SEC Info - PRGX Global, Inc. - ‘424B1’ on 3/17/98

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PRGX Global, Inc. – ‘424B1’ on 3/17/98

As of: Tuesday, 3/17/98 · Accession #: 950144-98-2832 · File #: 333-46225

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/17/98  PRGX Global, Inc.                 424B1                  1:324K                                   Bowne of Atlanta Inc/FA

Prospectus — Rule 424(b)(1)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Profit Recovery Group Form 424B1                      93    562K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Acquisition Risks Additional Information Business Capitalization Certain Articles and Bylaw Provisions Client Bankruptcies Client Base Competition Corporate Takeover Provisions Deferred loan costs Dependence on Key Clients Description of Capital Stock Dividend Policy Donald E. Ellis, Jr Employee Stock Purchase Plan Employment Agreements Experts Forward-Looking Statements Goodwill Incorporation of Certain Documents by Reference Index to Financial Statements International Operations Legal Matters Liquidity and Capital Resources Management Management's Discussion and Analysis of Financial Condition and Results of Operations Noncompete agreements Notes to Consolidated Financial Statements Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet Notes to Unaudited Pro Forma Consolidated Statements of Earnings Offering, The Operating income Option Grants Table Preferred Stock Price Range of Common Stock Principal and Selling Shareholders Profit Recovery Group Strategy, The Proprietary Rights Prospectus Summary Quarterly Results Recent Developments Revenues Risk Factors Seasonality Seasonality; Fluctuations in Quarterly Operating Results Selected Consolidated Financial Data Shares Eligible for Future Sale Stock Purchase Plan The Offering The Profit Recovery Group Strategy Unaudited Pro Forma Consolidated Financial Information Uncertainty of Revenue Recognition Estimates and Collection of Contract Receivables Underwriting Use of Proceeds 1996 Stock Option Plan
1	1st Page - Filing Submission
3	Prospectus Summary
4	Recent Developments
"	The Offering
6	Forward-Looking Statements
7	Risk Factors
"	Dependence on Key Clients
"	Uncertainty of Revenue Recognition Estimates and Collection of Contract Receivables
"	Acquisition Risks
8	International Operations
9	Seasonality; Fluctuations in Quarterly Operating Results
10	Competition
11	Client Bankruptcies
"	Shares Eligible for Future Sale
12	Use of Proceeds
13	Dividend Policy
"	Price Range of Common Stock
14	Capitalization
15	Selected Consolidated Financial Data
17	Management's Discussion and Analysis of Financial Condition and Results of Operations
18	Revenues
19	Operating income
21	Quarterly Results
22	Liquidity and Capital Resources
24	Business
25	The Profit Recovery Group Strategy
30	Client Base
31	Seasonality
"	Proprietary Rights
34	Management
35	Donald E. Ellis, Jr
38	Option Grants Table
39	Employment Agreements
41	1996 Stock Option Plan
"	Employee Stock Purchase Plan
42	Principal and Selling Shareholders
44	Description of Capital Stock
"	Preferred Stock
45	Certain Articles and Bylaw Provisions
"	Corporate Takeover Provisions
47	Stock Purchase Plan
49	Underwriting
50	Legal Matters
"	Experts
51	Additional Information
"	Incorporation of Certain Documents by Reference
52	Index to Financial Statements
59	Notes to Consolidated Financial Statements
62	Goodwill
"	Noncompete agreements
"	Deferred loan costs
74	Unaudited Pro Forma Consolidated Financial Information
77	Notes to Unaudited Pro Forma Consolidated Statements of Earnings
79	Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet

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Filed Pursuant to Rule 424(b)(1)
Registration No. 333-46225

THE PROFIT RECOVERY GROUP INTERNATIONAL LOGO

4,400,000 SHARES

COMMON STOCK

Of the 4,400,000 shares offered hereby, 2,000,000 shares are being sold by
The Profit Recovery Group International, Inc. (the "Company") and 2,400,000
shares are being sold by certain shareholders of the Company (the "Selling
Shareholders"). See "Principal and Selling Shareholders." The Company will not
receive any proceeds from the sale of shares of Common Stock by the Selling
Shareholders. The Common Stock of the Company is listed for trading on The
Nasdaq Stock Market under the symbol "PRGX." On March 16, 1998, the last sale
price for the Common Stock as reported on The Nasdaq Stock Market was $22.125
per share.

---------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.

---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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======================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDERS(2)
----------------------------------------------------------------------------------------------------------------------

Per Share................ $21.00 $1.05 $19.95 $19.95
----------------------------------------------------------------------------------------------------------------------
Total(2)................. $92,400,000 $4,620,000 $39,900,000 $47,880,000
======================================================================================================================

(1) Before deducting expenses payable by the Company estimated at $750,000.
(2) Certain Selling Shareholders have granted the Underwriters a 30-day option
to purchase up to 660,000 additional shares of Common Stock solely to cover
over-allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions, Proceeds to Company and Proceeds to
Selling Shareholders will be $106,260,000, $5,313,000, $39,900,000 and
$61,047,000, respectively. See "Underwriting."

--------------------------

The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of BancAmerica Robertson Stephens, San Francisco,
California, on or about March 20, 1998.

BANCAMERICA ROBERTSON STEPHENS
HAMBRECHT & QUIST
THE ROBINSON-HUMPHREY COMPANY
THE DATE OF THIS PROSPECTUS IS MARCH 16, 1998.

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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES
OR AN OFFER TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

---------------------

TABLE OF CONTENTS

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PAGE
----

Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Recent Developments......................................... 12
Use of Proceeds............................................. 12
Dividend Policy............................................. 13
Price Range of Common Stock................................. 13
Capitalization.............................................. 14
Selected Consolidated Financial Data........................ 15
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 17
Business.................................................... 24
Management.................................................. 34
Principal and Selling Shareholders.......................... 42
Description of Capital Stock................................ 44
Shares Eligible for Future Sale............................. 46
Underwriting................................................ 49
Legal Matters............................................... 50
Experts..................................................... 50
Additional Information...................................... 51
Incorporation of Certain Documents by Reference............. 51
Index to Financial Statements............................... F-1

AuditPro(R), AuditPro 97(TM), EDI Inquiry(TM), Claims Management
System(TM), FreightPro(TM), Profit Recovery Group International(R), PRG(R),
RecoverNow(R) and ReportPro(TM) are trademarks of the Company. All other
trademarks and trade names referred to in this Prospectus are the property of
their respective owners.

The Company's principal executive offices are located at 2300 Windy Ridge
Parkway, Suite 100 North, Atlanta, Georgia 30339-8426, and its telephone number
is (770) 955-3815.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus, including the information under "Risk Factors." Unless
otherwise indicated, all information in this Prospectus assumes no exercise of
the Underwriters' over-allotment option.

THE COMPANY

The Profit Recovery Group International, Inc. (the "Company") is a leading
provider of accounts payable and other recovery audit services to large
retailers, wholesale distributors, healthcare providers, technology companies
and other large transaction-intensive companies, as well as to certain
governmental agencies. In businesses with large purchase volumes and
continuously fluctuating prices, some small percentage of erroneous overpayments
to vendors is inevitable. In addition, the complexity of various tax laws
results in overpayments to governmental agencies. Moreover, services such as
telecommunications, utilities and freight provided to businesses under complex
pricing arrangements can result in overpayments. All of these overpayments
result in "lost profits." The Company identifies and documents overpayments by
using sophisticated proprietary technology and advanced audit techniques and
methodologies, and by employing highly trained, experienced recovery audit
specialists. The Company continuously updates and refines its proprietary
databases that serve as a central repository reflecting its auditors'
experiences, vendor practices and knowledge of regional and national pricing
information, including seasonal allowances, discounts and rebates, but excluding
confidential client data.

Retail businesses, such as discount, department, specialty, grocery and
drug stores, as well as wholesale distributors, certain governmental agencies,
healthcare providers and technology companies process large numbers of payment
transactions. Although the vast majority of payment transactions are processed
correctly, a small number of errors occur principally because of communication
failures between purchasing and payables departments, complex pricing
arrangements, personnel turnover and changes in information and accounting
systems. In the aggregate, vendor pricing errors, missed discounts, allowances
and rebates, incorrect freight charges and duplicate payments can represent
meaningful lost profits that can be particularly significant for businesses with
relatively narrow profit margins. Although internal recovery audit departments
identify some payment errors, independent recovery audit firms often are
retained by businesses to identify additional overpayments.

The Company principally targets large businesses having at least $500
million in annual revenues, although smaller businesses may be attractive
clients. Retailers continue to constitute the substantial majority of the
Company's client and revenue base, and the Company's current marketing efforts
are largely directed toward that industry. The top 100 retailers worldwide had
aggregate revenues of approximately $1.4 trillion in 1996, and over 1,600
retailers worldwide each had annual revenues in excess of $500 million. The U.S.
retailing industry represented approximately $2.5 trillion in revenues in 1996.
The Company believes that a typical U.S. retailer makes payment errors that are
not discovered internally, which in the aggregate can range from several hundred
thousand dollars to more than $1.0 million per billion dollars of revenues.

The domestic and international recovery audit industry is fragmented and
characterized by several large and many small, local and regional firms. Many
local and regional firms lack the centralized resources or broad client base to
support the technology investment required to provide comprehensive recovery
audit services. Businesses increasingly have implemented technology referred to
as electronic data interchange ("EDI") to communicate electronically with
vendors to exchange inventory and sales data, transmit purchase orders, submit
invoices, forward shipping and receiving information and remit payments.
Although EDI streamlines the processing of large numbers of transactions, it can
magnify errors because the errors may be replicated automatically in thousands
of transactions. Recovery audit firms, therefore, require sophisticated
technology in order to audit EDI accounts payable processes effectively.

The Company's objective is to become the leading worldwide provider of
recovery audit services. The Company believes that it will have to increase
significantly its revenues to achieve this objective. The Company's strategy is
to continue expanding its international presence and increasing its retail
client base, while diversifying into other transaction-intensive industries,
such as financial services, transportation and

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lodging and gaming. The Company recently expanded its recovery audit services to
the healthcare and technology industries as the result of three acquisitions in
the first half of 1997 and entered the tax recovery and ocean freight auditing
fields through two acquisitions in the fourth quarter of 1997. The Company also
seeks to maintain its high client retention rate and intends to promote client
outsourcing arrangements, maintain technology leadership, including its EDI
capabilities, and pursue strategic acquisitions of domestic and international
businesses providing complementary recovery audit services. Of the Company's
accounts payable audit clients in 1996 that had claims exceeding $100,000 in
that year (excluding clients no longer in existence due to such clients'
bankruptcies or acquisitions), more than 90% continued to utilize the Company's
services in 1997. The Company's revenues have increased 61.5%, 38.0% and 45.3%
for the years ended December 31, 1995, 1996 and 1997, respectively, due to the
Company's high client retention rate, increasing client base, expansion into
international markets and strategic acquisitions.

RECENT DEVELOPMENTS

In January 1997, the Company acquired the net operating assets of Shaps
Group, Inc., a California-based company providing recovery audit services to
manufacturers and distributors of technology products for a total purchase price
of $5.4 million, all of which was paid in Common Stock. In February 1997, the
Company acquired all of the common stock of Accounts Payable Recovery Services,
Inc., a Texas-based company providing recovery audit services to healthcare
entities and energy companies, for a total purchase price of $4.0 million, $2.0
million of which was paid in cash with the balance paid in Common Stock. In May
1997, the Company acquired all of the common stock of The Hale Group, a
California-based company that also provides recovery audit services primarily to
healthcare entities, for a total purchase price of $2.1 million, $1.1 million of
which was paid in cash with the balance paid in Common Stock.

In October 1997, the Company acquired 98.4% of Financiere Alma, S.A. and
its subsidiaries (collectively, "Alma"), a privately held recovery audit firm
based in Paris, France, for $24.6 million in cash and approximately 859,000
unregistered shares of Common Stock with the obligation to acquire the remaining
interest in Alma by January 1999. Founded in 1986, Alma specializes in
identifying and recovering various types of French tax overpayments by
corporations. Alma operates exclusively in France where it currently serves
approximately 2,000 clients, including many of France's 50 largest corporations.
Alma's revenues were $21.3 million and $21.7 million for the years ended
December 31, 1996 and 1997, respectively. The acquisition of Alma provides the
Company an entry into the tax recovery auditing field, and strengthens the
Company's management and operations in Europe. As a result of emerging
developments such as the Alma transaction, the Company restructured and
realigned certain facets of its European management structure in the fourth
quarter of 1997 and incurred a pre-tax charge to earnings of $1.2 million. In
November 1997, the Company acquired the net operating assets of TradeCheck, LLC,
a Washington-based company that provides ocean freight recovery audit services.
See "Recent Developments" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

THE OFFERING

Common Stock offered by the Company.... 2,000,000 shares

Common Stock offered by the Selling
Shareholders........................... 2,400,000 shares

Common Stock to be outstanding after
the offering........................... 21,264,124 shares(1)

Use of proceeds by the Company......... For repayment of outstanding
indebtedness incurred in the Alma
transaction, continued international
expansion, potential future
acquisitions, and general corporate
purposes, including working capital.
See "Use of Proceeds."

The Nasdaq Stock Market symbol......... PRGX
---------------

(1) Based on the number of shares outstanding at March 11, 1998. Excludes
2,531,293 shares of Common Stock issuable upon the exercise of stock options
outstanding at March 11, 1998 at a weighted average exercise price of $12.91
per share. See "Management -- 1996 Stock Option Plan."

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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

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YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1995(1) 1996(2) 1997(3)(4)
------- ------- ------- ----------

STATEMENTS OF EARNINGS DATA:
Revenues................................................ $34,690 $56,031 $77,330 $112,363
Operating income........................................ 4,184 6,442 11,039 16,175
Net earnings............................................ 3,640 4,507 3,150 9,623
Pro forma net earnings(5)............................... 2,220 2,935 6,668
Earnings (pro forma for 1995 and 1996) per share:
Basic................................................. .24 .41 .52
Diluted............................................... .21 .39 .51
Weighted average common and dilutive shares outstanding:
Basic................................................. 12,000 16,268 18,415
Diluted(6)............................................ 14,948 17,457 18,909

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DECEMBER 31, 1997
---------------------------
HISTORICAL AS ADJUSTED(7)
---------- --------------

BALANCE SHEET DATA:
Cash and cash equivalents................................... $19,386 $ 33,624
Working capital............................................. 34,563 50,200
Total assets................................................ 133,885 148,123
Long-term debt, excluding current installments.............. 24,365 852
Total shareholders' equity.................................. 63,072 102,222

---------------

(1) Effective January 1, 1995, the Company acquired Fial & Associates, Inc. See
Note 8 of Notes to Consolidated Financial Statements of the Company.
(2) Includes a $3.7 million net deferred tax charge to expense for the year
ended December 31, 1996 resulting from termination of the Company's
predecessors' Subchapter S and partnership status. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 5 of Notes to Consolidated Financial Statements of the Company.
(3) Effective October 1, 1997, the Company acquired 98.4% of Alma. See Note 8 of
Notes to Consolidated Financial Statements of the Company.
(4) Includes a $1.2 million charge to restructure and realign certain facets of
the European management structure in recognition of emerging developments
such as the Alma acquisition. See Note 14 of Notes to Consolidated Financial
Statements of the Company.
(5) The Company's predecessor entities prior to its initial public offering on
March 26, 1996 generally were either corporations electing to be taxed as
Subchapter S corporations or partnerships. As a result, any income tax
liabilities were the responsibilities of the respective shareholders and
partners. Pro forma net earnings reflect, where applicable, a provision for
income taxes to include the additional tax expense as if the Company had
been subject to federal and state income taxes for all periods presented
rather than the individual shareholders and partners.
(6) Includes all common dilutive shares issued in 1995 as exercised and
outstanding, using the treasury stock method, as applicable, for 1995 and
the first quarter of 1996. See Note 1(k) of Notes to Consolidated Financial
Statements of the Company.
(7) Adjusted to give effect to the application of the net proceeds from the sale
of 2,000,000 shares of Common Stock offered by the Company hereby. See "Use
of Proceeds."

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FORWARD-LOOKING STATEMENTS

This Prospectus contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), which represent the Company's expectations or beliefs,
including, but not limited to, statements concerning sales of the Company's
services and operating income. When used in this Prospectus, the words "may,"
"could," "should," "would," "believe," "anticipate," "estimate," "intend,"
"plan" and similar expressions are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, certain of which are beyond the Company's control. The Company
cautions that various factors, including, without limitation, the ability of the
Company to successfully implement its operating and acquisition strategies, the
Company's ability to manage rapid domestic and international expansion, changes
in economic cycles, competition, changes in laws and governmental regulations
applicable to the Company and the factors described under the captions "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" could cause actual results or outcomes to differ
materially from those expressed in any forward-looking statements of the Company
made by or on behalf of the Company. Any forward-looking statement speaks only
as of the date on which such statement is made, and the Company undertakes no
obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of an unanticipated event. New factors emerge from time
to time, and it is not possible for management to predict all of such factors.
Further, management cannot assess the impact of each such factor on the business
or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking
statements.

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RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating an investment in the Common
Stock offered hereby. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in "Risk Factors" and elsewhere in this Prospectus.

DEPENDENCE ON KEY CLIENTS

For the years ended December 31, 1995, 1996 and 1997, the Company derived
30.1%, 34.6% and 33.8%, respectively, of its revenues from its five largest
clients. Wal-Mart Stores, Inc., including its affiliates (collectively,
"Wal-Mart"), in the aggregate was the Company's largest client during 1995 and
1996, representing 12.7% and 14.4% of revenues during such years, respectively,
and was the Company's second largest client in 1997, representing 10.4% of
revenues for such year. Kmart Corporation ("Kmart") was the Company's largest
client in 1997, representing 12.3% of revenues during the period, due in large
part to a nonrecurring situation involving concurrent audits of multiple years.
There can be no assurance that the Company's reliance on any single client or
its largest clients will decrease over time or that the Company's largest
clients will continue to utilize the Company's services at the same level. For
example, one of the Company's five largest accounts representing 4.6% of the
Company's domestic revenues for 1996 changed the Company's status from primary
recovery auditor in 1996 to secondary recovery auditor in 1997. This change
resulted in significantly lower revenues from that client in 1997. In addition,
should one or more of the Company's large clients file for bankruptcy or
otherwise cease to do business with the Company, or should one or more of the
Company's large clients' vendors file for bankruptcy, the Company's business,
financial condition and results of operations could be materially and adversely
affected. See "Business -- Client Base."

UNCERTAINTY OF REVENUE RECOGNITION ESTIMATES AND COLLECTION OF CONTRACT
RECEIVABLES

The Company recognizes revenues from accounts payable recovery audit
services to retailers, wholesale distributors and governmental agencies at the
time overpayment claims are presented to and approved by clients, as adjusted
for estimated uncollectible claims. The revenues from these clients constitute a
substantial portion of the Company's revenues. Submitted claims that are not
approved by clients for whatever reason are not considered when recognizing
revenues. Estimated uncollectible claims initially are established, and
subsequently adjusted, for each individual client based on historical collection
rates, types of claims identified, current industry conditions and other factors
which, in the opinion of management, deserve recognition. There can be no
assurance that these estimates of uncollectible claims will be adequate and, if
underestimated, the Company's financial condition and results of operations
could be materially and adversely affected. See Note 1(c) of Notes to
Consolidated Financial Statements of the Company.

Claims subsequently are processed by clients and generally taken as credits
against outstanding payables or future purchases from the involved vendors. Once
credits are taken, the Company invoices its clients for its contractually
stipulated percentage of the amounts recovered. The Company's contract
receivables as of any balance sheet date are largely unbilled because the
Company does not control the timing or extent of client claims processing, and
because the timing of a client's payments for future purchases from the involved
vendors are outside the Company's control. Consequently, there can be no
assurance that the Company will collect its contract receivables because it is
dependent on its clients pursuing such claims. This lengthy revenue and cash
receipts cycle also subjects the Company to increased risk that contract
receivables will not be collected because (i) the client or the involved vendors
may file for bankruptcy protection, or (ii) the client may cease to do business
with the involved vendors, thus eliminating the ability to take a credit against
current and future purchases.

ACQUISITION RISKS

During 1997, the Company acquired Shaps Group, Inc. ("Shaps"), Accounts
Payable Recovery Services, Inc. ("APRSI"), The Hale Group ("Hale"), Alma and
TradeCheck, LLC ("TradeCheck"). The

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Company intends to continue pursuing possible future acquisitions. While the
Company is not currently a party to any agreements or understandings with
respect to any material acquisitions, management frequently evaluates strategic
opportunities, and the Company is pursuing, and intends to continue pursuing,
the acquisition of domestic and international businesses, including both direct
competitors and businesses providing other types of recovery audit services.
Future acquisitions may include larger businesses than those acquired to date
and may include businesses that charge for some or all of their services on a
fee basis rather than as a contractually negotiated percentage of amounts
recovered. There can be no assurance, however, that the Company will be
successful in consummating future acquisitions because of factors such as
receptivity of potential acquisition candidates and valuation issues.
Additionally, there can be no assurance that acquired companies can be
successfully integrated into the Company. Future acquisitions by the Company may
result in the diversion of management's attention from day-to-day operations,
and such acquisitions may include numerous other risks, including difficulties
integrating the operations, technology and personnel of the acquired companies.

The Company may continue to enter new foreign markets or new lines of
business by acquisition, such as the Company's recent acquisition of Alma in
France and the other 1997 acquisitions of Shaps, APRSI, Hale and TradeCheck.
Acquisitions of companies typically will be time consuming for management, and
the acquired companies may be difficult to integrate with the Company's other
operations because of differences in the respective companies' policies and
procedures and cultures. Moreover, future acquisitions by the Company may result
in dilutive issuances of equity securities, the incurrence of additional debt
and amortization expense related to goodwill and other intangible assets that
may materially and adversely affect the Company's business, financial condition
and results of operations. There can be no assurance that acquisition
opportunities will continue to exist, that the Company will be able to acquire
business operations or companies that satisfy the Company's acquisition
criteria, or that any such acquisitions will be on terms favorable to the
Company. See "Recent Developments."

INTERNATIONAL OPERATIONS

The Company derived 27.3% of its revenues from international operations in
1997 and is relying heavily on international expansion to achieve its long-term
growth objectives. For example, the Company recently acquired Alma, which had
revenues of $21.3 million and $21.7 million for the years ended December 31,
1996 and 1997, respectively, and which would have increased revenues from
international operations to 36.4% and 35.9% of the Company's consolidated
revenues on a pro forma basis for the respective years. The Company currently
operates outside the United States in Australia, Belgium, Canada, France,
Germany, Mexico, The Netherlands, New Zealand, the United Kingdom and portions
of Asia, including Hong Kong, Indonesia, Malaysia, Singapore, Taiwan and
Thailand, and anticipates commencing operations in South Africa, Argentina and
Brazil in the next 12 months. Although the Company's recovery audit services
constitute a generally accepted business practice among retailers in the U.S.
and in certain other countries, the services offered by the Company have not yet
become widely utilized in many international markets. There can be no assurance
that the Company's services will be accepted by prospective clients, vendors or
other involved parties in such foreign markets. The failure of such parties to
accept and utilize the services offered by the Company could have a material
adverse effect on the Company's results of operations and growth.

International operations are subject to inherent risks, including political
and economic instability, difficulties in staffing and managing foreign
operations and in collecting accounts receivable, fluctuating currency exchange
rates, costs associated with localizing service offerings in foreign countries,
unexpected changes in regulatory requirements and laws, difficulties in the
repatriation of earnings and burdens of complying with a wide variety of foreign
laws and labor practices, which may vary from country to country. For example,
certain tax recovery audit practices could be subject to regulation as the
unauthorized practice of law in some countries. The Company has encountered, and
expects to continue to encounter, significant expense and delays in expanding
its international operations because of language and cultural differences, and
staffing, communications and related issues.

In the Company's experience, entry into new international markets requires
significant management time as well as start-up expenses for market development,
hiring and establishing office facilities before any
8

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significant revenues are generated. As a result, initial operations in a new
market typically operate at low margins or may be unprofitable. The Company's
international expansion strategy will require substantial financial resources
and may result in the Company incurring additional indebtedness and dilutive
issuances of equity securities. There can be no assurance that such financing
will be available to the Company on terms and conditions acceptable to the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Business -- The
Profit Recovery Group Strategy."

MANAGEMENT OF GROWTH

The Company recently has experienced a period of growth that has placed
significant additional responsibilities on its operational, managerial and other
resources. There can be no assurance that the Company will be able to hire and
retain a sufficient number of qualified auditors to meet its anticipated growth
or, if hired, that the Company will be able to provide the depth of training it
is currently providing, or that a sufficient number of qualified non-auditor
personnel can be hired to support the activities of such additional auditors. In
particular, as the Company expands internationally, it will need to hire, train
and retain qualified personnel in countries where language, cultural or
regulatory impediments may exist. The Company's ability to manage its growth
successfully will require continued improvement in its operational, managerial
and financial systems controls. If the Company's management is unable to manage
growth effectively, the Company's business, financial condition and results of
operations could be adversely affected.

SEASONALITY; FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company has experienced and expects to continue to experience
significant seasonality in its business. The Company typically realizes higher
revenues and operating income in the last two quarters of its fiscal year. This
trend is expected to continue and reflects the inherent purchasing and
operational cycles of the retailing industry, which is the principal industry
served by the Company. The Company's October 1997 acquisition of Alma is not
expected to affect this trend because Alma historically has experienced similar
seasonality in its revenues and operating income. Should the Company not
continue to realize increased revenues in future third and fourth quarter
periods, profitability for any affected quarter and the entire year could be
materially and adversely affected due to ongoing selling, general and
administrative expenses that are largely fixed over the short term. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results" and "Business -- Seasonality."

OFFERING BENEFITS TO AFFILIATES

Certain parties affiliated with the Company will receive immediate and
substantial financial benefits as a result of this offering. The net proceeds
from the sale of shares of Common Stock in this offering, after deducting
underwriting discounts and commissions, to certain of the Selling Shareholders
are approximately as follows: John M. Cook and affiliates, $19.3 million; John
M. Toma, $3.0 million; Stanley B. Cohen, $5.0 million; Jonathan Golden, $4.0
million; and Garth H. Greimann and Berkshire Fund III, A Limited Partnership
("Berkshire Fund III"), $10.0 million. If the Underwriters' over-allotment
option is exercised in full, the aggregate net proceeds will be as follows: John
M. Cook and affiliates, $29.9 million; John M. Toma and affiliates, $3.4
million; and Garth H. Greimann and Berkshire Fund III, $12.0 million. See
"Principal and Selling Shareholders."

DEPENDENCE ON PROPRIETARY TECHNOLOGY; INTELLECTUAL PROPERTY RIGHTS

The Company's operations could be materially and adversely affected if it
were not able to adequately protect its proprietary software, audit techniques
and methodologies and other proprietary intellectual property rights. The
Company relies upon a combination of the trade secret laws, nondisclosure and
other contractual arrangements and technical measures to protect its proprietary
rights. Although the Company presently holds U.S. and foreign registered
trademarks and U.S. registered copyrights on certain of its proprietary
technology, there can be no assurance that the Company will be able to obtain
similar protection on its other intellectual property or that, in the case of
foreign registered trademarks, they will receive the same enforcement protection
as in the U.S. The Company generally enters into confidentiality agreements with
its employees, consultants, clients and potential clients and limits access to,
and distribution of, its proprietary information.
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There can be no assurance, however, that the steps taken by the Company in this
regard will be adequate to deter misappropriation of its proprietary information
or that the Company will be able to detect unauthorized use and take appropriate
steps to enforce its intellectual property rights. Further, the Company's
competitors may independently develop technologies that are substantially
equivalent or superior to the Company's technology. Although the Company
believes that its services and products do not infringe on the intellectual
property rights of others, there can be no assurance that such a claim will not
be asserted against the Company in the future. See "Business -- Proprietary
Rights."

COMPETITION

The recovery audit business is highly competitive. The competitive factors
affecting the market for the Company's recovery audit services include:
establishment and maintenance of client relationships, quality and quantity of
claims identified, experience and professionalism of audit staff, rates for
services, technology and geographic scope of operations. The Company's principal
competitors for accounts payable recovery audit services include local and
regional firms and one firm, Howard Schultz & Associates, Inc., with a network
of affiliate organizations in the U.S. and abroad. Management believes this
affiliated network has been in operation longer than the Company and may have
achieved greater revenues than the Company in 1997. The Company's competitors
for tax recovery audit services in France include major international accounting
firms, tax attorneys and several smaller tax recovery audit firms. There can be
no assurance that the Company will continue to be able to compete successfully
with such competitors. In addition, competitive pricing pressures could
adversely affect the Company's margins and may have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Competition."

DEPENDENCE ON KEY PERSONNEL

The development of the Company's business and its operations have been
materially dependent upon the active participation of John M. Cook, Michael A.
Lustig and its other executive officers and key employees. In addition, the
Company's success with tax recovery audit services in France has been, and will
be, dependent upon the active participation of Marc Eisenberg and Eric
Eisenberg. The loss of the services of one or more of these persons could have a
material adverse effect on the business, financial condition and results of
operations of the Company. The Company has entered into employment agreements
with Messrs. Cook, Lustig, Marc Eisenberg and Eric Eisenberg and other members
of management. The Company also maintains key man life insurance policies in the
aggregate amounts of $13.2 million on the life of Mr. Cook; $5.0 million on the
life of Mr. Lustig; and $5.0 million on the life of Marc Eisenberg.

SIGNIFICANT INFLUENCE BY MANAGEMENT

After giving effect to the sale of the shares of Common Stock offered
hereby, executive officers and directors of the Company collectively will
beneficially own 45.8% of the outstanding Common Stock (42.7% if the
Underwriters' over-allotment option is exercised in full), of which John M. Cook
will beneficially own 21.4% (18.9% if the Underwriters' over-allotment option is
exercised in full). As a result, members of management collectively have
significant influence over the election of the Board of Directors, the approval
or disapproval of any other matters requiring shareholder approval and the
affairs and policies of the Company. See "Management" and "Principal and Selling
Shareholders."

CERTAIN ANTI-TAKEOVER PROVISIONS

The Company's Articles of Incorporation and Bylaws and Georgia law contain
provisions that may have the effect of delaying, deferring or inhibiting a
future acquisition of the Company not approved by the Board of Directors in
which the shareholders otherwise might receive an attractive value for their
shares or that a substantial number or even a majority of the Company's
shareholders might believe to be in their best interest. These provisions are
intended to encourage any person interested in acquiring the Company to
negotiate with and obtain the approval of the Board of Directors of the Company
in connection with the transaction. These provisions include a staggered Board
of Directors, special meeting call restrictions and the ability of the Board of
Directors to consider the interests of various constituencies, including
employees, clients and creditors of
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the Company and the local community. In addition, the Company's Articles of
Incorporation authorize the Company to issue shares of preferred stock with such
designations, powers, preferences and rights as may be fixed by the Board of
Directors, without any further vote or action by the shareholders. Such
provisions also could discourage bids for the shares of Common Stock at a
premium, as well as create a depressive effect on the market price of the shares
of Common Stock. See "Description of Capital Stock -- Certain Articles and Bylaw
Provisions."

LIMITATION ON LIABILITY AND INDEMNIFICATION

The Company's Articles of Incorporation and Bylaws limit the liability of
its directors to the fullest extent permitted under the laws of the State of
Georgia. The Company's Bylaws provide that the Company shall indemnify its
directors and officers and that the Company has the power to indemnify its
employees and other agents to the maximum extent possible and in a manner
permitted by Georgia law. In addition, the Company's shareholders have approved,
and the Company has entered into, individual agreements to indemnify its
directors and certain officers. See "Description of Capital Stock -- Certain
Articles and Bylaw Provisions."

AUDITOR COMPENSATION

The Company has developed a revised compensation program for its
non-management domestic field auditors that it believes will more equitably
compensate these individuals for their unique experience, skills and
contributions in meeting Company objectives. The revised program was implemented
in May 1997 and is based on nine different categories of competency composed of
job-based skills and personal success factors. The Company designed the revised
program so that future aggregate domestic auditor compensation expense will be
unchanged from the aggregate amount that otherwise would have been paid under
the previous program. Although the Company and certain of its domestic auditors
have expended considerable time and resources to design the revised program,
there can be no assurance that it will meet its design objectives. If the design
objectives of the revised compensation program are not achieved, the Company's
domestic costs and revenues could be materially and adversely affected.

CLIENT BANKRUPTCIES

The Company currently derives a substantial portion of its revenues from
clients in the retailing industry. The retailing industry is an intensely
competitive environment, and retailer bankruptcy filings are not uncommon.
During 1995, 1996 and 1997, certain of the Company's domestic retailing clients
filed for bankruptcy protection resulting in aggregate net charges to operations
of $468,000, $398,000 and $180,000, respectively. Future bankruptcy filings by
the Company's clients or their vendors, particularly any of the Company's key
clients, could have a material adverse effect on the Company's business,
financial condition and results of operations.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 21,264,124 shares
of Common Stock outstanding. Substantially all of these shares will be
transferable without restriction or registration under the Securities Act or
pursuant to the volume and other limitations of Rule 144 promulgated under the
Securities Act.

Approximately 8,941,049 shares of Common Stock (the "Lock-up Shares") are
subject to lock-up agreements between the holders thereof and the
representatives of the Underwriters, pursuant to which the holders of the
Lock-up Shares have agreed not to offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of Common Stock until 90 days after the
date of this Prospectus (the "Lock-up Period"), subject to limited exceptions.
See "Underwriting." Following the expiration of the Lock-up Period,
substantially all of the Lock-up Shares will become available for immediate
resale in the public market subject to the volume and other limitations of Rule
144. In connection with the APRSI, Hale, Alma and TradeCheck transactions, an
additional 714,737 shares are subject to contractual lock-up provisions with the
Company that

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will expire beyond the Lock-up Period. See "Management -- 1996 Stock Option
Plan," "Description of Capital Stock" and "Shares Eligible for Future Sale."

POSSIBLE VOLATILITY OF STOCK PRICE

The Common Stock is traded on The Nasdaq Stock Market. Future announcements
concerning the Company or its key clients or competitors, technological
innovations, government regulations, litigation or changes in earnings estimates
by analysts may cause the market price of the Common Stock to fluctuate
substantially. Furthermore, stock prices for many companies fluctuate widely for
reasons that may be unrelated to their operating results. These fluctuations, as
well as general economic, political and market conditions, such as recessions or
international currency fluctuations, may adversely affect the market price of
the Common Stock. See "Price Range of Common Stock" and "Underwriting."

RECENT DEVELOPMENTS

In January 1997, the Company acquired the net operating assets of Shaps, a
California-based company providing recovery audit services to manufacturers and
distributors of technology products, for a total purchase price of $5.4 million,
all of which was paid in Common Stock. In February 1997, the Company acquired
all of the common stock of APRSI, a Texas-based company providing recovery audit
services to healthcare entities and energy companies, for a total purchase price
of $4.0 million, $2.0 million of which was paid in cash with the balance paid in
Common Stock. In May 1997, the Company acquired all of the common stock of Hale,
a California-based company that also provides recovery audit services primarily
to healthcare entities, for a total purchase price of $2.1 million, $1.1 million
of which was paid in cash with the balance paid in Common Stock.

In October 1997, the Company acquired 98.4% of Alma, a privately held
recovery audit firm based in Paris, France for $24.6 million in cash and
approximately 859,000 unregistered shares of Common Stock with the obligation to
acquire the remaining interest in Alma by January 1999 for $398,000 in cash and
13,900 unregistered shares of Common Stock. Founded in 1986, Alma specializes in
identifying and recovering various types of French tax overpayments by
corporations. Alma also provides general expense reduction services in various
areas including building and security services, assists clients in obtaining
grants and subsidies and operates a buying club for small businesses. Alma
operates exclusively in France where it currently serves approximately 2,000
clients, including many of France's 50 largest corporations. Alma's revenues
were $21.3 million and $21.7 million for the years ended December 31, 1996 and
1997, respectively. The acquisition of Alma provides the Company an entry into
the tax recovery auditing field and strengthens the Company's management and
operations in Europe. As a result of emerging developments such as the Alma
transaction, the Company restructured and realigned certain facets of its
European management structure in the fourth quarter of 1997 and incurred a
pre-tax charge to earnings of $1.2 million. In November 1997, the Company
acquired the net operating assets of TradeCheck, a Washington-based company that
provides ocean freight recovery audit services. See "Risk Factors -- Acquisition
Risks" and "-- International Operations" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby, after deducting underwriting
discounts and commissions and estimated expenses payable by the Company, are
approximately $39.2 million. The Company anticipates that the net proceeds will
be used to repay all outstanding indebtedness under its $30.0 million credit
facility with NationsBank N.A., all of which was incurred pursuant to a term
note in connection with the Alma transaction. At January 31, 1998, $24.9 million
in principal and accrued and unpaid interest were outstanding under such credit
facility at an interest rate of LIBOR plus 1.75% per annum (7.4% as of January
31, 1998). Such borrowings under this term note are repayable in varying amounts
with a final payment due October 2001. The balance of the proceeds will be used
for continued international expansion, potential future acquisitions and general
corporate purposes, including working capital. The Company is not currently a
party to any agreements or understandings with respect to any material
acquisitions and no assurance can be given that any such future acquisitions
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will be consummated. The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Shareholders.

Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds in short-term, investment grade securities,
certificates of deposit or direct or guaranteed obligations of the U.S.
government.

DIVIDEND POLICY

The Company has not paid cash dividends since its March 26, 1996 initial
public offering and does not intend to pay cash dividends in the foreseeable
future. Moreover, restrictive covenants included in the Credit Facility
specifically prohibit payments of cash dividends without the written consent of
the Company's lender. See Note 3 of Notes to Consolidated Financial Statements
of the Company. The Company's predecessors paid Subchapter S shareholder
dividends of approximately $860,000 and $10.3 million and paid partnership
distributions of approximately $215,000 and $382,000 in 1994 and 1995,
respectively. Immediately prior to the Company's initial public offering, the
Company's predecessors also paid a Subchapter S shareholder distribution of
approximately $4.7 million and a partnership distribution of approximately
$178,000.

PRICE RANGE OF COMMON STOCK

The following table sets forth the range of high and low sale prices per
share for the Common Stock as reported on The Nasdaq Stock Market, where the
stock trades under the symbol "PRGX," for the periods indicated.

[Download Table]

HIGH LOW
---- ---

FISCAL 1998
First Quarter (through March 16, 1998)...................... $23 $15 1/2
FISCAL 1997
First Quarter............................................... $18 1/4 $11 1/16
Second Quarter.............................................. 16 1/8 11 3/4
Third Quarter............................................... 20 1/8 13 5/8
Fourth Quarter.............................................. 19 1/2 13 7/8
FISCAL 1996
First Quarter (from March 26, 1996 through March 31,
1996)..................................................... $16 1/2 $11 (1)
Second Quarter.............................................. 22 1/2 15 1/4
Third Quarter............................................... 24 1/4 11 1/2
Fourth Quarter.............................................. 21 1/2 11 1/4

---------------

(1) Initial public offering price.

On March 16, 1998, the last sale price of the Common Stock as reported on
The Nasdaq Stock Market was $22.125 per share. As of March 11, 1998, there were
146 holders of record of the Common Stock. Management of the Company believes
that there are in excess of 400 beneficial holders of the Common Stock.

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CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1997, as adjusted to reflect the sale by the Company of 2,000,000
shares of Common Stock offered hereby and the application of net proceeds
therefrom as described in "Use of Proceeds." This table should be read in
conjunction with the Consolidated Financial Statements of the Company and Notes
thereto appearing elsewhere in this Prospectus:

[Enlarge/Download Table]

DECEMBER 31, 1997
-------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE DATA)

Current liabilities:
Notes payable to bank..................................... $ 81 $ 81
Current installments of long-term debt.................... 1,428 191
------- --------
$ 1,509 $ 272
======= ========
Long-term debt, excluding current installments.............. $24,365 $ 852
Shareholders' equity:
Preferred stock, no par value. Authorized 1,000,000
shares; no shares issued or outstanding in 1997........ -- --
Common stock, no par value; stated value $.001 per share.
Authorized 60,000,000 shares; 19,193,676 shares issued
and outstanding historical; and 21,193,676 shares
issued and outstanding, as adjusted.................... 19 21
Additional paid-in capital................................ 48,195 87,343
Cumulative translation adjustments........................ (1,149) (1,149)
Retained earnings......................................... 16,007 16,007
------- --------
Total shareholders' equity........................ 63,072 102,222
------- --------
Total capitalization......................... $87,437 $103,074
======= ========

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SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated historical financial
data for the Company as of and for the five years ended December 31, 1997. Such
historical consolidated financial data as of and for the five years ended
December 31, 1997 have been derived from the Company's Consolidated Financial
Statements and Notes thereto, which Consolidated Financial Statements have been
audited by KPMG Peat Marwick LLP, independent auditors. The audited Consolidated
Balance Sheets as of December 31, 1996 and 1997 and the related Consolidated
Statements of Earnings, Shareholders' Equity (Deficit) and Cash Flows for each
of the years in the three-year period ended December 31, 1997 and the report
thereon, which in 1997 is based partially upon the report of other auditors, are
included elsewhere herein. The selected pro forma Statements of Earnings data
for the four years ended December 31, 1996 are unaudited. The data presented
below should be read in conjunction with the Consolidated Financial Statements
and Notes thereto and other financial information appearing elsewhere in this
Prospectus. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

[Enlarge/Download Table]

YEARS ENDED DECEMBER 31,
------------------------------------------------
1993 1994 1995(1) 1996 1997(2)
------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENTS OF EARNINGS DATA:
HISTORICAL
Revenues.................................................... $25,262 $34,690 $56,031 $77,330 $112,363
Cost of revenues............................................ 13,299 18,163 30,554 40,330 57,726
Selling, general and administrative expenses................ 8,899 12,343 19,035 25,961 37,254
Restructuring costs(3)...................................... -- -- -- -- 1,208
------- ------- ------- ------- --------
Operating income.......................................... 3,064 4,184 6,442 11,039 16,175
Interest (expense), net..................................... (874) (544) (1,630) (100) (403)
Debt refinancing expenses................................... 414 -- -- -- --
------- ------- ------- ------- --------
Earnings before income taxes.............................. 1,776 3,640 4,812 10,939 15,772
Income taxes(4)............................................. -- -- 305 7,789 6,149
------- ------- ------- ------- --------
Net earnings.............................................. $ 1,776 $ 3,640 $ 4,507 $ 3,150 $ 9,623
======= ======= ======= ======= ========
Cash dividends per share.................................... $ -- $ .10 $ .93 $ .28 $ --
======= ======= ======= ======= ========
PRO FORMA(5)
Historical net earnings before income taxes................. $ 1,776 $ 3,640 $ 4,812 $10,939
Pro forma income taxes...................................... 692 1,420 1,877 4,271
------- ------- ------- -------
Pro forma net earnings.................................... $ 1,084 $ 2,220 $ 2,935 $ 6,668
======= ======= ======= =======
Earnings (pro forma earnings for 1995 and 1996) per share:
Basic..................................................... $ .24 $ .41 $ .52
======= ======= ========
Diluted................................................... $ .21 $ .39 $ .51
======= ======= ========

[Enlarge/Download Table]

DECEMBER 31,
------------------------------------------------
1993 1994 1995 1996(6) 1997(2)
------- ------- ------- ------- --------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 98 $ 1,284 $ 642 $16,891 $ 19,386
Working capital............................................. 2,068 4,889 6,738 30,004 34,563
Total assets................................................ 11,045 13,779 30,268 68,318 133,885
Long-term debt, excluding current installments.............. 4,256 2,741 17,629 692 24,365
Loans from shareholders..................................... 208 1,075 1,075 -- --
Total shareholders' equity (deficit)........................ (167) 2,356 (3,402) 40,559 63,072

---------------

(1) Effective January 1, 1995, the Company acquired Fial & Associates, Inc. See
Note 8 of Notes to Consolidated Financial Statements of the Company.

(2) During 1997, the Company completed five acquisitions including Shaps
(January), APRSI (February), Hale (May), Alma (October) and TradeCheck
(November). See Note 8 of Notes to Consolidated Financial Statements.

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(3) Includes a $1.2 million charge to restructure and realign certain facets of
the European management structure in recognition of emerging developments
such as the Alma acquisition. See Note 14 of the Notes to Consolidated
Financial Statements of the Company.

(4) In April 1995, the Company's predecessors reorganized and its international
entities became C corporations. Additionally, in connection with the
Company's March 1996 initial public offering, all domestic entities became C
corporations. As a result of these conversions to C corporations, the
Company incurred charges to operations of $305,000 in 1995 and $3.7 million
in 1996 for cumulative deferred income taxes. The Company's 1996 provision
for income taxes of $7.8 million consists of the above-mentioned $3.7
million charge for cumulative deferred income taxes combined with $4.1
million in tax provisions at a 39.0% composite effective rate for the three
quarters subsequent to the March 26, 1996 initial public offering.

(5) The Company's predecessor entities prior to its initial public offering on
March 26, 1996 generally were either corporations electing to be taxed as
Subchapter S corporations or partnerships. As a result, any income tax
liabilities were the responsibilities of the respective shareholders and
partners. Pro forma net earnings reflect, where applicable, a provision for
income taxes to include the additional tax expense as if the Company had
been subject to federal and state income taxes for all periods presented
rather than the individual shareholders and partners.

(6) Balance Sheet Data as of December 31, 1996 reflect the receipt of net
proceeds from the Company's March 26, 1996 initial public offering together
with the partial use of such proceeds to repay substantially all debt
obligations other than certain convertible debentures which were converted
to shareholders' equity immediately prior to the offering. See Note 7 of
Notes to Consolidated Financial Statements of the Company.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company is a leading provider of accounts payable and other recovery
audit services to large retailers, wholesale distributors, healthcare providers,
technology companies and other large transaction-intensive companies, as well as
to certain governmental agencies. In businesses with large purchase volumes and
continuously fluctuating prices, some small percentage of erroneous overpayments
to vendors is inevitable. In addition, the complexity of various tax laws
results in overpayments to governmental agencies. Moreover, services such as
telecommunications, utilities and freight provided to businesses under complex
pricing arrangements can result in overpayments. All of these overpayments
result in "lost profits." The Company identifies and documents overpayments by
using sophisticated proprietary technology and advanced audit techniques and
methodologies, and by employing highly trained, experienced recovery audit
specialists. The Company receives a contractually negotiated percentage of
amounts recovered.

The earliest of the Company's predecessors was formed in November 1990, and
in early 1991 the predecessors acquired the operating assets of Roy Greene
Associates, Inc. ("Roy Greene Associates") and Bottom Line Associates, Inc.,
which were formed in 1971 and 1985, respectively. In January 1995, the Company
purchased certain assets of Fial & Associates, Inc. ("Fial"), a direct U.S.
competitor. In January 1997, the Company acquired the net operating assets of
Shaps, a California-based company providing recovery audit services to
manufacturers and distributors of technology products. In February 1997, the
Company acquired all of the common stock of APRSI, a Texas-based company
providing recovery audit services to healthcare entities and energy companies.
In May 1997, the Company acquired all of the common stock of Hale, a
California-based company that also provides recovery audit services to
healthcare entities. In October 1997, the Company acquired 98.4% of Alma, a
Paris-based recovery audit firm specializing in identifying and recovering
various types of French corporate tax overpayments. In November 1997, the
Company acquired the net operating assets of TradeCheck, a Washington-based
recovery audit firm specializing in ocean freight shipments. The Company intends
to continue pursuing domestic and international strategic acquisitions,
including direct competitors and complementary businesses.

RESULTS OF OPERATIONS

The following table sets forth the percentage of revenues represented by
certain items in the Company's Consolidated Statements of Earnings for the
periods indicated:

[Enlarge/Download Table]

YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------

HISTORICAL
Revenues................................................ 100.0% 100.0% 100.0%
Cost of revenues........................................ 54.5 52.1 51.4
Selling, general and administrative expenses............ 34.0 33.6 33.2
Restructuring costs..................................... -- -- 1.0
----- ----- -----
Operating income................................ 11.5 14.3 14.4
Interest expense, net................................... 2.9 0.2 0.4
----- ----- -----
Earnings before income taxes.................... 8.6 14.1 14.0
Income taxes............................................ 0.6 10.0 5.4
----- ----- -----
Net earnings.................................... 8.0% 4.1% 8.6%
===== ===== =====
PRO FORMA
Historical earnings before income taxes................. 8.6% 14.1%
Pro forma income taxes.................................. 3.3 5.5
----- -----
Pro forma net earnings.......................... 5.3% 8.6%
===== =====

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1997 COMPARED WITH 1996

Revenues. The Company's revenues consist principally of contractual
percentages of overpayments recovered for clients that are primarily in the
retailing industry. Revenues increased 45.3% to $112.4 million for 1997, up from
$77.3 million in 1996.

Domestic revenues increased 30.2% to $81.7 million in 1997, up from $62.7
million in 1996. Of this 30.2% increase (i) 9.0% was contributed by existing
clients served in both the 1996 and 1997 periods; (ii) 13.3% was contributed by
the four recovery audit firms acquired in 1997; and (iii) 7.9% resulted from
provision of services to new clients (net of the effect of revenues in 1996 from
clients not served in 1997).

The Company considers international operations to be all operations located
outside of the United States. International revenues increased 109.9% to $30.7
million in 1997, up from $14.6 million in 1996. Of this 109.9% increase (i)
45.3% was contributed by operations of Alma subsequent to this October 1997
acquisition and (ii) 64.6% resulted from existing operations, primarily from
services provided to new clients. The Company continues to believe that the rate
of growth for its international operations will significantly exceed its rate of
domestic revenue growth for the foreseeable future if the revenue effect of
acquired businesses is excluded.

Cost of Revenues. Cost of revenues consists principally of commissions
paid or payable to the Company's auditors based primarily upon the level of
overpayment recoveries, and salaries and bonuses paid or payable to divisional
and regional managers. Also included in cost of revenues are other direct costs
incurred by these personnel including rental of field offices, travel and
entertainment, telephone, utilities, maintenance and supplies, and clerical
assistance. Cost of revenues as a percentage of revenues decreased to 51.4% in
1997 from 52.1% in 1996.

Domestically, cost of revenues as a percentage of revenues increased
slightly to 53.1% in 1997 from 52.7% in 1996. This increase related primarily to
cost of revenues associated with revenues subsequently recognized on claims in
process acquired as part of the Company's May 1997 acquisition of Hale. These
claims carried higher auditor compensation rates than those customarily paid by
the Company. The remainder of these claims in progress is expected to be
resolved in 1998.

Internationally, cost of revenues as a percentage of revenues decreased to
46.8% in 1997, from 49.7% in 1996. This reduction was due in part to the
operations of Alma during the fourth quarter of 1997 which were conducted at a
cost of revenue percentage of 44.2%. Excluding Alma's revenues and cost of
revenues from the Company's 1997 international operations, international cost of
revenues as a percentage of revenues would have been 47.5%, or a 2.2% reduction
from 1996. This improvement resulted primarily from gross margin expansions
during 1997 in the Company's more established international locations.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses include the expenses of sales and marketing activities,
information technology services and the corporate data center, human resources,
legal and accounting, administration, headquarters-related depreciation of
property and equipment and amortization of intangibles. Selling, general and
administrative expenses as a percentage of revenues decreased to 33.2% in 1997,
from 33.6% in 1996.

Domestic selling, general and administrative expenses as a percentage of
revenues increased to 30.6% in 1997, up from 30.2% in 1996. The Company's 1997
domestic selling, general and administrative expense percentage is higher than
the comparable percentage in 1996 due to increased expenditures for various 1997
initiatives such as significantly expanded training programs and period costs
associated with intensified mergers and acquisition efforts.

Internationally, selling, general and administrative expenses as a
percentage of revenues decreased to 40.0% in 1997, down significantly from 47.9%
in 1996. This reduction was due in part to the operations of Alma during the
fourth quarter of 1997 which were conducted at a selling, general and
administrative percentage of 26.9%. Excluding Alma's revenues and selling,
general and administrative expenses from the Company's 1997 international
operations, international selling, general and administrative expenses as a

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percentage of revenues would have been 43.6%, or a 4.3% reduction from 1996.
This improvement resulted primarily from various components of fixed costs being
spread over a rapidly growing revenue base.

In connection with acquired businesses, the Company has recorded intangible
assets including goodwill and deferred non-compete costs. Amortization of these
intangible assets totaled $1.9 million in 1997 and $1.2 million in 1996.

Restructuring Costs. In recognition of emerging developments such as the
Alma acquisition, the Company restructured and realigned certain facets of its
European management structure in the fourth quarter of 1997 and incurred a
pre-tax charge to earnings of $1.2 million. This charge consisted of employment
termination costs directly applicable to four of the Company's senior European
executives and residual contract costs due to an independent European advisor
for services no longer required by the Company. Of the $1.2 million charge,
$683,000 had been paid through December 31, 1997, and the remaining $525,000 is
currently estimated to be paid by June 30, 1998.

Operating Income. Operating income increased 46.5% to $16.2 million in
1997, up from $11.0 million in 1996. As a percentage of total revenues,
operating income increased to 14.4% of revenues in 1997, up slightly from 14.3%
in 1996. Excluding the effect of the $1.2 million nonrecurring pre-tax
restructuring charge on 1997 operations, operating income would have been $17.4
million or 15.5% of total revenues.

Interest Expense, Net. Interest expense, net, increased to $403,000 in
1997, up from $100,000 in 1996. Interest expense, net, for 1997 consisted of (i)
interest expense of $730,000, comprised primarily of interest on $24.8 million
of bank borrowings outstanding since October 1997 which were used to finance a
portion of the Alma acquisition, net of (ii) $327,000 of interest income derived
primarily from overnight investments.

Earnings Before Income Taxes. Earnings before income taxes increased 44.2%
to $15.8 million, up from $10.9 million in 1996. As a percentage of total
revenues, earnings before income taxes were 14.0% in 1997, down slightly from
14.1% in 1996. Excluding the effect of the $1.2 million nonrecurring pre-tax
restructuring on 1997 operations, earnings before income taxes as a percentage
on total revenues would have been 15.1%.

Income Taxes. The Company's predecessor entities prior to its initial
public offering on March 26, 1996 generally were either corporations electing to
be taxed as Subchapter S corporations or partnerships. As a result, any income
tax liabilities were the responsibilities of the respective shareholders and
partners. In connection with the initial public offering, all domestic entities
became C corporations. As a result of these conversions to C corporations, the
Company incurred a charge to operations of $3.7 million in the first quarter of
1996 for cumulative deferred income taxes.

The provisions for income taxes for all periods subsequent to March 31,
1996 consist of federal, state and foreign income taxes at the Company's
composite effective rate of 39.0%. The Company's 1996 provision for income taxes
of $7.8 million consists of the above-mentioned $3.7 million charge for
cumulative deferred income taxes combined with $4.1 million in tax provisions at
a 39.0% composite effective rate for the three quarters subsequent to the March
26, 1996 initial public offering.

Pro Forma Income Taxes. The results of operations for 1996 have been
adjusted on a pro forma basis to reflect federal, state and foreign income taxes
at a composite effective rate of 39.0% as if the Company's predecessors had been
C corporations throughout the year.

1996 COMPARED WITH 1995

Revenues. Revenues increased 38.0% to $77.3 million for 1996, up from
$56.0 million in 1995. Of this $21.3 million increase, $13.7 million, or 64.3%,
related to existing and new domestic accounts and $7.6 million, or 35.7%,
related to revenue growth from international operations. Domestic revenue growth
in 1996 of $13.7 million consisted of $5.7 million related to 35 new client
accounts and $8.0 million related to provision of additional services to
existing accounts.

International revenues grew 108.1% to $14.6 million for 1996, up from $7.0
million for 1995. International revenues grew from 12.5% of total revenues in
1995 to 18.9% during 1996.

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Cost of Revenues. Cost of revenues decreased to 52.1% of revenues in 1996,
down from 54.5% for 1995.

Domestically, the Company's cost of revenues as a percentage of revenues
decreased to 52.7% of revenues in 1996, down from 55.6% for 1995 due primarily
to Fial contracts-in-progress acquired in January 1995. These auditor contracts,
substantially all of which were concluded by December 31, 1995, carried higher
auditor compensation rates than those customarily paid by the Company. Excluding
the effect of this temporary $1.9 million rate-related differential, domestic
cost of revenues as a percentage of domestic revenues would have been 51.7% in
1995.

Internationally, cost of revenues increased to 49.7% of international
revenues in 1996, up from 47.2% during 1995. This increase resulted from an
increase in initial auditor compensation guarantees resulting from various new
markets entered by the Company in 1996.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of revenues decreased to 33.6% in 1996
from 34.0% in 1995.

Domestic selling, general and administrative expenses as a percentage of
domestic revenues were relatively flat at 30.2% in 1996 and 30.4% in 1995. The
Company's domestic selling, general and administrative expenses grew during 1996
at a rate approximately commensurate with its domestic revenue growth due
primarily to space, equipment and personnel additions at its corporate
headquarters facility in Atlanta, Georgia.

International selling, general and administrative expenses decreased to
47.9% of international revenues in 1996, down from 58.7% during 1995 due
principally to the 108.1% growth in international revenues in 1996 without a
proportionate increase in selling, general and administrative expenses.

Amortization of intangible assets totaled $1.2 million in both 1996 and
1995.

Operating Income. Operating income increased 71.4% to $11.0 million in
1996, up from $6.4 million in 1995. Operating income was 14.3% and 11.5% of
revenues for 1996 and 1995, respectively. Excluding the effect of the temporary
$1.9 million auditor compensation rate differential relating to
contracts-in-progress acquired in January 1995 from Fial, operating income for
1995 would have been $8.3 million, or 15.0% of revenues.

Interest Expense, Net. Interest expense, net, decreased to $100,000 in
1996, down from $1.6 million in 1995. Interest expense, net, for 1996 consisted
of $495,000 of net interest expense incurred in the first quarter prior to the
Company's March 26, 1996 initial public offering, less $395,000 of net interest
income derived primarily from the net initial public offering proceeds during
the remaining three quarters of the year.

Earnings Before Income Taxes. Earnings before income taxes increased
127.3% to $10.9 million, up from $4.8 million in 1995. As a percentage of total
revenues, earnings before income taxes were 14.1% in 1996 and 8.6% in 1995.
Excluding the effect of the temporary $1.9 million auditor compensation rate
differential relating to contracts-in-progress acquired in January 1995 from
Fial, earnings before income taxes for 1995 would have been $6.7 million, or
12.1% of revenues.

Income Taxes. The predecessor business entities that comprised the Company
generally were either Subchapter S corporations or partnerships. As a result,
income tax liabilities were the responsibilities of the respective shareholders
and partners. In April 1995, the Company's predecessors reorganized and its
international entities became C corporations. Additionally, in connection with
the Company's March 1996 initial public offering, all domestic entities became C
corporations. As a result of these conversions to C corporations, the Company
incurred charges to operations of $305,000 in 1995 and $3.7 million in 1996 for
cumulative deferred income taxes. The Company's 1996 provision for income taxes
of $7.8 million consists of the above-mentioned $3.7 million charge for
cumulative deferred income taxes combined with $4.1 million in tax provisions at
a 39.0% composite effective rate for the three quarters subsequent to the March
26, 1996 initial public offering.

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Pro Forma Income Taxes. The results of operations for 1996 and 1995 have
been adjusted on a pro forma basis to reflect federal, state and foreign income
taxes at a composite effective rate of 39.0% as if the Company's predecessors
had been C corporations throughout such periods.

QUARTERLY RESULTS

The following tables set forth certain unaudited quarterly financial data
for each of the Company's last eight quarters and such data expressed as a
percentage of the Company's revenues for the respective quarters. The
information has been derived from unaudited consolidated financial statements
that, in the opinion of management, reflect all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of such
quarterly information. The operating results for any quarter are not necessarily
indicative of the results to be expected for any future period.

[Enlarge/Download Table]

1996 QUARTER ENDED 1997 QUARTER ENDED
-------------------------------------- --------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- ------- ------- ------- -------- -------
(IN THOUSANDS)

Revenues.......................... $15,615 $17,963 $21,964 $21,788 $20,960 $25,858 $29,627 $35,918
Cost of revenues.................. 8,623 9,480 11,002 11,225 11,529 13,331 14,693 18,173
Selling, general and
administrative expenses......... 6,031 6,040 6,623 7,267 8,196 8,723 8,790 11,545
Restructuring costs............... -- -- -- -- -- -- -- 1,208
------- ------- ------- ------- ------- ------- ------- -------
Operating income......... 961 2,443 4,339 3,296 1,235 3,804 6,144 4,992
Interest income (expense), net.... (495) 106 162 127 63 55 14 (535)
------- ------- ------- ------- ------- ------- ------- -------
Earnings before income
taxes.................. 466 2,549 4,501 3,423 1,298 3,859 6,158 4,457
Income taxes...................... 3,700 994 1,759 1,336 506 1,491 2,400 1,752
------- ------- ------- ------- ------- ------- ------- -------
Net earnings (loss)...... $(3,234) $ 1,555 $ 2,742 $ 2,087 $ 792 $ 2,368 $ 3,758 $ 2,705
======= ======= ======= ======= ======= ======= ======= =======
PRO FORMA
Historical earnings before
income taxes.................. $ 466
Pro forma income taxes.......... 182
-------
Pro forma net earnings... $ 284
=======

[Enlarge/Download Table]

Revenues.......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues.................. 55.2 52.8 50.1 51.5 55.0 51.6 49.6 50.6
Selling, general and
administrative expenses......... 38.6 33.6 30.1 33.4 39.1 33.7 29.7 32.1
Restructuring costs............... -- -- -- -- -- -- -- 3.4
------- ------- ------- ------- ------- ------- ------- -------
Operating income......... 6.2 13.6 19.8 15.1 5.9 14.7 20.7 13.9
Interest income (expense), net.... (3.2) 0.6 0.7 0.6 0.3 0.2 0.1 (1.5)
------- ------- ------- ------- ------- ------- ------- -------
Earnings before income
taxes.................. 3.0 14.2 20.5 15.7 6.2 14.9 20.8 12.4
Income taxes...................... 23.7 5.5 8.0 6.1 2.4 5.8 8.1 4.9
------- ------- ------- ------- ------- ------- ------- -------
Net earnings (loss)...... (20.7)% 8.7% 12.5% 9.6% 3.8% 9.1% 12.7% 7.5%
======= ======= ======= ======= ======= ======= ======= =======
PRO FORMA
Historical earnings before
income taxes.................. 3.0%
Pro forma income taxes.......... 1.2
-------
Pro forma net earnings... 1.8%
=======

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revenues in future third and fourth quarter periods, profitability for any
affected quarter and the entire year could be materially and adversely affected
due to ongoing selling, general and administrative expenses that are largely
fixed over the short term.

LIQUIDITY AND CAPITAL RESOURCES

Through December 31, 1996, the Company's predecessors had acquired and
assimilated three operating companies and financed these acquisitions primarily
through a combination of bank and seller financing. Ongoing Company operations
and capital requirements prior to the Company's initial public offering were met
primarily with cash flows provided by operating activities and, to a lesser
extent, with the proceeds from bank and shareholder loans. On April 1, 1996, the
Company received its $34.8 million portion of the proceeds (net of underwriting
discounts and commissions) from its initial public offering. Of these proceeds,
approximately $1.1 million was subsequently utilized to pay expenses of the
offering, approximately $4.9 million was used to pay previously declared and
unpaid Subchapter S shareholder distributions and partnership distributions, and
approximately $14.6 million was used to pay principal and accrued interest on
substantially all outstanding interest-bearing debt (other than that portion of
certain convertible debt that was converted to Common Stock concurrent with the
initial public offering). All of the residual $14.2 million of net proceeds were
subsequently used to expand international operations, to acquire complementary
businesses and for general corporate purposes.

Net cash provided by operating activities was $2.5 million, $1.9 million
and $8.2 million for 1995, 1996 and 1997, respectively.

Net cash used in investing activities was $2.6 million, $5.1 million and
$30.8 million for 1995, 1996 and 1997, respectively. During 1997, the Company
spent $26.1 million (net of cash acquired) as the cash portion of consideration
paid for four recovery audit firms.

Net cash used in financing activities was $586,000 in 1995. Net cash
provided by financing activities was $19.4 million in 1996 and $25.0 million in
1997. Net cash provided by financing activities in 1997 consists primarily of
$24.8 million borrowed from NationsBank, N.A. in October 1997 to finance a
portion of the Alma acquisition. Net cash provided by financing activities in
1996 reflects proceeds from the Company's initial public offering, net of
repayments of debt and other obligations paid from those proceeds.

During 1997, the Company acquired five recovery audit firms. The Company is
pursuing, and intends to continue to pursue, the acquisition of domestic and
international businesses including both direct competitors and businesses
providing other types of recovery services. Future acquisitions may include much
larger businesses than those acquired to date. There can be no assurance,
however, that the Company will be successful in consummating further
acquisitions due to factors such as receptivity of potential acquisition
candidates and valuation issues. Additionally, there can be no assurance that
future acquisitions, if consummated, can be successfully assimilated into the
Company. See "Forward-Looking Statements".

The Company believes that its current working capital, existing line of
credit and cash flow generated from future operations will be sufficient to meet
the Company's working capital and capital expenditure requirements through
December 31, 1998 unless one or more acquisitions are consummated which require
the Company to seek additional debt or equity financing.

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NEW ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general purpose financial statements. This Statement requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. The Company
believes that its components of comprehensive income will consist principally of
traditionally-determined net income and foreign currency translation
adjustments. This Statement is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required.

Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" establishes revised standards
for the manner in which public business enterprises report information about
operating segments. The Company does not believe that this Statement will
significantly alter the segment disclosures it currently provides. This
Statement is effective for fiscal years beginning after December 15, 1997.

YEAR 2000 ISSUE

Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the year
2000.

The Company believes that its principal year 2000 exposure is confined to
one accounting subsystem which is currently under intense review by outside
consultants. The Company believes that this subsystem will be revised or
replaced within the next 12 months. Consulting costs to revise or replace this
subsystem have not been estimated, but are not anticipated to be material to the
Company's business, operations or financial condition.

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BUSINESS

The Company is a leading provider of accounts payable and other recovery
audit services to large retailers, wholesale distributors, healthcare providers,
technology companies and other large transaction-intensive companies, as well as
to certain governmental agencies. In businesses with large purchase volumes and
continuously fluctuating prices, some small percentage of erroneous overpayments
to vendors is inevitable. In addition, the complexity of various tax laws
results in overpayments to governmental agencies. Moreover, services such as
telecommunications, utilities and freight provided to businesses under complex
pricing arrangements can result in overpayments. All of these overpayments
result in "lost profits." The Company identifies and documents overpayments by
using sophisticated proprietary technology and advanced audit techniques and
methodologies, and by employing highly trained, experienced recovery audit
specialists. The Company continuously updates and refines its proprietary
databases that serve as a central repository reflecting its auditors'
experiences, vendor practices and knowledge of regional and national pricing
information, including seasonal allowances, discounts and rebates, but excluding
confidential client data.

THE RECOVERY AUDIT INDUSTRY

Businesses with substantial volumes of payment transactions involving
multiple vendors, numerous discounts and allowances, fluctuating prices and
complex tax and pricing arrangements find it difficult to detect all payment
errors. These businesses include retailers, such as discount, department,
specialty, grocery and drug stores, wholesale distributors, manufacturers and
distributors of technology products and certain governmental agencies and
healthcare providers. Although these businesses process the vast majority of
payment transactions correctly, a small number of errors occur principally
because of communication failures between purchasing and payables departments,
complex pricing arrangements, personnel turnover and changes in information and
accounting systems. These errors include vendor pricing errors, missed or
inaccurate discounts, allowances and rebates, incorrect freight charges and
duplicate payments. In the aggregate, these transaction errors can represent
meaningful lost profits that can be particularly significant for businesses with
relatively narrow profit margins. Although internal recovery audit departments
identify some payment errors, independent recovery audit firms often are
retained by businesses to identify additional overpayments.

In the U.S., large retailers routinely engage independent recovery audit
firms as standard business practice and other businesses increasingly are using
independent recovery audit firms. Outside the U.S., the Company believes that
large retailers and certain other businesses also increasingly are engaging
independent recovery audit firms. The U.S. retailing industry represented
approximately $2.5 trillion in revenues in 1996. The top 100 retailers worldwide
had aggregate revenues of approximately $1.4 trillion in 1996. The Company
believes that a typical U.S. retailer makes payment errors that are not
discovered internally, which in the aggregate can range from several hundred
thousand dollars to more than $1.0 million per billion dollars of revenues. In
addition, the Company believes that businesses in all industries also make
accounts payable errors.

Increasingly, businesses use technology to manage complex accounts payable
systems and realize greater operating efficiencies. Many businesses worldwide
communicate with vendors electronically to exchange inventory and sales data,
transmit purchase orders, submit invoices, forward shipping and receiving
information and remit payments. These paperless transactions are widely referred
to as "EDI" (Electronic Data Interchange), and implementation of this technology
is accelerating. EDI streamlines processing large numbers of transactions, but
does not eliminate payment errors because operator input errors may be
replicated automatically in thousands of transactions. EDI systems typically
generate significantly more individual transaction details in electronic form,
making these transactions easier to audit than traditional paper-based accounts
payable systems. Recovery audit firms, however, require sophisticated technology
in order to audit EDI accounts payable processes effectively.

Many businesses historically have maintained internal recovery audit
departments that review transactions before engaging independent recovery audit
firms. The Company believes that these businesses increasingly are outsourcing
internal recovery functions to independent recovery audit firms. Factors
contribut-

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ing to this trend include (i) a need for significant investments in technology,
especially in an EDI environment, which the Company believes are greater than
even large businesses often can justify, (ii) an inability to duplicate the
breadth of industry and auditing expertise of independent recovery audit firms,
(iii) a desire to focus limited resources on core competencies, and (iv) a
desire for larger and more timely recoveries.

The domestic and international recovery audit industry is characterized by
several large and many small, local and regional firms. Many local and regional
recovery audit firms lack the centralized resources or broad client base to
support technology investments required to provide comprehensive recovery audit
services for large, complex accounts payable systems. These firms are even less
equipped to audit large EDI accounts payable systems. In addition, because of
limited resources, most of these firms subcontract work to third parties and may
lack experience and the knowledge of national promotions, seasonal allowances
and current recovery audit practices. As a result, the Company believes
significant opportunities exist for recovery audit firms with a national and
international presence, well-trained and experienced professionals and the
advanced technology required to audit increasingly complex accounts payable
systems. See "-- Competition."

THE PROFIT RECOVERY GROUP SOLUTION

The Company provides its domestic and international clients with
comprehensive recovery audit services by using sophisticated proprietary
technology and advanced audit techniques and methodologies, and by employing
highly trained, experienced recovery audit specialists. As a result, the Company
believes it is able to identify significantly more payment errors in both
traditional paper-based and EDI accounts payable systems. By leveraging its
technology investment across a large client base, the Company is able to
continue developing proprietary software tools and expand its technology
leadership in the recovery audit industry.

The Company is a leader in developing and utilizing sophisticated software
audit tools and techniques that enhance the identification and recovery of
payment errors. In EDI accounts payable systems, the Company's proprietary
software audit tools and data processing capabilities enable auditors to sort,
filter and evaluate transactions in greater line-item detail. The Company has
developed and continuously updates and refines its proprietary databases that
serve as a central repository reflecting its auditors' experiences, vendor
practices and knowledge of regional and national pricing information, including
seasonal allowances, discounts and rebates. These proprietary databases do not
include confidential client information. The Company's technology provides a
uniform platform for its auditors to offer consistent and proven audit
techniques and methodologies regardless of the client's size, industry or
geographic scope of operations.

The Company also is a leader in establishing new recovery audit practices
to reflect evolving industry trends. The Company's auditors are highly trained
and many have joined the Company from finance-related management positions in
the retailing industry. To support its auditors, the Company provides data
processing, marketing, training and administrative services.

THE PROFIT RECOVERY GROUP STRATEGY

- Expand International Presence. The Company believes international
markets represent significant business opportunities and intends to
continue expanding its international presence. For example, based on 1996
sales, 63 of the top 100 retailers worldwide were headquartered outside
the U.S. Through sales and marketing efforts, the Company targets
countries having a concentration of transaction-intensive businesses. The
Company also enters new international markets by supporting its U.S.
clients' international operations. With the recent acquisition of Alma,
the Company has significantly increased its presence in France and the
Company intends to offer Alma's services to businesses in other European
countries. In the next 12 months, the Company anticipates that it will
commence operations in South Africa, Argentina and Brazil.

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- Expand Client Base. The Company seeks to increase its worldwide retail
client base and expand its recovery audit services to other industries.
The Company recently has expanded its recovery audit services to the
healthcare and technology industries and intends to expand into other
industries, such as financial services, transportation and lodging and
gaming. The Company believes that its proprietary technology and audit
techniques and methodologies also can be applied to these industries. The
Company believes that its typical fee arrangement enhances its ability to
attract new clients because clients pay a contractually negotiated
percentage of overpayments identified by the Company and recovered for
the clients. The Company intends to leverage existing client
relationships into new audit engagements for clients' other operating
units. Based on 1996 sales, 28 of the top 100 retailers worldwide, each
of which had sales of at least $3.9 billion, were clients of the Company
in 1997. The Company principally targets large businesses having at least
$500 million in annual revenues, although smaller businesses may be
attractive clients. Retailers continue to constitute the substantial
majority of the Company's client and revenue base, and the Company's
current marketing efforts are primarily directed toward that industry.

- Pursue Strategic Acquisitions. The Company intends to continue pursuing
the acquisition of domestic and international businesses including both
direct competitors and businesses providing complementary recovery audit
services. As examples, in January 1995, the Company successfully
completed the acquisition of Fial, a direct competitor; in January 1997,
the Company acquired Shaps, a firm providing recovery audit services to
manufacturers and distributors of technology products; in February 1997,
the Company acquired APRSI, a firm providing recovery audit services to
healthcare entities and energy companies; in May 1997, the Company
acquired Hale, a firm that provides recovery audit services primarily to
healthcare entities; in October 1997, the Company acquired Alma, a firm
that provides tax recovery audit services in France; and in November
1997, the Company acquired TradeCheck, a firm that provides ocean freight
recovery audit services.

- Expand Recovery Audit Services. The Company seeks to expand its recovery
audit service offerings beyond its traditional accounts payable recovery
audit business. For example, the Company recently began offering tax
recovery and ocean freight audit services following its acquisitions of
Alma and TradeCheck. In addition, the Company intends to expand into or
establish its capabilities in other recovery audit services, including
telecommunications, utilities, freight and sales and property tax.

- Maintain High Client Retention Rates. The Company intends to maintain
and improve its high client retention rate by providing comprehensive
recovery audit services, utilizing highly trained auditors, and
continuing to refine its advanced audit technology. Of the Company's
accounts payable audit clients in 1996 that had claims exceeding $100,000
in that year (excluding clients no longer in existence due to such
clients' bankruptcies and acquisitions), more than 90% continued to
utilize the Company's services in 1997.

- Maintain Technology Leadership. The Company believes its proprietary
technology provides a significant competitive advantage, especially in
audits of EDI accounts payable systems. The Company intends to continue
making substantial investments in technology to maintain its leadership
position and systems capabilities.

- Promote Outsourcing Arrangements. The Company seeks to capitalize on the
growing trend of businesses to outsource internal recovery audit efforts.
The Company believes that its outsourcing clients benefit significantly
from these arrangements because their recoveries generally are larger and
completed more quickly. The Company further believes that as clients
convert their systems to EDI, outsourcing arrangements involving recovery
audit work will become increasingly prevalent due in part to the absence
of traditional "audit trail" documents.

THE PROFIT RECOVERY GROUP SERVICES

The Company provides comprehensive accounts payable, tax and other
ancillary recovery audit services. In 1997, accounts payable recovery audit
services represented approximately 91.0% of the Company's revenues. Assuming the
Alma transaction had occurred on January 1, 1997, accounts payable recovery
audit
26

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services and tax recovery audit services would have represented on a pro forma
basis approximately 80.3% and 17.0%, respectively, of the Company's revenues for
1997.

Accounts Payable Recovery Audit Services

Using its proprietary technology, audit techniques and methodologies, the
Company conducts either primary or secondary accounts payable audits. In primary
audits, the Company is the first independent recovery audit firm engaged. In
secondary audits, the Company audits behind another independent recovery audit
firm. A substantial majority of accounts payable audits conducted by the Company
are primary audits.

Primary Audits. Although the Company is flexible in structuring recovery
audit programs to meet the individual needs of its clients, there are two basic
types of primary accounts payable audits conducted by the Company: (i) periodic
audits, which are usually performed nine to 18 months after a client's fiscal
year end; and (ii) continuous audits, marketed as RecoverNow, which are
performed more closely following transaction dates.

In most periodic audits, which constitute the vast majority of the
Company's present audit engagements, the client's internal recovery audit
department conducts a preliminary review of accounts payable records to identify
payment errors. Upon completion of the client's internal recovery audit review
process, which may be as long as nine to 18 months after the client's fiscal
year end, the Company begins its independent recovery audit.

Under the Company's RecoverNow program, clients provide the Company with
accounts payable data on a regular basis, often within 90 days following the
payment transaction. The Company believes its RecoverNow program generates
larger client recoveries for several reasons, including: (i) transaction data,
especially paper-based records, are more complete and accessible; (ii) the
impact of vendor bankruptcies is minimized because claims are made more timely
and continuously throughout the year; (iii) certain recoveries are facilitated
when claims are made prior to the expiration of seasonal or other special
pricing promotions; and (iv) vendor relationships are improved because of
on-going communications regarding billing and payment practices.

In some cases, the Company's clients outsource all or a portion of their
internal recovery audit functions to the Company. In these cases, the client
does not conduct an internal review prior to the Company's audit. In its
outsourcing engagements, the Company also may use client staff in the review
process. The Company believes that more businesses will outsource their recovery
audit functions in an effort to control personnel and technology costs, focus
resources on their core business functions, and increase recoveries.

Secondary Audits. In secondary audits, the Company conducts an accounts
payable audit after another independent recovery audit firm has completed its
audit. The Company usually receives a higher percentage recovery fee than
received from primary audits because it generally is more difficult to detect
payment errors in secondary audits. In most cases, the Company is able to
identify significant payment errors not previously detected by a client's
primary independent recovery audit firm. The Company utilizes secondary audits
as a marketing strategy to obtain new, primary audit clients and believes it has
been successful in implementing this strategy. Of the 28 secondary audits
performed in 1995 which individually provided revenues to the Company exceeding
$100,000, nine were converted to primary audit clients prior to December 31,
1997.

Tax Recovery Audit Services

With the recent acquisition of Alma, the Company now offers tax recovery
audit services in France. These services include the identification and recovery
of tax overpayments (other than income taxes), including business and personal
property taxes (referred to in France as "fiscal" taxes), workers compensation
taxes (referred to in France as "social" taxes), real property taxes (referred
to in France as "foncier" taxes), and value added taxes (referred to in France
as "TVA" taxes).

Using highly trained, experienced personnel together with proprietary audit
techniques and methodologies, Alma assists businesses in identifying and
recovering tax overpayments and reducing future tax obligations. Alma, with
assistance from professionals such as tax attorneys, physicians and surveyors,
applies its thorough understanding of the numerous complex French tax laws and
audits the factual information which
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underlies the tax in question. For example, certain fiscal taxes are based upon
a client's number of employees, payroll and fixed assets. Certain social taxes
are based upon industry segment and prior years' claim history. Foncier or real
property taxes are based on the size, use and valuation of building
improvements. Alma is constantly researching new and expanded tax audit
opportunities.

The time necessary to conduct a French tax audit and obtain governmental
approval of a claim can vary significantly based upon the type of audit. A
typical social tax audit, for example, is performed in six to nine months and
governmental approval can take an additional six to 12 months. In certain cases
when the tax authority denies a client's claim, litigation is necessary to seek
recovery. Like the Company's standard accounts payable recovery audits, the
Company receives a contractually negotiated percentage of the taxes recovered.

Ancillary Audit Services

In addition to accounts payable and tax recovery audit services, the
Company also offers ancillary recovery audit services. These ancillary services
may be offered individually or in conjunction with accounts payable and tax
recovery audit services.

- Freight Audits. The Company provides domestic freight audits using
FreightPro, the Company's proprietary freight recovery audit software, and
provides ocean freight audits. The Company also maintains centralized
domestic freight and shipping databases and has auditors who specialize in
freight audits. Freight audits are usually conducted in conjunction with
accounts payable recovery audits.

- Lease Compliance Audits. Real estate lease and landlord compliance
audits involve an examination of all aspects of a client's facility lease
arrangements to assist the client in identifying lease overpayments or
expenses incurred through landlord noncompliance with lease terms.

- Telecommunications Audits. This program assists clients in reducing
their overall telecommunications costs. For example, overpayments often
can result from the incorrect application of rates and tariffs. Auditors
also review clients' equipment, usage and systems configuration needs and
make recommendations on how to reduce future telecommunications costs.

- Utility Audits. Auditors also review clients' electrical and natural gas
requirements and analyze alternative rates and billing plans to verify
that the billing was proper and that the proper tariff rate was applied.

- Expense Reduction Audits. With the recent acquisition of Alma, the
Company assists clients in reducing their costs for building and security
services.

CLIENT CONTRACTS

The Company's standard accounts payable client contract provides that the
Company is entitled to a contractual percentage of overpayments recovered for
clients. Clients generally recover claims by taking credits against outstanding
payables or future purchases from the involved vendors. In many cases, the
Company's auditors work on site with client personnel and continually monitor
credits taken. In other situations, Company auditors schedule periodic
reconciliations with clients to determine which claims have been processed for
credit. The Company's standard accounts payable client contract imposes a duty
on the client to process promptly all claims against vendors. In the interest of
maintaining good vendor relations, however, many clients modify the standard
client contract with the Company to provide that they retain discretion on
whether to pursue collection of a claim. In the Company's experience, it is
extremely unusual for a client to forego the collection of a large, valid claim.
In some cases, a vendor may dispute a claim by providing additional
documentation or information supporting its position. Consequently, many clients
revise the Company's standard client contract to clarify that the Company is not
entitled to payment of its fee until the client recovers the claim from its
vendor.

In addition to the client contracts, most accounts payable clients
establish specific procedural guidelines that the Company must satisfy prior to
submitting claims for client approval. These guidelines are unique to

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each client and impose specific requirements on the Company prior to submitting
claims. With respect to accounts payable recovery audits for retailers,
wholesale distributors and governmental agencies, the Company recognizes
revenues at the time overpayment claims are presented to and approved by its
clients, as adjusted for estimated uncollectible claims. Estimated uncollectible
claims initially are established, and subsequently adjusted, for each individual
client based on a number of factors including historical experience. With
respect to accounts payable and other recovery audits for most entities other
than retailers, wholesale distributors and governmental agencies, the Company
recognizes revenues when it invoices clients for its portion of amounts
recovered. See "Risk Factors -- Uncertainty of Revenue Recognition Estimates and
Collection of Contract Receivables" and Note 1(c) to Notes to Consolidated
Financial Statements of the Company.

The Company's standard tax recovery client contract provides that the
Company is entitled to a contractual percentage of the taxes recovered and
anticipated savings for a specified period following the audit. The Company
recognizes revenue from its fiscal, social and foncier tax recovery audit
services when it receives notification that the applicable governmental agency
has approved a claim, the client is entitled to a recovery, and an invoice is
sent to the client requesting payment. For TVA recovery audit services, the
Company recognizes revenues when all documentation is filed with the appropriate
government agency. See Note 1.D. of Notes to Consolidated Financial Statements
of Alma.

TECHNOLOGY

The Company believes that its proprietary software audit tools and
proprietary databases, together with its centralized data processing
capabilities, provide it a competitive advantage over smaller local and regional
firms, especially when auditing complex EDI accounts payable systems. The
Company has devoted more than six years and has made substantial financial
investments in developing its proprietary technology. At January 31, 1998, the
Company's information services department in the United States had 64 employees,
10 of whom were dedicated to software development activities, including updating
and modifying the Company's existing proprietary software. In addition, Alma's
information services department had four employees as of January 31, 1998.

Centralized Data Preparation and Verification

At the beginning of a typical accounts payable audit, magnetic media
containing accounts payable transaction data are delivered to the Company's
central data processing facility. Experienced programmers in the Company's
information services department write specialized conversion programs that
permit this data to be reformatted into standardized and proprietary formats
using IBM ES 9000 mainframe and IBM AS 400 midrange computers and Windows NT and
OS/2 Warp Connect servers. Statistical reports are then prepared to verify the
completeness and accuracy of the data. Generally, it is not necessary to rewrite
conversion programs for clients for each successive audit. This reformatted data
is compressed onto CD-ROM media and delivered to the Company's auditors who,
using the Company's proprietary field audit software, sort, filter and search
the data for overpayments. Standard reports and client-specific statistical data
also are produced for auditors.

PC-Based Software Modules

The Company has developed PC-based proprietary software modules for use
primarily in the field by its accounts payable auditors. These software modules
include the following:

- AuditPro is used in non-EDI systems to facilitate auditor-defined
searches of reformatted client accounts payable records for patterns
indicative of potential overpayments. In addition to using the standard
analytical reports produced by AuditPro, auditors may design sophisticated
custom inquiries to sort, filter and print client records.

- EDI Inquiry is a comprehensive module used to sort, filter and print
purchasing, receiving and payment records at the line-item level for
clients operating in an EDI environment. By utilizing line-item detail,
this module facilitates the search of a significantly greater number of
transaction records and improves auditor productivity.
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- AuditPro 97 is a newly released module which will eventually replace both
AuditPro and EDI Inquiry. It can be utilized in both EDI and non-EDI
environments and includes considerably greater audit functionality than
the modules it replaces.

- Claims Management System enables the auditor to compile, print and report
on claims information by individual audit. This module also is used to
summarize audit findings for management reports that are typically
provided to clients at the conclusion of each engagement.

- FreightPro is used to audit and produce claims from electronic freight
records. Client freight billing data is compared with vendor routing guide
instructions to isolate potential overcharges.

- ReportPro is a specialized report generator designed to create and
display customized reports in conjunction with the Company's other
proprietary software modules.

Proprietary Databases

The Company has developed and continuously updates and refines its
proprietary accounts payable and other non-tax recovery audit databases that
serve as a central repository reflecting its auditors' experiences, vendor
practices and knowledge of regional and national pricing information, including
seasonal allowances, discounts and rebates. These proprietary databases do not
include confidential client information. Auditors use these databases to
identify discounts, allowances and other pricing information not previously
detected.

AUDITOR HIRING AND TRAINING

Many of the Company's auditors formerly held finance-related management
positions in the retailing industry. These experienced auditors provide
important insights into certain aspects of the retailing industry. The Company
also has relied on its auditors to assist in creating its auditor training
programs and techniques and in developing its proprietary audit software. To
meet its growing need for additional auditors, the Company has begun hiring
recent college graduates, particularly those with multi-lingual capabilities.
While the Company has been able to hire a sufficient number of new auditors to
support its growth, there can be no assurance that the Company will be able to
continue hiring sufficient numbers of qualified auditors to meet its future
needs.

The Company provides intensive in-house training for auditors utilizing
many self-paced media including specialized computer-based training modules. The
Company utilizes experienced auditors as full-time field trainers to assess each
trainee's progress as he or she completes the training program. The in-house
training program is continuously upgraded based on feedback from auditors and on
changing industry protocols. Additional on-the-job training by experienced
auditors enhances the in-house training and enables newly hired auditors to
refine their skills. Because auditor compensation is based on team performance
results as well as nine different categories of individual competency composed
of job-based skills and personal success factors, the Company believes senior
auditors are motivated to continue training new auditors to maximize client
recoveries and audit team compensation. As the Company hires new auditors, there
can be no assurance that it will be able to continue providing the same in-depth
training or have sufficient numbers of experienced auditors to continue its
on-the-job training program.

CLIENT BASE

The Company provides its services principally to large
transaction-intensive businesses that include retailers, such as discount,
department, specialty, grocery and drug stores, wholesale distributors,
manufacturers and distributors of technology products, certain governmental
agencies and healthcare providers. Based on 1996 sales, 28 of the top 100
retailers worldwide, each having sales in excess of $3.9 billion, were clients
of the Company in 1997. Although the Company targets clients principally with
$500 million or more in annual revenues, smaller businesses may be attractive
clients. Retailers continue to constitute the substantial majority of the
Company's client and revenue base, and the Company's current marketing efforts
are primarily directed toward that industry.

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For the years ended December 31, 1995, 1996 and 1997, the Company derived
30.1%, 34.6% and 33.8%, respectively, of its revenues from its five largest
clients. Wal-Mart was the Company's largest client during 1995 and 1996,
representing 12.7% and 14.4% of the revenues during such years, respectively,
and was the Company's second largest client in 1997, representing 10.4% of
revenues for such year. Kmart was the Company's largest client in 1997,
representing 12.3% of the revenues during the period, due in large part to a
nonrecurring situation involving concurrent audits of multiple years. There can
be no assurance that the Company's client base will increase or that the
Company's largest clients will continue to utilize the Company's services at the
same level. For example, one of the Company's five largest accounts representing
4.6% of all of the Company's domestic revenues for 1996 changed the Company's
status from primary recovery auditor in 1996 to secondary recovery auditor in
1997. This change resulted in significantly lower revenues from that client in
1997. In addition, should one or more of the Company's large clients file for
bankruptcy or otherwise cease to do business with the Company, or should one or
more of the Company's large client's vendors file for bankruptcy, the Company's
business, financial condition and results of operations could be materially and
adversely affected. See "Risk Factors -- Dependence on Key Clients" and
"-- Client Bankruptcies."

SEASONALITY

The Company has experienced and expects to continue to experience
significant seasonality in its business. The Company typically realizes higher
revenues and operating income in the last two quarters of its fiscal year.
Should this trend not continue, the Company's profitability for any affected
quarter and the entire year could be materially and adversely impacted due to
ongoing selling, general and administrative expenses that are largely fixed over
the short term. See "Risk Factors -- Seasonality; Fluctuations in Quarterly
Operating Results" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Quarterly Results."

SALES AND MARKETING

The Company markets its services primarily through one-on-one meetings with
executives of targeted clients. The decision to engage a recovery audit firm is
similar to the decision to engage most professional service firms and usually
involves a lengthy period of familiarization, investigation and evaluation by
the prospective client. The sales cycle often exceeds one year in both domestic
and international markets. In the U.S. and Canada, where the use of recovery
audit services is a generally accepted business practice among retailers, the
Company generally must displace a competing firm in order to expand market
share. In many other countries, recovery auditing is a new business service that
requires an initial educational process in order to gain acceptance.

At January 31, 1998, the Company's marketing staff consisted of 12 persons
in the United States headed by a senior officer and 36 persons in Europe. The
Company plans to expand its marketing staff in the U.S. and internationally as
its business grows and it enters new markets.

PROPRIETARY RIGHTS

The Company continuously develops new recovery audit software and enhances
existing proprietary software. The Company regards its proprietary software as
protected by trade secret and copyright laws of general applicability. In
addition, the Company attempts to safeguard its software through employee and
third-party nondisclosure agreements and other methods of protection. Despite
these precautions, it may be possible for unauthorized third parties to copy,
obtain or reverse engineer certain portions of the Company's software or
otherwise to obtain or use other information the Company regards as proprietary.
While the Company's competitive position may be affected by its ability to
protect its software and other proprietary information, the Company believes
that the protection afforded by trade secret and copyright laws is less
significant to the Company's success than the continued pursuit and
implementation of its operating strategies and other factors such as the
knowledge, ability and experience of its personnel.

The Company has registered its copyrights for AuditPro, EDI Inquiry, Claims
Management System, FreightPro and RecoverNow with the U.S. copyright office.
Third parties with functionally similar software could assert claims under the
Copyright Act of 1986, as amended, the federal patent law or state trade secret

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laws that the Company's proprietary recovery audit software application products
infringe or may infringe the proprietary rights of such entities. These third
parties may seek damages from the Company as a result of such alleged
infringement, demand that the Company license certain proprietary rights from
them or otherwise demand that the Company cease and desist from its use or
license the allegedly infringing software. Such action may result in protracted
and costly litigation or royalty arrangements or otherwise have a material
adverse effect on the Company's business, financial condition or results of
operations. Although the Company believes that its recovery audit software does
not infringe on the intellectual property rights of others and the Company knows
of no such pending or other extended claims of infringement, there can be no
assurance that such a claim will not be asserted against the Company in the
future.

The Company's trademarks include "Profit Recovery Group International,"
"PRG," "AuditPro," "AuditPro 97," "EDI Inquiry," "Claims Management System,"
"FreightPro," "ReportPro" and "RecoverNow." The Company has registered "Profit
Recovery Group International," "PRG," "AuditPro," "RecoverNow" and the Company's
logo as federal trademarks with the U.S. Patent and Trademark Office. There can
be no assurance, however, that the Company will be successful in its attempt to
register such trademarks or that it otherwise will be able to continue to use
any of the foregoing trademarks.

The Company has filed applications for protection of certain of its
trademarks outside of the U.S. in the various countries where the Company
conducts business, and such protection is available. There can be no assurance,
however, that the Company will be successful in its attempt to register or
continue to use such trademarks outside of the U.S.

COMPETITION

The recovery audit business is highly competitive. The competitive factors
affecting the market for the Company's recovery audit services include:
establishing and maintaining client relationships, quality and quantity of
claims identified, experience and professionalism of audit staff, rates for
services, technology and geographic scope of operations. The Company's principal
competitors for accounts payable recovery audit services include local and
regional firms and one firm, Howard Schultz & Associates, Inc., with a network
of affiliate organizations in the U.S. and abroad. The Company believes that
Howard Schultz & Associates, Inc. has been in operation longer than the Company
and may have achieved greater revenues than the Company in 1997. The Company's
competitors for tax recovery audit services in France include major
international accounting firms, tax attorneys and several smaller tax recovery
audit firms. There can be no assurance that the Company will continue competing
successfully with such competitors.

The Company believes that as large, transaction-intensive businesses expand
internationally and implement EDI accounts payable systems, smaller recovery
audit firms will lack the technology and infrastructure necessary to remain
competitive unless they make substantial investments to upgrade and expand their
skills, technologies and geographic scope of operations. See "Risk
Factors -- Competition."

EMPLOYEES

At January 31, 1998, the Company had 1,174 employees, 709 of whom were
located in the U.S., with 575 persons in the audit function, 12 persons in sales
and marketing, 64 persons in information services and the remainder in
corporate, finance and administrative functions. In addition to its 465
employees located outside the U.S., internationally the Company engaged 26
independent contractors at January 31, 1998. The Company believes its employee
relations are good.

FACILITIES

The Company's principal executive office is located in approximately 55,000
square feet of office space in Atlanta, Georgia. The Company subleases this
space through December 30, 2002 and has an option to renew the lease for five
years contingent upon the prime lease being renewed. The Company leases 25,000
square feet of office and warehouse space in Bentonville, Arkansas. This lease
has an initial five-year term that commenced on April 19, 1996, with an option
to renew for an additional five-year period. The Company leases 27,500 square
feet of office space in Levallois-Perret, France. This lease has a nine-year
term that commenced
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on January 1, 1997, with the Company having the right to terminate the lease
without penalty after the fourth and sixth years. In addition, the Company
maintains 45 other offices in close proximity to certain of its larger clients.
The leases for these offices vary in term and range from 1,000 to 10,000 square
feet. The Company is negotiating a five-year lease for an additional 15,000
square feet of space in Phoenix, Arizona. The Company anticipates that
additional space will be required as business expands and believes that it will
be able to obtain suitable space as needed. See Note 4 of Notes to Consolidated
Financial Statements of the Company.

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings that it believes could
have a material adverse effect on its business, financial condition or results
of operations.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning the directors
and executive officers of the Company:

[Enlarge/Download Table]

NAME AGE POSITION
---- --- --------

John M. Cook(1)...................... 55 Chairman of the Board, Chief Executive Officer and
Director
John M. Toma(1)...................... 52 Vice Chairman, Assistant Secretary and Director
Michael A. Lustig.................... 42 President and Director
Marc S. Eisenberg.................... 42 President of the Directorate of Alma and Director
Robert G. Kramer..................... 54 Executive Vice President and Chief Information Officer
Donald E. Ellis, Jr.................. 46 Senior Vice President -- Finance, Treasurer and Chief
Financial Officer
Clinton McKellar, Jr................. 51 Senior Vice President, General Counsel and Secretary
Tony G. Mills........................ 41 Senior Vice President -- Corporate Development and
Assistant Secretary
David A. Brookmire................... 45 Senior Vice President -- Human Resources
Stanley B. Cohen(1)(2)............... 54 Director
Jonathan Golden(1)(3)................ 60 Director
Garth H. Greimann(2)(3).............. 42 Director
Fred W.I. Lachotzki.................. 51 Director
E. James Lowrey(2)(3)................ 70 Director

---------------

(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.

John M. Cook is Chairman of the Board, Chief Executive Officer and a
Director of the Company and has served in such capacities since founding the
Company in November 1990. Mr. Cook served as President of the Company from
November 1990 through January 1998. Prior to forming the Company, Mr. Cook
served as President and Chief Operating Officer of Roy Greene Associates from
1989 to 1990. From 1987 to 1989, Mr. Cook served as Senior Vice President of
Caldor Stores, Inc., a division of May Department Stores Co. ("May"). From 1982
to 1987, Mr. Cook served in a similar capacity for Kaufmann's Department Stores,
Inc., also a division of May.

John M. Toma was elected Vice Chairman of the Company in January 1997.
Prior to that, he was Executive Vice President -- Administration of the Company
and had served in such capacity since 1992. Mr. Toma has served as a Director of
the Company since its founding in November 1990 and as Senior Vice
President -- Administration of the Company from 1990 to 1992. Prior to forming
the Company, Mr. Toma served as Senior Vice President -- Administration of Roy
Greene Associates from 1989 to 1990. Prior to joining Roy Greene Associates, Mr.
Toma served as Operating Vice President of Caldor Stores, Inc., a division of
May.

Michael A. Lustig joined the Company in 1995 as Senior Vice
President -- Operations. Mr. Lustig was promoted to Executive Vice President in
July 1996, and to President -- PRG Worldwide Accounts Payable Audit Operations
in January 1997. In January 1998, Mr. Lustig was elected President of the
Company and elected as a Director of the Company. Prior to joining the Company,
Mr. Lustig worked for The Actava Group, Inc. (formerly Fuqua Industries, Inc.)
from 1980 to 1995 where he held various officer positions, most recently as
Senior Vice President of Corporate Development.

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Marc S. Eisenberg has served as President of the Directorate of Alma since
the closing of the Alma transaction on October 7, 1997 and a Director of the
Company since October 15, 1997. Prior to October 1997, Mr. Eisenberg served as
President of Alma since its founding in 1986.

Robert G. Kramer joined the Company in October 1997 as Executive Vice
President and Chief Information Officer. Prior to joining the Company, Mr.
Kramer had worked for Home Shopping Network, Inc. since 1996 as Executive Vice
President and Chief Information Officer. From 1994 to 1996, Mr. Kramer served as
Executive Vice President and Chief Information Officer with Hanover Direct,
Inc., a direct specialty retailer.

Donald E. Ellis, Jr. joined the Company in 1995 as Senior Vice President,
Treasurer and Chief Financial Officer. From 1993 to 1995, Mr. Ellis served as
Vice President -- Finance, Treasurer and Chief Financial Officer of Information
America, Inc., a provider of on-line computer information services, and from
1991 to 1993, he was an independent financial consultant. From 1987 to 1991, Mr.
Ellis served in various positions with KnowledgeWare, Inc., a supplier of
application software, most recently as Senior Vice President, Chief Financial
Officer, Secretary and Treasurer. Mr. Ellis is a certified public accountant.

Clinton McKellar, Jr. joined the Company in June 1997 as Senior Vice
President, General Counsel and Secretary. Prior to joining the Company, from
1989 to May 1997, Mr. McKellar served as Vice President, General Counsel and
Secretary of Engraph, Inc., a manufacturer of consumer product packaging.

Tony G. Mills was elected Senior Vice President -- Corporate Development
and Assistant Secretary in June 1997. Prior to that, he was Senior Vice
President -- Legal Affairs, General Counsel and Secretary and had served in that
capacity since joining the Company in October 1995. For 11 years prior to
joining the Company, Mr. Mills was a shareholder in the Atlanta, Georgia law
firm of Silfen, Segal, Fryer & Shuster, P.C. ("SSFS") and provided legal
services to the Company through that firm since 1990. Mr. Mills remained as Of
Counsel to SSFS through January 1996.

David A. Brookmire joined the Company in 1995 as Senior Vice
President -- Human Resources. From 1987 to 1995, Mr. Brookmire held various
positions with Digital Communications Associates, Inc. (now Attachmate Corp.),
most recently as Vice President -- Human Resources.

Stanley B. Cohen has served as a Director of the Company since its founding
in 1990. Mr. Cohen is the Chairman of the Board, Chief Executive Officer and
President of both Advisory Services, Ltd. ("ASL") and SBC Financial Corporation
("SBC"). These companies provide certain financial consulting and investment
services to the Company and certain of its executive officers. In addition, Mr.
Cohen is President of Capital Advisory Corporation, a financial advisory
company.

Jonathan Golden has served as a Director of the Company since its founding
in 1990 and provides consulting services to the Company through Jonathan Golden,
P.C., a wholly owned professional corporation ("JGPC"). Mr. Golden also serves
through JGPC as a partner in the Atlanta, Georgia law firm of Arnall, Golden &
Gregory, LLP which provides legal services to the Company. Mr. Golden also
serves as a director for SYSCO Corporation ("SYSCO"), a distributor of food and
related products.

Garth H. Greimann has served as a Director of the Company since April 1995.
Mr. Greimann joined Berkshire Partners, a general partnership, in 1989 and
served as a general partner from 1994 until February 1996, when Berkshire
Partners was succeeded by Berkshire Partners LLC (Berkshire Partners, a general
partnership, and Berkshire Partners LLC are collectively referred to as
"Berkshire Partners"). Mr. Greimann has served as a member of Berkshire Partners
LLC since February 1996, and as a general partner of Third Berkshire Associates,
A Limited Partnership ("Third Berkshire Associates"), the general partner of
Berkshire Fund III, since 1994. From 1982 to 1989, Mr. Greimann held various
positions with The First National Bank of Boston (the "Bank"), most recently as
Vice President of the Bank's Acquisition Finance Division, and served in the
Bank's offices in Korea and Taiwan. Mr. Greimann also serves as a director of
Trico Marine Services, Inc., an operator of marine vessels active in offshore
energy exploration and production activities, and of Crown Castle International
Corporation, a provider of infrastructure and related support services to the
wireless communications industry.

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Fred W.I. Lachotzki has served as a Director of the Company since January
1996. Since 1989, Mr. Lachotzki has served as a Professor of Business Policy at
Nijenrode University, The Netherlands Business School, in The Netherlands. Mr.
Lachotzki also serves as a director of Virgin Blockbuster NV, a chain of music
superstores, NVS Salland Verzekeringen, an insurance company specializing in
healthcare, and Merison Holding NV, a supplier of non-food products to
supermarket chains and owner of a franchised chain of electronics retail stores.

E. James Lowrey has served as a Director of the Company since December
1995. Mr. Lowrey served as Executive Vice President -- Finance and
Administration of SYSCO from 1978 until his retirement in 1993 and was a
director of SYSCO from 1981 to 1993. He currently serves as a director of
Riviana Foods, Inc., a processor and distributor of rice and other food
products, and of Hi-Lo Automotive, Inc., an automotive parts retailer.

No family relationship exists among any of the directors and executive
officers of the Company.

The Board of Directors has an Executive Committee, Audit Committee and
Compensation Committee. The Executive Committee is empowered to exercise all of
the authority of the Board of Directors of the Company, except as limited by the
Georgia Business Corporation Code (the "GBCC"). Under the GBCC, a committee of
the board of directors of a company, among other things, may not approve or
recommend to shareholders actions required to be approved by shareholders, fill
vacancies on the board of directors, amend or repeal the bylaws or approve a
plan of merger not requiring shareholder approval. The functions of the Audit
Committee include recommending to the Board the retention of independent
auditors, reviewing the scope of the annual audit undertaken by the Company's
independent auditors and the progress and results of their work, and reviewing
the financial statements of the Company and its internal accounting and auditing
procedures. The functions of the Compensation Committee include reviewing and
approving executive compensation policies and practices, reviewing salaries and
bonuses for certain officers of the Company, administering The Profit Recovery
Group International, Inc. 1996 Stock Option Plan (the "1996 Plan") and
considering such other matters as may from time to time be referred to the
Compensation Committee by the Board.

The Company compensates its non-employee directors $20,000 per year for
their service on the Board and any committee thereof. Non-employee directors
will be reimbursed for all out-of-pocket expenses, if any, incurred in attending
Board and committee meetings. The Board of Directors has approved an automatic
annual grant to Directors not employed by the Company of options to purchase
from 2,500 to 7,500 shares of Common Stock. Beginning in 1998, grants will be
made as of December 31 of each year; provided, however, that no grants will be
made in any year unless the Company's earnings per share for such year shall
have increased by at least 25% over the previous year. A 25% increase in
earnings per share will result in a grant of options to purchase 2,500 shares of
Common Stock while each additional one percent increase in earnings per share
will result in a grant of options to purchase an additional 200 shares of Common
Stock, up to a maximum annual grant of options to purchase 7,500 shares of
Common Stock. The per share option exercise price will be the closing price of
the Company's Common Stock on The Nasdaq Stock Market on December 31 of the year
of grant, or if no sale of the Common Stock was made on that date, on the next
preceding date on which there was such a sale. Options will vest in 20%
increments over a period of 5 years.

Stanley B. Cohen, a director of the Company, provides financial and
investment advisory services to the Company and certain of its executive
officers through ASL and provides financial advisory services to the Company
through SBC. Mr. Cohen is the Chairman, President, Chief Executive Officer and
sole shareholder of ASL and SBC. During 1997, the Company paid SBC aggregate
consulting fees of approximately $70,000. The Company paid ASL consulting fees
of approximately $25,000 in 1997 for providing financial advisory services to
the Company and to certain of the Company's executive officers and expects to
continue utilizing the services of ASL and SBC in the future. The Company
currently pays SBC a consulting fee of $5,800 per month. The consulting
agreement may be terminated by either party for any reason upon not less than 30
days prior notice. The Company also pays the expenses of preparing certain
annual income tax returns for Mr. Cohen. The amount paid by the Company in 1997
for these services was approximately $7,900.

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Jonathan Golden, a director of the Company, provides consulting services to
the Company through JGPC. Mr. Golden is the sole shareholder of JGPC. During
1997, the Company paid JGPC aggregate consulting fees of approximately $70,000.
The Company currently pays JGPC a consulting fee of $5,800 per month. The
consulting agreement may be terminated by either party for any reason upon not
less than 30 days prior notice. In addition, the Company has paid the law firm
of Arnall, Golden & Gregory, LLP, of which JGPC serves as a partner,
compensation for legal services rendered since 1991 and expects to continue
utilizing this firm's services in the future. The Company also pays the expenses
of preparing certain annual income tax returns for Mr. Golden. The amount paid
by the Company in 1997 for these services was approximately $10,000.

The Company has also entered into a consulting agreement with Lieb Finance
S.A., a Luxembourg company of which Marc S. Eisenberg is the sole owner and
employee, to assist on strategic and long-term planning matters for the Company
and its affiliates in certain portions of Europe. The term of the consulting
agreement is for five years ending October 7, 2002. Under the consulting
agreement, Lieb Finance S.A. will receive an annual consulting fee of 325,000
French Francs (the current approximate equivalent of $53,000 as of February 11,
1998).

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid or accrued by the
Company to the Chief Executive Officer, the other four most highly paid
executive officers of the Company in 1997 (the "Named Executive Officers"). The
information presented is for the years ended December 31, 1995, 1996 and 1997.

SUMMARY COMPENSATION TABLE

[Enlarge/Download Table]

LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION(1) SECURITIES
-------------------------------------- UNDERLYING
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND POSITION YEAR SALARY(2) BONUS COMPENSATION(3) (# OF SHARES) COMPENSATION(1)(4)
----------------- ---- --------- -------- --------------- ------------- ------------------

John M. Cook............ 1997 $350,012 $350,000 $ -- 86,663 $ 18,402
Chairman of the Board 1996 356,731 262,500 -- 223,530 15,475
and Chief Executive 1995 695,000 -- -- -- 115,000
Officer
John M. Toma............ 1997 305,994 114,750 -- -- 57,180
Vice Chairman and 1996 307,609 122,400 -- 100,000 67,050
Assistant Secretary 1995 374,000 -- -- -- 4,000
Michael A. Lustig....... 1997 264,596 90,100 -- 135,000 20,000
President(5) 1996 211,269 67,302 -- 27,500 20,000
Donald E. Ellis, Jr..... 1997 172,115 64,922 -- -- 26,446
Senior Vice President, 1996 160,000 56,000 -- 10,000 26,446
Treasurer and Chief 1995 131,000 13,000 22,000 120,000 26,000
Financial Officer(6)
Tony G. Mills........... 1997 156,461 56,281 -- -- 1,784
Senior Vice
President -- Corporate
Development and
Assistant Secretary(5)

---------------

(1) The compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Executive Officers
which are available generally to all salaried employees of the Company and
certain perquisites and other personal benefits, securities or property
received by the Named Executive Officers which do not exceed the lesser of
$50,000 or 10% of any such officer's salary and bonus disclosed in this
table.

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(2) Includes contributions made to the Company's 401(k) Plan during the years
presented.
(3) Consisted of $12,500 for car allowance and $9,500 for financial advisory
services received by Mr. Ellis.
(4) Consists of:
(a) Premiums for supplemental term life insurance paid by the Company in
the approximate amounts set forth below:

[Download Table]

1995 1996 1997
-------- -------- --------

Mr. Cook....................................... $102,000 $ -- $ --
Mr. Toma....................................... 4,000 -- --
Mr. Lustig..................................... -- -- --
Mr. Ellis...................................... 1,000 1,446 1,446
Mr. Mills...................................... -- -- 1,784

(b) Deferred compensation accrued in the consolidated financial statements
of the Company on behalf of Messrs. Toma, Lustig and Ellis in the
amounts of $55,000, $20,000 and $25,000, respectively, in 1997 and
1996; and Mr. Ellis in the amount of $25,000 for 1995.
(c) Legal expenses paid by the Company in 1995 on behalf of Mr. Cook in the
amount of $13,000.
(d) Tax preparation expenses paid by the Company in 1996 on behalf of
Messrs. Cook and Toma in the amount of $15,475 and $12,050,
respectively; and in 1997 on behalf of Messrs. Cook and Toma in the
amount of $18,402 and $2,180, respectively.
(5) Mr. Lustig's 1995 and Mr. Mills' 1995 and 1996 compensation have not
previously been disclosed and are therefore not required to be disclosed
herein.
(6) Amounts shown for 1995 reflect compensation from March 1, 1995, when Mr.
Ellis began employment with the Company.

OPTION GRANTS TABLE

The following table sets forth certain information regarding options
granted to the Named Executive Officers during the year ended December 31, 1997.
No separate stock appreciation rights ("SARs") were granted during 1997.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

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PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED EXERCISE PRICE APPRECIATION FOR
UNDERLYING TO OR BASE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED IN 1997 ($/SH) DATE 5% 10%
---- ---------- ---------- -------- ---------- --------- -----------

John M. Cook....................... 86,663(1) 8.7% $17.75 12/31/07 $967,409 $2,451,603
John M. Toma....................... -- -- -- -- -- --
Michael A. Lustig.................. 60,000(1) 6.0 14.75 01/03/07 556,572 1,410,462
75,000(2) 7.5 17.75 12/31/07 837,216 2,121,670
Donald E. Ellis, Jr................ -- -- -- -- -- --
Tony G. Mills...................... -- -- -- -- -- --

---------------

(1) Options are non-qualified options granted under the 1996 Plan. All options
have ten year terms and vest as follows: 20% becomes exercisable on the
anniversary of grant and an additional 20% becomes exercisable on each grant
date anniversary thereafter; provided, however, that Mr. Cook's options will
vest automatically upon the occurrence of certain events. See "-- Employment
Agreements."
(2) Options are non-qualified options granted under the 1996 Plan. All options
have ten year terms and vest as follows: 25% becomes exercisable on the
anniversary of grant and an additional 25% becomes exercisable on each grant
date anniversary thereafter.

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OPTIONS EXERCISES AND YEAR-END VALUE TABLE

None of the Named Executive Officers has held or exercised separate SARs.
The following table sets forth certain information regarding options exercised
during the year ended December 31, 1997, and unexercised options held at
year-end, by each of the Named Executive Officers.

OPTION VALUES AT DECEMBER 31, 1997

[Enlarge/Download Table]

NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS AT
ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END($)(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------

John M. Cook......................... -- $ -- 44,706 265,487 $228,236 $912,942
John M. Toma......................... -- -- 20,000 80,000 135,000 540,000
Michael A. Lustig.................... -- -- 15,100 171,400 93,600 320,400
Donald E. Ellis, Jr.................. 24,000 280,800 2,000 80,000 13,500 950,400
Tony G. Mills........................ -- -- 20,000 60,000 180,600 473,400

---------------

(1) Calculated based on a fair market value of $17.75 per share of Common Stock
at December 31, 1997, less the applicable exercise prices.

EMPLOYMENT AGREEMENTS

The Company has entered into an employment agreement, as amended, with John
M. Cook that currently expires December 31, 2002. The employment agreement
provides for automatic one-year renewals upon the expiration of each year of
employment (such that it always has a five-year term), subject to prior notice
of non-renewal by the Board of Directors. Pursuant to Mr. Cook's employment
agreement, for 1998 through 2002, Mr. Cook will receive an annual base salary of
$350,000 and an annual bonus of up to 150% of his base salary based upon the
Company's performance for the respective year. For 1998, the Compensation
Committee has determined that Mr. Cook also is eligible to receive options up to
a maximum of 150,000 shares of Common Stock if 1998 earnings per share are 150%
or more of 1997 earnings per share. Should 1998 earnings per share be at least
125% of 1997 earnings per share, Mr. Cook will be entitled to receive options to
purchase an additional 75,000 shares of Common Stock, and a prorated additional
amount if 1998 earnings per share are between 126% and 149% of 1997 earnings per
share. Any options so granted to Mr. Cook shall be granted at fair market value
as of the end of 1998 and will vest over a five-year period at 20% per year. If
Mr. Cook is terminated other than for cause or if Mr. Cook resigns for "Good
Reason," he is eligible to receive a severance payment up to a maximum amount
not to be deemed an "excess parachute payment" under the Internal Revenue Code
of 1986, as amended (the "Code"), and all outstanding options immediately become
vested. For purposes of Mr. Cook's employment agreement "Good Reason" means,
unless Mr. Cook consents thereto, (i) the assignment of duties or a position or
title inconsistent with or lower than the duties, position or title provided in
Mr. Cook's employment agreement; (ii) the principal place where Mr. Cook is
required to perform a substantial portion of his duties is outside of Atlanta,
Georgia; (iii) the reduction of Mr. Cook's compensation unless the Board (or the
Compensation Committee) has authorized a general compensation decrease for all
executive employees of the Company; (iv) there is a merger, consolidation or
reorganization of the Company or any other transaction resulting in Mr. Cook
(together with his immediate family or trusts or limited partnerships
established for the benefit of Mr. Cook and/or such persons) owning in the
aggregate less than 20% of the voting control of the Company; or (v) there is a
sale or agreement to sell or a grant of an option to purchase all or
substantially all of the assets of the Company. Mr. Cook also is entitled to
receive certain supplemental insurance coverage and other personal benefits
under his employment agreement. Mr. Cook has agreed not to compete with the
Company or to solicit any of the Company's clients or employees for a period of
18 months following termination of employment.

The Company has also entered into employment agreements with John M. Toma,
Michael A. Lustig, Donald E. Ellis, Jr. and Tony G. Mills, each of which will
expire December 31, 1998 and provides for automatic one-year renewals upon the
expiration of each year of employment, subject to prior notice of

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nonrenewal by the Board of Directors. Messrs. Toma, Lustig, Ellis and Mills have
agreed not to compete with the Company or to solicit any clients or employees of
the Company for a period of 18 months following termination of their respective
employments.

Pursuant to Mr. Toma's employment agreement, for 1998, he will continue to
receive a base salary of $306,000, and the Compensation Committee increased Mr.
Toma's maximum potential bonus from 50% of his base salary to 60% of his base
salary based upon the Company's performance for 1998. On January 27, 1998, the
Compensation Committee granted Mr. Toma options to purchase 25,000 shares of
Common Stock at a purchase price of $15.75 per share, vesting over a five-year
period at 20% per year. For 1998, the Compensation Committee has determined that
Mr. Toma also is eligible to receive additional options up to a maximum of
75,000 shares of Common Stock if 1998 earnings per share are 150% or more of
1997 earnings per share. Should 1998 earnings per share be at least 125% of 1997
earnings per share, Mr. Toma will be entitled to receive options to purchase an
additional 25,000 shares of Common Stock, and a prorated additional amount if
1998 earnings per share are between 126% and 149% of 1997 earnings per share.
Any options so granted to Mr. Toma shall be granted at fair market value as of
the end of 1998 and will vest over a five-year period at 20% per year. In
addition, the Company has agreed to make annual contributions in the amount of
$55,000 per year to a deferred compensation program for Mr. Toma, which amounts
will vest 50% immediately and the remainder over a ten-year period at 10% per
year. Mr. Toma will be entitled to receive his deferred compensation upon
termination of his employment for any reason, other than for cause or for "Good
Reason (as such term is similarly defined in Mr. Cook's employment agreement),
including death or disability. The Company has also agreed to provide Mr. Toma
with certain other personal benefits. Upon termination, other than for cause or
by voluntary resignation, Mr. Toma will receive severance payments equal to one
year's base salary and other personal benefits. Mr. Toma will also receive
severance payments equal to one year's base salary if he resigns for "Good
Reason."

In January 1998, Mr. Lustig was elected as President of the Company and was
elected to the Board of Directors of the Company. For 1998, the Compensation
Committee increased Mr. Lustig's annual base salary to $300,000 and increased
his maximum potential bonus from 50% to 75% of his base salary based upon the
Company's performance for 1998. The Compensation Committee has determined that
Mr. Lustig also is eligible to receive additional options up to a maximum of
125,000 shares of Common Stock if 1998 earnings per share are 150% or more of
1997 earnings per share. Should 1998 earnings per share be at least 125% of 1997
earnings per share, Mr. Lustig will be entitled to receive options to purchase
an additional 37,500 shares of Common Stock, and a prorated additional amount if
1998 earnings per share are between 126% and 149% of 1997 earnings per share.
Any options so granted to Mr. Lustig shall be granted at fair market value as of
the end of 1998, and will vest over a four-year period at 25% per year.
Beginning in 1998, Mr. Lustig has elected to reduce his annual base salary by
$40,000 and to contribute such amount to a deferred compensation program for his
benefit, which amount vests immediately. In addition, the Company has agreed to
make annual matching contributions in the amount of $40,000 per year to such
deferred compensation program, which amounts will vest over a ten-year period at
10% per year. Mr. Lustig will be entitled to receive his deferred compensation
upon termination of his employment for any reason, other than for cause,
including death or disability. The Company has also agreed to provide Mr. Lustig
with certain other personal benefits. Upon termination, other than for cause or
by voluntary resignation, Mr. Lustig will receive severance payments equal to
six months' base salary.

Pursuant to Mr. Ellis' employment agreement, for 1998, he will continue to
receive an annual base salary of $175,000 and a bonus of up to 50% of his base
salary based in part upon the Company's performance for 1998. On January 27,
1998, the Compensation Committee granted Mr. Ellis options to purchase 15,000
shares of Common Stock at a purchase price of $15.75 per share, vesting over a
five-year period at 20% per year. Mr. Ellis has elected to reduce his annual
bonus by up to $25,000 and to contribute such amount to a deferred compensation
program for Mr. Ellis, which amount vests immediately. In addition, the Company
has agreed to make annual matching contributions in the amount of $25,000 per
year to such deferred compensation program, which amounts will vest over a
ten-year period at 10% per year. Mr. Ellis will be entitled to receive his
deferred compensation upon termination of his employment for any reason, other
than for cause or for "Good Reason" (as such term is similarly defined in Mr.
Cook's employment agreement), including death or

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disability. The Company has also agreed to provide Mr. Ellis with certain other
personal benefits. Upon termination, other than for cause or by voluntary
resignation, Mr. Ellis will receive severance payments equal to one years' base
salary. Mr. Ellis will also receive severance payments equal to one year's base
salary if he resigns for "Good Reason."

For 1998, the Compensation Committee increased Mr. Mills' annual base
salary to $170,000 (effective March 1, 1998). Pursuant to Mr. Mills' employment
agreement, for 1998, he will receive a bonus of up to 50% of his base salary
based in part upon the Company's performance for 1998. On January 27, 1998, the
Compensation Committee granted Mr. Mills options to purchase 15,000 shares of
Common Stock at a purchase price of $15.75 per share, vesting over a five-year
period at 20% per year. Beginning in 1998, the Compensation Committee has
determined that the Company will make annual contributions in the amount of
$10,000 per year to a deferred compensation program for Mr. Mills, which amounts
will vest over a ten-year period at 10% per year. Mr. Mills will be entitled to
receive his deferred compensation upon termination of his employment for any
reason, other than for cause, including death or disability. The Company has
also agreed to provide Mr. Mills with certain other personal benefits. Upon
termination, other than for cause or by voluntary resignation, Mr. Mills will
receive severance payments equal to nine months' base salary and certain other
personal benefits.

1996 STOCK OPTION PLAN

In January 1996, the Company, with the approval of its shareholders,
adopted the 1996 Plan. The 1996 Plan provides for the grant of options to
acquire a maximum of 3,500,000 shares of Common Stock, subject to certain
adjustments. In January 1998, the Board approved, subject to shareholder
approval, an additional 1,000,000 shares of Common Stock to be reserved for
issuance under the 1996 Plan. As of March 11, 1998, options for 2,531,293 shares
were outstanding (after adjustment for forfeitures) and 131,200 had been
exercised. Options may be granted under the 1996 Plan to key employees, officers
or directors of, and consultants and advisors to, the Company and its
subsidiaries. The Company estimates that, as of January 31, 1998, approximately
770 employees (including officers) and five non-officer directors of the Company
are eligible to participate in the 1996 Plan. Unless sooner terminated by the
Board, the 1996 Plan terminates in January 2006.

EMPLOYEE STOCK PURCHASE PLAN

In May 1997, the Company's shareholders approved the adoption of The Profit
Recovery Group International, Inc. Employee Stock Purchase Plan (the "Stock
Purchase Plan"). The Stock Purchase Plan is intended to be an "employee stock
purchase plan" as defined in Code Section 423. Under the Stock Purchase Plan,
eligible employees may authorize payroll deductions at the end of a semi-annual
purchase period of from one to ten percent of their compensation (as defined in
the Stock Purchase Plan), with a minimum deduction of ten dollars per payday and
a maximum aggregate deduction of $10,625 during each semi-annual purchase
period, to purchase Common Stock at a price of 85% of the fair market value
thereof as of the first Trading Day (as defined in the Stock Purchase Plan) of
the offering period. The aggregate number of shares of Common Stock which may be
purchased by all participants under the Stock Purchase Plan may not exceed
750,000, subject to certain adjustments. The Company estimates that, as of
January 31, 1998, approximately 880 employees of the Company and its
subsidiaries are eligible to participate in the Stock Purchase Plan. The Stock
Purchase Plan will terminate at the option of the Company's Compensation
Committee or, if not earlier, at the time purchase rights have been exercised
for all shares of Common Stock reserved for purchase under the Stock Purchase
Plan.

THE COMPANY'S 401(K) PLAN

The Company assumed, effective immediately prior to completion of its
initial public offering, the Code Section 401(k) plan (the "401(k) Plan")
sponsored by a predecessor of the Company. The 401(k) Plan is intended to be a
tax-qualified retirement plan. Under the 401(k) Plan, eligible employees of the
Company and employees of its participating subsidiaries may elect to make
pre-tax saving deferrals of from one percent to 15% of their compensation each
year, subject to annual limits on such deferrals (e.g., $10,000 in 1998)
41

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imposed by the Code. The Company may also in its discretion, on an annual basis,
make a matching contribution with respect to such participants' elective
deferrals and/or additional Company contributions. The only form of benefit
payment under the 401(k) Plan is a single lump-sum payment equal to the balance
in the participant's account. Under the 401(k) Plan, the vested portion of a
participant's accrued benefit is payable upon such employee's termination of
employment, attainment of age 59 1/2 (with respect to 100% vested accounts
only), retirement, total and permanent disability or death.

PRINCIPAL AND SELLING SHAREHOLDERS

The table below sets forth certain information regarding the beneficial
ownership of the Common Stock at March 11, 1998, as adjusted to reflect the sale
of the Common Stock offered hereby, of (i) each person known by the Company to
own beneficially five percent or more of the Common Stock, (ii) each director of
the Company who beneficially owns shares of Common Stock, (iii) each Named
Executive Officer who beneficially owns shares of Common Stock, (iv) the Selling
Shareholders and (v) all directors and executive officers as a group. Except as
otherwise indicated, the persons or entities listed below have sole voting and
investment power with respect to all shares beneficially owned by them.

[Enlarge/Download Table]

BENEFICIAL
OWNERSHIP
PRIOR TO BENEFICIAL OWNERSHIP
OFFERING(1) NUMBER OF AFTER OFFERING(1)
------------------- SHARES --------------------
NAME NUMBER PERCENT OFFERED(2) NUMBER PERCENT
---------------------------------------------- --------- ------- --------- ---------- -------

John M. Cook(3)(4)............................ 5,531,398 28.6% -- 4,564,793 21.4%
Cook Family Limited Partnership(3)............ 1,732,684 9.0 500,000 1,232,684 5.8
John M. Cook 1998 Revocable Trust(3).......... 1,000,000 5.2 466,605 533,395 2.5
John M. Toma(5)............................... 761,951 4.0 150,000 611,951 2.9
Donald E. Ellis, Jr.(6)....................... 2,000 * -- 2,000 *
Michael A. Lustig(7).......................... 28,130 * -- 28,130 *
Marc S. Eisenberg(8).......................... -- -- -- -- --
Tony G. Mills(9).............................. 1,798,007 9.3 -- 1,798,007 8.4
Stanley B. Cohen(10).......................... 900,000 4.7 250,000 650,000 3.1
Jonathan Golden(3)(11)........................ 1,082,928 5.6 200,000 882,928 4.2
Fred W. I. Lachotzki(12)...................... 14,000 * -- 14,000 *
E. James Lowrey(12)........................... 4,000 * -- 4,000 *
Berkshire Fund III(13)........................ 1,766,288 9.2 502,125 1,264,163 5.9
Bradley M. Bloom(13)(14)...................... 1,780,229 9.3 4,321 1,100,827 5.2
Jane Brock-Wilson(13)(14)..................... 1,773,949 9.2 2,374 1,096,236 5.2
Kevin T. Callaghan(13)(14).................... 1,773,949 9.2 2,374 1,096,494 5.2
J. Christopher Clifford(13)(14)(15)........... 1,792,129 9.3 3,687 1,113,361 5.2
Russell L. Epker(13)(14)...................... 1,778,185 9.3 3,687 1,099,417 5.2
Carl Ferenbach(13)(14)........................ 1,780,229 9.3 4,321 1,100,827 5.2
Garth H. Greimann(13)(14)..................... 1,773,949 9.3 -- 1,098,868 5.2
Ross M. Jones................................. 744 * 230 514 *
Ian K. Loring................................. 744 * 230 514 *
Richard K. Lubin Daughters' Trust dtd 8/18/91
fbo Emily(15)............................... 6,972 * 2,161 4,811 *
Richard K. Lubin Daughters' Trust dtd 8/18/91
fbo Kate(15)................................ 6,972 * 2,161 4,811 *
Robert J. Small............................... 2,554 * 791 1,763 *
Sally Shaps Trust............................. 134,375 * 62,500 71,875 *
Charles C. Kraft(16).......................... 126,540 * 58,770 67,770 *
Richard and Carol Leavitt Family Trust........ 18,750 * 9,375 9,375 *
Richard and Carol Leavitt Joint Tenants....... 2,750 * 2,750 -- --
Epargne Capitalisation Intermediare........... 114,359 * 114,359 -- --
Epargne Developpement......................... 57,179 * 57,179 -- --
All executive officers and directors as a
group (14 Persons)(17)...................... 11,889,881 61.1 2,068,730 9,821,151 45.8

------------------------

* Less than one percent.
(1) Applicable percentage of ownership at March 11, 1998 is based upon
19,264,124 shares of Common Stock outstanding. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting and investment power with respect to the
shares shown as beneficially owned. Shares of Common Stock subject to
options currently exercisable or exercisable

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within 60 days are deemed outstanding for computing the percentage
ownership of the person holding such options, but are not deemed
outstanding for computing the percentage ownership of any other persons.
(2) Amounts indicated reflect actual number of shares offered and assumes no
exercise of the Underwriters' over-allotment option. In the event such
option is exercised in full, Mr. Cook will sell, through the John M. Cook
1998 Revocable Trust, an additional 533,395 shares and will beneficially
own 4,031,398 shares, or 18.9%, of the Common Stock outstanding after this
offering. Assuming the Underwriters' over-allotment option is exercised in
full, Berkshire Fund III will sell an additional 99,767 shares and will
beneficially own 1,164,396 shares, or 5.8%, of the Common Stock outstanding
after this offering. Assuming the Underwriters' over-allotment option is
exercised in full, Mr. Toma will sell, through the Toma Family Limited
Partnership, an additional 21,605 shares and will beneficially own 590,346
shares, or 2.8% of the Common Stock outstanding after this offering.
(3) The business address for the named individual or entity is 2300 Windy Ridge
Parkway, Suite 100 North, Atlanta, Georgia 30339-8426.
(4) Does not include shares held for the benefit of John M. Cook or M. Lucy
Cook for which Tony G. Mills is the trustee and has the sole investment and
voting power with respect to such shares. Includes 1,732,684 shares held by
the Cook Family Limited Partnership, for which Mr. Cook serves as the
general partner and 67,867 shares held by his spouse. Also includes
1,000,000 shares held by the John M. Cook 1998 Revocable Trust, for which
Mr. Cook is the trustee. Also includes 134,000 shares owned by Cook Family
Foundation, Inc., of which Mr. Cook, his spouse and members of his
immediate family are the directors and 74,706 shares subject to options
which either are currently exercisable or will become exercisable within 60
days from the date of this Prospectus.
(5) Includes 38,233 shares held for the benefit of Mr. Toma for which Tony G.
Mills and Mr. Toma's wife serve as co-trustees and the trustees share
investment and voting power with respect to such shares. Includes 218,870
shares held by the Toma Family Limited Partnership, for which Mr. Toma
serves as the general partner. Also includes 50,000 shares held by Mr.
Toma's wife, 3,901 shares held by the Mary Caitlin Cook Trust, of which Mr.
Toma is the trustee, and 40,000 shares subject to options which either are
exercisable or will become exercisable within 60 days from the date of this
Prospectus. Does not include shares held for the benefit of Mr. Toma's
children in the Michael Toma Family Trust and the Michelle Toma Family
Trust.
(6) The shares indicated represent options which are either currently
exercisable or exercisable within 60 days from the date of this Prospectus.
(7) Includes 27,100 shares subject to options which are either currently
exercisable or will become exercisable within 60 days from the date of this
Prospectus.
(8) Excludes 421,138 shares in which Mr. Eisenberg has a pecuniary interest,
but as to which Mr. Eisenberg disclaims beneficial ownership. Such shares
are held pursuant to commercial relationship with the record owner. Mr.
Eisenberg has informed the Company that he neither has nor shares voting or
investment power with respect to such shares and that he does not have the
right either to acquire such voting or investment power within 60 days or
to terminate the commercial relationship with the record holder within 60
days.
(9) Includes shares held by trusts containing 1,697,774 shares for the benefit
of Mr. Cook and his spouse of which Mr. Mills is the sole trustee and by
trusts containing 78,233 shares for the benefit of Mr. Toma and certain
members of his immediate family of which Mr. Mills is a co-trustee. Also
includes 22,000 shares subject to options which are either currently
exercisable or will become exercisable within 60 days from the date of this
Prospectus.
(10) Includes 188,472 shares held for the benefit of Mr. Cohen for which Shirley
L. Cohen, Mr. Cohen's spouse, is the trustee and has sole voting and
investment power with respect to such shares.
(11) Includes 129,935 shares held for the benefit of Mr. Golden for which
Roberta P. Golden is the trustee and has sole voting and investment power
with respect to such shares.
(12) Includes 4,000 shares subject to options which are either currently
exercisable or will become exercisable within 60 days from the date of this
Prospectus.
(13) The business address for the named individual or entity is Suite 3300, One
Boston Place, Boston, Massachusetts 02108-4401.
(14) Includes 1,766,288 shares held by Berkshire Fund III for which the general
partner is Third Berkshire Associates. Ms. Brock-Wilson and Messrs. Bloom,
Callaghan, Clifford, Epker, Ferenbach and Greimann serve as general
partners of Third Berkshire Associates. These individuals each disclaim

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beneficial ownership of the shares owned by Berkshire Fund III, except to
the extent of their respective pecuniary interests therein.
(15) Includes shares held by Richard K. Lubin Daughters' Trust dtd 8/18/91 fbo
Emily and Richard K. Lubin Daughters' Trust dtd 8/18/91 fbo Kate, for which
Mr. Clifford serves as co-trustee and shares voting and investment power
with respect to such shares.
(16) Includes 9,000 shares subject to options which are either exercisable or
will become exercisable within 60 days from the date of this Prospectus.
(17) Includes options to purchase an aggregate of 193,806 shares which are
either currently exercisable or will become exercisable within 60 days from
the date of this Prospectus.

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 60,000,000 shares of
Common Stock, no par value, and 1,000,000 shares of Preferred Stock, no par
value ("Preferred Stock").

COMMON STOCK

At March 11, 1998, there were 19,264,124 shares of Common Stock outstanding
held of record by 146 shareholders. Immediately following the offering,
21,264,124 shares of Common Stock will be outstanding. Holders of Common Stock
are entitled to one vote for each share held of record on all matters submitted
to a vote of the shareholders. Holders of Common Stock do not have cumulative
voting rights; consequently, a holder of more than 50% of the shares of Common
Stock would be able to elect all of the Company's directors eligible for
election in a given year.

Subject to the preferences that may be applicable to any then outstanding
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board out of
funds legally available therefor. Upon any liquidation, dissolution or winding
up, whether voluntary or involuntary, of the Company, holders of Common Stock
are entitled to receive pro rata all assets available for distribution to
shareholders after payment or provision for payment of the debts and other
liabilities of the Company and the liquidation preferences of any then
outstanding Preferred Stock. There are no preemptive or other subscription
rights, conversion rights, or redemption or sinking fund provisions with respect
to shares of Common Stock. All outstanding shares of Common Stock are, and all
shares of Common Stock to be outstanding upon consummation of the offering will
be, fully paid and nonassessable. For a description of a provision eliminating
certain personal liability of directors, see "-- Certain Articles and Bylaw
Provisions."

PREFERRED STOCK

The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock. Currently, no shares of Preferred Stock are issued or outstanding. The
Preferred Stock may be issued at any time or from time to time in one or more
series with such designations, powers, preferences, rights, qualifications,
limitations and restrictions (including dividend, conversion and voting rights)
as may be fixed by the Board, without any further vote or action by the
shareholders. Although the Company has no present plans to issue any Preferred
Stock, the ownership and control of the Company by the holders of the Common
Stock would be diluted if the Company were to issue Preferred Stock that had
voting rights or that was convertible into Common Stock. In addition, the
holders of Preferred Stock issued by the Company would be entitled by law to
vote on certain transactions such as a merger or consolidation, and thus the
issuance of Preferred Stock could dilute the voting rights of the holders of the
Common Stock on such issues. The issuance of Preferred Stock also could have the
effect of delaying, deferring or preventing a change in control of the Company.

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CERTAIN ARTICLES AND BYLAW PROVISIONS

Shareholders' rights and related matters are governed by the Georgia
Business Corporation Code and the Company's Articles of Incorporation and
Bylaws. Certain provisions of the Articles of Incorporation and Bylaws of the
Company, which are summarized below, could either alone or in combination with
each other, have the effect of preventing a change in control of the Company or
making changes in management more difficult.

Corporate Takeover Provisions. The Company's Bylaws make applicable to the
Company provisions authorized by the Georgia Business Corporation Code relating
to business combinations with interested shareholders ("Corporate Takeover
Provisions"). The Corporate Takeover Provisions are designed to encourage any
person, before acquiring 10% of the Company's voting shares, to negotiate with
and seek approval of the Board of Directors for the terms of any contemplated
business combination. The Corporate Takeover Provisions will prevent for five
years certain business combinations with an "interested shareholder" (as defined
in the Corporate Takeover Provisions) unless (i) prior to the time such
shareholder became an interested shareholder, the Board of Directors approved
either the business combination or the transaction that resulted in the
shareholder becoming an interested shareholder, (ii) in the transaction that
resulted in the shareholder becoming an interested shareholder, the interested
shareholder became the beneficial owner of at least 90% of the outstanding
voting shares of the Company excluding, however, shares owned by the Company's
officers, directors, affiliates, subsidiaries and certain employee stock plans,
or (iii) subsequent to becoming an interested shareholder, such shareholder
acquired additional shares resulting in the interested shareholder becoming the
owner of at least 90% of the Company's outstanding voting shares and the
business combination being approved by the holders of a majority of the
Company's voting shares, excluding from the vote the stock owned by the
interested shareholder or by the Company's officers, directors, affiliates,
subsidiaries and certain employee stock plans. The Corporate Takeover Provisions
may be repealed only by the affirmative vote of (i) two-thirds of all directors
who are unaffiliated with an interested shareholder and (ii) a majority of all
outstanding shares, excluding those held by affiliates of an interested
shareholder. Shareholders of the Company who became interested shareholders
prior to the time of the adoption of the Corporate Takeover Provisions are not
subject to such provisions.

Issuance of Preferred Stock. The Company's Articles of Incorporation
permit the Board of Directors to issue shares of preferred stock of the Company
without shareholder approval, with the rights and privileges of such preferred
stock determined by the Board of Directors. Through the issuance of such
preferred stock, the Board could confer rights upon existing shareholders that
may make a takeover of the Company less desirable.

Classified Board of Directors. The Company's Board of Directors is divided
into three classes of directors serving staggered terms of three years each. As
a result, it will be more difficult to change the composition of the Company's
Board of Directors, which may discourage or make more difficult an attempt by a
person or group of persons to obtain control of the Company.

Transactions with Interested Shareholders. The Company's Bylaws provide
that the Company will be subject to the fair price provisions of the Georgia
Business Corporation Code (the "Fair Price Provisions"). The Fair Price
Provisions require that certain business combinations between the Company and
shareholders who beneficially own ten percent or more of the Company's
outstanding stock must satisfy certain conditions unless the business
combination is (i) unanimously approved by members of the Board of Directors who
are not affiliated with the interested shareholder, or (ii) recommended by
two-thirds of such unaffiliated directors and approved by a majority of
outstanding shares, excluding those held by affiliates of the interested
shareholder. The conditions to be satisfied require (a) that the aggregate of
the cash and "fair market value," as defined in the Georgia Business Corporation
Code, of property exchanged for shares equal to the highest of (i) the highest
per share price paid by the interested shareholder within certain periods, (ii)
the fair market value of the shares on the day the interested transaction is
announced or (iii) the highest preferential amount to which holders of such
shares would be entitled upon liquidation or dissolution of the Company; (b) the
interested shareholder acquires the shares using the same form of consideration
as used in any prior acquisition of the shares; and (c) there have not been
certain changes in the Company's dividend policy or practice since the
interested shareholder became an interested shareholder.

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Special Meeting Call Restrictions. Under the Company's Articles of
Incorporation, special meetings of the shareholders may only be called by the
Chairman of the Board, the President, a majority of the Board of Directors or
upon the written demand of the holders of 35% of the outstanding shares of
Common Stock entitled to vote at any such meeting, provided that the Company has
more than 100 shareholders. If the Company has 100 or fewer shareholders, 25% of
the holders of the outstanding shares of Common Stock entitled to vote at a
meeting may submit written demand for such meeting. This provision may make it
more difficult to shareholders to require the Company to call a special meeting
of shareholders to consider any proposed corporate action, including any sale of
the Company, which may be favored by the shareholders.

Number of Directors, Removal, Filling Vacancies. Under the Company's
Bylaws, the Board of Directors determines the number of directors on the Board
and fills any newly created directorships or director vacancies, although
directors elected by the Board to fill vacancies may serve only until the next
annual meeting of shareholders at which directors are elected by the
shareholders to fill such vacancies.

Constituency Considerations. The Company's Articles of Incorporation
provide the Board of Directors the right to consider the interests of various
constituencies, including employees, clients and creditors of the Company, as
well as the communities in which the Company is located, in addition to the
interest of the Company and its shareholders, in discharging their duties in
determining what is in the Company's best interests.

Limitation of Directors' Liability. The Company's Articles of
Incorporation eliminate, subject to certain exceptions, the personal liability
of directors to the Company or its shareholders for monetary damages for
breaches of such directors' duty of care or other duties as a director. The
Articles do not provide for the elimination of or any limitation on the personal
liability of a director for (i) any appropriation, in violation of the
director's duties, of any business opportunity of the Company, (ii) acts or
omissions that involve intentional misconduct or a knowing violation of law,
(iii) unlawful corporate distributions, or (iv) any transaction from which the
director received an improper benefit. In addition, the Company's Bylaws provide
broad indemnification rights to directors and officers so long as the director
or officer acted in a manner believed in good faith to be in or not opposed to
the best interests of the Company, and with respect to criminal proceedings, if
the director had no reasonable cause to believe his or her conduct was unlawful.
The personal liability of directors for monetary damages for violations of
federal securities laws is not affected by these provisions. These provisions of
the Articles and Bylaws will limit the remedies available to a shareholder who
is dissatisfied with a Board decision protected by these provisions, and such
shareholder's only remedy in that circumstance may be to bring a suit to prevent
the Board's action. In many situations, this remedy may not be effective, as,
for example, when shareholders have no prior awareness of the Board's
consideration of the particular transaction or event.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is First
Union National Bank.

SHARES ELIGIBLE FOR FUTURE SALE

SALES OF RESTRICTED SHARES

Approximately 8,941,049 Lock-up Shares are subject to lock-up agreements
between the holders thereof and the representatives of the Underwriters,
pursuant to which the holders of the Lock-up Shares have agreed not to offer,
sell, contract to sell or grant any option to purchase or otherwise dispose of
Common Stock until after the 90-day Lock-up Period, subject to limited
exceptions. See "Underwriting." Following the expiration

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of the Lock-up Period, substantially all of the Lock-up Shares will become
available for immediate resale in the public market subject to the volume and
other limitations of Rule 144. In connection with the APRSI, Hale, Alma and
TradeCheck transactions, an additional 714,737 shares of Common Stock are
subject to contractual lock-up provisions with the Company that will expire
beyond the Lock-up Period.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least one year, including a person who may be deemed an Affiliate of the
Company, is entitled to sell, within any three-month period, a number of shares
of Common Stock that does not exceed the greater of one percent of the
then-outstanding shares of Common Stock of the Company (approximately 212,641
shares after giving effect to this offering) and the average weekly reported
trading volume of the Company's Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 are subject to certain restrictions
relating to manner of sale, notice and availability of current public
information about the Company. In addition, under Rule 144(k), a person who is
not an Affiliate and has not been an Affiliate at any time during the 90 days
preceding a sale, and who has beneficially owned shares for at least two years,
would be entitled to sell such shares immediately following this offering
without regard to the volume limitations, manner of sale provisions or notice or
other requirements of Rule 144 of the Securities Act. The transfer agent,
however, may require an opinion of counsel that a proposed sale of shares comes
within the terms of Rule 144 of the Securities Act prior to effecting a transfer
of such shares. Such opinion would be provided by and at the cost of the
transferor.

OPTIONS

At March 11, 1998, options to purchase a total of 2,531,293 shares of
Common Stock pursuant to the 1996 Plan were outstanding, of which 348,746 were
exercisable. Of the shares subject to options, 597,193 are subject to lock-up
agreements. Upon completion of this offering, an additional 837,507 shares of
Common Stock will be available for future option grants under the 1996 Plan. In
January 1998, the Board approved, subject to shareholder approval, an additional
1,000,000 shares of Common Stock to be reserved for issuance under the 1996
Plan. See "Management -- Option Grants Table" and "-- 1996 Stock Option Plan."

STOCK PURCHASE PLAN

In May 1997, the Company adopted the Stock Purchase Plan. The aggregate
number of shares of Common Stock that may be purchased by all participants under
the Stock Purchase Plan may not exceed 750,000, subject to certain adjustments.
At March 11, 1998, 32,348 shares of Common Stock had been purchased under the
Stock Purchase Plan. See "Management -- Employee Stock Purchase Plan."

REGISTRATION RIGHTS

Pursuant to agreements with certain shareholders entered into in connection
with the reorganization of the Company before its initial public offering,
holders of 1,865,633 shares of Common Stock (the "Registrable Securities") have
certain rights with respect to the registration of such shares under the
Securities Act. If, at any time, the Company proposes to register any of its
securities under the Securities Act (with certain limited exceptions), such
persons will be entitled to notice of such registration and to include their
shares of Common Stock in such registration. The underwriters of any offering
have the right to limit the number of shares to be included in such registration
by such persons if the underwriters state in writing that they are unwilling to
include any or all of such securities in the proposed underwriting because such
inclusion will materially interfere with the orderly sale and distribution of
the securities being offered by the Company. Generally, the Company is required
to bear the expenses of all such registrations, except that holders of
Registrable Securities will be required to bear their pro rata share of the
underwriters' discounts and filing fees related to the inclusion of such
Registrable Securities in such registration statement.

In addition, the holders of the Registrable Securities have the right to
require the Company on one occasion to file a registration statement under the
Securities Act with respect to Registrable Securities owned by them provided the
net proceeds in such offering shall exceed a minimum stated amount. Following
notice by the Company to the other holders of Registrable Securities that
certain of such holders have exercised their demand registration rights, such
other holders will have the option of including their Registrable Securities in

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such registration statement upon approval of a majority of the holders so
requesting registration. The Company will be required to use its best efforts to
effect such registration, subject to certain conditions and limitations. The
holders of the Registrable Securities also are entitled to demand on three
occasions that the Company register their shares of Common Stock on a Form S-3
or "short-form" registration statement. These holders are entitled to request no
more often than once every 12 months that their Registrable Securities be
registered for resale on a Form S-3. All demand registration rights of these
holders expire on March 26, 1999. Generally, the Company is required to bear the
expenses of all requested registration statements, except that holders of
Registrable Securities will be required to bear their pro rata share of the
underwriters' discounts and filing fees attributable to the inclusion of such
Registrable Securities in such registration statement.

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UNDERWRITING

The Underwriters named below (the "Underwriters"), acting through their
representatives, BancAmerica Robertson Stephens, Hambrecht & Quist LLC and The
Robinson-Humphrey Company, LLC (the "Representatives"), have severally agreed
with the Company and the Selling Shareholders, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company and the
Selling Shareholders the respective number of shares of Common Stock set forth
opposite their names below. The Underwriters are committed to purchase and pay
for all shares if any are purchased.

[Download Table]

NUMBER OF
UNDERWRITER SHARES
----------- ---------

BancAmerica Robertson Stephens.............................. 1,925,000
Hambrecht & Quist LLC....................................... 962,500
The Robinson-Humphrey Company, LLC.......................... 962,500
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 150,000
Smith Barney Inc............................................ 150,000
Barrington Research Associates, Inc......................... 125,000
Brean Murray & Co., Inc..................................... 125,000
---------
Total............................................. 4,400,000
=========

The nature of the Underwriters' obligation under the Underwriting Agreement
is such that all shares of Common Stock being offered, excluding shares covered
by the over-allotment option granted to the Underwriters, must be purchased if
any shares of Common Stock are purchased.

The Company and the Selling Shareholders have been advised by the
Representatives that the Underwriters initially propose to offer the shares of
Common Stock to the public at the public offering price set forth on the cover
page of this Prospectus and to certain dealers at such price less a concession
of not more than $.60 per share, of which $.10 may be reallowed to other
dealers. After the public offering, the public offering price, concession and
reallowance to dealers may be reduced by the Representatives. No such reduction
shall change the amount of proceeds to be received by the Company or the Selling
Shareholders as set forth on the cover page of this Prospectus.

Certain Selling Shareholders have granted to the Underwriters an option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 660,000 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the Company and the
Selling Shareholders will receive for the 4,400,000 shares that the Underwriters
have agreed to purchase. To the extent that the Underwriters exercise such
option, each of the Underwriters will have made a firm commitment to purchase
approximately the same percentage of such additional shares that the number of
shares of Common Stock to be purchased by it shown in the above table represents
as a percentage of the 4,400,000 offered hereby. If purchased, such additional
shares will be sold by the Underwriters on the same terms as those on which the
4,400,000 shares are being sold.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Shareholders against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
Underwriting Agreement.

The Company, its directors, executive officers and certain shareholders
have agreed that, subject to certain limited exceptions, they will not, for a
period of 90 days after the date of this Prospectus, sell, offer to sell,
contract to sell or otherwise dispose of any of their shares of Common Stock
(except for sales described in or contemplated by this Prospectus) or other
securities of the Company without the prior written consent of BancAmerica
Robertson Stephens.

The Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.

The Representatives of the Underwriters have advised the Company that,
pursuant to Regulation M under the Securities Act, certain persons participating
in the offering may engage in transactions, including
49

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stabilizing bids, syndicate covering transactions or the imposition of penalty
bids, which may have the effect of stabilizing or maintaining the market price
of the Common Stock at a level above that which might otherwise prevail in the
open market. A "stabilizing bid" is a bid for or the purchase of the Common
Stock on behalf of the Underwriters for the purpose of fixing or maintaining the
price of the Common Stock. A "syndicate covering transaction" is the bid for or
the purchase of the Common Stock on behalf of the Underwriters to reduce a short
position incurred by the Underwriters in connection with the offering. A
"penalty bid" is an arrangement permitting the Representatives to reclaim the
selling commission otherwise accruing to an Underwriter or syndicate member in
connection with the offering if the Common Stock originally sold by such
Underwriter or syndicate member is purchased by the Representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such Underwriter or syndicate member. The Representatives have advised the
Company that such transactions may be effected on The Nasdaq Stock Market or
otherwise and, if commenced, may be discontinued at any time.

As permitted by Rule 103 under the Exchange Act, Underwriters or
prospective Underwriters that are market makers ("passive market makers") in the
Common Stock may make bids for or purchases of Common Stock on The Nasdaq Stock
Market until such time, if any, when a stabilizing bid for such securities has
been made. Rule 103 generally provides that: (i) a passive market maker's net
daily purchases of the Common Stock may not exceed 30% of its average daily
trading volume in such securities for the two full consecutive calendar months
(or any 60 consecutive days ending within the ten days) immediately preceding
the filing date of the registration statement of which this Prospectus forms a
part; (ii) a passive market maker may not effect transactions or display bids
for the Common Stock at a price that exceeds the highest independent bid for the
Common Stock by persons who are not passive market makers; and (iii) bids made
by passive market makers must be identified as such.

LEGAL MATTERS

Certain legal matters with respect to the validity of the shares of Common
Stock will be passed upon for the Company and the Selling Shareholders by Long
Aldridge & Norman LLP, Atlanta, Georgia. Certain legal matters related to the
offering will be passed upon for the Underwriters by Alston & Bird LLP, Atlanta,
Georgia.

EXPERTS

The Consolidated Financial Statements of the Company as of December 31,
1996 and 1997, and for each of the years in the three-year period ended December
31, 1997, have been included herein or incorporated by reference and in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent auditors, appearing elsewhere herein or incorporated by reference,
and upon the authority of said firm as experts in accounting and auditing.

The Consolidated Financial Statements of Financiere Alma, S.A. and
subsidiaries as of December 31, 1995 and 1996 and June 30, 1997, and for each of
the years in the two-year period ended December 31, 1996 and the six months
ended June 30, 1997, have been included herein and in the Registration Statement
in reliance upon the report of ERNST & YOUNG Entrepreneurs, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

The Consolidated Financial Statements of Financiere Alma, S.A. and
subsidiaries as of December 31, 1997 and for the three months ended December 31,
1997 (not presented separately herein) have been incorporated herein and in the
Registration Statement in reliance upon the report of ERNST & YOUNG
Entrepreneurs, appearing elsewhere herein or incorporated by reference, and upon
the authority of said firm as experts in accounting and auditing.

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ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at prescribed rates at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC
20549, and should also be available for inspection and copying at the following
regional offices of the Commission: Seven World Trade Center, 13th Floor, New
York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Such material also may be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. Quotations relating to the Common Stock appear on The Nasdaq
Stock Market's National Market. Such reports, proxy statements and other
information concerning the Company also can be inspected at the offices of the
Nasdaq National Market, 1735 K Street, N.W., Washington, DC 20006.

The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus, which is a part of the
Registration Statement, omits certain of the information set forth in, or
annexed as exhibits to, the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations of the Commission. For
further information with respect to the Company and the shares of Common Stock
offered hereby, reference is hereby made to the Registration Statement and the
related exhibits thereto. Copies of the Registration Statement, including
exhibits, may be obtained from the aforementioned public reference facilities of
the Commission upon payment of the prescribed fees, or may be examined without
charge at such facilities. Statements contained herein concerning any document
filed as an exhibit are necessarily summaries, and in each such instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission under the
Exchange Act are incorporated by reference in and made a part of this
Prospectus:

(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended; and

(b) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated March 26, 1996 (Commission File
No. 0-28000).

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of this Offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, or any other
subsequently filed document, which also is incorporated or deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company hereby undertakes to provide, without
charge, to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the information incorporated herein by reference. Exhibits to
any of such documents, however, will not be provided unless such exhibits are
specifically incorporated by reference into such documents. The request should
be addressed to the Company's principal executive offices, attention: Secretary,
2300 Windy Ridge Parkway, Suite 100 North, Atlanta, Georgia 30339-8426,
telephone number (770) 955-3815.
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INDEX TO FINANCIAL STATEMENTS

[Download Table]

PAGE
NUMBER
------

THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND
SUBSIDIARIES HISTORICAL:
Independent Auditors' Reports............................... F-2
Consolidated Statements of Earnings for the years ended
December 31, 1995, 1996 and 1997.......................... F-4
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... F-5
Consolidated Statements of Shareholders' Equity (Deficit)
for the years ended December 31, 1995, 1996 and 1997...... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997.......................... F-7
Notes to Consolidated Financial Statements.................. F-8
PRO FORMA:
Unaudited Pro Forma Consolidated Financial Information...... F-23
Unaudited Pro Forma Consolidated Statement of Earnings for
year ended December 31, 1996.............................. F-24
Unaudited Pro Forma Consolidated Statement of Earnings for
nine months ended September 30, 1997...................... F-25
Notes to Unaudited Pro Forma Consolidated Statements of
Earnings.................................................. F-26
Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of September 30, 1997..................................... F-27
Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet..................................................... F-28
FINANCIERE ALMA, S.A. AND SUBSIDIARIES
Independent Auditors' Report................................ F-29
Consolidated Statements of Earnings for the years ended
December 31, 1995 and 1996, the six months ended June 30,
1997 and the nine months ended September 30, 1996 and
1997...................................................... F-30
Consolidated Balance Sheets as of December 31, 1995 and
1996, June 30, 1997 and September 30, 1997................ F-31
Consolidated Statements of Shareholders' Equity for years
ended December 31, 1995 and 1996, six months ended June
30, 1997 and nine months ended September 30, 1997......... F-32
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1996, six months ended June 30, 1997
and nine months ended September 30, 1996 and 1997......... F-33
Notes to Consolidated Financial Statements.................. F-34

F-1

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INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
The Profit Recovery Group International, Inc.:

We have audited the accompanying Consolidated Balance Sheets of The Profit
Recovery Group International, Inc. and subsidiaries as of December 31, 1996 and
1997, and the related Consolidated Statements of Earnings, Shareholders' Equity
(Deficit), and Cash Flows for each of the years in the three-year period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We did
not audit the consolidated financial statements of Financiere Alma, S.A. and
subsidiaries, which financial statements reflect total assets constituting 12%
and total revenues constituting 6% in 1997 of the related consolidated totals.
Those financial statements where audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for Financiere Alma, S.A. and subsidiaries, is based solely on the report of the
other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of The Profit Recovery Group
International, Inc. and subsidiaries as of December 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997 in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Atlanta, Georgia
January 31, 1998

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INDEPENDENT AUDITORS' REPORT

The Directors and Shareholders of
Financiere Alma, S.A.

We have audited the accompanying consolidated balance sheet of Financiere
Alma, S.A. and subsidiaries as of December 31, 1997 and the related consolidated
statements of earnings, shareholders' equity and cash flows for the three months
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Financiere
Alma, S.A. and subsidiaries as of December 31, 1997, and the results of their
operations and their cash flows for the three months ended December 31, 1997 in
conformity with accounting principles generally accepted in the United States.

ERNST & YOUNG Entrepreneurs
Departement d'E&Y Audit

Any Antola
Paris, France
January 31, 1998

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

[Enlarge/Download Table]

YEARS ENDED DECEMBER 31,
------------------------------
1995 1996 1997
------- ------- --------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)

HISTORICAL
Revenues.................................................... $56,031 $77,330 $112,363
Cost of revenues............................................ 30,554 40,330 57,726
Selling, general, and administrative expenses (Note 2)...... 19,035 25,961 37,254
Restructuring costs (Note 14)............................... -- -- 1,208
------- ------- --------
Operating income.................................. 6,442 11,039 16,175
Interest (expense), net (Note 2)............................ (1,630) (100) (403)
------- ------- --------
Earnings before income taxes...................... 4,812 10,939 15,772
Income taxes (Note 5)....................................... 305 7,789 6,149
------- ------- --------
Net earnings...................................... $ 4,507 $ 3,150 $ 9,623
======= ======= ========
PRO FORMA
Historical earnings before income taxes..................... $ 4,812 $10,939
Pro forma income taxes (Note 5)............................. 1,877 4,271
------- -------
Pro forma net earnings............................ $ 2,935 $ 6,668
======= =======
PER SHARE (Note 13)
Earnings (pro forma earnings for 1995 and 1996) per
share -- basic............................................ $ .24 $ .41 $ .52
======= ======= ========
Earnings (pro forma earnings for 1995 and 1996) per
share -- diluted.......................................... $ .21 $ .39 $ .51
======= ======= ========

See accompanying Notes to Consolidated Financial Statements.

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

[Download Table]

DECEMBER 31,
-------------------
1996 1997
-------- --------
(IN THOUSANDS,
EXCEPT
SHARE AND PER SHARE
DATA)

ASSETS
Current assets:
Cash and cash equivalents................................. $ 16,891 $ 19,386
Receivables:
Billed contract receivables............................. 3,864 12,100
Unbilled contract receivables........................... 30,734 41,771
Employee advances....................................... 1,363 2,299
-------- --------
Total receivables.................................. 35,961 56,170
-------- --------
Refundable income taxes................................... 2,049 --
Prepaid expenses and other current assets................. 528 2,430
-------- --------
Total current assets............................... 55,429 77,986
-------- --------
Property and equipment:
Computer and other equipment.............................. 5,753 10,658
Furniture and fixtures.................................... 1,569 2,111
Leasehold improvements.................................... 1,183 1,760
-------- --------
8,505 14,529
Less accumulated depreciation and amortization............ 2,272 5,760
-------- --------
6,233 8,769
-------- --------
Noncompete agreements, less accumulated amortization of
$2,759 in 1996 and $3,797 in 1997......................... 4,509 3,471
Deferred loan costs, less accumulated amortization of $8 in
1996 and $40 in 1997...................................... 56 24
Goodwill, less accumulated amortization of $157 in 1996 and
$986 in 1997.............................................. 393 39,591
Deferred income taxes (Note 5).............................. 1,174 3,585
Other assets................................................ 524 459
-------- --------
$ 68,318 $133,885
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank..................................... $ -- $ 81
Current installments of long-term debt (Note 3)........... 79 1,428
Accounts payable and accrued expenses..................... 1,383 4,835
Accrued payroll and related expenses...................... 16,356 26,075
Deferred income taxes (Note 5)............................ 7,607 9,917
Deferred revenue.......................................... -- 1,087
-------- --------
Total current liabilities.......................... 25,425 43,423
Long-term debt, excluding current installments (Note 3)..... 692 24,365
Deferred compensation (Note 6).............................. 1,642 2,563
Other long-term liabilities................................. -- 462
-------- --------
Total liabilities.................................. 27,759 70,813
-------- --------
Shareholders' equity (Notes 3 and 9):
Preferred stock, no par value. Authorized 1,000,000
shares; none issued or outstanding in 1996 and 1997..... -- --
Common stock, no par value; $.001 stated value per share.
Authorized 60,000,000 shares; issued and outstanding
17,649,152 shares in 1996 and 19,193,676 shares in
1997.................................................... 18 19
Additional paid-in capital................................ 34,188 48,195
Cumulative translation adjustments........................ (31) (1,149)
Retained earnings......................................... 6,384 16,007
-------- --------
Total shareholders' equity......................... 40,559 63,072
Commitments (Notes 2, 3, 4 and 8)
-------- --------
$ 68,318 $133,885
======== ========

See accompanying Notes to Consolidated Financial Statements.

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

[Enlarge/Download Table]

RETAINED TOTAL
ADDITIONAL CUMULATIVE EARNINGS SHAREHOLDERS'
COMMON PAID-IN SUBSCRIPTIONS TRANSLATION (ACCUMULATED EQUITY
STOCK CAPITAL RECEIVABLE ADJUSTMENTS DEFICIT) (DEFICIT)
------ ---------- ------------- ----------- ------------ -------------
(IN THOUSANDS)

BALANCE AT DECEMBER 31,
1994....................... $ 57 $ -- $(3) $ (56) $ 2,358 $ 2,356
Net earnings................. -- -- -- -- 4,507 4,507
Proceeds from subscription
receivable................. -- -- 3 -- -- 3
Effect of reorganization
(Note 1(a))................ -- (1,550) -- -- 1,550 --
Distributions................ -- -- -- -- (10,716) (10,716)
Cumulative translation
adjustments................ -- -- -- 5 -- 5
Issuance of common stock in
acquisition of Fial &
Associates, Inc............ 1 442 -- -- -- 443
---- -------- --- ------- ------- -------
BALANCE AT DECEMBER 31,
1995....................... 58 (1,108) -- (51) (2,301) (3,402)
Net earnings................. -- -- -- -- 3,150 3,150
Effect of stock split........ (57) 57 -- -- -- --
Issuance of shares under
employee stock option
plans...................... -- 132 -- -- -- 132
Tax effect of issuance of
option shares to
employees.................. -- 115 -- -- -- 115
Effect of reorganization,
including termination of
Subchapter S and
partnership status (Note
1(a))...................... 2 (10,464) -- 51 10,411 --
Distributions................ -- -- -- -- (4,876) (4,876)
Cumulative translation
adjustments................ -- -- -- (31) -- (31)
Issuance of common stock..... 4 34,008 -- -- -- 34,012
Conversion of 5% convertible
debentures................. 11 11,448 -- -- -- 11,459
---- -------- --- ------- ------- -------
BALANCE AT DECEMBER 31,
1996....................... 18 34,188 -- (31) 6,384 40,559
Net earnings................. -- -- -- -- 9,623 9,623
Issuance of shares under
employee stock option
plans...................... -- 366 -- -- -- 366
Tax effect of issuance of
option shares to
employees.................. -- 263 -- -- -- 263
Cumulative translation
adjustments................ -- -- -- (1,118) -- (1,118)
Issuance of common stock in
acquisitions of
businesses................. 1 13,378 -- -- -- 13,379
---- -------- --- ------- ------- -------
BALANCE AT DECEMBER 31,
1997....................... $ 19 $ 48,195 $-- $(1,149) $16,007 $63,072
==== ======== === ======= ======= =======

See accompanying Notes to Consolidated Financial Statements.

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

[Enlarge/Download Table]

YEARS ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
-------- -------- -------
(IN THOUSANDS)

Cash flows from operating activities:
Net earnings.............................................. $ 4,507 $ 3,150 $ 9,623
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization.......................... 1,810 2,460 4,755
Loss on sale of property and equipment................. 79 -- 26
Deferred compensation expense.......................... 474 606 920
Deferred income taxes.................................. 305 6,823 1,703
Foreign translation adjustments........................ 5 (31) (1,118)
Changes in assets and liabilities, net of effect of
acquisition:
Receivables.......................................... (6,755) (16,237) (12,388)
Refundable income taxes.............................. -- (2,049) 1,325
Prepaid expenses and other current assets............ (237) (226) (929)
Other assets......................................... (132) (316) 20
Accounts payable and accrued expenses................ 957 (816) (452)
Accrued payroll and related expenses................. 1,518 8,520 4,644
Deferred revenue..................................... -- -- 103
Other long-term liabilities.......................... -- -- (16)
-------- -------- -------
Net cash provided by operating activities......... 2,531 1,884 8,216
-------- -------- -------
Cash flows from investing activities:
Purchases of property and equipment....................... (2,048) (5,076) (4,655)
Acquisition of businesses................................. (550) -- (26,096)
Net decrease in notes receivable from affiliates.......... 11 -- --
-------- -------- -------
Net cash used in investing activities............. (2,587) (5,076) (30,751)
-------- -------- -------
Cash flows from financing activities:
Net increase in (repayments of) note payable to bank...... 1,763 (1,763) (66)
Proceeds from issuance of long-term debt.................. 12,800 -- 24,750
Proceeds from loans from shareholders..................... -- 2,600 --
Repayments of long-term debt.............................. (2,853) (7,104) (20)
Payments of deferred loan costs........................... (1,000) -- --
Repayments of loans from shareholders..................... (580) (3,675) --
Net proceeds from common stock............................ 1 34,259 366
Distributions............................................. (10,717) (4,876) --
-------- -------- -------
Net cash provided by (used in) financing
activities...................................... (586) 19,441 25,030
-------- -------- -------
Net change in cash and cash equivalents........... (642) 16,249 2,495
Cash and cash equivalents at beginning of year.............. 1,284 642 16,891
-------- -------- -------
Cash and cash equivalents at end of year.................... $ 642 $ 16,891 $19,386
======== ======== =======
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 1,207 $ 1,091 $ 592
======== ======== =======
Cash paid during the year for income taxes, net of refunds
received............................................... $ -- $ 3,585 $ 3,266
======== ======== =======
Supplemental disclosure of noncash investing and financing
activities:
In 1997, the Company purchased all the outstanding stock
of four companies and the majority of the outstanding
stock of a foreign company. In conjunction with the
acquisitions, the Company assumed liabilities as
follows:
Fair value of assets acquired............................................... $50,619
Cash paid for the acquisitions.............................................. (26,096)
Fair value of shares issued for acquisitions................................ (13,379)
-------
Liabilities assumed.................................................... $11,144
=======

See accompanying Notes to Consolidated Financial Statements.

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of Business and Basis of Presentation

Description of Business

The principal business of The Profit Recovery Group International, Inc. and
subsidiaries (the "Company") is providing accounts payable and other recovery
audit services to large retailers, wholesale distributors, healthcare providers,
technology companies and other large transaction-intensive companies, as well as
to certain governmental agencies. The Company provides its services throughout
North America, Western Europe, and Southeast Asia.

On March 26, 1996, the Company completed the initial public offering of its
common stock.

Basis of Presentation

Prior to a reorganization in April 1995, the Company was a combination of
the following eight entities with common control: The Profit Recovery Group,
Inc. ("PRG"); The Profit Recovery Group International, L.P. ("PRG L.P."); PRG
International Inc.; The Profit Recovery Group Asia, Inc. ("Asia"); The Profit
Recovery Group Canada, Inc. ("Canada"); The Profit Recovery Group France, Inc.
("France"); The Profit Recovery Group Mexico, Inc. ("Mexico"); and The Profit
Recovery Group U.K., Inc. ("UK").

The April 1995 reorganization principally included the contribution of the
capital stock in Asia, Canada, France, Mexico, and the UK (collectively referred
to as the "Foreign Operating Companies") to a newly formed subsidiary of PRG
L.P., PRG International Holding Co. ("PRG Holdco"). Subsequent to this
reorganization, the Company was a combination of the following three entities
with common ownership: The Profit Recovery Group International I, Inc.
("PRGI" -- formerly PRG), PRG L.P., and PRG Holdco and its five wholly owned
subsidiaries, which are the Foreign Operating Companies. All reorganization
transactions were between parties under common control and, accordingly, were
accounted for in a manner similar to that in a pooling-of-interests.

In connection with the Company's March 1996 initial public offering of its
common stock, a further reorganization was effected. Immediately subsequent to
this reorganization, the Company consisted of The Profit Recovery Group
International, Inc. as the publicly traded parent company and seven wholly owned
subsidiaries: PRGI, Asia, Canada, France, Mexico, UK, and The Profit Recovery
Group Belgium, Inc. ("Belgium"). All reorganization transactions were between
parties under common control and, accordingly, were accounted for in a manner
similar to that in a pooling-of-interests. Upon completion of the March 1996
reorganization, United States operations were conducted through PRGI and the
international operations through the other six subsidiaries. Various additional
operating entities, both domestic and international, have been acquired or
established subsequent to the March 1996 reorganization.

(b) Principles of Consolidation

The consolidated financial statements of the Company in 1996 and 1997, and
the combined financial statements of the Company for 1995 include the financial
statements of the aforementioned entities. All significant intercompany balances
and transactions have been eliminated in consolidation or combination.

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates. A material estimate that is particularly
susceptible to change is the estimation of uncollectible claims (see (c) Revenue
Recognition).

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's revenues are based on specific contracts with its clients.
Such contracts generally specify (a) time periods covered by the audit, (b)
nature and extent of audit services to be provided by the Company, (c) client's
duties in assisting and cooperating with the Company, and (d) fee payable to the
Company expressed as a specified percentage of the amounts recovered by the
client resulting from liability overpayment claims identified. In addition to
contractual provisions, most clients also establish specific procedural
guidelines which the Company must satisfy prior to submitting claims for client
approval. These guidelines are unique to each client and impose specific
requirements on the Company such as adherence to vendor interaction protocols,
provision of advance written notification to vendors of forthcoming claims,
securing written claim validity concurrence from designated client personnel
and, in limited cases, securing written claim validity concurrence from the
involved vendors. The Company defers revenue recognition until client
guidelines, of whatever nature, have been satisfied.

Accepted claims basis of revenue recognition

With respect to accounts payable and ancillary audit services for
retailers, wholesale distributors and governmental agencies (the Company's
historical client base), the Company recognizes revenues at the time overpayment
claims are presented to and approved by its clients, as adjusted for estimated
uncollectible claims.

For accounts payable and ancillary audit services provided to retailers,
wholesale distributors and governmental agencies, the Company believes that it
has completed substantially all contractual obligations to its client at the
time an identified and documented claim which satisfies all client-imposed
guidelines is presented to, and approved by, appropriate client personnel. The
Company further believes that at the time a claim is submitted and accepted by
its client, such claim represents a valid overpayment due to the client from its
vendor. Accordingly, the Company believes that it is entitled to its fee upon
acceptance of such claim by its client, subject to (a) customary and routine
claim disallowance adjustments by the vendor resulting primarily from the
receipt of previously unknown information, and (b) applicable laws.
Disallowances of client-approved claims are susceptible to experience-based
estimation.

The Company's standard client contract for accounts payable and ancillary
audit services provided to retailers, wholesale distributors and governmental
agencies imposes a duty on the client to process promptly all claims against
vendors. In the interest of vendor relations, however, many clients modify the
standard client contract with the Company to provide that they retain discretion
whether to pursue collection of a claim. In the Company's experience, it is
extremely unusual for a client to forego the collection of a large, valid claim.
In some cases, a vendor may dispute a claim by providing additional
documentation or information supporting its position. Consequently, many clients
revise the Company's standard client contract to clarify that the Company is not
entitled to payment of its fee until the client recovers the claim from its
vendor.

Submitted claims for accounts payable and ancillary audit services provided
to retailers, wholesale distributors and governmental agencies that are not
approved by clients for whatever reason are not considered when recognizing
revenues. Estimated uncollectible claims are initially established, and
subsequently adjusted, for each individual client based on historical collection
rates, types of claims identified, current industry conditions, and other
factors which, in the opinion of management, deserve recognition. The Company
records revenues for accounts payable and ancillary audit services provided to
retailers, wholesale distributors and governmental agencies at estimated net
realizable value without reserves. Accordingly, adjustments to uncollectible
claim estimates are directly charged or credited to earnings, as appropriate.

Approved claims for accounts payable and ancillary audit services provided
to retailers, wholesale distributors and governmental agencies are processed by
clients and generally taken as credits against outstanding payables or future
purchases from the vendors involved. Once credits are taken, the Company

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

invoices its clients for a contractually stipulated percentage of the amounts
recovered. The Company's contract receivables for accounts payable and ancillary
audit services provided to retailers, wholesale distributors and governmental
agencies are largely unbilled because it does not control (a) the timing of a
client's claims processing activities, or (b) the timing of a client's payments
for current and future purchases. In the Company's experience, material
receivables are expected to be collected within one year after such receivables
are recorded.

During 1995, 1996 and 1997, revenues derived from accounts payable and
ancillary services provided to retailers, wholesale distributors and
governmental agencies represented 100.0%, 100.0% and 86.7%, respectively, of
total revenues for such years.

Invoice basis of revenue recognition

With regard to accounts payable and other recovery audit services provided
to most entities other than retailers, wholesale distributors and governmental
agencies, the Company recognizes revenues primarily when it invoices clients for
its portion of amounts already recovered. This deferral of revenue recognition
for these types of clients results principally from the Company's lack of a
historical experience base to accurately estimate uncollectible claims. Revenues
recognized in 1997 on the invoice basis represented 13.3% of total revenues for
the year. The Company did not serve entities other than retailers, wholesale
distributors and governmental agencies (the Company's historical client base) in
either 1995 or 1996.

(d) Cash Equivalents

Cash equivalents at December 31, 1996 and 1997 consisted of $11.9 million
and $2.5 million, respectively, of reverse repurchase agreements with
NationsBank, N.A. (South) which were fully collateralized by United States of
America Treasury Notes in the possession of such bank. The reverse repurchase
agreement in effect on December 31, 1997, matured and was settled on January 2,
1998. In addition, certain of the Company's French subsidiaries at December 31,
1997 had cash equivalents of $4.7 million in temporary investments held at a
French bank.

The Company does not intend to take possession of collateral securities on
future reverse repurchase agreement transactions conducted with banking
institutions of national standing. The Company does insist, however, that all
such agreements provide for full collateralization using obligations of the
United States of America having a current market value equivalent to or
exceeding the reverse repurchase agreement amount.

(e) Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized using the straight-line method over the
shorter of the lease term or estimated life of the asset.

(f) Direct Expenses

Direct expenses incurred during the course of the accounts payable audits
and other recovery audit services are expensed as incurred.

Non-management auditor compensation expense for substantially all of the
Company's domestic auditors and certain of its international auditors is
recorded at the time of related revenue recognition and subsequently paid as
such revenue is collected. Previously established auditor compensation accruals
are subsequently adjusted on a monthly basis to correspond with adjustments to
uncollectible claim estimates. In certain of the Company's international
locations fixed salaries are paid to non-management auditors. All non-auditor
Company employees are compensated on the basis of salary and in certain cases,
bonuses, which are charged to operations as incurred.
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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(g) Software Development Costs

Software development costs related to the development of the Company's
proprietary audit software are expensed as incurred.

(h) Intangibles

Goodwill. Goodwill represents the excess of the purchase price over the
estimated fair market value of net assets of acquired businesses. The Company
evaluates the unique relevant aspects of each individual acquisition when
establishing an appropriate goodwill amortization period, and amortizes all
goodwill amounts on a straight-line basis. Goodwill recorded as of December 31,
1997 is being amortized over periods ranging from seven to 20 years. The Company
assesses the recoverability of this intangible asset by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation. The
amount of goodwill impairment, if any, is measured based on projected discounted
future operating cash flows using a discount rate reflecting the Company's
average cost of funds. The assessment of the recoverability of goodwill will be
impacted if estimated future operating cash flows are not achieved.

Noncompete Agreements. Noncompete agreements are recorded at cost and are
amortized on a straight-line basis over the terms of the respective agreements.

Deferred Loan Costs. Deferred loan costs are recorded at cost and are
amortized on a straight-line basis over the terms of the respective loan
agreements.

(i) Income Taxes

The Company's predecessors (prior to April 24, 1995 for international
entities and March 28, 1996 for domestic entities) consisted of Subchapter S
corporations and a partnership. As such, the Federal and state income taxes with
regard to these entities historically have been the responsibility of the
respective shareholders and partners. The results of operations for all periods
presented which include operations prior to April 1, 1996 have been adjusted on
a pro forma basis to reflect Federal and state income taxes at a composite rate
of 39% as if the Company's predecessors had been C corporations throughout such
periods.

In the second quarter of 1995, the Company's predecessors reorganized and
its international entities became C corporations. Additionally, in connection
with the Company's March 1996 initial public offering, all domestic entities
became C corporations. As a result of these conversions to C corporations, the
Company incurred charges to operations of $305,000 in the second quarter of 1995
and $3.7 million in the first quarter of 1996 for cumulative deferred income
taxes.

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

(j) Foreign Currency Translation

The local currency has been used as the functional currency in the
countries in which the Company conducts business outside of the United States.
The assets and liabilities denominated in foreign currency are translated into
U.S. dollars at the current rate of exchange at the balance sheet date and
revenues and expenses are translated at the average monthly exchange rates. The
translation gains and losses are included as

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

a separate component of shareholders' equity. Transaction gains and losses
included in results of operations are not material.

(k) Earnings (Pro Forma Earnings) Per Share

Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." This pronouncement
required the restatement of all prior-period earnings per share data presented
to conform to its provisions. Basic earnings (pro forma earnings) per share is
computed by dividing net earnings (pro forma earnings) by the weighted average
number of shares of common stock outstanding during the year. Diluted earnings
(pro forma earnings) per share is computed by dividing net earnings (pro forma
earnings) by the sum of (1) the weighted average number of shares of common
stock outstanding during the period (2) the dilutive effect of the assumed
exercise of stock options using the treasury stock method and (3) dilutive
effect of other potentially dilutive securities.

For all periods prior to April 1, 1996, diluted pro forma earnings per
share has been computed by dividing the pro forma net earnings, which gives
effect to pro forma income taxes, by the weighted average number of common and
potential common shares outstanding during the period, after giving effect to
the reorganization enacted at the time of the Company's March 1996 initial
public offering. For purposes of determining the weighted average number of
common and potential common shares for all periods prior to April 1, 1996, the
Company has followed required supplementary guidance contained in Securities and
Exchange Commission Staff Accounting Bulletin Topic 4D and has treated all
common shares, warrants, options, and convertible debentures issued within one
year prior to its initial public offering as exercised and outstanding, using
the treasury stock method, regardless if the effect was antidilutive. In
addition, the aforementioned computation includes the equivalent number of
common shares derived from dividing the $4.9 million in 1996 dividends and
distributions by $11.00 per share.

(l) Employee Stock Options

Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosures of SFAS No. 123.

(2) RELATED PARTY TRANSACTIONS

Prior to the Company's March 1996 initial public offering, the Company
periodically borrowed funds from its principal shareholders. These loans were
evidenced by promissory notes bearing interest at market rates. All loans from
shareholders were repaid in full immediately subsequent to the Company's initial
public offering.

Interest expense on loans from shareholders for the years ended December
31, 1995 and 1996 was approximately $140,000 and $38,000, respectively.

Financial advisory and management services historically have been provided
to the Company by two directors who are also shareholders of the Company. In
addition, a director elected in 1995 provided

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

management advisory services to the Company from July 1995 through December
1996, but no longer provided such services effective January 1, 1997. Such
services by directors aggregated $406,000 in 1995, $293,000 in 1996, and
$165,000 in 1997. The Company has agreed to pay the above-mentioned two
directors a minimum of $140,000 in 1998 for financial advisory and management
services.

(3) LONG-TERM DEBT

Long-term debt at December 31, 1996 and 1997 is summarized as follows:

[Download Table]

1996 1997
---- -------
(IN THOUSANDS)

Term bank loan with interest at LIBOR plus 1.75% (7.69% at
December 31, 1997), interest only payments through
September 1998, and monthly principal payments of $412,500
plus interest due commencing October 1998 and continuing
through September 2001; remaining unpaid balance due
September 2001............................................ $ -- $24,750
5.05% promissory note, principal and interest payable in
annual installments of $100,000 beginning December 1998
and continuing through December 2009...................... 771 790
Term loan with interest of PIBOR plus 1.25% (3.7% at
December 31, 1997) requiring quarterly payments of 44,704
French Francs, or $7,465 at December 31, 1997, including
interest, with final payment due April 2000............... -- 198
Other....................................................... -- 55
---- -------
771 25,793
Less current installments................................... 79 1,428
---- -------
Long-term debt, excluding current installments.... $692 $24,365
==== =======

During October 1997, the Company increased its credit facility with
NationsBank, N.A. from $20.0 million to $30.0 million. The credit facility
permits the Company to borrow up to $30.0 million on a term loan basis to
finance mergers and acquisitions. Alternatively, the Company, at its option, may
utilize up to $10.0 million as a revolving line of credit for working capital
and utilize the remaining $20.0 million for mergers and acquisitions. Borrowings
under the credit facility can be made through September 1999 although repayment
of individual term loan borrowings made before or during September 1999 are
repayable over 48 months. As of December 31, 1997, the Company had outstanding
principal borrowings of $24.8 million under the credit facility. Such borrowings
were made in October 1997 in connection with the financing of the Financiere
Alma, S.A. and subsidiaries acquisition (see Note 8). The credit facility is
secured by substantially all assets of the Company and interest on borrowings
can be tied to either prime or LIBOR at the Company's discretion. The Company is
required to repay all amounts outstanding under the revolving line of credit
portion of the aggregate credit facility and to refrain from borrowing any
amounts under such line of credit portion for at least a 30-consecutive-day
period each year. The credit facility requires an annual commitment fee of 1/4
of 1% and contains customary covenants, including financial ratios and the
prohibition of cash dividend payments to shareholders. At December 31, 1997, the
Company was in compliance with all such covenants.

Approximate future minimum annual principal payments for long-term debt for
each of the five years subsequent to December 31, 1997 are as follows (in
thousands):

[Download Table]

1998........................................................ $ 1,428
1999........................................................ 5,108
2000........................................................ 5,046
2001........................................................ 13,673
2002........................................................ 64

In December 1995, the Company extinguished a noncompete agreement
obligation. Such extinguishment resulted in a loss which was not material.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) LEASE COMMITMENTS

The Company is committed under noncancelable operating lease arrangements
for facilities and equipment. Rent expense for 1995, 1996, and 1997 was $1.0
million, $2.5 million, and $3.0 million, respectively. The future minimum annual
lease payments under these leases by year are summarized as follows (in
thousands):

[Download Table]

YEAR ENDING DECEMBER 31,
------------------------

1998........................................................ $ 3,697
1999........................................................ 2,799
2000........................................................ 1,980
2001........................................................ 1,535
2002........................................................ 800
Thereafter.................................................. 3,932
-------
$14,743
=======

(5) INCOME TAXES

HISTORICAL

Prior to the April 1995 reorganization, the historical income taxes were
the responsibility of the shareholders and partners (see Note 1(i) Income
Taxes). In connection with the April 1995 reorganization, the Company
established a net deferred tax liability of approximately $305,000 as a charge
to the 1995 Consolidated Statement of Earnings related to the five Foreign
Operating Companies' termination of the Subchapter S corporation status. The
results of operations for the five Foreign Operating Companies from May 1995 to
December 1995 represented a taxable loss which was fully offset by a deferred
income tax valuation allowance. Such amounts and related deferred income tax
temporary differences were not significant.

In connection with the Company's March 1996 initial public offering, a
further reorganization occurred and the Subchapter S corporation status or
partnership status of all then remaining entities that comprised the Company was
terminated. These terminations resulted in the establishment of an additional
deferred tax liability of approximately $3.7 million and a corresponding charge
to the 1996 Consolidated Statement of Earnings.

The provision for income taxes for the years ended December 31, 1996 and
1997 consists of the following (in thousands):

[Download Table]

1996 1997
------ ------

Current:
Federal................................................... $ 413 $1,171
State..................................................... 153 375
Foreign................................................... 400 2,900
------ ------
966 4,446
------ ------
Deferred:
Federal................................................... 5,997 921
State..................................................... 826 184
Foreign................................................... -- 598
------ ------
6,823 1,703
------ ------
Total............................................. $7,789 $6,149
====== ======

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of income tax expense at the Federal statutory rates of
34% and 35% to actual tax expense for the years ended December 31, 1996 and
1997, respectively, follows (in thousands):

[Download Table]

1996 1997
------ ------

Income taxes at Federal statutory rate...................... $3,719 $5,520
Establishment of deferred tax liability due to termination
of Subchapter S corporation status and partnership
status.................................................... 3,700 --
State income taxes, net of Federal income tax benefit....... 646 363
Pro forma income taxes that were the responsibility of the
shareholders and partners................................. (158) --
Other, net.................................................. (118) 266
------ ------
$7,789 $6,149
====== ======

A summary of the components of deferred tax liabilities and assets as of
December 31, 1996 and 1997 follows (in thousands):

[Download Table]

1996 1997
------- -------

Deferred tax liabilities:
Contract receivables...................................... $11,987 $16,974
Accelerated depreciation for tax purposes................. 234 532
Goodwill.................................................. 154 177
------- -------
Gross deferred tax liabilities.................... 12,375 17,683
------- -------
Deferred tax assets:
Cash to accrual conversion from termination of Subchapter
S and partnership status............................... 419 309
Accounts payable and accrued expenses..................... -- 438
Accrued payroll and related expenses...................... 3,961 5,912
Deferred compensation..................................... 875 961
Noncompete agreements..................................... 410 848
Deferred revenues......................................... -- 577
Deferred loan costs....................................... 277 182
Net operating loss carryforward of foreign subsidiary..... -- 385
Foreign tax credit carryforwards.......................... -- 1,554
Other..................................................... -- 185
------- -------
Gross deferred tax assets......................... 5,942 11,351
------- -------
Net deferred tax liabilities...................... $ 6,433 $ 6,332
======= =======

In assessing the realizability of deferred tax assets, the Company's
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. No valuation allowances were
deemed necessary since all deductible temporary differences are expected to be
utilized primarily against reversals of taxable temporary differences, and net
operating loss carryforwards and foreign tax credit carryforwards are expected
to be utilized through related future taxable and foreign source earnings. The
Company has no undistributed earnings of foreign subsidiaries, but does have a
net operating loss carryforward of $1.1 million which can be utilized
indefinitely against future taxable earnings of a foreign subsidiary, to the
extent there is no significant change in the ownership of the foreign
subsidiary. The Company's management believes the net operating loss
carryforward will be fully utilized against the forecasted future taxable
earnings of the foreign subsidiary. The Company has foreign income tax credit
carryforwards amounting to $1.6 million, of which $400,000 will expire in 2001
and $1.2 million will expire in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2002. The Company expects to generate sufficient foreign-sourced income by
implementing reasonable tax planning strategies to fully utilize the foreign
income tax credit carryforwards.

(UNAUDITED) PRO FORMA

The pro forma provision for income taxes reflects the income taxes as if
the Company were subject to all Federal and state income taxes for all periods
presented that include operations prior to April 1, 1996, rather than primarily
by the individual shareholders and partners. All pro forma income taxes have
been calculated using a 39% composite effective rate.

(6) EMPLOYEE BENEFIT PLANS

The Company maintains a 401(k) Plan in accordance with Section 401(k) of
the Internal Revenue Code, which allows eligible participating employees to
defer receipt of a portion of their compensation up to 15% and contribute such
amount to one or more investment funds. Employee contributions are matched by
the Company in a discretionary amount to be determined by the Company each plan
year up to $450 per participant. The Company may also make discretionary
contributions to the Plan as determined by the Company each plan year. Company
matching funds and discretionary contributions vest at the rate of 20% each year
beginning after the participants' first year of service. Company contributions
were approximately $33,000 in 1995, $114,000 in 1996 and $130,000 in 1997.

The Company also maintains deferred compensation arrangements for certain
key officers and executives. Total expense related to these deferred
compensation arrangements was approximately $340,000, $606,000, and $920,000 in
1995, 1996, and 1997, respectively.

Effective May 15, 1997, the Company established an employee stock purchase
plan pursuant to Section 423 of the Internal Revenue Code of 1986, as amended.
The plan covers 750,000 shares of the Company's common stock which may be
authorized but unissued shares, reacquired shares or shares bought on the open
market. The initial purchase period began on July 1, 1997 and ended on December
31, 1997. On January 19, 1998, share certificates for 32,348 shares were issued
to employees who were initial purchase period participants. The Company is not
required to recognize compensation expense related to this plan.

(7) COMMON STOCK

The following presents the common stock at December 31, 1995 for each
combined entity:

[Download Table]

Common stock:
The Profit Recovery Group International I, Inc. (formerly
The Profit Recovery Group, Inc.) authorized 10,000,000
shares with $.01 par value; issued and outstanding
5,740,000 shares....................................... $57,400
PRG International Holding Co. -- authorized 1,000 shares
with $1.00 par value; issued and outstanding 1,000
shares at December 31, 1995............................ 1,000
-------
$58,400
=======

In connection with the April 1995 reorganization, the Company issued an
additional 480,000 shares of common stock in PRGI to the existing shareholders,
formed PRG Holdco with 1,000 shares of common stock, and consolidated the five
Foreign Operating Companies into PRG Holdco.

Subsequent to the Company's March 1996 initial public offering of its
common stock, all entities that comprise the Company are wholly owned
subsidiaries of the publicly traded parent company, The Profit Recovery Group
International, Inc., whose common stock is reflected in shareholders' equity on
the accompanying December 31, 1996 and 1997 Consolidated Balance Sheets.
Concurrent with the Company's

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

initial public offering, The Profit Recovery Group International, Inc. declared
a two-for-one stock split effected in the form of a stock dividend. All share
and pro forma per share information has been adjusted to reflect the effect of
the stock split.

Immediately prior to the Company's March 26, 1996 initial public offering
of its common stock, holders of the $12.7 million in convertible debentures
elected to convert $12.3 million into equity of the Company. The remaining
debentures together with accrued interest of the entire $12.7 million were paid
in April 1996 with a portion of the initial public offering proceeds.
Additionally, $817,000 in deferred loan costs directly related to the debentures
was reclassified as a reduction in shareholders' equity concurrent with the
conversion of the debentures. In connection with the debentures origination, an
investment banking firm received a warrant to purchase 63,530 shares of PRGI's
common stock for $5.89 per share. This warrant was exercised in full immediately
prior to the Company's initial public offering.

The Company's initial public offering of its common stock was declared
effective by the United States Securities and Exchange Commission on March 26,
1996, and public trading in the registered shares commenced March 27, 1996. The
initial public offering consisted of 4.6 million shares priced at $11 per share
with the Company selling 3.4 million newly issued shares and certain
shareholders selling 1.2 million existing shares. The Company received $34.8
million as its portion of the proceeds (net of underwriting discounts and
commissions, but prior to offering expenses). On April 18, 1996, the Company
received notification from its initial public offering underwriting syndicate
that the syndicate had exercised its full over-allotment option to purchase an
additional 690,000 shares of Company common stock. All of these shares were then
sold to the underwriting syndicate by certain selling shareholders. The Company
received no proceeds from the sale of such shares.

Although the Company has issued no preferred stock through December 31,
1997, and has no present intentions to issue any preferred stock, such stock may
be issued at any time or from time to time in one or more series with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions (including dividend, conversion and voting rights) as may be
determined by the Company's Board of Directors, without any further vote or
action by the shareholders.

(8) ACQUISITIONS

Effective January 1, 1995, PRGI acquired certain assets of Fial &
Associates, Inc., primarily consisting of contract receivables, net of related
commissions liabilities, with an estimated fair value of approximately $444,000,
and entered into a noncompete agreement for seven years with the former owner of
Fial, with an estimated fair value of $6.0 million. In exchange for the assets
and the noncompete agreement, PRGI issued 240,000 shares of PRGI's common stock,
paid $1.6 million in cash, and incurred an obligation of approximately $5.0
million. In the opinion of the Company's management, the common stock had an
estimated fair value of $1.85 per share. The acquisition was accounted for under
the purchase method of accounting and resulted in goodwill of $550,000 which is
being amortized over seven years using the straight-line method. Fial's
principal business was similar to PRGI's business. Fial provided its services
throughout the United States.

On January 2, 1997, the Company acquired the net operating assets of Shaps
Group, Inc., a California-based company providing recovery audit services to
manufacturers, and distributors of high technology products. The Company issued
375,000 shares of its common stock in the transaction which was accounted for as
a pooling-of-interests. Since prior years' financial positions and results of
operations of Shaps Group, Inc. are not material in relation to the Company's
historical financial statements, the Company did not restate its prior years'
consolidated financial statements.

On February 11, 1997, the Company acquired all of the common stock of
Accounts Payable Recovery Services, Inc., a Texas-based company providing
recovery audit services to healthcare entities and energy companies. This
transaction was accounted for as a purchase with consideration of $2.0 million
in cash and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

130,599 shares of the Company's common stock valued at $15.25 per share. This
acquisition resulted in goodwill of $3.9 million which is being amortized over
15 years using the straight-line method.

On May 23, 1997, the Company acquired all of the common stock of The Hale
Group, a California-based company providing recovery audit services to
healthcare entities. This transaction was accounted for as a purchase with
consideration of $1.1 million in cash and 74,998 shares of the Company's common
stock valued at $13.38 per share. This acquisition resulted in goodwill of $2.1
million which is being amortized over 15 years using the straight-line method.

On October 7, 1997, the Company acquired 98.4% of Financiere Alma, S.A. and
subsidiaries ("Alma"), a privately held recovery audit firm based in Paris,
France. This transaction was accounted for as a purchase with consideration of
$24.6 million in cash and approximately 859,000 restricted, unregistered shares
of the Company's common stock with an aggregate estimated fair value of $10.0
million, based on an independent external valuation. The Company has an
obligation to acquire the remaining interest in Alma by January 1999 for
$398,000 in cash and 13,900 unregistered shares of the Company's common stock.
This acquisition resulted in goodwill of $33.0 million which is being amortized
over 20 years using the straight-line method.

On November 21, 1997, the Company acquired the net operating assets of
TradeCheck, LLC, a Washington-based recovery audit firm specializing in ocean
freight shipments. This transaction was accounted for as a purchase with
consideration of $700,000 in cash and 40,000 shares of the Company's common
stock valued at $14.375 per share. This acquisition resulted in goodwill of $1.1
million which is being amortized over 15 years using the straight-line method.

Results of operations for all 1997 acquisitions accounted for under the
purchase method of accounting have been included in the 1997 Consolidated
Statement of Earnings from their respective dates of acquisition with the
exception of the October 7, 1997 acquisition of Alma, which was included
effective October 1, 1997.

The following represents the summary (unaudited) pro forma results of
operations as if the Alma acquisition had occurred at the beginning of 1996. The
pro forma results are not necessarily indicative of the results that will occur
in the future.

[Download Table]

YEARS ENDED
DECEMBER 31,
-------------------
1996 1997
------- --------

Revenues.................................................... $98,586 $127,409
Net earnings................................................ 2,500 9,432
Pro forma net earnings...................................... 6,018 9,432
Earnings (pro forma net earnings for 1996) per share:
Basic..................................................... .36 .49
Diluted................................................... .33 .48

All businesses acquired by the Company during 1997, other than Alma,
previously maintained their respective accounting records using the cash basis
of accounting. Accordingly, it is not practicable to provide accrual basis pro
forma results of operations which include these entities. The Company believes,
however, that pro forma accrual basis results of operations for these entities,
if determined, would not be significant, either individually or in the
aggregate.

(9) STOCK OPTION PLAN

The Company's 1996 Stock Option Plan ("Plan") has authorized the grant of
options to purchase 3,500,000 shares of the Company's common stock to key
employees and directors. All options granted through December 31, 1997 have
10-year terms and vest and become fully exercisable on a ratable basis over four
or five years of continued employment.

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Pro forma information regarding net earnings and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1995, 1996 and 1997:

[Enlarge/Download Table]

1995 1996 1997
------- ------- -------

Risk-free interest rates.................................... 6.06% 6.26% 6.17%
Dividend yields............................................. -- -- --
Volatility factor of expected market price.................. .396 .396 .537
Weighted-average expected life of option.................... 6 years 6 years 6 years

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information for the years ended December 31, 1995, 1996 and 1997
follows (in thousands, except for pro forma earnings per share information):

[Download Table]

1995 1996 1997
------- ------- -------

Historical earnings before income taxes................... $ 4,812 $10,939 $15,772
Income taxes (pro forma income taxes for 1995 and 1996)... 1,877 4,271 6,149
------- ------- -------
Net earnings (pro forma net earnings for 1995 and 1996)
before pro forma effect of compensation expense
recognition provisions of SFAS No. 123.................. 2,935 6,668 9,623
Pro forma effect of compensation expense recognition
provisions of SFAS No. 123.............................. 111 504 1,382
------- ------- -------
Pro forma net earnings.................................... $ 2,824 $ 6,164 $ 8,241
======= ======= =======
Pro forma net earnings per share:
Basic................................................... $ .24 $ .38 $ .45
======= ======= =======
Diluted................................................. $ .21 $ .36 $ .44
======= ======= =======

A summary of the Company's stock option activity and related information
for the years ended December 31 follows:

[Enlarge/Download Table]

1995 1996 1997
------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- --------- --------- --------- --------- ---------

Outstanding -- beginning of
year...................... -- $ -- 633,000 $ 5.53 1,258,030 $ 9.60
Granted..................... 633,000 5.53 677,030 13.16 1,030,263 15.47
Exercised................... -- -- (28,000) 5.30 (65,100) 5.36
Forfeited................... -- -- (24,000) 5.94 (15,300) 13.60
------- --------- ---------
Outstanding -- end of
year...................... 633,000 $5.53 1,258,030 $ 9.60 2,207,893 $12.44
======= ========= =========
Exercisable at end of
year...................... -- $ -- 94,400 $ 5.30 287,946 $ 9.12
Weighted average fair value
of options granted during
year...................... $ 2.67 $ 6.44 $ 8.96

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Exercise prices for options outstanding as of December 31, 1997 ranged from
$5.30 to $19.88 per share. The weighted average remaining contract life of those
options was 8.6 years. Of the 2,207,893 options outstanding at December 31,
1997, 527,600 were granted at prices below the Company's initial public offering
price of $11.00 per share and 1,680,293 were granted at prices equal to or
greater than $11.00.

The 527,600 options outstanding at December 31, 1997 which were priced
below $11.00 per share carried a weighted-average exercise price of $5.60 per
share and had a weighted-average remaining contract life of 7.5 years. They
included 135,040 exercisable options at a price of $5.30 per share.

The 1,680,293 options outstanding at December 31, 1997 which were priced at
or above $11.00 per share carried a weighted-average exercise price of $14.59
per share and had a weighted-average remaining contract life of 9.0 years. They
included 131,706 options that were exercisable at a weighted-average price of
$13.21 per share.

(10) MAJOR CLIENTS

The Company had two major clients during 1997, each of which provided
revenues in excess of 10% of total revenues. Both major clients are mass
merchandisers operating in the retail industry.

During the years ended December 31, 1995, 1996, and 1997, the Company
derived 12.7%, 14.4% and 10.4%, respectively, of its total revenues from its
historically largest client. Additionally, during 1997 the Company derived 12.3%
of its total revenues from another client due in large part to a nonrecurring
situation involving concurrent audits of multiple years.

(11) INTERNATIONAL SEGMENTS

The Company has operations outside the United States. The following is a
summary of geographic area information, as measured by the area of
revenue-producing operations, for the years ended December 31, 1995, 1996, and
1997 (in thousands):

[Enlarge/Download Table]

1995 1996 1997
------- ------- --------

Revenues:
United States (U.S.)................................... $49,002 $62,701 $ 81,653
North America, excluding U.S........................... 3,778 7,811 10,907
Western Europe......................................... 2,422 4,422 17,233
Asia-Pacific........................................... 829 2,396 2,570
------- ------- --------
Total.......................................... $56,031 $77,330 $112,363
======= ======= ========
Operating income (loss):
United States (U.S.)................................... $ 6,854 $10,680 $ 12,109
North America, excluding U.S........................... 30 899 2,971
Western Europe......................................... (137) (238) 3,541
Asia-Pacific........................................... (305) (302) (2,446)
------- ------- --------
Total.......................................... $ 6,442 $11,039 $ 16,175
======= ======= ========
Identifiable assets:
United States (U.S.)................................... $27,244 $59,237 $ 74,876
North America, excluding U.S........................... 1,541 4,593 5,362
Western Europe......................................... 851 2,155 50,942
Asia-Pacific........................................... 632 2,333 2,705
------- ------- --------
Total.......................................... $30,268 $68,318 $133,885
======= ======= ========

F-20

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents, receivables, note
payable to bank, accounts payable and accrued expenses, accrued payroll and
related expenses, and deferred revenue approximate fair value because of the
short maturity of these instruments.

The fair values of each of the Company's long-term debt instruments are
based on the amount of future cash flows associated with each instrument
discounted using the Company's current borrowing rate for similar debt
instruments of comparable maturity. The estimated fair value of the Company's
long-term debt instruments at December 31, 1996 and 1997 was $675,000 and $25.9
million, respectively, and the carrying value of the Company's long-term debt at
December 31, 1996 and 1997 was $771,000 and $25.8 million, respectively.

Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.

(13) EARNINGS PER SHARE

The following table sets forth the computations of basic and diluted
earnings per share for the years ended December 31, 1995, 1996 and 1997 (in
thousands, except for earnings per share information):

[Enlarge/Download Table]

1995 1996 1997
------- ------- -------

Numerator:
Numerator for basic earnings (pro forma earnings for 1995
and 1996) per share.................................... $ 2,935 $ 6,668 $ 9,623
Interest accrued on convertible debt, net of income
taxes.................................................. 258 97 --
------- ------- -------
Numerator for diluted earnings (pro forma earnings for
1995 and 1996) per share............................... $ 3,193 $ 6,765 $ 9,623
======= ======= =======
Denominator:
Denominator for basic earnings (pro forma earnings for
1995 and 1996) per share -- weighted-average shares
outstanding............................................ 12,000 16,268 18,415
Effect of dilutive securities:
Employee stock options................................. 348 545 494
Convertible debt....................................... 2,157 539 --
Common equivalent shares from the distribution payable
($4,875,576) divided by the initial public offering
price of $11 per share (and weighted since the initial
public offering)...................................... 443 105 --
------- ------- -------
Denominator for diluted earnings (pro forma earnings
for 1995 and 1996) per share........................ 14,948 17,457 18,909
======= ======= =======
Earnings (pro forma for 1995 and 1996) per share -- basic... $ .24 $ .41 $ .52
======= ======= =======
Earnings (pro forma for 1995 and 1996) per
share -- diluted.......................................... $ .21 $ .39 $ .51
======= ======= =======

Options to purchase 473,000 shares of common stock, at prices ranging from
$16.00 to $19.88 per share, were outstanding during 1997 but were excluded from
the computation of diluted earnings per share because the options' exercise
price was greater than the average market price of the common shares and,
therefore, the effect would be antidilutive.

F-21

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) RESTRUCTURING COSTS

In recognition of emerging developments such as the Alma acquisition, the
Company restructured and realigned certain facets of its European management
structure in the fourth quarter of 1997 and incurred a pre-tax charge to
earnings of $1.2 million. This charge consisted of employment termination costs
directly applicable to four of the Company's senior European executives and
residual contract costs due to an independent European advisor for services no
longer required by the Company. Of the $1.2 million charge, $683,000 had been
paid through December 31, 1997, and the remaining $525,000 is currently
estimated to be paid by June 30, 1998.

F-22

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

On October 7, 1997, The Profit Recovery Group International, Inc. (the
"Company") acquired 98.4% of Financiere Alma, S.A. and subsidiaries ("Alma"), a
French company providing primarily corporate tax recovery services in France.
The transaction was accounted for as a purchase, effective as of October 1,
1997, with consideration of $24,602,000 in cash and 859,000 unregistered shares
of the Company's common stock. Approximately $1,700,000 in direct
acquisition-related costs were also incurred and capitalized as part of this
transaction. The Company has an obligation to purchase the remaining 1.6% of
Alma by January 1999 for $398,000 in cash and 13,900 unregistered shares of the
Company's common stock.

The Company incurred debt to pay the cash consideration and a minor portion
of the direct acquisition-related expenses incurred in connection with the
acquisition of Alma.

The following unaudited pro forma consolidated statements of earnings for
the year ended December 31, 1996 and the nine months ended September 30, 1997
present the consolidated historical accounts of the Company, adjusted to give
effect to the acquisition of Alma as of the beginning of the periods presented.
The following unaudited pro forma condensed consolidated balance sheet as of
September 30, 1997 presents the consolidated historical accounts of the Company
as of that date, adjusted to give effect to the acquisition of Alma as if the
transaction had occurred on September 30, 1997.

The unaudited pro forma financial data and accompanying notes should be
read in conjunction with the consolidated financial statements of the Company
and related notes, as well as the consolidated financial statements and related
notes of Alma, all of which are included elsewhere in this Prospectus. The
Company believes that the assumptions set forth in the notes on pages F-26 and
F-28 provide a reasonable basis on which to present the pro forma financial
data, which is provided for informational purposes only and should not be
construed to be indicative of the Company's financial condition or results of
operations had the transactions and events described above been consummated on
the dates assumed. The unaudited pro forma financial data is not intended to
project the Company's financial condition on any future date or results of
operations for any future period.

F-23

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1996

[Enlarge/Download Table]

THE PROFIT
RECOVERY
GROUP
INTERNATIONAL, PRO FORMA
INC. ALMA ADJUSTMENTS PRO FORMA
-------------- ------- ----------- -----------
(AMOUNTS IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)

Revenues.................................. $77,330 $21,256 $ -- $98,586
Cost of revenues.......................... 40,330 10,597 -- 50,927
Selling, general and administrative
expenses................................ 25,961 8,085 1,669(A) 35,715
------- ------- ------- -------
Operating income........................ 11,039 2,574 (1,669) 11,944
Interest income (expense), net............ (100) 41 (2,104)(B) (2,163)
------- ------- ------- -------
Earnings before income taxes and
minority interest.................... 10,939 2,615 (3,773) 9,781
Income taxes.............................. 7,789 974 (1,471)(C) 7,292
------- ------- ------- -------
Earnings before minority interest....... 3,150 1,641 (2,302) 2,489
Minority interest......................... -- 498 (509)(D) (11)
------- ------- ------- -------
Net earnings............................ $ 3,150 $ 1,143 $(1,793) $ 2,500
======= ======= ======= =======
Pro forma information:
Historical earnings before income taxes
and minority interest................ $10,939 $ 2,615 $(3,773) $ 9,781
Pro forma income taxes.................. 4,271 974 (1,471) 3,774
Minority interest....................... -- 498 (509) (11)
------- ------- ------- -------
Pro forma net earnings.................. $ 6,668 $ 1,143 $(1,793) $ 6,018
======= ======= ======= =======
Pro forma earnings per share:
Basic................................ $ .41 $ .36
======= =======
Diluted.............................. $ .39 $ .33
======= =======
Weighted average common and dilutive
shares outstanding:
Basic................................ 16,268 859(E) 17,127
======= ======= =======
Diluted.............................. 17,457 859(E) 18,316
======= ======= =======

See accompanying notes to unaudited pro forma consolidated statements of
earnings.

F-24

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1997

[Enlarge/Download Table]

THE PROFIT
RECOVERY GROUP PRO FORMA
INTERNATIONAL, INC. ALMA ADJUSTMENTS PRO FORMA
-------------------- -------- ------------ ------------
(AMOUNTS IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)

Revenues................................ $76,445 $15,046 $ -- $91,491
Cost of revenues........................ 39,553 7,706 -- 47,259
Selling, general and administrative
expenses.............................. 25,709 5,174 1,252(A) 32,135
------- ------- ------- -------
Operating income...................... 11,183 2,166 (1,252) 12,097
Interest income (expense), net.......... 132 76 (1,578)(B) (1,370)
------- ------- ------- -------
Earnings before income taxes and
minority interest.................. 11,315 2,242 (2,830) 10,727
Income taxes............................ 4,397 820 (1,104)(C) 4,113
------- ------- ------- -------
Earnings before minority interest..... 6,918 1,422 (1,726) 6,614
Minority interest....................... -- 431 (436)(D) (5)
------- ------- ------- -------
Net earnings.................. $ 6,918 $ 991 $(1,290) $ 6,619
======= ======= ======= =======
Earnings per share:
Basic................................. $ .38 $ .35
======= =======
Diluted............................... $ .37 $ .34
======= =======
Weighted average common and dilutive
shares outstanding:
Basic................................. 18,185 859(E) 19,044
======= ======= =======
Diluted............................... 18,720 859(E) 19,579
======= ======= =======

See accompanying notes to unaudited pro forma consolidated statements of
earnings.

F-25

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1996 AND NINE MONTHS ENDED SEPTEMBER 30, 1997

The following explanations describe the assumptions used in determining the
unaudited pro forma adjustments necessary to present the historical results of
operations, giving effect to the acquisition of Alma (see "Use of Proceeds").

(A) Adjustment relates to amortization of the goodwill amounting to
$33,379,000 over a 20-year period.

(B) Adjustment relates to the $24,750,000 of indebtedness, at an interest
rate of 8.5%, incurred in connection with the Alma acquisition.

(C) Adjustment relates to the tax benefit derived from the deductibility of
the goodwill and interest expense assuming a combined Federal and state
effective income tax rate of 39%.

(D) Adjustment to reduce minority interest to reflect minority interest
ownership of 1.6% of Alma.

(E) Adjustment reflects the issuance of 859,000 shares in connection with
the Alma acquisition.

(F) The pro forma adjustments do not reflect the $1.2 million pre-tax
charge to operations in the fourth quarter of 1997 to restructure and realign
certain facets of the Company's European management structure in recognition of
emerging developments such as the Alma acquisition. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations"

F-26

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997

[Enlarge/Download Table]

THE PROFIT
RECOVERY
GROUP
INTERNATIONAL, PRO FORMA
INC. ALMA ADJUSTMENTS PRO FORMA
-------------- ------- ----------- ---------
(AMOUNTS IN THOUSANDS OF US DOLLARS)

Current assets:
Cash and cash equivalents....................... $12,231 $ 3,528 $ -- $ 15,759
Contract receivables............................ 45,301 7,239 -- 52,540
Other receivables............................... 2,160 47 -- 2,207
Prepaid expenses and other current assets....... 1,292 973 -- 2,265
Deferred income taxes........................... -- 1,058 -- 1,058
------- ------- ------- --------
Total current assets.................... 60,984 12,845 -- 73,829
Property and equipment, net....................... 8,581 458 -- 9,039
Noncompete agreements, net........................ 3,734 -- -- 3,734
Deferred loan costs, net.......................... 32 -- -- 32
Goodwill, net..................................... 6,204 -- 33,379(A) 39,583
Deferred income taxes............................. 1,174 -- -- 1,174
Other assets...................................... 537 44 -- 581
------- ------- ------- --------
$81,246 $13,347 $33,379 $127,972
======= ======= ======= ========
Current liabilities:
Bank overdraft.................................. $ -- $ 147 $ -- $ 147
Due to shareholders and affiliates.............. -- 116 -- 116
Current installments of long term-debt.......... 83 124 -- 207
Accounts payable and accrued expenses........... 1,719 1,627 1,552(B) 4,898
Accrued payroll and related expenses............ 17,788 4,709 -- 22,497
VAT payable..................................... -- 2,065 -- 2,065
Deferred revenues............................... -- 984 -- 984
Deferred income taxes........................... 7,607 -- -- 7,607
------- ------- ------- --------
Total current liabilities............... 27,197 9,772 1,552 38,521
Long-term debt, excluding current installments.... 707 167 24,750(B) 25,624
Deferred compensation............................. 2,263 -- -- 2,263
Other long-term liabilities....................... -- 478 -- 478
------- ------- ------- --------
Total liabilities....................... 30,167 10,417 26,302 66,886
Minority interest................................. -- 476 (428)(C) 48
Shareholders' equity:
Common stock.................................... 18 69 (68)(D) 19
Additional paid-in capital...................... 37,815 12 9,946(D) 47,773
Cumulative translation adjustments.............. (56) (104) 104(D) (56)
Retained earnings............................... 13,302 2,477 (2,477)(D) 13,302
------- ------- ------- --------
Total shareholders' equity.............. 51,079 2,454 7,505 61,038
------- ------- ------- --------
$81,246 $13,347 $33,379 $127,972
======= ======= ======= ========

See accompanying notes to unaudited pro forma condensed consolidated balance
sheet.

F-27

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THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997

The following explanations describe the assumptions used in determining the
unaudited pro forma adjustments necessary to present the historical financial
position, giving effect to the acquisition of Alma (see "Use of Proceeds").

(A) The acquisition is accounted for as a purchase in accordance with
Accounting Principles Board Opinion 16, "Business Combinations." The purchase
price is allocated first to the tangible and identifiable assets and liabilities
of the acquired company based on preliminary estimates of their fair value, with
the remainder allocated to goodwill. The following schedule presents the
goodwill computation (amounts in thousands of US dollars):

[Download Table]

Purchase price:
Cash paid................................................. $24,602
Fair value of unregistered shares issued.................. 9,959
-------
34,561
Estimated direct acquisition-related costs.................. 1,700
Less net book value of Alma, which approximates fair value,
and minority interest..................................... (2,930)
Plus minority interest for 1.6% of Alma not purchased....... 48
-------
Goodwill............................................... $33,379
=======

(B) The Company has incurred indebtedness of $24,750,000 to fund the cash
paid and a minor portion of direct acquisition-related costs incurred in
connection with the acquisition of Alma, and accrued an additional $1,552,000 to
pay the remaining unpaid direct acquisition-related costs incurred.

(D) The changes in components of shareholders' equity are a result of (a)
the elimination of the equity of Alma, (b) the reclassification of the portion
of the minority interest purchased and (c) the issuance of common shares of the
Company in connection with the Alma acquisition.

F-28

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INDEPENDENT AUDITORS' REPORT

The Directors and Shareholders of
Financiere Alma, S.A.

We have audited the accompanying consolidated balance sheets of Financiere
Alma, S.A. and subsidiaries as of December 31, 1995 and 1996 and June 30, 1997,
and the related consolidated statements of earnings, shareholders' equity and
cash flows for each of the years in the two-year period ended December 31, 1996,
and for the six months ended June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated statements referred to above present
fairly, in all material respects, the financial position of Financiere Alma,
S.A. and subsidiaries as of December 31, 1995 and 1996 and June 30, 1997, and
the results of their operations and their cash flows for each of the years in
the two-year period ended December 31, 1996, and for the six months ended June
30, 1997 in conformity with accounting principles generally accepted in the
United States.

ERNST & YOUNG Entrepreneurs
Departement d'E&Y Audit

Any Antola

Paris, France, September 30, 1997, except
for note 12 which is as
of October 7, 1997

F-29

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FINANCIERE ALMA, S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

[Enlarge/Download Table]

YEARS ENDED SIX MONTHS NINE MONTHS ENDED
DECEMBER 31, ENDED SEPTEMBER 30,
----------------- JUNE 30, -----------------
1995 1996 1997 1996 1997
------- ------- ---------- ------- -------
(AMOUNTS IN THOUSANDS OF US DOLLARS)
(UNAUDITED)

Revenues........................................ $20,858 $21,256 $9,557 $14,241 $15,046
Cost of revenues................................ 8,265 10,597 4,875 7,539 7,706
Selling, general and administrative expenses.... 7,536 8,085 3,650 5,461 5,174
------- ------- ------ ------- -------
Operating income.............................. 5,057 2,574 1,032 1,241 2,166
Interest income, net............................ 224 41 61 105 76
------- ------- ------ ------- -------
Earnings before income taxes and minority
interest................................... 5,281 2,615 1,093 1,346 2,242
Income taxes.................................... 1,862 974 425 511 820
------- ------- ------ ------- -------
Earnings before minority interest............. 3,419 1,641 668 835 1,422
Minority interest............................... 1,547 498 119 182 431
------- ------- ------ ------- -------
Net earnings.................................. $ 1,872 $ 1,143 $ 549 $ 653 $ 991
======= ======= ====== ======= =======

See accompanying notes to consolidated financial statements.

F-30

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FINANCIERE ALMA, S.A. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

[Enlarge/Download Table]

DECEMBER 31,
----------------- JUNE 30, SEPTEMBER 30,
1995 1996 1997 1997
------- ------- -------- -------------
(AMOUNTS IN THOUSANDS OF US DOLLARS,
EXCEPT PER SHARE DATA)
(UNAUDITED)

ASSETS
Current assets:
Cash and cash equivalents (note 3)..................... $ 5,783 $ 7,389 $ 3,254 $ 3,528
Accounts receivable, less allowance of $1,706, $2,245
and $2,271 at December 31, 1995 and 1996 and June 30,
1997, respectively................................... 7,876 5,600 5,502 7,239
Due from affiliates (note 2)........................... 564 2,052 1,698 47
Prepaid expenses and other current assets.............. 565 1,120 919 973
Deferred income taxes (note 7)......................... 957 1,058 1,037 1,058
------- ------- ------- -------
Total current assets............................ 15,745 17,219 12,410 12,845
------- ------- ------- -------
Property and equipment:
Computer and other equipment........................... 630 710 677 732
Furniture and fixtures................................. 189 203 163 205
Leasehold improvements................................. 510 157 417 413
------- ------- ------- -------
1,329 1,070 1,257 1,350
Less accumulated depreciation and amortization......... 672 737 738 892
------- ------- ------- -------
657 333 519 458
Other assets............................................. 248 138 49 44
------- ------- ------- -------
$16,650 $17,690 $12,978 $13,347
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdrafts........................................ $ 141 $ 1,023 $ 113 $ 147
Due to shareholders (note 2)........................... 179 1,460 780 29
Due to affiliates (note 2)............................. 196 180 161 87
Current installments of long-term debt (note 4)........ 88 410 435 124
Accounts payable and accrued expenses.................. 3,050 3,644 1,383 1,627
Accrued payroll and related expenses................... 4,303 4,495 3,379 4,709
Dividends and distributions payable.................... 1,734 -- 414 --
VAT payable............................................ 1,933 1,813 1,758 2,065
Deferred revenues...................................... 1,106 851 756 984
------- ------- ------- -------
Total current liabilities....................... 12,730 13,876 9,179 9,772
Other long-term liabilities.............................. 569 540 482 167
Long-term debt, excluding current installments (note
4)..................................................... 156 1,065 1,087 478
------- ------- ------- -------
Total liabilities............................... 13,455 15,481 10,748 10,417
Minority interest (note 11).............................. 1,274 539 184 476
Shareholders' equity:
Common stock, FRF 100 ($18) par value, 3,884 authorized
issued and outstanding shares at December 31, 1995
and 1996, June 30, 1997 and September 30, 1997....... 69 69 69 69
Additional paid-in capital............................. 12 12 12 12
Cumulative translation adjustment...................... 222 103 (70) (104)
Retained earnings...................................... 1,618 1,486 2,035 2,477
------- ------- ------- -------
Total shareholders' equity...................... 1,921 1,670 2,046 2,454
Commitments and contingencies (notes 6 and 9)............
------- ------- ------- -------
$16,650 $17,690 $12,978 $13,347
======= ======= ======= =======

See accompanying notes to consolidated financial statements.

F-31

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FINANCIERE ALMA, S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND
SIX MONTHS ENDED JUNE 30, 1997 AND NINE
MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)

[Enlarge/Download Table]

CUMULATIVE TOTAL
COMMON ADDITIONAL TRANSLATION RETAINED SHAREHOLDERS'
STOCK PAID-IN CAPITAL ADJUSTMENT EARNINGS EQUITY
------ --------------- ----------- -------- -------------
(AMOUNTS IN THOUSANDS OF US DOLLARS)

Balance at December 31, 1994.............. $57 $-- $ -- $ 1,208 $ 1,265
Net earnings.............................. -- -- -- 1,872 1,872
Dividends................................. -- -- -- (1,751) (1,751)
Contribution of minority interest (note
11)..................................... 12 12 -- 289 313
Cumulative translation adjustment......... -- -- 222 -- 222
--- --- ----- ------- -------
Balance at December 31, 1995............ 69 12 222 1,618 1,921
Net earnings.............................. -- -- -- 1,143 1,143
Dividends................................. -- -- -- (1,275) (1,275)
Cumulative translation adjustment......... -- -- (119) -- (119)
--- --- ----- ------- -------
Balance at December 31, 1996............ 69 12 103 1,486 1,670
Net earnings.............................. -- -- -- 549 549
Cumulative translation adjustment......... -- -- (173) -- (173)
--- --- ----- ------- -------
Balance at June 30, 1997................ 69 12 (70) 2,035 2,046
Net earnings.............................. -- -- -- 442 442
Cumulative translation adjustment......... -- -- (34) -- (34)
--- --- ----- ------- -------
Balance at September 30, 1997
(unaudited).......................... $69 $12 $(104) $ 2,477 $ 2,454
=== === ===== ======= =======

See accompanying notes to consolidated financial statements.

F-32

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FINANCIERE ALMA, S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

[Enlarge/Download Table]

YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SIX MONTHS ENDED SEPTEMBER 30,
----------------- JUNE 30, -----------------
1995 1996 1997 1996 1997
------- ------- ----------------- ------- -------
(AMOUNTS IN THOUSANDS OF US DOLLARS)
(UNAUDITED)

Cash flows from operating activities:
Net earnings....................................... $ 1,872 $ 1,143 $ 549 $ 653 $ 991
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization.................... 195 243 176 179 347
Loss from sale of property and equipment......... -- 178 -- -- --
Minority interest expense........................ 1,547 498 119 182 431
Deferred income taxes............................ (88) (165) (70) 99 (125)
Changes in assets and liabilities:
Accounts receivable............................ (3,223) 1,811 (516) 2,325 (2,320)
Prepaid expenses and other current assets...... (345) (606) 79 (993) 16
Other assets................................... (152) 111 64 58 79
VAT payable.................................... 427 4 144 (655) 469
Accounts payable and accrued expenses.......... 1,581 810 (1,881) 195 (1,601)
Accrued payroll and related expenses........... 362 480 (631) 139 739
Deferred revenues.............................. (236) (188) (2) (81) 235
Other long-term liabilities.................... 485 8 2 4 2
------- ------- ------- ------- -------
Net cash provided by (used in) operating
activities.............................. 2,425 4,327 (1,967) 2,105 (737)
------- ------- ------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment.............. (266) (149) (443) (137) (552)
Proceeds from sale of property and equipment..... 14 17 21 16 37
Net change in due from affiliates................ 16 (1,561) 132 (969) 1,787
------- ------- ------- ------- -------
Net cash provided by (used in) investing
activities.............................. (236) (1,693) (290) (1,090) 1,272
------- ------- ------- ------- -------
Cash flows from financing activities:
Bank overdraft changes, net...................... 133 913 (805) (29) (765)
Proceeds from issuance of long-term debt......... -- 1,369 257 1,344 223
(Repayments) proceeds from loans to (from)
shareholders, net.............................. (7) 1,324 (525) (2) (1,275)
(Repayments) proceeds from loans from affiliates,
net............................................ -- (4) -- 1 (73)
Repayments of long-term debt..................... (80) (88) (34) (76) (1,246)
Dividends and distributions...................... (3,144) (4,101) -- (2,779) (415)
------- ------- ------- ------- -------
Net cash used in financing activities..... (3,098) (587) (1,107) (1,541) (3,551)
------- ------- ------- ------- -------
Effect of foreign exchange rate changes on cash and
cash equivalents................................. 428 (441) (771) (303) (845)
------- ------- ------- ------- -------
Net change in cash and cash equivalents... (481) 1,606 (4,135) (829) (3,861)
Cash and cash equivalents at beginning of period... 6,264 5,783 7,389 5,783 7,389
------- ------- ------- ------- -------
Cash and cash equivalents at end of
period.................................. $ 5,783 $ 7,389 $ 3,254 $ 4,954 $ 3,528
======= ======= ======= ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest......... $ 25 $ 66 $ 47 $ 58 $ 61
======= ======= ======= ======= =======
Cash paid during the period for income taxes..... $ 2,355 $ 1,117 $ 422 $ 756 $ 626
======= ======= ======= ======= =======

See accompanying notes to consolidated financial statements.

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FINANCIERE ALMA, S.A. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 AND JUNE 30, 1997
(AMOUNTS IN US DOLLARS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION

The consolidated financial statements consist of Financiere Alma and,
except for NAAC, its majority owned subsidiaries Alma Intervention, S.A., Club
Affairs Alma, S.A.R.L., Meridian VAT Reclaim France, S.A.R.L., B&F Associes,
S.A.R.L., and STEP, S.A. (collectively referred to as "Alma"). A majority owned
subsidiary, NAAC, has been excluded from the consolidation as certain of Alma's
shareholders have agreed to acquire the investment at its carrying value (see
note 2). Alma acquired B&F Associes, S.A.R.L. in March 1996 and Meridian VAT
Reclaim France, S.A.R.L. in January 1996 for amounts equivalent to their net
tangible assets. The results of operations include these two companies from
their respective acquisition dates. Pro forma and other acquisition related
information is not material.

The separate legal entities are all registered in France and prepare their
financial statements in French francs and in accordance with accounting
principles generally accepted in France. For the purpose of the proposed
acquisition of Alma by the US corporation, The Profit Recovery Group
International, Inc., the financial statements of Alma have been restated to
comply with US generally accepted accounting principles and are presented in US
dollars. The principal differences between French and US generally accepted
accounting principles relate to the timing of the recognition of revenues, the
carrying values of work-in-progress and the recognition of deferred income
taxes.

For the purpose of the translation of French franc amounts into US dollars,
the closing exchange rate has been applied for the consolidated balance sheets
and the average exchange rate has been applied for the consolidated statements
of earnings. Translation differences are recorded in shareholders' equity under
"cumulative translation adjustment." Average exchange rates of French francs to
US dollars for the years ended December 31, 1995 and 1996 and the six month
period ended June 30, 1997 were 4.9917, 5.1148 and 5.8296, respectively. The
closing exchange rate of French francs to US dollars as of December 31, 1995 and
1996 and June 30, 1997 were 4.9000, 5.2370 and 5.8777, respectively.

The accompanying unaudited condensed consolidated financial statements of
Alma as of September 30, 1997 and for the nine months ended September 30, 1996
and 1997 have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997.

B. DESCRIPTION OF BUSINESS

Alma is headquartered in Paris, France. Founded in 1986, Alma provides its
services exclusively within France. Alma is a recovery audit firm which
primarily assists businesses in the identification and recovery of tax
overpayments, including business and personal property taxes (referred to in
France as "fiscal"), workers compensation taxes (referred to in France as
"social"), real property taxes (referred to in France as "foncier") and value
added taxes ("VAT" referred to in France as "TVA").

Alma also provides certain consulting services. Club Affairs Alma, S.A.R.L.
is a "buying" club that assists small companies in obtaining volume discounts
primarily for office supplies and equipment. Alma Intervention, S.A. also
assists French companies obtain grants and subsidies and negotiate contracts for
security and cleaning services.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

C. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements have been prepared in accordance with
US generally accepted accounting principles. In preparing these consolidated
financial statements, management is required to make a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.

The consolidated financial statements of Alma include the financial
statements of the aforementioned entities. All significant intercompany balances
and transactions have been eliminated in consolidation.

The 1996 acquisitions of B&F Associes, S.A.R.L. and Meridian VAT Reclaim
France, S.A.R.L., as mentioned above, do not have a significant impact on cash.
As such, the cash flows related to these transactions are not presented
separately in the consolidated statement of cash flows.

D. REVENUE RECOGNITION

Alma's tax recovery audit services revenues are based on specific contracts
with its clients. Such contracts generally specify:

- time periods covered by the audit;

- nature and extent of the audit services to be provided;

- client duties in assisting and cooperating with Alma; and

- fee payable to Alma expressed as a specified percentage of the amounts
recovered by the client resulting from liability overpayments claims
identified.

Liability overpayment claims identified for fiscal, social and foncier tax
services are presented to the respective government agency for review and
approval. Claims for VAT services are filed directly with the respective
government agency.

For the fiscal, social and foncier services, Alma recognizes revenues when
(a) it receives notification of the government agency approval and (b) its
clients are entitled to the recovery. For VAT services, Alma recognizes revenues
when all documentation is filed with the appropriate government agency. Alma
generally invoices its clients concurrently with the point of revenue
recognition. Amounts received before meeting both criteria above are classified
as deferred revenue on the accompanying consolidated balance sheets.

Alma recognizes revenues for its other services as they are provided to its
clients.

E. PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of 3 years for computer
and other equipment, and 5 years for furniture and fixtures. Leasehold
improvements are amortized using the straight-line method over the term of the
lease, including extension options.

F. DIRECT AND COMPENSATION EXPENSE

Direct expenses incurred during the course of the recovery audit services
are expensed as incurred.

Non-management auditors have an element of their compensation which is
commission based and the compensation expense is recorded at the time of the
related revenue recognition, and subsequently paid as such revenue is collected.
Previously established auditor compensation accruals are subsequently adjusted
to correspond with adjustments for doubtful accounts. The salary portion of the
non-management auditors'

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compensation is charged to operations as incurred. All other Alma employees are
compensated on the basis of salary and, in certain cases, bonuses, which are
charged to operations as incurred.

G. CASH EQUIVALENTS

Alma considers all highly liquid debt instruments with original maturities
of three months or less to be cash equivalents. Cash equivalents consist
primarily of temporary cash investments with original maturity of 90 days or
less.

H. CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject Alma to concentrations of
credit risk consist principally of cash and cash equivalents and trade
receivables.

Alma has cash investment policies that limit investments to short-term low
risk instruments. Alma's cash is held principally in French francs and
concentrated in several major French banks.

Alma sells its products to customers in a variety of industries in France.
Alma performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses. To date, such losses have been within
management's expectations. Alma generally requires no collateral.

I. INCOME TAXES

2. RELATED PARTY TRANSACTIONS

Alma leases vehicles and posters from a company owned by the Chairman of
the Board of Directors of Alma. In addition, Alma leases office space from a
relative of the Chairman. Total rent expense for the posters, vehicles and
office for the years ended December 31, 1995 and 1996 and the six months ended
June 30, 1997 were $269,000, $306,000 and $123,000, respectively.

Alma also contributes 40 percent of the rental payment for an apartment in
Paris, France for the Chairman. Total rent expense for the apartment for the
years ended December 31, 1995 and 1996 and the six months ended June 30, 1997
was approximately $26,000, $25,000, and $22,000, respectively.

Alma subleases a portion of its corporate headquarters to certain
affiliates. Rental income recorded on these subleases for the year ended
December 31, 1995 and 1996 and the six months ended June 30, 1997 were
approximately $27,000, $35,000 and $20,000, respectively.

Consulting services have been provided to Alma by a major shareholder who
is also a director of Alma. Consulting fees for the years ended December 31,
1995 and 1996 and the six months ended June 30, 1997 were $194,000, $227,000 and
$100,000, respectively.

The amounts contained in "Due from affiliates" represent mainly a loan to
and the net book value of NACC. In September 1997, Alma's interest in NACC was
sold to certain of Alma's shareholders at book value for cash.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The amounts in "Due to shareholders" and "Due to affiliates" represent
interest free advances by the Chairman to Alma for operating purposes and
expenses paid on behalf of Alma by affiliated companies, respectively.

Prior to 1994, Alma had guaranteed one half of a FF10,000,000 loan held by
NACC. The amount of the guarantee was approximately $851,000 at June 30, 1997.
This guarantee was secured by a pledge of the shares in Alma Intervention, S.A.
Subsequent to June 30, 1997, the guarantee given and security pledged by Alma
has been released.

During 1995, Financiere Alma loaned approximately $292,000 to a shareholder
who was also an employee of Alma. The full amount of the loan was repaid prior
to December 31, 1995.

3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include:

[Enlarge/Download Table]

DECEMBER 31,
--------------- JUNE 30,
1995 1996 1997
------ ------ --------
(AMOUNTS IN THOUSANDS)

Cash held at bank........................................... $2,420 $1,485 $ 676
Cash equivalents............................................ 3,363 5,904 2,578
------ ------ ------
$5,783 $7,389 $3,254
====== ====== ======

The fair value of cash equivalents, all classified as available-for-sale,
approximate book value at December 31, 1995 and 1996 and at June 30, 1997.

4. LONG-TERM DEBT

Long-term debt is summarized as follows:

[Enlarge/Download Table]

DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
---- ------ --------
(AMOUNTS IN THOUSANDS)

Term loan with interest rate of PIBOR plus 2% (5.39% at June
30, 1997) with final payment due December 1999(a)......... $ -- $1,336 $1,190
Term loan with interest rate of 7.5% requiring quarterly
payments of FF 75,000, or $12,864 at June 30, 1997, plus
interest with final payment due February 1998............. 146 72 39
Term loan with interest rate of PIBOR plus 1.25% (4.64% at
June 30, 1997) requiring quarterly payments of FF 44,704
or $7,668 at June 30, 1997, plus interest with final
payment due April 2000.................................... -- -- 245
Other....................................................... 98 67 48
---- ------ ------
244 1,475 1,522
Less current installments................................... 88 410 435
---- ------ ------
Long-term debt, excluding current installments.... $156 $1,065 $1,087
==== ====== ======

---------------

(a) This loan is secured by a pledge of 6,307 shares of Alma Intervention, S.A.
Alma would be liable to a 2% per year indemnity in case of early repayment.
A merger, transfer of assets, change in ownership constitutes an event
default which could cause early repayment (see note 12).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum annual principal payments for long-term debt for each of the
years subsequent to December 31, 1996 are as follows:

[Download Table]

(AMOUNTS IN THOUSANDS)

YEARS ENDING DECEMBER 31,
1997........................................................ $ 410
1998........................................................ 501
1999........................................................ 553
2000........................................................ 11
------
Total............................................. $1,475
======

5. SHAREHOLDERS' EQUITY

In September 1995, Alma increased its ownership interest in Alma
Intervention, S.A. from 50.7% to 60.6% by the issuance of 561 ordinary shares.
The Alma Intervention, S.A. shares were purchased from the Chairman, and valued
for an amount which was considerably lower than the fair value of the interest
acquired. As this transaction involved entities under common control, the excess
of fair value over book value has been accounted for as a contribution by
minority interests to retained earnings.

6. LEASES

Alma is committed under non-cancelable operating lease arrangements for
facilities, vehicles and artwork, including related party leases (see note 2).
Rent expense for the years ended December 31, 1995 and 1996 and the six months
ended June 30, 1997 was $694,000, $803,000 and $242,000, respectively. The
future minimum lease payments under these leases, net of related party subleases
(see note 2), are summarized as follows:

[Enlarge/Download Table]

RELATED OTHER
PARTIES LEASES TOTAL
------- ------ ------
(AMOUNTS IN THOUSANDS)

YEARS ENDING DECEMBER 31,
1997........................................................ $ 83 $ 267 $ 350
1998........................................................ 214 462 676
1999........................................................ 104 517 621
2000........................................................ 4 -- 4
---- ------ ------
Total............................................. $405 $1,246 $1,651
==== ====== ======

7. INCOME TAXES

The provision for income taxes for the years ended December 31, 1995 and
1996 and the six months ended June 30, 1997 consists of the following:

[Enlarge/Download Table]

YEARS ENDED
DECEMBER 31,
--------------- JUNE 30,
1995 1996 1997
------ ------ --------
(AMOUNTS IN THOUSANDS)

Current..................................................... $1,950 $1,139 $495
Deferred.................................................... (88) (165) (70)
------ ------ ----
Total............................................. $1,862 $ 974 $425
====== ====== ====

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of income taxes computed at the French statutory rate
(36.66% in 1995, 1996 and 1997) to income tax expense is as follows:

[Enlarge/Download Table]

YEARS ENDED
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------ ---- --------
(AMOUNTS IN THOUSANDS)

Income tax expense computed at the French statutory rate.... $1,935 $960 $417
Other....................................................... (73) 14 8
------ ---- ----
Total............................................. $1,862 $974 $425
====== ==== ====

Deferred taxes reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred taxes consist of the following:

[Enlarge/Download Table]

YEARS ENDED
DECEMBER 31,
--------------- JUNE 30,
1995 1996 1997
------ ------ --------
(AMOUNTS IN THOUSANDS)

Deferred tax liabilities:
Accrued payroll and related expenses...................... $ 46 $ 68 $ 60
Accumulated depreciation.................................. 2 -- --
------ ------ ------
Total deferred tax liabilities.................... 48 68 60
------ ------ ------
Deferred tax assets:
Deferred revenues......................................... 702 824 759
Accounts payable and accrued expenses..................... 260 236 239
Other..................................................... 43 66 99
------ ------ ------
Total deferred tax assets.............................. 1,005 1,126 1,097
------ ------ ------
Net deferred tax assets................................ $ 957 $1,058 $1,037
====== ====== ======

A proposal to increase the statutory tax rate from 36.7% to 41.6% effective
January 1, 1997 will be the subject of a vote by the members of the French
National Assembly. If approved, income tax expense for the six months ended June
30, 1997 would increase by $64,000 and the net deferred tax asset would increase
by $156,000.

No valuation allowances were deemed necessary since all deductible
temporary differences could be carried back to recover income taxes previously
paid.

8. EMPLOYEE BENEFIT PLANS

Alma contributes to pensions for personnel in France in accordance with
French law, by contributions based on salaries to the relevant state-sponsored
organizations. Alma has no further liability in connection with these plans.

French law also requires payment of a lump sum retirement indemnity to
employees, based upon years of service and compensation at retirement. Benefits
do not vest prior to retirement. Alma's estimated obligations at December 31,
1995 and 1996 and June 30, 1997 were determined using actuarial methods. Expense
related to this plan for the years ended December 31, 1995 and 1996 and six
months ended June 30, 1997 were $4,000, $4,000 and $2,000, respectively.

In March 1992, Alma Intervention, S.A. implemented a profit sharing
agreement as required under French corporate law. This agreement was
subsequently renewed in December, 1996 and extended to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

employees of all companies except B&F Associes, S.A.R.L. The agreement allows
all qualified employees with at least six months of service to receive a benefit
equal to a percentage of Alma's taxable income, based on the employee's length
of service and amount of salary. The benefit is deposited in a venture capital
fund and cannot be used by the employee for a five year period, except under
circumstances defined by the plan, such as death or resignation. B&F Associes,
S.A.R.L. adopted a similar benefit plan for its employees on November 13, 1995,
which terminates on November 12, 1998, with the option to renew. Expense related
to this plan for the years ended December 31, 1995 and 1996 and six months ended
June 30, 1997 were $424,000, $384,000 and $185,000, respectively.

In October 1993, Alma entered into an employee savings agreement which
entitles employees with at least six months of service to contribute, either
directly in cash or by transferring part or all of the sums deposited in the
venture capital fund referred to above, to a fund that purchases either
short-term investments or acquires shares in Alma Intervention, S.A. The shares
purchased cannot be transferred by the employees for a five year period, except
under circumstances defined by the plan such as death, retirement or
resignation. Employees have the right to purchase shares under this plan at
their estimated fair value only during periods designated by Alma. Since the
inception of the plan, only one sale was offered to employees, on October 1993,
resulting in 341 shares of Alma Intervention, S.A. being purchased.

In June 1994, a bonus incentive agreement was adopted by Alma Intervention,
S.A. for a three year period for all employees having at least six months
service. The agreement allows all qualified employees to receive a benefit as a
result of achieving certain corporate goals. The amount of the benefit and
specific corporate goals are generally established at the beginning of each
fiscal year. By adopting this plan, Alma receives tax benefits such as lower
social taxes on employee wages. The agreement was renewed for three years in
June 1997. Expense related to this plan for the years ended December 31, 1995
and 1996 and six months ended June 30, 1997 were $444,000, $480,000 and
$218,000, respectively.

9. COMMITMENTS AND CONTINGENCIES

Alma guarantees the validity of the claims identified by providing a
commitment to refund fees earned on successful claims which are later determined
to be unsuccessful. Since Alma's fees are a percentage of the recovery received
by its clients, the refunds for unsuccessful claims arise if the favorable
ruling during a tax audit for fiscal, social and foncier tax claims is
subsequently overturned or a VAT tax claim is denied (see note 1.A). Alma
secures certain guarantees with a bank guarantee in favor of its client. The
terms of these bank guarantees generally correspond with the remaining statutory
period for tax audits of the related claim identified. Bank guarantees
outstanding at June 30, 1997 totaled $799,000. Historically, Alma has rarely
been required to refund its fees. Management believes that any future
reimbursement of fees received will not be material.

Alma is subject to legal proceedings and claims which arise in the ordinary
course of its business. While these actions are being contested, management
believes that any liability resulting from these matters, after taking into
consideration insurance coverage and amounts already accrued, should not have a
material adverse effect on the consolidated financial position or results of
operations.

During December 1995, Alma entered into an agreement with Lasseri, Durand
et Associes ("LDA") to provide legal, audit and research services at
pre-established invoicing rates, based on Alma's request. The contract
stipulates that Alma's yearly demand of LDA's services is not to fall below 25%
of the highest annual fees paid to LDA during the previous three years ("the
standard fee level"). Failure on the part of Alma to fulfill this level of
request for services from LDA will result in a penalty to be paid to LDA in the
amount of the decrease in the demand of services from the standard fee level. If
Alma terminates the contract prior to expiration, Alma will be required to pay
to LDA an amount equal to the highest annual fees invoiced by LDA during the
last three years. The agreement covers a period of five years ending December
2000. Fees paid to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LDA for the years ended December 31, 1995 and 1996 and the six months ended June
30, 1997 were $366,000, $410,000 and $101,000, respectively.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

At December 31, 1995 and 1996, and June 30, 1997, the carrying values of
financial instruments such as cash and cash equivalents, accounts receivable,
due from affiliates and current liabilities approximated their market values,
based on the short-term maturities of these instruments. The fair value of
Alma's long-term debt instruments are based on the amount of future cash flows
associated with each instrument discounted using Alma's current borrowing rate
for similar debt instruments of comparable maturity. The estimated fair value of
the Company's long-term debt instruments, excluding current installments of
long-term debt (see note 4), at December 31, 1995 and 1996 and June 30, 1997 was
$198,000, $1,298,000 and $1,126,000, respectively.

11. MINORITY INTEREST

As of June 30, 1997, Financiere Alma owned either directly or indirectly
through Alma Intervention, S.A., 61% of Alma Intervention, S.A., 90% of Step,
S.A., 99% of B&F Associes, S.A.R.L., 85% of Club Affaires Alma, S.A.R.L., and
90% of Meridian VAT Reclaim France, S.A.R.L. Minority interest distributions
during the years ended December 31, 1995 and 1996, and the six months ended June
30, 1997 were $1,456,000, $1,163,000 and $414,000, respectively. During
September 1995, approximately $289,000 was transferred from minority interest to
retained earnings (see note 5).

In September 1997, Alma Intervention, S.A. purchased the minority ownership
in Club Affairs Alma, S.A.R.L., Meridian VAT Reclaim France, S.A.R.L., B&F
Associes, S.A.R.L. and Step, S.A. for amounts that approximated the net book
value of the minority interest. The net book value approximates the fair value.

12. SUBSEQUENT EVENT

On October 7, 1997, The Profit Recovery Group International, Inc. ("PRG")
acquired substantially all ownership interests of Alma for a consideration of
approximately $24,602,000 in cash and 859,000 unregistered shares of PRG's
common stock. PRG has the obligation to purchase the remaining ownership
(approximately 1.6%) of Alma by January 1999 for terms similar to the October
1997 transaction.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘424B1’ Filing	Date	First	Last	Other Filings

	12/31/02	39		10-K
	12/30/02	32
	10/7/02	37
	3/26/99	48
	12/31/98	22	39	10-K405, 5
	11/12/98	91		10-Q
	6/30/98	19	73	10-Q
	3/20/98	1
Filed on:	3/17/98
	3/16/98	1	13	10-K/A, S-3/A
	3/11/98	4	47
	3/1/98	41
	2/11/98	37		SC 13G/A
	1/31/98	12	54	4
	1/27/98	40	41
	1/19/98	67
	1/2/98	61
	12/31/97	4	89	10-K, 10-K/A, 5
	12/15/97	23
	11/21/97	69		8-K/A
	10/15/97	35		3, 3/A
	10/7/97	35	92	8-K, 8-K/A
	10/1/97	5	74
	9/30/97	52	85	10-Q
	7/1/97	67
	6/30/97	50	92	10-Q
	5/23/97	69
	5/15/97	67		DEF 14A
	2/11/97	68		SC 13G
	1/2/97	68
	1/1/97	26	90
	12/31/96	4	92	10-K, 4
	9/30/96	52	85	10-Q
	4/19/96	32
	4/18/96	68
	4/1/96	22	67
	3/31/96	13	19
	3/28/96	62
	3/27/96	68
	3/26/96	5	68
	1/1/96	63
	12/31/95	4	92
	11/13/95	91
	4/24/95	62
	3/1/95	38
	1/1/95	5	68
	12/31/94	57	83
				List all Filings

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Filing Submission 0000950144-98-002832 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

PRGX Global, Inc. – ‘424B1’ on 3/17/98

As of: Tuesday, 3/17/98 · Accession #: 950144-98-2832 · File #: 333-46225

Prospectus — Rule 424(b)(1)Filing Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Prospectus — Rule 424(b)(1)
Filing Table of Contents