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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended June 29, 2003

OR

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission File Number: 333-49821

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

|                                           |  |                                     
|------------------------------------------ |  | ------------------------------------
|Delaware                                   |  | 38-3323099                          
|(State or other jurisdiction               |  | (I.R.S. Employer Identification No.)
|of incorporation or organization)          |  |                                     
|                                           |  |                                     
|22355 W. Eleven Mile, Southfield, Michigan |  | 48034                               
|(Address of principal executive offices)   |  | (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 x No o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12(b)-2 of the Securities and Exchange Act of 1934). Yes o
No x



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TABLE OF CONTENTS



|                                             |                                                                                               |                                                                                                                                       |  |  |  |  |  | 
|-------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION               
|                                             | ITEM 1. Financial Statements                                                                 
|                                             |                                                                                               | Consolidated Balance Sheets as of June 29, 2003 (unaudited) and December 29, 2002                                                    
|                                             |                                                                                               | Consolidated Statements of Operations (unaudited) for the fiscal quarters and fiscal six months ended June 29, 2003 and June 30, 2002
|                                             |                                                                                               | Consolidated Statements of Cash Flows (unaudited) for the fiscal six months ended June 29, 2003 and June 30, 2002                    
|                                             |                                                                                               | Notes to Consolidated Financial Statements (unaudited)                                                                               
|                                             | ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                             | ITEM 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                  
|                                             | ITEM 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                   
|302 Certification of Chief Financial Officer
|302 Certification of Chief Executive Officer
|Section 906 Certification of the CEO & CFO  
|Press Release                               



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MSX INTERNATIONAL, INC.
INDEX

|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|---------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ----- | -- | - | 
|PART I.FINANCIAL INFORMATION |                                                                                              |                                                                                                                                       |       |   
|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|                             | ITEM 1.Financial Statements:                                                                 |                                                                                                                                       | Pages
|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|                             |                                                                                              | Consolidated Balance Sheets as of June 29, 2003 (unaudited) and
December 29, 2002                                                     |       |    | 2 | 
|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|                             |                                                                                              | Consolidated Statements of Operations (unaudited) for the fiscal quarters
and fiscal six months ended June 29, 2003 and June 30, 2002 |       |    | 3 | 
|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|                             |                                                                                              | Consolidated Statements of Cash Flows (unaudited) for the fiscal six months
ended June 29, 2003 and June 30, 2002                     |       |    | 4 | 
|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|                             |                                                                                              | Notes to Consolidated Financial Statements (unaudited)                                                                                |       |    | 5 | 
|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|                             | ITEM 2.Managements Discussion and Analysis of Financial Condition and
Results of Operations |                                                                                                                                       |       | 17 |  
|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|                             | ITEM 4.Controls and Procedures                                                               |                                                                                                                                       |       | 22 |  
|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|PART II.OTHER INFORMATION    |                                                                                              |                                                                                                                                       |       |   
|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|                             | ITEM 6. Exhibits and Reports on Form 8-K                                                     |                                                                                                                                       |       | 23 |  
|                             |                                                                                              |                                                                                                                                       |       |    |   | 
|SIGNATURE                    |                                                                                              |                                                                                                                                       | 24    |   

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PART I.  FINANCIAL INFORMATIONITEM 1.  FINANCIAL STATEMENTS




MSX INTERNATIONAL, INC. 
CONSOLIDATED BALANCE SHEETSas of June 29, 2003 and December 29, 2002

|                                                         |                                                                                                                                                                             |                                             |         |         |          |             |         |         |              |   |  | 
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------- | ------- | -------- | ----------- | ------- | ------- | ------------ | - |  | 
|                                                         |                                                                                                                                                                             |                                             |         |         |          | June 29,    |         |         |              |   | 
|                                                         |                                                                                                                                                                             |                                             |         |         |          | 2003        |         |         | December 29, |  
|                                                         |                                                                                                                                                                             |                                             |         |         |          | (Unaudited) |         |         | 2002         |  
|                                                         |                                                                                                                                                                             |                                             |         |         |          |             |         |         |              |  
|                                                         | (dollars in thousands)                                                                                                                                                      |                                            
|ASSETS                                                   |                                                                                                                                                                             |                                             |         |         |          |             |         |        
|Current assets:                                          |                                                                                                                                                                             |                                             |         |         |          |             |         |        
|                                                         | Cash and cash equivalents                                                                                                                                                   |                                             | $       | 4,434   |          |             | $       | 10,935  |             
|                                                         | Accounts receivable, net (Note 5)                                                                                                                                           |                                             |         | 215,151 |          |             |         | 211,957 |             
|                                                         | Inventory                                                                                                                                                                   |                                             |         | 5,743   |          |             |         | 4,824   |             
|                                                         | Prepaid expenses and other assets                                                                                                                                           |                                             |         | 8,308   |          |             |         | 7,277   |             
|                                                         | Deferred income taxes, net                                                                                                                                                  |                                             |         | 6,737   |          |             |         | 6,557   |             
|                                                         |                                                                                                                                                                             |                                             |         |         |          |            
|                                                         |                                                                                                                                                                             | Total current assets                        |         |         | 240,373  |             |         |         | 241,550      |  
|                                                        
|Property and equipment, net                              |                                                                                                                                                                             |                                             | 33,679  |         |          |             | 39,186  |        
|Goodwill, net (Note 3)                                   |                                                                                                                                                                             |                                             | 130,370 |         |          |             | 127,254 |        
|Other assets                                             |                                                                                                                                                                             |                                             | 12,030  |         |          |             | 11,732  |        
|Deferred income taxes, net                               |                                                                                                                                                                             |                                             | 14,064  |         |          |             | 12,820  |        
|                                                         |                                                                                                                                                                             |                                             |         |         |          |            
|                                                         |                                                                                                                                                                             | Total assets                                |         | $       | 430,516  |             |         | $       | 432,542      |  
|                                                         |                                                                                                                                                                             |                                             |         |         |          |            
|LIABILITIES AND SHAREHOLDERS DEFICIT                    |                                                                                                                                                                             |                                             |         |         |          |             |         |        
|Current liabilities:                                     |                                                                                                                                                                             |                                             |         |         |          |             |         |        
|                                                         | Notes payable and current portion of long-term debt (Note 6)                                                                                                                |                                             | $       | 8,361   |          |             | $       | 14,671  |             
|                                                         | Accounts payable and drafts                                                                                                                                                 |                                             |         | 134,528 |          |             |         | 132,358 |             
|                                                         | Accrued payroll and benefits                                                                                                                                                |                                             |         | 29,156  |          |             |         | 28,252  |             
|                                                         | Other accrued liabilities                                                                                                                                                   |                                             |         | 56,753  |          |             |         | 61,786  |             
|                                                         |                                                                                                                                                                             |                                             |         |         |          |            
|                                                         |                                                                                                                                                                             | Total current liabilities                   |         |         | 228,798  |             |         |         | 237,067      |  
|                                                        
|Long-term debt (Note 6)                                  |                                                                                                                                                                             |                                             | 225,519 |         |          |             | 220,003 |        
|Long-term deferred compensation and other liabilities    |                                                                                                                                                                             |                                             | 10,578  |         |          |             | 11,494  |        
|                                                         |                                                                                                                                                                             |                                             |         |         |          |            
|                                                         |                                                                                                                                                                             | Total liabilities                           |         |         | 464,895  |             |         |         | 468,564      |  
|                                                        
|Minority interests                                       |                                                                                                                                                                             |                                             | 60      |         |          |             | 166     |        
|Mandatorily Redeemable Series A Preferred Stock (Note 7) |                                                                                                                                                                             |                                             | 77,084  |         |          |             | 72,629  |        
|Shareholders deficit:                                   |                                                                                                                                                                             |                                             |         |         |          |             |         |        
|                                                         | Common Stock, $.01 par value, 200,000,000 aggregate shares
of
Class A and Class B Common Stock authorized; 20,054,000
shares of Class A Common Stock issued and outstanding |                                             |         | 201     |          |             |         | 201     |             
|                                                         | Additional paid-in-capital                                                                                                                                                  |                                             |         | (21,879 | )        |             |         | (21,879 | )           
|                                                         | Note receivable from officer                                                                                                                                                |                                             |         | (3,198  | )        |             |         | (3,198  | )           
|                                                         | Accumulated other comprehensive loss                                                                                                                                        |                                             |         | (4,104  | )        |             |         | (9,303  | )           
|                                                         | Retained deficit                                                                                                                                                            |                                             |         | (82,543 | )        |             |         | (74,638 | )           
|                                                         |                                                                                                                                                                             |                                             |         |         |          |            
|                                                         |                                                                                                                                                                             | Total shareholders deficit                 |         |         | (111,523 | )           |         |         | (108,817     | )
|                                                         |                                                                                                                                                                             |                                             |         |         |          |            
|                                                         |                                                                                                                                                                             | Total liabilities and shareholders deficit |         | $       | 430,516  |             |         | $       | 432,542      |  
|                                                         |                                                                                                                                                                             |                                             |         |         |          |            

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

2



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MSX INTERNATIONAL, INC.




CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)for the fiscal quarters and fiscal six months ended June 29, 2003 and June 30, 2002

|                                                                                                |                                                                                     |   |                      |        |   |                         |          |        |          |   |         |               |   |          |         |         |  
|----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | - | -------------------- | ------ | - | ----------------------- | -------- | ------ | -------- | - | ------- | ------------- | - | -------- | ------- | ------- | -
|                                                                                                |                                                                                     |   | Fiscal Quarter Ended |        |   | Fiscal Six Months Ended |         
|                                                                                                |                                                                                     |   |                      |        |   |                         |         
|                                                                                                |                                                                                     |   |                      |        |   |                         | June 30, |        |          |   |         |               |   | June 30, |        
|                                                                                                |                                                                                     |   | June 29,             |        |   | 2002                    |          |        | June 29, |   |         | 2002          |  
|                                                                                                |                                                                                     |   | 2003                 |        |   | (as restated)           |          |        | 2003     |   |         | (as restated) |  
|                                                                                                |                                                                                     |   |                      |        |   |                         |          |        |          |   |         |               |  
|                                                                                                |                                                                                     |   | (in thousands)       |       
|Net sales                                                                                       |                                                                                     | $ | 185,735              |        |   | $                       | 212,141  |        |          | $ | 369,086 |               |   | $        | 417,614 |        
|Cost of sales                                                                                   |                                                                                     |   | 162,634              |        |   |                         | 185,540  |        |          |   | 325,808 |               |   |          | 364,360 |        
|                                                                                                |                                                                                     |   |                      |        |   |                         |          |        |          |   |         |              
|                                                                                                | Gross profit                                                                        |   |                      | 23,101 |   |                         |          | 26,601 |          |   |         | 43,278        |   |          |         | 53,254  |  
|Selling, general and administrative expenses                                                    |                                                                                     |   | 15,722               |        |   |                         | 20,684   |        |          |   | 31,426  |               |   |          | 40,549  |        
|Restructuring and severance costs (Note 4)                                                      |                                                                                     |   | 565                  |        |   |                         | 147      |        |          |   | 1,996   |               |   |          | 425     |        
|                                                                                                |                                                                                     |   |                      |        |   |                         |          |        |          |   |         |              
|                                                                                                | Operating income                                                                    |   |                      | 6,814  |   |                         |          | 5,770  |          |   |         | 9,856         |   |          |         | 12,280  |  
|Interest expense, net                                                                           |                                                                                     |   | 6,633                |        |   |                         | 6,306    |        |          |   | 13,308  |               |   |          | 12,567  |        
|                                                                                                |                                                                                     |   |                      |        |   |                         |          |        |          |   |         |              
|                                                                                                | Income (loss) before income taxes, minority
interests, and equity in affiliates     |   |                      | 181    |   |                         |          | (536   | )        |   |         | (3,452        | ) |          |         | (287    | )
|Income tax provision                                                                            |                                                                                     |   | 132                  |        |   |                         | 1,566    |        |          |   | 233     |               |   |          | 1,667   |        
|Less minority interests and equity in
affiliates, net of taxes                                  |                                                                                     |   | (61                  | )      |   |                         | 378      |        |          |   | (235    | )             |   |          | 616     |        
|                                                                                                |                                                                                     |   |                      |        |   |                         |          |        |          |   |         |              
|                                                                                                | Income (loss) before cumulative effect of
accounting change for goodwill impairment |   |                      | 110    |   |                         |          | (2,480 | )        |   |         | (3,450        | ) |          |         | (2,570  | )
|Cumulative effect of accounting change for
goodwill impairment, net of taxes of $9,745
(Note 3) |                                                                                     |   |                     |        |   |                         |         |        |          |   |        |               |   |          | (38,102 | )      
|                                                                                                |                                                                                     |   |                      |        |   |                         |          |        |          |   |         |              
|                                                                                                | Net income (loss)                                                                   |   |                      | 110    |   |                         |          | (2,480 | )        |   |         | (3,450        | ) |          |         | (40,672 | )
|Preferred stock dividends (Note 7)                                                              |                                                                                     |   | (2,261               | )      |   |                         | (2,007   | )      |          |   | (4,455  | )             |   |          | (3,956  | )      
|                                                                                                |                                                                                     |   |                      |        |   |                         |          |        |          |   |         |              
|                                                                                                | Net loss available to common shareholders                                           |   | $                    | (2,151 | ) |                         | $        | (4,487 | )        |   | $       | (7,905        | ) |          | $       | (44,628 | )
|                                                                                                |                                                                                     |   |                      |        |   |                         |          |        |          |   |         |              

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 six months ended June 29, 2003 and June 30, 2002

|                                                                     |                                                                                            |                                                                |        |                         |        |   |          |         |         |  
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | -------------------------------------------------------------- | ------ | ----------------------- | ------ | - | -------- | ------- | ------- | -
|                                                                     |                                                                                            |                                                                |        | Fiscal Six Months Ended |       
|                                                                     |                                                                                            |                                                                |        |                         |       
|                                                                     |                                                                                            |                                                                |        | June 29,                |        |   | June 30, |        
|                                                                     |                                                                                            |                                                                |        | 2003                    |        |   | 2002     |        
|                                                                     |                                                                                            |                                                                |        |                         |        |   |          |        
|                                                                     |                                                                                            | (in thousands)                                                
|Cash flows from operating activities:                                |                                                                                            |                                                                |        |                         |        |   |          |        
|                                                                     | Net loss                                                                                   |                                                                | $      | (3,450                  | )      |   | $        | (40,672 | )      
|                                                                     | Adjustments to reconcile net 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 affiliates                    |        |                         | (235   | ) |          |         | 616     |  
|                                                                     |                                                                                            | Depreciation                                                   |        |                         | 9,445  |   |          |         | 9,123   |  
|                                                                     |                                                                                            | Amortization of debt issuance costs                            |        |                         | 1,072  |   |          |         | 766     |  
|                                                                     |                                                                                            | Deferred taxes                                                 |        |                         | (1,435 | ) |          |         | (1,811  | )
|                                                                     |                                                                                            | Loss on sale/disposal of property and equipment                |        |                         | 332    |   |          |         | 225     |  
|                                                                     |                                                                                            | (Increase) decrease in receivables, net                        |        |                         | (3,194 | ) |          |         | 2,036   |  
|                                                                     |                                                                                            | (Increase) decrease in inventory                               |        |                         | (919   | ) |          |         | (2,265  | )
|                                                                     |                                                                                            | (Increase) decrease in prepaid expenses and other assets       |        |                         | (1,083 | ) |          |         | (280    | )
|                                                                     |                                                                                            | Increase (decrease) in current liabilities                     |        |                         | (1,097 | ) |          |         | (15,599 | )
|                                                                     |                                                                                            | Other, net                                                     |        |                         | (883   | ) |          |         | (46     | )
|                                                                     |                                                                                            |                                                                |        |                         |        |   |         
|Net cash used for operating activities                               |                                                                                            |                                                                | (1,447 | )                       |        |   | (9,805   | )      
|                                                                     |                                                                                            |                                                                |        |                         |        |  
|Cash flows from investing activities:                                |                                                                                            |                                                                |        |                         |        |   |          |        
|                                                                     | Capital expenditures                                                                       |                                                                |        | (3,754                  | )      |   |          | (6,723  | )      
|                                                                     | Acquisition of businesses, net of cash acquired                                            |                                                                |        |                        |        |   |          | (3,014  | )      
|                                                                     | Proceeds from sale/disposal of equipment                                                   |                                                                |        | 1,291                   |        |   |          | 144     |        
|                                                                     | Other, net                                                                                 |                                                                |        | (399                    | )      |   |          | 1,891   |        
|                                                                     |                                                                                            |                                                                |        |                         |        |  
|Net cash used for investing activities                               |                                                                                            |                                                                | (2,862 | )                       |        |   | (7,702   | )      
|                                                                     |                                                                                            |                                                                |        |                         |        |  
|Cash flows from financing activities:                                |                                                                                            |                                                                |        |                         |        |   |          |        
|                                                                     | Repayment of debt                                                                          |                                                                |        | (6,343                  | )      |   |          | (13,745 | )      
|                                                                     | Debt issuance costs                                                                        |                                                                |        | (1,008                  | )      |   |          | (25     | )      
|                                                                     | Changes in revolving debt, net                                                             |                                                                |        | 5,540                   |        |   |          | 26,490  |        
|                                                                     | Changes in book overdrafts, net                                                            |                                                                |        | (850                    | )      |   |          | 4,428   |        
|                                                                     | Repurchase of common and preferred stock                                                   |                                                                |        |                        |        |   |          | (209    | )      
|                                                                     |                                                                                            |                                                                |        |                         |        |   |         
|Net cash (used for) provided by financing activities                 |                                                                                            |                                                                | (2,661 | )                       |        |   | 16,939   |        
|                                                                     |                                                                                            |                                                                |        |                         |        |  
|Effect of foreign exchange rate changes on cash and cash equivalents |                                                                                            |                                                                | 469    |                         |        |   | 1,439    |        
|                                                                     |                                                                                            |                                                                |        |                         |        |  
|Cash and cash equivalents:                                           |                                                                                            |                                                                |        |                         |        |   |          |        
|                                                                     | (Decrease) increase for the period                                                         |                                                                |        | (6,501                  | )      |   |          | 871     |        
|                                                                     | Balance, beginning of period                                                               |                                                                |        | 10,935                  |        |   |          | 4,924   |        
|                                                                     |                                                                                            |                                                                |        |                         |        |   |         
|                                                                     | Balance, end of period                                                                     |                                                                | $      | 4,434                   |        |   | $        | 5,795   |        
|                                                                     |                                                                                            |                                                                |        |                         |        |  

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 technical business 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 and fiscal six months ended June 29, 2003 and June 30, 2002 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 29, 2002. Certain prior year amounts have been reclassified to
conform to the presentation adopted during the current period.



|2. |  | Acquisitions of Businesses:
|-- |  | ---------------------------

Effective in December 2002 we acquired the remaining 25% of the
outstanding common stock of Satiz Srl from Fiat SpA. The transaction had been
contemplated as part of the original acquisition of 75% of the outstanding
common stock of Satiz in December of 1999. The total purchase price was about
$3.5 million based on formulas established at the time of the original 75%
acquisition. The transaction was accounted for under the purchase method of
accounting resulting in additional goodwill of $2.4 million. Satiz specializes
in commercial and technical publishing in Europe and derives a significant
portion of its sales from Fiat and related subsidiaries.



|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 ($38.1 million net of taxes), 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.

The following summarizes the changes in our goodwill balances during the
six months ended June 29, 2003:

|                              |  |               |   |  |                     |   |        |                    |  |   |        |  |  |   |         | 
|----------------------------- |  | ------------- | - |  | ------------------- | - | ------ | ------------------ |  | - | ------ |  |  | - | ------- | 
|                              |  | Collaborative |   |  |                     |   |        |                    |  |   |        |  |  |   |        
|                              |  | Engineering   |   |  | Human Capital       |   |        | Technical and      |  |   |        |  | 
|                              |  | Management    |   |  | Management Services |   |        | Marketing Services |  |   | Total  | 
|                              |  |               |   |  |                     |   |        |                    |  |   |        | 
|Balance at December 29, 2002  |  | $             |  |  |                     | $ | 97,603 |                    |  | $ | 29,651 |  |  | $ | 127,254 | 
|Translation changes and other |  |               |  |  |                     |   | 134    |                    |  |   | 2,982  |  |  |   | 3,116   | 
|                              |  |               |   |  |                     |   |        |                    |  |   |        | 
|Balance at June 29, 2003      |  | $             |  |  |                     | $ | 97,737 |                    |  | $ | 32,633 |  |  | $ | 130,370 | 
|                              |  |               |   |  |                     |   |        |                    |  |   |        | 

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



|4. |  | Restructuring and Severance:
|-- |  | ----------------------------

As of December 29, 2002, accrued restructuring and severance costs totaled
$4.5 million. Approximately $2.0 million and $4.9 million were charged to the
restructuring and severance accrual during the second quarter and the first six
months of 2003, respectively. These charges are comprised of severance and
termination benefits associated with headcount reductions approved by
management during the fourth quarter of 2002. Additional charges of $2.0
million were recorded during the first six months of 2003 primarily for
additional severance and termination benefits approved and communicated by
management prior to June 29, 2003. Remaining accrued severance costs totaled
$1.6 million as of June 29, 2003 and are expected to be paid during 2003.



|5. |  | Accounts Receivable:
|-- |  | --------------------

Accounts receivable includes both billed and unbilled receivables.
Unbilled receivables amounted to $82.8 million and $66.8 million at June 29,
2003 and December 29, 2002, respectively. All such billings are expected to be
collected within the ensuing year. Accounts receivable also 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 $41.9 million as of June 29, 2003 and
$37.1 million as of December 29, 2002. A corresponding liability to our vendors
for these amounts is recorded in accounts payable at the time the receivable is
recognized.



|6. |  | Debt:
|-- |  | -----

Debt is comprised of the following:

|                                          |                                |  |                   |           |   |                |           |            |          |   |         |              |  |   |         |        | 
|----------------------------------------- | ------------------------------ |  | ----------------- | --------- | - | -------------- | --------- | ---------- | -------- | - | ------- | ------------ |  | - | ------- | ------ | 
|                                          |                                |  | Interest Rates at |           |   | Outstanding at |          
|                                          |                                |  |                   |           |   |                |          
|                                          |                                |  | June 29,          |           |   | December 29,   |           |            | June 29, |   |         | December 29, | 
|                                          |                                |  | 2003              |           |   | 2002           |           |            | 2003     |   |         | 2002         | 
|                                          |                                |  |                   |           |   |                |           |            |          |   |         |              | 
|Senior subordinated notes                 |                                |  | 11.375            | %         |   |                | 11.375    | %          |          | $ | 130,000 |              |  | $ | 130,000 |       
|Second secured term loan                  |                                |  | 10.00             | %         |   |                | 10.00     | %          |          |   | 16,934  |              |  |   | 16,109  |       
|Credit facility, as amended and restated: |                                |  |                   |           |   |                |           |            |          |   |         |              |  |   |         |       
|                                          | Revolving line of credit notes |  |                   | 4.68-6.13 | % |                |           | 4.42       | %        |   |         | 19,034       |  |   |         | 4,000  | 
|                                          | Swingline notes                |  |                   | 7.25-8.50 | % |                |           | 4.46-11.15 | %        |   |         | 325          |  |   |         | 8,559  | 
|                                          | Term notes                     |  |                   | 5.54-6.29 | % |                |           | 5.64-6.26  | %        |   |         | 64,105       |  |   |         | 65,798 | 
|Satiz facility                            |                                |  | 4.73              | %         |   |                | 4.12      | %          |          |   | 1,284   |              |  |   | 4,954   |       
|Other                                     |                                |  | 7.00              | %         |   |                | 7.00-9.00 | %          |          |   | 2,198   |              |  |   | 5,254   |       
|                                          |                                |  |                   |           |   |                |           |            |          |   |         |              |  |  
|                                          |                                |  |                   |           |   |                |           |            |          |   | 233,880 |              |  |   | 234,674 |       
|Less current portion                      |                                |  |                   |           |   |                |           |            |          |   | 8,361   |              |  |   | 14,671  |       
|                                          |                                |  |                   |           |   |                |           |            |          |   |         |              |  |  
|Total long-term debt                      |                                |  |                   |           |   |                |           |            |          | $ | 225,519 |              |  | $ | 220,003 |       
|                                          |                                |  |                   |           |   |                |           |            |          |   |         |              |  |  

As of June 29, 2003, $19.4 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. Recent developments related to our debt arrangements are
discussed in Note 10.

6



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



|7. |  | Mandatorily Redeemable Series A Preferred Stock:
|-- |  | ------------------------------------------------

As of June 29, 2003 and December 29, 2002 there are 359,448 shares of 12%
Series A Cumulative Mandatorily Redeemable Preferred Stock (the Preferred
Stock) outstanding with a stated value of $100 per share or about $36 million
in total. 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 June 29, 2003, we have not declared or paid any
dividends. However, due to the mandatory redemption features of the preferred
stock, dividends accrued totaled $41.1 million as of June 29, 2003. We may not
declare or pay any dividends or other distribution with respect to any common
stock or other class or series of stock ranking junior to the Preferred Stock
without first complying with restrictions specified in the Amended and Restated
Stockholders Agreement. Our ability to pay cash dividends, and to acquire or
redeem the preferred stock, is subject to restrictions contained in our debt
agreements.

Prior results of operations reflect a change in the treatment of
accumulated dividends on the Preferred Stock. Accumulated dividends on
Preferred Stock, which had been disclosed in previous filings, have been
deducted from shareholders deficit and included with the related Preferred
Stock on the consolidated balance sheets. The change in treatment was adopted
during the fourth quarter of 2002 and had no impact on cash flows for any of
the periods presented.



|8. |  | Comprehensive Income (Loss):
|-- |  | ----------------------------

Our comprehensive income (loss) was:

|                                                                      |  |                      |       |  |                         |   |        |               |  |   |               |   |  |   |         |  
|--------------------------------------------------------------------- |  | -------------------- | ----- |  | ----------------------- | - | ------ | ------------- |  | - | ------------- | - |  | - | ------- | -
|                                                                      |  | Fiscal Quarter Ended |       |  | Fiscal Six Months Ended |  
|                                                                      |  |                      |       |  |                         |  
|                                                                      |  | June 29, 2003        |       |  | June 30, 2002           |   |        | June 29, 2003 |  |   | June 30, 2002 |  
|                                                                      |  |                      |       |  |                         |   |        |               |  |   |               |  
|Net income (loss)                                                     |  | $                    | 110   |  |                         | $ | (2,480 | )             |  | $ | (3,450        | ) |  | $ | (40,672 | )
|Other comprehensive income -
foreign currency translation adjustments |  |                      | 3,801 |  |                         |   | 4,561  |               |  |   | 5,199         |   |  |   | 2,835   |  
|                                                                      |  |                      |       |  |                         |   |        |               |  |   |               |  
|Comprehensive income (loss)                                           |  | $                    | 3,911 |  |                         | $ | 2,081  |               |  | $ | 1,749         |   |  | $ | (37,837 | )
|                                                                      |  |                      |       |  |                         |   |        |               |  |   |               |  

7



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



|9. |  | Segment Information:
|-- |  | --------------------

MSXI is a global provider of technical business services to the automotive
and other industries. Our business includes: collaborative engineering
services, human capital management services, and technical and marketing
services. Collaborative engineering offers a full range of total product,
custom, or single point engineering solutions. Human capital management
services include a full range of staffing solutions, including direct support
of our engineering and other collaborative services. Our technical and
marketing services include solutions to quality, supply chain, and
communication related customer needs. Certain operations within each of our
segments have been aggregated following the provisions of SFAS No. 131 due to
the similar characteristics of their operations, including the nature of their
service offerings, processes supporting the delivery of the services,
customers, and marketing and sales processes.

The accounting policies of our segments are the same as those for MSXI
except that the financial results for each segment are presented using a
management approach. We evaluate performance based on earnings before
interest, taxes and amortization (EBITA), including the Michigan Single
Business Tax and other similar taxes. The results of each segment include
certain allocations for general, administrative, and other shared costs.
However, certain shared costs and termination and restructuring costs, included
in other below, are not allocated to the segments.

The following is a summary of selected data for each of our service lines:

|                            |                        |                        |   |               |        |  |                     |        |        |                    |   |        |        |  |   |        |        |   |   |         |         | 
|--------------------------- | ---------------------- | ---------------------- | - | ------------- | ------ |  | ------------------- | ------ | ------ | ------------------ | - | ------ | ------ |  | - | ------ | ------ | - | - | ------- | ------- | 
|                            |                        |                        |   | Collaborative |        |  |                     |        |        |                    |   |        |        |  |   |        |        |   |   |         |        
|                            |                        |                        |   | Engineering   |        |  | Human Capital       |        |        | Technical and      |   |        |        |  |   |        |        |   |  
|                            |                        |                        |   | Management    |        |  | Management Services |        |        | Marketing Services |   |        | Other  |  |   | Total  |       
|                            |                        |                        |   |               |        |  |                     |        |        |                    |   |        |        |  |   |        |       
|Quarter Ended June 29, 2003 |                        |                        |   |               |        |  |                     |        |        |                    |   |        |        |  |   |        |        |   |   |        
|                            | Net sales  external   |                        | $ | 50,556        |        |  | $                   | 61,924 |        |                    | $ | 73,255 |        |  | $ |       |        |   | $ | 185,735 |        
|                            | Net intercompany sales |                        |   | 153           |        |  |                     | 23     |        |                    |   | 2,411  |        |  |   | (2,587 | )      |   |   |        |        
|                            | EBITA                  |                        |   | (894          | )      |  |                     | 4,349  |        |                    |   | 5,709  |        |  |   | (1,449 | )      |   |   | 7,715   |        
|Quarter Ended June 30, 2002 |                        |                        |   |               |        |  |                     |        |        |                    |   |        |        |  |   |        |        |   |   |        
|                            |                        | Net sales  external   |   |               | 60,113 |  |                     |        | 85,268 |                    |   |        | 66,760 |  |   |        |       |   |   |         | 212,141 | 
|                            |                        | Net intercompany sales |   |               | 208    |  |                     |        | 362    |                    |   |        | 2,626  |  |   |        | (3,196 | ) |   |         |        | 
|                            |                        | EBITA                  |   |               | 584    |  |                     |        | 3,753  |                    |   |        | 4,503  |  |   |        | (2,168 | ) |   |         | 6,672   | 

|                               |                        |                        |   |               |         |  |                     |         |         |                    |   |         |         |  |   |        |        |   |   |         |         | 
|------------------------------ | ---------------------- | ---------------------- | - | ------------- | ------- |  | ------------------- | ------- | ------- | ------------------ | - | ------- | ------- |  | - | ------ | ------ | - | - | ------- | ------- | 
|                               |                        |                        |   | Collaborative |         |  |                     |         |         |                    |   |         |         |  |   |        |        |   |   |         |        
|                               |                        |                        |   | Engineering   |         |  | Human Capital       |         |         | Technical and      |   |         |         |  |   |        |        |   |  
|                               |                        |                        |   | Management    |         |  | Management Services |         |         | Marketing Services |   |         | Other   |  |   | Total  |       
|                               |                        |                        |   |               |         |  |                     |         |         |                    |   |         |         |  |   |        |       
|Six Months Ended June 29, 2003 |                        |                        |   |               |         |  |                     |         |         |                    |   |         |         |  |   |        |        |   |   |        
|                               | Net sales  external   |                        | $ | 101,324       |         |  | $                   | 127,011 |         |                    | $ | 140,751 |         |  | $ |       |        |   | $ | 369,086 |        
|                               | Net intercompany sales |                        |   | 292           |         |  |                     | 315     |         |                    |   | 3,939   |         |  |   | (4,546 | )      |   |   |        |        
|                               | EBITA                  |                        |   | (2,138        | )       |  |                     | 8,151   |         |                    |   | 9,741   |         |  |   | (4,122 | )      |   |   | 11,632  |        
|Six Months Ended June 30, 2002 |                        |                        |   |               |         |  |                     |         |         |                    |   |         |         |  |   |        |        |   |   |        
|                               |                        | Net sales  external   |   |               | 117,252 |  |                     |         | 170,126 |                    |   |         | 130,236 |  |   |        |       |   |   |         | 417,614 | 
|                               |                        | Net intercompany sales |   |               | 1,176   |  |                     |         | 742     |                    |   |         | 4,441   |  |   |        | (6,359 | ) |   |         |        | 
|                               |                        | EBITA                  |   |               | 542     |  |                     |         | 7,823   |                    |   |         | 10,326  |  |   |        | (4,618 | ) |   |         | 14,073  | 

8



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



|9. |  | Segment Information:  continued
|-- |  | --------------------------------

A reconciliation of consolidated EBITA to consolidated income (loss)
before income taxes, minority interests and equity in affiliates is as follows:

|                                                                                     |  |                      |        |   |                         |   |        |          |  |   |          |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | -------------------- | ------ | - | ----------------------- | - | ------ | -------- |  | - | -------- | - |  | - | ------- | -
|                                                                                     |  | Fiscal Quarter Ended |        |   | Fiscal Six Months Ended |  
|                                                                                     |  |                      |        |   |                         |  
|                                                                                     |  | June 29,             |        |   | June 30,                |   |        | June 29, |  |   | June 30, |  
|                                                                                     |  | 2003                 |        |   | 2002                    |   |        | 2003     |  |   | 2002     |  
|                                                                                     |  |                      |        |   |                         |   |        |          |  |   |          |  
|Total EBITA before minority interests and equity in
affiliates                       |  | $                    | 7,715  |   |                         | $ | 6,672  |          |  | $ | 11,632   |   |  | $ | 14,073  |  
|Interest expense, net                                                                |  |                      | (6,633 | ) |                         |   | (6,306 | )        |  |   | (13,308  | ) |  |   | (12,567 | )
|Michigan single business tax and other similar taxes                                 |  |                      | (901   | ) |                         |   | (902   | )        |  |   | (1,776   | ) |  |   | (1,793  | )
|                                                                                     |  |                      |        |   |                         |   |        |          |  |   |          |  
|Consolidated income (loss) before taxes, minority
interests
and equity in affiliates |  | $                    | 181    |   |                         | $ | (536   | )        |  | $ | (3,452   | ) |  | $ | (287    | )
|                                                                                     |  |                      |        |   |                         |   |        |          |  |   |          |  



|10. |  | Subsequent Event:
|--- |  | -----------------

On August 1, 2003 we completed a private offering of senior notes totaling
$100.5 million that mature October 15, 2007. The transaction included the
issuance of $75.5 million aggregate principal amount of 11% notes, priced to
yield 11.25%, and $25.0 million aggregate principal amount of 11.5% notes. The
notes were issued by both MSX International, Inc. and its wholly-owned
subsidiary in the United Kingdom. The $25.0 million notes were issued to
Citicorp Mezzanine III, L.P. In connection with the $25.0 million issuance,
the company will also issue stock purchase warrants for a number of shares of
our Class A common stock to be determined. Proceeds from the offering totaled
$96.6 million, net of related expenses and were used to repay substantially all
debt outstanding under our credit facility.

Upon consummation of this offering, our second secured term note was
amended and restated into a $14.7 million note issued by MSX International, Inc
and a $2.4 million note issued by MSX International Limited (our subsidiary in
the United Kingdom). The amendments to the note also include extending the
maturity from June 7, 2007 to January 15, 2008, and resetting the covenants in
the notes so that they are equivalent to the covenants in the senior notes sold
on August 1, 2003.

Concurrent with the offering, we entered into an amended and restated
credit facility with Bank One, N.A. Terms of the amendment allow for revolving
debt up to $40.0 million on a secured basis through July 2006 plus an
additional $5 million available exclusively for the issuance of letters of
credit. Available borrowings are subject to adequate accounts receivable
balance requirements.



|11. |  | New Accounting Pronouncement:
|--- |  | -----------------------------

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. SFAS No. 150 establishes standards for how companies
classify and measure in their statement of financial position certain financial
instruments with characteristics of both liabilities and equity. It requires
that a company classify certain financial instruments as liabilities because
they embody an obligation of the company. This statement is effective for
financial instruments entered into or modified after May 31, 2003 except for
mandatorily redeemable financial instruments for nonpublic entities. For
nonpublic entities with mandatorily redeemable financial instruments, such as
MSXI, this statement is effective for the first fiscal period beginning after
December 15, 2003. The Company is in the process of assessing the impact that
SFAS No. 150 will have on the consolidated results of operations and financial
position.

9



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



|12. |  | 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. The following presentation does not
reflect changes in the makeup of guarantors and non-guarantors which will
result from the refinancing transactions discussed in Note 10. As a result of
the refinancing transactions, certain subsidiaries classified as non-guarantor
subsidiaries will be presented as guarantor subsidiaries in future filings.

10



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



|12. |  | Guarantor and Non-Guarantor Subsidiaries:  continued
|--- |  | -----------------------------------------------------

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEETas of June 29, 2003

|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |          |         |         | 
|----------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------- | -------- | -------- | ------- |  | ------------ | ------- | ------- | ------------- | ------ | ------- | ------------ |  | -------- | ------------ | -------- | - | -------- | ------- | ------- | 
|                                                      |                                                     |                                                      |          | MSXI     |         |  | Guarantor    |         |         | Non-Guarantor |        |         |              |  |          |              | MSXI     |  
|                                                      |                                                     |                                                      |          | (Issuer) |         |  | Subsidiaries |         |         | Subsidiaries  |        |         | Eliminations |  |          | Consolidated |         
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |         
|ASSETS                                                |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |          |        
|Current assets:                                       |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |          |        
|                                                      | Cash and cash equivalents                           |                                                      | $        |         |         |  | $            | 170     |         |               | $      | 4,264   |              |  | $        |             |          |   | $        | 4,434   |        
|                                                      | Accounts receivable, net                            |                                                      |          | 106      |         |  |              | 110,519 |         |               |        | 104,526 |              |  |          |             |          |   |          | 215,151 |        
|                                                      | Inventory                                           |                                                      |          |         |         |  |              | 3,515   |         |               |        | 2,228   |              |  |          |             |          |   |          | 5,743   |        
|                                                      | Prepaid expenses and other assets                   |                                                      |          |         |         |  |              | 4,602   |         |               |        | 3,706   |              |  |          |             |          |   |          | 8,308   |        
|                                                      | Deferred income taxes, net                          |                                                      |          |         |         |  |              | 1,966   |         |               |        | 4,771   |              |  |          |             |          |   |          | 6,737   |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total current assets                                 |          |          | 106     |  |              |         | 120,772 |               |        |         | 119,495      |  |          |              |         |   |          |         | 240,373 | 
|                                                     
|Property and equipment, net                           |                                                     |                                                      |         |          |         |  | 17,902       |         |         |               | 15,777 |         |              |  |         |              |          |   | 33,679   |        
|Goodwill, net                                         |                                                     |                                                      |         |          |         |  | 99,473       |         |         |               | 30,897 |         |              |  |         |              |          |   | 130,370  |        
|Investment in subsidiaries                            |                                                     |                                                      | 117,492  |          |         |  | 61,495       |         |         |               | 2,125  |         |              |  | (178,723 | )            |          |   | 2,389    |        
|Other assets                                          |                                                     |                                                      | 5,908    |          |         |  | 3,534        |         |         |               | 199    |         |              |  |         |              |          |   | 9,641    |        
|Deferred income taxes, net                            |                                                     |                                                      | 6,618    |          |         |  | 5,440        |         |         |               | 2,006  |         |              |  |         |              |          |   | 14,064   |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                      |                                                     | Total assets                                         |          | $        | 130,124 |  |              | $       | 308,616 |               |        | $       | 170,499      |  |          | $            | (178,723 | ) |          | $       | 430,516 | 
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)        |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |          |        
|Current liabilities:                                  |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |          |        
|                                                      | Notes payable and current portion of
long-term debt |                                                      | $        | 7,077    |         |  | $            |        |         |               | $      | 1,284   |              |  | $        |             |          |   | $        | 8,361   |        
|                                                      | Accounts payable and drafts                         |                                                      |          |         |         |  |              | 85,759  |         |               |        | 48,769  |              |  |          |             |          |   |          | 134,528 |        
|                                                      | Accrued liabilities                                 |                                                      |          | 3,285    |         |  |              | 45,165  |         |               |        | 37,459  |              |  |          |             |          |   |          | 85,909  |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total current liabilities                            |          |          | 10,362  |  |              |         | 130,924 |               |        |         | 87,512       |  |          |              |         |   |          |         | 228,798 | 
|                                                     
|Long-term debt                                        |                                                     |                                                      | 219,562  |          |         |  |             |         |         |               | 5,957  |         |              |  |         |              |          |   | 225,519  |        
|Intercompany accounts                                 |                                                     |                                                      | (65,361  | )        |         |  | 56,138       |         |         |               | 9,223  |         |              |  |         |              |          |   |         |        
|Long-term deferred compensation and other
liabilities |                                                     |                                                      |         |          |         |  | 2,911        |         |         |               | 7,667  |         |              |  |         |              |          |   | 10,578   |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total liabilities                                    |          |          | 164,563 |  |              |         | 189,973 |               |        |         | 110,359      |  |          |              |         |   |          |         | 464,895 | 
|                                                     
|Minority interests                                    |                                                     |                                                      |         |          |         |  |             |         |         |               | 60     |         |              |  |         |              |          |   | 60       |        
|Mandatorily Redeemable Series A Preferred Stock       |                                                     |                                                      | 77,084   |          |         |  |             |         |         |               |       |         |              |  |         |              |          |   | 77,084   |        
|Shareholders equity (deficit)                        |                                                     |                                                      | (111,523 | )        |         |  | 118,643      |         |         |               | 60,080 |         |              |  | (178,723 | )            |          |   | (111,523 | )      
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total liabilities and shareholders
equity (deficit) |          | $        | 130,124 |  |              | $       | 308,616 |               |        | $       | 170,499      |  |          | $            | (178,723 | ) |          | $       | 430,516 | 
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         

11



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##### Table of Contents



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



|12. |  | Guarantor and Non-Guarantor Subsidiaries:  continued
|--- |  | -----------------------------------------------------

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEETas of December 29, 2002

|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |          |         |         | 
|----------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------- | -------- | -------- | ------- |  | ------------ | ------- | ------- | ------------- | ------ | ------- | ------------ |  | -------- | ------------ | -------- | - | -------- | ------- | ------- | 
|                                                      |                                                     |                                                      |          | MSXI     |         |  | Guarantor    |         |         | Non-Guarantor |        |         |              |  |          |              | MSXI     |  
|                                                      |                                                     |                                                      |          | (Issuer) |         |  | Subsidiaries |         |         | Subsidiaries  |        |         | Eliminations |  |          | Consolidated |         
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |         
|ASSETS                                                |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |          |        
|Current assets:                                       |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |          |        
|                                                      | Cash and cash equivalents                           |                                                      | $        |         |         |  | $            | 154     |         |               | $      | 10,781  |              |  | $        |             |          |   | $        | 10,935  |        
|                                                      | Accounts receivable, net                            |                                                      |          | 181      |         |  |              | 108,616 |         |               |        | 103,160 |              |  |          |             |          |   |          | 211,957 |        
|                                                      | Inventory                                           |                                                      |          |         |         |  |              | 3,405   |         |               |        | 1,419   |              |  |          |             |          |   |          | 4,824   |        
|                                                      | Prepaid expenses and other assets                   |                                                      |          | 7        |         |  |              | 3,469   |         |               |        | 3,801   |              |  |          |             |          |   |          | 7,277   |        
|                                                      | Deferred income taxes, net                          |                                                      |          |         |         |  |              | 2,152   |         |               |        | 4,405   |              |  |          |             |          |   |          | 6,557   |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total current assets                                 |          |          | 188     |  |              |         | 117,796 |               |        |         | 123,566      |  |          |              |         |   |          |         | 241,550 | 
|                                                     
|Property and equipment, net                           |                                                     |                                                      |         |          |         |  | 21,097       |         |         |               | 18,089 |         |              |  |         |              |          |   | 39,186   |        
|Goodwill, net                                         |                                                     |                                                      |         |          |         |  | 99,473       |         |         |               | 27,781 |         |              |  |         |              |          |   | 127,254  |        
|Investment in subsidiaries                            |                                                     |                                                      | 108,502  |          |         |  | 57,167       |         |         |               | 2,222  |         |              |  | (165,519 | )            |          |   | 2,372    |        
|Other assets                                          |                                                     |                                                      | 5,972    |          |         |  | 3,159        |         |         |               | 229    |         |              |  |         |              |          |   | 9,360    |        
|Deferred income taxes, net                            |                                                     |                                                      | 4,661    |          |         |  | 6,001        |         |         |               | 2,158  |         |              |  |         |              |          |   | 12,820   |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                      |                                                     | Total assets                                         |          | $        | 119,323 |  |              | $       | 304,693 |               |        | $       | 174,045      |  |          | $            | (165,519 | ) |          | $       | 432,542 | 
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)        |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |          |        
|Current liabilities:                                  |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |          |        
|                                                      | Notes payable and current portion
of long-term debt |                                                      | $        | 6,461    |         |  | $            |        |         |               | $      | 8,210   |              |  | $        |             |          |   | $        | 14,671  |        
|                                                      | Accounts payable and drafts                         |                                                      |          |         |         |  |              | 78,965  |         |               |        | 53,393  |              |  |          |             |          |   |          | 132,358 |        
|                                                      | Accrued liabilities                                 |                                                      |          | 3,287    |         |  |              | 51,074  |         |               |        | 35,677  |              |  |          |             |          |   |          | 90,038  |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total current liabilities                            |          |          | 9,748   |  |              |         | 130,039 |               |        |         | 97,280       |  |          |              |         |   |          |         | 237,067 | 
|                                                     
|Long-term debt                                        |                                                     |                                                      | 217,445  |          |         |  |             |         |         |               | 2,558  |         |              |  |         |              |          |   | 220,003  |        
|Intercompany accounts                                 |                                                     |                                                      | (71,682  | )        |         |  | 61,729       |         |         |               | 9,953  |         |              |  |         |              |          |   |         |        
|Long-term deferred compensation and
other liabilities |                                                     |                                                      |         |          |         |  | 3,266        |         |         |               | 8,228  |         |              |  |         |              |          |   | 11,494   |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total liabilities                                    |          |          | 155,511 |  |              |         | 195,034 |               |        |         | 118,019      |  |          |              |         |   |          |         | 468,564 | 
|                                                     
|Minority interests                                    |                                                     |                                                      |         |          |         |  |             |         |         |               | 166    |         |              |  |         |              |          |   | 166      |        
|Redeemable Series A Preferred Stock                   |                                                     |                                                      | 72,629   |          |         |  |             |         |         |               |       |         |              |  |         |              |          |   | 72,629   |        
|Shareholders equity (deficit)                        |                                                     |                                                      | (108,817 | )        |         |  | 109,659      |         |         |               | 55,860 |         |              |  | (165,519 | )            |          |   | (108,817 | )      
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total liabilities and shareholders
equity (deficit) |          | $        | 119,323 |  |              | $       | 304,693 |               |        | $       | 174,045      |  |          | $            | (165,519 | ) |          | $       | 432,542 | 
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         

12



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##### Table of Contents



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



|12. |  | Guarantor and Non-Guarantor Subsidiaries:  continued
|--- |  | -----------------------------------------------------

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONSFor the fiscal quarters ended June 29, 2003 and June 30, 2002

|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |              |        |   |   |         |        |  
|---------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | - | -------- | ------ | - | ------------ | ------- | ------ | ------------- | - | ------ | ------------ | - | - | ------------ | ------ | - | - | ------- | ------ | -
|                                                                             |                                                                                     |   | MSXI     |        |   | Guarantor    |         |        | Non-Guarantor |   |        |              |   |   |              | MSXI   |  
|                                                                             |                                                                                     |   | (Issuer) |        |   | Subsidiaries |         |        | Subsidiaries  |   |        | Eliminations |   |   | Consolidated |       
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |              |       
|Fiscal Quarter Ended June 29, 2003:                                          |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |              |        |   |   |         |       
|Net sales                                                                    |                                                                                     | $ |         |        |   | $            | 101,838 |        |               | $ | 86,483 |              |   | $ | (2,586       | )      |   | $ | 185,735 |       
|Cost of sales                                                                |                                                                                     |   |         |        |   |              | 86,328  |        |               |   | 78,581 |              |   |   | (2,275       | )      |   |   | 162,634 |       
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|                                                                             | Gross profit                                                                        |   |          |       |   |              |         | 15,510 |               |   |        | 7,902        |   |   |              | (311   | ) |   |         | 23,101 |  
|Selling, general and administrative expenses                                 |                                                                                     |   |         |        |   |              | 7,340   |        |               |   | 8,382  |              |   |   |             |        |   |   | 15,722  |       
|Restructuring and severance costs                                            |                                                                                     |   |         |        |   |              | (55     | )      |               |   | 620    |              |   |   |             |        |   |   | 565     |       
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|                                                                             | Operating income                                                                    |   |          |       |   |              |         | 8,225  |               |   |        | (1,100       | ) |   |              | (311   | ) |   |         | 6,814  |  
|Interest income (expense), net                                               |                                                                                     |   | (5,345   | )      |   |              | (1,081  | )      |               |   | (207   | )            |   |   |             |        |   |   | (6,633  | )     
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|                                                                             | Income (loss) before income taxes,
minority interests and equity in affiliates      |   |          | (5,345 | ) |              |         | 7,144  |               |   |        | (1,307       | ) |   |              | (311   | ) |   |         | 181    |  
|Income tax provision (benefit)                                               |                                                                                     |   | (148     | )      |   |              | 393     |        |               |   | (113   | )            |   |   |             |        |   |   | 132     |       
|Minority interests and equity in affiliates                                  |                                                                                     |   | 5,307    |        |   |              | (1,049  | )      |               |   | 61     |              |   |   | (4,258       | )      |   |   | 61      |       
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|                                                                             | Income (loss) before cumulative effect of accounting change for goodwill
impairment |   |          | 110    |   |              |         | 5,702  |               |   |        | (1,133       | ) |   |              | (4,569 | ) |   |         | 110    |  
|Cumulative effect of accounting change for goodwill impairment, net of taxes |                                                                                     |   |         |        |   |              |        |        |               |   |       |              |   |   |             |        |   |   |        |       
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|                                                                             | Net income (loss)                                                                   |   | $        | 110    |   |              | $       | 5,702  |               |   | $      | (1,133       | ) |   | $            | (4,569 | ) |   | $       | 110    |  
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|Fiscal Quarter Ended June 30, 2002:                                          |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |              |        |   |   |         |       
|Net sales                                                                    |                                                                                     | $ |         |        |   | $            | 116,912 |        |               | $ | 98,425 |              |   | $ | (3,196       | )      |   | $ | 212,141 |       
|Cost of sales                                                                |                                                                                     |   |         |        |   |              | 102,405 |        |               |   | 86,331 |              |   |   | (3,196       | )      |   |   | 185,540 |       
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|                                                                             | Gross profit                                                                        |   |          |       |   |              |         | 14,507 |               |   |        | 12,094       |   |   |              |       |   |   |         | 26,601 |  
|Selling, general and administrative expenses                                 |                                                                                     |   |         |        |   |              | 11,980  |        |               |   | 8,704  |              |   |   |             |        |   |   | 20,684  |       
|Restructuring and severance costs                                            |                                                                                     |   |         |        |   |              | 147     |        |               |   |       |              |   |   |             |        |   |   | 147     |       
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|                                                                             | Operating income                                                                    |   |          |       |   |              |         | 2,380  |               |   |        | 3,390        |   |   |              |       |   |   |         | 5,770  |  
|Interest income (expense), net                                               |                                                                                     |   | (3,084   | )      |   |              | (2,699  | )      |               |   | (523   | )            |   |   |             |        |   |   | (6,306  | )     
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|                                                                             | Income (loss) before income taxes,
minority interests and equity in affiliates      |   |          | (3,084 | ) |              |         | (319   | )             |   |        | 2,867        |   |   |              |       |   |   |         | (536   | )
|Income tax provision (benefit)                                               |                                                                                     |   | (890     | )      |   |              | 1,105   |        |               |   | 1,351  |              |   |   |             |        |   |   | 1,566   |       
|Minority interests and equity in affiliates                                  |                                                                                     |   | (286     | )      |   |              | 1,138   |        |               |   | (277   | )            |   |   | (953         | )      |   |   | (378    | )     
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|                                                                             | Income (loss) before cumulative effect of
accounting change for goodwill impairment |   |          | (2,480 | ) |              |         | (286   | )             |   |        | 1,239        |   |   |              | (953   | ) |   |         | (2,480 | )
|Cumulative effect of accounting change for goodwill
impairment, net of taxes |                                                                                     |   |         |        |   |              |        |        |               |   |       |              |   |   |             |        |   |   |        |       
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             
|                                                                             | Net income (loss)                                                                   |   | $        | (2,480 | ) |              | $       | (286   | )             |   | $      | 1,239        |   |   | $            | (953   | ) |   | $       | (2,480 | )
|                                                                             |                                                                                     |   |          |        |   |              |         |        |               |   |        |              |   |   |             

13



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##### Table of Contents



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



|12. |  | Guarantor and Non-Guarantor Subsidiaries:  continued
|--- |  | -----------------------------------------------------

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONSFor the fiscal six months ended June 29, 2003 and June 30, 2002

|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |              |        |   |   |         |         |  
|---------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | - | -------- | ------- | - | ------------ | ------- | ------- | ------------- | - | ------- | ------------ | - | - | ------------ | ------ | - | - | ------- | ------- | -
|                                                                             |                                                                                     |   | MSXI     |         |   | Guarantor    |         |         | Non-Guarantor |   |         |              |   |   |              | MSXI   |  
|                                                                             |                                                                                     |   | (Issuer) |         |   | Subsidiaries |         |         | Subsidiaries  |   |         | Eliminations |   |   | Consolidated |       
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |              |       
|Fiscal Six Months Ended June 29, 2003:                                       |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |              |        |   |   |         |        
|Net sales                                                                    |                                                                                     | $ |         |         |   | $            | 204,877 |         |               | $ | 168,754 |              |   | $ | (4,545       | )      |   | $ | 369,086 |        
|Cost of sales                                                                |                                                                                     |   |         |         |   |              | 177,569 |         |               |   | 152,473 |              |   |   | (4,234       | )      |   |   | 325,808 |        
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Gross profit                                                                        |   |          |        |   |              |         | 27,308  |               |   |         | 16,281       |   |   |              | (311   | ) |   |         | 43,278  |  
|Selling, general and administrative expenses                                 |                                                                                     |   |         |         |   |              | 16,794  |         |               |   | 14,632  |              |   |   |             |        |   |   | 31,426  |        
|Restructuring and severance costs                                            |                                                                                     |   |         |         |   |              | 957     |         |               |   | 1,039   |              |   |   |             |        |   |   | 1,996   |        
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Operating income                                                                    |   |          |        |   |              |         | 9,557   |               |   |         | 610          |   |   |              | (311   | ) |   |         | 9,856   |  
|Interest income (expense), net                                               |                                                                                     |   | (8,694   | )       |   |              | (4,099  | )       |               |   | (515    | )            |   |   |             |        |   |   | (13,308 | )      
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Income (loss) before income taxes,
minority interests, and equity in affiliates     |   |          | (8,694  | ) |              |         | 5,458   |               |   |         | 95           |   |   |              | (311   | ) |   |         | (3,452  | )
|Income tax provision (benefit)                                               |                                                                                     |   | (1,443   | )       |   |              | 792     |         |               |   | 884     |              |   |   |             |        |   |   | 233     |        
|Minority interests and equity in affiliates                                  |                                                                                     |   | 3,801    |         |   |              | (865    | )       |               |   | 120     |              |   |   | (2,821       | )      |   |   | 235     |        
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Income (loss) before cumulative effect of accounting
change for goodwill impairment |   |          | (3,450  | ) |              |         | 3,801   |               |   |         | (669         | ) |   |              | (3,132 | ) |   |         | (3,450  | )
|Cumulative effect of accounting change for goodwill
impairment, net of taxes |                                                                                     |   |         |         |   |              |        |         |               |   |        |              |   |   |             |        |   |   |        |        
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Net income (loss)                                                                   |   | $        | (3,450  | ) |              | $       | 3,801   |               |   | $       | (669         | ) |   | $            | (3,132 | ) |   | $       | (3,450  | )
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|Fiscal Six Months Ended June 30, 2002:                                       |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |              |        |   |   |         |        
|Net sales                                                                    |                                                                                     | $ |         |         |   | $            | 231,393 |         |               | $ | 192,580 |              |   | $ | (6,359       | )      |   | $ | 417,614 |        
|Cost of sales                                                                |                                                                                     |   |         |         |   |              | 202,426 |         |               |   | 168,293 |              |   |   | (6,359       | )      |   |   | 364,360 |        
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Gross profit                                                                        |   |          |        |   |              |         | 28,967  |               |   |         | 24,287       |   |   |              |       |   |   |         | 53,254  |  
|Selling, general and administrative expenses                                 |                                                                                     |   |         |         |   |              | 23,441  |         |               |   | 17,108  |              |   |   |             |        |   |   | 40,549  |        
|Restructuring and severance costs                                            |                                                                                     |   |         |         |   |              | 382     |         |               |   | 43      |              |   |   |             |        |   |   | 425     |        
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Operating income                                                                    |   |          |        |   |              |         | 5,144   |               |   |         | 7,136        |   |   |              |       |   |   |         | 12,280  |  
|Interest income (expense), net                                               |                                                                                     |   | (6,204   | )       |   |              | (5,361  | )       |               |   | (1,002  | )            |   |   |             |        |   |   | (12,567 | )      
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Income (loss) before income taxes,
minority interests, and equity in affiliates     |   |          | (6,204  | ) |              |         | (217    | )             |   |         | 6,134        |   |   |              |       |   |   |         | (287    | )
|Income tax provision (benefit)                                               |                                                                                     |   | (2,169   | )       |   |              | 1,147   |         |               |   | 2,689   |              |   |   |             |        |   |   | 1,667   |        
|Minority interests and equity in affiliates                                  |                                                                                     |   | (36,637  | )       |   |              | (17,175 | )       |               |   | (377    | )            |   |   | 53,573       |        |   |   | (616    | )      
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Income (loss) before cumulative effect of accounting
change for goodwill impairment |   |          | (40,672 | ) |              |         | (18,539 | )             |   |         | 3,068        |   |   |              | 53,573 |   |   |         | (2,570  | )
|Cumulative effect of accounting change for goodwill
impairment, net of taxes |                                                                                     |   |         |         |   |              | (18,098 | )       |               |   | (20,004 | )            |   |   |             |        |   |   | (38,102 | )      
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             
|                                                                             | Net income (loss)                                                                   |   | $        | (40,672 | ) |              | $       | (36,637 | )             |   | $       | (16,936      | ) |   | $            | 53,573 |   |   | $       | (40,672 | )
|                                                                             |                                                                                     |   |          |         |   |              |         |         |               |   |         |              |   |   |             

14



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##### Table of Contents



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



|12. |  | Guarantor and Non-Guarantor Subsidiaries:  continued
|--- |  | -----------------------------------------------------

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSfor the six months ended June 29, 2003

|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |        |         |              |       |        |     |        |        |  
|---------------------------------------------------- | -------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ----- | -------- | ------ | ------- | ------------ | ------ | ------ | ------------- | --- | ------ | ------------ | ------ | ------- | ------------ | ----- | ------ | --- | ------ | ------ | -
|                                                     |                                                                      |                                                                                                     |                                                          |       | MSXI     |        |         | Guarantor    |        |        | Non-Guarantor |     |        |              |        |         |              | MSXI  |       
|                                                     |                                                                      |                                                                                                     |                                                          |       | (Issuer) |        |         | Subsidiaries |        |        | Subsidiaries  |     |        | Eliminations |        |         | Consolidated |      
|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |        |         |              |      
|Cash flows from operating activities:                |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |        |         |              |       |        |    
|                                                     |                                                                      | Net income (loss)                                                                                   |                                                          | $     | (3,450   | )      |         | $            | 3,801  |        |               | $   | (669   | )            |        | $       | (3,132       | )     |        | $   | (3,450 | )     
|                                                     |                                                                      | Adjustments to reconcile net income (loss) to net
cash
provided by (used for) operating activities: |                                                          |       |          |        |         |              |        |        |               |     |        |              |        |         |              |       |        |     |        |       
|                                                     |                                                                      |                                                                                                     | Equity in affiliates                                     |       |          | (3,801 | )       |              |        | 865    |               |     |        | (120         | )      |         |              | 2,821 |        |     |        | (235   | )
|                                                     |                                                                      |                                                                                                     | Depreciation                                             |       |          |       |         |              |        | 4,624  |               |     |        | 4,821        |        |         |              |      |        |     |        | 9,445  |  
|                                                     |                                                                      |                                                                                                     | Amortization of debt issuance costs                      |       |          | 1,072  |         |              |        |       |               |     |        |             |        |         |              |      |        |     |        | 1,072  |  
|                                                     |                                                                      |                                                                                                     | Deferred taxes                                           |       |          | (1,958 | )       |              |        | 747    |               |     |        | (224         | )      |         |              |      |        |     |        | (1,435 | )
|                                                     |                                                                      |                                                                                                     | Loss on sale/disposal of property and
equipment          |       |          |       |         |              |        | 101    |               |     |        | 231          |        |         |              |      |        |     |        | 332    |  
|                                                     |                                                                      |                                                                                                     | (Increase) decrease in receivables, net                  |       |          | 75     |         |              |        | (1,903 | )             |     |        | (1,366       | )      |         |              |      |        |     |        | (3,194 | )
|                                                     |                                                                      |                                                                                                     | (Increase) decrease in inventory                         |       |          |       |         |              |        | (111   | )             |     |        | (808         | )      |         |              |      |        |     |        | (919   | )
|                                                     |                                                                      |                                                                                                     | (Increase) decrease in prepaid expenses
and other assets |       |          | 7      |         |              |        | (1,134 | )             |     |        | 44           |        |         |              |      |        |     |        | (1,083 | )
|                                                     |                                                                      |                                                                                                     | Increase (decrease) in current liabilities               |       |          |       |         |              |        | 1,728  |               |     |        | (2,825       | )      |         |              |      |        |     |        | (1,097 | )
|                                                     |                                                                      |                                                                                                     | Other, net                                               |       |          | (1     | )       |              |        | (552   | )             |     |        | (330         | )      |         |              |      |        |     |        | (883   | )
|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |        |         |             
|Net cash provided by (used for) operating activities |                                                                      |                                                                                                     | (8,056                                                   | )     |          |        | 8,166   |              |        |        | (1,246        | )   |        |              | (311   | )       |              |       | (1,447 | )  
|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |       
|Cash flows from investing activities:                |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |        |         |              |       |        |    
|                                                     |                                                                      | Capital expenditures                                                                                |                                                          |       |         |        |         |              | (1,970 | )      |               |     | (1,784 | )            |        |         |             |       |        |     | (3,754 | )     
|                                                     |                                                                      | Proceeds from sale/disposal of equipment                                                            |                                                          |       |         |        |         |              | 672    |        |               |     | 619    |              |        |         |             |       |        |     | 1,291  |       
|                                                     |                                                                      | Other, net                                                                                          |                                                          |       |         |        |         |              | (397   | )      |               |     | (2     | )            |        |         |             |       |        |     | (399   | )     
|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |       
|Net cash provided by (used for) investing activities |                                                                      |                                                                                                     |                                                         |       |          |        | (1,695  | )            |        |        | (1,167        | )   |        |              |       |         |              |       | (2,862 | )  
|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |       
|Cash flows from financing activities:                |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |        |         |              |       |        |    
|                                                     |                                                                      | Intercompany                                                                                        |                                                          |       | 6,331    |        |         |              | (5,601 | )      |               |     | (730   | )            |        |         |             |       |        |     |       |       
|                                                     |                                                                      | Transactions with subsidiaries                                                                      |                                                          |       | (5,193   | )      |         |              | (5,194 | )      |               |     | (313   | )            |        |         | 10,700       |       |        |     |       |       
|                                                     |                                                                      | Repayment of debt                                                                                   |                                                          |       | (3,077   | )      |         |              | (10    | )      |               |     | (3,256 | )            |        |         |             |       |        |     | (6,343 | )     
|                                                     |                                                                      | Debt issuance costs                                                                                 |                                                          |       | (1,008   | )      |         |              |       |        |               |     |       |              |        |         |             |       |        |     | (1,008 | )     
|                                                     |                                                                      | Changes in revolving debt, net                                                                      |                                                          |       | 5,809    |        |         |              |       |        |               |     | (269   | )            |        |         |             |       |        |     | 5,540  |       
|                                                     |                                                                      | Changes in book overdrafts, net                                                                     |                                                          |       |         |        |         |              | (844   | )      |               |     | (6     | )            |        |         |             |       |        |     | (850   | )     
|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |        |         |             
|Net cash provided by (used for) financing activities |                                                                      |                                                                                                     | 2,862                                                    |       |          |        | (11,649 | )            |        |        | (4,574        | )   |        |              | 10,700 |         |              |       | (2,661 | )  
|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |       
|                                                     | Effect of foreign exchange rate changes on cash and
cash equivalents |                                                                                                     |                                                          | 5,194 |          |        |         | 5,194        |        |        |               | 470 |        |              |        | (10,389 | )            |       |        | 469 |       
|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |       
|Cash and cash equivalents:                           |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |        |         |              |       |        |    
|                                                     |                                                                      | Increase (decrease) for the period                                                                  |                                                          |       |         |        |         |              | 16     |        |               |     | (6,517 | )            |        |         |             |       |        |     | (6,501 | )     
|                                                     |                                                                      | Balance, beginning of period                                                                        |                                                          |       |         |        |         |              | 154    |        |               |     | 10,781 |              |        |         |             |       |        |     | 10,935 |       
|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |        |         |             
|                                                     |                                                                      | Balance, end of period                                                                              |                                                          | $     |         |        |         | $            | 170    |        |               | $   | 4,264  |              |        | $       |             |       |        | $   | 4,434  |       
|                                                     |                                                                      |                                                                                                     |                                                          |       |          |        |         |              |        |        |               |     |        |              |       

15



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##### Table of Contents



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



|12. |  | Guarantor and Non-Guarantor Subsidiaries:  continued
|--- |  | -----------------------------------------------------

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSfor the six months ended June 30, 2002

|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |        |              |         |   |        |         |         |  
|-------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ------ | -------- | ------ | - | ------------ | ------- | ------- | ------------- | ------ | ------- | ------------ | - | ------ | ------------ | ------- | - | ------ | ------- | ------- | -
|                                                                     |                                                                                                     |                                                                |        | MSXI     |        |   | Guarantor    |         |         | Non-Guarantor |        |         |              |   |        |              | MSXI    |  
|                                                                     |                                                                                                     |                                                                |        | (Issuer) |        |   | Subsidiaries |         |         | Subsidiaries  |        |         | Eliminations |   |        | Consolidated |        
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |        |              |        
|Cash flows from operating activities:                                |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |        |              |         |   |        |        
|                                                                     | Net income (loss)                                                                                   |                                                                | $      | (40,672  | )      |   | $            | (36,637 | )       |               | $      | (16,936 | )            |   | $      | 53,573       |         |   | $      | (40,672 | )      
|                                                                     | 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 affiliates                                           |        |          | 36,637 |   |              |         | 17,175  |               |        |         | 377          |   |        |              | (53,573 | ) |        |         | 616     |  
|                                                                     |                                                                                                     | Depreciation                                                   |        |          |       |   |              |         | 4,408   |               |        |         | 4,715        |   |        |              |        |   |        |         | 9,123   |  
|                                                                     |                                                                                                     | Amortization of debt issuance costs                            |        |          | 766    |   |              |         |        |               |        |         |             |   |        |              |        |   |        |         | 766     |  
|                                                                     |                                                                                                     | Deferred taxes                                                 |        |          | (3,085 | ) |              |         | 1,330   |               |        |         | (56          | ) |        |              |        |   |        |         | (1,811  | )
|                                                                     |                                                                                                     | Loss on sale/disposal of property and
equipment                |        |          |       |   |              |         | 13      |               |        |         | 212          |   |        |              |        |   |        |         | 225     |  
|                                                                     |                                                                                                     | (Increase) decrease in receivables, net                        |        |          | (100   | ) |              |         | 14,021  |               |        |         | (11,885      | ) |        |              |        |   |        |         | 2,036   |  
|                                                                     |                                                                                                     | (Increase) decrease in inventory                               |        |          |       |   |              |         | (660    | )             |        |         | (1,605       | ) |        |              |        |   |        |         | (2,265  | )
|                                                                     |                                                                                                     | (Increase) decrease in prepaid expenses
and other assets       |        |          | 63     |   |              |         | 2,132   |               |        |         | (2,475       | ) |        |              |        |   |        |         | (280    | )
|                                                                     |                                                                                                     | Increase (decrease) in current liabilities                     |        |          | (234   | ) |              |         | (22,001 | )             |        |         | 6,636        |   |        |              |        |   |        |         | (15,599 | )
|                                                                     |                                                                                                     | Other, net                                                     |        |          | (75    | ) |              |         | 441     |               |        |         | (412         | ) |        |              |         |   |        |         | (46     | )
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |        |             
|Net cash used for operating activities                               |                                                                                                     |                                                                | (6,700 | )        |        |   | (1,680       | )       |         |               | (1,425 | )       |              |   |       |              |         |   | (9,805 | )      
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |       
|Cash flows from investing activities:                                |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |        |              |         |   |        |        
|                                                                     | Capital expenditures                                                                                |                                                                |        |         |        |   |              | (5,138  | )       |               |        | (1,585  | )            |   |        |             |         |   |        | (6,723  | )      
|                                                                     | Acquisition of businesses, net of cash acquired                                                     |                                                                |        |         |        |   |              | (323    | )       |               |        | (2,691  | )            |   |        |             |         |   |        | (3,014  | )      
|                                                                     | Proceeds from sale/disposal of equipment                                                            |                                                                |        |         |        |   |              | 41      |         |               |        | 103     |              |   |        |             |         |   |        | 144     |        
|                                                                     | Other, net                                                                                          |                                                                |        |         |        |   |              | 1,891   |         |               |        |        |              |   |        |             |         |   |        | 1,891   |        
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |       
|Net cash used for investing activities                               |                                                                                                     |                                                                |       |          |        |   | (3,529       | )       |         |               | (4,173 | )       |              |   |       |              |         |   | (7,702 | )      
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |       
|Cash flows from financing activities:                                |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |        |              |         |   |        |        
|                                                                     | Intercompany                                                                                        |                                                                |        | 1,179    |        |   |              | 3,546   |         |               |        | (4,725  | )            |   |        |             |         |   |        |        |        
|                                                                     | Transactions with subsidiaries                                                                      |                                                                |        | (2,835   | )      |   |              | (2,372  | )       |               |        | (471    | )            |   |        | 5,678        |         |   |        |        |        
|                                                                     | Repayment of debt                                                                                   |                                                                |        | (13,745  | )      |   |              |        |         |               |        |        |              |   |        |             |         |   |        | (13,745 | )      
|                                                                     | Debt issuance costs                                                                                 |                                                                |        | (25      | )      |   |              |        |         |               |        |        |              |   |        |             |         |   |        | (25     | )      
|                                                                     | Changes in revolving debt, net                                                                      |                                                                |        | 19,500   |        |   |              |        |         |               |        | 6,990   |              |   |        |             |         |   |        | 26,490  |        
|                                                                     | Changes in book overdrafts, net                                                                     |                                                                |        |         |        |   |              | 4,444   |         |               |        | (16     | )            |   |        |             |         |   |        | 4,428   |        
|                                                                     | Repurchase of common and preferred stock                                                            |                                                                |        | (209     | )      |   |              |        |         |               |        |        |              |   |        |             |         |   |        | (209    | )      
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |        |             
|Net cash provided by financing activities                            |                                                                                                     |                                                                | 3,865  |          |        |   | 5,618        |         |         |               | 1,778  |         |              |   | 5,678  |              |         |   | 16,939 |        
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |       
|Effect of foreign exchange rate changes on cash and
cash equivalents |                                                                                                     |                                                                | 2,835  |          |        |   | 2,835        |         |         |               | 1,447  |         |              |   | (5,678 | )            |         |   | 1,439  |        
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |       
|                                                                     | Cash and cash equivalents:                                                                          |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |        |              |         |   |        |         |        
|                                                                     | Increase (decrease) for the period                                                                  |                                                                |        |         |        |   |              | 3,244   |         |               |        | (2,373  | )            |   |        |             |         |   |        | 871     |        
|                                                                     | Balance, beginning of period                                                                        |                                                                |        |         |        |   |              | 638     |         |               |        | 4,286   |              |   |        |             |         |   |        | 4,924   |        
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |       
|                                                                     | Balance, end of period                                                                              |                                                                | $      |         |        |   | $            | 3,882   |         |               | $      | 1,913   |              |   | $      |             |         |   | $      | 5,795   |        
|                                                                     |                                                                                                     |                                                                |        |          |        |   |              |         |         |               |        |         |              |   |       

16



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##### Table of Contents






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

Results of Operations

Outlook

As reflected in our year over year operating results, our business has
been challenged by reduced demand for information technology staffing
solutions, cost containment actions at out major customers and deferrals of
product development initiatives in the automotive industry resulting from
economic uncertainties. In response to these trends, we have taken, and
continue to take, actions to reduce indirect and overhead costs and discontinue
unprofitable operations while maintaining disciplined cash flow management. As
a result of these actions, we achieved significant improvements in operating
profit during the second quarter of 2003 versus both the first quarter of 2003
and fourth quarter of 2002. We believe our sales have now stabilized as we
have seen recent increases in new product development activity and
strengthening demand for technical staffing.

We remain focused on bundling our customized services into standardized
and scalable product offerings. We believe that this positioning of our
services as integrated solutions will improve our value proposition to existing
and prospective customers. Our strategy is to sell high value solutions by
leveraging our global organization and existing customer base. Although we
cannot provide assurance about the future, our actions are expected to improve
profitability, increase operating efficiencies, and expand our customer base,
including growth in non-automotive markets.

Net Sales

For the first six months of fiscal 2003, consolidated net sales decreased
$48.5 million, or 11.6%, from $417.6 million during fiscal 2002 to $369.1
million during fiscal 2003. For the second quarter of fiscal 2003,
consolidated net sales decreased $26.4 million, or 12.4%, from $212.1 million
in fiscal 2002 to $185.7 million during fiscal 2003. Overall, the decline in sales reflects
lower demand for automotive engineering and human capital management services and reductions from the
closure/sale of certain operations.
Spending on information technology projects and product development programs
remains lower versus early 2002. Although sales for the second quarter remain
unfavorable compared to last year, our sales have leveled off versus the first
quarter of 2003 and late 2002. Our sales by service line, net of intercompany
sales, were as follows:

|                   |                                      |                 |   |         |         |  |      |         |         |   |   |         |         |   |  |       |       |   
|------------------ | ------------------------------------ | --------------- | - | ------- | ------- |  | ---- | ------- | ------- | - | - | ------- | ------- | - |  | ----- | ----- | --
|                   |                                      |                 |   |         |         |  |      |         |         |   |   | Change  |        
|                   |                                      |                 |   |         |         |  |      |         |         |   |   |         |        
|                   |                                      |                 |   | 2003    |         |  | 2002 |         |         | $ |   |         | %       |  
|                   |                                      |                 |   |         |         |  |      |         |         |   |   |         |         |  
|                   | (dollars in thousands)               |                
|Fiscal Quarter:    |                                      |                 |   |         |         |  |      |         |         |   |   |         |         |   |  |      
|                   | Collaborative Engineering
Management |                 | $ | 50,556  |         |  | $    | 60,113  |         |   | $ | (9,557  | )       |   |  | (15.9 | %)   
|                   | Human Capital Management Services    |                 |   | 61,924  |         |  |      | 85,268  |         |   |   | (23,344 | )       |   |  | (27.4 | %)   
|                   | Technical and Marketing Services     |                 |   | 73,255  |         |  |      | 66,760  |         |   |   | 6,495   |         |   |  | 9.7   | %    
|                   |                                      |                 |   |         |         |  |      |         |         |   |   |         |        
|                   |                                      | Total net sales |   | $       | 185,735 |  |      | $       | 212,141 |   |   | $       | (26,406 | ) |  |       | (12.4 | )%
|                   |                                      |                 |   |         |         |  |      |         |         |   |   |         |        
|Fiscal Six Months: |                                      |                 |   |         |         |  |      |         |         |   |   |         |         |   |  |      
|                   | Collaborative Engineering
Management |                 | $ | 101,324 |         |  | $    | 117,252 |         |   | $ | (15,928 | )       |   |  | (13.6 | %)   
|                   | Human Capital Management Services    |                 |   | 127,011 |         |  |      | 170,126 |         |   |   | (43,115 | )       |   |  | (25.3 | %)   
|                   | Technical and Marketing Services     |                 |   | 140,751 |         |  |      | 130,236 |         |   |   | 10,515  |         |   |  | 8.1   | %    
|                   |                                      |                 |   |         |         |  |      |         |         |   |   |         |        
|                   |                                      | Total net sales |   | $       | 369,086 |  |      | $       | 417,614 |   |   | $       | (48,528 | ) |  |       | (11.6 | )%
|                   |                                      |                 |   |         |         |  |      |         |         |   |   |         |        

Sales of collaborative engineering services reflect declining volumes in
our European operations and improved exchange rates on sales resulting in a net decrease
of $10.6 million and $19.8 million in Europe versus the second quarter and
first six months of 2002, respectively. Our sales were relatively flat for our
North American engineering operations. Our European engineering operations
have been challenged by cost reduction programs and delayed product development
efforts at key customers. The decline in human capital management services
reflects reduced volumes in our engineering staffing in North America and
Europe and reduced volumes of information technology and technical staffing
services in our North American markets. The decrease in human capital
management sales during the second quarter and the first six months of 2003
includes $7.4 million and an $11.8 million, respectively, of reductions as a
result of the closure/sale of certain unprofitable operations as part of our
2002 cost reduction plan. In addition, our master vendor programs reflect
price reductions negotiated with customers. Sales of technical and marketing
services improved versus 2002 as a result of favorable exchange rate changes in our
European operations. Excluding the impact of foreign exchange rate changes,
sales of technical and marketing services for the second quarter and the first six months of 2003 decreased
about $2.2 million, or 3.3% and $6.0 million or 4.6%, respectively, versus
2002. The decrease reflects reduced demand for custom communication services
in Italy due to program delays by our customers and lower volumes in North
America.

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

Operating Profit

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

|                   |                  |                        |   |        |      |   |      |        |      |   |   |        |     |  |  |       |     | 
|------------------ | ---------------- | ---------------------- | - | ------ | ---- | - | ---- | ------ | ---- | - | - | ------ | --- |  |  | ----- | --- | 
|                   |                  |                        |   |        |      |   |      |        |      |   |   | Change |    
|                   |                  |                        |   |        |      |   |      |        |      |   |   |        |    
|                   |                  |                        |   | 2003   |      |   | 2002 |        |      | $ |   |        | %   | 
|                   |                  |                        |   |        |      |   |      |        |      |   |   |        |     | 
|Fiscal Quarter:    |                  | (dollars in thousands) |  
|                   | Gross profit     |                        | $ | 23,101 |      |   | $    | 26,601 |      |   | $ | (3,500 | )   |  |  | (13.2 | )% 
|                   |                  | % of net sales         |   |        | 12.4 | % |      |        | 12.5 | % |   |        | n/a |  |  |       | n/a | 
|                   | Operating income |                        | $ | 6,814  |      |   | $    | 5,770  |      |   | $ | 1,044  |     |  |  | 18.1  | %  
|                   |                  | % of net sales         |   |        | 3.7  | % |      |        | 2.7  | % |   |        | n/a |  |  |       | n/a | 
|Fiscal Six Months: |                  |                        |   |        |      |   |      |        |      |   |   |        |     |  |  |      
|                   | Gross profit     |                        | $ | 43,278 |      |   | $    | 53,254 |      |   | $ | (9,976 | )   |  |  | (18.7 | )% 
|                   |                  | % of net sales         |   |        | 11.7 | % |      |        | 12.8 | % |   |        | n/a |  |  |       | n/a | 
|                   | Operating income |                        | $ | 9,856  |      |   | $    | 12,280 |      |   | $ | (2,424 | )   |  |  | (19.7 | )% 
|                   |                  | % of net sales         |   |        | 2.7  | % |      |        | 2.9  | % |   |        | 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. The impact of reduced volumes and pricing
pressures was partially offset by cost reductions implemented throughout the
company. Our cost reduction programs have focused primarily on indirect labor
and related fringe benefit costs, elimination of unprofitable operations, and
other indirect operating costs. These initiatives resulted in overall savings
in excess of $4.0 million for the first six months of 2003. Gross profit as a
percentage of sales declined to 12.4% for the second quarter and 11.7% for the
first six months of 2003 compared to 12.5% and 12.8% during the corresponding
periods of 2002. The decrease as a percent of sales for the first six months
of 2003 reflects unfavorable absorption of certain fixed costs, including
unutilized facilities. In response to this trend, several facility
consolidations and/or closures were completed during the first six months of
2003 resulting in lease termination penalties of $0.9 million included in gross
margin.

Selling, general and administrative expenses decreased $5.0 million and
$9.1 million compared to the second quarter and first six months of 2002,
respectively. Selling, general and administrative expenses, as a percentage of
net sales, were 8.5% during the first six months of fiscal 2003 compared to
9.7% in the comparable period of fiscal 2002. The decreases resulted from
cost reduction programs implemented across the company in late 2001 and
throughout 2002. These reductions are expected to result in annualized savings
of approximately $16 million during 2003. Cost savings achieved were partially
offset by additional restructuring costs totaling $2.0 million for the first
six months of 2003. Restructuring costs include additional severance for
targeted areas in Europe and North America, primarily in our engineering and
supply chain management businesses.

Interest expense

Interest expense increased from $6.3 million during the second quarter of
2002 to $6.6 million during the second quarter of 2003, a $0.3 million
increase. For the first six months of 2003, interest expense increased $0.7
million versus 2002. The impact of reductions in average bank borrowings
outstanding were more than offset by increased interest on our second secured
term loan and additional amortization of debt issuance costs associated with
amendments to our bank facility. Interest rates on bank debt for the second
quarter and for the six months ended 2003 were slightly higher than the
comparable periods of 2002 primarily as a result of amendments to our bank
facility during the third quarter of 2002 and first quarter of 2003.

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

Income taxes

Income tax expense was $0.1 million and $0.2 million during the second
quarter and first six months of 2003, respectively. This compares to income
tax expense of $1.6 million and $1.7 million for the comparable time periods of
2002. A tax provision was recorded on pre-tax losses during 2003 primarily as
a result of valuation allowances established against losses from certain
European and North American operations. The effect of valuation allowances,
combined with taxable income in other tax jurisdictions, resulted in a net
provision during 2003 despite an overall loss before taxes for the six months
ended 2003. Valuation allowances were required for selected operations where,
based on current facts and circumstances, management determined that the
likelihood of realizing deferred tax assets, including net operating loss
carryforwards, was not sufficient to allow for recognition of the assets.

Minority interest/equity in affiliates

Minority interests and equity losses improved from an expense of $0.6
million during the first six months of 2002 to income of $0.2 million during
the first six months of 2003. Expense during 2002 included minority interest
cost of $0.5 million related to a 25% minority stake in Satiz and $0.2 million
of equity losses from our investment in MTE Groups LLC. We acquired the
minority interest in Satiz and wrote off our remaining investment in MTE during
the fourth quarter of 2002.

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 fair value approach
instead of amortizing such intangibles over specified periods. Effective
January 1, 2002, we evaluated the fair 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 one-time, non-cash charge of
$47.8 million ($38.1 million after taxes). The impairment charge relates to
our collaborative engineering and human capital management service lines. Both
of these areas experienced significant downturns during 2001 due to reduced
demand for selected services and price reductions implemented by certain
customers. The impact of the declines had a significant impact on current
valuations when compared to prior performance levels and growth rates.
Adoption of SFAS No. 142 required that we record this charge during the first
quarter of 2002 as a cumulative adjustment from adoption of the new rules.

Determining fair 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.

Liquidity and Capital Resources

Cash Flows

General.Our principal capital requirements are for working capital,
product development initiatives, and capital expenditures for customer
programs. 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.

Operating Activities. Net cash used for operating activities was $1.4
million for the first six months of 2003 compared to $9.8 million during the
comparable period of 2002. The improvement in cash used resulted from changes in our working capital due primarily to the timing of vendor payments relative to the close of the fiscal period.

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

Investing Activities.Net cash used for investing activities decreased $4.8
million from $7.7 million for the first six months of 2002 to $2.9 million for
the first six months of 2003. Capital expenditure requirements for current
programs decreased commensurate with the current lower volumes in business
while discretionary spending was reduced as a result of management initiatives.
Cash used to acquire businesses during 2002 included funding of the Draupner
Associates AB acquisition and the acquisition of the remaining outstanding
common stock of Cadform-MSX Engineering GmbH. Proceeds from the sale/disposal
of equipment were the result of the company disposing of idle or obsolete
equipment. Other cash from investing activities during the first six months of
2002 primarily represents the refund of escrow funds related to an investment
in MTE Groups LLC as a result of their non-attainment of earnings targets.

Financing Activities. Net cash used in financing activities was $2.7 million for the first six months of 2003 compared to cash provided by financing activities of $16.9 million for the first six months of 2002.
Financing requirements during the first six months of 2002 increased to fund
investments and provide for changes in working capital. Repayment of
debt during 2002 includes a mandatory prepayment totaling $9.1 million as a
result of cash flows generated during fiscal 2001. Under the terms of our
credit agreement, we are 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.

Available Financing Sources

Our total indebtedness as of June 29, 2003 consists of senior subordinated notes, our second
secured term loan, borrowings under our credit facilities and borrowings under
various short-term arrangements. In addition to our total indebtedness, we
also have contingent commitments under letters of credit totaling about $4.9
million, without duplication, at June 29, 2003.

Available borrowings under our credit facility as of June 29, 2003 are
subject to adequate accounts receivable balance requirements. As of June 29,
2003 we have $65.6 million of unutilized capacity under the revolving credit
portion of our credit facility of which $46.9 million was available for
immediate borrowing based on eligible accounts receivable as determined in
accordance with our credit agreement, as amended.

On August 1, 2003 we completed a private offering of senior secured notes
and mezzanine term notes, both maturing October 15, 2007. We also entered into
a new three-year senior secured revolving credit facility that consists of a
$40.0 million revolving credit agreement plus an additional $5 million
available exclusively for the issuance of letters of credit. In addition we
also amended the terms of certain of our other debt obligations. Proceeds from
the offering were used to repay term loans and revolving debt under our credit
facilities that matured between December 2004 and December 2006. These
transactions refinance our current obligations over a longer term and remove certain restrictive covenants in place under prior arrangements.

New Accounting Pronouncement

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS
No. 150, Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity. SFAS No. 150 establishes standards for how
companies classify and measure in their statement of financial position certain
financial instruments with characteristics of both liabilities and equity. It
requires that a company classify certain financial instruments as liabilities
because they embody an obligation of the company. This statement is effective
for financial instruments entered into or modified after May 31, 2003 except
for mandatorily redeemable financial instruments for nonpublic entities. For
nonpublic entities, with mandatorily redeemable financial instruments, such as MSXI, this
statement is effective for the first fiscal period beginning after December 15,
2003. The Company is in the process of assessing the impact that SFAS No. 150
will have on the consolidated results of operations and financial position.

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

Forward - Looking Statements

Certain of the statements made in this report on Form 10Q, including the
success of restructuring activities and other operational improvements,
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements may be identified by
the use of forward looking terminology such as believes, expects,
estimates, will, should, plans, anticipates or the negative thereof
or other variations thereon or comparable terminology, or by discussions of
strategy. Such forward-looking statements are based on current management
projections and expectations. They involve significant risks and
uncertainties. As such, they are not guarantees of future performance. MSX
International disclaims any intent or obligation to update such statements.

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 important factors include: our leverage and
related exposure to changes in interest rates; our reliance on major customers
in the automotive industry and the timing of their product development and
other initiatives; the market demand for our technical business services in
general; our ability to recruit and place qualified personnel; delays or
unexpected costs associated with cost reduction efforts; risks associated with
operating internationally, including economic, political and currency risks;
and risks associated with our acquisition strategy. Additional information
concerning these and other factors are discussed in MSX Internationals
Registration Statement on Form S-4 (dated July 20, 1999) and in other filings
with the Securities and Exchange Commission.

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|ITEM 4. |  | CONTROLS AND PROCEDURES
|------- |  | -----------------------

As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of MSX
International, Inc.s Disclosure Committee and management, including the Chief
Executive Officer and the Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to
Exchange Act Rules 13a-15. Based upon this evaluation the Chief Executive
Officer and the Chief Financial Officer concluded that our disclosure controls
and procedures are effective to ensure that information required to be
disclosed in our periodic SEC reports is recorded, processed, summarized, and
reported as and when required. In addition, they concluded that no significant
deficiencies in the design or operation of internal controls existed which
could significantly affect our ability to record, process, summarize and report
financial data.

There have been no significant changes in internal control over financial
reporting that have materially affected, or is reasonably likely to materially
affect our internal control over financial reporting.

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PART II.  OTHER INFORMATION






|ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K
|------- |  | --------------------------------



| | (a) |  | Exhibits:
| | --- |  | ---------

|     |  |  |                                                                                                                                                      
|---- |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  |  | Certification of Chief Financial Officer
pursuant to rules 13a-15(e) and 15d-15(e) promulgated under
the Securities Exchange Act of 1934, as amended.
|     |  |  |                                                                                                                                                      
|31.2 |  |  | Certification of Chief Executive Officer
pursuant to rules 13a-15(e) and 15d-15(e) promulgated under
the Securities Exchange Act of 1934, as amended.
|     |  |  |                                                                                                                                                      
|32.1 |  |  | Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to section 906 of the Sarbanes -
Oxley Act of 2002                             
|     |  |  |                                                                                                                                                      
|99.1 |  |  | Press release announcing 2nd quarter results                                                                                                         



| | (b) |  | Reports on Form 8-K:                                                                                                                                                            
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | During the period covered by this report, a form 8-K was filed on May 12, 2003
reporting under Item 9. Regulation FD Disclosure the announcement of our
first quarter results.

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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: August 8, 2003

MSX INTERNATIONAL, INC.
(Registrant)



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

(Chief accounting officer
and authorized signatory)

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EXHIBIT INDEX

|            |  |                                                                                                                                                       | 
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- | 
|EXHIBIT NO. |  | DESCRIPTION                                                                                                                                          
|            |  |                                                                                                                                                      
|31.1        |  | Certification of Chief Financial Officer
pursuant to rules 13a-15(e) and 15d-15(e) promulgated under
the Securities Exchange Act of 1934, as amended.
|            |  |                                                                                                                                                       | 
|31.2        |  | Certification of Chief Executive Officer
pursuant to rules 13a-15(e) and 15d-15(e) promulgated under
the Securities Exchange Act of 1934, as amended.
|            |  |                                                                                                                                                       | 
|32.1        |  | Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to section 906 of the Sarbanes -
Oxley Act of 2002                             
|            |  |                                                                                                                                                       | 
|99.1        |  | Press release announcing 2nd quarter results                                                                                                         

25