SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Commission File Number: 333-49821

MSX International, Inc.

(248) 299-1000
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12(b)-2 of the Securities and Exchange Act of 1934). Yes o No þ

     At May 16, 2005, 486,354 shares of Class A common stock of the Registrant were outstanding.

MSX INTERNATIONAL, INC.
INDEX

1

PART I. FINANCIAL INFORMATION

MSX INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)
as of April 3, 2005 and January 2, 2005

The accompanying notes are an integral part of the consolidated financial statements

2

MSX INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
for the fiscal quarters ended April 3, 2005 and April 4, 2004

The accompanying notes are an integral part of the consolidated financial statements

3

MSX INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
for the fiscal quarters ended April 3, 2005 and April 4, 2004

The accompanying notes are an integral part of the consolidated financial statements

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MSX International, Inc.

Notes to Consolidated Financial Statements (Unaudited)

1. Organization and Basis of Presentation:

     The accompanying financial statements present the consolidated assets and liabilities and results of operations of MSX International, Inc. and its majority owned subsidiaries (“MSXI”). MSXI is a holding company owned primarily by Citicorp and affiliates and certain members of management. We are principally engaged in providing technical business services to automobile manufacturers and suppliers and other industries primarily in North America and Europe. We utilize a 52-53 week fiscal year, which ends on the Sunday nearest December 31.

     All intercompany transactions and balances have been eliminated. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal recurring items, which are necessary for a fair presentation. The operating results for the fiscal quarters ended April 3, 2005 and April 4, 2004 are not necessarily indicative of the results of operations for the entire year. Reference should be made to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2005. Certain prior year amounts have been reclassified to conform to the presentation adopted during the current period.

     Results of operations classified as discontinued at April 3, 2005 have been excluded from the discussion of continuing operations for all periods presented and are discussed separately in Note 2. Net assets held for sale are classified as such in the period that management commits to the plan of the sale. At April 3, 2005, net assets held for sale include substantially all engineering and staffing business in Europe as well as our technical and commercial publishing business primarily in Italy. Net assets held for sale at January 2, 2005 reflect only those associated with European engineering and staffing business.

2. Discontinued Operations

     In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” discontinued operations include components of entities or entire entities that, through disposal transactions, will be eliminated from the on-going operations of MSXI. Selected European businesses are reflected as discontinued operations and eliminated from the on-going operations of MSXI due to management’s decision to divest such operations. Operations reflected as discontinued include substantially all engineering and staffing business in Europe as well as our technical and commercial publishing business primarily in Italy. Management has determined these businesses are no longer core to the company’s strategy due to changing competitive requirements, customer demands and a required focus on business with higher growth and return prospects. For all businesses reflected as discontinued a process for selling such operations has been initiated and prospective buyers have been identified.

     The following summary results of operations information is derived from the businesses that are in the disposal process:

     Results of discontinued operations include restructuring charges totaling $6.6 million related primarily to employment actions taken in our technical and commercial publishing business in Italy. During the first quarter of 2005 we

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited) — continued
(dollars in thousands unless otherwise stated)

entered into an agreement with various trade union organizations that establishes a program for permanent employment reductions affecting 124 personnel. Affected employees are expected to utilize the program in the first half of 2006.

     Results of discontinued operations reflect a goodwill impairment charge totaling $7.1 million related to our technical and commercial publishing business in Italy. The impairment charge was calculated based on the estimated fair value of this business versus the carrying value of assets held for sale. Fair value of such assets was estimated based upon market values contemplated in the proposed sale.

     The summary balance sheet information is derived from the businesses that are in the disposal process, which management believes is representative of the net assets of the businesses held for disposal. At April 3, 2005, assets held for sale include substantially all engineering and staffing business in Europe as well as our technical and commercial publishing business primarily in Italy. Net assets held for sale at January 2, 2005 include only our European engineering and staffing business due to the timing of management’s commitment to the sale.

     The net proceeds received from the prospective disposal may be subject to limitations in the Company’s senior credit facility. When such net proceeds become known and available, management anticipates applying them to reduce outstanding indebtedness.

3. Restructuring and Severance:

     The following table shows the activity related to restructuring reserves for the fiscal quarter ended April 3, 2005:

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited) — continued
(dollars in thousands unless otherwise stated)

4. Accounts Receivable:

     Accounts receivable include both billed and unbilled receivables. Unbilled receivables amounted to $28.1 million and $46.5 million at April 3, 2005 and January 2, 2005, respectively, excluding assets held for sale. All such billings are expected to be collected within the ensuing year. Accounts receivable also include the portion of our billings for certain vendor management services attributable to services provided by our vendors, which are passed on to our customers. These amounts totaled $41.4 million as of April 3, 2005 and $47.6 million as of January 2, 2005. A corresponding liability to our vendors for these amounts is recorded in accounts payable at the time the receivable is recognized.

5. Goodwill, net:

     The following summarizes the changes in our goodwill balances by segment, net of assets held for sale, as of January 2, 2005, during the three months ended April 3, 2005:

     Results of discontinued operations reflect a goodwill impairment charge totaling $7.1 million as discussed further in Note 2.

6. Debt:

     Debt is comprised of the following, excluding amounts held for sale:

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited) — continued
(dollars in thousands unless otherwise stated)

7. Redeemable Series A Preferred Stock:

     As of April 3, 2005 and January 2, 2003 there are 359,448 shares of the Preferred Stock outstanding with a stated value of $100 per share or about $36 million in total. We are authorized to issue up to 1,500,000 shares of Preferred Stock, divided into two classes: 500,000 shares of Series A Preferred Stock, par value $0.01, and 1,000,000 shares of New Preferred Stock, par value $0.01. The Preferred Stock is redeemable to the extent that funds are legally available, on or after December 31, 2008, at the option of the company or the shareholder. As of April 3, 2005, dividends accrued totaled $58.1 million, however we have not declared or paid any dividends. We may not declare or pay any dividends or other distribution with respect to any common stock or other class or series of stock ranking junior to the Preferred Stock without first complying with restrictions specified in the Amended and Restated Stockholders’ Agreement. Our ability to pay cash dividends, and to acquire or redeem the preferred stock, is subject to restrictions contained in our debt agreements.

8. Comprehensive Loss:

     Our comprehensive loss was:

9. Income Taxes:

     The company currently provides valuation allowances for a significant portion of its deferred tax assets. The effective tax rate for the quarter ended April 3, 2005 differs from the 35% federal statutory rate primarily because of such valuation allowances and the effect of certain foreign tax rates. Tax expense for the period relates primarily to earnings in foreign jurisdictions for which valuation allowances have not previously been recorded.

10. Segment Information:

     MSXI is a global provider of technical business services to the automotive and other industries. Our business includes: business services, human capital services, and engineering services. Our business services include solutions to quality, and communication related customer needs. Human capital services include a full range of staffing solutions, including direct support of our engineering and business services. Engineering services offers a full range of total product, custom, or single point engineering solutions. Certain operations within each of our segments have been aggregated following the provisions of SFAS No. 131 due to the similar characteristics of their operations, including the nature of their service offerings, processes supporting the delivery of the services, common customers, and marketing and sales processes.

     The accounting policies of each of our segments are the same as those for MSXI except that the financial results for each segment are presented using a management approach. We evaluate performance based on earnings before interest, taxes, including the Michigan Single Business Tax and other similar taxes, amortization and non-cash charges, (EBITA). The results of each segment include certain allocations for general, administrative, and other shared costs. However, certain shared costs and termination and restructuring costs are not allocated to the segments.

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited) — continued
(dollars in thousands unless otherwise stated)

     The following is a summary of selected data for each of our segments, excluding discontinued operations:

     A reconciliation of total segment EBITA to consolidated income (loss) from continuing operations before income taxes is as follows:

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited) — continued
(dollars in thousands unless otherwise stated)

11. Stock-Based Compensation:

     We account for stock options under the recognition and measurement principles of Accounting Principles Board Opinion No. 25 (“APB Opinion No. 25”), “Accounting for Stock Issued to Employees,” and related interpretations. In June, 2003 we repriced selected outstanding stock options. In accordance with APB Opinion No. 25 we now account for the options under variable plan accounting. We have not recognized any expense related to employee stock options as the estimated fair value of the stock is below the exercise price of the options as of April 3, 2005. Applying the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” would have no effect on our reported results of operations.

12. New Accounting Pronouncements:

     SFAS No. 123-R,: Accounting for Stock-Based Compensation- Revised: Issued by the FASB in December 2004, this standard establishes the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The new statement is now effective for public companies for annual periods beginning after June 15, 2005. MSXI is in the process of studying this statement, and has yet to determine the effects, if any, on its consolidated financial statements.

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited) — continued
(dollars in thousands unless otherwise stated)

13. Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc.:

     Senior secured notes that are issued by MSX International, Inc. are collateralized by security interests in substantially all of the assets of the company and its domestic subsidiaries, subject to permitted liens. Payment obligations under the senior secured notes as well as the senior subordinated notes issued by MSX International, Inc. are guaranteed jointly and severally by all domestic subsidiaries of MSX International, Inc.

     The following presents condensed consolidating financial information for:

	•	MSXI—the parent company and issuer
	•	The guarantor subsidiaries
	•	The non-guarantor subsidiaries
	•	MSXI on a consolidated basis

     Investments in subsidiaries are accounted for under the equity method. The principal elimination entries are to eliminate the investments in subsidiaries and intercompany balances and transactions. Separate financial statements for each of the guarantor and non-guarantor subsidiaries are not presented because management has determined such statements would not provide additional material information to the holders of the senior subordinated or senior secured notes.

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited) — continued
(dollars in thousands unless otherwise stated)

13. Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc. – continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET
as of April 3, 2005

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited) — continued
(dollars in thousands unless otherwise stated)

13. Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc. – continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET
as of January 2, 2005

13

MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited) — continued
(dollars in thousands unless otherwise stated)

13. Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc.- continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the fiscal quarters ended April 3, 2005 and April 4, 2004

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MSX International, Inc.
Notes to Consolidated Financial Statements (Unaudited) — continued
(dollars in thousands unless otherwise stated)

13. Guarantor and Non-Guarantor Subsidiaries of MSX International, Inc. – continued

MSX INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
for the fiscal quarter ended April 3, 2005