##### Table of Contents



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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 July 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)

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

(248) 299-1000
(Registrants telephone number, including area 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. Finacial Information
|                             | Item 1. Financial Statements                                                                 
|                             |                                                                                               | Consolidated Balance Sheets as of July 1, 2001 (Unaudited) and December 31, 2000                                               
|                             |                                                                                               | Consolidated Statements of Income (Unaudited) for the Fiscal Quarters and Fiscal Six Months Ended July 1, 2001 and July 2, 2000
|                             |                                                                                               | Consolidated Statements of Cash Flows (Unaudited) for the Fiscal Six Months Ended July 1, 2001 and July 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 6. Exhibits and Reports on Form 8-K                                                     
|Signature                   



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##### Table of Contents



MSX INTERNATIONAL, INC.
INDEX

|                               |                                                                                              |                                                                                                                                 |       |    |   | 
|------------------------------ | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | ----- | -- | - | 
|PART I.  FINANCIAL INFORMATION |                                                                                             
|                              
|                              
|                              
|                              
|                               | ITEM 1.  Financial Statements:                                                               |                                                                                                                                 | Pages |   
|                              
|                              
|                              
|                              
|                               |                                                                                              | Consolidated Balance Sheets as of July 1, 2001 (Unaudited) and
December 31, 2000                                                |       |    | 2 | 
|                              
|                              
|                              
|                              
|                               |                                                                                              | Consolidated Statements of Income (Unaudited) for the Fiscal Quarters and Fiscal Six Months
Ended July 1, 2001 and July 2, 2000 |       |    | 3 | 
|                              
|                              
|                              
|                              
|                               |                                                                                              | Consolidated Statements of Cash Flows (Unaudited) for the Fiscal Six Months
Ended July 1, 2001 and July 2, 2000                 |       |    | 4 | 
|                              
|                              
|                              
|                              
|                               |                                                                                              | Notes to Consolidated Financial Statements (Unaudited)                                                                          |       |    | 5 | 
|                              
|                              
|                              
|                              
|                               | ITEM 2.Managements Discussion and Analysis of Financial Condition and
Results of Operations |                                                                                                                                 |       | 15 |  
|                              
|                              
|                              
|                              
|PART II.OTHER INFORMATION     
|                              
|                              
|                              
|                              
|                               | ITEM 6.Exhibits and Reports on Form 8-K                                                      |                                                                                                                                 |       | 17 |  
|                              
|                              
|                              
|                              
|SIGNATURE                      |                                                                                              |                                                                                                                                 | 18    |   

1



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##### Table of Contents









PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

MSX INTERNATIONAL, INC.




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



|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         |                        |         |         |              |         |         |  
|---------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------------------------------------------- | ------- | ---------------------- | ------- | ------- | ------------ | ------- | ------- | -
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         | July 1,                |        
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         | 2001                   |         |         | December 31, |        
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         | (Unaudited)            |         |         | 2000         |        
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         |                        |         |         |              |        
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         | (dollars in thousands) |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|ASSETS                                                                                              
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Current assets:                                                                                     
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Cash and cash equivalents                                                                                                                                                                                |                      | $                                           | 6,206   |                        |         | $       | 4,686        |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Accounts receivable, net (Note 3)                                                                                                                                                                        |                      |                                             | 287,126 |                        |         |         | 317,458      |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Inventory                                                                                                                                                                                                |                      |                                             | 7,469   |                        |         |         | 7,464        |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Prepaid expenses and other assets                                                                                                                                                                        |                      |                                             | 10,258  |                        |         |         | 8,578        |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Deferred income taxes, net                                                                                                                                                                               |                      |                                             | 3,731   |                        |         |         | 3,209        |        
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         |                        |        
|                                                                                                     |                                                                                                                                                                                                          | Total current assets |                                             |         | 314,790                |         |         |              | 341,395 |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Property and equipment, net                                                                          |                                                                                                                                                                                                          |                      | 39,475                                      |         |                        |         | 40,959  |             
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Goodwill and other intangibles, net of accumulated amortization
of $14,465 and $11,395, respectively |                                                                                                                                                                                                          |                      | 171,355                                     |         |                        |         | 172,091 |             
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Other assets                                                                                         |                                                                                                                                                                                                          |                      | 23,398                                      |         |                        |         | 18,774  |             
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Deferred income taxes, net                                                                           |                                                                                                                                                                                                          |                      | 4,511                                       |         |                        |         | 3,810   |             
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         |                        |        
|                                                                                                     |                                                                                                                                                                                                          |                      | Total assets                                |         | $                      | 553,529 |         |              | $       | 577,029 |  
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         |                        |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|LIABILITIES AND SHAREHOLDERS DEFICIT                                                               
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Current liabilities:                                                                                
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Notes payable and current portion of long-term debt (Note 4)                                                                                                                                             |                      | $                                           | 16,336  |                        |         | $       | 13,170       |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Accounts payable and drafts                                                                                                                                                                              |                      |                                             | 159,049 |                        |         |         | 176,569      |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Accrued payroll and benefits                                                                                                                                                                             |                      |                                             | 20,162  |                        |         |         | 30,561       |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Other accrued liabilities                                                                                                                                                                                |                      |                                             | 75,515  |                        |         |         | 71,017       |        
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         |                        |        
|                                                                                                     |                                                                                                                                                                                                          |                      | Total current liabilities                   |         |                        | 271,062 |         |              |         | 291,317 |  
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Long-term debt (Note 4)                                                                              |                                                                                                                                                                                                          |                      | 248,444                                     |         |                        |         | 253,676 |             
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Long-term deferred compensation liabilities and other                                                |                                                                                                                                                                                                          |                      | 10,998                                      |         |                        |         | 10,406  |             
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         |                        |        
|                                                                                                     | Total liabilities                                                                                                                                                                                        |                      |                                             | 530,504 |                        |         |         | 555,399      |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Minority interests                                                                                   |                                                                                                                                                                                                          |                      | 1,364                                       |         |                        |         | 1,092   |             
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Redeemable Series A Preferred Stock (Note 5)                                                         |                                                                                                                                                                                                          |                      | 36,000                                      |         |                        |         | 36,000  |             
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Shareholders deficit:                                                                              
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | 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          |        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Additional paid-in-capital                                                                                                                                                                               |                      |                                             | (21,769 | )                      |         |         | (21,705      | )      
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Note receivable from officer                                                                                                                                                                             |                      |                                             | (3,000  | )                      |         |         | (3,000       | )      
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Accumulated other comprehensive loss (Note 6)                                                                                                                                                            |                      |                                             | (17,406 | )                      |         |         | (15,641      | )      
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Retained earnings                                                                                                                                                                                        |                      |                                             | 27,635  |                        |         |         | 24,680       |        
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         |                        |        
|                                                                                                     |                                                                                                                                                                                                          |                      | Total shareholders deficit                 |         |                        | (14,339 | )       |              |         | (15,462 | )
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         |                        |        
|                                                                                                     |                                                                                                                                                                                                          |                      | Total liabilities and shareholders deficit |         | $                      | 553,529 |         |              | $       | 577,029 |  
|                                                                                                     |                                                                                                                                                                                                          |                      |                                             |         |                        |        

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

2



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##### Table of Contents



MSX INTERNATIONAL, INC.




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



|                                                                             |  |                                                                                        |         |                      |        |   |                         |                |        |         |         |   |         |   |         |   |        | 
|---------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------- | ------- | -------------------- | ------ | - | ----------------------- | -------------- | ------ | ------- | ------- | - | ------- | - | ------- | - | ------ | 
|                                                                             |  |                                                                                        |         | Fiscal Quarter Ended |        |   | Fiscal Six Months Ended |               
|                                                                             |  |                                                                                        |         |                      |        |   |                         |               
|                                                                             |  |                                                                                        |         | July 1,              |        |   | July 2,                 |                |        | July 1, |         |   | July 2, |  
|                                                                             |  |                                                                                        |         | 2001                 |        |   | 2000                    |                |        | 2001    |         |   | 2000    |  
|                                                                             |  |                                                                                        |         |                      |        |   |                         |                |        |         |         |   |         |  
|                                                                             |  |                                                                                        |         |                      |        |   |                         | (in thousands) |       
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Net sales (Note 7)                                                           |  | $                                                                                      | 241,921 |                      |        | $ | 269,512                 |                |        | $       | 498,558 |   |         | $ | 517,477 |  
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Cost of sales                                                                |  |                                                                                        | 209,424 |                      |        |   | 230,913                 |                |        |         | 433,869 |   |         |   | 443,718 |  
|                                                                             |  |                                                                                        |         |                      |        |   |                         |                |        |         |         |  
|                                                                             |  | Gross profit                                                                           |         |                      | 32,497 |   |                         |                | 38,599 |         |         |   | 64,689  |   |         |   | 73,759 | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Selling, general and administrative expenses                                 |  |                                                                                        | 18,685  |                      |        |   | 21,642                  |                |        |         | 39,928  |   |         |   | 41,729  |  
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Amortization of goodwill and other intangibles                               |  |                                                                                        | 1,508   |                      |        |   | 1,398                   |                |        |         | 3,112   |   |         |   | 2,500   |  
|                                                                             |  |                                                                                        |         |                      |        |   |                         |                |        |         |         |  
|                                                                             |  | Operating income                                                                       |         |                      | 12,304 |   |                         |                | 15,559 |         |         |   | 21,649  |   |         |   | 29,530 | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Interest expense, net                                                        |  |                                                                                        | 7,556   |                      |        |   | 7,659                   |                |        |         | 14,484  |   |         |   | 14,570  |  
|                                                                             |  |                                                                                        |         |                      |        |   |                         |                |        |         |         |  
|                                                                             |  | Income before income taxes, minority
interests, and equity in net losses of
affiliates |         |                      | 4,748  |   |                         |                | 7,900  |         |         |   | 7,165   |   |         |   | 14,960 | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Income tax provision                                                         |  |                                                                                        | 1,946   |                      |        |   | 3,222                   |                |        |         | 2,961   |   |         |   | 6,150   |  
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Less minority interests and equity in net losses
of affiliates, net of taxes |  |                                                                                        | 548     |                      |        |   | 548                     |                |        |         | 750     |   |         |   | 466     |  
|                                                                             |  |                                                                                        |         |                      |        |   |                         |                |        |         |         |  
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |  | Net income                                                                             |         | $                    | 2,254  |   |                         | $              | 4,130  |         |         | $ | 3,454   |   |         | $ | 8,344  | 
|                                                                             |  |                                                                                        |         |                      |        |   |                         |                |        |         |         |  

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

3



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##### Table of Contents



MSX INTERNATIONAL, INC.




CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)for the fiscal six months ended July 1, 2001 and July 2, 2000



|                                                                     |  |                                                                                              |                                                           |   |                         |         |         |         |         |        |  
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- | --------------------------------------------------------- | - | ----------------------- | ------- | ------- | ------- | ------- | ------ | -
|                                                                     |  |                                                                                              |                                                           |   | Fiscal Six Months Ended |        
|                                                                     |  |                                                                                              |                                                           |   |                         |        
|                                                                     |  |                                                                                              |                                                           |   | July 1,                 |         |         | July 2, |        
|                                                                     |  |                                                                                              |                                                           |   | 2001                    |         |         | 2000    |        
|                                                                     |  |                                                                                              |                                                           |   |                         |         |         |         |        
|                                                                     |  |                                                                                              |                                                           |   | (in thousands)          |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash flows from operating activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Net income                                                                                   |                                                           | $ | 3,454                   |         |         | $       | 8,344   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Adjustments to reconcile net income
to net cash provided by (used for) operating activities:
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Minority interests and equity in net losses of affiliates |   |                         | 750     |         |         |         | 466    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Depreciation                                              |   |                         | 8,058   |         |         |         | 8,566  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Amortization                                              |   |                         | 3,671   |         |         |         | 3,032  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Deferred taxes                                            |   |                         | (1,223  | )       |         |         | 4,326  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Loss on sale/disposal of property and equipment           |   |                         |        |         |         |         | 80     |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | (Increase) decrease in receivables, net                   |   |                         | 30,332  |         |         |         | 22,388 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | (Increase) decrease in inventory                          |   |                         | (5      | )       |         |         | (80    | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | (Increase) decrease in prepaid expenses and other assets  |   |                         | (1,680  | )       |         |         | (1,231 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Increase (decrease) in current liabilities                |   |                         | (17,111 | )       |         |         | 8,826  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Other, net                                                |   |                         | (899    | )       |         |         | (1,906 | )
|                                                                     |  |                                                                                              |                                                           |   |                         |        
|Net cash provided by operating activities                            |  |                                                                                              | 25,347                                                    |   |                         |         | 52,811  |        
|                                                                     |  |                                                                                              |                                                           |   |                         |        
|Cash flows from investing activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Capital expenditures                                                                         |                                                           |   | (7,374                  | )       |         |         | (8,367  | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Acquisition of businesses, net of cash received                                              |                                                           |   | (11,519                 | )       |         |         | (57,747 | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Proceeds from sale/disposal of equipment                                                     |                                                           |   | 104                     |         |         |         | 113     |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Other, net                                                                                   |                                                           |   | 97                      |         |         |         | 761     |       
|                                                                     |  |                                                                                              |                                                           |   |                         |        
|Net cash used for investing activities                               |  |                                                                                              | (18,692                                                   | ) |                         |         | (65,240 | )      
|                                                                     |  |                                                                                              |                                                           |   |                         |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash flows from financing activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Proceeds from issuance of debt                                                               |                                                           |   |                        |         |         |         | 25,000  |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Repayment of debt                                                                            |                                                           |   | (2,625                  | )       |         |         | (1,917  | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Debt issuance costs                                                                          |                                                           |   | (12                     | )       |         |         | (178    | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Changes in revolving debt, net                                                               |                                                           |   | 559                     |         |         |         | (9,467  | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Changes in book overdraft, net                                                               |                                                           |   | (1,621                  | )       |         |         | 1,369   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Repurchase of common stock                                                                   |                                                           |   | (4,178                  | )       |         |         |        |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Sale of common stock                                                                         |                                                           |   | 3,612                   |         |         |         |        |       
|                                                                     |  |                                                                                              |                                                           |   |                         |        
|Net cash provided by (used for) financing activities                 |  |                                                                                              | (4,265                                                    | ) |                         |         | 14,807  |        
|                                                                     |  |                                                                                              |                                                           |   |                         |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Effect of foreign exchange rate changes on cash and cash equivalents |  |                                                                                              | (870                                                      | ) |                         |         | (2,620  | )      
|                                                                     |  |                                                                                              |                                                           |   |                         |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash and cash equivalents:                                          
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Increase (decrease) for the period                                                           |                                                           |   | 1,520                   |         |         |         | (242    | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Balance, beginning of period                                                                 |                                                           |   | 4,686                   |         |         |         | 6,879   |       
|                                                                     |  |                                                                                              |                                                           |   |                         |        
|                                                                     |  | Balance, end of period                                                                       |                                                           | $ | 6,206                   |         |         | $       | 6,637   |       
|                                                                     |  |                                                                                              |                                                           |   |                         |        

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). MSXI is a leading global provider of
technology-driven business services, which enable our customers to significantly improve their competitive advantage. 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 and fiscal six
months ended July 1, 2001 and July 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 in fiscal 2001.

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

The terms of certain of our acquisition agreements 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 generally 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.

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 $57.3 million as of July 1, 2001 and
$82.5 million as of December 31, 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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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited)  continued
(dollars in thousands unless otherwise stated)

4. Debt:

Debt is comprised of the following:

|                                          |                                |             |                   |   |             |                |        |   |         |        |         |              |       |         |         |  | 
|----------------------------------------- | ------------------------------ | ----------- | ----------------- | - | ----------- | -------------- | ------ | - | ------- | ------ | ------- | ------------ | ----- | ------- | ------- |  | 
|                                          |                                |             | Interest Rates at |   |             | Outstanding at |       
|                                          |                                |             |                   |   |             |                |       
|                                          |                                |             | July 1,           |   |             | December 31,   |        |   | July 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 |             | 5.81 - 7.28       | % |             | 7.47 - 9.75    | %      |   |         | 22,510 |         |              |       | 19,964  |        
|                                         
|                                         
|                                         
|                                         
|                                          | Swingline notes                |             | 6.78 - 7.75       | % |             | 7.53 - 9.00    | %      |   |         | 3,275  |         |              |       | 7,712   |        
|                                         
|                                         
|                                         
|                                         
|                                          | Term notes                     |             | 6.21 - 7.01       | % |             | 8.21 - 9.69    | %      |   |         | 98,625 |         |              |       | 101,250 |        
|                                         
|                                         
|                                         
|                                         
|Satiz Facility                            |                                |             | 5.47              | % |             |                | 5.73   | % |         |        | 9,301   |              |       |         | 6,392   | 
|                                         
|                                         
|                                         
|                                         
|Other debt                                |                                | 5.47 - 7.75 | %                 |   | 7.50 - 8.00 | %              |        |   | 1,069   |        |         |              | 1,528 |        
|                                          |                                |             |                   |   |             |                |        |   |         |        |         |              |       |        
|                                          |                                |             |                   |   |             |                |        |   |         |        | 264,780 |              |       |         | 266,846 | 
|                                         
|                                         
|                                         
|                                         
|Less current portion                      |                                |             |                   |   |             |                |        |   |         |        | 16,336  |              |       |         | 13,170  | 
|                                          |                                |             |                   |   |             |                |        |   |         |        |         |              |       |        
|                                         
|                                         
|                                         
|                                         
|Total long-term debt                      |                                |             |                   |   |             |                |        |   |         | $      | 248,444 |              |       | $       | 253,676 | 
|                                          |                                |             |                   |   |             |                |        |   |         |        |         |              |       |        

As of July 1, 2001, $25.8 million was outstanding under the revolving and swingline 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
July 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 July 1, 2001, we have not declared or paid any dividends. Dividends
accumulated but not declared totaled about $24.8 million as of July 1, 2001.

6. Comprehensive Income:

Our comprehensive income was:

|                           |                                          |   |                      |        |   |                         |       |        |         |   |       |         |   |   |       |        |  
|-------------------------- | ---------------------------------------- | - | -------------------- | ------ | - | ----------------------- | ----- | ------ | ------- | - | ----- | ------- | - | - | ----- | ------ | -
|                           |                                          |   | Fiscal Quarter Ended |        |   | Fiscal Six Months Ended |      
|                           |                                          |   |                      |        |   |                         |      
|                           |                                          |   | July 1,              |        |   | July 2,                 |       |        | July 1, |   |       | July 2, |  
|                           |                                          |   | 2001                 |        |   | 2000                    |       |        | 2001    |   |       | 2000    |  
|                           |                                          |   |                      |        |   |                         |       |        |         |   |       |         |  
|Net income                 |                                          | $ | 2,254                |        |   | $                       | 4,130 |        |         | $ | 3,454 |         |   | $ | 8,344 |       
|                          
|                          
|                          
|                          
|Other comprehensive loss -
|                          
|                          
|                          
|                          
|                           | Foreign currency translation adjustments |   |                      | (3,230 | ) |                         |       | (2,284 | )       |   |       | (1,765  | ) |   |       | (3,986 | )
|                           |                                          |   |                      |        |   |                         |       |        |         |   |       |        
|                          
|                          
|                          
|                          
|Comprehensive income       |                                          | $ | (976                 | )      |   | $                       | 1,846 |        |         | $ | 1,689 |         |   | $ | 4,358 |       
|                           |                                          |   |                      |        |   |                         |       |        |         |   |       |        

6



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

7. Segment Information:

MSXI is a leading 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 |         |  | Fiscal Six Months Ended |  
|                                      |  |                      |         |  |                         |  
|                                      |  | July 1,              |         |  | July 2,                 |   |         | July 1, |  |   | July 2, | 
|                                      |  | 2001                 |         |  | 2000                    |   |         | 2001    |  |   | 2000    | 
|                                      |  |                      |         |  |                         |   |         |         |  |   |         | 
|Engineering Services                  |  | $                    | 130,127 |  |                         | $ | 141,966 |         |  | $ | 272,945 |  |  | $ | 285,771 | 
|                                     
|                                     
|                                     
|                                     
|IT and Professional Staffing Services |  |                      | 42,090  |  |                         |   | 51,921  |         |  |   | 88,100  |  |  |   | 87,056  | 
|                                     
|                                     
|                                     
|                                     
|Business and Technology Services      |  |                      | 69,704  |  |                         |   | 75,625  |         |  |   | 137,513 |  |  |   | 144,650 | 
|                                      |  |                      |         |  |                         |   |         |         |  |   |         | 
|                                     
|                                     
|                                     
|                                     
|Total net sales                       |  | $                    | 241,921 |  |                         | $ | 269,512 |         |  | $ | 498,558 |  |  | $ | 517,477 | 
|                                      |  |                      |         |  |                         |   |         |         |  |   |         | 

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

|                                                                                            |                          |   |                      |   |  |                         |        |   |         |   |         |         |  |   |         |   | 
|------------------------------------------------------------------------------------------- | ------------------------ | - | -------------------- | - |  | ----------------------- | ------ | - | ------- | - | ------- | ------- |  | - | ------- | - | 
|                                                                                            |                          |   | Fiscal Quarter Ended |   |  | Fiscal Six Months Ended |       
|                                                                                            |                          |   |                      |   |  |                         |       
|                                                                                            |                          |   | July 1,              |   |  | July 2,                 |        |   | July 1, |   |         | July 2, | 
|                                                                                            |                          |   | 2001                 |   |  | 2000                    |        |   | 2001    |   |         | 2000    | 
|                                                                                            |                          |   |                      |   |  |                         |        |   |         |   |         |         | 
|Total EBIT before minority interests and equity in                                          |                          | $ | 13,601               |   |  | $                       | 16,895 |   |         | $ | 23,985  |         |  | $ | 32,308  |  
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                            | net losses of affiliates
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Interest expense                                                                            |                          |   | (7,556               | ) |  |                         | (7,659 | ) |         |   | (14,484 | )       |  |   | (14,570 | )
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Michigan Single Business Tax and other similar taxes                                        |                          |   | (1,297               | ) |  |                         | (1,336 | ) |         |   | (2,336  | )       |  |   | (2,778  | )
|                                                                                            |                          |   |                      |   |  |                         |        |   |         |   |         |        
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Consolidated income before taxes, minority interests
and equity in net losses of affiliates |                          | $ | 4,748                |   |  | $                       | 7,900  |   |         | $ | 7,165   |         |  | $ | 14,960  |  
|                                                                                            |                          |   |                      |   |  |                         |        |   |         |   |         |        

8. Recent Accounting Pronouncements:

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules,
goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the statements. Other intangible assets will continue to be amortized over their useful
lives. We are currently reviewing the impact of SFAS Nos. 141 and 142 and will be performing a fair-value analysis at a
later date in connection with the adoption of SFAS No. 142 during the first quarter of fiscal 2002.

7



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##### Table of Contents



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

9. Guarantor and Non-Guarantor Subsidiaries:

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

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

8



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##### Table of Contents



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

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEETas of July 1, 2001

|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |              |          |   |         |         |         | 
|----------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------- | ------- | -------- | ------- |  | ------------ | ------- | ------- | ------------- | ------ | ------- | ------------ |  | -------- | ------------ | -------- | - | ------- | ------- | ------- | 
|                                                      |                                                     |                                                      |         | MSXI     |         |  | Guarantor    |         |         | Non-Guarantor |        |         |              |  |          |              | MSXI     |  
|                                                      |                                                     |                                                      |         | (Issuer) |         |  | Subsidiaries |         |         | Subsidiaries  |        |         | Eliminations |  |          | Consolidated |         
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |              |         
|ASSETS                                               
|                                                     
|                                                     
|                                                     
|                                                     
|Current assets:                                      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cash and cash equivalents                           |                                                      | $       | 3,259    |         |  | $            | 49      |         |               | $      | 2,898   |              |  | $        |             |          |   | $       | 6,206   |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts receivable, net                            |                                                      |         | 70       |         |  |              | 161,873 |         |               |        | 125,183 |              |  |          |             |          |   |         | 287,126 |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Inventory                                           |                                                      |         |         |         |  |              | 6,603   |         |               |        | 866     |              |  |          |             |          |   |         | 7,469   |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Prepaid expenses and other assets                   |                                                      |         | 198      |         |  |              | 4,818   |         |               |        | 5,242   |              |  |          |             |          |   |         | 10,258  |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred income taxes, net                          |                                                      |         |         |         |  |              | 2,656   |         |               |        | 1,075   |              |  |          |             |          |   |         | 3,731   |        
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                      |                                                     | Total current assets                                 |         |          | 3,527   |  |              |         | 175,999 |               |        |         | 135,264      |  |          |              |         |   |         |         | 314,790 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Property and equipment, net                           |                                                     |                                                      |        |          |         |  | 19,148       |         |         |               | 20,327 |         |              |  |         |              |          |   | 39,475  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Goodwill and other intangibles, net                   |                                                     |                                                      |        |          |         |  | 130,820      |         |         |               | 40,535 |         |              |  |         |              |          |   | 171,355 |        
|                                                     
|                                                     
|                                                     
|                                                     
|Investment in subsidiaries                            |                                                     |                                                      | 174,192 |          |         |  | 87,107       |         |         |               | 5,228  |         |              |  | (254,624 | )            |          |   | 11,903  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Other assets                                          |                                                     |                                                      | 6,024   |          |         |  | 5,194        |         |         |               | 277    |         |              |  |         |              |          |   | 11,495  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Deferred income taxes, net                            |                                                     |                                                      | 728     |          |         |  | 1,435        |         |         |               | 2,348  |         |              |  |         |              |          |   | 4,511   |        
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                      |                                                     | Total assets                                         |         | $        | 184,471 |  |              | $       | 419,703 |               |        | $       | 203,979      |  |          | $            | (254,624 | ) |         | $       | 553,529 | 
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                     
|                                                     
|                                                     
|                                                     
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)       
|                                                     
|                                                     
|                                                     
|                                                     
|Current liabilities:                                 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Notes payable and current portion
of long-term debt |                                                      | $       | 6,000    |         |  | $            |        |         |               | $      | 10,336  |              |  | $        |             |          |   | $       | 16,336  |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts payable and drafts                         |                                                      |         |         |         |  |              | 113,291 |         |               |        | 45,758  |              |  |          |             |          |   |         | 159,049 |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accrued liabilities                                 |                                                      |         | 3,602    |         |  |              | 56,904  |         |               |        | 35,171  |              |  |          |             |          |   |         | 95,677  |        
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                      |                                                     | Total current liabilities                            |         |          | 9,602   |  |              |         | 170,195 |               |        |         | 91,265       |  |          |              |         |   |         |         | 271,062 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Long-term debt                                        |                                                     |                                                      | 225,429 |          |         |  | 10,196       |         |         |               | 12,819 |         |              |  |         |              |          |   | 248,444 |        
|                                                     
|                                                     
|                                                     
|                                                     
|Intercompany accounts                                 |                                                     |                                                      | (72,217 | )        |         |  | 60,480       |         |         |               | 11,737 |         |              |  |         |              |          |   |        |        
|                                                     
|                                                     
|                                                     
|                                                     
|Long-term deferred compensation
liabilities and other |                                                     |                                                      |        |          |         |  | 4,640        |         |         |               | 6,358  |         |              |  |         |              |          |   | 10,998  |        
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                      |                                                     | Total liabilities                                    |         |          | 162,814 |  |              |         | 245,511 |               |        |         | 122,179      |  |          |              |         |   |         |         | 530,504 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Minority interests                                    |                                                     |                                                      |        |          |         |  |             |         |         |               | 1,364  |         |              |  |         |              |          |   | 1,364   |        
|                                                     
|                                                     
|                                                     
|                                                     
|Redeemable Series A Preferred Stock                   |                                                     |                                                      | 36,000  |          |         |  |             |         |         |               |       |         |              |  |         |              |          |   | 36,000  |        
|                                                     
|                                                     
|                                                     
|                                                     
|Shareholders equity (deficit)                        |                                                     |                                                      | (14,343 | )        |         |  | 174,192      |         |         |               | 80,436 |         |              |  | (254,624 | )            |          |   | (14,339 | )      
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                      |                                                     | Total liabilities and shareholders
equity (deficit) |         | $        | 184,471 |  |              | $       | 419,703 |               |        | $       | 203,979      |  |          | $            | (254,624 | ) |         | $       | 553,529 | 
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |             

9



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##### Table of Contents



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

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING 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      |         |  |              | 194,128 |         |               |        | 123,159 |              |  |          |             |          |   |         | 317,458 |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Inventory                                           |                                                      |         |         |         |  |              | 6,142   |         |               |        | 1,322   |              |  |          |             |          |   |         | 7,464   |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 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                                 |                                                      |         |          |         |  |              | 65,340  |         |               |        | 29,807  |              |  |          |             |          |   |         | 101,578 |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                     |                                                      | 6,431   |         
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |             
|                                                      |                                                     | 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
liabilities and other |                                                     |                                                      |        |          |         |  | 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 | 
|                                                      |                                                     |                                                      |         |          |         |  |              |         |         |               |        |         |              |  |          |             

10



---



##### Table of Contents



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

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

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

|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |              |         |   |   |         |        | 
|----------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | - | -------- | ------ | - | ------------ | ------- | ------ | ------------- | - | ------ | ------------ |  | - | ------------ | ------- | - | - | ------- | ------ | 
|                                                                        |                                                                                               |   | MSXI     |        |   | Guarantor    |         |        | Non-Guarantor |   |        |              |  |   |              | MSXI    |  
|                                                                        |                                                                                               |   | (Issuer) |        |   | Subsidiaries |         |        | Subsidiaries  |   |        | Eliminations |  |   | Consolidated |        
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |              |        
|Fiscal Quarter Ended July 1, 2001:                                     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net sales                                                               |                                                                                               | $ |         |        |   | $            | 147,881 |        |               | $ | 98,526 |              |  | $ | (4,486       | )       |   | $ | 241,921 |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cost of sales                                                           |                                                                                               |   |         |        |   |              | 125,079 |        |               |   | 88,831 |              |  |   | (4,486       |         |   |   | 209,424 |       
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |             
|                                                                        | Gross profit                                                                                  |   |          |       |   |              |         | 22,802 |               |   |        | 9,695        |  |   |              |        |   |   |         | 32,497 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Selling, general and administrative expenses                            |                                                                                               |   |         |        |   |              | 13,070  |        |               |   | 5,615  |              |  |   |             |         |   |   | 18,685  |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Amortization of goodwill and other intangibles                          |                                                                                               |   |         |        |   |              | 1,167   |        |               |   | 341    |              |  |   |             |         |   |   | 1,508   |       
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |             
|                                                                        | Operating income                                                                              |   |          |       |   |              |         | 8,565  |               |   |        | 3,739        |  |   |              |        |   |   |         | 12,304 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Interest income (expense), net                                          |                                                                                               |   | (7,060   | )      |   |              | 48      |        |               |   | (544   | )            |  |   |             |         |   |   | 7,556   |       
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |             
|                                                                        | Income (loss) before income taxes,
minority interests, and equity in net
losses of affiliates |   |          | (7,060 | ) |              |         | 8,613  |               |   |        | 3,195        |  |   |              |        |   |   |         | 4,748  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Income tax provision (benefit)                                          |                                                                                               |   | (2,605   | )      |   |              | 3,187   |        |               |   | 1,364  |              |  |   |             |         |   |   | 1,946   |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Minority interests and equity in net
losses of affiliates, net of taxes |                                                                                               |   | 6,709    |        |   |              | 1,283   |        |               |   | (301   | )            |  |   | (8,239       | )       |   |   | (548    | )     
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |             
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Net income                                                                                    |   | $        | 2,254  |   |              | $       | 6,709  |               |   | $      | 1,530        |  |   | $            | (8,239  | ) |   | $       | 2,254  | 
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |             
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Fiscal Quarter Ended July 2, 2000:                                     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net sales                                                               |                                                                                               | $ |         |        |   | $            | 174,404 |        |               | $ | 99,252 |              |  | $ | (4,144       | )       |   | $ | 269,512 |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cost of sales                                                           |                                                                                               |   |         |        |   |              | 148,637 |        |               |   | 86,420 |              |  |   | (4,144       | )       |   |   | 230,913 |       
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |             
|                                                                        | Gross profit                                                                                  |   |          |       |   |              |         | 25,767 |               |   |        | 12,832       |  |   |              |        |   |   |         | 38,599 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Selling, general and administrative expenses                            |                                                                                               |   |         |        |   |              | 14,798  |        |               |   | 6,844  |              |  |   |             |         |   |   | 21,642  |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Amortization of goodwill and other intangibles                          |                                                                                               |   |         |        |   |              | 1,115   |        |               |   | 283    |              |  |   |             |         |   |   | 1,398   |       
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |             
|                                                                        | Operating income                                                                              |   |          |       |   |              |         | 9,854  |               |   |        | 5,705        |  |   |              |        |   |   |         | 15,559 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Interest income (expense), net                                          |                                                                                               |   | (7,254   | )      |   |              | 425     |        |               |   | (830   | )            |  |   |             |         |   |   | (7,659  | )     
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |             
|                                                                        | Income (loss) before income taxes,
minority interests, and equity in net
losses of affiliates |   |          | (7,254 | ) |              |         | 10,279 |               |   |        | 4,875        |  |   |              |        |   |   |         | 7,900  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Income tax provision (benefit)                                          |                                                                                               |   | (2,555   | )      |   |              | 3,967   |        |               |   | 1,810  |              |  |   |             |         |   |   | 3,222   |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Minority interests and equity in net
losses of affiliates, net of taxes |                                                                                               |   | 8,829    |        |   |              | 2,517   |        |               |   | (548   | )            |  |   | (11,346      | )       |   |   | (548    | )     
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |             
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Net income                                                                                    |   | $        | 4,130  |   |              | $       | 8,829  |               |   | $      | 2,517        |  |   | $            | (11,346 | ) |   | $       | 4,130  | 
|                                                                        |                                                                                               |   |          |        |   |              |         |        |               |   |        |              |  |   |             

11



---



##### Table of Contents



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

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENTS OF INCOMEFor the fiscal six months ended July 1, 2001 and July 2, 2000

|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |         |         |              |         |         |      |        |        | 
|----------------------------------------------------------------------- | ----------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------- | ------ | -------- | ----- | ------- | ------------ | ------ | ------ | ------------- | ---- | ------ | ------------ | ------- | ------- | ------------ | ------- | ------- | ---- | ------ | ------ | 
|                                                                        |                                                                         |                                                                                               |                  |        | MSXI     |       |         | Guarantor    |        |        | Non-Guarantor |      |        |              |         |         |              | MSXI    |        
|                                                                        |                                                                         |                                                                                               |                  |        | (Issuer) |       |         | Subsidiaries |        |        | Subsidiaries  |      |        | Eliminations |         |         | Consolidated |        
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |         |         |              |        
|Fiscal Six Months Ended July 1, 2001:                                  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net sales                                                               |                                                                         | $                                                                                             |                 |        |          | $     | 308,131 |              |        | $      | 199,483       |      |        | $            | (9,056  | )       |              | $       | 498,558 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cost of sales                                                           |                                                                         |                                                                                               |                 |        |          |       | 263,077 |              |        |        | 179,848       |      |        |              | (9,056  | )       |              |         | 433,869 |     
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |        
|                                                                        |                                                                         | Gross profit                                                                                  |                  |        |         |       |         |              | 45,054 |        |               |      | 19,635 |              |         |         |             |         |         |      | 64,689 |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Selling, general and administrative expenses                            |                                                                         |                                                                                               |                 |        |          |       | 28,492  |              |        |        | 11,436        |      |        |              |        |         |              |         | 39,928  |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Amortization of goodwill and other intangibles                          |                                                                         |                                                                                               |                 |        |          |       | 2,337   |              |        |        | 775           |      |        |              |        |         |              |         | 3,112   |     
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |        
|                                                                        |                                                                         |                                                                                               | Operating income |        |          |      |         |              |        | 14,225 |               |      |        | 7,424        |         |         |              |        |         |      |        | 21,649 | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Interest income (expense), net                                          |                                                                         |                                                                                               | (13,958          | )      |          |       | 121     |              |        |        | (647          | )    |        |              |        |         |              |         | 14,484  |     
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |        
|                                                                        |                                                                         | Income (loss) before income taxes,
minority interests, and equity in net
losses of affiliates |                  |        | (13,958  | )     |         |              | 14,346 |        |               |      | 6,777  |              |         |         |             |         |         |      | 7,165  |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Income tax provision (benefit)                                          |                                                                         |                                                                                               | (5,143           | )      |          |       | 5,308   |              |        |        | 2,796         |      |        |              |        |         |              |         | 2,961   |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Minority interests and equity in net
Losses of affiliates, net of taxes |                                                                         |                                                                                               | 12,269           |        |          |       | 3,231   |              |        |        | (503          | )    |        |              | (15,747 | )       |              |         | (750    | )   
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                                                         | Net income                                                                                    |                  | $      | 3,454    |       |         | $            | 12,269 |        |               | $    | 3,478  |              |         | $       | (15,747      | )       |         | $    | 3,454  |       
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Fiscal Six Months Ended July 2, 2000:                                  
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Net sales                                                               |                                                                         | $                                                                                             |                 |        |          | $     | 331,529 |              |        | $      | 193,738       |      |        | $            | (7,790  | )       |              | $       | 517,477 |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Cost of sales                                                           |                                                                         |                                                                                               |                 |        |          |       | 280,934 |              |        |        | 170,574       |      |        |              | (7,790  | )       |              |         | 443,718 |     
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |        
|                                                                        |                                                                         | Gross profit                                                                                  |                  |        |         |       |         |              | 50,595 |        |               |      | 23,164 |              |         |         |             |         |         |      | 73,759 |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Selling, general and administrative expenses                            |                                                                         |                                                                                               |                 |        |          |       | 28,906  |              |        |        | 12,823        |      |        |              |        |         |              |         | 41,729  |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Amortization of goodwill and other intangibles                          |                                                                         |                                                                                               |                 |        |          |       | 1,980   |              |        |        | 520           |      |        |              |        |         |              |         | 2,500   |     
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |        
|                                                                        |                                                                         | Operating income                                                                              |                  |        |         |       |         |              | 19,709 |        |               |      | 9,821  |              |         |         |             |         |         |      | 29,530 |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Interest income (expense), net                                          |                                                                         |                                                                                               | (13,762          | )      |          |       | 834     |              |        |        | (1,642        | )    |        |              |        |         |              |         | (14,570 | )   
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |        
|                                                                        |                                                                         | Income (loss) before income taxes,
minority interests, and equity in net
Losses of affiliates |                  |        | (13,762  | )     |         |              | 20,543 |        |               |      | 8,179  |              |         |         |             |         |         |      | 14,960 |       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Income tax provision (benefit)                                          |                                                                         |                                                                                               | (4,927           | )      |          |       | 7,793   |              |        |        | 3,284         |      |        |              |        |         |              |         | 6,150   |     
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Minority interests and equity in net
losses of affiliates, net of taxes |                                                                                               |                  | 17,179 |          |       |         | 4,429        |        |        |               | (466 | )      |              |         | (21,608 | )            |         |         | (466 | )     
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                                                         |                                                                                               | Net income       |        | $        | 8,344 |         |              | $      | 17,179 |               |      | $      | 4,429        |         |         | $            | (21,608 | )       |      | $      | 8,344  | 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        |                                                                         |                                                                                               |                  |        |          |       |         |              |        |        |               |      |        |              |        

12



---



##### Table of Contents



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

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSfor the fiscal six months ended July 1, 2001

|                                                                     |  |                                                                                   |                                                          |   |          |         |         |              |         |               |              |   |        |              |        |   |              |        |         |   |         |         |  
|-------------------------------------------------------------------- |  | --------------------------------------------------------------------------------- | -------------------------------------------------------- | - | -------- | ------- | ------- | ------------ | ------- | ------------- | ------------ | - | ------ | ------------ | ------ | - | ------------ | ------ | ------- | - | ------- | ------- | -
|                                                                     |  |                                                                                   |                                                          |   | MSXI     |         |         | Guarantor    |         | Non-Guarantor |              |   | MSXI   |             
|                                                                     |  |                                                                                   |                                                          |   | (Issuer) |         |         | Subsidiaries |         |               | Subsidiaries |   |        | Eliminations |        |   | Consolidated |       
|                                                                     |  |                                                                                   |                                                          |   |          |         |         |              |         |               |              |   |        |              |        |   |              |       
|Cash flows from operating activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Net income                                                                        |                                                          | $ | 3,454    |         |         | $            | 12,269  |               |              | $ | 3,478  |              |        | $ | (15,747      | )      |         | $ | 3,454   |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Adjustments to reconcile net income to net
cash provided by operating activities:
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                   | Equity in earnings of subsidiaries                       |   |          | (12,269 | )       |              |         | (3,231        | )            |   |        | 503          |        |   |              | 15,747 |         |   |         | 750     |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                   | Depreciation                                             |   |          |        |         |              |         | 4,021         |              |   |        | 4,037        |        |   |              |       |         |   |         | 8,058   |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                   | Amortization                                             |   |          | 559     |         |              |         | 2,337         |              |   |        | 775          |        |   |              |       |         |   |         | 3,671   |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                   | Deferred taxes                                           |   |          | (728    | )       |              |         | 314           |              |   |        | (809         | )      |   |              |       |         |   |         | (1,223  | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                   | Loss on sale/disposal of property and
equipment          |   |          |        |         |              |         |              |              |   |        |             |        |   |              |       |         |   |         |        |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                   | (Increase) decrease in receivables, net                  |   |          | 102     |         |              |         | 32,255        |              |   |        | (2,025       | )      |   |              |       |         |   |         | 30,332  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                   | (Increase) decrease in inventory                         |   |          |        |         |              |         | (461          | )            |   |        | 456          |        |   |              |       |         |   |         | (5      | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                   | (Increase) decrease in prepaid expenses
and other assets |   |          | 63      |         |              |         | 19            |              |   |        | (1,762       | )      |   |              |       |         |   |         | (1,680  | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                   | Increase (decrease) in current liabilities               |   |          | (2,828  | )       |              |         | (13,763       | )            |   |        | (520         | )      |   |              |       |         |   |         | (17,111 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                   | Other, net                                               |   |          |        |         |              |         | (529          | )            |   |        | (370         | )      |   |              |       |         |   |         | (899    | )
|                                                                     |  |                                                                                   |                                                          |   |          |         |         |              |         |               |              |   |        |              |        |   |             
|Net cash provided by (used for) operating
activities                 |  |                                                                                   | (11,647                                                  | ) |          |         | 33,231  |              |         |               | 3,763        |   |        |              |       |   |              |        | 25,347  |  
|                                                                     |  |                                                                                   |                                                          |   |          |         |         |              |         |               |              |   |        |              |        |   |             
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash flows from investing activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Capital expenditures                                                              |                                                          |   |         |         |         |              | (3,206  | )             |              |   | (4,168 | )            |        |   |             |        |         |   | (7,374  | )      
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Acquisition of businesses, net of cash
received                                   |                                                          |   |         |         |         |              | (11,093 | )             |              |   | (426   | )            |        |   |             |        |         |   | (11,519 | )      
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Proceeds from sale/disposal of property and
equipment                             |                                                          |   |         |         |         |              | 6       |               |              |   | 98     |              |        |   |             |        |         |   | 104     |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Other, net                                                                        |                                                          |   |         |         |         |              | 97      |               |              |   |       |              |        |   |             |        |         |   | 97      |        
|                                                                     |  |                                                                                   |                                                          |   |          |         |         |              |         |               |              |   |        |              |        |   |             
|Net cash used for investing activities                               |  |                                                                                   |                                                         |   |          |         | (14,196 | )            |         |               | (4,496       | ) |        |              |       |   |              |        | (18,692 | )
|                                                                     |  |                                                                                   |                                                          |   |          |         |         |              |         |               |              |   |        |              |        |   |             
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash flows from financing activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Intercompany                                                                      |                                                          |   | 19,857   |         |         |              | (17,832 | )             |              |   | (2,025 | )            |        |   |             |        |         |   |        |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Transactions with subsidiaries                                                    |                                                          |   | 1,772    |         |         |              | 1,688   |               |              |   | 71     |              |        |   | (3,531       | )      |         |   |        |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Proceeds from issuance of debt                                                    |                                                          |   |         |         |         |              |        |               |              |   |       |              |        |   |             |        |         |   |        |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Repayment of debt                                                                 |                                                          |   | (2,625   | )       |         |              |        |               |              |   |       |              |        |   |             |        |         |   | (2,625  | )      
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Debt issuance costs                                                               |                                                          |   | (12      | )       |         |              |        |               |              |   |       |              |        |   |             |        |         |   | (12     | )      
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Changes in revolving debt, net                                                    |                                                          |   | (1,750   | )       |         |              |        |               |              |   | 2,309  |              |        |   |             |        |         |   | 559     |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Changes in book overdraft, net                                                    |                                                          |   |         |         |         |              | (1,642  | )             |              |   | 21     |              |        |   |             |        |         |   | (1,621  | )      
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | 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                 |  |                                                                                   | 16,676                                                   |   |          |         | (17,786 | )            |         |               | 376          |   |        |              | (3,531 | ) |              |        | (4,265  | )
|                                                                     |  |                                                                                   |                                                          |   |          |         |         |              |         |               |              |   |        |              |        |   |             
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Effect of foreign exchange rate changes on cash
and cash equivalents |  |                                                                                   | (1,770                                                   | ) |          |         | (1,769  | )            |         |               | (862         | ) |        |              | 3,531  |   |              |        | (870    | )
|                                                                     |  |                                                                                   |                                                          |   |          |         |         |              |         |               |              |   |        |              |        |   |             
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash and cash equivalents:                                          
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Increase (decrease) for the period                                                |                                                          |   | 3,259    |         |         |              | (520    | )             |              |   | (1,219 | )            |        |   |             |        |         |   | 1,520   |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Balance, beginning of period                                                      |                                                          |   |         |         |         |              | 569     |               |              |   | 4,117  |              |        |   |             |        |         |   | 4,686   |        
|                                                                     |  |                                                                                   |                                                          |   |          |         |         |              |         |               |              |   |        |              |        |   |             
|                                                                     |  | Balance, end of period                                                            |                                                          | $ | 3,259    |         |         | $            | 49      |               |              | $ | 2,898  |              |        | $ |             |        |         | $ | 6,206   |        
|                                                                     |  |                                                                                   |                                                          |   |          |         |         |              |         |               |              |   |        |              |        |   |             

13



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##### Table of Contents



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

9. Guarantor and Non-Guarantor Subsidiaries:  continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
for the fiscal six months ended July 2, 2000

|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |              |        |         |   |         |        |  
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- | -------------------------------------------------------- | - | -------- | ------- | ------- | ------------ | ------- | ------ | ------------- | - | ------- | ------------ | ------ | - | ------------ | ------ | ------- | - | ------- | ------ | -
|                                                                     |  |                                                                                              |                                                          |   | MSXI     |         |         | Guarantor    |         |        | Non-Guarantor |   |         |              |        |   |              | MSXI   |        
|                                                                     |  |                                                                                              |                                                          |   | (Issuer) |         |         | Subsidiaries |         |        | Subsidiaries  |   |         | Eliminations |        |   | Consolidated |       
|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |              |       
|Cash flows from operating activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Net income                                                                                   |                                                          | $ | 8,344    |         |         | $            | 17,179  |        |               | $ | 4,429   |              |        | $ | (21,608      | )      |         | $ | 8,344   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Equity in earnings of subsidiaries                       |   |          | (17,179 | )       |              |         | (4,429 | )             |   |         | 466          |        |   |              | 21,608 |         |   |         | 466    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Depreciation                                             |   |          |        |         |              |         | 5,070  |               |   |         | 3,496        |        |   |              |       |         |   |         | 8,566  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Amortization                                             |   |          | 532     |         |              |         | 1,980  |               |   |         | 520          |        |   |              |       |         |   |         | 3,032  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Deferred taxes                                           |   |          |        |         |              |         | 3,157  |               |   |         | 1,169        |        |   |              |       |         |   |         | 4,326  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Loss on sale/disposal of property and
equipment          |   |          |        |         |              |         | 71     |               |   |         | 9            |        |   |              |       |         |   |         | 80     |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | (Increase) decrease in receivables, net                  |   |          | (70     | )       |              |         | 638    |               |   |         | 21,820       |        |   |              |       |         |   |         | 22,388 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | (Increase) decrease in inventory                         |   |          |        |         |              |         | (484   | )             |   |         | 404          |        |   |              |       |         |   |         | (80    | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | (Increase) decrease in prepaid expenses
and other assets |   |          | 64      |         |              |         | (358   | )             |   |         | (937         | )      |   |              |       |         |   |         | (1,231 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Increase (decrease) in current liabilities               |   |          | 11,126  |         |              |         | 10,771 |               |   |         | (13,104      | )      |   |              | 33     |         |   |         | 8,826  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  |                                                                                              | Other, net                                               |   |          |        |         |              |         | (436   | )             |   |         | (1,470       | )      |   |              |       |         |   |         | (1,906 | )
|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |             
|Net cash provided by operating activities                            |  |                                                                                              | 2,817                                                    |   |          |         | 33,159  |              |         |        | 16,802        |   |         |              | 33     |   |              |        | 52,811  |  
|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |             
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash flows from investing activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Capital expenditures                                                                         |                                                          |   |         |         |         |              | (2,742  | )      |               |   | (5,625  | )            |        |   |             |        |         |   | (8,367  | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Acquisition of businesses, net of cash
received                                              |                                                          |   |         |         |         |              | (39,660 | )      |               |   | (18,087 | )            |        |   |             |        |         |   | (57,747 | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Proceeds from sale/disposal of equipment                                                     |                                                          |   |         |         |         |              | 22      |        |               |   | 91      |              |        |   |             |        |         |   | 113     |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Other, net                                                                                   |                                                          |   |         |         |         |              | 761     |        |               |   |        |              |        |   |             |        |         |   | 761     |       
|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |             
|Net cash used for investing activities                               |  |                                                                                              |                                                         |   |          |         | (41,619 | )            |         |        | (23,621       | ) |         |              |       |   |              |        | (65,240 | )
|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |             
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash flows from financing activities:                               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Intercompany                                                                                 |                                                          |   | (5,818   | )       |         |              | 3,721   |        |               |   | 2,097   |              |        |   |             |        |         |   |        |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Transactions with subsidiaries                                                               |                                                          |   | 3,986    |         |         |              | (5,881  | )      |               |   | 10,437  |              |        |   | (8,542       | )      |         |   |        |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Proceeds from issuance of debt                                                               |                                                          |   | 25,000   |         |         |              |        |        |               |   |        |              |        |   |             |        |         |   | 25,000  |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Repayment of debt                                                                            |                                                          |   | (1,875   | )       |         |              | (42     | )      |               |   |        |              |        |   |             |        |         |   | (1,917  | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Debt issuance costs                                                                          |                                                          |   | (178     | )       |         |              |        |        |               |   |        |              |        |   |             |        |         |   | (178    | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Changes in revolving debt, net                                                               |                                                          |   | (19,946  | )       |         |              | 10,196  |        |               |   | 283     |              |        |   |             |        |         |   | (9,467  | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Changes in book overdrafts, net                                                              |                                                          |   |         |         |         |              | 4,315   |        |               |   | (2,946  | )            |        |   |             |        |         |   | 1,369   |       
|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |             
|Net cash provided by financing activities                            |  |                                                                                              | 1,169                                                    |   |          |         | 12,309  |              |         |        | 9,871         |   |         |              | (8,542 | ) |              |        | 14,807  |  
|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |             
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Effect of foreign exchange rate changes on cash
and cash equivalents |  |                                                                                              | (3,986                                                   | ) |          |         | (3,986  | )            |         |        | (3,157        | ) |         |              | 8,509  |   |              |        | (2,620  | )
|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |             
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash and cash equivalents:                                          
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Increase (decrease) for the period                                                           |                                                          |   |         |         |         |              | (137    | )      |               |   | (105    | )            |        |   |             |        |         |   | (242    | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |  | Balance, beginning of period                                                                 |                                                          |   |         |         |         |              | 873     |        |               |   | 6,006   |              |        |   |             |        |         |   | 6,879   |       
|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |             
|                                                                     |  | Balance, end of period                                                                       |                                                          | $ |         |         |         | $            | 736     |        |               | $ | 5,901   |              |        | $ |             |        |         | $ | 6,637   |       
|                                                                     |  |                                                                                              |                                                          |   |          |         |         |              |         |        |               |   |         |              |        |   |             

14



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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 were $241.9 million for the second quarter of fiscal 2001 compared to $269.5 during fiscal
2000, a decrease of $27.6 million, or 10.2%. Consolidated net sales for the first six months of fiscal 2001 decreased
$18.9 million, or 3.7%, from $517.5 million in fiscal 2000 to $498.6 million in fiscal 2001. Fiscal 2001 sales continue to
be negatively impacted by declines in foreign currency exchange rates in certain countries in which we operate. The net
impact of declining exchange rates was to reduce consolidated net sales by $6.1 million and $13.3 million for the second
quarter and first six months of fiscal 2001, respectively. Excluding the impact of foreign currency exchange rate
fluctuations, consolidated net sales decreased $21.5 million for the second quarter, and $5.6 million for the first six
month of fiscal 2001. Sales to non-automotive customers increased to 20.5% of total sales for the first six months of
fiscal 2001 compared to 17.1% for the first quarter of fiscal 2000. This increase reflects our continued efforts to
diversify our customer base.

Sales of our engineering services for the second quarter of fiscal 2001 decreased $11.8 million, or 8.3% compared
to fiscal 2000. For the first six month of fiscal 2001, sales of engineering services decreased $12.8 million, or 4.5%
compared to fiscal 2000. The decreases reflect reduced volumes of certain engineering services in the United Kingdom and
North America in addition to reductions caused by declining foreign currency exchange rates. Reductions caused by
declining volumes and exchange rate fluctuations were partially offset by an improved mix of services in North America.
Sales of our IT and professional staffing services decreased $9.8 million, or 18.9% during the second quarter of fiscal
2001. For the first six months of fiscal 2001, sales of IT and professional staffing services increased $1.0 million, or
1.2%, compared to fiscal 2000. The increase, on a year to date basis, reflects the favorable impact of businesses acquired
early in fiscal 2000, partially offset by decreased volumes in existing businesses. Sales of our business and technology
services during the second quarter of fiscal 2001 decreased $5.9 million, or 7.8%, compared to fiscal 2000. For the first
six months of fiscal 2001, sales of business and technology services were down $7.1 million, or 4.9% compared to fiscal
2000. The decrease resulted from declining foreign currency exchange rates and lower volumes due to the divestiture of a
non-core business during fiscal 2000.

Operating Income

Our consolidated operating income for the periods presented was:

|                   |                  |  |         |        |  |         |                        |        |        |  |   |         |   |  |  |         | 
|------------------ | ---------------- |  | ------- | ------ |  | ------- | ---------------------- | ------ | ------ |  | - | ------- | - |  |  | ------- | 
|                   |                  |  | July 1, |        |  | July 2, |                        |        | Change | 
|                   |                  |  |         |        |  |         |                        |        |        | 
|                   |                  |  | 2001    |        |  | 2000    |                        |        | $      |  |   | %       |  
|                   |                  |  |         |        |  |         |                        |        |        |  |   |         |  
|                   |                  |  |         |        |  |         | (dollars in thousands) |       
|Fiscal Quarter:   
|                  
|                  
|                  
|                  
|                   | Operating income |  | $       | 12,304 |  |         | $                      | 15,559 |        |  | $ | (3,255  | ) |  |  | (20.9%) | 
|                  
|                  
|                  
|                  
|                   | % of net sales   |  |         | 5.1%   |  |         |                        | 5.8%   |        |  |   | n/a     |   |  |  | n/a     | 
|                  
|                  
|                  
|                  
|Fiscal Six Months:
|                  
|                  
|                  
|                  
|                   | Operating income |  | $       | 21,649 |  |         | $                      | 29,530 |        |  | $ | (7,881) |   |  |  | (26.7%) | 
|                  
|                  
|                  
|                  
|                   | % of net sales   |  |         | 4.3%   |  |         |                        | 5.7%   |        |  |   | n/a     |   |  |  | n/a     | 

Overall, operating income
decreased during the second quarter and for the first six months of fiscal 2001 compared to fiscal 2000 due to reduced
gross profits and increased spending required to position the company for future growth and expansion. Gross profit, as a
percentage of sales, decreased to 13.4% for the second quarter and 13.0% for the first six months of fiscal 2001 compared
to 14.3% for the comparable periods of fiscal 2000. The decline in gross margin resulted from unfavorable volumes,
primarily in our engineering operations, unfavorable sales mix in our IT staffing operations, and added operating costs.
The overall decline in our operating results is attributable to the general economic downturn, which has impacted demand
for technical services in the automotive and telecommunications sectors. We cannot predict with certainty when economic
conditions will improve and are taking steps to further diversify our business to other markets and customers while
containing our operating costs.

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Selling, general and administrative expenses, as a percentage of net sales, were 7.7% during the second quarter
of fiscal 2001 compared to 8.0% during the comparable period of fiscal 2000. For the first six months of fiscal 2001,
selling, general and administrative expenses were 8.0% of net sales compared to 8.1% during the first six months of fiscal
2000. The decreases in selling, general and administrative expenses resulted from reductions in accrued incentive
compensation totaling $2.8 million for the second quarter and $4.3 million for the first six months of fiscal 2001. After
adjusting for decreased incentive compensation, selling general and administrative expenses increased on a year to date
basis. The increased costs were incurred to develop our service offerings and sales efforts within our developing vertical
markets.

Interest Expense

Interest expense decreased marginally from $7.7 million during the second quarter of fiscal 2000 to $7.6 million
for the second quarter of 2001. For the first six months of fiscal 2001 interest expense was $14.5 million compared to
$14.6 million in 2000. Interest expense improved during 2001, despite higher average borrowings required to fund
acquisitions and investments, due to improvements in interest rates on our variable rate debt outstanding.

Net Income

As a result of the foregoing, net income for the second quarter of fiscal 2001 decreased $1.9 million, or 45.4%,
from $4.1 million in 2000, to $2.2 million in 2001. Net income for the first six months of 2001 decreased $4.9 million, or
58.6%, from $8.3 million in 2000 to $3.4 million in 2001. Our effective income tax rate was constant during the quarter
and six-month periods, while minority interests and equity losses increased on a year to date basis as a result of losses
reported by our equity investees during the periods.

Liquidity and Capital Resources

Cash Flows

General.   Historically, our principal capital requirements are for the acquisition of businesses and investments,
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 provided by operating activities decreased by $27.5 million to $25.3 million for
the first six months of fiscal 2001, compared to $52.8 million for the first six months of fiscal 2000. Cash provided by
operations during fiscal 2000 included significant improvements in accounts receivable collections resulting from the
transition of Satiz S.r.l., which was acquired in December 1999, into our cash management system. This reduction in Satiz
accounts receivable resulted in a one time improvement in cash from operations of about $12 million during the first six
months of fiscal 2000. Excluding the one-time improvements during fiscal 2000, cash provided by operations decreased from
a combination of lower cash earnings and the net funding of accruals.

Investing Activities.   Net cash used for investing activities decreased $46.5 million from $65.2 million for the
first six months of fiscal 2000, to $18.7 million for the first six months of fiscal 2001. This included a decrease in
cash used for business acquisitions of $46.2 million and a decrease of $1.0 million in capital expenditures. Cash used to
acquire businesses during fiscal 2000 primarily relates to the acquisition of four companies from Corporate Staffing
Resource, Inc. as detailed in Note 2 to our consolidated financial statements. Cash used to acquire businesses during
fiscal 2001 includes the acquisition of a minority investment in MTE Groups LLC 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. Capital
expenditures have declined commensurate with the decreased volumes of engineering and other services.

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Financing Activities.   Net cash used for financing activities during the first six months of fiscal 2001 was $4.3
compared to net cash provided by financing activities of $14.8 million during fiscal 2000. Financing requirements during
the first six months of fiscal 2001 decreased consistent with the reduction in funds required to acquire companies. During
the first quarter of fiscal 2001, a subsidiary of MSX International, Inc. completed a sale of unregistered securities to
certain directors and members of management. The securities were sold in units with each unit comprised of MSX
International Inc.s Series A Preferred Stock, par value $0.01 per share, and Class A Common Stock, par value $0.01 per
share. In total, 9,936 shares of Series A Preferred Stock and 482,400 shares of Class A Common Stock were sold. The
shares of Series A Preferred Stock and Class A Common Stock, which comprised the units sold, were acquired from Citicorp,
our majority stockholder, at a price equal to the price at which the units were offered to management. The proceeds of
$3.6 million were wholly used to pay the purchase price of the shares acquired from Citicorp.

Available Financing Sources

Financing activities during fiscal 2000 included the issuance of an additional $25 million in term notes under our
credit facility. 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 our credit facility. As of July 1, 2001, $71.9 million was available for potential future borrowings under the
revolving credit portion of our amended and restated credit facility.

Forward  Looking Statements

This quarterly 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 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:  August 14, 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 signator

18