ADDING and REPLACING PRG-Schultz Announces Third Quarter 2007 Financial Results

Please add the Schedule 4, PRG-Schultz International, Inc. and Subsidiaries, Condensed Consolidated Statements of Cash Flows to the end of the release. The corrected release reads: PRG-SCHULTZ ANNOUNCES THIRD QUARTER 2007 FINANCIAL RESULTS PRG-Schultz International, Inc. (NASDAQ: PRGX), the world's largest recovery audit firm, today announced its unaudited financial results for the third quarter and nine months ended September 30, 2007. Highlights of Financial Results Net loss for the 2007 third quarter was $3.0 million or $(0.31) per basic and diluted share, compared to a net loss of $4.2 million, or $(0.69) per basic and diluted share for the same period in 2006. The third quarter 2007 net loss included a $6.9 million charge for stock-based compensation, most of which resulted from the issuance of additional performance units in accordance with the anti-dilution provisions of the Company’s 2006 Management Incentive Plan. The net loss also included an operational restructuring charge of $1.6 million related to the Company’s successful sub-leasing and exit of approximately 25% of its headquarters office space. The third quarter 2006 net loss included earnings from discontinued operations of $0.7 million, an operational restructuring charge of $0.2 million and a charge of $4.1 million for stock-based compensation. Adjusted EBITDA for the 2007 third quarter was $10.7 million compared to $7.2 million of adjusted EBITDA for the same period in 2006. The 2007 third quarter adjusted EBITDA is earnings (loss) from continuing operations before interest, taxes, depreciation and amortization (EBITDA) excluding the $1.6 million operational restructuring charge related to the exit of a portion of its headquarters office space and the $6.9 million charge for stock-based compensation. The comparable adjusted EBITDA amount for the third quarter of 2006 excludes from EBITDA for such period the charge of $4.1 million related to stock-based compensation and the operational restructuring charge of $0.2 million. (Schedule 3 attached to this press release provides a reconciliation of net earnings (loss) to each of EBITDA and adjusted EBITDA). Consolidated revenue for the third quarter of 2007 was $53.2 million, a decrease of 2.9% compared to $54.8 million for the same period in 2006. Cost of revenue and SG&A expenses combined were $51.1 million for the 2007 third quarter, down 5.7% compared to the same period in 2006. Net earnings for the first nine months of 2007 were $17.1 million or $1.80 per basic and diluted share, which included the previously announced gain on the sale of the Meridian business of $19.5 million, earnings from discontinued operations of $0.3 million, the $1.6 million lease exit restructuring charge and $12.3 million of stock-based compensation expense which was also mostly attributable to the anti-dilution provisions of the Company’s 2006 Management Incentive Plan. This compares to a net loss of $18.2 million, or $(2.95) per basic and diluted share for the same period in 2006, which included earnings from discontinued operations of $1.9 million, a $10 million non-cash charge related to the Company’s March 2006 financial restructuring, a charge of $4.8 million related to stock-based compensation, and $2.1 million of operational restructuring charges. Adjusted EBITDA for the nine months ended September 30, 2007 was $29.8 million compared to $17.6 million of adjusted EBITDA for the same period in 2006. The 2007 adjusted EBITDA excludes the $19.5 million gain on the sale of the Meridian business, earnings from discontinued operations of $0.3 million, the $1.6 million lease exit restructuring charge and the $12.3 million of stock-based compensation charges. The comparable adjusted EBITDA amount for the first nine months of 2006 excludes the earnings from discontinued operations of $1.9 million, the non-cash charge of $10 million related to the Company’s financial restructuring, the charge of $4.8 million related to stock-based compensation, and the operational restructuring charge of $2.1 million. Consolidated revenue in the first nine months of 2007 was $163.6 million compared to $165.7 million for the same period in 2006. Cost of Revenue and SG&A expenses combined were $151.4 million for the first nine months of 2007, down 5.8% compared to the same period in 2006. Liquidity At September 30, 2007 the Company had cash and cash equivalents of $27.8 million and had no borrowings against its revolving credit facility. As recently announced, on October 4, 2007 the Company completed the redemption of its 11% Senior Notes and its 10% Senior Convertible Notes and on October 19, 2007 completed the redemption of its Series A Convertible Preferred Stock. As a result of the call for redemption, virtually all of the convertible securities were converted into shares of PRG-Schultz common stock. Following the completion of the conversions and redemptions, the Company has approximately 21.5 million shares of common stock outstanding, a $45 million term loan due September 2011 and cash and cash equivalents exceeding $20 million. "We are pleased to report another quarter of significant progress,” said James B. McCurry, chairman, president and chief executive officer. "We registered our seventh successive quarter of year-over-year increase in adjusted EBITDA, while continuing to build our capabilities in new areas of recovery audit, and in providing new services, beyond recovery audit, to our existing client base.” Third Quarter Earnings Call As previously announced, management will hold a conference call at 8:30 AM (EDT) tomorrow to discuss its 2007 third quarter and year-to-date financial results. To access the conference call, listeners in the U.S. and Canada should dial 1-888-713-4213 at least 5 minutes prior to the start of the conference. Listeners outside the U.S. and Canada should dial 617-213-4865. To be admitted to the call, listeners should use passcode 93451143. A replay of the call will be available one hour after the conclusion of the live call, extending through November 30, 2007. To directly access the replay, dial 1-888-286-8010 (U.S. and Canada) or 617-801-6888 (outside the U.S. and Canada). The passcode for the replay is 96844003. This teleconference will also be audiocast on the Internet at www.prgx.com (click on "(NASDAQ: PRGX)” under "Investor Relations”) or click PRGX Investor Relations. A replay of the audiocast will be available at the same location beginning one hour after the conclusion of the live audiocast, extending through November 30, 2007. Please note that the Internet audiocast is "listen-only." Microsoft Windows Media Player is required to access the live audiocast and the replay and can be downloaded from http://www.microsoft.com/windows/windowsmedia/download. About PRG-Schultz International, Inc. Headquartered in Atlanta, PRG-Schultz International, Inc. is the world's leading recovery audit firm, providing clients throughout the world with insightful value to optimize and expertly manage their business transactions. Using proprietary software and expert audit methodologies, PRG industry specialists review client purchases and payment information to identify and recover overpayments. Non-GAAP Financial Measures EBITDA and adjusted EBITDA are both "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. Management uses these measures in evaluating the Company’s financial performance and believes that providing investors with this information provides greater transparency and insight into management’s assessment and analysis of that performance. Additionally, rating agencies and a number of lenders, including the Company’s secured lenders, use measures similar to EBITDA and adjusted EBITDA to assess the Company’s performance. However, 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 evaluating EBITDA and adjusted EBITDA, you should be aware that, as described above, the adjustments may vary from period to period and 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 3 provides a reconciliation of net earnings (loss) to each of EBITDA and adjusted EBITDA. 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 liquidity, the existence and continuation of the Company’s significant progress, the building of capabilities in new areas of recovery audit, and the Company’s progress in providing new services. 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 the Company’s ability to attract and retain personnel, Medicare audit revenues that do not meet expectations or justify costs incurred, the Company’s ability to replace the declining revenues from its core accounts payable services, changes in the market for the Company’s services, 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 and the success of its restructuring plan, please see the Company’s filings with the Securities and Exchange Commission, including its Form 10-K filed on March 23, 2007. The Company disclaims any obligation or duty to update or modify these forward-looking statements.           SCHEDULE 1 PRG-Schultz International, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Amounts in thousands, except per share data) (Unaudited)     Three Months Nine Months Ended September 30, Ended September 30, 2007 2006 2007 2006   Revenues $ 53,207 $ 54,830 $ 163,552 $ 165,686 Cost of revenues   33,511     37,531     105,624     117,254   Gross margin 19,696 17,299 57,928 48,432   Selling, general and administrative expenses 17,562 16,605 45,730 43,408 Operational restructuring expenses   1,644     153     1,644     2,141     Operating income 490 541 10,554 2,883   Interest expense, net 3,133 5,278 12,023 12,137 Loss on financial restructuring   -     (82 )   -     10,047     Earnings (loss) from continuing operations before income taxes and discontinued operations (2,643 ) (4,655 ) (1,469 ) (19,301 )   Income taxes   337     306     1,212     760     Earnings (loss) from continuing operations before discontinued operations (2,980 ) (4,961 ) (2,681 ) (20,061 )   Discontinued operations: Operating income, net of taxes (11 ) 727 304 1,643 Gain (loss) on disposal   -     -     19,460     245   Earnings (loss) from discontinued operations, net of taxes   (11 )   727     19,764     1,888     Net earnings (loss)   $ (2,991 ) $ (4,234 ) $ 17,083   $ (18,173 )     Basic and diluted earnings (loss) per common share: Earnings (loss) from continuing operations $ (0.31 ) $ (0.80 ) $ (0.34 ) $ (3.24 ) Earnings (loss) from discontinued operations   -     0.11     2.14     0.29   Net earnings (loss)   $ (0.31 ) $ (0.69 ) $ 1.80   $ (2.95 )       Weighted average common shares outstanding: Basic   10,275     6,575     9,247     6,391   Diluted   10,275     6,575     9,247     6,391     Certain reclassifications have been made to the 2006 amounts to conform to the presentation in 2007. These reclassifications include the presentation of the Meridian reporting segment as discontinued operations.       SCHEDULE 2 PRG-Schultz International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Amounts in thousands) (Unaudited)     September 30, December 31, 2007 2006 ASSETS Current assets: Cash and cash equivalents $ 27,757 $ 30,228 Restricted cash 242 139 Receivables: Contract receivables 39,993 39,703 Employee advances and miscellaneous receivables   355     2,534   Total receivables 40,348 42,237   Prepaid expenses and other current assets 3,007 2,092 Current assets of discontinued operations   2,152     52,320   Total current assets 73,506 127,016   Property and equipment 7,151 8,810 Goodwill 4,600 4,600 Intangible assets 21,770 23,062 Other assets 8,301 11,058 Noncurrent assets of discontinued operations   -     4,121   Total assets $ 115,328   $ 178,667       LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Current portions of debt obligations $ 477 $ 750 Accounts payable and accrued expenses 14,183 17,959 Accrued payroll and related expenses 27,578 37,224 Refund liabilities and deferred revenue 10,437 10,657 Current liabilities of discontinued operations   -     55,208   Total current liabilities 52,675 121,798   Senior notes 44,812 43,796 Senior convertible notes 28,216 68,030 Other debt obligations 647 25,096 Noncurrent compensation obligations 10,704 5,859 Other long-term liabilities   7,643     7,372   Total liabilities   144,697     271,951     Mandatorily redeemable participating preferred stock 6,481 11,199   Shareholders' equity (deficit): Common stock 158 84 Additional paid-in capital 563,211 513,920 Accumulated deficit (555,065 ) (571,818 ) Accumulated other comprehensive income 4,556 2,041 Treasury stock at cost   (48,710 )   (48,710 ) Total shareholders' equity (deficit)   (35,850 )   (104,483 )   Total liabilities and shareholders' equity (deficit) $ 115,328   $ 178,667       2006 balances have been reclassified to present the assets and liabilities of the Meridian reporting segment as those of discontinued operations. Meridian was sold in May 2007.           SCHEDULE 3 PRG-Schultz International, Inc. and Subsidiaries Reconciliation of Net Earnings (Loss) to EBITDA and Adjusted EBITDA (Amounts in thousands) (Unaudited)     Three Months Nine Months Ended September 30, Ended September 30, 2007 2006 2007 2006 Reconciliation of net earnings (loss) to EBITDA and to Adjusted EBITDA:   Net earnings (loss) $ (2,991 ) $ (4,234 ) $ 17,083 $ (18,173 )   Adjust for: Earnings (loss) from discontinued operations   (11 )   727     19,764     1,888     Earnings (loss) from continuing operations (2,980 ) (4,961 ) (2,681 ) (20,061 )   Adjust for: Income taxes 337 306 1,212 760 Interest 3,133 5,278 12,023 12,137 Loss on financial restructuring - (82 ) - 10,047 Depreciation and amortization   1,699     2,394     5,263     7,733     EBITDA   2,189     2,935     15,817     10,616     Operational restructuring expenses 1,644 153 1,644 2,141 Stock-based compensation   6,886     4,101     12,315     4,835     Adjusted EBITDA $ 10,719   $ 7,189   $ 29,776   $ 17,592   EBITDA and adjusted EBITDA are both "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. Management uses these measures in evaluating the Company’s financial performance and believes that providing investors with this information provides greater transparency and insight into management’s assessment and analysis of that performance. Additionally, rating agencies and a number of lenders, including the Company’s secured lenders, use measures similar to EBITDA and adjusted EBITDA to assess the Company’s performance. However, 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 evaluating EBITDA and adjusted EBITDA, you should be aware that, as described above, the adjustments may vary from period to period and 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 PRG-Schultz International, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Amounts in thousands) (Unaudited)     Three Months Nine Months Ended September 30, Ended September 30, 2007 2006 2007 2006 Cash flows from operating activities:   Net earnings (loss) $ (2,991 ) $ (4,234 ) $ 17,083 $ (18,173 ) Earnings (loss) from discontinued operations   (11 )   727     19,764     1,888   Earnings (loss) from continuing operations (2,980 ) (4,961 ) (2,681 ) (20,061 ) Adjustments to reconcile earnings (loss) from continuing operations to net cash provided by (used in) operations: Loss on financial restructuring - (82 ) - 10,047 Depreciation and amortization 1,699 2,394 5,263 7,733 Stock-based compensation expense 6,886 4,101 12,315 4,835 Amortization of debt discounts and deferred costs 448 552 2,451 1,130 (Increase) decrease in receivables (3,040 ) (2,398 ) 3,899 9,355 Increase (decrease) in accounts payable, accrued payroll and other accrued expenses (3,218 ) 990 (13,857 ) (7,083 ) Other, primarily changes in assets and liabilities   666     195     (492 )   1,177   Net cash provided by (used in) operating activities   461     791     6,898     7,133     Cash flows from investing activities - purchases of property and equipment, net of disposals   (1,033 )   (358 )   (2,172 )   (766 )   Net cash provided by (used in) financing activities   (1,700 )   -     (27,069 )   (831 )   Cash flows from discontinued operations   (125 )   (264 )   18,944     459     Effect of exchange rates on cash and cash equivalents   572     (103 )   928     927     Net increase (decrease) in cash and cash equivalents (1,825 ) 66 (2,471 ) 6,922   Cash and cash equivalents at beginning of period   29,582     15,217     30,228     8,361     Cash and cash equivalents at end of period $ 27,757   $ 15,283   $ 27,757   $ 15,283