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PRGX Global, Inc. Announces Fourth Quarter And Full Year 2012 Financial Results

Stocks in this article: PRGX

Forward-Looking Statements

In addition to historical information, this press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include both implied and express statements regarding the Company's financial condition and revenue and Adjusted EBITDA growth, improvements in gross margin, and the success of its growth strategies and expansion into new markets.Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to differ materially from the historical results or from any results expressed or implied by such forward-looking statements. Risks that could affect the Company's future performance include revenue that do not meet expectations or justify costs incurred, the Company's ability to develop material sources of new revenue in addition to revenue from its core recovery audit services, changes in the market for the Company's services, the Company's ability to retain and attract qualified personnel, changes to Medicare and Medicaid recovery audit contractor (RAC) programs and the anticipated re-bid of Medicare RAC program contracts, the Company's ability to integrate recent and future acquisitions, uncertainty in the credit markets, the Company's ability to maintain compliance with its financial covenants, client bankruptcies, loss of major clients, and other risks generally applicable to the Company's business. For a discussion of other risk factors that may impact the Company's business, please see the Company's filings with the Securities and Exchange Commission, including its Form 10-K filed on March 15, 2012. The Company disclaims any obligation or duty to update or modify these forward-looking statements.

SCHEDULE 1
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Amounts in thousands, except per share data)
(Unaudited)
         
         
  Three Months Twelve Months
  Ended December 31, Ended December 31,
  2012 2011 2012 2011
         
Revenue  $ 53,109  $ 49,944  $ 208,503  $ 203,117
Operating expenses:        
Cost of revenue  34,399  34,240  134,390  137,482
Selling, general and administrative expenses  13,952  11,958  52,527  49,102
Depreciation of property and equipment  2,276  1,542  7,084  5,401
Amortization of intangible assets  2,007  1,464  7,224  4,991
Total operating expenses  52,634  49,204  201,225  196,976
         
Operating income  475  740  7,278  6,141
         
Foreign currency transaction (gains) losses on short-term intercompany balances  (187)  241  (377)  417
Interest expense (income), net  (582)  393  966  1,616
Earnings before income taxes  1,244  106  6,689  4,108
         
Income tax (benefit) expense  (289)  (1,206)  1,297  1,292
         
Net earnings  $ 1,533  $ 1,312  $ 5,392  $ 2,816
         
         
Basic earnings per common share  $ 0.06  $ 0.05  $ 0.21  $ 0.11
         
Diluted earnings per common share  $ 0.06  $ 0.05  $ 0.21  $ 0.11
         
Weighted average common shares outstanding:      
Basic  26,150  25,002  25,566  24,634
Diluted  26,716  25,409  26,137  25,029
 
SCHEDULE 2
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
     
     
  December 31, December 31,
  2012 2011
     
ASSETS 
Current assets:    
Cash and cash equivalents  $ 37,806  $ 20,337
Restricted cash  65  64
Receivables:    
Contract receivables, net  45,127  40,624
Employee advances and miscellaneous receivables, net  1,352  1,343
Total receivables  46,479  41,967
     
Prepaid expenses and other current assets  3,853  5,594
Total current assets  88,203  67,962
     
Property and equipment, net  19,574  18,586
Goodwill  13,669  13,194
Intangible assets, net  18,399  23,406
Deferred income taxes  1,552  831
Other assets  2,189  2,434
 Total assets   $ 143,586  $ 126,413
     
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:    
Accounts payable and accrued expenses  $ 14,136  $ 15,035
Accrued payroll and related expenses  20,874  21,920
Refund liabilities and deferred revenue  8,530  8,434
Current portion of debt  3,000  3,000
Business acquisition obligations  4,218  3,502
Total current liabilities  50,758  51,891
     
Long-term debt  3,000  6,000
Noncurrent business acquisition obligations  2,479  5,604
Other long-term liabilities  2,697  3,828
Total liabilities  58,934  67,323
     
Shareholders' equity:    
Common stock  279  251
Additional paid-in capital  594,045  574,266
Accumulated deficit  (513,200)  (518,592)
Accumulated other comprehensive income  3,528  3,165
Total shareholders' equity  84,652  59,090
     
 Total liabilities and shareholders' equity   $ 143,586  $ 126,413
 
SCHEDULE 3
PRGX Global, Inc. and Subsidiaries
Reconciliation of Net Earnings to EBIT, EBITDA and Adjusted EBITDA
(Amounts in thousands)
(Unaudited)
         
         
  Three Months Twelve Months
  Ended December 31, Ended December 31,
  2012 2011 2012 2011
Reconciliation of net earnings to EBIT, EBITDA and Adjusted EBITDA:        
         
Net earnings  $ 1,533  $ 1,312  $ 5,392  $ 2,816
         
Income tax (benefit) expense  (289)  (1,206)  1,297  1,292
Interest expense (income), net  (582)  393  966  1,616
         
EBIT  662  499  7,655  5,724
         
Depreciation of property and equipment  2,276  1,542  7,084  5,401
Amortization of intangible assets  2,007  1,464  7,224  4,991
         
EBITDA  4,945  3,505  21,963  16,116
         
Foreign currency transaction (gains) losses on short-term intercompany balances  (187)  241  (377)  417
Acquisition transaction costs and acquisition obligations classified as compensation  94  466  382  800
Transformation severance and related expenses  1,071  764  2,107  2,031
Wage claim costs  407  --  984  --
Stock-based compensation  1,842  1,430  6,321  5,093
         
Adjusted EBITDA  $ 8,172  $ 6,406  $ 31,380  $ 24,457
         
         
         
EBIT, EBITDA and Adjusted EBITDA are all "non-GAAP financial measures" presented as supplemental measures of our performance. They are not presented in accordance with accounting principles generally accepted in the United States, or GAAP. The Company believes these measures provide additional meaningful information in evaluating the Company's performance over time, and that the rating agencies and a number of lenders use EBIT, EBITDA and similar measures for similar purposes. In addition, a measure similar to Adjusted EBITDA is used in the restrictive covenants contained in the Company's secured credit facility. However, EBIT, EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. In addition, in evaluating EBIT, EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses such as those used in calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
 
SCHEDULE 4
PRGX Global, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
         
         
  Three Months Twelve Months
  Ended December 31, Ended December 31,
  2012 2011 2012 2011
Cash flows from operating activities:      
Net earnings  $ 1,533  $ 1,312  $ 5,392  $ 2,816
Adjustments to reconcile net earnings to net cash provided by operating activities:        
Depreciation and amortization  4,283  3,006  14,308  10,392
Amortization of deferred debt costs  46  52  183  188
Stock-based compensation expense  1,842  1,430  6,321  5,093
Foreign currency transaction (gains) losses on short-term intercompany balances  (187)  241  (377)  417
Decrease (increase) in receivables  (57)  (1,530)  (3,777)  (3,702)
Increase (decrease) in accounts payable, accrued payroll and other accrued expenses  204  4,089  (2,148)  7,224
Other, primarily changes in assets and liabilities  (1,186)  (2,050)  (1,059)  (3,135)
Net cash provided by operating activities  6,478  6,550  18,843  19,293
         
Cash flows from investing activities:      
Business acquisitions  (105)  (2,492)  (1,542)  (3,155)
Purchases of property and equipment, net of disposals  (2,242)  (2,197)  (7,931)  (8,287)
Net cash used in investing activities  (2,347)  (4,689)  (9,473)  (11,442)
         
Cash flows from financing activities:      
Net proceeds from issuance of common stock  14,682  --  14,682  --
Other, net  (881)  (967)  (6,883)  (5,410)
Net cash provided by (used in) financing activities  13,801  (967)  7,799  (5,410)
         
Effect of exchange rates on cash and cash equivalents  11  (53)  300  (552)
         
Net increase in cash and cash equivalents  17,943  841  17,469  1,889
         
Cash and cash equivalents at beginning of period  19,863  19,496  20,337  18,448
         
Cash and cash equivalents at end of period  $ 37,806  $ 20,337  $ 37,806  $ 20,337
 
SCHEDULE 5
PRGX Global, Inc. and Subsidiaries
Results by Operating Segment *
(Amounts in thousands)
(Unaudited)
             
             
  Three Months Ended Twelve Months Ended
  December 31, December 31,
             
  2012 2011 Change 2012 2011 Change
Revenue            
Recovery Audit Services - Americas  $ 29,998  $ 27,813  $ 2,185  $ 121,638  $ 115,807  $ 5,831
Recovery Audit Services - Europe/Asia-Pacific   14,661  16,549  (1,888)  53,783  61,570  (7,787)
New Services  8,450  5,582  2,868  33,082  25,740  7,342
Total  $ 53,109  $ 49,944  $ 3,165  $ 208,503  $ 203,117  $ 5,386
             
Cost of revenue            
Recovery Audit Services - Americas  $ 15,329  $ 15,951  $ 622  $ 64,205  $ 64,946  $ 741
Recovery Audit Services - Europe/Asia-Pacific   11,320  12,459  1,139  41,715  47,105  5,390
New Services  7,750  5,830  (1,920)  28,470  25,431  (3,039)
Total  $ 34,399  $ 34,240  $ (159)  $ 134,390  $ 137,482  $ 3,092
             
Selling, general and administrative expenses          
Recovery Audit Services - Americas  $ 5,171  $ 3,810  $ (1,361)  $ 19,882  $ 18,479  $ (1,403)
Recovery Audit Services - Europe/Asia-Pacific   1,359  1,124  (235)  4,980  4,627  (353)
New Services  1,500  1,217  (283)  5,497  4,907  (590)
Corporate  5,922  5,807  (115)  22,168  21,089  (1,079)
Total  $ 13,952  $ 11,958  $ (1,994)  $ 52,527  $ 49,102  $ (3,425)
             
Depreciation of property and equipment          
Recovery Audit Services - Americas  $ 1,635  $ 985  $ (650)  $ 4,651  $ 3,491  $ (1,160)
Recovery Audit Services - Europe/Asia-Pacific   105  138  33  322  417  95
New Services  536  419  (117)  2,111  1,493  (618)
Total  $ 2,276  $ 1,542  $ (734)  $ 7,084  $ 5,401  $ (1,683)
             
Amortization of intangible assets          
Recovery Audit Services - Americas  $ 1,235  $ 748  $ (487)  $ 4,355  $ 2,467  $ (1,888)
Recovery Audit Services - Europe/Asia-Pacific   571  505  (66)  2,062  1,665  (397)
New Services  201  211  10  807  859  52
Total  $ 2,007  $ 1,464  $ (543)  $ 7,224  $ 4,991  $ (2,233)
             
Operating income (loss)            
Recovery Audit Services - Americas  $ 6,628  $ 6,319  $ 309  $ 28,545  $ 26,424  $ 2,121
Recovery Audit Services - Europe/Asia-Pacific   1,306  2,323  (1,017)  4,704  7,756  (3,052)
New Services  (1,537)  (2,095)  558  (3,803)  (6,950)  3,147
Corporate  (5,922)  (5,807)  (115)  (22,168)  (21,089)  (1,079)
Total  $ 475  $ 740  $ (265)  $ 7,278  $ 6,141  $ 1,137
             
Adjusted EBITDA            
Recovery Audit Services - Americas  $ 9,633  $ 8,398  $ 1,235  $ 38,621  $ 33,847  $ 4,774
Recovery Audit Services - Europe/Asia-Pacific   2,787  3,382  (595)  8,244  10,402  (2,158)
New Services  (232)  (1,358)  1,126  298  (4,157)  4,455
Corporate  (4,016)  (4,016)  --  (15,783)  (15,635)  (148)
Total  $ 8,172  $ 6,406  $ 1,766  $ 31,380  $ 24,457  $ 6,923
             
* The Recovery Audit Services - Americas segment represents recovery audit services, excluding New Services, provided in the United States, Canada and Latin America. The Recovery Audit Services - Europe/Asia-Pacific segment represents recovery audit services provided in Europe, Asia and the Pacific region. The New Services segment represents Healthcare Claims Recovery Audit services and Profit Optimization services. 
CONTACT: PRGX Global, Inc.
         investor-relations@prgx.com
         Phone: 770-779-3011

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