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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended April 1, 2001

OR

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

For the transition period from         to

Commission File Number: 333-49821

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

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|Delaware                                                       |  | 38-3323099                          
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|(State or other jurisdiction
of incorporation or organization) |  | (I.R.S. Employer Identification No.)
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|275 Rex Boulevard, Auburn Hills, Michigan                      |  | 48326                               
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|(Address of principal executive offices)                       |  | (Zip Code)                          

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



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TABLE OF CONTENTS



|                              |                                                                                                |                                                                                                                 |  |  |  |  |  | 
|----------------------------- | ---------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                  
|                              |                                                                                                | CONSOLIDATED BALANCE SHEETS AS OF APRIL 1, 2000 (UNAUDITED) AND DECEMBER 31, 2000                              
|                              |                                                                                                | CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE FISCAL QUARTERS ENDED APRIL 1, 2001 AND APRIL 2, 2000    
|                              |                                                                                                | CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE FISCAL QUARTERS ENDED APRIL 1, 2001 AND APRIL 2, 2000
|                              |                                                                                                | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)                                                         
|                              | ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II.  OTHER INFORMATION  
|                              | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                             
|                              | ITEM 6. EXHIBITS AND REPORTS OM FORM 8-K                                                      
|SIGNATURE                    



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##### Table of Contents



MSX INTERNATIONAL, INC.INDEX

PART I.FINANCIAL INFORMATION



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|                          | ITEM 1. |                                                                                                                 | Financial Statements:                                                                
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|                          |         | Consolidated Balance Sheets as of April 1, 2001 (Unaudited) and
December 31, 2000                               |                                                                                       |  | 2 |   
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|                          |         | Consolidated Statements of Income (Unaudited) for the Fiscal Quarters
Ended April 1, 2001 and April 2, 2000     |                                                                                       |  | 3 |   
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|                          |         | Consolidated Statements of Cash Flows (Unaudited) for the Fiscal Quarters
Ended April 1, 2001 and April 2, 2000 |                                                                                       |  | 4 |   
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|                          |         | Notes to Consolidated Financial Statements (Unaudited)                                                          |                                                                                       |  | 5 |   
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|                          | ITEM 2. |                                                                                                                 | Managements Discussion
and Analysis of Financial
Condition and Results of
Operations |  |   | 13 | 
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|PART II.OTHER INFORMATION
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|                          | ITEM 2. |                                                                                                                 | Changes in Securities and Use
of Proceeds                                             |  |   | 15 | 
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|                          | ITEM 6. |                                                                                                                 | Exhibits and Reports on Form 8-K                                                      |  |   | 15 | 
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|SIGNATURE                 |         |                                                                                                                 | 16                                                                                   

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##### Table of Contents












PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

MSX INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETSas of April 1, 2001 and December 31, 2000

|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         |                        |         |         |              |         |         |  
|---------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | -------------------- | ------------------------------------------- | ------- | ---------------------- | ------- | ------- | ------------ | ------- | ------- | -
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         | April 1,               |        
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         | 2001                   |         |         | December 31, |        
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         | (Unaudited)            |         |         | 2000         |        
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         |                        |         |         |              |        
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         | (dollars in thousands) |        
|ASSETS                                                                                              
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|Current assets:                                                                                     
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Cash and cash equivalents                                                                                                                                                                                |              | $                    | 4,571                                       |         |                        | $       | 4,686   |             
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Accounts receivable, net (Note 3)                                                                                                                                                                        |              |                      | 307,083                                     |         |                        |         | 321,733 |             
|                                                                                                    
|                                                                                                    
|                                                                                                    
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|                                                                                                     | Inventory                                                                                                                                                                                                |              |                      | 3,441                                       |         |                        |         | 3,189   |             
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Prepaid expenses and other assets                                                                                                                                                                        |              |                      | 12,071                                      |         |                        |         | 8,578   |             
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Deferred income taxes, net                                                                                                                                                                               |              |                      | 3,086                                       |         |                        |         | 3,209   |             
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         |                       
|                                                                                                     |                                                                                                                                                                                                          |              | Total current assets |                                             |         | 330,252                |         |         |              | 341,395 |        
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|Property and equipment, net                                                                          |                                                                                                                                                                                                          |              | 41,935               |                                             |         |                        | 40,959  |        
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|Goodwill and other intangibles, net of accumulated amortization
of $12,931 and $11,395, respectively |                                                                                                                                                                                                          |              | 172,718              |                                             |         |                        | 172,091 |        
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|Other assets                                                                                         |                                                                                                                                                                                                          |              | 23,338               |                                             |         |                        | 18,774  |        
|                                                                                                    
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|Deferred income taxes, net                                                                           |                                                                                                                                                                                                          |              | 4,803                |                                             |         |                        | 3,810   |        
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         |                        |        
|                                                                                                     |                                                                                                                                                                                                          | Total assets |                      | $                                           | 573,046 |                        |         | $       | 577,029      |        
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|LIABILITIES AND SHAREHOLDERS DEFICIT                                                               
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|Current liabilities:                                                                                
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|                                                                                                     | Notes payable and current portion of long-term debt (Note 4)                                                                                                                                             |              | $                    | 11,656                                      |         |                        | $       | 13,170  |             
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|                                                                                                     | Accounts payable and drafts                                                                                                                                                                              |              |                      | 163,802                                     |         |                        |         | 176,569 |             
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|                                                                                                     | Accrued payroll and benefits                                                                                                                                                                             |              |                      | 21,774                                      |         |                        |         | 30,561  |             
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|                                                                                                     | Other accrued liabilities                                                                                                                                                                                |              |                      | 68,171                                      |         |                        |         | 71,017  |             
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         |                       
|                                                                                                     |                                                                                                                                                                                                          |              |                      | Total current liabilities                   |         |                        | 265,403 |         |              |         | 291,317 |  
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|Long-term debt (Note 4)                                                                              |                                                                                                                                                                                                          |              | 272,553              |                                             |         |                        | 253,676 |        
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|Long-term deferred compensation and other liabilities                                                |                                                                                                                                                                                                          |              | 11,245               |                                             |         |                        | 10,406  |        
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         |                        |        
|                                                                                                     | Total liabilities                                                                                                                                                                                        |              |                      | 549,201                                     |         |                        |         | 555,399 |             
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|Minority interests                                                                                   |                                                                                                                                                                                                          |              | 1,208                |                                             |         |                        | 1,092   |        
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|Redeemable Series A Preferred Stock (Note 5)                                                         |                                                                                                                                                                                                          |              | 36,000               |                                             |         |                        | 36,000  |        
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|Shareholders deficit:                                                                              
|                                                                                                    
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|                                                                                                     | Common Stock, $.01 par value, 200,000,000 aggregate shares
of
Class A and Class B Common Stock authorized; 20,080,800
and 20,400,600 shares of Class A Common Stock issued and
outstanding, respectively |              |                      | 201                                         |         |                        |         | 204     |             
|                                                                                                    
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|                                                                                                     | Additional paid-in-capital                                                                                                                                                                               |              |                      | (21,769                                     | )       |                        |         | (21,705 | )           
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|                                                                                                     | Note receivable from officer                                                                                                                                                                             |              |                      | (3,000                                      | )       |                        |         | (3,000  | )           
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|                                                                                                     | Accumulated other comprehensive loss                                                                                                                                                                     |              |                      | (14,176                                     | )       |                        |         | (15,641 | )           
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|                                                                                                     | Retained earnings                                                                                                                                                                                        |              |                      | 25,381                                      |         |                        |         | 24,680  |             
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         |                        |        
|                                                                                                     |                                                                                                                                                                                                          |              |                      | Total shareholders deficit                 |         |                        | (13,363 | )       |              |         | (15,462 | )
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         |                        |        
|                                                                                                     |                                                                                                                                                                                                          |              |                      | Total liabilities and shareholders deficit |         | $                      | 573,046 |         |              | $       | 577,029 |  
|                                                                                                     |                                                                                                                                                                                                          |              |                      |                                             |         |                       

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

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##### Table of Contents






MSX INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)for the fiscal quarters ended April 1, 2001 and April 2, 2000

|                                                                        |                                                                                       |   |                      |        |  |          |         |        | 
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | - | -------------------- | ------ |  | -------- | ------- | ------ | 
|                                                                        |                                                                                       |   | Fiscal Quarter Ended |       
|                                                                        |                                                                                       |   |                      |       
|                                                                        |                                                                                       |   | April 1,             |        |  | April 2, |        
|                                                                        |                                                                                       |   | 2001                 |        |  | 2000     |        
|                                                                        |                                                                                       |   |                      |        |  |          |        
|                                                                        |                                                                                       |   | (in thousands)       |       
|Net sales                                                               |                                                                                       | $ | 256,637              |        |  | $        | 247,965 |       
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|Cost of sales                                                           |                                                                                       |   | 224,445              |        |  |          | 212,805 |       
|                                                                        |                                                                                       |   |                      |        |  |         
|                                                                        | Gross profit                                                                          |   |                      | 32,192 |  |          |         | 35,160 | 
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|Selling, general and administrative expenses                            |                                                                                       |   | 21,243               |        |  |          | 20,087  |       
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|Amortization of goodwill and other intangibles                          |                                                                                       |   | 1,604                |        |  |          | 1,102   |       
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|                                                                        | Operating income                                                                      |   |                      | 9,345  |  |          |         | 13,971 | 
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|Interest expense, net                                                   |                                                                                       |   | 6,928                |        |  |          | 6,911   |       
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|                                                                        |                                                                                       |   |                      |        |  |         
|                                                                        | Income before income taxes, minority interests and equity in
net losses of affiliates |   |                      | 2,417  |  |          |         | 7,060  | 
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|Income tax provision                                                    |                                                                                       |   | 1,015                |        |  |          | 2,928   |       
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|Minority interests and equity in net losses
of affiliates, net of taxes |                                                                                       |   | (202                 | )      |  |          | 82      |       
|                                                                        |                                                                                       |   |                      |        |  |         
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|                                                                        | Net income                                                                            |   | $                    | 1,200  |  |          | $       | 4,214  | 
|                                                                        |                                                                                       |   |                      |        |  |         

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

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##### Table of Contents






MSX INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)for the fiscal quarters ended April 1, 2001 and April 2, 2000

|                                                                     |                                                                                              |                                                           |         |                      |         |   |          |         |        |  
|-------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------------- | ------- | -------------------- | ------- | - | -------- | ------- | ------ | -
|                                                                     |                                                                                              |                                                           |         | Fiscal Quarter Ended |        
|                                                                     |                                                                                              |                                                           |         |                      |        
|                                                                     |                                                                                              |                                                           |         | April 1,             |         |   | April 2, |        
|                                                                     |                                                                                              |                                                           |         | 2001                 |         |   | 2000     |        
|                                                                     |                                                                                              |                                                           |         |                      |         |   |          |        
|                                                                     |                                                                                              |                                                           |         | (in thousands)       |        
|Cash flows from operating activities:                               
|                                                                    
|                                                                    
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|                                                                     | Net income                                                                                   |                                                           | $       | 1,200                |         |   | $        | 4,214   |       
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|                                                                     | Adjustments to reconcile net income
to net cash provided by (used for) operating activities:
|                                                                    
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|                                                                     |                                                                                              | Minority interests and equity in net losses of affiliates |         |                      | 202     |   |          |         | (82    | )
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|                                                                     |                                                                                              | Depreciation                                              |         |                      | 3,920   |   |          |         | 3,864  |  
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|                                                                     |                                                                                              | Amortization                                              |         |                      | 1,882   |   |          |         | 1,365  |  
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|                                                                     |                                                                                              | Deferred taxes                                            |         |                      | (870    | ) |          |         | 993    |  
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|                                                                     |                                                                                              | Loss on sale/disposal of property and equipment           |         |                      |        |   |          |         | 19     |  
|                                                                    
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|                                                                     |                                                                                              | (Increase) decrease in receivables, net                   |         |                      | 14,650  |   |          |         | (4,238 | )
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|                                                                     |                                                                                              | (Increase) decrease in inventory                          |         |                      | (252    | ) |          |         | (295   | )
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|                                                                     |                                                                                              | (Increase) decrease in prepaid expenses and other assets  |         |                      | (3,491  | ) |          |         | (2,472 | )
|                                                                    
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|                                                                     |                                                                                              | Increase (decrease) in current liabilities                |         |                      | (25,347 | ) |          |         | 4,739  |  
|                                                                    
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|                                                                     |                                                                                              | Other, net                                                |         |                      | 237     |   |          |         | (144   | )
|                                                                     |                                                                                              |                                                           |         |                      |         |   |         
|Net cash provided by (used for) operating activities                 |                                                                                              |                                                           | (7,869  | )                    |         |   | 7,963    |        
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|Cash flows from investing activities:                               
|                                                                    
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|                                                                     | Capital expenditures                                                                         |                                                           |         | (4,999               | )       |   |          | (4,465  | )     
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|                                                                     | Acquisition of businesses, net of cash acquired                                              |                                                           |         | (11,348              | )       |   |          | (32,613 | )     
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|                                                                    
|                                                                     | Proceeds from sale/disposal of equipment                                                     |                                                           |         | 4                    |         |   |          | 55      |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Other, net                                                                                   |                                                           |         | (14                  | )       |   |          | (662    | )     
|                                                                     |                                                                                              |                                                           |         |                      |         |  
|Net cash used for investing activities                               |                                                                                              |                                                           | (16,357 | )                    |         |   | (37,685  | )      
|                                                                     |                                                                                              |                                                           |         |                      |         |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash flows from financing activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Proceeds from issuance of debt                                                               |                                                           |         |                     |         |   |          | 25,000  |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Repayment of debt                                                                            |                                                           |         | (1,313               | )       |   |          | (980    | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Debt issuance costs                                                                          |                                                           |         | (7                   | )       |   |          | (160    | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Changes in revolving debt, net                                                               |                                                           |         | 18,677               |         |   |          | 6,485   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Changes in book overdrafts, net                                                              |                                                           |         | 5,657                |         |   |          | 1,056   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Repurchase of common stock                                                                   |                                                           |         | (4,178               | )       |   |          |        |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Sale of common stock                                                                         |                                                           |         | 3,612                |         |   |          |        |       
|                                                                     |                                                                                              |                                                           |         |                      |         |   |         
|Net cash provided by financing activities                            |                                                                                              |                                                           | 22,448  |                      |         |   | 31,401   |        
|                                                                     |                                                                                              |                                                           |         |                      |         |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Effect of foreign exchange rate changes on cash and cash equivalents |                                                                                              |                                                           | 1,663   |                      |         |   | (1,258   | )      
|                                                                     |                                                                                              |                                                           |         |                      |         |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash and cash equivalents:                                          
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Increase (decrease) for the period                                                           |                                                           |         | (115                 | )       |   |          | 421     |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Balance, beginning of period                                                                 |                                                           |         | 4,686                |         |   |          | 6,879   |       
|                                                                     |                                                                                              |                                                           |         |                      |         |   |         
|                                                                     | Balance, end of period                                                                       |                                                           | $       | 4,571                |         |   | $        | 7,300   |       
|                                                                     |                                                                                              |                                                           |         |                      |         |  

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

4



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##### Table of Contents






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

1. Organization and Basis of Presentation:

The accompanying financial statements represent the consolidated assets
and liabilities and results of operations of MSX International, Inc. and its
majority owned subsidiaries (MSXI). We are principally engaged in the
business of providing engineering services, information technology (IT) and
professional staffing services, and business and technology services primarily
to automobile manufacturers and suppliers in the United States and Europe. We
utilize a 52-53 week fiscal year, which ends on the Sunday nearest December 31.

All intercompany transactions and balances between subsidiaries of MSXI
have been eliminated. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting of only
normal recurring items, which are necessary for a fair presentation. The
operating results for the fiscal quarters ended
April 1, 2001 and April 2, 2000 are not necessarily indicative of the results
of operations for the entire year. Reference should be made to the consolidated
financial statements and notes thereto included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2000. Certain prior year amounts
have been reclassified to conform to the presentation adopted during the
current period.

2. Acquisitions of Businesses:

CSR Acquisition. On February 23, 2000 we acquired the professional
staffing operations of Corporate Staffing Resources, Inc. (the CSR
Acquisition). Specifically, we acquired 100% of the outstanding common stock
of Intranational Computer Consultants, Inc. and Programming Management and
Systems, Inc. and selected assets and liabilities of CMS Management Services
and Ascend. The total purchase price, upon settlement of certain contractual
matters, of about $31.8 million was funded with borrowings under our credit
facility. These companies provide information technology and technical
professional staffing services throughout the United States with combined
historical annual sales in excess of $57 million. The CSR Acquisition was
accounted for under the purchase method of accounting, resulting in goodwill of
$26.9 million.

The terms of certain of our acquisition agreements from prior years
provide for additional contingent consideration to be paid over a period of up
to two years if the acquired entitys future operating results exceed targeted
levels. Contingent consideration is earned when the acquired entitys
financial performance grows in excess of the targeted levels established at the
time of acquisition. Such additional consideration is recorded, when earned,
as additional purchase price. In this regard, we recorded additional
consideration during fiscal 2000 and 2001, related to prior year acquisitions,
which resulted in additional goodwill capitalization. Additional goodwill is
amortized over the remaining amortization period.

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

3. Accounts Receivable:

Accounts receivable include the portion of our billings for purchasing
support services attributable to services provided by our vendors which are
passed on to our customers. These amounts totaled $67.7 million as of April 1,
2001 and $68.5 million as of April 2, 2000. A corresponding liability to our
vendors for these amounts is recorded in accounts payable at the time the
receivable is recognized.

5



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##### Table of Contents



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

Debt:

Debt is comprised of the following:

|                                          |                                |  |                   |           |   |                |           |           |          |   |         |              |  |   |         |         | 
|----------------------------------------- | ------------------------------ |  | ----------------- | --------- | - | -------------- | --------- | --------- | -------- | - | ------- | ------------ |  | - | ------- | ------- | 
|                                          |                                |  | Interest Rates at |           |   | Outstanding at |          
|                                          |                                |  |                   |           |   |                |          
|                                          |                                |  | April 1,          |           |   | December 31,   |           |           | April 1, |   |         | December 31, | 
|                                          |                                |  | 2001              |           |   | 2000           |           |           | 2001     |   |         | 2000         | 
|                                          |                                |  |                   |           |   |                |           |           |          |   |         |              | 
|Senior Subordinated Notes                 |                                |  | 11.375            | %         |   |                | 11.375    | %         |          | $ | 130,000 |              |  | $ | 130,000 |        
|                                         
|                                         
|                                         
|                                         
|Credit Facility, as amended and restated:
|                                         
|                                         
|                                         
|                                         
|                                          | Revolving line of credit notes |  |                   | 6.56-7.22 | % |                |           | 7.47-9.75 | %        |   |         | 26,181       |  |   |         | 19,964  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Swingline notes                |  |                   | 7.00-8.25 | % |                |           | 7.53-9.00 | %        |   |         | 22,060       |  |   |         | 7,712   | 
|                                         
|                                         
|                                         
|                                         
|                                          | Term notes                     |  |                   | 6.91-9.46 | % |                |           | 8.21-9.69 | %        |   |         | 99,937       |  |   |         | 101,250 | 
|                                         
|                                         
|                                         
|                                         
|Satiz Facility                            |                                |  | 5.64              | %         |   |                | 5.73      | %         |          |   | 5,397   |              |  |   | 6,392   |        
|                                         
|                                         
|                                         
|                                         
|Other                                     |                                |  | 7.75              | %         |   |                | 7.50-8.00 | %         |          |   | 634     |              |  |   | 1,528   |        
|                                          |                                |  |                   |           |   |                |           |           |          |   |         |              |  |  
|                                          |                                |  |                   |           |   |                |           |           |          |   | 284,209 |              |  |   | 266,846 |        
|                                         
|                                         
|                                         
|                                         
|Less current portion                      |                                |  |                   |           |   |                |           |           |          |   | 11,656  |              |  |   | 13,170  |        
|                                          |                                |  |                   |           |   |                |           |           |          |   |         |              |  |  
|Total long-term debt                      |                                |  |                   |           |   |                |           |           |          | $ | 272,553 |              |  | $ | 253,676 |        
|                                          |                                |  |                   |           |   |                |           |           |          |   |         |              |  |  

As of April 1, 2001, $48.2 million was outstanding under the revolving
credit portions of our credit facility and has been classified as long-term
debt as we have both the ability and intent to refinance such amounts under the
credit facility.

5. Redeemable Series A Preferred Stock:

We are authorized to issue up to 1,500,000 shares of Preferred Stock,
divided into two classes: 500,000 shares of Redeemable Series A Preferred
Stock, par value $0.01, and 1,000,000 shares of New Preferred Stock, par value
$0.01. As of April 1, 2001 and December 31, 2000, 360,000 shares of our
Redeemable Series A Preferred Stock are issued and outstanding. Dividends on
preferred stock are payable in cash at a rate per annum equal to 12 percent of
the stated value plus an amount equal to any accrued and unpaid dividends. As
of April 1, 2001, we have not declared or paid any dividends. Dividends
accumulated but not declared totaled about $23.0 million as of April 1, 2001.

6. Comprehensive Income:

Our comprehensive income was:

|                                                                    |  |                      |       |  |          |   |        |  
|------------------------------------------------------------------- |  | -------------------- | ----- |  | -------- | - | ------ | -
|                                                                    |  | Fiscal Quarter Ended |      
|                                                                    |  |                      |      
|                                                                    |  | April 1,             |       |  | April 2, |  
|                                                                    |  | 2001                 |       |  | 2000     |  
|                                                                    |  |                      |       |  |          |  
|Net income                                                          |  | $                    | 1,200 |  |          | $ | 4,214  |  
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Other comprehensive loss -
foreign currency translation adjustments |  |                      | 1,465 |  |          |   | (1,702 | )
|                                                                    |  |                      |       |  |          |  
|Comprehensive income                                                |  | $                    | 2,665 |  |          | $ | 2,512  |  
|                                                                    |  |                      |       |  |          |  

6



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##### Table of Contents



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

7. Segment Information:

MSXI is a global provider of technology driven business services to the
automotive and other industries. We group our services into three service line
categories: engineering services, information technology (IT) and
professional staffing services, and business and technology services. Due to
the similar characteristics of our service lines, including the nature of our
service offerings, processes supporting the delivery of our services, our
customers, and our marketing and sales processes, our operations have been
aggregated following the provisions of Statement of Financial Accounting
Standards (SFAS) No. 131 for segment reporting purposes.

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

|                                      |                 |   |                      |         |  |          |         |         | 
|------------------------------------- | --------------- | - | -------------------- | ------- |  | -------- | ------- | ------- | 
|                                      |                 |   | Fiscal Quarter Ended |        
|                                      |                 |   |                      |        
|                                      |                 |   | April 1,             |         |  | April 2, |        
|                                      |                 |   | 2001                 |         |  | 2000     |        
|                                      |                 |   |                      |         |  |          |        
|Engineering Services                  |                 | $ | 142,818              |         |  | $        | 143,805 |        
|                                     
|                                     
|                                     
|                                     
|IT and Professional Staffing Services |                 |   | 46,010               |         |  |          | 35,136  |        
|                                     
|                                     
|                                     
|                                     
|Business & Technology Services        |                 |   | 67,809               |         |  |          | 69,024  |        
|                                      |                 |   |                      |         |  |         
|                                      | Total net sales |   | $                    | 256,637 |  |          | $       | 247,965 | 
|                                      |                 |   |                      |         |  |         

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

|                                                                                            |  |                      |        |   |          |   |        |  
|------------------------------------------------------------------------------------------- |  | -------------------- | ------ | - | -------- | - | ------ | -
|                                                                                            |  | Fiscal Quarter Ended |       
|                                                                                            |  |                      |       
|                                                                                            |  | April 1,             |        |   | April 2, |  
|                                                                                            |  | 2001                 |        |   | 2000     |  
|                                                                                            |  |                      |        |   |          |  
|Total EBIT before minority interests and equity in
net losses of affiliates                 |  | $                    | 10,384 |   |          | $ | 15,413 |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Interest expense                                                                            |  |                      | (6,928 | ) |          |   | (6,911 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Michigan Single Business Tax and other similar taxes                                        |  |                      | (1,039 | ) |          |   | (1,442 | )
|                                                                                            |  |                      |        |   |          |  
|Consolidated income before taxes, minority interests
and equity in net losses of affiliates |  | $                    | 2,417  |   |          | $ | 7,060  |  
|                                                                                            |  |                      |        |   |          |  

8. Guarantor and Non-Guarantor Subsidiaries:

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

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

7



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##### Table of Contents



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

8. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEETas of April 1, 2001

|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |         |         | 
|----------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------- | -------- | -------- | ------- |  | ------------ | ------- | ------- | ------------- | ------ | ------- | ------------ |  | -------- | ------------ | -------- | - | ------- | ------- | ------- | 
|                                                      |                                                     |                                                      |          | MSXI     |         |  | Guarantor    |         |         | Non-Guarantor |        |         |              |  |          |              | MSXI     |  
|                                                      |                                                     |                                                      |          | (Issuer) |         |  | Subsidiaries |         |         | Subsidiaries  |        |         | Eliminations |  |          | Consolidated |         
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |              |         
|ASSETS                                               
|                                                     
|                                                     
|                                                     
|                                                     
|Current assets:                                      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cash and cash equivalents                           |                                                      | $        |         |         |  | $            | 315     |         |               | $      | 4,256   |              |  | $        |             |          |   | $       | 4,571   |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts receivable, net                            |                                                      |          | 19       |         |  |              | 190,653 |         |               |        | 116,411 |              |  |          |             |          |   |         | 307,083 |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Inventory                                           |                                                      |          |         |         |  |              | 2,342   |         |               |        | 1,099   |              |  |          |             |          |   |         | 3,441   |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Prepaid expenses and other assets                   |                                                      |          | 230      |         |  |              | 5,997   |         |               |        | 5,844   |              |  |          |             |          |   |         | 12,071  |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred income taxes, net                          |                                                      |          |         |         |  |              | 2,770   |         |               |        | 316     |              |  |          |             |          |   |         | 3,086   |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total current assets                                 |          |          | 249     |  |              |         | 202,077 |               |        |         | 127,926      |  |          |              |         |   |         |         | 330,252 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Property and equipment, net                           |                                                     |                                                      |         |          |         |  | 20,113       |         |         |               | 21,822 |         |              |  |         |              |          |   | 41,935  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Goodwill and other intangibles, net                   |                                                     |                                                      |         |          |         |  | 131,797      |         |         |               | 40,921 |         |              |  |         |              |          |   | 172,718 |        
|                                                     
|                                                     
|                                                     
|                                                     
|Investment in subsidiaries                            |                                                     |                                                      | 170,717  |          |         |  | 89,105       |         |         |               | 5,326  |         |              |  | (252,843 | )            |          |   | 12,305  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Other assets                                          |                                                     |                                                      | 6,297    |          |         |  | 4,387        |         |         |               | 349    |         |              |  |         |              |          |   | 11,033  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Deferred income taxes, net                            |                                                     |                                                      |         |          |         |  | 1,635        |         |         |               | 3,168  |         |              |  |         |              |          |   | 4,803   |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                      |                                                     | Total assets                                         |          | $        | 177,263 |  |              | $       | 449,114 |               |        | $       | 199,512      |  |          | $            | (252,843 | ) |         | $       | 573,046 | 
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Current liabilities:                                 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Notes payable and current portion
of long-term debt |                                                      | $        | 5,625    |         |  | $            |        |         |               | $      | 6,031   |              |  | $        |             |          |   | $       | 11,656  |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts payable and drafts                         |                                                      |          |         |         |  |              | 114,625 |         |               |        | 49,177  |              |  |          |             |          |   |         | 163,802 |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accrued liabilities                                 |                                                      |          | 175      |         |  |              | 59,365  |         |               |        | 30,405  |              |  |          |             |          |   |         | 89,945  |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total current liabilities                            |          |          | 5,800   |  |              |         | 173,990 |               |        |         | 85,613       |  |          |              |         |   |         |         | 265,403 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Long-term debt                                        |                                                     |                                                      | 251,366  |          |         |  | 10,196       |         |         |               | 10,991 |         |              |  |         |              |          |   | 272,553 |        
|                                                     
|                                                     
|                                                     
|                                                     
|Intercompany accounts                                 |                                                     |                                                      | (102,540 | )        |         |  | 89,713       |         |         |               | 12,827 |         |              |  |         |              |          |   |        |        
|                                                     
|                                                     
|                                                     
|                                                     
|Long-term deferred compensation and
other liabilities |                                                     |                                                      |         |          |         |  | 4,498        |         |         |               | 6,747  |         |              |  |         |              |          |   | 11,245  |        
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total liabilities                                    |          |          | 154,626 |  |              |         | 278,397 |               |        |         | 116,178      |  |          |              |         |   |         |         | 549,201 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Minority interests                                    |                                                     |                                                      |         |          |         |  |             |         |         |               | 1,208  |         |              |  |         |              |          |   | 1,208   |        
|                                                     
|                                                     
|                                                     
|                                                     
|Redeemable Series A Preferred Stock                   |                                                     |                                                      | 36,000   |          |         |  |             |         |         |               |       |         |              |  |         |              |          |   | 36,000  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Shareholders equity (deficit)                        |                                                     |                                                      | (13,363  | )        |         |  | 170,717      |         |         |               | 82,126 |         |              |  | (252,843 | )            |          |   | (13,363 | )      
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total liabilities and shareholders
equity (deficit) |          | $        | 177,263 |  |              | $       | 449,114 |               |        | $       | 199,512      |  |          | $            | (252,843 | ) |         | $       | 573,046 | 
|                                                      |                                                     |                                                      |          |          |         |  |              |         |         |               |        |         |              |  |         

8



---



##### Table of Contents



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

8. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEETas of December 31, 2000

|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |         |         | 
|----------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------- | ------- | -------- | ------- |  | ------------ | ------- | ------- | ------------- | ------ | ------- | ------------ |  | -------- | ------------ | -------- | - | ------- | ------- | ------- | 
|                                                      |                                                     |                                                      |         | MSXI     |         |  | Guarantor    |         |         | Non-Guarantor |        |         |              |  |          |              | MSXI     |  
|                                                      |                                                     |                                                      |         | (Issuer) |         |  | Subsidiaries |         |         | Subsidiaries  |        |         | Eliminations |  |          | Consolidated |         
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |              |         
|ASSETS                                               
|                                                     
|                                                     
|                                                     
|                                                     
|Current assets:                                      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cash and cash equivalents                           |                                                      | $       |         |         |  | $            | 569     |         |               | $      | 4,117   |              |  | $        |             |          |   | $       | 4,686   |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts receivable, net                            |                                                      |         | 171      |         |  |              | 198,403 |         |               |        | 123,159 |              |  |          |             |          |   |         | 321,733 |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Inventory                                           |                                                      |         |         |         |  |              | 1,867   |         |               |        | 1,322   |              |  |          |             |          |   |         | 3,189   |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Prepaid expenses and other assets                   |                                                      |         | 262      |         |  |              | 4,837   |         |               |        | 3,479   |              |  |          |             |          |   |         | 8,578   |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred income taxes, net                          |                                                      |         |         |         |  |              | 2,770   |         |               |        | 439     |              |  |          |             |          |   |         | 3,209   |        
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total current assets                                 |         |          | 433     |  |              |         | 208,446 |               |        |         | 132,516      |  |          |              |         |   |         |         | 341,395 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Property and equipment, net                           |                                                     |                                                      |        |          |         |  | 19,770       |         |         |               | 21,189 |         |              |  |         |              |          |   | 40,959  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Goodwill and other intangibles, net                   |                                                     |                                                      |        |          |         |  | 132,914      |         |         |               | 39,177 |         |              |  |         |              |          |   | 172,091 |        
|                                                     
|                                                     
|                                                     
|                                                     
|Investment in subsidiaries                            |                                                     |                                                      | 163,697 |          |         |  | 80,666       |         |         |               | 5,523  |         |              |  | (242,417 | )            |          |   | 7,469   |        
|                                                     
|                                                     
|                                                     
|                                                     
|Other assets                                          |                                                     |                                                      | 6,569   |          |         |  | 4,252        |         |         |               | 484    |         |              |  |         |              |          |   | 11,305  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Deferred income taxes, net                            |                                                     |                                                      |        |          |         |  | 1,635        |         |         |               | 2,175  |         |              |  |         |              |          |   | 3,810   |        
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                      |                                                     | Total assets                                         |         | $        | 170,699 |  |              | $       | 447,683 |               |        | $       | 201,064      |  |          | $            | (242,417 | ) |         | $       | 577,029 | 
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Current liabilities:                                 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Notes payable and current portion
of long-term debt |                                                      | $       | 5,250    |         |  | $            |        |         |               | $      | 7,920   |              |  | $        |             |          |   | $       | 13,170  |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts payable and drafts                         |                                                      |         |         |         |  |              | 126,198 |         |               |        | 50,371  |              |  |          |             |          |   |         | 176,569 |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accrued liabilities                                 |                                                      |         | 6,431    |         |  |              | 65,340  |         |               |        | 29,807  |              |  |          |             |          |   |         | 101,578 |        
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total current liabilities                            |         |          | 11,681  |  |              |         | 191,538 |               |        |         | 88,098       |  |          |              |         |   |         |         | 291,317 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Long-term debt                                        |                                                     |                                                      | 230,554 |          |         |  | 10,196       |         |         |               | 12,926 |         |              |  |         |              |          |   | 253,676 |        
|                                                     
|                                                     
|                                                     
|                                                     
|Intercompany accounts                                 |                                                     |                                                      | (92,074 | )        |         |  | 78,312       |         |         |               | 13,762 |         |              |  |         |              |          |   |        |        
|                                                     
|                                                     
|                                                     
|                                                     
|Long-term deferred compensation and
other liabilities |                                                     |                                                      |        |          |         |  | 3,940        |         |         |               | 6,466  |         |              |  |         |              |          |   | 10,406  |        
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total liabilities                                    |         |          | 150,161 |  |              |         | 283,986 |               |        |         | 121,252      |  |          |              |         |   |         |         | 555,399 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                     
|Minority interests                                    |                                                     |                                                      |        |          |         |  |             |         |         |               | 1,092  |         |              |  |         |              |          |   | 1,092   |        
|                                                     
|                                                     
|                                                     
|                                                     
|Redeemable Series A Preferred Stock                   |                                                     |                                                      | 36,000  |          |         |  |             |         |         |               |       |         |              |  |         |              |          |   | 36,000  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Shareholders equity (deficit)                        |                                                     |                                                      | (15,462 | )        |         |  | 163,697      |         |         |               | 78,720 |         |              |  | (242,417 | )            |          |   | (15,462 | )      
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         
|                                                      |                                                     | Total liabilities and shareholders
equity (deficit) |         | $        | 170,699 |  |              | $       | 447,683 |               |        | $       | 201,064      |  |          | $            | (242,417 | ) |         | $       | 577,029 | 
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |         

9



---



##### Table of Contents



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

8. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENTS OF INCOMEFor the fiscal quarters ended April 1, 2001 and April 2, 2000

|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |              |         |   |   |         |        | 
|----------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | - | -------- | ------ | - | ------------ | ------- | ------ | ------------- | - | ------- | ------------ |  | - | ------------ | ------- | - | - | ------- | ------ | 
|                                                                        |                                                                                              |   | MSXI     |        |   | Guarantor    |         |        | Non-Guarantor |   |         |              |  |   |              | MSXI    |  
|                                                                        |                                                                                              |   | (Issuer) |        |   | Subsidiaries |         |        | Subsidiaries  |   |         | Eliminations |  |   | Consolidated |        
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |              |        
|Fiscal Quarter Ended April 1, 2001:                                    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net sales                                                               |                                                                                              | $ |         |        |   | $            | 160,250 |        |               | $ | 100,957 |              |  | $ | (4,570       | )       |   | $ | 256,637 |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cost of sales                                                           |                                                                                              |   |         |        |   |              | 137,998 |        |               |   | 91,017  |              |  |   | (4,570       | )       |   |   | 224,445 |       
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |             
|                                                                        | Gross profit                                                                                 |   |          |       |   |              |         | 22,252 |               |   |         | 9,940        |  |   |              |        |   |   |         | 32,192 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Selling, general and administrative expenses                            |                                                                                              |   |         |        |   |              | 15,422  |        |               |   | 5,821   |              |  |   |             |         |   |   | 21,243  |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Amortization of goodwill and other intangibles                          |                                                                                              |   |         |        |   |              | 1,170   |        |               |   | 434     |              |  |   |             |         |   |   | 1,604   |       
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |             
|                                                                        | Operating income                                                                             |   |          |       |   |              |         | 5,660  |               |   |         | 3,685        |  |   |              |        |   |   |         | 9,345  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Interest income (expense), net                                          |                                                                                              |   | (6,898   | )      |   |              | 73      |        |               |   | (103    | )            |  |   |             |         |   |   | (6,928  | )     
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |             
|                                                                        | Income (loss) before income taxes,
minority interests and equity in net
losses
of affiliates |   |          | (6,898 | ) |              |         | 5,733  |               |   |         | 3,582        |  |   |              |        |   |   |         | 2,417  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Income tax provision (benefit)                                          |                                                                                              |   | (2,538   | )      |   |              | 2,121   |        |               |   | 1,432   |              |  |   |             |         |   |   | 1,015   |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Minority interests and equity in net losses of
affiliates, net of taxes |                                                                                              |   | 5,560    |        |   |              | 1,948   |        |               |   | (202    | )            |  |   | (7,508       | )       |   |   | (202    | )     
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |             
|                                                                        | Net income                                                                                   |   | $        | 1,200  |   |              | $       | 5,560  |               |   | $       | 1,948        |  |   | $            | (7,508  | ) |   | $       | 1,200  | 
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |             
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Fiscal Quarter Ended April 2, 2000:                                    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net sales                                                               |                                                                                              | $ |         |        |   | $            | 157,125 |        |               | $ | 94,486  |              |  | $ | (3,646       | )       |   | $ | 247,965 |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cost of sales                                                           |                                                                                              |   |         |        |   |              | 132,297 |        |               |   | 84,154  |              |  |   | (3,646       | )       |   |   | 212,805 |       
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |             
|                                                                        | Gross profit                                                                                 |   |          |       |   |              |         | 24,828 |               |   |         | 10,332       |  |   |              |        |   |   |         | 35,160 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Selling, general and administrative expenses                            |                                                                                              |   |         |        |   |              | 14,108  |        |               |   | 5,979   |              |  |   |             |         |   |   | 20,087  |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Amortization of goodwill and other intangibles                          |                                                                                              |   |         |        |   |              | 865     |        |               |   | 237     |              |  |   |             |         |   |   | 1,102   |       
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |             
|                                                                        | Operating income                                                                             |   |          |       |   |              |         | 9,855  |               |   |         | 4,116        |  |   |              |        |   |   |         | 13,971 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Interest income (expense), net                                          |                                                                                              |   | (6,508   | )      |   |              | 409     |        |               |   | (812    | )            |  |   |             |         |   |   | (6,911  | )     
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |             
|                                                                        | Income (loss) before income taxes,
minority interests and equity in net
losses
of affiliates |   |          | (6,508 | ) |              |         | 10,264 |               |   |         | 3,304        |  |   |              |        |   |   |         | 7,060  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Income tax provision (benefit)                                          |                                                                                              |   | (2,372   | )      |   |              | 3,826   |        |               |   | 1,474   |              |  |   |             |         |   |   | 2,928   |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Minority interests and equity in net losses of
affiliates, net of taxes |                                                                                              |   | 8,350    |        |   |              | 1,912   |        |               |   | 82      |              |  |   | (10,262      | )       |   |   | 82      |       
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |             
|                                                                        | Net income                                                                                   |   | $        | 4,214  |   |              | $       | 8,350  |               |   | $       | 1,912        |  |   | $            | (10,262 | ) |   | $       | 4,214  | 
|                                                                        |                                                                                              |   |          |        |   |              |         |        |               |   |         |              |  |   |             

10



---



##### Table of Contents



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

8. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

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

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

11



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##### Table of Contents



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

8. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSfor the fiscal quarter ended April 2, 2000

|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |        |              |        |  |         |         |        |  
|-------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------ | -------- | ------ | - | ------------ | ------- | ------- | ------------- | ------- | ------- | ------------ | - | ------ | ------------ | ------ |  | ------- | ------- | ------ | -
|                                                                     |                                                                                                     |                                                          |        | MSXI     |        |   | Guarantor    |         |         | Non-Guarantor |         |         |              |   |        |              | MSXI   | 
|                                                                     |                                                                                                     |                                                          |        | (Issuer) |        |   | Subsidiaries |         |         | Subsidiaries  |         |         | Eliminations |   |        | Consolidated |       
|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |        |              |       
|Cash flows from operating activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Net income                                                                                          |                                                          | $      | 4,214    |        |   | $            | 8,350   |         |               | $       | 1,912   |              |   | $      | (10,262      | )      |  | $       | 4,214   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating
activities:
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                                     | Equity in earnings of subsidiaries                       |        |          | (8,350 | ) |              |         | (1,912  | )             |         |         | (82          | ) |        |              | 10,262 |  |         |         | (82    | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                                     | Depreciation                                             |        |          |       |   |              |         | 2,450   |               |         |         | 1,414        |   |        |              |       |  |         |         | 3,864  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                                     | Amortization                                             |        |          | 263    |   |              |         | 865     |               |         |         | 237          |   |        |              |       |  |         |         | 1,365  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                                     | Deferred taxes                                           |        |          |       |   |              |         | 664     |               |         |         | 329          |   |        |              |       |  |         |         | 993    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                                     | Loss on sale/disposal of property and
equipment          |        |          |       |   |              |         | 1       |               |         |         | 18           |   |        |              |       |  |         |         | 19     |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                                     | (Increase) decrease in receivables, net                  |        |          | (20    | ) |              |         | (9,074  | )             |         |         | 4,856        |   |        |              |       |  |         |         | (4,238 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                                     | (Increase) decrease in inventory                         |        |          |       |   |              |         | (438    | )             |         |         | 143          |   |        |              |       |  |         |         | (295   | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                                     | (Increase) decrease in prepaid expenses
and other assets |        |          | 32     |   |              |         | (2,260  | )             |         |         | (244         | ) |        |              |       |  |         |         | (2,472 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                                     | Increase (decrease) in current liabilities               |        |          | 10,976 |   |              |         | (12,726 | )             |         |         | 6,456        |   |        |              | 33     |  |         |         | 4,739  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                                     | Other, net                                               |        |          |       |   |              |         | (153    | )             |         |         | 9            |   |        |              |       |  |         |         | (144   | )
|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |        |             
|Net cash provided by (used for) operating activities                 |                                                                                                     |                                                          | 7,115  |          |        |   | (14,233      | )       |         |               | 15,048  |         |              |   | 33     |              |        |  | 7,963   |        
|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash flows from investing activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Capital expenditures                                                                                |                                                          |        |         |        |   |              | (1,506  | )       |               |         | (2,959  | )            |   |        |             |        |  |         | (4,465  | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Acquisition of businesses, net of cash acquired                                                     |                                                          |        |         |        |   |              | (21,227 | )       |               |         | (11,386 | )            |   |        |             |        |  |         | (32,613 | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Proceeds from sale/disposal of equipment                                                            |                                                          |        |         |        |   |              | 45      |         |               |         | 10      |              |   |        |             |        |  |         | 55      |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Other, net                                                                                          |                                                          |        |         |        |   |              | (662    | )       |               |         |        |              |   |        |             |        |  |         | (662    | )     
|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |       
|Net cash used for investing activities                               |                                                                                                     |                                                          |       |          |        |   | (23,350      | )       |         |               | (14,335 | )       |              |   |       |              |        |  | (37,685 | )      
|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash flows from financing activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Intercompany                                                                                        |                                                          |        | (46,886  | )      |   |              | 43,223  |         |               |         | 3,663   |              |   |        |             |        |  |         |        |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Transactions with subsidiaries                                                                      |                                                          |        | 2,220    |        |   |              | (9,156  | )       |               |         | 10,439  |              |   |        | (3,503       | )      |  |         |        |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Proceeds from issuance of debt                                                                      |                                                          |        | 25,000   |        |   |              |        |         |               |         |        |              |   |        |             |        |  |         | 25,000  |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Repayment of debt                                                                                   |                                                          |        | (937     | )      |   |              | (43     | )       |               |         |        |              |   |        |             |        |  |         | (980    | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Debt issuance costs                                                                                 |                                                          |        | (160     | )      |   |              |        |         |               |         |        |              |   |        |             |        |  |         | (160    | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Changes in revolving debt, net                                                                      |                                                          |        | 15,350   |        |   |              | 674     |         |               |         | (9,539  | )            |   |        |             |        |  |         | 6,485   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Changes in book overdrafts, net                                                                     |                                                          |        |         |        |   |              | 3,989   |         |               |         | (2,933  | )            |   |        |             |        |  |         | 1,056   |       
|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |        |             
|Net cash provided by (used for) financing activities                 |                                                                                                     |                                                          | (5,413 | )        |        |   | 38,687       |         |         |               | 1,630   |         |              |   | (3,503 | )            |        |  | 31,401  |        
|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Effect of foreign exchange rate changes on cash and
cash equivalents |                                                                                                     |                                                          | (1,702 | )        |        |   | (1,702       | )       |         |               | (1,324  | )       |              |   | 3,470  |              |        |  | (1,258  | )      
|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |       
|Cash and cash equivalents:                                          
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Increase (decrease) for the period                                                                  |                                                          |        |         |        |   |              | (598    | )       |               |         | 1,019   |              |   |        |             |        |  |         | 421     |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Balance, beginning of period                                                                        |                                                          |        |         |        |   |              | 873     |         |               |         | 6,006   |              |   |        |             |        |  |         | 6,879   |       
|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |        |             
|                                                                     | Balance, end of period                                                                              |                                                          | $      |         |        |   | $            | 275     |         |               | $       | 7,025   |              |   | $      |             |        |  | $       | 7,300   |       
|                                                                     |                                                                                                     |                                                          |        |          |        |   |              |         |         |               |         |         |              |   |       

12



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##### Table of Contents






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

Results of Operations

Net Sales.

Consolidated net sales increased $8.6 million, or 3.5%, from $248.0
million during the first quarter of fiscal 2000 to $256.6 million during the
first quarter of fiscal 2001. Fiscal 2001 sales were negatively impacted by
declines in foreign currency exchange rates in many of the countries in which
we operate. The net impact of declining exchange rates during the first quarter
of fiscal 2001 was to reduce net sales by about $7.3 million compared to the
first quarter of fiscal 2000. Before the impact of foreign currency exchange
rate fluctuations, consolidated net sales for the first quarter of fiscal 2001
increased about $15.9 million, or 6%, over fiscal 2000. The increase in net sales, before the impact of foreign currency
exchange rate fluctuations, includes favorable sales of $11.9 million from
companies acquired early in fiscal 2000 and sales growth from existing
businesses totaling about $4.0 million.

Sales of our engineering services decreased $1.0 million, or less than 1%,
compared to fiscal 2000. The decrease reflects a drop in value added sales
volumes and price reductions from certain customers partially offset by an
increase in subcontract and material volumes. Sales of our IT and professional
staffing services increased $10.9 million, or 31.0%, including $11.9 million of
incremental sales from companies acquired in early fiscal 2000. Excluding the
impact of acquisitions, sales decreased about $1.0 million. Sales of our business and technology services
decreased $1.2 million, or 1.8%, compared to fiscal 2000. The decrease
reflects volume reductions due to the divestiture of certain non-core
operations during fiscal 2000 and the impact of price reductions from certain
customers. Sales to non-automotive customers increased to 20.0% of total sales
for the first quarter of fiscal 2001 compared to 15.2% for the first quarter of
fiscal 2000. The increase reflects our continued efforts to diversify our
customer base beyond the automotive markets.

Operating Income

Our consolidated operating income and changes in operating income for the
periods presented were:

|                 |  |                        |       |   |          |   |        |   |  |   |        |   |  |  |       |   
|---------------- |  | ---------------------- | ----- | - | -------- | - | ------ | - |  | - | ------ | - |  |  | ----- | --
|                 |  | Fiscal Quarter Ended   |      
|                 |  |                        |       |   | Change   |  
|                 |  | April 1,               |       |   | April 2, |   |        |   | 
|                 |  | 2001                   |       |   | 2000     |   |        | $ |  |   | %      |  
|                 |  |                        |       |   |          |   |        |   |  |   |        |  
|                 |  | (dollars in thousands) |      
|Operating income |  | $                      | 9,345 |   |          | $ | 13,971 |   |  | $ | (4,626 | ) |  |  | (33.1 | %)
|                
|                
|                
|                
|% of net sales   |  |                        | 3.6   | % |          |   | 5.6    | % |  |   | n/a    |   |  |  | n/a   |   

Overall, operating income decreased during the first quarter of fiscal
2001 due to reduced gross profits and increased spending required to position
the company for future growth. Gross profit, as a percentage of sales,
decreased to 12.5% for the first quarter of fiscal 2001 compared to 14.2% for
the first quarter of fiscal 2000. The decrease is primarily due to unfavorable
sales mix and price reductions. Specifically, engineering labor sales
decreased during the quarter while subcontractor and material sales increased,
resulting in a lower margin mix. In addition, decreased IT staffing permanent placement
fees, which generate strong margins, and pricing pressures from the automotive
sector further reduced gross profits.

Selling, general and administrative expenses, as a percentage of net
sales, were 8.3% during the first quarter of fiscal 2001 compared to 8.1% in
the comparable period of fiscal 2000. The increase includes additional costs
incurred during the first quarter of fiscal 2001 to develop our service
offerings and sales efforts within our developing vertical markets. Through
these efforts we are positioning ourselves to grow our service offerings and
customer reach within the areas of collaborative engineering, quality
relationship management, human capital management and supply chain management.
These increased costs were partially offset by decreased incentive compensation
expense and Michigan single business tax during the first quarter of 2001.

13



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##### Table of Contents



Net Income

Net income for the first quarter of fiscal 2001 decreased by $3.0 million,
from $4.2 million in fiscal 2000 to $1.2 million in fiscal 2001. The decrease
in net income reflects our lower operating income as well as an increase in
minority interest expense and equity in net losses of our affiliates. Interest
expense remained constant despite incremental average borrowings due to a
decrease in interest rates year over year. Minority interests and equity in
net losses of affiliates primarily represents the portion of Satiz S.r.l. (an
Italian subsidiary) earnings attributable to the minority owner and equity in
net losses of CADFORM-MSX Engineering GmbH.

Liquidity and Capital Resources

Cash Flows

General.Our principal capital requirements are for the acquisition of
businesses, capital expenditures, and working capital to support growth. These
requirements have been met through a combination of bank debt, issuance of
subordinated notes and cash from operations. Cash balances in excess of
amounts required to fund daily operations are used to pay down amounts
outstanding under the revolving credit portion of our credit facility.

We typically pay our employees on a weekly basis and receive payment from
our customers within invoicing terms, which is generally a 60-day period after
the invoice date. However, in connection with our purchasing support services,
we collect related receivables at approximately the same time we make payment
to suppliers.

Operating Activities. Net cash used for operating activities was $(7.9)
million for the first quarter of fiscal 2001 compared to net cash provided by
operations of $8.0 million during fiscal 2000, a decrease of $15.8 million.
Cash used during the first quarter of fiscal 2001 primarily reflects the impact
of certain pass through payments related to our purchasing support services
amounting to about $20 million which were paid prior to quarter end. Excluding
the impact of the pass through payments, cash provided by operations improved
year over year due to improvements in managed working capital.

Investing Activities.Net cash used for investing activities decreased
$21.3 million from $37.7 million for the fiscal three months ended April 2,
2000 to $16.4 million for the fiscal three months ended April 1, 2001. Cash
used to acquire businesses of $32.6 million during fiscal 2000 primarily
relates to the acquisition of four companies from Corporate Staffing Resources,
Inc. during February 2000 as detailed in Note 2 of our consolidated financial
statements. Cash used to acquire businesses of $11.3 million during fiscal
2001 includes the acquisition of a minority investment in MTE Groups L.L.C. and
the payment of contingent consideration related to certain prior year
acquisitions. MTE is a certified minority enterprise offering tooling
manufacturing, prototype design and build services, and placement services to
automotive manufacturers and suppliers.

Financing Activities. Net cash provided by financing activities decreased
$9.0 million from $31.4 million for the fiscal three months ended April 2, 2000
to $22.4 million for the fiscal three month period ended April 1, 2001.
Financing requirements during the fiscal three months ended April 1, 2001
decreased consistent with the reduction in funds required to acquire companies,
after giving effect to the impact of certain pass through payments made prior
to quarter end. Financing activities during the first quarter of fiscal 2000
included the issuance of an additional $25 million in term notes as discussed
below.

Available Financing Sources

During the first quarter of 2000, the seven-year institutional term note,
with principal outstanding of $50 million as of January 2, 2000, was increased
to $75 million pursuant the terms of our amended and restated credit facility.
Upon completion of the syndication of the credit facility, our total borrowing
capacity increased to $205 million. Proceeds from the additional term debt
were used to repay amounts outstanding under the revolving credit portion of
the credit facility. Cash paid to repurchase stock, net of proceeds from the
sale of stock, represents the retirement of shares owned by a former employee
of the company. As of April 1, 2001, $49.3 million was available for potential
future borrowing under the revolving credit portion of our amended and restated
credit facility.

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Forward  Looking Statements

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




PART II. OTHER INFORMATION




ITEM 2.Changes in Securities and Use of Proceeds

On March 30, 2001 a subsidiary of MSX International, Inc. completed a sale
of unregistered securities to certain directors and members of management. The
securities were sold in units with each unit comprised of MSX International
Inc.s Series A Preferred Stock, par value $0.01 per share, and Class A Common
Stock, par value $0.01 per share. In total, 9,936 shares of Series A Preferred
Stock and 482,400 shares of Class A Common Stock were sold. The shares of
Series A Preferred Stock and Class A Common Stock, which comprised the units
sold, were acquired from Citicorp, our majority stockholder, at a price equal
to the price at which the units were offered to management. The proceeds of
$3.6 million were wholly used to pay the purchase price of the shares acquired
from Citicorp. These securities were not registered with the Securities and
Exchange Commission or the securities commission of any state or jurisdiction.
They were offered pursuant to an exemption from registration under Regulation D
of the Securities Act of 1933, as amended.




ITEM 6.Exhibits and Reports on Form 8-K



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



| |     
| | ----
| | None



| |                         
| | ------------------------
| | (b) Reports on Form 8-K:



| |     
| | ----
| | None

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SIGNATURE

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

Date: May 16, 2001

MSX INTERNATIONAL, INC.
(Registrant)

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

(Chief accounting officer
and authorized signatory)

16