<PAGE> 1
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, 1999
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) 214-7000
(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 October 31, 1999 there were 5,542,497 shares of the Registrant's Common
Stock outstanding.
Exhibit Index is on page 14.
<PAGE> 2
TALX CORPORATION AND SUBSIDIARIES
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999
and March 31, 1999 3
Consolidated Statements of Operations for the Three Months and
Six Months Ended September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows for the Three Months and
Six Months Ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Securities Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE> 3
TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
Sept. 30, March 31,
1999 1999
---------------- -----------------
(unaudited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 525 $ 267
Trade receivables, net 7,372 6,552
Inventories 1,004 1,262
Work in progress, less progress billings 4,453 3,170
Prepaid expenses and other current assets 980 1,299
Deferred tax assets, net 235 235
---------------- -----------------
Total current assets 14,569 12,785
Property and equipment, net 5,542 5,856
Capitalized software development costs, net 3,459 3,822
Net assets of business held for sale 1,153 859
Deferred tax asset, net 266 1,021
Other assets 308 221
---------------- -----------------
$ 25,297 $ 24,564
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 1,132 $ 1,075
Accrued expenses and other liabilities 1,097 1,681
Progress billings in excess of work in progress 1,011 588
Deferred maintenance revenue 890 1,125
---------------- -----------------
Total current liabilities 4,130 4,469
---------------- -----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000 shares and
no shares issued or outstanding at September 30, 1999 and March 31, 1999 - -
Common stock, $.01 par value; authorized 30,000,000 shares,
issued and outstanding 5,541,969 shares at September 30, 1999
and 5,505,017 shares at March 31, 1999 55 55
Additional paid-in capital 23,567 23,478
Accumulated deficit (2,368) (3,432)
Treasury stock, at cost, 11,196 shares at September 30, 1999
and 948 shares at March 31, 1999 (87) (6)
---------------- -----------------
Total stockholders' equity 21,167 20,095
---------------- -----------------
$ 25,297 $ 24,564
================ =================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share information)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Six Months Ended Sept. 30,
-------------------------------------- --------------------------------------
1999 1998 1999 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
The Work Number $ 2,822 $ 2,021 $ 5,456 $ 3,740
Outsourced services 2,143 1,441 3,298 2,393
Customer premises systems 2,409 2,425 5,560 5,231
Maintenance and support 1,280 1,326 2,542 2,600
------------------ ------------------ ------------------ ------------------
Total revenues 8,654 7,213 16,856 13,964
------------------ ------------------ ------------------ ------------------
Cost of revenues:
The Work Number 916 700 1,821 1,364
Outsourced services 1,003 807 1,724 1,420
Customer premises systems 2,001 1,736 4,180 3,462
Maintenance and support 338 408 676 834
------------------ ------------------ ------------------ ------------------
Total cost of revenues 4,258 3,651 8,401 7,080
------------------ ------------------ ------------------ ------------------
Gross margin 4,396 3,562 8,455 6,884
------------------ ------------------ ------------------ ------------------
Operating expenses:
Selling and marketing 1,939 2,353 3,822 4,577
General and administrative 1,300 1,245 2,684 2,297
------------------ ------------------ ------------------ ------------------
Total operating expenses 3,239 3,598 6,506 6,874
------------------ ------------------ ------------------ ------------------
Operating income (loss) 1,157 (36) 1,949 10
------------------ ------------------ ------------------ ------------------
Other income (expense), net:
Interest income 5 25 9 49
Interest expense (3) (12) (4) (12)
Other, net - 19 1 19
------------------ ------------------ ------------------ ------------------
Total other income, net 2 32 6 56
------------------ ------------------ ------------------ ------------------
Earnings (loss) before income
tax expense 1,159 (4) 1,955 66
Income tax expense (benefit) 445 (1) 755 25
------------------ ------------------ ------------------ ------------------
Net earnings (loss) $ 714 $ (3) $ 1,200 $ 41
================== ================== ================== ==================
Basic earnings (loss) per share $ 0.13 $ (0.00) $ 0.22 $ 0.01
================== ================== ================== ==================
Diluted earnings (loss) per share $ 0.13 $ (0.00) $ 0.21 $ 0.01
================== ================== ================== ==================
Weighed average number of shares
outstanding - basic 5,535,989 5,342,554 5,532,348 5,333,815
================== ================== ================== ==================
Weighed average number of shares
outstanding - diluted 5,614,767 5,515,236 5,611,022 5,511,002
================== ================== ================== ==================
</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,
-----------------------------------
1999 1998
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,200 $ 41
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,974 1,340
Loss on disposal of discontinued operations, net - (236)
Net assets of business held for sale (294) -
Deferred taxes 755 25
Change in assets and liabilities:
Trade receivables (820) (31)
Inventories 258 249
Work in progress in excess of progress billings (1,283) (1,537)
Prepaid expenses and other current assets 319 19
Other assets (87) (39)
Accounts payable 57 109
Accrued expenses and other liabilities (584) (239)
Progress billings in excess of work in progress, net 423 321
Deferred maintenance revenue (235) (181)
----------------- -----------------
Net cash provided by (used in) operating activities 1,683 (159)
----------------- -----------------
Cash flows from investing activities:
Additions to property and equipment (544) (2,648)
Capitalized software development costs (753) (933)
----------------- -----------------
Net cash used in investing activities (1,297) (3,581)
----------------- -----------------
Cash flows from financing activities:
Issuance of common stock 317 110
Purchases of treasury stock (445) -
Borrowings under note payable - 836
----------------- -----------------
Net cash provided by (used in) financing activities (128) 946
----------------- -----------------
Net increase (decrease) in cash and cash equivalents 258 (2,794)
Cash and cash equivalents at beginning of period 267 2,879
----------------- -----------------
Cash and cash equivalents at end of period $ 525 $ 85
================= =================
</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, 1999 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, 1999 are not necessarily
indicative of the results that may be expected for the year ending
March 31, 2000. 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, 1999.
2. EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number
of common shares outstanding during the period. Diluted earnings per
share reflects the incremental increase in common shares outstanding
assuming the exercise of all employee stock options and warrants that
would have had a dilutive effect on earnings per share. The weighted
average number of shares is based on common stock outstanding for basic
earnings per share and common stock outstanding and common stock
options and warrants for diluted earnings per share in periods when
such common stock options and warrants are not antidilutive.
3. RECLASSIFICATIONS
Certain balances as of March 31, 1999 have been reclassified to conform
with the current period presentation.
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 integration (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. 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. The Company is actively marketing
its database services business.
This Form 10-Q 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, without limitation, statements
regarding possible Year 2000 effects. All statements other than statements of
historical facts included herein 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)
Year 2000 compliance and (7) risks associated with a lengthy sales cycle. See a
more comprehensive description of risk factors in Item 1 of the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
7
<PAGE> 8
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 -------------------------------
ENDED SEPT. 30, ENDED SEPT. 30, THREE MONTHS SIX MONTHS
----------------- -------------- ENDED SEPT. 30, ENDED SEPT. 30,
1999 1998 1999 1998 1999 OVER 1998 1999 OVER 1998
---- ---- ---- ---- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
The Work Number 32.6% 28.0% 32.4% 26.8% 39.6% 45.9%
Outsourced services 24.8 20.0 19.6 17.1 48.7 37.8
Customer premises systems 27.8 33.6 33.0 37.5 (0.7) 6.3
Maintenance and support 14.8 18.4 15.0 18.6 (3.5) (2.2)
------ ------ ------ ------
Total revenues 100.0 100.0 100.0 100.0 20.0 20.7
------ ------ ------ ------
Cost of revenues
The Work Number 10.6 9.7 10.8 9.7 30.9 33.5
Outsourced services 11.6 11.2 10.2 10.2 24.3 21.4
Customer premises systems 23.1 24.1 24.8 24.8 15.3 20.7
Maintenance and support 3.9 5.6 4.0 6.0 (17.2) (18.9)
------ ------ ------ ------
Total cost of revenues 49.2 50.6 49.8 50.7 16.6 18.7
------ ------ ------ ------
Gross Margin 50.8 49.4 50.2 49.3 23.4 22.8
------ ------ ------ ------
Operating expenses
Selling and marketing 22.4 32.6 22.7 32.8 (17.6) (16.5)
General and administrative 15.0 17.3 15.9 16.4 4.4 16.8
------ ------ ------ ------
Total operating expenses 37.4 49.9 38.6 49.2 (10.0) (5.4)
------ ------ ------ ------
Operating income (loss) 13.4 (0.5) 11.6 0.1 * *
Other income (expense), net 0.0 0.5 0.0 0.4 (93.8) (89.3)
------ ------ ------ ------
Earnings (loss) from continuing operations
before income tax expense 13.4 (0.0) 11.6 0.5 * *
Income tax expense 5.1 (0.0) 4.5 0.2 * *
------ ------- ----- ------
Net earnings (loss) from continuing operations 8.3% (0.0)% 7.1% 0.3% * *
====== ======= ===== ======
</TABLE>
* - Not meaningful
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
REVENUES. Total revenues increased by 20.0%, from $7.2 million for the three
months ended September 30, 1998 to $8.7 million for the three months ended
September 30, 1999. Revenues from The Work Number increased 39.6% from $2.0
million for the three months ended September 30, 1998 to $2.8 million for the
three months ended September 30, 1999, due to the continued expansion of
marketing to employers and verifiers on a nationwide basis and an increase in
the number of employment records, and related transaction volume, on the system.
During the quarter, the Company entered into a contract to provide volume
verifications from The Work Number database. The Company does not anticipate
realizing meaningful revenue prior to the first quarter of fiscal 2001. Revenues
from outsourced services increased 48.7% from $1.4 million for the three months
ended September 30, 1998 to $2.1 million for the three months ended September
30, 1999, due to the Company capitalizing on the trend of some corporations to
outsource their non-core functions, and an increase in pricing during the
current year. Revenues from customer premises systems remained consistent at
$2.4 million for the three months ended September 30, 1998 and 1999. Revenues
from maintenance and support related to the customer premises systems were
consistent at $1.3 million for the three months ended September 30, 1998 and
1999, due to the cancellation of maintenance on older product lines, offset by
support provided to an increased installed base of customer premises systems.
COST OF REVENUES. Total cost of revenues increased by 16.6%, from $3.7 million
for the three months ended September 30, 1998 to $4.3 million for the three
months ended September 30, 1999. Cost of revenues from The Work Number increased
30.9% from $700,000 for the three months ended September 30, 1998 to $916,000
for the three months ended September 30, 1999, due principally to the growth in
revenues, offset by improved leveraging of personnel and infrastructure costs.
Cost of revenues from outsourced services increased by 24.3%, from $807,000 for
the three months ended September 30, 1998 to $1.0 million for the
8
<PAGE> 9
three months ended September 30, 1999. This increase in cost is attributable to
the revenue described above. Cost of revenues from customer premises systems
increased by 15.3%, from $1.7 million for the three months ended September 30,
1998 to $2.0 million for the three months ended September 30, 1999. This
increase in cost is due to an increase in labor costs. Cost of revenues from
maintenance and support related to customer premises systems decreased by 17.2%,
from $408,000 for the three months ended September 30, 1998 to $338,000 for the
three months ended September 30, 1999, due principally to a lower cost of
hardware components.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses decreased 17.6%
from $2.4 million for the three months ended September 30, 1998 to $1.9 million
for the three months ended September 30, 1999. As a percentage of revenues, such
expenses decreased from 32.6% for the three months ended September 30, 1998 to
22.4% for the three months ended September 30, 1999. The decrease in expense
reflects the impact of the Company's restructuring efforts during the quarter
ended December 31, 1998. In conjunction with the reorganization, the Company
reduced its workforce and closed certain regional sales office.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 4.4% from $1.2 million for the three months ended September 30, 1998
to $1.3 million for the three months ended September 30, 1999. As a percentage
of revenues, such expenses decreased from 17.3% for the three months ended
September 30, 1998 to 15.0% for the three months ended September 30, 1999. The
increase in such expenses reflects the increased infrastructure costs of a
growing business. The decrease as a percentage of revenues is due to improved
leveraging of infrastructure costs.
OTHER INCOME (EXPENSE), NET. Other income (expense) decreased 93.8% from $32,000
for the three months ended September 30, 1998 to $2,000 for the three months
ended September 30, 1999, due to a lower level of invested funds.
INCOME TAX EXPENSE. The Company's effective income tax rate was 23.4% for the
three months ended September 30, 1998 and 38.4% for the three months ended
September 30, 1999. The Company expects that the future effective rate will be
consistent with the September 30, 1999 effective rate.
SIX MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
REVENUES. Total revenues increased by 20.7%, from $14.0 million for the six
months ended September 30, 1998 to $16.9 million for the six months ended
September 30, 1999. Revenues from The Work Number increased 45.9% from $3.7
million for the six months ended September 30, 1998 to $5.5 million for the six
months ended September 30, 1999, due to the continued expansion of marketing to
employers and verifiers on a nationwide basis and an increase in the number of
employment records, and related transaction volume, on the system. Revenues from
outsourced services increased 37.8% from $2.4 million for the six months ended
September 30, 1998 to $3.3 million for the six months ended September 30, 1999,
due to the Company capitalizing on the trend of some corporations to outsource
their non-core functions, and an increase in pricing during the current year.
Revenues from customer premises systems increased 6.3% from $5.2 million for the
six months ended September 30, 1998 to $5.6 million for the six months ended
September 30, 1999. Management believes that the revenue increase was due
principally to the Company responding better to web-based opportunities in the
marketplace. Revenues from maintenance and support related to the customer
premises systems decreased slightly from $2.6 million for the six months ended
September 30, 1998 to 2.5 million for the six months ended September 30, 1999,
due to the cancellation of maintenance on older product lines, offset by support
provided to an increased installed base of customer premises systems.
COST OF REVENUES. Total cost of revenues increased by 22.8%, from $7.1 million
for the six months ended September 30, 1998 to $8.4 million for the six months
ended September 30, 1999. Cost of revenues from The Work Number increased 33.5%
from $1.4 million for the six months ended September 30, 1998 to $1.8 million
for the six months ended September 30, 1999, due principally to the growth in
revenues, offset by improved leveraging of personnel and infrastructure costs.
Cost of revenues from outsourced services increased by 21.4%, from $1.4 million
for the six months ended September 30, 1998 to $1.7 million for the six months
ended September 30, 1999. This increase in cost is attributable to the revenue
growth described above. Cost of revenues from customer premises systems
increased by 20.7%, from $3.5 million for the six months ended September 30,
1998 to $4.2 million for the six months ended September 30, 1999. This
9
<PAGE> 10
increase in cost is due to the growth in revenues, along with an increase in
labor costs. Cost of revenues from maintenance and support related to customer
premises systems decreased by 18.9%, from $834,000 for the six months ended
September 30, 1998 to $676,000 for the six months ended September 30, 1999, due
principally to a lower cost of hardware components.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses decreased 16.5%
from $4.6 million for the six months ended September 30, 1998 to $3.8 million
for the six months ended September 30, 1999. As a percentage of revenues, such
expenses decreased from 32.8% for the six months ended September 30, 1998 to
22.7% for the six months ended September 30, 1999. The decrease in expense
reflects the impact of the Company's restructuring efforts during the quarter
ended December 31, 1998. In conjunction with the reorganization, the Company
reduced its workforce and closed certain regional sales office.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 16.8% from $2.3 million for the six months ended September 30, 1998 to
$2.7 million for the six months ended September 30, 1999. As a percentage of
revenues, such expenses decreased from 16.4% for the six months ended September
30, 1998 to 15.9% for the six months ended September 30, 1999. The increase in
such expenses reflects the increased infrastructure costs of a growing business.
The decrease as a percentage of revenues is due to improved leveraging of
infrastructure costs.
OTHER INCOME (EXPENSE), NET. Other income (expense) decreased 89.3% from $56,000
for the six months ended September 30, 1998 to $6,000 for the six months ended
September 30, 1999, due to a lower level of invested funds.
INCOME TAX EXPENSE. The Company's effective income tax rate was 37.8% for the
six months ended September 30, 1998 and 38.6% for the six months ended September
30, 1999. The Company expects that the future effective rate will be consistent
with the September 30, 1999 effective rate.
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, which has been subsequently
repaid, 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 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a current ratio of 2.86 to 1 and 3.53 to 1 at March 31, 1999 and
September 30, 1999, respectively. The Company's working capital was $8.3 million
and $10.4 million at March 31, 1999 and September 30, 1999, respectively. Total
working capital increased during the six months ended September 30, 1999 due
principally to the Company's earnings for the period.
The Company's accounts receivable increased from $6.6 million at March 31, 1999
to $7.4 million at September 30, 1999. The increase is due primarily to
increased revenues in the second quarter of fiscal 2000 compared to the fourth
quarter of fiscal 1999, offset by improved collections of accounts receivable.
As a percentage of the Company's total revenues for the respective quarter,
accounts receivable increased slightly from 83% of revenues at March 31, 1999 to
85% of revenues at September 30, 1999.
The Company's capital expenditures, principally computer equipment, were
$544,000 during the six months ended September 30, 1999. At September 30, 1999,
the Company had no significant capital spending or purchase commitments other
than normal purchase commitments and commitments under facilities and operating
leases.
10
<PAGE> 11
In November 1998, the Company's Board of Directors authorized the Company to
repurchase up to 350,000 shares of its stock in the open market. During the six
months ended September 30, 1999, the Company repurchased 56,000 shares for
$445,000. Cumulative shares repurchased amount to 97,587.
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
has a $5 million line of credit facility with a commercial bank. No balances
were outstanding under this line of credit at September 30, 1999 or March 31,
1999. 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 decrease to capitalized software development costs was
$363,000 in the first six months of fiscal 2000. The Company anticipates that
the capitalized software balance will decrease slightly in future periods as
amortization exceeds capitalized costs.
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 utilizes 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.
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 completed the inventory, assessment
and remediation, and testing phases for its hardware and purchased software. The
costs of remediation were included in the Company's normal capital budgets, and
not separately measured. The Company continues to receive, evaluate and
implement third party software year 2000 updates. To a large extent, the Company
is dependent 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, or its suppliers and
other third parties, will identify and resolve any and all century compliance
problems with its internal use information systems in a 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 in the process of
developing a contingency plan, in the event some systems are not year 2000
compliant prior to the end of calendar 1999. However, no assurance can be given
that such a plan will be successful.
11
<PAGE> 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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 9, 1999, 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: William W. Canfield and Richard F. Ford. The
number of votes cast for the election of each of the nominees for
director, and the number of votes withheld, were as follows:
5,159,140 votes for the election of William W. Canfield, with
4,249 votes withheld and 5,158,649 votes for the election of
Richard F. Ford, with 4,740 votes withheld.
Ratification of Selection of Independent Auditors - The
stockholders ratified the appointment of KPMG LLP as the
Company's independent auditors to perform the audit of the
Company's financial statements for the year ending March 31,
2000. 5,155,522 votes were cast in favor of the appointment,
3,127 votes were cast against, and there were 4,740 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.
12
<PAGE> 13
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 10, 1999 By /s/ William W. Canfield
---------------------------------
Chairman, President and
Chief Executive Officer
Date: November 10, 1999 By /s/ Craig N. Cohen
---------------------------------
Chief Financial Officer
13
<PAGE> 14
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)
14
<PAGE> 1
EXHIBIT 11
TALX CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Three Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Six Months Ended Sept. 30,
---------------------------------- -------------------------------------
1999 1998 1999 1998
---------------- ---------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
Actual shares outstanding - beginning of period 5,540,983 5,335,084 5,505,017 5,316,032
Weighted average number of common shares issued (1) (4,994) 7,470 27,331 17,783
---------------- ---------------- ------------------- ----------------
Weighted average number of common shares outstanding -
end of period 5,535,989 5,342,554 5,532,348 5,333,815
================ ================ =================== ================
Net earnings: $ 714,000 $ (3,000) $ 1,200,000 $ 41,000
================ ================ =================== ================
Basic earnings per common share: $ 0.13 $ (0.00) $ 0.22 $ 0.01
================ ================ =================== ================
Diluted Earnings Per Share:
Actual shares outstanding - beginning of period 5,540,983 5,335,084 5,505,017 5,316,032
Weighted average number of common shares issued (1) 73,784 180,152 106,005 194,970
---------------- ---------------- ------------------- ----------------
Weighted average number of common shares outstanding -
end of period 5,614,767 5,515,236 5,611,022 5,511,002
================ ================ =================== ================
Net earnings: $ 714,000 $ (3,000) $ 1,200,000 $ 41,000
================ ================ =================== ================
Diluted earnings per common share: $ 0.13 $ (0.00) $ 0.21 $ 0.01
================ ================ =================== ================
</TABLE>
(1) Basic and diluted earnings 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 is based on common
stock outstanding for basic earnings per share and common stock
outstanding and common stock options and warrants for diluted earnings
per share in periods when such common stock options and warrants are not
antidilutive.
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 525
<SECURITIES> 0
<RECEIVABLES> 12,073
<ALLOWANCES> 248
<INVENTORY> 1,004
<CURRENT-ASSETS> 14,569
<PP&E> 10,715
<DEPRECIATION> 5,173
<TOTAL-ASSETS> 25,297
<CURRENT-LIABILITIES> 4,130
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 21,112
<TOTAL-LIABILITY-AND-EQUITY> 25,297
<SALES> 16,856
<TOTAL-REVENUES> 16,856
<CGS> 8,401
<TOTAL-COSTS> 8,401
<OTHER-EXPENSES> 6,506
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 1,955
<INCOME-TAX> 755
<INCOME-CONTINUING> 1,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,200
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.21
</TABLE>
