain customers. The impact of these
recent declines has a significant impact on current valuations when compared to
prior performance levels and growth rates. While we believe these lower
valuations are temporary in nature, adoption of SFAS No. 142 requires that we
record this charge during the first quarter of 2002 as a cumulative adjustment
from adoption of the new rules.

Determining market values based on discounted cash flows requires
management to make significant estimates and assumptions including, but not
limited to, long term projections of cash flows, market conditions, and
appropriate discount rates. Management judgments are based on historical
experience, information from our customers, market and regional trends, and
other information. While we believe that the estimates and assumptions
underlying our valuation models are valid, different assumptions could result
in a different outcome.

Net income (loss)

As a result of the foregoing, our net loss for the first quarter of fiscal
2002 was $38.2 million compared to net income of $1.2 million in fiscal 2001.

Liquidity and Capital Resources

Cash Flows

General.Our principal capital requirements are for the acquisition of
businesses, capital expenditures, product development initiatives, and working
capital to support growth. These requirements have been met through a
combination of bank debt, issuance of subordinated notes and cash from
operations. Cash balances in excess of amounts required to fund daily
operations are used to pay down amounts outstanding under the revolving credit
portion of our credit facility. We typically pay our employees on a weekly
basis and receive payment from our customers within invoicing terms, which is
generally a 60-day period after the invoice date. However, in connection with
certain of our supply chain management and master vendor services, we collect
related receivables at approximately the same time we make payment to
suppliers.

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Operating Activities. Net cash provided by operating activities was $0.9
million for the first quarter of fiscal 2002 compared to net cash used for
operations of $(7.9) million during fiscal 2001. Cash from operations during
both quarters reflects the unfavorable timing of certain pass through payments
related to our master vendor services, which were not received prior to quarter
end. During the first quarter of 2002 this unfavorable impact was partially
offset by other improvements in working capital.

Investing Activities.Net cash used for investing activities decreased
$13.6 million from $16.4 million for the first three months of 2001 to $2.8
million for the first three months of 2002. Capital expenditure requirements
decreased commensurate with the current lower volumes in business. Cash used
to acquire businesses during 2002 includes funding of the Draupner and Cadform
transactions while cash used to acquire businesses during fiscal 2001 includes
the acquisition of a minority investment in MTE Groups L.L.C. and the payment
of contingent consideration related to certain prior year acquisitions. Other
cash from investing activities during the first quarter of 2002 primarily
represents the refund of escrow funds related to the MTE investment resulting
from the non-attainment of earnings targets.

Financing Activities. Net cash provided by financing activities decreased
$19.7 million from $22.4 million for the first three months of 2001 to $2.7
million for the first three months of 2002. Financing requirements during the
fiscal three months ended March 31, 2002 decreased consistent with the
reduction in funds required to fund capital expenditures and acquire companies.
During the first quarter of fiscal 2001, a subsidiary of MSX International,
Inc. completed a sale of unregistered securities to certain directors and
members of management. The securities were sold in units with each unit
comprised of MSX International Inc.s Series A Preferred Stock, par value $0.01
per share, and Class A Common Stock, par value $0.01 per share. In total,
9,936 shares of Series A Preferred Stock and 482,400 shares of Class A Common
Stock were sold. The shares of Series A Preferred Stock and Class A Common
Stock, which comprised the units sold, were acquired from Citicorp, our
majority stockholder, at a price equal to the price at which the units were
sold to management. The entire proceeds of $3.6 million were used to pay the
purchase price of the shares acquired from Citicorp. The remainder of cash
used to repurchase common and preferred stock during 2001 and 2002 arose from
the repurchase of shares pursuant to the Amended and Restated Stockholders
Agreement.

Available Financing Sources

Our total indebtedness consists of senior subordinated notes, borrowings
under our credit facilities and borrowings under various short-term
arrangements. Available borrowings under the credit facility are subject to
adequate accounts receivable balance requirements. As of March 31, 2002, $66.5
million was available for future borrowing while $36.8 million was available
for immediate borrowing based on our current level of accounts receivable.
Under the terms of our credit agreement, we are also subject to mandatory
partial prepayments of amounts outstanding under the term loan portion of the
credit facility if excess cash flows, as defined, are generated on an annual
basis. As a result of cash flows generated during fiscal 2001, we are subject
to such a mandatory prepayment totaling $9.1 million. Such payment was made in
April 2002, in accordance with the agreement, and was funded with borrowings
under the revolving credit portion of our credit facility. This prepayment had
no adverse effect on our current borrowing capacity.

Forward-Looking Statements

This report on Form 10-Q contains statements that constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements can be identified by the use of
forward-looking terminology such as believes, expects, may, estimates,
will, should, plans or anticipates or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy.
Such forward-looking statements are not guarantees of future performance and
involve significant risks and uncertainties. Actual results may vary
materially from those in the forward-looking statements as a result of any
number of factors, many of which are beyond the control of management. These
factors include, but are not limited to, the Companys leverage, its reliance
on major customers in the automotive industry, the degree and nature of
competition, the Companys ability to recruit and place qualified personnel,
risks associated with its acquisition strategy, and employment liability risk.

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PART II. OTHER INFORMATION




ITEM 6.Exhibits and Reports on Form 8-K

| |  |     |  |                     
| |  | --- |  | --------------------
| |  | (a) |  | Exhibits:           
| |  |     |  |                     
| |  |     |  | None                
| |  |     |  |                     
| |  | (b) |  | Reports on Form 8-K:
| |  |     |  |                     
| |  |     |  | None                

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: May 13, 2002

MSX INTERNATIONAL, INC.
(Registrant)

By: /s/ Frederick K. MinturnFrederick K. Minturn
       Executive Vice President and
       Chief Financial Officer

(Chief accounting officer
and authorized signatory)

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