##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended July 2, 2006
 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.
  Delaware
    
    38-3323099(State or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)1950 Concept Drive, Warren, Michigan
    
    48091(Address of principal executive offices)
    
    (Zip Code)
 (248) 299-1000
 þ o
  o o þ
 o þ




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##### 



MSX INTERNATIONAL, INC.
 INDEX
 PagesPART I.FINANCIAL INFORMATIONITEM 1.Financial Statements (unaudited):Consolidated Balance Sheets as of July 2, 2006 and
January 1, 2006
    
    
    2Consolidated Statements of Operations for the fiscal quarters and fiscal six months
ended July 2, 2006 and July 3, 2005
    
    
    3Consolidated Statements of Cash Flows for the fiscal six months
ended July 2, 2006 and July 3, 2005
    
    
    4Notes to Consolidated Financial Statements
    
    
    5ITEM 2.Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    28ITEM 4.Controls and Procedures
    
    
    36PART II.OTHER INFORMATIONITEM 1.Legal Proceedings
    
    
    37ITEM 1A.Risk Factors
    
    
    37ITEM 4.Submission of Matters to a Vote of Security Holders
    
    
    37ITEM 6. Exhibits
    
    
    37SIGNATURE
    
    
    38Certification of Chief Financial Officer to rules 13a-15(e) and 15d-15(e)Certification of Chief Executive Officer to rules 13a-15(e) and 15d-15(e)Certification pursuant to 18 U.S.C. Section 1350Press Release
  1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 MSX INTERNATIONAL, INC.
 
 CONSOLIDATED BALANCE SHEETS (Unaudited)
 as of July 2, 2006 and January 1, 2006
 July 2,
    
    
    January 1,2006
    
    
    2006(in thousands, except share amounts)ASSETSCurrent assets:Cash and cash equivalents (including $3.9
million and $5.0 million of
restricted cash, respectively) (Note 6)
    
    $
    26,547
    
    
    $
    27,737Accounts receivable, net (Note 4)
    
    
    93,629
    
    
    
    96,684Inventory
    
    
    801
    
    
    
    785Prepaid expenses and other assets
    
    
    3,819
    
    
    
    3,708Assets held for sale (Note 2)
    
    
    3,317
    
    
    
    36,229Deferred income taxes, net
    
    
    5,485
    
    
    
    5,634Total current assets
    
    
    133,598
    
    
    
    170,777Property and equipment, net
    
    
    3,294
    
    
    
    3,757Goodwill, net (Note 5)
    
    
    25,773
    
    
    
    26,504Assets held for sale (Note 2)
    
    
    1,683
    
    
    
    5,588Other assets
    
    
    6,050
    
    
    
    6,810Deferred income taxes, net
    
    
    
    
    
    
    1,000Total assets
    
    $
    170,398
    
    
    $
    214,436LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Notes Payable and current portion of debt
(Note 6)
    
    $
    3,332
    
    
    $
    Accounts payable and drafts
    
    
    55,823
    
    
    
    63,467Accrued payroll and benefits
    
    
    17,210
    
    
    
    19,906Liabilities held for sale (Note 2)
    
    
    1,739
    
    
    
    31,332Other accrued liabilities
    
    
    40,627
    
    
    
    41,771Total current
liabilities
    
    
    118,731
    
    
    
    156,476Long-term debt (Note 6)
    
    
    254,600
    
    
    
    251,688Long-term deferred compensation liabilities and other
    
    
    4,257
    
    
    
    5,402Liabilities held for sale (Note 2)
    
    
    
    
    
    
    9,138Deferred income taxes, net
    
    
    142
    
    
    
    Total liabilities
    
    
    377,730
    
    
    
    422,704Commitments and contingencies (Note 7)
    
    
    
    
    
    
    Redeemable Series A Preferred Stock (Note 8)
    
    
    108,702
    
    
    
    102,566Shareholders deficitCommon Stock, $.01 par value, 5,000,000
aggregate shares of each of
Class A and Class B
Common Stock
authorized; 486,354
shares of
Class A Common
Stock issued and
outstanding
    
    
    5
    
    
    
    5Additional paid-in capital
    
    
    (24,881
    )
    
    
    (24,881
    )Common stock purchase warrants
    
    
    750
    
    
    
    750Accumulated other comprehensive loss
    
    
    (5,382
    )
    
    
    (2,602
    )Retained deficit
    
    
    (286,526
    )
    
    
    (284,106
    )Total shareholders
deficit
    
    
    (316,034
    )
    
    
    (310,834
    )Total liabilities
and shareholders
deficit
    
    $
    170,398
    
    
    $
    214,436
 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 July 2, 2006 and July 3, 2005
 Fiscal Quarter Ended
    
    
    Fiscal Six Months EndedJuly 2,
    
    
    July 3,
    
    
    July 2,
    
    
    July 3,2006
    
    
    2005
    
    
    2006
    
    
    2005(in thousands)Net sales
    
    $
    87,160
    
    
    $
    104,566
    
    
    $
    175,780
    
    
    $
    205,655Cost of sales
    
    
    71,636
    
    
    
    88,020
    
    
    
    144,498
    
    
    
    172,614Gross profit
    
    
    15,524
    
    
    
    16,546
    
    
    
    31,282
    
    
    
    33,041Selling, general and administrative expenses
    
    
    6,960
    
    
    
    7,139
    
    
    
    13,760
    
    
    
    15,653Restructuring and severance costs (Note 3)
    
    
    232
    
    
    
    324
    
    
    
    415
    
    
    
    450Income from continuing operations
before interest and income taxes
    
    
    8,332
    
    
    
    9,083
    
    
    
    17,107
    
    
    
    16,938Interest expense, net
    
    
    7,308
    
    
    
    8,967
    
    
    
    14,953
    
    
    
    17,471Income (loss) from continuing
operations before income taxes
    
    
    1,024
    
    
    
    116
    
    
    
    2,154
    
    
    
    (533
    )Income tax provision
    
    
    1,846
    
    
    
    323
    
    
    
    3,497
    
    
    
    1,563Loss from continuing operations
    
    
    (822
    )
    
    
    (207
    )
    
    
    (1,343
    )
    
    
    (2,096
    )Income (loss) from discontinued operations, net
of taxes (Note 2)
    
    
    3,785
    
    
    
    (4,237
    )
    
    
    5,060
    
    
    
    (17,184
    )Net income (loss)
    
    
    2,963
    
    
    
    (4,444
    )
    
    
    3,717
    
    
    
    (19,280
    )Accretion for redemption of preferred stock
    
    
    (3,068
    )
    
    
    (2,732
    )
    
    
    (6,137
    )
    
    
    (5,464
    )Net loss available to common shareholders
    
    $
    (105
    )
    
    $
    (7,176
    )
    
    $
    (2,420
    )
    
    $
    (24,744
    )
 The accompanying notes are an integral part of the consolidated financial statements
 3




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MSX INTERNATIONAL, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)  for the fiscal six months ended July 2, 2006 and July 3, 2005
 Fiscal Six Months EndedJuly 2,
    
    
    July 3,2006
    
    
    2005(in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    3,717
    
    
    $
    (19,280
    )Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:Net (gain) loss on sale of businesses
    
    
    (4,071
    )
    
    
    3,998Depreciation
    
    
    1,428
    
    
    
    3,516Goodwill impairment charges
    
    
    
    
    
    
    7,131Amortization of debt issuance costs
    
    
    2,611
    
    
    
    2,287Deferred income taxes
    
    
    1,771
    
    
    
    434(Gain) loss on sale/disposal of property and equipment
    
    
    44
    
    
    
    (100
    )(Increase) decrease in receivables, net
    
    
    9,627
    
    
    
    21,001(Increase) decrease in inventory
    
    
    (62
    )
    
    
    1,680(Increase) decrease in prepaid expenses and other assets
    
    
    (171
    )
    
    
    (924
    )Increase (decrease) in current liabilities
    
    
    (14,132
    )
    
    
    (5,424
    )Other, net
    
    
    (997
    )
    
    
    (1,694
    )Net cash provided by (used for) operating activities
    
    
    (235
    )
    
    
    12,625Cash flows from investing activities:Capital expenditures
    
    
    (1,130
    )
    
    
    (1,586
    )Payments for contingent consideration
    
    
    (1,208
    )
    
    
    (1,208
    )Proceeds from sale of businesses, net of related expenses
    
    
    5,610
    
    
    
    5,041Proceeds from sale/disposal of property and equipment
    
    
    91
    
    
    
    202Net cash provided by investing activities
    
    
    3,363
    
    
    
    2,449Cash flows from financing activities:Debt issuance costs
    
    
    (570
    )
    
    
    (19
    )Changes in revolving debt, net
    
    
    1,946
    
    
    
    (8,605
    )Repayment of long term debt
    
    
    (1,228
    )
    
    
    Changes in book overdrafts, net
    
    
    (4,220
    )
    
    
    (6,166
    )Net cash used for financing activities
    
    
    (4,072
    )
    
    
    (14,790
    )Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    (519
    )
    
    
    (1,567
    )Cash and cash equivalents:Decrease for the period
    
    
    (1,463
    )
    
    
    (1,283
    )Balance, beginning of period (including $273 of cash held for sale
at January 1, 2006)
    
    
    28,010
    
    
    
    34,377Balance, end of period (including $941 of cash held for sale
at July 3, 2005)
    
    $
    26,547
    
    
    $
    33,094
 The accompanying notes are an integral part of the consolidated financial statements
 4




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MSX International, Inc.
 
 Notes to Consolidated
Financial Statements (Unaudited)
 1. Organization and Basis of Presentation
   2. Discontinued Operations
   Assets Held for Sale
 At July 2, 2006
 
    
    MSX International Engineering GmbH, our remaining
engineering operations in Germany
 At January 1, 2006
 
    
    MSX International Engineering GmbH, our remaining
engineering operations in Germany
    
    Satiz S.r.l., our Italian technical and commercial publishing
business (sold April 21, 2006)
    
    Creative Technology Services, LLC (sold
January 19, 2006)
 5




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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
  At July 2,
    
    
    At January 1,2006
    
    
    2006Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    273Accounts receivable, net
    
    
    3,181
    
    
    
    27,188Inventory
    
    
    
    
    
    
    6,657Prepaid expenses
    
    
    136
    
    
    
    373Deferred tax assets
    
    
    
    
    
    
    1,738Total current assets held for sale
    
    
    3,317
    
    
    
    36,229Property and equipment, net
    
    
    1,289
    
    
    
    4,765Goodwill, net
    
    
    394
    
    
    
    372Other assets
    
    
    
    
    
    
    313Deferred tax assets
    
    
    
    
    
    
    138Total assets held for sale
    
    
    5,000
    
    
    
    41,817Liabilities:Note payable and
current portion of
long-term debt
    
    
    
    
    
    
    1,084Accounts payable and drafts
    
    
    286
    
    
    
    22,535Accrued payroll and
benefits
    
    
    717
    
    
    
    5,755Other accrued
liabilities
    
    
    736
    
    
    
    1,958Total current
liabilities held for
sale
    
    
    1,739
    
    
    
    31,332Long-term deferred
compensation
liabilities and other
    
    
    
    
    
    
    7,532Deferred tax liabilities
    
    
    
    
    
    
    1,606Total liabilities held for sale
    
    
    1,739
    
    
    
    40,470Net assets held for sale
    
    $
    3,261
    
    
    $
    1,347
  Fiscal Quarter Ended
    
    
    Fiscal Six Months EndedJuly 2,
    
    
    July 3,
    
    
    July 2,
    
    
    July 3,2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    7,835
    
    
    $
    44,722
    
    
    $
    30,377
    
    
    $
    89,569Cost of sales
    
    
    7,437
    
    
    
    40,915
    
    
    
    27,383
    
    
    
    83,429Gross profit
    
    
    398
    
    
    
    3,807
    
    
    
    2,994
    
    
    
    6,140Selling, general and administrative expense
    
    
    146
    
    
    
    2,710
    
    
    
    1,851
    
    
    
    5,442Restructuring and severance
    
    
    
    
    
    
    22
    
    
    
    11
    
    
    
    6,655Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,131Operating income
(loss)
    
    
    252
    
    
    
    1,075
    
    
    
    1,132
    
    
    
    (13,088
    )Interest expense, net
    
    
    52
    
    
    
    52
    
    
    
    49
    
    
    
    69Net gain (loss) on sale of businesses
    
    
    3,601
    
    
    
    (3,998
    )
    
    
    4,071
    
    
    
    (3,998
    )Income (loss)
before taxes, net
    
    
    3,801
    
    
    
    (2,975
    )
    
    
    5,154
    
    
    
    (17,155
    )Income tax expense
    
    
    16
    
    
    
    1,262
    
    
    
    94
    
    
    
    29Income (loss) from
discontinued
operations
    
    $
    3,785
    
    
    $
    (4,237
    )
    
    $
    5,060
    
    
    $
    (17,184
    )
 6




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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
        Fiscal Six Months EndedJuly 2,
    
    
    July 3,2006
    
    
    2005Gross sale price:Proceeds from sale
    
    $
    9,147
    
    
    $
    7,872Note receivable from sale
    
    
    250
    
    
    
    Total consideration
    
    
    9,397
    
    
    
    7,872Cumulative currency translation
gain
    
    
    2,643
    
    
    
    Less:Net assets sold
    
    
    859
    
    
    
    7,803Assumption of debt
    
    
    5,368
    
    
    
    Reserves and expenses
    
    
    1,742
    
    
    
    4,067Gain (loss) on sales, net
    
    $
    4,071
    
    
    $
    (3,998
    )
 7




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
  2006
    
    
    2005Assets:Cash and cash equivalents
    
    $
    459
    
    
    $
    181Accounts receivable, net
    
    
    19,663
    
    
    
    10,470Inventory
    
    
    6,702
    
    
    
    Prepaid expenses
    
    
    334
    
    
    
    975Deferred tax assets -
current
    
    
    2,383
    
    
    
    Total current assets sold
    
    
    29,541
    
    
    
    11,626Property and equipment, net
    
    
    3,819
    
    
    
    1,936Goodwill, net
    
    
    732
    
    
    
    Other assets
    
    
    975
    
    
    
    Total assets sold
    
    
    35,067
    
    
    
    13,562Liabilities:Current portion of debt
    
    
    2,775
    
    
    
    Accounts payable and drafts
    
    
    17,504
    
    
    
    1,127Accrued payroll and
benefits
    
    
    3,043
    
    
    
    1,918Other accrued liabilities
    
    
    1,204
    
    
    
    2,714Total current
liabilities sold
    
    
    24,526
    
    
    
    5,759Deferred compensation
and other liabilities
    
    
    6,265
    
    
    
    Deferred tax liability
    
    
    3,417
    
    
    
    Total liabilities sold
    
    
    34,208
    
    
    
    5,759Net assets sold
    
    $
    859
    
    
    $
    7,803
 8




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 3. Restructuring and Severance:
  TerminationBenefitsReserve at January 1, 2006
    
    $
    5,423Charges from continuing operations
    
    
    415Charges from discontinued operations
    
    
    11Payments and reserve utilization
    
    
    (3,587
    )Reserves sold during the period
    
    
    (1,677
    )Reserve at July 2, 2006
    
    $
    585
 4. Accounts Receivable, net:
  5. Goodwill, net:
  Business
    
    
    HumanOutsourcing
    
    
    Capital
    
    
    EngineeringServices
    
    
    Services
    
    
    Services
    
    
    TotalBalance at January 1, 2006
    
    $
    17,200
    
    
    $
    9,304
    
    
    $
    
    
    
    $
    26,504Goodwill classified as held for sale during the fiscal period
    
    
    
    
    
    
    (732
    )
    
    
    
    
    
    
    (732
    )Translation changes and other
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Balance at July 2, 2006
    
    $
    17,201
    
    
    $
    8,572
    
    
    $
    
    
    
    $
    25,773
 9




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 6.
    
    Debt:
  Outstanding atInterest
    
    
    Maturity
    
    July 2,
    
    
    January 1,Rates
    
    
    Date
    
    2006
    
    
    2006Senior credit facility  JPMorgan Chase Bank, N.A.
    
    
    n/a
    
    
    January 15, 2007
    
    
    
    
    
    $
    Senior credit facility  Wells Fargo Foothill, Inc.
    
    
    n/a
    
    
    June 30, 2009
    
    $
    
    
    
    
    Senior secured notes, net of unamortized discount
    
    
    11.00
    %
    
    October 15, 2007
    
    
    75,300
    
    
    
    75,224Mezzanine term notes, net of unamortized discount
    
    
    11.50
    %
    
    October 15, 2007
    
    
    24,773
    
    
    
    24,684Fourth lien term notes
    
    
    10.00
    %
    
    January 15, 2008
    
    
    22,895
    
    
    
    21,780Senior subordinated notes
    
    
    11.375
    %
    
    January 15, 2008
    
    
    130,000
    
    
    
    130,000Notes payable to Satiz
    
    
    6.00
    %
    
    Various
    
    
    4,964
    
    
    
    257,932
    
    
    
    251,688Less Current Portion
    
    
    
    
    
    
    
    
    3,332
    
    
    
    Total long-term debt
    
    
    
    
    
    
    
    $
    254,600
    
    
    $
    251,688
      7.
    
    Commitments and Contingencies:
  10




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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
    8.
    
    Redeemable Series A Preferred Stock:
  9.
    
    Comprehensive Income (Loss):
  Fiscal Quarter Ended
    
    
    Fiscal Six Months EndedJuly 2,
    
    
    July 3,
    
    
    July 2,
    
    
    July 3,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    2,963
    
    
    $
    (4,444
    )
    
    $
    3,717
    
    
    $
    (19,280
    )Other comprehensive loss 
foreign currency translation adjustments
    
    
    (2,459
    )
    
    
    (1,409
    )
    
    
    (2,780
    )
    
    
    (2,960
    )Comprehensive income (loss)
    
    $
    504
    
    
    $
    (5,853
    )
    
    $
    937
    
    
    $
    (22,240
    )
 10. Income Taxes:
  11




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
  11.
    
    Segment Information:
    Business
    
    HumanOutsourcing
    
    Capital
    
    EngineeringServices
    
    Services
    
    Services
    
    Other
    
    TotalQuarter Ended July 2, 2006:Net sales  external
    
    $
    41,135
    
    
    $
    25,845
    
    
    $
    20,180
    
    
    $
    
    
    
    $
    87,160Net intercompany sales
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    (31
    )
    
    
    EBITA
    
    
    5,291
    
    
    
    4,029
    
    
    
    2,128
    
    
    
    
    
    
    
    11,448Quarter Ended July 3, 2005:Net sales  external
    
    
    44,117
    
    
    
    37,272
    
    
    
    23,177
    
    
    
    
    
    
    
    104,566Net intercompany sales
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    EBITA
    
    
    6,280
    
    
    
    4,066
    
    
    
    2,212
    
    
    
    
    
    
    
    12,558Six Months Ended July 2, 2006:Net sales  external
    
    
    81,391
    
    
    
    52,451
    
    
    
    41,938
    
    
    
    
    
    
    
    175,780Net intercompany sales
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    EBITA
    
    
    10,644
    
    
    
    6,816
    
    
    
    3,945
    
    
    
    
    
    
    
    21,405Six Months Ended July 3, 2005:Net sales  external
    
    
    87,287
    
    
    
    73,742
    
    
    
    44,626
    
    
    
    
    
    
    
    205,655Net intercompany sales
    
    
    27
    
    
    
    
    
    
    
    2
    
    
    
    (29
    )
    
    
    EBITA
    
    
    11,883
    
    
    
    7,413
    
    
    
    4,044
    
    
    
    
    
    
    
    23,340
  Fiscal Quarter Ended
    
    
    Fiscal Six Months EndedJuly 2,
    
    
    July 3,
    
    
    July 2,
    
    
    July 3,2006
    
    
    2005
    
    
    2006
    
    
    2005Total segment EBITA
    
    $
    11,448
    
    
    $
    12,558
    
    
    $
    21,405
    
    
    $
    23,340Net costs not allocated to segments
    
    
    (2,726
    )
    
    
    (2,961
    )
    
    
    (3,564
    )
    
    
    (5,378
    )Interest expense
    
    
    (7,308
    )
    
    
    (8,967
    )
    
    
    (14,953
    )
    
    
    (17,471
    )Michigan single business tax and other similar taxes
    
    
    (390
    )
    
    
    (514
    )
    
    
    (734
    )
    
    
    (1,024
    )Consolidated income (loss) from continuing operations before income taxes
    
    $
    1,024
    
    
    $
    116
    
    
    $
    2,154
    
    
    $
    (533
    )
 12




---



##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 12.
    
    Stock-Based Compensation:
     WeightedaverageNumber of
    
    
    Weighted
    
    
    remaining
    
    
    AggregateStock
    
    
    average exercise
    
    
    contractual life
    
    
    IntrinsicOptions
    
    
    price
    
    
    in years
    
    
    Value (000s)Outstanding at January 1, 2006
    
    
    39,650
    
    
    $
    64.04
    
    
    
    6.6
    
    
    $
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (6,900
    )
    
    
    60.72
    
    
    
    
    
    
    
    Outstanding at July 2, 2006
    
    
    32,750
    
    
    
    64.73
    
    
    
    5.9
    
    
    
    Exercisable at July 2, 2006
    
    
    22,475
    
    
    
    63.09
    
    
    
    5.5
    
    
    $
    
   13




---



##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 13.
    
    Subsequent Event:
  14.
    
    Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.
 15.
    
    Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc.:
   
    
    MSXIthe parent company and issuer
    
    The guarantor subsidiaries
    
    The non-guarantor subsidiaries
    
    MSXI on a consolidated basis
  14




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 15.
Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc.  continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING BALANCE SHEET
as of July 2, 2006
 MSXI
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    19,105
    
    
    $
    377
    
    
    $
    7,065
    
    
    $
    
    
    
    $
    26,547Accounts receivable, net
    
    
    
    
    
    
    53,966
    
    
    
    39,663
    
    
    
    
    
    
    
    93,629Inventory
    
    
    
    
    
    
    794
    
    
    
    7
    
    
    
    
    
    
    
    801Prepaid expenses and other assets
    
    
    
    
    
    
    1,726
    
    
    
    2,093
    
    
    
    
    
    
    
    3,819Assets held for sale
    
    
    
    
    
    
    
    
    
    
    3,317
    
    
    
    
    
    
    
    3,317Deferred income taxes, net
    
    
    
    
    
    
    3,964
    
    
    
    5,485
    
    
    
    (3,964
    )
    
    
    5,485Total current assets
    
    
    19,105
    
    
    
    60,827
    
    
    
    57,630
    
    
    
    (3,964
    )
    
    
    133,598Property and equipment, net
    
    
    
    
    
    
    1,496
    
    
    
    1,798
    
    
    
    
    
    
    
    3,294Goodwill, net
    
    
    
    
    
    
    25,742
    
    
    
    31
    
    
    
    
    
    
    
    25,773Investments in subsidiaries
    
    
    28,313
    
    
    
    (5,998
    )
    
    
    
    
    
    
    (22,315
    )
    
    
    Assets held for sale
    
    
    
    
    
    
    
    
    
    
    1,683
    
    
    
    
    
    
    
    1,683Other assets
    
    
    3,040
    
    
    
    2,718
    
    
    
    292
    
    
    
    
    
    
    
    6,050Deferred income taxes, net
    
    
    4,188
    
    
    
    
    
    
    
    128
    
    
    
    (4,316
    )
    
    
    Total assets
    
    $
    54,646
    
    
    $
    84,785
    
    
    $
    61,562
    
    
    $
    (30,595
    )
    
    $
    170,398LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current liabilities:Notes payable and current portion
of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    3,332
    
    
    $
    
    
    
    $
    3,332Accounts payable and drafts
    
    
    
    
    
    
    38,497
    
    
    
    17,326
    
    
    
    
    
    
    
    55,823Accrued liabilities
    
    
    11,635
    
    
    
    21,499
    
    
    
    24,703
    
    
    
    
    
    
    
    57,837Liabilities held for sale
    
    
    
    
    
    
    
    
    
    
    1,739
    
    
    
    
    
    
    
    1,739Deferred income taxes, net
    
    
    3,964
    
    
    
    
    
    
    
    
    
    
    
    (3,964
    )
    
    
    Total current liabilities
    
    
    15,599
    
    
    
    59,996
    
    
    
    47,100
    
    
    
    (3,964
    )
    
    
    118,731Long-term debt
    
    
    235,724
    
    
    
    
    
    
    
    18,876
    
    
    
    
    
    
    
    254,600Intercompany accounts
    
    
    10,655
    
    
    
    (11,502
    )
    
    
    847
    
    
    
    
    
    
    
    Long-term deferred compensation and other liabilities
    
    
    
    
    
    
    3,520
    
    
    
    737
    
    
    
    
    
    
    
    4,257Deferred income taxes, net
    
    
    
    
    
    
    4,458
    
    
    
    
    
    
    
    (4,316
    )
    
    
    142Total liabilities
    
    
    261,978
    
    
    
    56,472
    
    
    
    67,560
    
    
    
    (8,280
    )
    
    
    377,730Redeemable Series A Preferred Stock
    
    
    108,702
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,702Shareholders equity (deficit)
    
    
    (316,034
    )
    
    
    28,313
    
    
    
    (5,998
    )
    
    
    (22,315
    )
    
    
    (316,034
    )Total liabilities and shareholders
equity (deficit)
    
    $
    54,646
    
    
    $
    84,785
    
    
    $
    61,562
    
    
    $
    (30,595
    )
    
    $
    170,398
 15




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 15.
Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc.  continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING BALANCE SHEET
as of January 1, 2006
 MSXI
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,995
    
    
    $
    432
    
    
    $
    15,310
    
    
    $
    
    
    
    $
    27,737Accounts receivable, net
    
    
    
    
    
    
    55,279
    
    
    
    41,405
    
    
    
    
    
    
    
    96,684Inventory
    
    
    
    
    
    
    778
    
    
    
    7
    
    
    
    
    
    
    
    785Prepaid expenses and other assets
    
    
    
    
    
    
    2,095
    
    
    
    1,613
    
    
    
    
    
    
    
    3,708Assets held for sale
    
    
    
    
    
    
    7,327
    
    
    
    28,902
    
    
    
    
    
    
    
    36,229Deferred income taxes, net
    
    
    
    
    
    
    3,718
    
    
    
    5,766
    
    
    
    (3,850
    )
    
    
    5,634Total current assets
    
    
    11,995
    
    
    
    69,629
    
    
    
    93,003
    
    
    
    (3,850
    )
    
    
    170,777Property and equipment, net
    
    
    
    
    
    
    2,154
    
    
    
    1,603
    
    
    
    
    
    
    
    3,757Goodwill, net
    
    
    
    
    
    
    26,475
    
    
    
    29
    
    
    
    
    
    
    
    26,504Investment in subsidiaries
    
    
    14,493
    
    
    
    (6,006
    )
    
    
    
    
    
    
    (8,487
    )
    
    
    Assets held for sale
    
    
    
    
    
    
    497
    
    
    
    5,091
    
    
    
    
    
    
    
    5,588Other assets
    
    
    3,698
    
    
    
    2,760
    
    
    
    352
    
    
    
    
    
    
    
    6,810Deferred income taxes, net
    
    
    3,373
    
    
    
    
    
    
    
    1,138
    
    
    
    (3,511
    )
    
    
    1,000Total assets
    
    $
    33,559
    
    
    $
    95,509
    
    
    $
    101,216
    
    
    $
    (15,848
    )
    
    $
    214,436LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current liabilities:Notes payable and current portion
of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Accounts payable and drafts
    
    
    
    
    
    
    42,049
    
    
    
    21,418
    
    
    
    
    
    
    
    63,467Accrued liabilities
    
    
    11,499
    
    
    
    26,655
    
    
    
    23,523
    
    
    
    
    
    
    
    61,677Liabilities held for sale
    
    
    
    
    
    
    1,653
    
    
    
    29,679
    
    
    
    
    
    
    
    31,332Deferred income taxes, net
    
    
    3,850
    
    
    
    
    
    
    
    
    
    
    
    (3,850
    )
    
    
    Total current liabilities
    
    
    15,349
    
    
    
    70,357
    
    
    
    74,620
    
    
    
    (3,850
    )
    
    
    156,476Long-term debt
    
    
    234,610
    
    
    
    
    
    
    
    17,078
    
    
    
    
    
    
    
    251,688Intercompany accounts
    
    
    (8,132
    )
    
    
    2,160
    
    
    
    5,972
    
    
    
    
    
    
    
    Long-term deferred compensation and other liabilities
    
    
    
    
    
    
    4,916
    
    
    
    486
    
    
    
    
    
    
    
    5,402Liabilities held for sale
    
    
    
    
    
    
    72
    
    
    
    9,066
    
    
    
    
    
    
    
    9,138Deferred income taxes, net
    
    
    
    
    
    
    3,511
    
    
    
    
    
    
    
    (3,511
    )
    
    
    Total liabilities
    
    
    241,827
    
    
    
    81,016
    
    
    
    107,222
    
    
    
    (7,361
    )
    
    
    422,704Redeemable Series A Preferred Stock
    
    
    102,566
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,566Shareholders equity (deficit)
    
    
    (310,834
    )
    
    
    14,493
    
    
    
    (6,006
    )
    
    
    (8,487
    )
    
    
    (310,834
    )Total liabilities and shareholders
equity (deficit)
    
    $
    33,559
    
    
    $
    95,509
    
    
    $
    101,216
    
    
    $
    (15,848
    )
    
    $
    214,436
 16




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 15.
Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc.
 continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the fiscal quarters ended July 2, 2006 and July 3, 2005
 MSXI
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Fiscal Quarter Ended July 2, 2006:Net sales
    
    $
    
    
    
    $
    50,102
    
    
    $
    37,067
    
    
    $
    (9
    )
    
    $
    87,160Cost of sales
    
    
    
    
    
    
    41,793
    
    
    
    29,852
    
    
    
    (9
    )
    
    
    71,636Gross profit
    
    
    
    
    
    
    8,309
    
    
    
    7,215
    
    
    
    
    
    
    
    15,524Selling, general and administrative expenses
    
    
    
    
    
    
    4,039
    
    
    
    2,921
    
    
    
    
    
    
    
    6,960Restructuring and severance costs
    
    
    
    
    
    
    216
    
    
    
    16
    
    
    
    
    
    
    
    232Income from continuing operations before
interest, income taxes, and equity in
affiliates
    
    
    
    
    
    
    4,054
    
    
    
    4,278
    
    
    
    
    
    
    
    8,332Interest expense, net
    
    
    7,566
    
    
    
    (166
    )
    
    
    (92
    )
    
    
    
    
    
    
    7,308Income (loss) from continuing operations before
income taxes, and equity in affiliates
    
    
    (7,566
    )
    
    
    4,220
    
    
    
    4,370
    
    
    
    
    
    
    
    1,024Income tax provision (benefit)
    
    
    (900
    )
    
    
    870
    
    
    
    1,876
    
    
    
    
    
    
    
    1,846Equity in affiliates
    
    
    5,844
    
    
    
    2,494
    
    
    
    
    
    
    
    (8,338
    )
    
    
    Income (loss) from continuing operations
    
    
    (822
    )
    
    
    5,844
    
    
    
    2,494
    
    
    
    (8,338
    )
    
    
    (822
    )Income from discontinued operations, net
    
    
    3,785
    
    
    
    3,785
    
    
    
    3,583
    
    
    
    (7,368
    )
    
    
    3,785Net income
    
    $
    2,963
    
    
    $
    9,629
    
    
    $
    6,077
    
    
    $
    (15,706
    )
    
    $
    2,963Fiscal Quarter Ended July 3, 2005:Net sales
    
    $
    
    
    
    $
    70,281
    
    
    $
    34,299
    
    
    $
    (14
    )
    
    $
    104,566Cost of sales
    
    
    
    
    
    
    60,339
    
    
    
    27,695
    
    
    
    (14
    )
    
    
    88,020Gross profit
    
    
    
    
    
    
    9,942
    
    
    
    6,604
    
    
    
    
    
    
    
    16,546Selling, general and administrative expenses
    
    
    
    
    
    
    4,743
    
    
    
    2,396
    
    
    
    
    
    
    
    7,139Restructuring and severance costs
    
    
    
    
    
    
    252
    
    
    
    72
    
    
    
    
    
    
    
    324Income from continuing operations before
interest, income taxes, and equity in
affiliates
    
    
    
    
    
    
    4,947
    
    
    
    4,136
    
    
    
    
    
    
    
    9,083Interest expense, net
    
    
    6,663
    
    
    
    840
    
    
    
    1,464
    
    
    
    
    
    
    
    8,967Income (loss) from continuing operations before
income taxes, and equity in affiliates
    
    
    (6,663
    )
    
    
    4,107
    
    
    
    2,672
    
    
    
    
    
    
    
    116Income tax provision (benefit)
    
    
    (1,535
    )
    
    
    1,496
    
    
    
    362
    
    
    
    
    
    
    
    323Equity in affiliates
    
    
    4,921
    
    
    
    2,310
    
    
    
    
    
    
    
    (7,231
    )
    
    
    Income (loss) from continuing operations
    
    
    (207
    )
    
    
    4,921
    
    
    
    2,310
    
    
    
    (7,231
    )
    
    
    (207
    )Loss from discontinued operations, net
    
    
    (4,237
    )
    
    
    (4,237
    )
    
    
    (4,434
    )
    
    
    8,671
    
    
    
    (4,237
    )Net income (loss)
    
    $
    (4,444
    )
    
    $
    684
    
    
    $
    (2,124
    )
    
    $
    1,440
    
    
    $
    (4,444
    )
 17




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 15.
    
    Guarantor and Non-Guarantor Subsidiaries of MSX
International, Inc.  continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the fiscal six months ended July 2, 2006 and July 3, 2005
 MSXI
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Fiscal Six Months Ended July 2, 2006:Net sales
    
    $
    
    
    
    $
    103,894
    
    
    $
    71,906
    
    
    $
    (20
    )
    
    $
    175,780Cost of sales
    
    
    
    
    
    
    86,592
    
    
    
    57,926
    
    
    
    (20
    )
    
    
    144,498Gross profit
    
    
    
    
    
    
    17,302
    
    
    
    13,980
    
    
    
    
    
    
    
    31,282Selling, general and administrative expenses
    
    
    
    
    
    
    8,208
    
    
    
    5,552
    
    
    
    
    
    
    
    13,760Restructuring and severance costs
    
    
    
    
    
    
    295
    
    
    
    120
    
    
    
    
    
    
    
    415Income from continuing operations before
interest, income taxes, and equity in
affiliates
    
    
    
    
    
    
    8,799
    
    
    
    8,308
    
    
    
    
    
    
    
    17,107Interest expense (income), net
    
    
    14,969
    
    
    
    (213
    )
    
    
    197
    
    
    
    
    
    
    
    14,953Income (loss) from continuing operations before
income taxes, and equity in affiliates
    
    
    (14,969
    )
    
    
    9,012
    
    
    
    8,111
    
    
    
    
    
    
    
    2,154Income tax provision (benefit)
    
    
    (2,085
    )
    
    
    2,061
    
    
    
    3,521
    
    
    
    
    
    
    
    3,497Equity in affiliates
    
    
    11,541
    
    
    
    4,590
    
    
    
    
    
    
    
    (16,131
    )
    
    
    Income (loss) from continuing operations
    
    
    (1,343
    )
    
    
    11,541
    
    
    
    4,590
    
    
    
    (16,131
    )
    
    
    (1,343
    )Income from discontinued operations, net
    
    
    5,060
    
    
    
    5,060
    
    
    
    4,130
    
    
    
    (9,190
    )
    
    
    5,060Net income
    
    $
    3,717
    
    
    $
    16,601
    
    
    $
    8,720
    
    
    $
    (25,321
    )
    
    $
    3,717Fiscal Six Months Ended July 3, 2005:Net sales
    
    $
    
    
    
    $
    139,140
    
    
    $
    66,557
    
    
    $
    (42
    )
    
    $
    205,655Cost of sales
    
    
    
    
    
    
    119,093
    
    
    
    53,563
    
    
    
    (42
    )
    
    
    172,614Gross profit
    
    
    
    
    
    
    20,047
    
    
    
    12,994
    
    
    
    
    
    
    
    33,041Selling, general and administrative expenses
    
    
    
    
    
    
    10,982
    
    
    
    4,671
    
    
    
    
    
    
    
    15,653Restructuring and severance costs
    
    
    
    
    
    
    353
    
    
    
    97
    
    
    
    
    
    
    
    450Income from continuing operations before
interest, income taxes, and equity in
affiliates
    
    
    
    
    
    
    8,712
    
    
    
    8,226
    
    
    
    
    
    
    
    16,938Interest expense, net
    
    
    12,916
    
    
    
    2,131
    
    
    
    2,424
    
    
    
    
    
    
    
    17,471Income (loss) from continuing operations before
income taxes, and equity in affiliates
    
    
    (12,916
    )
    
    
    6,581
    
    
    
    5,802
    
    
    
    
    
    
    
    (533
    )Income tax provision (benefit)
    
    
    (2,343
    )
    
    
    2,286
    
    
    
    1,620
    
    
    
    
    
    
    
    1,563Equity in affiliates
    
    
    8,477
    
    
    
    4,182
    
    
    
    
    
    
    
    (12,659
    )
    
    
    Income (loss) from continuing operations
    
    
    (2,096
    )
    
    
    8,477
    
    
    
    4,182
    
    
    
    (12,659
    )
    
    
    (2,096
    )Loss from discontinued operations, net
    
    
    (17,184
    )
    
    
    (17,184
    )
    
    
    (17,156
    )
    
    
    34,340
    
    
    
    (17,184
    )Net loss
    
    $
    (19,280
    )
    
    $
    (8,707
    )
    
    $
    (12,974
    )
    
    $
    21,681
    
    
    $
    (19,280
    )
 18




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 15.
Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc.  continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
for the fiscal six months ended July 2, 2006
 MSXI
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    3,717
    
    
    $
    16,601
    
    
    $
    8,720
    
    
    $
    (25,321
    )
    
    $
    3,717Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:Equity in affiliates, including discontinued operations
    
    
    (16,601
    )
    
    
    (8,720
    )
    
    
    
    
    
    
    25,321
    
    
    
    Gain on sale of businesses
    
    
    
    
    
    
    (453
    )
    
    
    (3,618
    )
    
    
    
    
    
    
    (4,071
    )Depreciation
    
    
    
    
    
    
    879
    
    
    
    549
    
    
    
    
    
    
    
    1,428Amortization of debt issuance costs and
non-cash interest
    
    
    2,341
    
    
    
    
    
    
    
    270
    
    
    
    
    
    
    
    2,611Deferred taxes
    
    
    (701
    )
    
    
    839
    
    
    
    1,633
    
    
    
    
    
    
    
    1,771(Gain) loss on sale/disposal of property
and equipment
    
    
    
    
    
    
    42
    
    
    
    2
    
    
    
    
    
    
    
    44(Increase) decrease in receivables, net
    
    
    
    
    
    
    1,658
    
    
    
    7,969
    
    
    
    
    
    
    
    9,627(Increase) decrease in inventory
    
    
    
    
    
    
    (16
    )
    
    
    (46
    )
    
    
    
    
    
    
    (62
    )(Increase) decrease in prepaid expenses
and other assets
    
    
    
    
    
    
    369
    
    
    
    (540
    )
    
    
    
    
    
    
    (171
    )Increase (decrease) in current liabilities
    
    
    138
    
    
    
    (5,070
    )
    
    
    (9,200
    )
    
    
    
    
    
    
    (14,132
    )Other, net
    
    
    
    
    
    
    149
    
    
    
    (1,146
    )
    
    
    
    
    
    
    (997
    )Net cash provided by (used for) operating activities
    
    
    (11,106
    )
    
    
    6,278
    
    
    
    4,593
    
    
    
    
    
    
    
    (235
    )Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (330
    )
    
    
    (800
    )
    
    
    
    
    
    
    (1,130
    )Payments for contingent consideration and minority interests
    
    
    
    
    
    
    (1,208
    )
    
    
    
    
    
    
    
    
    
    
    (1,208
    )Proceeds from sale of businesses, net of expenses paid
    
    
    
    
    
    
    6,845
    
    
    
    (1,235
    )
    
    
    
    
    
    
    5,610Proceeds from sale/disposal of property and equipment
    
    
    
    
    
    
    46
    
    
    
    45
    
    
    
    
    
    
    
    91Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used for) investing activities
    
    
    
    
    
    
    5,353
    
    
    
    (1,990
    )
    
    
    
    
    
    
    3,363Cash flows from financing activities:Transactions with subsidiaries
    
    
    18,786
    
    
    
    (7,728
    )
    
    
    (11,058
    )
    
    
    
    
    
    
    Debt issuance costs
    
    
    (570
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (570
    )Changes in revolving debt, net
    
    
    
    
    
    
    
    
    
    
    1,946
    
    
    
    
    
    
    
    1,946Repayment of longterm debt
    
    
    
    
    
    
    
    
    
    
    (1,228
    )
    
    
    
    
    
    
    (1,228
    )Change in book overdrafts, net
    
    
    
    
    
    
    (3,958
    )
    
    
    (262
    )
    
    
    
    
    
    
    (4,220
    )Net cash provided by (used for) financing activities
    
    
    18,216
    
    
    
    (11,686
    )
    
    
    (10,602
    )
    
    
    
    
    
    
    (4,072
    )Effect of foreign exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (519
    )
    
    
    
    
    
    
    (519
    )Cash and cash equivalents:Increase (decrease) for the period
    
    
    7,110
    
    
    
    (55
    )
    
    
    (8,518
    )
    
    
    
    
    
    
    (1,463
    )Balance, beginning of period (including $273 of cash held for sale)
    
    
    11,995
    
    
    
    432
    
    
    
    15,583
    
    
    
    
    
    
    
    28,010Balance, end of period
    
    $
    19,105
    
    
    $
    377
    
    
    $
    7,065
    
    
    $
    
    
    
    $
    26,547
 19




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 15.
Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc. continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
for the fiscal six months ended July 3, 2005
 MSXI
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (19,280
    )
    
    $
    (8,707
    )
    
    $
    (12,974
    )
    
    $
    21,681
    
    
    $
    (19,280
    )Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:Equity in affiliates, including discontinued operations
    
    
    8,707
    
    
    
    12,974
    
    
    
    
    
    
    
    (21,681
    )
    
    
    Loss on sale of businesses
    
    
    
    
    
    
    
    
    
    
    3,998
    
    
    
    
    
    
    
    3,998Depreciation
    
    
    
    
    
    
    1,613
    
    
    
    1,903
    
    
    
    
    
    
    
    3,516Goodwill impairment charges
    
    
    
    
    
    
    
    
    
    
    7,131
    
    
    
    
    
    
    
    7,131Amortization of debt issuance costs
    
    
    2,073
    
    
    
    
    
    
    
    214
    
    
    
    
    
    
    
    2,287Deferred taxes
    
    
    (1,691
    )
    
    
    1,691
    
    
    
    434
    
    
    
    
    
    
    
    434(Gain) Loss on sale/disposal of property
and equipment
    
    
    
    
    
    
    (44
    )
    
    
    (56
    )
    
    
    
    
    
    
    (100
    )(Increase) decrease in receivables, net
    
    
    
    
    
    
    (8,444
    )
    
    
    29,445
    
    
    
    
    
    
    
    21,001(Increase) decrease in inventory
    
    
    
    
    
    
    1,452
    
    
    
    228
    
    
    
    
    
    
    
    1,680(Increase) decrease in prepaid expenses
and other assets
    
    
    
    
    
    
    65
    
    
    
    (989
    )
    
    
    
    
    
    
    (924
    )Increase (decrease) in current liabilities
    
    
    753
    
    
    
    6,452
    
    
    
    (12,629
    )
    
    
    
    
    
    
    (5,424
    )Other, net
    
    
    
    
    
    
    (151
    )
    
    
    (1,543
    )
    
    
    
    
    
    
    (1,694
    )Net cash provided by (used for) operating activities
    
    
    (9,438
    )
    
    
    6,901
    
    
    
    15,162
    
    
    
    
    
    
    
    12,625Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (752
    )
    
    
    (834
    )
    
    
    
    
    
    
    (1,586
    )Payments for contingent consideration
    
    
    
    
    
    
    (1,208
    )
    
    
    
    
    
    
    
    
    
    
    (1,208
    )Proceeds from sale of businesses, net of expenses paid
    
    
    
    
    
    
    
    
    
    
    5,041
    
    
    
    
    
    
    
    5,041Proceeds from sale/disposal of property and equipment
    
    
    
    
    
    
    54
    
    
    
    148
    
    
    
    
    
    
    
    202Net cash provided by (used for) investing activities
    
    
    
    
    
    
    (1,906
    )
    
    
    4,355
    
    
    
    
    
    
    
    2,449Cash flows from financing activities:Transactions with subsidiaries
    
    
    13,629
    
    
    
    (9,925
    )
    
    
    (3,704
    )
    
    
    
    
    
    
    Debt issuance costs
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )Changes in revolving debt, net
    
    
    
    
    
    
    
    
    
    
    (8,605
    )
    
    
    
    
    
    
    (8,605
    )Change in book overdrafts
    
    
    
    
    
    
    (6,166
    )
    
    
    
    
    
    
    
    
    
    
    (6,166
    )Net cash provided by (used for) financing activities
    
    
    13,610
    
    
    
    (16,091
    )
    
    
    (12,309
    )
    
    
    
    
    
    
    (14,790
    )Effect of foreign exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (1,567
    )
    
    
    
    
    
    
    (1,567
    )Cash and cash equivalents:Increase (decrease) for the period
    
    
    4,172
    
    
    
    (11,096
    )
    
    
    5,641
    
    
    
    
    
    
    
    (1,283
    )Balance, beginning of period
    
    
    5,650
    
    
    
    11,570
    
    
    
    17,157
    
    
    
    
    
    
    
    34,377Balance, end of period (including $941 of cash held for sale)
    
    $
    9,822
    
    
    $
    474
    
    
    $
    22,798
    
    
    $
    
    
    
    $
    33,094
 20




---



##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 16. Guarantor and Non-Guarantor Subsidiaries of MSXI Limited:
  
    
    MSXI  the parent company
    
    MSXI Limited  the issuer
    
    The guarantor subsidiaries
    
    The non-guarantor subsidiaries
    
    MSXI on a consolidated basis
  21




---



##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 16.
Guarantor and Non-Guarantor Subsidiaries of MSXI Limited  continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING BALANCE SHEET
as of July 2, 2006
 MSXIMSXI
    
    
    Limited
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Parent)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    19,105
    
    
    $
    1,249
    
    
    $
    377
    
    
    $
    5,816
    
    
    $
    
    
    
    $
    26,547Accounts receivable, net
    
    
    
    
    
    
    8,644
    
    
    
    53,966
    
    
    
    31,019
    
    
    
    
    
    
    
    93,629Inventory
    
    
    
    
    
    
    
    
    
    
    794
    
    
    
    7
    
    
    
    
    
    
    
    801Prepaid expenses and other assets
    
    
    
    
    
    
    645
    
    
    
    1,726
    
    
    
    1,448
    
    
    
    
    
    
    
    3,819Assets held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,317
    
    
    
    
    
    
    
    3,317Deferred income taxes, net
    
    
    
    
    
    
    
    
    
    
    3,964
    
    
    
    5,768
    
    
    
    (4,247
    )
    
    
    5,485Total current assets
    
    
    19,105
    
    
    
    10,538
    
    
    
    60,827
    
    
    
    47,375
    
    
    
    (4,247
    )
    
    
    133,598Property and equipment, net
    
    
    
    
    
    
    250
    
    
    
    1,496
    
    
    
    1,548
    
    
    
    
    
    
    
    3,294Goodwill, net
    
    
    
    
    
    
    31
    
    
    
    25,742
    
    
    
    
    
    
    
    
    
    
    
    25,773Investments in subsidiaries
    
    
    28,313
    
    
    
    
    
    
    
    (5,998
    )
    
    
    16,348
    
    
    
    (38,663
    )
    
    
    Assets held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,683
    
    
    
    
    
    
    
    1,683Other assets
    
    
    3,040
    
    
    
    223
    
    
    
    2,718
    
    
    
    69
    
    
    
    
    
    
    
    6,050Deferred income taxes, net
    
    
    4,188
    
    
    
    1,533
    
    
    
    
    
    
    
    
    
    
    
    (5,721
    )
    
    
    Total assets
    
    $
    54,646
    
    
    $
    12,575
    
    
    $
    84,785
    
    
    $
    67,023
    
    
    $
    (48,631
    )
    
    $
    170,398LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current liabilities:Notes payable and current portion
of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3,332
    
    
    $
    
    
    
    $
    3,332Accounts payable and drafts
    
    
    
    
    
    
    6,512
    
    
    
    38,497
    
    
    
    10,814
    
    
    
    
    
    
    
    55,823Accrued liabilities
    
    
    11,635
    
    
    
    4,319
    
    
    
    21,499
    
    
    
    20,384
    
    
    
    
    
    
    
    57,837Liabilities held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,739
    
    
    
    
    
    
    
    1,739Deferred income taxes, net
    
    
    3,964
    
    
    
    283
    
    
    
    
    
    
    
    
    
    
    
    (4,247
    )
    
    
    Total current liabilities
    
    
    15,599
    
    
    
    11,114
    
    
    
    59,996
    
    
    
    36,269
    
    
    
    (4,247
    )
    
    
    118,731Long-term debt
    
    
    235,724
    
    
    
    17,244
    
    
    
    
    
    
    
    1,632
    
    
    
    
    
    
    
    254,600Intercompany accounts
    
    
    10,655
    
    
    
    (32,081
    )
    
    
    (11,502
    )
    
    
    32,928
    
    
    
    
    
    
    
    Long-term deferred compensation and
other liabilities
    
    
    
    
    
    
    (50
    )
    
    
    3,520
    
    
    
    787
    
    
    
    
    
    
    
    4,257Liabilities held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred income taxes, net
    
    
    
    
    
    
    
    
    
    
    4,458
    
    
    
    1,405
    
    
    
    (5,721
    )
    
    
    142Total liabilities
    
    
    261,978
    
    
    
    (3,773
    )
    
    
    56,472
    
    
    
    73,021
    
    
    
    (9,968
    )
    
    
    377,730Redeemable Series A Preferred Stock
    
    
    108,702
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,702Shareholders equity (deficit)
    
    
    (316,034
    )
    
    
    16,348
    
    
    
    28,313
    
    
    
    (5,998
    )
    
    
    (38,663
    )
    
    
    (316,034
    )Total liabilities and shareholders
equity (deficit)
    
    $
    54,646
    
    
    $
    12,575
    
    
    $
    84,785
    
    
    $
    67,023
    
    
    $
    (48,631
    )
    
    $
    170,398
 22




---



##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 16.
Guarantor and Non-Guarantor Subsidiaries of MSXI Limited  continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING BALANCE SHEET
as of January 1, 2006
 MSXIMSXI
    
    
    Limited
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Parent)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,995
    
    
    $
    6,980
    
    
    $
    432
    
    
    $
    8,330
    
    
    $
    
    
    
    $
    27,737Accounts receivable, net
    
    
    
    
    
    
    10,616
    
    
    
    55,279
    
    
    
    30,789
    
    
    
    
    
    
    
    96,684Inventory
    
    
    
    
    
    
    
    
    
    
    778
    
    
    
    7
    
    
    
    
    
    
    
    785Prepaid expenses and other assets
    
    
    
    
    
    
    578
    
    
    
    2,095
    
    
    
    1,035
    
    
    
    
    
    
    
    3,708Assets held for sale
    
    
    
    
    
    
    
    
    
    
    7,327
    
    
    
    28,902
    
    
    
    
    
    
    
    36,229Deferred income taxes, net
    
    
    
    
    
    
    
    
    
    
    3,718
    
    
    
    6,023
    
    
    
    (4,107
    )
    
    
    5,634Total current assets
    
    
    11,995
    
    
    
    18,174
    
    
    
    69,629
    
    
    
    75,086
    
    
    
    (4,107
    )
    
    
    170,777Property and equipment, net
    
    
    
    
    
    
    300
    
    
    
    2,154
    
    
    
    1,303
    
    
    
    
    
    
    
    3,757Goodwill, net
    
    
    
    
    
    
    29
    
    
    
    26,475
    
    
    
    
    
    
    
    
    
    
    
    26,504Investment in subsidiaries
    
    
    14,493
    
    
    
    
    
    
    
    (6,006
    )
    
    
    13,920
    
    
    
    (22,407
    )
    
    
    Assets held for sale
    
    
    
    
    
    
    
    
    
    
    497
    
    
    
    5,091
    
    
    
    
    
    
    
    5,588Other assets
    
    
    3,698
    
    
    
    288
    
    
    
    2,760
    
    
    
    64
    
    
    
    
    
    
    
    6,810Deferred income taxes, net
    
    
    3,373
    
    
    
    2,562
    
    
    
    
    
    
    
    
    
    
    
    (4,935
    )
    
    
    1,000Total assets
    
    $
    33,559
    
    
    $
    21,353
    
    
    $
    95,509
    
    
    $
    95,464
    
    
    $
    (31,449
    )
    
    $
    214,436LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current liabilities:Notes payable and current portion
of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Accounts payable and drafts
    
    
    
    
    
    
    7,409
    
    
    
    42,049
    
    
    
    14,009
    
    
    
    
    
    
    
    63,467Accrued liabilities
    
    
    11,499
    
    
    
    5,609
    
    
    
    26,655
    
    
    
    17,914
    
    
    
    
    
    
    
    61,677Liabilities held for sale
    
    
    
    
    
    
    
    
    
    
    1,653
    
    
    
    29,679
    
    
    
    
    
    
    
    31,332Deferred income taxes, net
    
    
    3,850
    
    
    
    257
    
    
    
    
    
    
    
    
    
    
    
    (4,107
    )
    
    
    Total current liabilities
    
    
    15,349
    
    
    
    13,275
    
    
    
    70,357
    
    
    
    61,602
    
    
    
    (4,107
    )
    
    
    156,476Long-term debt
    
    
    234,610
    
    
    
    17,078
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    251,688Intercompany accounts
    
    
    (8,132
    )
    
    
    (22,870
    )
    
    
    2,160
    
    
    
    28,842
    
    
    
    
    
    
    
    Long-term deferred compensation and
other liabilities
    
    
    
    
    
    
    (50
    )
    
    
    4,916
    
    
    
    536
    
    
    
    
    
    
    
    5,402Liabilities held for sale
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    9,066
    
    
    
    
    
    
    
    9,138Deferred income taxes, net
    
    
    
    
    
    
    
    
    
    
    3,511
    
    
    
    1,424
    
    
    
    (4,935
    )
    
    
    Total liabilities
    
    
    241,827
    
    
    
    7,433
    
    
    
    81,016
    
    
    
    101,470
    
    
    
    (9,042
    )
    
    
    422,704Redeemable Series A Preferred Stock
    
    
    102,566
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,566Shareholders equity (deficit)
    
    
    (310,834
    )
    
    
    13,920
    
    
    
    14,493
    
    
    
    (6,006
    )
    
    
    (22,407
    )
    
    
    (310,834
    )Total liabilities and shareholders
equity (deficit)
    
    $
    33,559
    
    
    $
    21,353
    
    
    $
    95,509
    
    
    $
    95,464
    
    
    $
    (31,449
    )
    
    $
    214,436
 23




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 16.
Guarantor and Non-Guarantor Subsidiaries of MSXI Limited continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the fiscal quarters ended July 2, 2006 and July 3, 2005
 MSXIMSXI
    
    
    Limited
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Parent)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Fiscal Quarter Ended July 2, 2006:Net sales
    
    $
    
    
    
    $
    6,652
    
    
    $
    50,102
    
    
    $
    30,415
    
    
    $
    (9
    )
    
    $
    87,160Cost of sales
    
    
    
    
    
    
    4,902
    
    
    
    41,793
    
    
    
    24,950
    
    
    
    (9
    )
    
    
    71,636Gross profit
    
    
    
    
    
    
    1,750
    
    
    
    8,309
    
    
    
    5,465
    
    
    
    
    
    
    
    15,524Selling, general and administrative expenses
    
    
    
    
    
    
    358
    
    
    
    4,039
    
    
    
    2,563
    
    
    
    
    
    
    
    6,960Restructuring and severance costs
    
    
    
    
    
    
    
    
    
    
    216
    
    
    
    16
    
    
    
    
    
    
    
    232Income from continuing operations
before interest, income taxes, and equity in
affiliates
    
    
    
    
    
    
    1,392
    
    
    
    4,054
    
    
    
    2,886
    
    
    
    
    
    
    
    8,332Interest expense (income), net
    
    
    7,566
    
    
    
    (417
    )
    
    
    (166
    )
    
    
    325
    
    
    
    
    
    
    
    7,308Income (loss) from continuing operations
before income taxes, and equity in affiliates
    
    
    (7,566
    )
    
    
    1,809
    
    
    
    4,220
    
    
    
    2,561
    
    
    
    
    
    
    
    1,024Income tax provision (benefit)
    
    
    (900
    )
    
    
    1,170
    
    
    
    870
    
    
    
    706
    
    
    
    
    
    
    
    1,846Equity in affiliates
    
    
    5,844
    
    
    
    
    
    
    
    2,494
    
    
    
    640
    
    
    
    (8,978
    )
    
    
    Income (loss) from continuing operations
    
    
    (822
    )
    
    
    639
    
    
    
    5,844
    
    
    
    2,495
    
    
    
    (8,978
    )
    
    
    (822
    )Income (loss) from discontinued operations, net
    
    
    3,785
    
    
    
    (192
    )
    
    
    3,785
    
    
    
    3,582
    
    
    
    (7,175
    )
    
    
    3,785Net income
    
    $
    2,963
    
    
    $
    447
    
    
    $
    9,629
    
    
    $
    6,077
    
    
    $
    (16,153
    )
    
    $
    2,963Fiscal Quarter Ended July 3, 2005:Net sales
    
    $
    
    
    
    $
    6,655
    
    
    $
    70,281
    
    
    $
    27,644
    
    
    $
    (14
    )
    
    $
    104,566Cost of sales
    
    
    
    
    
    
    4,453
    
    
    
    60,339
    
    
    
    23,242
    
    
    
    (14
    )
    
    
    88,020Gross profit
    
    
    
    
    
    
    2,202
    
    
    
    9,942
    
    
    
    4,402
    
    
    
    
    
    
    
    16,546Selling, general and administrative expenses
    
    
    
    
    
    
    726
    
    
    
    4,743
    
    
    
    1,670
    
    
    
    
    
    
    
    7,139Restructuring and severance costs
    
    
    
    
    
    
    
    
    
    
    252
    
    
    
    72
    
    
    
    
    
    
    
    324Income from continuing operations
before interest, income taxes, and
equity in affiliates
    
    
    
    
    
    
    1,476
    
    
    
    4,947
    
    
    
    2,660
    
    
    
    
    
    
    
    9,083Interest expense, net
    
    
    6,663
    
    
    
    1,238
    
    
    
    840
    
    
    
    226
    
    
    
    
    
    
    
    8,967Income (loss) from continuing operations
before income taxes, and equity in affiliates
    
    
    (6,663
    )
    
    
    238
    
    
    
    4,107
    
    
    
    2,434
    
    
    
    
    
    
    
    116Income tax provision (benefit)
    
    
    (1,535
    )
    
    
    
    
    
    
    1,496
    
    
    
    362
    
    
    
    
    
    
    
    323Equity in affiliates
    
    
    4,921
    
    
    
    
    
    
    
    2,310
    
    
    
    244
    
    
    
    (7,475
    )
    
    
    Income (loss) from continuing operations
    
    
    (207
    )
    
    
    238
    
    
    
    4,921
    
    
    
    2,313
    
    
    
    (7,475
    )
    
    
    (207
    )Income (loss) from discontinued operations
    
    
    (4,237
    )
    
    
    846
    
    
    
    (4,237
    )
    
    
    (4,437
    )
    
    
    7,828
    
    
    
    (4,237
    )Net income (loss)
    
    $
    (4,444
    )
    
    $
    1,084
    
    
    $
    684
    
    
    $
    (2,124
    )
    
    $
    353
    
    
    $
    (4,444
    )
 24




---



##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 16.
Guarantor and Non-Guarantor Subsidiaries of MSXI Limited continued
 MSXI
    
    
    Limited
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Parent)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Fiscal Six Months Ended July 2, 2006:Net sales
    
    $
    
    
    
    $
    12,751
    
    
    $
    103,894
    
    
    $
    59,155
    
    
    $
    (20
    )
    
    $
    175,780Cost of sales
    
    
    
    
    
    
    9,067
    
    
    
    86,592
    
    
    
    48,859
    
    
    
    (20
    )
    
    
    144,498Gross profit
    
    
    
    
    
    
    3,684
    
    
    
    17,302
    
    
    
    10,296
    
    
    
    
    
    
    
    31,282Selling, general and administrative expenses
    
    
    
    
    
    
    1,143
    
    
    
    8,208
    
    
    
    4,409
    
    
    
    
    
    
    
    13,760Restructuring and severance costs
    
    
    
    
    
    
    
    
    
    
    295
    
    
    
    120
    
    
    
    
    
    
    
    415Income from continuing operations
before interest, income taxes, and equity in
affiliates
    
    
    
    
    
    
    2,541
    
    
    
    8,799
    
    
    
    5,767
    
    
    
    
    
    
    
    17,107Interest expense (income), net
    
    
    14,969
    
    
    
    (362
    )
    
    
    (213
    )
    
    
    559
    
    
    
    
    
    
    
    14,953Income (loss) from continuing operations
before income taxes, and equity in affiliates
    
    
    (14,969
    )
    
    
    2,903
    
    
    
    9,012
    
    
    
    5,208
    
    
    
    
    
    
    
    2,154Income tax provision (benefit)
    
    
    (2,085
    )
    
    
    1,171
    
    
    
    2,061
    
    
    
    2,350
    
    
    
    
    
    
    
    3,497Equity in affiliates
    
    
    11,541
    
    
    
    
    
    
    
    4,590
    
    
    
    1,732
    
    
    
    (17,863
    )
    
    
    Income (loss) from continuing operations
    
    
    (1,343
    )
    
    
    1,732
    
    
    
    11,541
    
    
    
    4,590
    
    
    
    (17,863
    )
    
    
    (1,343
    )Income (loss) from discontinued operations, net
    
    
    5,060
    
    
    
    (193
    )
    
    
    5,060
    
    
    
    4,130
    
    
    
    (8,997
    )
    
    
    5,060Net income
    
    $
    3,717
    
    
    $
    1,539
    
    
    $
    16,601
    
    
    $
    8,720
    
    
    $
    (26,860
    )
    
    $
    3,717Fiscal Six Months Ended July 3, 2005:Net sales
    
    $
    
    
    
    $
    12,640
    
    
    $
    139,140
    
    
    $
    53,917
    
    
    $
    (42
    )
    
    $
    205,655Cost of sales
    
    
    
    
    
    
    8,990
    
    
    
    119,093
    
    
    
    44,573
    
    
    
    (42
    )
    
    
    172,614Gross profit
    
    
    
    
    
    
    3,650
    
    
    
    20,047
    
    
    
    9,344
    
    
    
    
    
    
    
    33,041Selling, general and administrative expenses
    
    
    
    
    
    
    1,271
    
    
    
    10,982
    
    
    
    3,400
    
    
    
    
    
    
    
    15,653Restructuring and severance costs
    
    
    
    
    
    
    
    
    
    
    353
    
    
    
    97
    
    
    
    
    
    
    
    450Income from continuing operations
before interest, income taxes, and
equity in affiliates
    
    
    
    
    
    
    2,379
    
    
    
    8,712
    
    
    
    5,847
    
    
    
    
    
    
    
    16,938Interest expense, net
    
    
    12,916
    
    
    
    1,976
    
    
    
    2,131
    
    
    
    448
    
    
    
    
    
    
    
    17,471Income (loss) from continuing operations
before income taxes, and equity in affiliates
    
    
    (12,916
    )
    
    
    403
    
    
    
    6,581
    
    
    
    5,399
    
    
    
    
    
    
    
    (533
    )Income tax provision (benefit)
    
    
    (2,343
    )
    
    
    
    
    
    
    2,286
    
    
    
    1,620
    
    
    
    
    
    
    
    1,563Equity in affiliates
    
    
    8,477
    
    
    
    
    
    
    
    4,182
    
    
    
    403
    
    
    
    (13,062
    )
    
    
    Income (loss) from continuing operations
    
    
    (2,096
    )
    
    
    403
    
    
    
    8,477
    
    
    
    4,182
    
    
    
    (13,062
    )
    
    
    (2,096
    )Income (loss) from discontinued operations
    
    
    (17,184
    )
    
    
    1,043
    
    
    
    (17,184
    )
    
    
    (17,156
    )
    
    
    33,297
    
    
    
    (17,184
    )Net income (loss)
    
    $
    (19,280
    )
    
    $
    1,446
    
    
    $
    (8,707
    )
    
    $
    (12,974
    )
    
    $
    20,235
    
    
    $
    (19,280
    )
 25




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 16.
Guarantor and Non-Guarantor Subsidiaries of MSXI Limited continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
for the fiscal six months ended July 2, 2006
 MSXIMSXI
    
    
    Limited
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Parent)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    3,717
    
    
    $
    1,539
    
    
    $
    16,601
    
    
    $
    8,720
    
    
    $
    (26,860
    )
    
    $
    3,717Adjustments to reconcile net income to net cash
provided by (used for) operating activities:Equity in affiliates, including discontinued
operations
    
    
    (16,601
    )
    
    
    
    
    
    
    (8,720
    )
    
    
    (1,539
    )
    
    
    26,860
    
    
    
    Loss (gain) on sale of businesses
    
    
    
    
    
    
    193
    
    
    
    (453
    )
    
    
    (3,811
    )
    
    
    
    
    
    
    (4,071
    )Depreciation
    
    
    
    
    
    
    106
    
    
    
    879
    
    
    
    443
    
    
    
    
    
    
    
    1,428Amortization of debt issuance costs
    
    
    2,341
    
    
    
    270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,611Deferred taxes
    
    
    (701
    )
    
    
    1,054
    
    
    
    839
    
    
    
    579
    
    
    
    
    
    
    
    1,771Loss on sale/disposal of property and
equipment
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    2
    
    
    
    
    
    
    
    44(Increase) decrease in receivable, net
    
    
    
    
    
    
    1,974
    
    
    
    1,658
    
    
    
    5,995
    
    
    
    
    
    
    
    9,627(Increase) decrease in inventory
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    (46
    )
    
    
    
    
    
    
    (62
    )(Increase) decrease in prepaid expenses
and other assets
    
    
    
    
    
    
    (68
    )
    
    
    369
    
    
    
    (472
    )
    
    
    
    
    
    
    (171
    )Increase (decrease) in current liabilities
    
    
    138
    
    
    
    (2,186
    )
    
    
    (5,070
    )
    
    
    (7,014
    )
    
    
    
    
    
    
    (14,132
    )Other, net
    
    
    
    
    
    
    5
    
    
    
    149
    
    
    
    (1,151
    )
    
    
    
    
    
    
    (997
    )Net cash provided by (used for) operating activities
    
    
    (11,106
    )
    
    
    2,887
    
    
    
    6,278
    
    
    
    1,706
    
    
    
    
    
    
    
    (235
    )Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (58
    )
    
    
    (330
    )
    
    
    (742
    )
    
    
    
    
    
    
    (1,130
    )Payments for contingent consideration and minority interests
    
    
    
    
    
    
    
    
    
    
    (1,208
    )
    
    
    
    
    
    
    
    
    
    
    (1,208
    )Proceeds from sale of businesses, net of expenses paid
    
    
    
    
    
    
    (193
    )
    
    
    6,845
    
    
    
    (1,042
    )
    
    
    
    
    
    
    5,610Proceeds from sale/disposal of property and
equipment
    
    
    
    
    
    
    10
    
    
    
    46
    
    
    
    35
    
    
    
    
    
    
    
    91Net cash provided by (used for) investing activities
    
    
    
    
    
    
    (241
    )
    
    
    5,353
    
    
    
    (1,749
    )
    
    
    
    
    
    
    3,363Cash flows from financing activities:Transactions with subsidiaries
    
    
    18,786
    
    
    
    (9,211
    )
    
    
    (7,728
    )
    
    
    (1,847
    )
    
    
    
    
    
    
    Debt issuance costs
    
    
    (570
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (570
    )Changes in revolving and term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,946
    
    
    
    
    
    
    
    1,946Repayment of long term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,228
    )
    
    
    
    
    
    
    (1,228
    )Changes in bank overdrafts, net
    
    
    
    
    
    
    
    
    
    
    (3,958
    )
    
    
    (262
    )
    
    
    
    
    
    
    (4,220
    )Net cash provided by (used for) financing activities
    
    
    18,216
    
    
    
    (9,211
    )
    
    
    (11,686
    )
    
    
    (1,391
    )
    
    
    
    
    
    
    (4,072
    )Effect of foreign exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    834
    
    
    
    
    
    
    
    (1,353
    )
    
    
    
    
    
    
    (519
    )Cash and cash equivalents:Increase (decrease) for the period
    
    
    7,110
    
    
    
    (5,731
    )
    
    
    (55
    )
    
    
    (2,787
    )
    
    
    
    
    
    
    (1,463
    )Balance, beginning of period (including $273 of cash held for sale)
    
    
    11,995
    
    
    
    6,980
    
    
    
    432
    
    
    
    8,603
    
    
    
    
    
    
    
    28,010Balance, end of period
    
    $
    19,105
    
    
    $
    1,249
    
    
    $
    377
    
    
    $
    5,816
    
    
    $
    
    
    
    $
    26,547
 26




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##### Table of Contents



MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
 16.
Guarantor and Non-Guarantor Subsidiaries of MSXI Limited continued
 MSX INTERNATIONAL, INC.
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
for the fiscal six months ended July 3, 2005
 MSXIMSXI
    
    
    Limited
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    MSXI(Parent)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (19,280
    )
    
    $
    1,448
    
    
    $
    (8,707
    )
    
    $
    (12,974
    )
    
    $
    20,233
    
    
    $
    (19,280
    )Adjustments to reconcile net income (loss)
to net cash provided by (used for)
operating activities:Equity in affiliates, including discontinued
operations
    
    
    8,707
    
    
    
    
    
    
    
    12,974
    
    
    
    (1,448
    )
    
    
    (20,233
    )
    
    
    Loss (gain) on sale of businesses
    
    
    
    
    
    
    (607
    )
    
    
    
    
    
    
    4,605
    
    
    
    
    
    
    
    3,998Depreciation
    
    
    
    
    
    
    519
    
    
    
    1,613
    
    
    
    1,384
    
    
    
    
    
    
    
    3,516Goodwill impairment charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,131
    
    
    
    
    
    
    
    7,131Amortization of debt issuance costs
    
    
    2,073
    
    
    
    214
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,287Deferred taxes
    
    
    (1,691
    )
    
    
    
    
    
    
    1,691
    
    
    
    434
    
    
    
    
    
    
    
    434Gain on sale/disposal of property
and equipment
    
    
    
    
    
    
    (1
    )
    
    
    (44
    )
    
    
    (55
    )
    
    
    
    
    
    
    (100
    )(Increase) decrease in receivable, net
    
    
    
    
    
    
    2,209
    
    
    
    (8,444
    )
    
    
    27,236
    
    
    
    
    
    
    
    21,001(Increase) decrease in inventory
    
    
    
    
    
    
    
    
    
    
    1,452
    
    
    
    228
    
    
    
    
    
    
    
    1,680(Increase) decrease in prepaid expenses
and other assets
    
    
    
    
    
    
    (355
    )
    
    
    65
    
    
    
    (634
    )
    
    
    
    
    
    
    (924
    )Increase (decrease) in current liabilities
    
    
    753
    
    
    
    (903
    )
    
    
    6,452
    
    
    
    (11,726
    )
    
    
    
    
    
    
    (5,424
    )Other, net
    
    
    
    
    
    
    7
    
    
    
    (151
    )
    
    
    (1,550
    )
    
    
    
    
    
    
    (1,694
    )Net cash provided by (used for) operating activities
    
    
    (9,438
    )
    
    
    2,531
    
    
    
    6,901
    
    
    
    12,631
    
    
    
    
    
    
    
    12,625Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (165
    )
    
    
    (752
    )
    
    
    (669
    )
    
    
    
    
    
    
    (1,586
    )Payments for contingent consideration
    
    
    
    
    
    
    
    
    
    
    (1,208
    )
    
    
    
    
    
    
    
    
    
    
    (1,208
    )Proceeds
from sale of business, net of expenses paid
    
    
    
    
    
    
    5,041
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,041Proceeds from sale/disposal of property and
equipment
    
    
    
    
    
    
    13
    
    
    
    54
    
    
    
    135
    
    
    
    
    
    
    
    202Net cash provided by (used for) investing activities
    
    
    
    
    
    
    4,889
    
    
    
    (1,906
    )
    
    
    (534
    )
    
    
    
    
    
    
    2,449Cash flows from financing activities:Transactions with subsidiaries
    
    
    13,629
    
    
    
    1,897
    
    
    
    (9,925
    )
    
    
    (5,601
    )
    
    
    
    
    
    
    Debt issuance costs
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )Changes in revolving debt, net
    
    
    
    
    
    
    (583
    )
    
    
    
    
    
    
    (8,022
    )
    
    
    
    
    
    
    (8,605
    )Changes in book overdrafts, net
    
    
    
    
    
    
    
    
    
    
    (6,166
    )
    
    
    
    
    
    
    
    
    
    
    (6,166
    )Net cash provided by (used for) financing activities
    
    
    13,610
    
    
    
    1,314
    
    
    
    (16,091
    )
    
    
    (13,623
    )
    
    
    
    
    
    
    (14,790
    )Effect of foreign exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    (1,564
    )
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (1,567
    )Cash and cash equivalents:Increase (decrease) for the period
    
    
    4,172
    
    
    
    7,170
    
    
    
    (11,096
    )
    
    
    (1,529
    )
    
    
    
    
    
    
    (1,283
    )Balance, beginning of period
    
    
    5,650
    
    
    
    18
    
    
    
    11,570
    
    
    
    17,139
    
    
    
    
    
    
    
    34,377Balance, end of period (including $941 of cash
held for sale)
    
    $
    9,822
    
    
    $
    7,188
    
    
    $
    474
    
    
    $
    15,610
    
    
    $
    
    
    
    $
    33,094
 27




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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
    Net Sales
  28




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  July 2,
    
    
    July 3,
    
    
    Inc / (Dec) vs. 20052006
    
    
    2005
    
    
    $
    
    
    %(dollars in thousands)Fiscal Quarter Ended:Business Outsourcing Services
    
    $
    41,135
    
    
    $
    44,117
    
    
    $
    (2,982
    )
    
    
    (6.8
    %)Human Capital Services
    
    
    25,845
    
    
    
    37,272
    
    
    
    (11,427
    )
    
    
    (30.7
    %)Engineering Services
    
    
    20,180
    
    
    
    23,177
    
    
    
    (2,997
    )
    
    
    (12.9
    %)Total net sales
    
    $
    87,160
    
    
    $
    104,566
    
    
    $
    (17,406
    )
    
    
    (16.6
    %)
 July 2,
    
    
    July 3,
    
    
    Inc / (Dec) vs. 20052006
    
    
    2005
    
    
    $
    
    
    %(dollars in thousands)Fiscal six months ended:Business Outsourcing Services
    
    $
    81,391
    
    
    $
    87,287
    
    
    $
    (5,896
    )
    
    
    (6.8
    %)Human Capital Services
    
    
    52,451
    
    
    
    73,742
    
    
    
    (21,291
    )
    
    
    (28.9
    %)Engineering Services
    
    
    41,938
    
    
    
    44,626
    
    
    
    (2,688
    )
    
    
    (6.0
    %)Total net sales
    
    $
    175,780
    
    
    $
    205,655
    
    
    $
    (29,875
    )
    
    
    (14.5
    %)
    Operating Profit
  29




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 July 2,
    
    July 3,
    
    Inc (Dec) vs. 20052006
    
    2005
    
    $
    
    %(dollars in thousands)Fiscal Quarter Ended:Gross profit
    
    $
    15,524
    
    
    $
    16,546
    
    
    $
    (1,022
    )
    
    
    (6.2
    %)% of net sales
    
    
    17.8
    %
    
    
    15.8
    %
    
    
    n/a
    
    
    
    n/aSelling, general and administrative expenses
    
    $
    6,960
    
    
    $
    7,139
    
    
    $
    (179
    )
    
    
    (2.5
    %)% of net sales
    
    
    8.0
    %
    
    
    6.8
    %
    
    
    n/a
    
    
    
    n/aOperating income
    
    $
    8,332
    
    
    $
    9,083
    
    
    $
    (751
    )
    
    
    (8.3
    %)% of net sales
    
    
    9.6
    %
    
    
    8.7
    %
    
    
    n/a
    
    
    
    n/a
 July 2,
    
    July 3,
    
    Inc (Dec) vs. 20052006
    
    2005
    
    $
    
    %(dollars in thousands)Fiscal six months ended:Gross profit
    
    $
    31,282
    
    
    $
    33,041
    
    
    $
    (1,759
    )
    
    
    (5.3
    %)% of net sales
    
    
    17.8
    %
    
    
    16.1
    %
    
    
    n/a
    
    
    
    n/aSelling, general and administrative expenses
    
    $
    13,760
    
    
    $
    15,653
    
    
    $
    (1,893
    )
    
    
    (12.1
    %)% of net sales
    
    
    7.8
    %
    
    
    7.6
    %
    
    
    n/a
    
    
    
    n/aOperating income
    
    $
    17,107
    
    
    $
    16,938
    
    
    $
    169
    
    
    
    1.0
    %% of net sales
    
    
    9.7
    %
    
    
    8.2
    %
    
    
    n/a
    
    
    
    n/a
   Interest expense, net
  30




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 Income taxes
  Discontinued Operations
  Assets Held for SaleAt July 2, 2006
    
    MSX International Engineering GmbH, our remaining
engineering operations in GermanyAt January 1, 2006
    
    MSX International Engineering GmbH, our remainingengineering operations in Germany
    
    Satiz S.r.l., our Italian technical and commercial publishingbusiness (sold April 21, 2006)
    
    Creative Technology Services, LLC (sold
January 19, 2006)
 31




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
  Fiscal Quarter Ended
    
    
    Fiscal Six Months EndedJuly 2,
    
    
    July 3,
    
    
    July 2,
    
    
    July 3,2006
    
    
    2005
    
    
    2006
    
    
    2005(in thousands)Net sales
    
    $
    7,835
    
    
    $
    44,722
    
    
    $
    30,377
    
    
    $
    89,569Cost of sales
    
    
    7,437
    
    
    
    40,915
    
    
    
    27,383
    
    
    
    83,429Gross profit
    
    
    398
    
    
    
    3,807
    
    
    
    2,994
    
    
    
    6,140Selling, general and administrative expense
    
    
    146
    
    
    
    2,710
    
    
    
    1,851
    
    
    
    5,442Restructuring and severance
    
    
    
    
    
    
    22
    
    
    
    11
    
    
    
    6,655Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,131Operating income (loss)
    
    
    252
    
    
    
    1,075
    
    
    
    1,132
    
    
    
    (13,088
    )Interest expense, net
    
    
    52
    
    
    
    52
    
    
    
    49
    
    
    
    69Net gain on sale of businesses
    
    
    3,601
    
    
    
    (3,998
    )
    
    
    4,071
    
    
    
    (3,998
    )Income (loss) before taxes, net
    
    
    3,801
    
    
    
    (2,975
    )
    
    
    5,154
    
    
    
    (17,155
    )Income tax expense
    
    
    16
    
    
    
    1,262
    
    
    
    94
    
    
    
    29Income (loss) from discontinued operations
    
    $
    3,785
    
    
    $
    (4,237
    )
    
    $
    5,060
    
    
    $
    (17,184
    )
      32




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 Liquidity and Capital Resources
 Cash Flows
 General.
  Operating Activities
 Investing Activities.
 Financing Activities
 Liquidity and Available Financings
  33




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
   .
  Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.
 Forward  Looking Statements
  
    
    Our substantial leverage and related exposure to changes in interest rates;
    
    Our reliance on the automotive industry and major customers in such industry,
including without limitation the timing of such customers product development and
other initiatives;
    
    The market demand for our business services in general;
 34




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
    
    Our ability to attract, retain, develop and place qualified personnel, particularly technical personnel;
    
    Delays or unexpected costs associated with our cost reduction efforts;
    
    Risks associated with operating internationally, including economic, political and currency risks; and
    
    Risks associated with material weaknesses we have identified in our internal
controls over financial reporting and the potential adverse affect of those weaknesses
on our business if such weaknesses are not adequately addressed.
   35




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##### Table of Contents



ITEM
4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedure:
   Material Weaknesses in Internal Control over Financial Reporting:
  
    
    The Company did not maintain an effective control environment over the financial
reporting and general ledger processes due primarily to limitations in the capacity of
the accounting and other departments. Limitations are believed to be caused by
voluntary and involuntary staff turnover resulting from downsizing of operations and
related support functions. These limitations, in addition to other factors resulted in
weaknesses identified for (1) Authorization of Journal Entries multiple individuals
have the ability to initiate and record journal entries into the general ledger without
prior review or approval. Reviews of such journal entries are not done on a regular
basis. Formal policies and procedures for authorization and/or review of posted
journal entries are not developed or implemented (2) Financial Reporting and Oversight
The financial statements of Satiz S.r.l. for 2003 and 2004 were not correct primarily
as a result of unsubstantiated amounts recorded as unbilled accounts receivable. In
addition, the financial statements of other subsidiaries for 2004 were not correct as a
result of misstated pension and other liabilities. These errors caused the financial
statements of the Company for 2003 and 2004 to be restated in our Annual Report on Form
10-K filed on April 17, 2006. These restatements are an indication that the controls
over financial reporting are not adequate and (3) Segregation of Duties The Company
does not maintain adequate segregation of duties over certain general ledger activities
or maintain adequate monitoring controls in such areas.
    
    Employees within certain departments have access rights within the accounting system
that are incompatible with their assigned roles. Appropriate controls are not in place
to provide assurance over the information technology process such as review of security
event logs and activity reports.
 Plan for Remediation of Material Weaknesses in Internal Control over Financial Reporting:
  36




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  Our ability to meet our long-term liquidity needs and obtain additional financing is uncertain.
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 6. 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
 37




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##### Table of Contents



SIGNATURE
   MSX INTERNATIONAL, INC.
(Registrant)By:
    
    /s/ Frederick K. Minturn

Frederick K. MinturnExecutive Vice President and
Chief Financial Officer(Chief accounting officerand authorized signatory)
 38




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##### Table of Contents



ExhibitNumber
    
    Exhibit Name31.1
    
    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