<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended September 30, 1998
or
[ ] 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
incorporation or organization) Identification No.)
1850 BORMAN COURT, ST. LOUIS, MO 63146
(Address of principal executive offices) (Zip Code)
(314) 434-0046
(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. [x] Yes [ ]No
As of November 6, 1998 there were 5,350,173 shares of the Registrant's Common
Stock outstanding.
Exhibit Index is on page 15.
1
<PAGE> 2
TALX CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
PAGE NO.
--------
Item 1. Financial Statements
<S> <C> <C>
Consolidated Balance Sheets as of September 30, 1998 3
and March 31, 1998
Consolidated Statements of Operations for the Three Months and
Six Months Ended September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Three Months and
Six Months Ended September 30, 1998 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
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Securities Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE> 3
TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
SEPT. 30, MARCH 31,
1998 1998
----------------- -----------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 85 $ 2,879
Trade receivables, net 9,990 8,422
Inventories 1,203 1,452
Prepaid expenses and other current assets 735 754
Income tax refund receivable 14 14
Deferred tax assets, net 146 171
----------------- -----------------
Total current assets 12,173 13,692
Property and equipment, net 5,943 3,956
Capitalized software development costs, net 4,091 3,837
Net assets of business held for sale 1,393 1,157
Deferred tax asset, net 1,324 1,324
Other assets 194 155
----------------- -----------------
$ 25,118 $ 24,121
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank $ 836 $ --
Accounts payable 1,887 1,778
Accrued expenses and other liabilities 1,463 1,702
Progress billings in excess of work in progress 497 176
Deferred maintenance revenue 776 957
----------------- -----------------
Total current liabilities 5,459 4,613
----------------- -----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000
shares and no shares issued or outstanding at
September 30, 1998 and March 31, 1998 -- --
Common stock, $.01 par value; authorized 30,000,000
shares, issued and outstanding 5,350,025 shares
at September 30, 1998 and 5,316,032 at March 31, 1998 53 53
Additional paid-in capital 23,335 23,225
Accumulated deficit (3,729) (3,770)
----------------- -----------------
Total stockholders' equity 19,659 19,508
----------------- -----------------
$ 25,118 $ 24,121
================= =================
</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,
----------------------------
1998 1997
---------- ---------
<S> <C> <C>
Revenues:
The Work Number $ 2,021 $ 934
Outsourced services 1,441 895
Customer premises systems 2,425 3,178
Maintenance and support 1,326 1,012
---------- --------
Total revenues 7,213 6,019
---------- --------
Cost of revenues:
The Work Number 700 416
Outsourced services 807 526
Customer premises systems 1,736 1,512
Maintenance and support 408 305
---------- --------
Total cost of revenues 3,651 2,759
---------- --------
Gross margin 3,562 3,260
---------- --------
Operating expenses:
Selling and marketing 2,353 1,869
General and administrative 1,245 756
---------- --------
Total operating expenses 3,598 2,625
---------- --------
Operating income (loss) (36) 635
---------- --------
Other income (expense), net:
Interest income 25 71
Interest expense (12) (1)
Other, net 19 --
---------- --------
Total other income, net 32 70
---------- --------
Earnings (loss) from continuing operations
before income tax expense (benefit) (4) 705
Income tax expense (benefit) (1) 261
---------- --------
Net earnings (loss) $ (3) $ 444
========== ========
Basic and diluted earnings per share $ 0.00 $ 0.08
========== ========
Six Months Ended Sept. 30,
----------------------------
1998 1997
---------- ---------
<S> <C> <C>
Revenues:
The Work Number $ 3,740 $ 1,711
Outsourced services 2,393 1,470
Customer premises systems 5,231 6,252
Maintenance and support 2,600 2,006
----------- --------
Total revenues 13,964 11,439
----------- --------
Cost of revenues:
The Work Number 1,364 724
Outsourced services 1,420 819
Customer premises systems 3,462 3,012
Maintenance and support 834 613
----------- --------
Total cost of revenues 7,080 5,168
----------- --------
Gross margin 6,884 6,271
----------- --------
Operating expenses:
Selling and marketing 4,577 3,744
General and administrative 2,297 1,522
----------- --------
Total operating expenses 6,874 5,266
----------- --------
Operating income (loss) 10 1,005
----------- --------
Other income (expense), net:
Interest income 49 150
Interest expense (12) (2)
Other, net 19 1
----------- --------
Total other income, net 56 149
----------- --------
Earnings (loss) from continuing operations
before income tax expense (benefit) 66 1,154
Income tax expense (benefit) 25 427
----------- --------
Net earnings (loss) $ 41 $ 727
=========== ========
Basic and diluted earnings per share $ 0.01 $ 0.13
=========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Sept. 30,
---------------------------
1998 1997
------------ ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 41 $ 727
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,340 1,276
Loss on disposal of discontinued operations, net (236) 0
Deferred taxes 25 427
Change in assets and liabilities:
Trade receivables (1,568) (1,256)
Inventories 249 (111)
Prepaid expenses and other current assets 19 62
Other assets (39) (548)
Accounts payable 109 250
Accrued expenses and other liabilities (239) 14
Progress billings in excess of work in progress, net 321 14
Deferred maintenance revenue (181) (434)
------------ ---------
Net cash provided by (used in)
operating activities (159) 421
------------ ---------
Cash flows from investing activities:
Additions to property and equipment (2,648) (1,062)
Capitalized software development costs (933) (1,037)
Maturities of short-term investments 0 1,055
------------ ---------
Net cash used in investing activities (3,581) (1,044)
------------ ---------
Cash flows from financing activities
Issuance of common stock 110 79
Borrowings under line of credit 836 0
Payments on capitalized lease obligations 0 (18)
------------ ---------
Net cash provided by financing activities 946 61
------------ ---------
Net decrease in cash and cash equivalents (2,794) (562)
Cash and cash equivalents at beginning of period 2,879 1,684
------------ ---------
Cash and cash equivalents at end of period $ 85 $ 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, 1998 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, 1998 are not necessarily
indicative of the results that may be expected for the year ending
March 31, 1999. 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, 1998.
2. EARNINGS PER SHARE
Effective with the fiscal year ended March 31, 1998, the Company
adopted Statement of Financial Accounting Standards No. 128 (SFAS No.
128). SFAS No. 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of stock options. Diluted earnings per share is
similar to the previously reported fully diluted earnings per share.
The weighted average number of shares used in computing basic and
diluted earnings per share was 5,333,815 and 5,511,002, respectively.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's revenues are derived from interactive Web, interactive voice
response (IVR), computer telephony (CTI) software and services, which consist of
The Work Number, outsourced services, the sale of customer premises systems, and
maintenance and support services related to those systems.
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 Company's customer premises systems business provides interactive Web, IVR,
CTI software and services that 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, custom applications,
and related hardware 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). 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 Web and
interactive voice response 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
establishment of the service and transaction-based fees.
In addition to providing software and services, 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.
This discussion and analysis contains certain statements regarding future
results, performance, expectations, or intentions 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, including statements regarding Year 2000
matters. All statements other than statements of historical facts are Forward
Looking Statements. Although the Company believes that the expectations
reflected in such Forward Looking Statements are reasonable, it can give no
assurance that such expectations will prove to be correct. 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,
(1) the Company's ability to successfully market and expand The Work Number for
Everyone(R) and its other products and services, (2) the successful divestiture
of the remaining assets of the discontinued operations, (3) intense competition
in the interactive web and interactive voice response industry, (4) dependence
on certain strategic marketing alliances, (5) risks associated with rapid
technological change, (6) risks associated with a lengthy sales cycle and (7)
other factors set forth under "Risk Factors" in Item 1 of the Company's Annual
Report on Form 10-K for the year ended March 31, 1998 filed with the Securities
and Exchange Commission.
7
<PAGE> 8
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,
------------------ ------------------ 1998 over 1998 over
1998 1997 1998 1997 1997 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
The Work Number 28.0% 15.5% 26.8% 15.0% 116.4% 118.6%
Outsourced services 20.0 14.9 17.1 12.9 61.0 62.8
Customer premises systems 33.6 52.8 37.5 54.6 (23.7) (16.3)
Maintenance and support 18.4 16.8 18.6 17.5 31.0 29.6
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0 19.8 22.1
----- ----- ----- -----
Cost of revenues
The Work Number 9.7 6.9 9.7 6.3 68.3 88.4
Outsourced services 11.2 8.7 10.2 7.2 53.4 73.4
Customer premises systems 24.1 25.1 24.8 26.3 14.8 14.9
Maintenance and support 5.6 5.1 6.0 5.4 33.8 36.1
--- --- --- ---
Total cost of revenues 50.6 45.8 50.7 45.2 32.3 37.0
---- ---- ---- ----
Gross Margin 49.4 54.2 49.3 54.8 9.3 9.8
---- ---- ---- ----
Operating expenses
Selling and marketing 32.6 31.1 32.8 32.7 25.9 22.2
General and administrative 17.3 12.6 16.4 13.3 64.7 50.9
---- ---- ---- ----
Total operating expenses 49.9 43.7 49.2 46.0 37.1 30.5
---- ---- ---- ----
Operating income (loss) (0.5) 10.5 0.1 8.8 (105.7) (99.0)
Other income (expense), net 0.5 1.2 0.4 1.3 (54.3) (62.4)
--- --- --- ---
Earnings from continuing operations
before income tax expense 0.0 11.7 0.5 10.1 (100.6) (94.3)
Income tax expense 0.0 4.3 0.2 3.7 (100.4) (94.1)
--- --- --- ---
Earnings from continuing
operations 0.0 7.4 0.3 6.4 (100.7) (94.4)
Discontinued operations, net 0.0 0.0 0.0 0.0 -- --
--- --- --- ---
Net earnings 0.0% 7.4% 0.3% 6.4% (100.7)% (94.4)%
=== === === ===
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
REVENUES. Total revenues increased by 19.8%, from $6.0 million for the three
months ended September 30, 1997 to $7.2 million for the three months ended
September 30, 1998. Revenues from The Work Number increased 116.4% from $934,000
for the three months ended September 30, 1997 to $2.0 million for the three
months ended September 30, 1998, due to the continued expansion of marketing on
a nationwide basis and an increase in the number of employment records on the
system. Revenues from outsourced services increased 61.0% from $895,000 for the
three months ended September 30, 1997 to $1.4 million for the three months ended
September 30, 1998, due to the Company capitalizing on the trend of some
corporations to outsource their non-core functions. Revenues from customer
premises systems decreased 23.7% from $3.2 million for the three months ended
September 30, 1997 to $2.4 million for the three months ended September 30,
1998. Management believes that the revenue decrease is due principally to a
lengthened sales cycle, as customers study the impact of incorporating web-based
capabilities in their self-service systems. Revenues from maintenance and
support related to the customer premises systems increased 31.0% from $1.0
million for the three months ended September 30, 1997 to $1.3 million for the
three months ended September 30, 1998, reflecting the support provided to an
increased installed base of customer premises systems.
8
<PAGE> 9
COST OF REVENUES. Total cost of revenues increased by 32.3%, from $2.8 million
for the three months ended September 30, 1997 to $3.7 million for the three
months ended September 30, 1998. Cost of revenues from The Work Number increased
68.3% from $416,000 for the three months ended September 30, 1997 to $700,000
for the three months ended September 30, 1998, due principally to the growth in
revenues. Cost of revenues from outsourced services increased by 53.4%, from
$526,000 for the three months ended September 30, 1997 to $807,000 for the three
months ended September 30, 1998. 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 14.8%,
from $1.5 million for the three months ended September 30, 1997 to $1.7 million
for the three months ended September 30, 1998. This increase in cost is
primarily attributable to an increase in fixed labor costs. Cost of revenues
from maintenance and support related to customer premises systems increased by
33.8%, from $305,000 for the three months ended September 30, 1997 to $408,000
for the three months ended September 30, 1998, due to the revenue growth and an
increase in personnel costs to provide an appropriate level of customer service.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses increased 25.9%
from $1.9 million for the three months ended September 30, 1997 to $2.4 million
for the three months ended September 30, 1998. As a percentage of revenues, such
expenses increased from 31.1% for the three months ended September 30, 1997 to
32.6% for the three months ended September 30, 1998. The increase in expense
reflects the continuing expansion of the Company's sales and marketing efforts.
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 64.7% from $756,000 for the three months ended September 30, 1997 to
$1.2 million for the three months ended September 30, 1998. As a percentage of
revenues, such expenses increased from 12.6% for the three months ended
September 30, 1997 to 17.3% for the three months ended September 30, 1998. The
increase in expense reflects the expansion of the Company's infrastructure to
respond to increased revenues and possible future increased levels of revenues.
The increase in the expense as a percentage of revenues is reflective of
revenues being lower than management expectations. The Company anticipates that
general and administrative expenses will increase in dollar amount in future
periods, but decrease as a percentage of total revenues.
OTHER INCOME (EXPENSE), NET. Interest income decreased 64.8% from $71,000 for
the three months ended September 30, 1997 to $25,000 for the three months ended
September 30, 1998, due to a lower level of invested funds. The Company also
incurred $12,000 of interest expense on borrowings under its line of credit
during the three months ended September 30, 1998.
INCOME TAX EXPENSE. The Company's effective income tax rate was 37.0% for the
three months ended September 30, 1997 and for the three months ended September
30, 1998.
SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
REVENUES. Total revenues increased by 22.1%, from $11.4 million for the six
months ended September 30, 1997 to $14.0 million for the six months ended
September 30, 1998. Revenues from The Work Number increased 118.6% from $1.7
million for the six months ended September 30, 1997 to $3.7 million for the six
months ended September 30, 1998, due to the continued expansion of marketing on
a nationwide basis and an increase in the number of employment records on the
system. Revenues from outsourced services increased 62.8% from $1.5 million for
the six months ended September 30, 1997 to $2.4 million for the six months ended
September 30, 1998, due to the Company capitalizing on the trend of some
corporations to outsource their non-core functions. Revenues from customer
premises systems decreased 16.3% from $6.3 million for the six months ended
September 30, 1997 to $5.2 million for the six months ended September 30, 1998.
Management believes that the revenue decrease is due principally to a lengthened
sales cycle, as customers study the impact of incorporating web-based
capabilities in their self-service systems. Revenues from maintenance and
support related to the customer premises systems increased 29.6% from $2.0
million for the six months ended September 30, 1997 to $2.6 million for the six
months ended September 30, 1998,
9
<PAGE> 10
reflecting the support provided to an increased installed base of customer
premises systems.
COST OF REVENUES. Total cost of revenues increased by 37.0%, from $5.2 million
for the six months ended September 30, 1997 to $7.1 million for the six months
ended September 30, 1998. Cost of revenues from The Work Number increased 88.4%
from $724,000 for the six months ended September 30, 1997 to $1.4 million for
the six months ended September 30, 1998, due principally to the growth in
revenues. Cost of revenues from outsourced services increased by 73.4%, from
$819,000 for the six months ended September 30, 1997 to $1.4 million for the six
months ended September 30, 1998. 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 14.9%,
from $3.0 million for the six months ended September 30, 1997 to $3.5 million
for the six months ended September 30, 1998. This increase in cost is primarily
attributable to an increase in fixed labor costs. Cost of revenues from
maintenance and support related to customer premises systems increased by 36.1%,
from $613,000 for the six months ended September 30, 1997 to $834,000 for the
six months ended September 30, 1998, due to the revenue growth and an increase
in personnel costs to provide an appropriate level of customer service.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses increased 22.2%
from $3.7 million for the six months ended September 30, 1997 to $4.6 million
for the six months ended September 30, 1998. As a percentage of revenues, such
expenses increased from 32.7% for the six months ended September 30, 1997 to
32.8% for the six months ended September 30, 1998. The increase in expense
reflects the continuing expansion of the Company's sales and marketing efforts.
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 50.9% from $1.5 million for the six months ended September 30, 1997 to
$2.3 million for the six months ended September 30, 1998. As a percentage of
revenues, such expenses increased from 13.3% for the six months ended September
30, 1997 to 16.4% for the six months ended September 30, 1998. The increase in
expense reflects the expansion of the Company's infrastructure to respond to
increased revenues and possible future increased levels of revenues. The
increase in the expense as a percentage of revenues is reflective of revenues
being lower than management expectations. The Company anticipates that general
and administrative expenses will increase in dollar amount in future periods,
but decrease as a percentage of total revenues.
OTHER INCOME (EXPENSE), NET. Interest income decreased 67.3% from $150,000 for
the six months ended September 30, 1997 to $49,000 for the six months ended
September 30, 1998, due to a lower level of invested funds. The Company also
incurred $12,000 of interest expense on borrowings under its line of credit
during the six months ended September 30, 1998.
INCOME TAX EXPENSE. The Company's effective income tax rate was 37.0% for the
three months ended September 30, 1997 and for the three months ended September
30, 1998.
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 and 1998, the Company provided additional provisions for loss, net of
tax, in the amount of $550,000 and $374,000, respectively. The Company
anticipates disposition of the remaining operations through sale during fiscal
1999.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
The Company had a current ratio of 4.64 to 1, 2.97 to 1 and 2.23 to 1 at March
31, 1997, March 31, 1998 and September 30, 1998, respectively. The Company's
working capital was $13.4 million, $9.1 million and $6.7 million at March 31,
1997, March 31, 1998 and September 30, 1998, respectively. Total working capital
decreased in fiscal 1998 due to the Company's net loss and investments in
property and equipment and capitalized software development costs. Total working
capital decreased during the six months ended June 30, 1998 due principally to
current year earnings, offset by investments in property and equipment and
capitalized software development costs.
The Company's accounts receivable increased from $8.4 million at March 31, 1998
to $10.0 million at September 30, 1998. The increase is due to increased
revenues in the second quarter of fiscal 1999 compared to the fourth quarter of
fiscal 1998, offset by improved collections of accounts receivable. As a
percentage of the Company's total revenues for the respective quarter, accounts
receivable decreased from 199% of revenues at March 31, 1998 to 138% of revenues
at September 30, 1998.
The Company's capital expenditures were $2.3 million in fiscal 1998 and $2.6
million for the first six months of fiscal 1999. At September 30, 1998, the
Company had 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 and borrowing capacity under a $5 million
line of credit, will be sufficient to meet its working capital and capital
expenditure requirements for at least the next 12 months. Outstanding borrowings
under the line of credit bear interest at LIBOR plus 2.25% and are secured by
accounts receivable and inventory.
The Company's net increase to capitalized software development costs was
$735,000 in fiscal 1998 and $254,000 in the first six months of fiscal 1999. See
Notes 1 and 5 of Notes to Consolidated Financial Statements contained in the
Company's Annual Report on Form 10-K for the year ended March 31, 1998. The
Company intends to continue to make investments in software solutions at
comparable or increasing levels in fiscal 1999.
YEAR 2000 COMPLIANCE
Many installed computer systems used by numerous companies to run a variety of
applications are not capable of processing date sensitive information that falls
beyond the twentieth century. Unless these computer systems are replaced or
upgraded prior to the year 2000 to process such date sensitive information, the
systems may experience severe operating difficulties or system failures. Based
on a review and testing of its software products and other products, the Company
believes that its current products are century compliant. The Company's
assessment of its current products is partially dependent upon the accuracy of
representations concerning century compliance made by its suppliers, such as
Microsoft and IBM. Many of the Company's customers are, however, using earlier
versions of the Company's software products and other products that may not be
century compliant. The Company has instituted programs to warn these customers
of the risks associated with using software and other products which may not be
century compliant, and to encourage such customers to migrate to the Company's
current products. In addition, the Company's products are generally integrated
with a customer's enterprise system, which typically utilize software products
developed by other vendors. A customer may mistakenly believe that century
compliance problems with its enterprise system are attributable to products
provided by the Company. The Company may in the future be subject to claims
based on century compliance issues related to a customer's enterprise system or
other products provided by third parties, custom modifications to the Company's
products made by third parties, or issues arising from the integration of the
Company's products with other products. The Company has not been a party to any
proceeding involving its products or services in connection with century
compliance issues, however, there is no assurance that the Company will not in
the future be required to defend its products or services in such proceedings
against claims of century compliance issues, and any resulting liability of the
Company for damages could have a material adverse effect on the Company's
business, operating results and financial condition.
11
<PAGE> 12
During fiscal 1998, the Company initiated a program to review, replace and
upgrade its internal use information systems and non-information technology
systems to accommodate the Company's growth, improve productivity and remedy any
century compliance problems. The Company has substantially completed the
inventory phase for its hardware and purchased software. The assessment and
remediation stages are currently underway. This phase is expected to be
substantially complete by March 31, 1999. Testing is targeted for completion by
June 30, 1999. To a large extent, the Company is dependant on its suppliers and
their efforts. The Company believes that its internal use information systems
will be century compliant prior to the year 2000. However, there is no assurance
that the Company will identify and resolve any and all century compliance
problems with its internal use information systems in timely manner, that the
expenses associated with such remedial efforts will not be significant, or that
such problems will not have a material adverse effect on the Company's business,
operating results and financial condition. The Company is also evaluating
whether to develop a contingency plan, in the event some systems are not year
2000 compliant prior to the end of calender 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
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, September 10, 1998, in St. Louis,
Missouri.
(b) The Company's stockholders voted on the following matters:
Election of Director - The following person was the nominee of the
Board of Directors who was elected as a director at the annual
meeting: Craig E. LaBarge. 4,939,448 votes were cast for the
election of Mr. LaBarge and 34,927 votes were withheld.
Approval of Amendment to the Company's Amended and Restated 1994
Stock Option Plan - This amendment included an increase in the
number of authorized shares issuable thereunder from 430,000 to
930,000. 3,504,074 votes were cast for approval of the amendment,
79,299 votes were cast against the amendment, and there were 3,700
abstentions.
Approval of Amendment to the Company's 1996 Employee Stock
Purchase Plan - This amendment included an increase in the number
of authorized shares issuable thereunder from 80,000 to 200,000.
3,531,704 votes were cast for approval of the amendment, 46,969
votes were cast against the amendment, and there were 6,700
abstentions.
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, 1999.
4,957,036 votes were cast in favor of the appointment, 10,939
votes were cast against, and there were 6,400 abstentions.
Item 5. Other Information
Not applicable.
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 12, 1998 By /s/ William W. Canfield
----------------------------------------------
William W. Canfield
Chairman, President and
Chief Executive Officer
Date: November 12, 1998 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))
3.3 Bylaws of the Company (incorporated by reference from
Exhibit 3.3 to the Company's Registration Statement on Form S-1
(File No. 333-10969))
11 Computation of Earnings Per Share
27 Financial Data Schedule
(provided for the information of the Securities and Exchange
Commission only)
15
<PAGE> 1
Exhibit 11.1
TALX CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Three Months and Six Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Six Months Ended Sept. 30,
---------------------------- -------------------------
1998 1997 1998 1997
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
Actual shares outstanding - beginning of period 5,335,084 5,282,984 5,316,032 5,263,455
Weighted average number of common shares issued 7,470 239,688 17,783 16,788
----------- ------------ ---------- ------------
Weighted average number of common
shares outstanding - end of period 5,342,554 5,522,672 5,333,815 5,280,243
=========== ============ ========== ============
Net earnings (loss) $ (3,000) $ 444,000 $ 41,000 $ 727,000
=========== ============ ========== ============
Basic earnings (loss) per common share $ (0.00) $ 0.08 $ 0.01 $ 0.13
=========== ============ ========== ============
Diluted Earnings Per Share:
Actual shares outstanding - beginning of period 5,335,084 5,282,984 5,316,032 5,263,455
Weighted average number of common shares issued (1) 180,152 239,688 194,970 218,281
----------- ------------ ---------- ------------
Weighted average number of common
shares outstanding - end of period 5,515,236 5,522,672 5,511,002 5,481,736
=========== ============ ========== ============
Net earnings (loss) $ (3,000) $ 444,000 $ 41,000 $ 727,000
=========== ============ ========== ============
Diluted earnings (loss) per common share $ (0.00) $ 0.08 $ 0.01 $ 0.13
=========== =========== ========== ============
</TABLE>
(1) Basic and diluted earnings (loss) per share has been computed using the
number of shares of common stock and common stock options and warrants
outstanding. The weighted average number of shares was based on common
stock outstanding for basic earnings (loss) per share and common stock
outstanding and common stock options and warrants for diluted earnings
(loss) per share in periods when such common stock options and warrants
are not antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 85
<SECURITIES> 0
<RECEIVABLES> 10,111
<ALLOWANCES> 121
<INVENTORY> 1,203
<CURRENT-ASSETS> 12,173
<PP&E> 9,406
<DEPRECIATION> 3,463
<TOTAL-ASSETS> 25,118
<CURRENT-LIABILITIES> 5,459
<BONDS> 0
0
0
<COMMON> 53
<OTHER-SE> 19,606
<TOTAL-LIABILITY-AND-EQUITY> 25,118
<SALES> 13,964
<TOTAL-REVENUES> 13,964
<CGS> 7,080
<TOTAL-COSTS> 7,080
<OTHER-EXPENSES> 6,874
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> 66
<INCOME-TAX> 25
<INCOME-CONTINUING> 41
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
