As Filed with the Securities and Exchange Commission on July 22, 1997
REGISTRATION NO. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE PROFIT RECOVERY GROUP
INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-2213805
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2300 WINDY RIDGE PARKWAY
SUITE 100 NORTH
ATLANTA, GEORGIA 30339-8426
(770) 955-3815
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
CLINTON MCKELLAR, JR., ESQ. COPIES OF COMMUNICATIONS TO:
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. B. JOSEPH ALLEY, JR., ESQ.
2300 WINDY RIDGE PARKWAY ARNALL GOLDEN & GREGORY, LLP
SUITE 100 NORTH 2800 ONE ATLANTIC CENTER
ATLANTA, GEORGIA 30339-8426 1201 WEST PEACHTREE STREET
(770) 955-3815 ATLANTA, GEORGIA 30309
(404) 873-8500
(Name, address, including zip code and telephone
number, including area code, of agent for service)
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE
SECURITIES TO THE PUBLIC: From time to time after this
Registration Statement becomes effective.
---------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Registered Offering Price Per Share(1Aggregate Offering Amount of
Securities to be Registered Price(1) Registration Fee(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 166,559 Shares $16.75 $2,789,863.25 $845.42
=============================================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(c) and based on the average of the high and
low prices of the Company's Common Stock on July 18, 1997 as reported on The
Nasdaq Stock Market.
------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 22, 1997
PROSPECTUS
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
166,559 SHARES OF COMMON STOCK
NO PAR VALUE PER SHARE
This Prospectus relates to an aggregate of 166,559 shares of Common Stock,
no par value per share (the "Common Stock"), of The Profit Recovery Group
International, Inc., a Georgia corporation ("PRGX" or the "Company"). All of the
Common Stock offered hereby may be sold from time to time by and for the account
of the Selling Shareholders named in this Prospectus (the "Selling
Shareholders"), or for the account of pledgees, donees, transferees or other
successors in interest of the Selling Shareholders. See "Selling Shareholders"
herein.
The methods of sale of the Common Stock offered hereby are described under
the heading "Plan of Distribution." The Company will receive none of the
proceeds from such sales. Except as set forth below, the Company will pay all
expenses (other than underwriting and brokerage expenses, fees, discounts, and
commissions, all of which will be paid by the Selling Shareholders) incurred in
connection with the offering described in this Prospectus. The lesser of
one-half of all expenses incurred or $6,000 will be paid by one of the Selling
Shareholders. See "Selling Shareholders" herein.
The Selling Shareholders and any broker-dealers that participate in the
distribution of the Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"1933 Act"), and any commission or profit on the resale of shares received by
such broker-dealers may be deemed to be underwriting commissions and discounts
under the 1933 Act. Upon the Company's being notified by the Selling
Shareholders that any material arrangement has been entered into with a broker
or dealer for the sale of the shares through a secondary distribution, or a
purchase by a broker or dealer, a supplemented Prospectus will be filed, if
required, disclosing among other things the names of such brokers and dealers,
the number of shares involved, the price at which such shares are being sold and
the commissions paid or the discounts or concessions allowed to such
broker-dealers.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
Sales of the Common Stock may also be made for the account of the Selling
Shareholders, or for the account of donees, transferees or other successors in
interest of the Selling Shareholders, pursuant to Rule 144 under the 1933 Act.
The Common Stock of the Company is listed on The Nasdaq Stock Market's National
Market System (Symbol: PRGX). On July 18, 1997, the closing price of the Common
Stock was $17.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------
THE DATE OF THIS PROSPECTUS IS __________, 1997.
<PAGE>
AVAILABLE 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"). Reports, proxy statements
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission, 450 Fifth Street,
N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and at regional
offices of the Commission at the Citicorp Center, 500 West Madison, Suite 1400,
Chicago, Illinois 60661 and at 7 World Trade Center, New York, New York 10048.
Copies of such material may be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material may also be inspected and copied at the offices
of The Nasdaq Stock Market, 1735 K Street, Washington, D.C. 20006-1500, on which
the Company's Common Stock is listed. In addition, the Commission maintains a
site on the World Wide Web portion of the Internet that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information contained in the Registration Statement on
Form S-3, as amended (the "Registration Statement"), of which this Prospectus is
a part. For further information with respect to the Company and the Common
Stock, reference is made to the Registration Statement and the exhibits thereto.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document are not necessarily complete; and while the Company believes
the descriptions of the material provisions of such contracts, agreements and
other documents contained in this Prospectus are accurate summaries of such
material provisions, reference is made to such contract, agreement or other
document filed as an exhibit to the Registration Statement for a more complete
description of the matter involved, and each such statement is qualified in its
entirety by such reference.
NOTE: THE DISCUSSIONS IN THIS PROSPECTUS CONTAIN FORWARD LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. STATEMENTS CONTAINED IN THIS PROSPECTUS
THAT ARE NOT HISTORICAL FACTS ARE FORWARD LOOKING STATEMENTS THAT ARE SUBJECT TO
THE SAFE HARBOR CREATED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
A NUMBER OF IMPORTANT FACTORS COULD CAUSE THE COMPANY'S ACTUAL RESULTS FOR 1997
AND BEYOND TO DIFFER MATERIALLY FROM PAST RESULTS AND FROM THOSE EXPRESSED OR
IMPLIED IN ANY FORWARD LOOKING STATEMENTS MADE BY, OR ON BEHALF OF, THE COMPANY.
THESE FACTORS INCLUDE, WITHOUT LIMITATION, THOSE LISTED UNDER THE HEADING "RISK
FACTORS."
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following documents previously filed with the Commission pursuant to the
Exchange Act: (i) Annual Report of the Company on Form 10-K for the year ended
December 31, 1996, (ii) Quarterly Report of the Company on Form 10-Q for the
quarter ended March 31, 1997, and (iii) the description of the Company's Common
Stock contained in the Company's registration statement filed under Section 12
of the Exchange Act, including any amendment or report filed for the purpose of
updating such description.
Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock pursuant hereto shall be
deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained in this Prospectus or in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained in this Prospectus or in any subsequently
filed document that also is or is deemed to be incorporated by reference in this
Prospectus 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 the Registration Statement or this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents that are incorporated by reference in this
Prospectus, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to The Profit Recovery Group International, Inc., Attn:
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Chief Financial Officer, 2300 Windy Ridge Parkway, Suite 100 North, Atlanta,
Georgia 30339-8426, telephone (770) 955-3815.
THE COMPANY
The Company is a leading provider of accounts payable and other recovery
audit services to large retailers and other transaction-intensive companies. In
businesses with large purchase volumes and continuously fluctuating prices, some
small percentage of erroneous overpayments to vendors is inevitable, resulting
in "lost profits." The Company identifies and documents these 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 earliest of the Company's predecessors were formed in November 1990,
and in early 1991 acquired the operating assets of Roy Greene Associates, Inc.
and Bottom Line Associates, Inc. which were formed in 1971 and 1985,
respectively. In January 1995, the Company's predecessors acquired the operating
assets of Fial & Associates, Inc., a direct competitor. The predecessor business
entities that comprised the Company generally were either Subchapter S
corporations or partnerships, all under common ownership and control. In April
1995, the Company's predecessors reorganized and its international entities
became C corporations. Additionally, prior to the Company's March 1996 initial
public offering, all domestic entities became C corporations. Subsequent to the
Company's initial public offering, the Company has conducted its operations
through its various wholly-owned domestic and international subsidiaries.
The Company has operations 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.
RECENT DEVELOPMENTS
On May 23, 1997, pursuant to an Agreement and Plan of Reorganization, The
Hale Group, a California corporation ("Hale"), a provider of recovery audit
services primarily for companies engaged in the healthcare business, was merged
into the Company's wholly-owned subsidiary, Accounts Payable Recovery Services,
Inc., a Georgia corporation. Pursuant to the merger, the Company issued 75,000
shares of its Common Stock and paid approximately $800,000 in cash to the former
Hale shareholders. The Company also assumed approximately $260,000 of
indebtedness and other liabilities.
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.
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,
reflecting the inherent purchasing and operational cycles of the retailing
industry, which is the principal industry currently served by the Company.
Quarterly operating results also are affected by the timing of acquisitions and
the timing and magnitude of expenses associated with entering new markets.
Fluctuations in quarterly operating results may result in volatility in the
price of the Common Stock.
DEPENDENCE ON KEY CLIENTS
For the year ended December 31, 1996, the Company derived 14.4% of its
revenues from Wal-Mart Stores, Inc. and its affiliates ("Wal-Mart") and 34.6% of
revenues from its five largest clients (including Wal-Mart) as compared to 12.7%
and 30.1%, respectively, for 1995 and 15.5% and 44.0%, respectively, for 1994.
The Company anticipates that its reliance on any individual client or its five
largest clients will decrease over time as
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<PAGE>
its client base increases. Nevertheless, 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. In addition,
should one or more of such large clients file for bankruptcy or otherwise cease
to do business with the Company, the Company's business, financial condition and
results of operations could be materially and adversely affected.
UNCERTAINTY OF REVENUE RECOGNITION ESTIMATES AND COLLECTION OF CONTRACT
RECEIVABLES
The Company recognizes revenue at the time overpayment claims are presented
to and approved by clients, as adjusted for estimated uncollectible claims.
Submitted claims that are not approved by the 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.
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 is 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.
MANAGEMENT OF EXPANDING OPERATIONS
The Company recently has experienced a period of growth that 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.
INTERNATIONAL OPERATIONS
Although the Company derived only 18.9% of its revenues from international
operations in 1996, the Company is relying heavily on rapid and sustained
international expansion to achieve its long-term growth objectives. 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 and South
America during 1997. 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
generally accepted retailing business practice in many international markets.
There can be no assurance that the Company's services will be accepted by
retailers, 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 revenues are subject to inherent risks, including political
and economic instability, difficulties in staffing and managing foreign
operations and in accounts receivable collections, fluctuating currency exchange
rates, costs associated with localizing service offerings in foreign countries,
unexpected changes in regulatory requirements, difficulties in the repatriation
of earnings and burdens of complying with a wide variety of foreign laws and
labor practices. The Company has encountered, and expects to continue to
encounter, significant expense
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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 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.
REVISED AUDITOR COMPENSATION PROGRAM
The Company has developed a revised compensation program for its
non-management domestic field auditors which it believes will more equitably
compensate these individuals for their unique experience, skills and
contributions in meeting Company objectives. The revised program has been
designed with considerable input from auditor focus groups, has been subjected
to thorough in-house testing, and has undergone extensive field tests in the
first quarter of 1997. The revised program was implemented in May 1997. The
Company has attempted to design the revised program such that future aggregate
domestic auditor compensation expense will be unchanged from aggregate amounts
which would otherwise be paid under the existing 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.
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. registered trademarks and U.S.
registered copyrights on certain of its proprietary technology, there can be no
assurance that it will be able to obtain similar protection on its other
intellectual property. 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. 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.
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 include local or regional firms and one firm, Howard Schultz &
Associates, 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 1996.
There can be no assurance that the Company will continue to be able to compete
successfully with such firms. 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.
ACQUISITIONS
Thus far during 1997, the Company has acquired three complimentary
businesses, Shaps Group, Inc., Accounts Payable Recovery Service, Inc. and The
Hale Group. In addition, the Company intends to aggressively
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pursue possible future acquisitions. While there are currently no commitments
with respect to any significant acquisitions, management frequently evaluates
strategic opportunities and 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. Future acquisitions by the Company may result in
the diversion of management's attention from day-to-day operations and may
include numerous other risks, including difficulties in the integration of the
operations, technology and personnel of the acquired companies. Moreover, future
acquisitions by the Company may result in dilutive issuances of equity
securities, the incurrence of additional debt and amortization expenses related
to goodwill and other intangible assets that may materially and adversely affect
the Company's operating results. There can be no assurance that the 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.
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. 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 Mr. Cook, Mr. Lustig and
other members of management. The Company also maintains key man life insurance
policies in the aggregate amount of $13.8 million on the life of Mr. Cook.
CONTROL BY MANAGEMENT
Executive officers and directors of the Company, collectively, beneficially
own approximately 65% of the outstanding Common Stock. As a result, members of
management collectively have the power to elect the Board of Directors of the
Company, to approve or disapprove any other matters requiring shareholder
approval without the vote of any other shareholders and effectively to control
the affairs and policies of the Company.
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 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 for the shares of Common Stock.
INDEMNIFICATION AND LIMITATION ON LIABILITY
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.
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VOLATILE STOCK PRICE
The Company's Common Stock is traded on The Nasdaq Stock Market. The
Company's Common Stock was initially offered to the public on March 26, 1996 at
$11.00 per share. Following the Company's initial public offering, the trading
price of the Common Stock has been subject to fluctuations, with a high close of
$23 1/4 on August 16, 1996 and a low close of $11 1/16 on March 19, 1997. As of
July 18, 1997 the Common Stock closed at $17.00. In addition, 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.
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 1996, 1995 and 1994, certain of the Company's domestic retailing clients
filed for bankruptcy protection, resulting in aggregate net charges to
operations of $403,000, $468,000 and $247,000, respectively. Future bankruptcy
filings by the Company's clients, 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.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Stock offered by the Selling Shareholders.
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SELLING SHAREHOLDERS
The Profit Recovery Group International, Inc. Common Stock to which this
Prospectus relates is being offered by former shareholders (the "Shaps Selling
Shareholders") of Shaps Group, Inc., a California corporation ("Shaps"), and by
Mr. Louis D. Lerner ("Lerner"), a former shareholder of Accounts Payable
Recovery Services, Inc., a Texas corporation ("APRS") (the Shaps Selling
Shareholders and Lerner are collectively referred to herein as the "Selling
Shareholders"). The Company acquired substantially all of the assets of Shaps
effective as of January 1, 1997. An aggregate of 375,000 shares were issued to
the Shaps Selling Shareholders in connection with the acquisition. The Shaps
Selling Shareholders received demand registration rights with respect to all of
the shares of The Profit Recovery Group International, Inc. Common Stock
received by them pursuant to the acquisition, and have exercised their rights
with respect to 153,500 shares of Common Stock as to which their demand rights
were currently exercisable. Mr. Lerner acquired his shares of Common Stock in
connection with the Company's acquisition of APRS in February 1997. Although Mr.
Lerner acquired registration rights with respect to his shares, they do not
begin to become exercisable until 1998. The Company has agreed to allow Mr.
Lerner to include all of the shares received by him pursuant to the APRS
acquisition in this registration in consideration of Mr. Lerner's agreement to
pay the lesser of one-half of the Company's expenses in effecting this
registration or $6,000.
The following table states the number of shares of Common Stock of the
Company beneficially owned by the Selling Shareholders as of June 30, 1997, and
the number of such shares which may be sold for the account of the Selling
Shareholders.
<TABLE>
<CAPTION>
Relationship to Beneficial Ownership Beneficial Ownership
Beneficial Owner Company Prior to the Offering(1) Shares Offered After the Offering(2)
- ---------------- ------- ------------------------ -------------- ---------------------
Shares Percentage Shares Percentage
------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Joel Shaps President, PRG 281,250 * 100,000 181,250 *
Manufacturing and
High Technology
Division
Shealagh Meehan Vice President, PRG 75,000 * 37,500 37,500 *
Manufacturing and
High Technology
Division
Carol and Richard Auditors 37,500(3) * 16,000 21,500(3) *
Leavitt
Louis D. Lerner Vice President, PRG 13,059 * 13,059 ___ *
Healthcare and
Energy Division
</TABLE>
- ------------------------
(1) Percentage is the percentage of outstanding shares of each class of Common
Stock beneficially owned as of June 30, 1997. As of such date, 18,230,149
shares of Common Stock were outstanding.
(2) Assumes all offered securities will be sold.
(3) Includes 18,750 shares of Common Stock which Mr. and Mrs. Leavitt currently
have the right to purchase from Mr. Shaps.
*Less than one percent.
PLAN OF DISTRIBUTION
The Shares covered hereby may be offered and sold from time to time by the
Selling Shareholders. The Selling Shareholders will act independently of the
Company in making decisions with respect to the timing, manner and size of each
sale. Such sales may be made on The Nasdaq Stock Market or otherwise, at prices
related to the then current market price or in negotiated transactions,
including one or more of the following methods: (a)
8
<PAGE>
purchases by a broker-dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus; (b) ordinary brokerage transactions
and transactions in which the broker solicits purchasers; and (c) block trades
in which the broker-dealer so engaged will attempt to sell the Shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction. The Company has been advised by the Selling Shareholders that
they have not made any arrangements relating to the distribution of the Shares
covered by this Prospectus. In effecting sales, broker-dealers engaged by the
Selling Shareholders may arrange for other broker-dealers to participate.
Broker-dealers may receive commissions or discounts from the Selling Shareholder
in amounts to be negotiated.
In offering the Shares covered hereby, the Selling Shareholders and any
broker-dealers and any other participating broker-dealers who execute sales for
the Selling Shareholders may be deemed to be "underwriters" within the meaning
of the Securities Act in connection with such sales, and any profits realized by
the Selling Shareholders and the compensation of such broker-dealer may be
deemed to be underwriting discounts and commissions. In addition, any Shares
covered by this Prospectus which qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this Prospectus. None of the Shares
covered by this Prospectus presently qualify for sale pursuant to Rule 144 and
it is not anticipated that any Shares will so qualify during the effectiveness
of the Registration Statement in which this Prospectus is contained.
The Company has advised the Selling Shareholders that during such time as
they may be engaged in a distribution of Shares covered hereby, they are
required to comply with Regulation M under the Exchange Act as described below
and, in connection therewith, that they may not engage in any stabilization
activity in connection with the Company's Common Stock, are required to furnish
to each purchaser and/or broker-dealer through which Shares covered hereby may
be offered copies of this Prospectus, and may not bid for or purchase any
securities of the Company or attempt to induce any person to purchase any
securities of the Company except as permitted under the Exchange Act. Each
Selling Shareholder has agreed to inform the Company when the distribution of
his or her Shares is completed.
Regulation M under the Exchange Act also prohibits, with certain
exceptions, participants in a distribution from bidding for or purchasing, for
an account in which the participant has a beneficial interest, any of the
securities that are the subject of the distribution. Regulation M also governs
bids and purchases made in order to stabilize the price of a security in
connection with a distribution of the security.
This offering will terminate on the earlier of 90 days from the date hereof
or the date on which all Shares offered hereby have been sold by the Selling
Shareholder.
In order to comply with certain states' securities laws, if applicable, the
Shares offered hereby will be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, the Shares may not be sold in
certain states unless they have been registered or qualified for sale in such
states or an exemption from registration or qualification is available and is
complied with.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock covered by this
Prospectus are being passed upon by Arnall Golden & Gregory, LLP. Jonathan
Golden, the sole stockholder of Jonathan Golden P.C. (a partner of Arnall Golden
& Gregory, LLP), is a director of the registrant. As of the date hereof,
attorneys with Arnall Golden & Gregory, LLP beneficially own an aggregate of
approximately 1,100,000 shares of the registrant's Common Stock.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and 1995, and for each of the years in the three-year period ended December
31, 1996, included in the Company's Form 10-K for the year ended December 31,
1996 have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
auditors, incorporated by reference herein, and upon the authority of said firm
as experts in accounting and auditing.
9
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the fees and expenses to be incurred in
connection with the issuance and distribution of the shares of Common Stock, no
par value per share, offered hereby.
Securities and Exchange Commission Registration Fee..... $ 845.42
--------------
Nasdaq Listing Fee...................................... n.a.
--------------
Blue Sky Fees and Expenses.............................. n.a.
--------------
Legal Fees and Expenses................................. $ 6,000
--------------
Accounting Fees......................................... $ 6,000
--------------
Printing and Engraving Costs............................ n.a.
--------------
Transfer Agent's Fee.................................... n.a.
--------------
Miscellaneous Expenses.................................. n.a.
--------------
TOTAL................................................... $ 12,845.42
==============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 8 of the Company's Articles of Incorporation and Article VII of the
Company's Bylaws set forth the extent to which the Company's directors and
officers may be indemnified against liabilities they may incur while serving in
such capacities. Such indemnification will be provided to the fullest extent
allowed by the Georgia Business Corporation Code, as amended from time to time.
Under these indemnification provisions, the Company is required to indemnify any
of its directors and officers against any reasonable expenses (including
attorneys' fees) incurred by such party in the defense of any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
such person was made a party, or in defense to any claim, issue or matter
therein, by reason of the fact that such person is or was a director or officer
of the Company or who, while a director of officer of the Company, is or was
serving at the Company's request as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise to the extent that such director or
officer has been successful, on the merits or otherwise, in such defense. The
Company also is required to indemnify any of its directors or officers against
any liability incurred in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the name of the Company, in which
event, additional determinations must be made before indemnification is
provided) by reason of the fact that he or she is or was a director or officer
of the Company who, while a director or officer of the Company, is or was
serving at the Company's request as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, if such director or officer acted in
a manner he or she believed in good faith to be in, or not opposed to, the best
interests of the Company, and with respect to any criminal proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The Company may
also provide advances of expenses incurred by a director or officer in defending
such action, suit or proceeding upon receipt of a written affirmation of such
officer or director that he or she has met certain standards of conduct and an
undertaking by or on behalf of such officer or director to repay such advances
unless it is ultimately determined that he or she is entitled to indemnification
by the Company.
The Company's Articles of Incorporation contain a provision which
eliminates, to the fullest extent permitted by law, director liability for
monetary damages for breach of the fiduciary duty of care or any other duty as a
director.
The Company has entered into indemnification agreements (the
"Indemnification Agreements") with each of its directors and certain executive
officers. The Indemnification Agreements set forth certain procedural matters
relating to indemnification, including the manner in which an indemnified party
may make a claim and the right of an indemnified party to court adjudication of
his or her claim if indemnification is denied by the Company.
II - 1
<PAGE>
The Company has obtained an insurance policy insuring the directors and
officers of the Company against certain liabilities, including liabilities under
the 1933 Act.
Pursuant to the Underwriting Agreement entered into by the Company in
connection with its initial public offering of common stock, the Underwriters
thereunder have agreed to indemnify the directors and officers of the Company
and certain other persons against certain civil liabilities.
ITEM 16. EXHIBITS
a. Exhibits:
Exhibit
Number Description
4* Form of Common Stock certificate.
5** Opinion of Arnall Golden & Gregory, LLP regarding legality.
23.1** Consent of Arnall Golden & Gregory, LLP (contained in Exhibit 5).
23.2** Consent of KPMG Peat Marwick LLP.
- ----------
* INCORPORATED BY REFERENCE TO THE SAME EXHIBIT NUMBER IN THE REGISTRANT'S
REGISTRATION STATEMENT ON FORM S-1 (NO. 333-1086).
** FILED HEREWITH.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
1933 Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected on the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraph (1)(i) and (1)(ii) above do not apply if
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the registration statement.
II - 2
<PAGE>
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions set forth in response to Item 15, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on July 22, 1997.
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
By: John M. Cook
----------------------------------------
John M. Cook, Chairman of the Board,
Chief Executive Officer and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints John M. Cook, Clinton McKellar, Jr. and
Donald E. Ellis, Jr. and each of them, as his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
any related registration statement filed pursuant to Rule 462 promulgated
pursuant to the Securities Act, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
John M. Cook Chairman of the Board and Director, Chief July 22, 1997
- -------------------
John M. Cook Executive Officer and President
(Principal Executive Officer)
Donald E. Ellis, Jr. Senior Vice President, Chief Financial July 22, 1997
- -------------------
Donald E. Ellis, Jr. Officer and Treasurer
(Principal Financial Officer)
Michael R. Melton
- ------------------- Vice President-Finance July 22, 1997
Michael R. Melton (Principal Accounting Officer)
John M. Toma Vice Chairman and Director July 22, 1997
- -------------------
John M. Toma
Stanley B. Cohen
- ------------------ Director July 22, 1997
Stanley B. Cohen
II - 4
<PAGE>
Jonathan Golden
- --------------------- Director July 22, 1997
Jonathan Golden
Garth H. Greimann
- -------------------- Director July 22, 1997
Garth H. Greimann
Fred W. I. Lachotzki
- -------------------- Director July 22, 1997
Fred W. I. Lachotzki
E. James Lowrey
- ------------------- Director July 22, 1997
E. James Lowrey
II - 5
EXHIBIT 5
<PAGE>
ARNALL GOLDEN & GREGORY,LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
(404) 873-8500
(404) 873-8501
July 22, 1997
The Profit Recovery Group International, Inc.
2300 Windy Ridge Parkway
Suite 100 North
Atlanta, GA 30339-8426
Re: Form S-3 Registration Statement
Gentlemen:
We have acted as your counsel in connection with the preparation of the
Registration Statement on Form S-3 (the "Registration Statement") filed by The
Profit Recovery Group International, Inc., a Georgia corporation (the
"Company"), with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Act"). This Registration Statement relates to an offer
by certain selling stockholders named therein of up to 166,559 shares of the
Company's Common Stock, no par value (the "Shares").
In acting as counsel to you, we have examined and relied upon such
corporate records, documents, certificates and other instruments and examined
such questions of law as we have considered necessary or appropriate for the
purposes of this opinion. Based upon and subject to the foregoing, we advise you
that in our opinion the Shares are legally issued, fully paid and
non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" contained therein and elsewhere in the Registration Statement. This
consent is not to be construed as an admission that we are a party whose consent
is required to be filed with the Registration Statement under the provisions of
the Act.
Sincerely,
ARNALL GOLDEN & GREGORY, LLP
ARNALL GOLDEN & GREGORY, LLP
EXHIBIT 23.2
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
The Profit Recovery Group International, Inc.:
We consent to incorporation by reference in this registration statement on Form
S-3 of The Profit Recovery Group International, Inc. of our report dated January
24, 1997, except for the final paragraph of Note 8, as to which the date is
February 11, 1997, relating to the consolidated balance sheets of The Profit
Recovery Group International, Inc. and subsidiaries as of December 31, 1996 and
1995, 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, 1996, which report appears in the December 31, 1996 annual report
on Form 10-K of The Profit Recovery Group International, Inc.
KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Atlanta, Georgia
July 21, 1997
