Prgschultz International Inc. has a market cap of $108.28 million; its shares were traded at around $4.65 with a P/E ratio of 13.68 and P/S ratio of 0.6. PRGX is in the portfolios of Richard Blum of Blum Capital Partners, Jim Simons of Renaissance Technologies LLC, Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC.
Highlight of Business Operations:Interest Expense. Net interest expense was $1.8 million and $0.7 million for the three months ended March 31, 2010 and 2009, respectively. The increase in interest expense resulted from $1.4 million of unamortized deferred loan costs from the Ableco LLC term loan which were written off in January 2010 in conjunction with the Company entering into a new credit facility with SunTrust Bank (see New Credit Facility below). Interest expense in the three months ended March 31, 2010 consisted primarily of the write off of unamortized deferred costs and interest related to the SunTrust Bank term loan under the Companys credit facility, which had an outstanding balance of $14.2 million as of March 31, 2010.
Operating Activities. Net cash provided by (used in) operating activities was $(3.5 million) and $0.4 million during the first quarter of 2010 and 2009, respectively. The $3.9 million decrease in cash provided by (used in) operating activities in the first quarter of 2010 compared to the first quarter of 2009 was due to a $0.7 million decline in the change in operating assets and liabilities from the beginning to the end of the relevant periods combined with a net operating loss. The $0.7 million decline in the change in operating assets and liabilities in the first quarter of 2010 compared to the first quarter of 2009 was the result of lower collections on accounts receivable in the first quarter of 2010 compared to the first quarter of 2009. The 2010 first quarter operation loss included a $0.8 million loss attributable to the Companys performance of the CMS RAC program subcontracts. These decreases in cash flow in the first quarter of 2010 were partially offset by lower payments for compensation, severance and other accrued liabilities made during the three months ended March 31, 2010. Such changes are itemized in the Companys Consolidated Statements of Cash Flows included in Item 1 of this Form 10-Q.
Investing Activities and Depreciation and Amortization Expense. Depreciation and amortization expense for the three months ended March 31, 2010 and 2009 amounted to $2.1 million and $1.3 million, respectively. Net cash used for property and equipment capital expenditures was $1.5 million and $0.7 million during the three months ended March 31, 2010 and 2009, respectively. Purchases of property, plant and equipment during 2010 and 2009 primarily related to investments to upgrade the Companys software and information technology infrastructure.
Financing Activities and Interest Expense. Net cash used in financing activities was $0.5 million and $1.6 million for the three months ended March 31, 2010 and 2009, respectively. In January 2010, the Company entered into a new $15 million term loan, the proceeds of which were was used to repay the remaining $14.2 million of outstanding principal from the Ableco LLC term loan and to pay $0.5 million in loan costs incurred in connection with the new SunTrust credit facility. During the first quarter of 2010, the Company made mandatory payments totaling $0.8 million on its new term loan and reduced its capital lease obligations by $0.1 million.
The principal portion of the SunTrust term loan must be repaid in quarterly installments of $0.8 million each commencing in March 2010. The loan agreement requires mandatory prepayments with the net cash proceeds from certain asset sales, equity offerings and insurance proceeds received by the Company. The loan agreement also requires an additional annual prepayment if excess cash flow as defined in the agreement exceeds a certain threshold. The first of any such excess cash flow payments would be payable in April 2011. The remaining balance of the SunTrust term loan is due in January 2014. As of March 31, 2010, there were no outstanding borrowings under the SunTrust revolver. Interest on both the revolver and term loan are payable monthly and accrues at an index rate using the one-month LIBOR rate, plus an applicable margin as determined by the loan agreement. The applicable interest rate margin varies from 2.25% per annum to 3.5% per annum, dependent on the Companys consolidated leverage ratio, and is determined in accordance with a pricing grid under the SunTrust loan agreement. The Company also must pay a commitment fee of 0.5% per annum, payable monthly, on the unused portion of the $15.0 million SunTrust revolving credit facility. As of March 31, 2010 the applicable interest rate under the SunTrust credit facility was 2.73%. The Company incurred approximately $0.5 million of costs in connection with entering into the SunTrust credit facility. Such amount has been capitalized and is being amortized over the life of the facility.
Interest Rate Risk. Our interest income and expense are sensitive to changes in the general level of U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest earned on our cash equivalents as well as interest paid on our debt. The Company had $5.5 million of calculated borrowing availability under its revolving credit facility and $14.2 million outstanding under a term loan as of March 31, 2010. Interest on both the revolver and term loan are payable monthly and accrued at an index rate using the one-month LIBOR rate, plus an applicable margin as determined by the loan agreement. The applicable interest rate margin varies from 2.25% per annum to 3.5% per annum. There are no borrowings outstanding under the revolving credit facility. However, assuming full utilization of the revolving credit facility, a hypothetical 100 basis point change in interest rates applicable to the revolver would result in an approximate $0.1 million change in annual pre-tax income. A h
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