<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
--------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- ---------------------------
Commission file number 000-21465
TALX CORPORATION
(Exact name of registrant as specified in its charter)
MISSOURI 43-0988805
- ----------------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1850 Borman Ct., St. Louis, Missouri 63146
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 314-434-0046
---------------------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 X No
Shares of Common Stock, par value $.01 per share, outstanding at
November 1, 1997: 5,289,949.
Exhibit Index is on page 13.
1
<PAGE> 2
TALX CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
PAGE NO.
--------
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997
and September 30, 1997 3
Consolidated Statements of Operations for the Three Months
and Six Months Ended September 30, 1996 and 1997 4
Consolidated Statements of Cash Flows for the Six Months
Ended September 30, 1996 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders 13
Item 6. Exhibit(s) and Reports on Form 8-K 13
Signatures 14
2
<PAGE> 3
TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
MARCH 31, SEPT. 30,
1997 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,684 $ 1,122
Short-term investments 4,117 3,062
Trade receivables, net 8,441 9,697
Inventories 1,378 1,489
Prepaid expenses and other current assets 694 672
Income tax refund receivable 195 195
Deferred tax assets, net 511 210
------- -------
Total current assets 17,020 16,447
Property and equipment, net 2,652 3,243
Capitalized software development costs, net of amortization of
$3,683 at March 31, 1997 and $3,944 at September 30, 1997 3,102 3,334
Net assets of business held for sale 707 707
Deferred tax asset, net 372 206
Other assets 219 767
------- -------
$24,072 $24,704
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of obligations under capital leases $ 36 $ 18
Accounts payable 1,145 1,395
Accrued expenses and other liabilities 1,472 1,486
Progress billings in excess of work in progress 35 49
Deferred maintenance revenue 981 547
------- -------
Total current liabilities 3,669 3,495
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000 shares and
no shares issued or outstanding at March 31 and September 30, 1997 - -
Common stock, $.01 par value; authorized 30,000,000 shares,
issued and outstanding 5,263,455 shares at March 31, 1997
and 5,289,949 at September 30, 1997 53 53
Additional paid-in capital 23,036 23,115
Accumulated deficit (2,686) (1,959)
------- -------
Total stockholders' equity 20,403 21,209
------- -------
$24,072 $24,704
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share information)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT. 30, SIX MONTHS ENDED SEPT. 30,
--------------------------- -------------------------
1996 1997 1996 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
The Work Number $ 332 $ 934 $ 583 $ 1,711
Outsourced services 660 895 990 1,470
Customer premises systems 2,643 3,178 5,487 6,252
Maintenance and support 916 1,012 1,784 2,006
------- ------- ------- -------
Total revenues 4,551 6,019 8,844 11,439
------- ------- ------- -------
Cost of revenues:
The Work Number 137 416 248 724
Outsourced services 215 526 343 819
Customer premises systems 1,325 1,512 2,772 3,012
Maintenance and support 244 305 481 613
------- ------- ------- -------
Total cost of revenues 1,921 2,759 3,844 5,168
------- ------- ------- -------
Gross margin 2,630 3,260 5,000 6,271
------- ------- ------- -------
Operating expenses:
Selling and marketing 1,509 1,869 2,878 3,744
General and administrative 658 756 1,295 1,522
------- ------- ------- -------
Total operating expenses 2,167 2,625 4,173 5,266
------- ------- ------- -------
Operating income 463 635 827 1,005
------- ------- ------- -------
Other income (expense), net:
Interest income - 71 - 150
Interest expense (262) (1) (378) (2)
Other, net (2) - (26) 1
------- ------- ------- -------
Total other income (expense), net (264) 70 (404) 149
------- ------- ------- -------
Earnings from continuing operations
before income tax expense 199 705 423 1,154
Income tax expense 74 261 157 427
------- ------- ------- -------
Earnings from continuing operations 125 444 266 727
------- ------- ------- -------
Discontinued operations:
Loss from operation of discontinued operations,
net of income taxes - - (164) -
Loss on disposal of discontinued operations,
net of income taxes - - (350) -
------- ------- ------- -------
Loss from discontinued operations,
net of income taxes - - (514) -
------- ------- ------- -------
Net earnings (loss) $ 125 $ 444 $ (248) $ 727
======= ======= ======= =======
Net earnings (loss) per share:
Earnings from continuing operations $ 0.04 $ 0.08 $ 0.08 $ 0.13
Loss from discontinued operations - - (0.15) -
------- ------- ------- -------
Net earnings (loss) $ 0.04 $ 0.08 $ (0.07) $ 0.13
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
-----------------------------
1996 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)
$ (248) $ 727
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,292 1,276
Loss on disposal of discontinued operations, net 158 -
Deferred taxes (49) 427
Change in assets and liabilites:
Trade receivables (2,225) (1,256)
Inventories (137) (111)
Prepaid expenses and other current assets 166 62
Other assets (389) (548)
Accounts payable 82 250
Accrued expenses and other liabilities 337 14
Progress billings in excess of work in progress, net (220) 14
Deferred maintenance revenue 192 (434)
------- -------
Net cash provided by (used in) operating activities (1,041) 421
------- -------
Cash flows from investing activities:
Additions to property and equipment (814) (1,062)
Capitalized software development costs (902) (1,037)
Maturities of short-term investments - 1,055
------- -------
Net cash provided by (used in) investing activities (1,716) (1,044)
------- -------
Cash flows from financing activities
Change in notes payable to bank (953) -
Borrowings of subordinated notes payable and issuance
of warrants 4,000 -
Repayments on long-term debt (250) -
Repurchase of common and preferred stock (1) -
Issuance of common stock 42 79
Payments on capitalized lease obligations (110) (18)
------- -------
Net cash provided by financing activities 2,728 61
------- -------
Net decrease in cash and cash equivalents (29) (562)
Cash and cash equivalents at beginning of period 56 1,684
------- -------
Cash and cash equivalents at end of period $ 27 $ 1,122
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
TALX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated balance sheet of TALX Corporation ("TALX" or the
"Company") at March 31, 1997 was obtained from the Company's audited
balance sheet as of that date. All other financial statements contained
herein are unaudited and, in the opinion of management, contain all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation. Operating results for the three
months and six months ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending
March 31, 1998. The Company's accounting policies and certain other
disclosures are set forth in the notes to the Company's audited
consolidated financial statements as of and for the year ended March
31, 1997.
2. NET EARNINGS (LOSS) PER SHARE
Net earnings (loss) per share has been computed using the weighted
average number of shares of common stock and common stock equivalents
outstanding. The number of shares used in computing net earnings per
share was 5,481,736 for the six months ended September 30, 1997.
Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, shares issued and stock options and warrants granted
at prices below the initial public offering price of $9 per share
during the 12-month period preceding the date of the initial filing of
the Company's registration statement have been included in the
calculation of common stock equivalent shares, using the treasury stock
method, as if they were outstanding for the first three quarters of
fiscal 1997. Subsequent to this period, the weighted average number of
shares was based on common stock outstanding and common stock
equivalents.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's revenues are derived from interactive communications, which
consist of The Work Number, outsourced services, the sale of customer premises
systems and maintenance and support services related to those systems.
The Work Number service is still in the early stage of its life cycle.
Accordingly, it is difficult to draw meaningful relationships between revenues
recognized to date, or in a given quarter, and the corresponding number of
employers that have contracted for the service or the number of employment
records covered by the service. Revenues derived from The Work Number include
fees charged to mortgage lenders and other verifiers for verification of
employment history, including the past three years of salary history of
participating employers' current and former employees, ongoing maintenance fees
charged to employers and one-time conversion fees from new employers. The lag
between the time an employer enters into an agreement with the Company for The
Work Number and the time the employer converts its records to the service and
begins to routinely refer inquiries to The Work Number can distort normal
quarter to quarter revenue comparisons early in the service's life cycle.
Further, revenues to date reflect the relatively large percentage of conversion
fees recognized early in the service's life cycle as compared to fees from
verifications, which can also distort normal quarter to quarter revenue
comparisons at this stage of the service's life cycle. The Company expects that
over time fees from verifications will be a greater percentage of The Work
Number revenues than they have been historically. Additionally, due to the early
stage of the service and the attendant start-up costs, it is difficult to draw
meaningful relationships between historical gross margins and gross margins that
may be realized in the future. The future success of this branded service is
contingent upon a number of factors, including, without limitation, increased
acceptance and usage of the service.
The Company's customer premises systems business designs and implements customer
premises systems with interactive communications capabilities using computer
telephony to integrate technologies such as interactive voice response,
facsimile, e-mail, Internet and corporate Intranet. The Company's interactive
communications solutions enable an organization's users to access, input and
update information without human assistance. Revenues from customer premises
systems are derived from the license or sale of software, related hardware and
custom applications and are generally recognized upon shipment of the system.
Sales are effected through a direct sales force and in conjunction with
strategic marketing alliances (including third party resellers). The typical
size of a system ranges from $35,000 to $200,000 or more and averages
approximately $90,000. In the case of a third party reseller, revenues are
recognized at the time of shipment to the reseller; however, the Company does
not have any future obligations related to these types of sales. The Company
provides maintenance and support services with respect to installed customer
premises systems. These services include a 24-hour per day, 7-day a week
toll-free customer service line. Revenues from maintenance and support are
recognized ratably over the term of the maintenance agreement.
The Company's outsourced services business provides interactive communication
services to organizations that choose not to purchase a customer premises
system. The Company maintains a system on its premises that contains a customer
database and receives incoming requests for access to the information. Revenues
from outsourced services include fees derived from the establishment of the
service and transaction-based fees.
In addition to providing interactive communication systems, the Company has
historically provided database and document services. Database services include
sales leads and pre-press services for directory publishers, and document
services include the preparation and mailing of invoices, statements and
confirmation letters for organizations with high volume requirements. Revenues
from database and document services are recognized as the services are performed
through progress billings. These customers' contracts cover periods generally
from one to six months, and progress billings are made in accordance with
individual customer contract terms. In August 1996, the Company determined to
pursue the divestiture of the database and document services businesses and,
accordingly, has reflected the results of operations of such businesses as
discontinued operations. In January 1997, the document services business was
sold.
7
<PAGE> 8
This discussion and analysis contains certain statements that may be considered
forward looking statements ("Forward Looking Statements") within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in the Forward Looking Statements as a result of
risks facing the Company. Such risks include, but are not limited to, the
Company's ability to successfully market and expand The Work Number for
Everyone(R) and its other products and services, the successful divestiture of
the remaining assets of the discontinued operations, intense competition in the
interactive web and interactive voice response industry, dependence on certain
strategic marketing alliances, risks associated with rapid technological change,
a lengthy sales cycle and other factors set forth in the Company's Annual Report
on Form 10-K filed with the Securities and Exchange Commission. All subsequent
written and oral Forward Looking Statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
foregoing cautionary statements. The Company does not undertake any obligation
to release publicly any revisions to Forward Looking Statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from
the Company's consolidated statements of operations, expressed as a percentage
of total revenues, and the percentage change in the dollar amount of such items
compared to the prior comparable period.
<TABLE>
<CAPTION>
Percentage Increase
-----------------------------------
Three Months Six Months Three Months Six Months
Ended Sept. 30, Ended Sept. 30, Ended Sept. 30 Ended Sept. 30,
---------------- ---------------- 1997 over 1997 over
1996 1997 1996 1997 1996 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
The Work Number 7.3% 15.5% 6.6% 15.0% 181.3% 193.5%
Outsourced services 14.5 14.9 11.2 12.9 35.6 48.5
Customer premises systems 58.1 52.8 62.0 54.6 20.2 13.9
Maintenance and support 20.1 16.8 20.2 17.5 10.5 12.4
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0 32.3 29.3
----- ----- ----- -----
Cost of revenues
The Work Number 3.0 6.9 2.8 6.3 203.6 191.9
Outsourced services 4.7 8.7 3.9 7.2 144.7 138.8
Customer premises systems 29.1 25.1 31.3 26.3 14.1 8.7
Maintenance and support 5.4 5.1 5.5 5.4 25.0 27.4
----- ----- ----- -----
Total cost of revenues 45.2 45.8 43.5 45.2 43.6 34.4
----- ----- ----- -----
Gross Margin 57.8 54.2 56.5 54.8 24.0 25.4
----- ----- ----- -----
Operating expenses
Selling and marketing 33.1 31.1 32.5 32.7 23.9 30.1
General and administrative 14.5 12.6 14.6 13.3 14.9 17.5
----- ----- ----- -----
Total operating expenses 47.6 43.7 47.1 46.0 21.1 26.2
----- ----- ----- -----
Operating income 10.2 10.5 9.4 8.8 37.1 21.5
Other income (expense), net (5.8) 1.2 (4.6) 1.3 * *
----- ----- ----- -----
Earnings from continuing operations
before income tax expense 4.4 11.7 4.8 10.1 254.3 172.8
Income tax expense 1.6 4.3 1.8 3.7 252.7 172.8
----- ----- ----- -----
Earnings (loss) from continuing
operations 2.8 7.4 3.0 6.4 255.2 173.3%
Discontinued operations, net 0.0 0.0 (5.8) 0.0 - *
----- ----- ----- -----
Net earnings (loss) 2.8% 7.4% (2.8)% 6.4% 255.2% *
===== ===== ===== =====
</TABLE>
* Not meaningful
Three Months Ended September 30, 1996 and 1997
Revenues. Total revenues increased by 32.3%, from $4.6 million for the three
months ended September 30, 1996 to $6.0 million for the three months ended
September 30, 1997. Revenues from The Work Number increased 181.3% from $332,000
for the three months ended September 30, 1996 to $934,000 for the three
8
<PAGE> 9
months ended September 30, 1997, due to the expansion of marketing on a
nationwide basis and an increase in the number of employment records on the
system. Revenues from outsourced services increased by 35.6% from $660,000 for
the three months ended September 30, 1996 to $895,000 for the three months ended
September 30, 1997, due to the Company capitalizing on the trend of some
corporations to outsource their non- core functions. Revenues from customer
premises systems increased 20.2% from $2.6 million for the three months ended
September 30, 1996 to $3.2 million for the three months ended September 30,
1997. The revenue growth is due to increases in sales and marketing resources
and the development of strategic marketing alliances. Revenues from maintenance
and support related to the customer premises systems increased by 10.5%, from
$916,000 for the three months ended September 30, 1996 to $1.0 million for the
three months ended September 30, 1997, reflecting the support provided to an
increased installed base of customer premises systems.
Cost of Revenues. Total cost of revenues increased by 43.6%, from $1.9 million
for the three months ended September 30, 1996 to $2.8 million for the three
months ended September 30, 1997. Cost of revenues from The Work Number increased
by 203.6% from $137,000 for the three months ended September 30, 1996 to
$416,000 for the three months ended September 30, 1997, due to the revenue
growth of this service. Due to the early stage of the service in its life cycle,
it is difficult to draw meaningful relationships between historical gross
margins and gross margins that may be realized in the future. Cost of revenues
from outsourced services increased by 144.7%, from $215,000 for the three months
ended September 30, 1996 to $526,000 for the three months ended September 30,
1997. This increase in cost is attributable to the revenue growth described
above and the increase of fixed labor costs and telephone and network
infrastructure to support possible future increases in revenue. Cost of revenues
from customer premises systems increased by 14.1%, from $1.3 million for the
three months ended September 30, 1996 to $1.5 million for the three months ended
September 30, 1997. This increase in cost is attributable to the revenue growth
describe above. Cost of revenues from maintenance and support related to
customer premises systems increased by 25.0%, from $244,000 for the three months
ended September 30, 1996 to $305,000 for the three months ended September 30,
1997, principally due to revenue growth and an increase in personnel costs to
provide a higher level of customer service.
Selling and Marketing Expenses. Selling and marketing expenses increased 23.9%
from $1.5 million for the three months ended September 30, 1996 to $1.9 million
for the three months ended September 30, 1997. As a percentage of revenues, such
expenses decreased from 33.1% for the three months ended September 30, 1996 to
31.1% for the three months ended September 30, 1997. The increase in dollar
amount reflects continuing expansion of the Company's sales and marketing
efforts, including development of distribution channels both in domestic and
international markets. The Company anticipates that selling and marketing
expenses will continue to increase in dollar amount as the Company expands its
sales and marketing efforts.
General and Administrative Expenses. General and administrative expenses
increased 14.9% from $658,000 for the three months ended September 30, 1996 to
$756,000 for the three months ended September 30, 1997. As a percentage of
revenues, such expenses decreased from 14.5% for the three months ended
September 30, 1996 to 12.6% for the three months ended September 30, 1997. This
reflects a better leveraging of fixed costs as the Company's revenue increases.
The Company anticipates that general and administrative expenses will increase
in dollar amount in future periods.
Other Income (Expense), net. Interest income was $71,000 for the three months
ended September 30, 1997, which represents investment income on the Company's
invested funds. Interest expense decreased from $262,000 for the three months
ended September 30, 1996 to $1,000 for the three months ended September 30,
1997. This decrease is due to the Company's repayment of most of its outstanding
borrowings on October 22, 1996, with the proceeds of its initial public
offering.
Income Tax Expense. The Company's effective income tax rate was 37.1% for the
three months ended September 30, 1996 and 37.0% for the three months ended
September 30, 1997.
9
<PAGE> 10
Six Months Ended September 30, 1996 and 1997
Revenues. Total revenues increased by 29.3%, from $8.8 million for the six
months ended September 30, 1996 to $11.4 million for the six months ended
September 30, 1997. Revenues from The Work Number increased by 193.5%, from
$583,000 for the six months ended September 30, 1996 to $1.7 million for the six
months ended September 30, 1997, due to the expansion of marketing on a
nationwide basis and an increase in the number of employment records on the
system. Revenues from outsourced services increased by 48.5%, from $990,000 for
the six months ended September 30, 1996 to $1.5 million for the six months ended
September 30, 1997, due to the Company capitalizing on the trend of some
corporations to outsource their non-core functions. Revenues from customer
premises systems increased by 13.9%, from $5.5 million for the six months ended
September 30, 1996 to $6.3 million for the six months ended September 30, 1997.
The revenue growth is due to increases in sales and marketing resources and the
development of strategic marketing alliances. Revenues from maintenance and
support related to the customer premises systems increased by 12.4%, from $1.8
million for the six months ended September 30, 1996 to $2.0 million for the six
months ended September 30, 1997, reflecting the support provided to an increased
installed base of customer premises systems.
Cost of Revenues. Total cost of revenues increased by 34.4%, from $3.8 million
for the six months ended September 30, 1996 to $5.2 million for the six months
ended September 30, 1997. Cost of revenues from The Work Number increased by
191.9%, from $248,000 for the six months ended September 30, 1996 to $724,000
for the six months ended September 30, 1997, due to the revenue growth of this
service. Due to the early stage of the service in its life cycle, it is
difficult to draw meaningful relationships between historical gross margins and
gross margins that may be realized in the future. Cost of revenues from
outsourced services increased by 138.8%, from $343,000 for the six months ended
September 30, 1996 to $819,000 for the six months ended September 30, 1996. This
increase in cost is attributable to the revenue growth described above and the
increase of fixed labor costs and telephone and network infrastructure to
support possible future increases in revenue. Cost of revenues from customer
premises systems increased by 8.7%, from $2.8 million for the six months ended
September 30, 1996 to $3.0 million for the six months ended September 30, 1997.
This increase in cost is attributable to the revenue growth described above.
Cost of revenues from maintenance and support related to customer premises
systems increased by 27.4%, from $481,000 for the six months ended September 30,
1996 to $613,000 for the six months ended September 30, 1997, principally due to
an increase in personnel costs to provide a higher level of customer service.
Selling and Marketing Expenses. Selling and marketing expenses increased 30.1%
from $2.9 million for the six months ended September 30, 1996 to $3.7 million
for the six months ended September 30, 1997. As a percentage of revenues, such
expenses increased from 32.5% for the six months ended September 30, 1996 to
32.7% for the six months ended September 30, 1997. The increase reflects
continuing expansion of the Company's sales and marketing efforts, including
development of distribution channels both in domestic and international markets.
The Company anticipates that selling and marketing expenses will continue to
increase in dollar amount as the Company expands its sales and marketing
efforts.
General and Administrative Expenses. General and administrative expenses
increased 17.5% from $1.3 million for the six months ended September 30, 1996 to
$1.5 million for the six months ended September 30, 1997. As a percentage of
revenues, such expenses decreased from 14.6% for the six months ended September
30, 1996 to 13.3% for the six months ended September 30, 1997.This reflects a
better leveraging of fixed costs as the Company's revenue increases. The Company
anticipates that general and administrative expenses will increase in dollar
amount in future periods.
Other Income (Expense), net. Interest income was $150,000 for the six months
ended September 30, 1997, which represents investment income on the Company's
invested funds. Interest expense decreased from $378,000 for the six months
ended September 30, 1996 to $2,000 for the six months ended September 30, 1997.
This decrease is due to the Company's repayment of most of its outstanding
borrowings on October 22, 1996, with the proceeds of its initial public
offering.
Income Tax Expense. The Company's effective income tax rate was 37.1% for the
six months ended September 30, 1996 and 37.0% for the six months ended September
30, 1997.
10
<PAGE> 11
DISCONTINUED OPERATIONS
In August 1996, the Company determined to pursue the divestiture of the database
and document services businesses and, accordingly, has reflected the results of
operations of such businesses as discontinued operations. A provision of
$350,000 was made as of June 30, 1996 to reflect the anticipated loss from
operations until the time of disposal. On January 31, 1997, the Company sold
substantially all of the assets of the document services business to Sterling
Direct, Inc., the largest customer of the division. The sales price, after
giving effect to the post-closing adjustments, was $1,241,000. Of this amount,
$200,000 was in the form of a subordinated note, and the remainder was paid in
cash. The net assets related to this sale were approximately $566,000. At March
31, 1997, the Company determined that an additional provision for loss in the
amount of $550,000 was required to reflect the anticipated results from
operations and the estimated proceeds from the sale of the database business.
The Company anticipates disposition of the remaining operations through sale
during fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
Prior to its initial public offering, the Company had limited liquidity, due in
part to net losses in fiscal 1995 and 1996. The Company had financed its
operations primarily through cash flow from operations, private placements of
equity and debt securities and bank lines of credit. On October 16, 1996, the
Company completed its initial public offering of 2,000,000 shares of common
stock at a price of $9 per share, for gross proceeds of $18,000,000, and
proceeds net of underwriting discounts and expenses of approximately
$15,587,000.
The Company used a portion of the net proceeds of its initial public offering to
repay its outstanding indebtedness represented by (i) a Subordinated Note in the
aggregate principal amount of $4.0 million, which was due and payable in July
2001 and accrued interest at an annual rate of 13.25%, with an effective
interest rate of 19.25%, (ii) a promissory note in the principal amount of
approximately $417,000, which was due and payable through August 1997 and
accrued interest at the bank's prime rate plus 0.75%, and (iii) a demand note in
the amount of $3,080,000 representing borrowings under a revolving line of
credit which accrued interest at the bank's prime rate plus 0.875%.
The Company had a current ratio of 0.87 to 1, 4.64 to 1 and 4.71 to 1 at March
31, 1996, March 31, 1997 and September 30, 1997, respectively. The Company's
working capital was $(1,261,000), $13,351,000 and $12,952,000 at March 31, 1996,
March 31, 1997 and September 30, 1997, respectively. Total working capital
increased in fiscal 1997 principally due to the net proceeds from the initial
public offering. Total working capital decreased during the six months ended
September 30, 1997 due to current year earnings offset by capital additions.
The Company's accounts receivable increased from $8,441,000 at March 31, 1997 to
$9,697,000 at September 30, 1997. The increase is due to increased revenues in
the second quarter of fiscal 1998 compared to the fourth quarter of fiscal 1997.
As a percentage of the Company's total revenues for the respective quarter,
accounts receivable decreased from 189% of revenues at March 31, 1997 to 161% of
revenues at September 30, 1997.
The Company's capital expenditures were $1,550,000 in fiscal 1997 and $1,062,000
for the first six months of fiscal 1998. At September 30, 1997, the Company has
no significant capital spending or purchase commitments other than normal
purchase commitments and commitments under facilities and operating leases. The
Company believes that its working capital, together with its anticipated cash
flows from operations will be sufficient to meet its working capital and capital
expenditure requirements for at least the next 12 months.
The Company's net increase to capitalized software development costs was
$481,000 in fiscal 1997 and $232,000 in the first six months of fiscal 1998. See
Notes 1 and 5 of Notes to Consolidated Financial Statements. The Company intends
to continue to make investments in software solutions at comparable or
increasing levels in fiscal 1998.
11
<PAGE> 12
RECENT FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No.
128 established standards for the computation and presentation of earnings per
share for entities with publicly held common stock or potential common stock.
This Statement is effective for financial statements issued for periods ending
after December 15, 1997 and requires retroactive restatement of all prior period
earnings per share data presented. The effect of SFAS No.
128 on the financial periods presented is not material to the Company.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders
(a) The annual meeting of shareholders of the Company was held at
2:00 p.m., local time, on Thursday, August 21, 1997, in
St. Louis, Missouri.
(b) The Company's stockholders voted on the following matters:
Election of Directors - The following persons were the nominees of the
Board of Directors who were elected as directors at the annual meeting:
Eugene M. Toombs and Steve Yoakum. The number of votes cast for the
election of each of the nominees for director, and the number of votes
withheld, were as follows: 4,173,602 votes for the election of Eugene
M. Toombs, with 12,100 votes withheld and 4,173,456 votes for the
election of Steve Yoakum, with 12,246 votes withheld.
Ratification of Selection of Independent Auditors - The stockholders
ratified the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors to perform the audit of the Company's financial
statements for the year ending March 31, 1998. 4,179,410 votes were
cast in favor of the appointment, 2,300 votes were cast against, and
there were 3,992 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter for which
this report is filed.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TALX CORPORATION
(Registrant)
Date: November 14, 1997 By /s/ William W. Canfield
------------------------------------
William W. Canfield
Chairman, President and
Chief Executive Officer
Date: November 14, 1997 By /s/ Craig N. Cohen
------------------------------------
Craig N. Cohen
Chief Financial Officer
14
<PAGE> 15
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
3.1 Restated Articles of Incorporation, as amended (incorporated by
reference from Exhibit 3.1 to the Company's Form 10-K for the
fiscal year ended March 31, 1997 (File No. 000-21465))
3.2 Bylaws of the Company (incorporated by reference from
Exhibit 3.2 to the Company's Registration Statement on Form S-1
(File No. 333-10969))
11 Statement Regarding Computation of Earnings Per Share
27 Financial Data Schedule
(provided for the information of the Securities and Exchange
Commission only)
15
<PAGE> 1
EXHIBIT 11
TALX CORPORATION AND SUBSIDIARIES
Statement Regarding Computation of Earnings Per Share
Six Months Ended September 30, 1997
<TABLE>
<S> <C>
Shares outstanding - beginning of period 5,263,455
Weighted average number of common shares issued and
common equivalent shares (1) 218,281
---------
Weighted average number of common and
common equivalent shares outstanding - end of period 5,481,736
=========
Six months ended September 30, 1997:
Earnings from continuing operations $ 727,000
Discontinued operations -
---------
Net earnings $ 727,000
=========
Earnings per common and common equivalent share:
Earnings from continuing operations $ .13
Discontinued operations -
---------
Net earnings $ .13
=========
</TABLE>
(1) Common and common equivalent shares issued consist of certain effects
of shares issued, stock options and warrants. Common equivalent shares
from stock options and warrants have been included in the computation
using the treasury stock method.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR TALX CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,122
<SECURITIES> 3,062
<RECEIVABLES> 9,703
<ALLOWANCES> 6
<INVENTORY> 1,489
<CURRENT-ASSETS> 16,447
<PP&E> 5,662
<DEPRECIATION> 2,419
<TOTAL-ASSETS> 24,704
<CURRENT-LIABILITIES> 3,495
<BONDS> 0
0
0
<COMMON> 53
<OTHER-SE> 21,156
<TOTAL-LIABILITY-AND-EQUITY> 24,704
<SALES> 11,439
<TOTAL-REVENUES> 11,439
<CGS> 5,168
<TOTAL-COSTS> 5,168
<OTHER-EXPENSES> 5,266
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 1,154
<INCOME-TAX> 427
<INCOME-CONTINUING> 727
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 727
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
