<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, 2000
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 30, 2000 there were 6,204,474 shares of the Registrant's Common
Stock outstanding.
Exhibit Index is on page 15.
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TALX CORPORATION
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of September 30, 2000
and March 31, 2000 3
Statements of Operations for the Three Months and
Six Months Ended September 30, 2000 and 1999 4
Statements of Cash Flows for the Three Months and
Six Months Ended September 30, 2000 and 1999 5
Notes to 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
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TALX Corporation
Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, March 31,
2000 2000
-------------------- -----------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,789 $ 3,276
Short-term investments 4,482 3,015
Trade receivables, net 7,770 7,980
Inventories 813 832
Work in progress, less progress billings 3,309 2,684
Prepaid expenses and other current assets 1,310 2,404
Deferred tax assets, net 337 624
-------------------- -----------------
Total current assets 19,810 20,815
Property and equipment, net 5,826 5,777
Capitalized software development costs, net 3,767 3,401
Other assets 125 140
-------------------- -----------------
$ 29,528 $ 30,133
==================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 827 $ 803
Accrued expenses and other liabilities 1,456 2,737
Dividends payable 188 -
Income taxes payable 64 87
Progress billings in excess of work in progress 656 931
Deferred revenue 861 1,099
-------------------- -----------------
Total current liabilities 4,052 5,657
Deferred tax liabilities, net 1,160 1,168
-------------------- -----------------
Total liabilities 5,212 6,825
-------------------- -----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000 shares and
no shares issued or outstanding at September 30, 2000 and March 31, 2000 - -
Common stock, $.01 par value; authorized 30,000,000 shares,
issued and outstanding 6,204,474 shares at September 30, 2000
and 5,616,448 shares at March 31, 2000 62 56
Additional paid-in capital 33,945 23,978
Accumulated deficit (9,662) (726)
Accumulated other comprehensive income:
Unrealized loss on securities classified as available for sale,
net of tax of $9 (13) -
Treasury stock, at cost, 941 shares at September 30, 2000, and
no shares at March 31, 2000 (16) -
-------------------- -----------------
Total stockholders' equity 24,316 23,308
-------------------- -----------------
$ 29,528 $ 30,133
==================== =================
</TABLE>
See accompanying notes to consolidated financial statements.
3
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TALX CORPORATION
STATEMENTS OF EARNINGS
(dollars in thousands, except share information)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Six Months Ended Sept. 30,
--------------------------------- -----------------------------------
2000 1999 2000 1999
-------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
The Work Number $ 4,531 $ 2,822 $ 8,663 $ 5,456
Application services 2,806 2,143 4,867 3,298
Customer premises systems 2,347 2,409 4,475 5,560
Maintenance and support 1,113 1,280 2,255 2,542
-------------- ----------------- ----------------- ---------------
Total revenues 10,797 8,654 20,260 16,856
-------------- ----------------- ----------------- ---------------
Cost of revenues:
The Work Number 1,540 916 2,831 1,821
Application services 1,921 1,003 3,227 1,724
Customer premises systems 1,441 2,001 3,391 4,180
Maintenance and support 335 338 675 676
-------------- ----------------- ----------------- ---------------
Total cost of revenues 5,237 4,258 10,124 8,401
-------------- ----------------- ----------------- ---------------
Gross margin 5,560 4,396 10,136 8,455
-------------- ----------------- ----------------- ---------------
Operating expenses:
Selling and marketing 2,144 1,939 4,198 3,822
General and administrative 1,500 1,300 2,869 2,684
-------------- ----------------- ----------------- ---------------
Total operating expenses 3,644 3,239 7,067 6,506
-------------- ----------------- ----------------- ---------------
Operating income 1,916 1,157 3,069 1,949
-------------- ----------------- ----------------- ---------------
Other income (expense), net:
Interest income 128 5 249 9
Interest expense - (3) - (4)
Other, net 1 - 1 1
-------------- ----------------- ----------------- ---------------
Total other income (expense), net 129 2 250 6
-------------- ----------------- ----------------- ---------------
Earnings from continuing operations
before income tax expense 2,045 1,159 3,319 1,955
Income tax expense 833 445 1,366 755
-------------- ----------------- ----------------- ---------------
Earnings from continuing operations 1,212 714 1,953 1,200
Discontinued operations:
Gain on disposal of discontinued operations,
net of income taxes 36 - 36 -
-------------- ----------------- ----------------- ---------------
Net earnings $ 1,248 $ 714 $ 1,989 $ 1,200
============== ================= ================= ===============
Basic earnings per share:
Earnings from continuing operations $ 0.19 $ 0.12 $ 0.32 $ 0.20
Gain on disposal of discontinued operations 0.01 - 0.00 -
-------------- ----------------- ----------------- ---------------
Net earnings $ 0.20 $ 0.12 $ 0.32 $ 0.20
============== ================= ================= ===============
Diluted earnings per share:
Earnings from continuing operations $ 0.19 $ 0.12 $ 0.31 $ 0.19
Gain on disposal of discontinued operations 0.01 - 0.00 -
-------------- ----------------- ----------------- ---------------
Net earnings $ 0.20 $ 0.12 $ 0.31 $ 0.19
============== ================= ================= ===============
Weighted average number of shares outstanding - basic 6,197,864 6,089,587 6,186,654 6,085,583
============== ================= ================= ===============
Weighted average number of shares outstanding - diluted 6,332,181 6,176,243 6,331,639 6,172,124
============== ================= ================= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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TALX CORPORATION
STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Sept. 30,
-----------------------------------
2000 1999
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,989 $ 1,200
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 2,234 1,974
Net assets of business held for sale - (294)
Deferred taxes 279 755
Change in assets and liabilities:
Trade receivables 210 (820)
Inventories 19 258
Work in progress in excess of progress billings (625) (1,283)
Prepaid expenses and other current assets 1,094 319
Other assets 15 (87)
Accounts payable 24 57
Accrued expenses and other liabilities (1,281) (584)
Income taxes payable (14) -
Progress billings in excess of work in progress, net (275) 423
Deferred revenue (238) (235)
----------------- -----------------
Net cash provided by operating activities 3,431 1,683
----------------- -----------------
Cash flows from investing activities:
Additions to property and equipment (1,190) (544)
Purchases of short-term investments (1,505) -
Capitalized software development costs (1,443) (753)
----------------- -----------------
Net cash used in investing activities (4,138) (1,297)
----------------- -----------------
Cash flows from financing activities:
Issuance of common stock 680 317
Purchases of treasury stock (1,460) (445)
----------------- -----------------
Net cash used in financing activities (780) (128)
----------------- -----------------
Net increase (decrease) in cash and cash equivalents (1,487) 258
Cash and cash equivalents at beginning of period 3,276 267
----------------- -----------------
Cash and cash equivalents at end of period $ 1,789 $ 525
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
5
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TALX CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The balance sheet of TALX Corporation ("TALX" or the "Company") at
March 31, 2000 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, 2000 are not necessarily indicative of the
results that may be expected for the year ending March 31, 2001. The
Company's accounting policies and certain other disclosures are set
forth in the notes to the Company's audited financial statements as of
and for the year ended March 31, 2000.
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. All
weighted average share amounts include the effect of a 10% stock
dividend declared September 7, 2000 payable to shareholders of record
on September 21, 2000.
3. RECLASSIFICATIONS
Certain balances as of March 31, 2000 have been reclassified to conform
with the current period presentation.
4. COMPREHENSIVE INCOME
Comprehensive income was $1,239,000 and $714,000 for the three months
ended September 30, 2000 and 1999, respectively and $1,976,000 and
$1,200,000 for the six months ended September 30, 2000 and 1999,
respectively. The difference between comprehensive income and net
income for the three and six month periods ended September 30, 2000
arose from unrealized holding losses on the Company's debt securities
portfolio. There were no differences between comprehensive income and
net income for the three and six month periods ended September 30,
1999.
5. SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION
During the three and six month periods ended September 30, 2000, the
Company paid $923,000 and $1,126,000, respectively, for income taxes.
No income taxes were paid during the three and six month periods ended
September 30, 1999.
The Company declared a $0.03 per share cash dividend, totaling
$188,000, on September 7, 2000. This dividend is payable October 19,
2000.
6. STOCKHOLDERS' EQUITY
On September 7, 2000 the Company announced that it would pay a 10
percent stock dividend and a $0.03 per share cash dividend on October
19, 2000, to shareholders of record at the close of business on
September 21, 2000. As a result of these dividends, common stock
increased $6,000, additional paid-in capital increased $9.9 million and
accumulated deficit increased $10.1 million during the quarter ended
September 30, 2000.
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, application 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 income 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
and CTI software and services that enable an organization's users to access,
input and update information without human assistance. The Company has adopted
the American Institute of CPA's Statement of Position 97-2 ("SOP 97-2"). Under
SOP 97-2, the Company recognizes hardware and software license revenue upon
shipment. Revenues for customization services are recognized by the contract
method of accounting using percentage of completion for larger, more complex
systems and the completed contract method for smaller systems. 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 client service line. Revenues from maintenance
and support are recognized ratably over the term of the maintenance agreement.
The Company's application 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 application services include fees derived from
establishment of the service and transaction-based fees.
In addition to providing software and services, the Company formerly provided
database and document services. In August 1996, the Company determined to pursue
the divestiture of the database and document services businesses and,
accordingly, reflected the results of operations of such businesses as
discontinued operations. In January 1997, the document services business was
sold and in March 2000, the database services business was sold.
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. 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) risk of uncertainty regarding possible applicability of the Fair
Credit Reporting Act to The Work Number(R), (3) intense competition in the
interactive web and interactive voice response industry, (4) risk of
interruption of computer network and telephone operations, (5) risks associated
with rapid technological change, and (6) 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. The Company disclaims any obligations or intent to update these
statements.
7
<PAGE> 8
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from
the Company's 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,
2000 1999 2000 1999 2000 OVER 1999 2000 OVER 1999
---- ---- ---- ---- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
The Work Number 42.0% 32.6% 42.8% 32.4% 60.6% 58.8%
Application services 26.0 24.8 24.0 19.6 30.9 47.6
Customer premises systems 21.7 27.8 22.1 33.0 (2.6) (19.5)
Maintenance and support 10.3 14.8 11.1 15.0 (13.0) (11.3)
----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0 24.8 20.2
----- ----- ----- -----
Cost of revenues
The Work Number 14.3 10.6 14.0 10.8 68.1 55.5
Application services 17.8 11.6 15.9 10.2 91.5 87.2
Customer premises systems 13.3 23.1 16.8 24.8 (28.0) (18.9)
Maintenance and support 3.1 3.9 3.3 4.0 (0.9) (0.1)
----- ----- ----- -----
Total cost of revenues 48.5 49.2 50.0 49.8 23.0 20.5
----- ----- ------ -----
Gross margin 51.5 50.8 50.0 50.2 26.5 19.9
----- ----- ----- -----
Operating expenses
Selling and marketing 19.9 22.4 20.7 22.7 10.6 9.8
General and administrative 13.9 15.0 14.2 15.9 15.4 6.9
----- ----- ----- -----
Total operating expenses 33.8 37.4 34.9 38.6 12.5 8.6
----- ----- ----- -----
Operating income 17.7 13.4 15.1 11.6 65.6 57.5
Other income (expense), net 1.2 0.0 1.2 0.0 * *
----- ----- ----- -----
Earnings from continuing operations
before income tax expense 18.9 13.4 16.3 11.6 76.4 69.8
Income tax expense 7.7 5.1 6.7 4.5 87.2 80.9
----- ----- ----- -----
Earnings from continuing operations 11.2 8.3 9.6 7.1 69.7 62.8
Gain on disposal of discontinued
operations,
net of income taxes 0.3 0.0 0.2 0.0 * *
----- ----- ----- -----
Net earnings 11.5% 8.3% 9.8% 7.1% 74.8 65.8
===== ===== ===== =====
</TABLE>
* - Not meaningful
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
REVENUES. Total revenues increased by 24.8%, from $8.7 million for the three
months ended September 30, 1999 to $10.8 million for the three months ended
September 30, 2000. Revenues from The Work Number increased 60.6% from $2.8
million for the three months ended September 30, 1999 to $4.5 million for the
three months ended September 30, 2000, due to an increase in the number of
employment records, and related transaction volume, on the system, the continued
expansion of marketing to employers and verifiers on a nationwide basis, and, to
a lesser extent, an increase in pricing during the third quarter of fiscal 2000.
During the second quarter of fiscal 2000, the Company entered into a contract to
provide volume verifications from The Work Number database. Since inception, the
Company has realized insignificant amounts of revenue related to this contract,
and cannot predict when, or if, meaningful revenue associated with this contract
will begin. Revenues from application services increased 30.9% from $2.1 million
for the three months ended September 30, 1999 to $2.8 million for the three
months ended September 30, 2000, due primarily to the Company capitalizing on
the trend of some corporations to outsource their non-core functions. Revenues
from customer premises systems decreased 2.6% from $2.4 million for the three
months ended September 30, 1999 to $2.3 million for the three months ended
September 30, 1999. This decrease was due primarily to a shift in both the
Company focus and the market from purchasing in-house systems to utilizing the
Company's application services. Revenues from maintenance and support related to
customer premises systems decreased by 13.0% from $1.3 million for the three
months ended September 30, 1999 to $1.1 million for the three months ended
September 30, 2000, reflecting the support provided to a slightly shrinking
installed base as the Company shifts its strategy towards providing the same
solutions through application services. Over
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<PAGE> 9
the next 18 months the Company anticipates revenues from customer premises
systems and maintenance and support will decrease slightly from 2nd quarter
results as it continues to emphasize application services.
COST OF REVENUES. Total cost of revenues increased by 23.0%, from $4.3 million
for the three months ended September 30, 1999 to $5.2 million for the three
months ended September 30, 2000. Cost of revenues from The Work Number increased
68.1% from $916,000 for the three months ended September 30, 1999 to $1.5
million for the three months ended September 30, 2000, due principally to
increased personnel and infrastructure costs associated with the delivery of the
increased revenue. Cost of revenues from application services increased by
91.5%, from $1.0 million for the three months ended September 30, 1999 to $1.9
million for the three months ended September 30, 2000. This increase in cost is
due principally to increased personnel and infrastructure costs associated with
the delivery of the increased revenue. Costs during the three months ended
September 30, 2000 also include the transition of personnel from the customer
premises systems business in anticipation of possible future growth in
application services. Cost of revenues from customer premises systems decreased
28.0%, from $2.0 million for the three months ended September 30, 1999 to $1.4
million for the three months ended September 30, 2000. This decrease in cost is
due to a shift of trained personnel to the application services business unit.
Cost of revenues from maintenance and support related to customer premises
systems decreased slightly from $338,000 for the three months ended September
30, 1999 to $335,000 for the three months ended September 30, 2000. Costs stayed
consistent during the period, despite a 13.0% decrease in revenue. This is due
to the fixed costs related to providing 24/7 maintenance and support service to
our customer premises system clients.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses increased 10.6%
from $1.9 million for the three months ended September 30, 1999 to $2.1 million
for the three months ended September 30, 2000. As a percentage of revenues, such
expenses decreased from 22.4% for the three months ended September 30, 1999 to
19.9% for the three months ended September 30, 2000. The increase in expense
reflects the expansion of the Company's sales and marketing efforts. The
decrease in percentage of revenues is due to improved leveraging of personnel
and related costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 15.4% from $1.3 million for the three months ended September 30, 1999
to $1.5 million for the three months ended September 30, 2000. As a percentage
of revenues, such expenses decreased from 15.0% for the three months ended
September 30, 1999 to 13.9% for the three months ended September 30, 2000. 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) increased from $2,000 of net
interest income for the three months ended September 30, 1999 to $129,000 for
the three months ended September 30, 2000, due to interest income earned on a
higher level of invested funds.
INCOME TAX EXPENSE. The Company's effective income tax rate was 38.4% for the
three months ended September 30, 1999 and 40.7% for the three months ended
September 30, 2000. The increase in effective tax rate is due to higher state
tax rates and the expiration of certain tax credit carryforwards. The Company
expects that the effective rate during fiscal 2001 will be generally consistent
with the September 30, 2000 effective rate.
SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 2000
REVENUES. Total revenues increased by 20.2% from $16.9 million for the six
months ended September 30, 1999 to $20.3 million for the six months ended
September 30, 2000. Revenues from The Work Number increased 58.8% from $5.5
million for the six months ended September 30, 1999 to $8.7 million for the six
months ended September 30, 2000, due to an increase in the number of employment
records, and related transaction volume, on the system, the continued expansion
of marketing to employers and verifiers on a nationwide basis, and an increase
in pricing during the third quarter of fiscal 2000. Revenues from application
services increased 47.6% from $3.3 million for the six months ended September
30, 1999 to $4.9 million for the six months ended September 30, 2000, due
primarily to the Company capitalizing on the trend of some corporations to
outsource their non-core functions. Revenues from customer premises systems
decreased 19.5% from $5.6 million for the six months ended September 30, 1999 to
$4.5 million for the six months ended September 30, 2000. This decrease was due
primarily to a shift in both the Company focus and the market
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<PAGE> 10
from purchasing in-house systems to utilizing the Company's application
services. Revenues from maintenance and support related to customer premises
systems decreased 11.3% from $2.5 million for the six months ended September 30,
1999 to $2.3 million for the six months ended September 30, 2000, reflecting the
support provided to a slightly shrinking installed base as the Company shifts
its strategy towards providing the same solutions through application services.
Over the next 18 months the Company anticipates revenues from customer premises
systems and maintenance and support will decrease slightly from 2nd quarter
results as it continues to emphasize application services.
COST OF REVENUES. Total cost of revenues increased by 20.5%, from $8.4 million
for the six months ended September 30, 1999 to $10.1 million for the six months
ended September 30, 2000. Cost of revenues from The Work Number increased 55.5%
from $1.8 million for the six months ended September 30, 1999 to $2.8 million
for the six months ended September 30, 2000, due principally to increased
personnel and infrastructure costs associated with the delivery of the increased
revenue. Cost of revenues from application services increased by 87.2%, from
$1.7 million for the six months ended September 30, 1999 to $3.2 million for the
six months ended September 30, 2000. This increase in cost is due principally to
increased personnel and infrastructure costs associated with the delivery of the
increased revenue. Costs during the six months ended September 30, 2000 also
include the transition of personnel from the customer premises systems business
in anticipation of possible future growth in application services. Cost of
revenues from customer premises systems decreased by 18.9%, from $4.2 million
for the six months ended September 30, 1999 to $3.4 million for the six months
ended September 30, 2000. This decrease in cost is related to the decrease in
revenue and the transition of personnel to the application services business
unit. Cost of revenues from maintenance and support related to customer premises
systems decreased slightly from $676,000 for the six months ended September 30,
1999 to $675,000 for the six months ended September 30, 2000. Costs stayed
consistent during the period, despite a 11.3% decrease in revenue. This is due
to the fixed costs related to providing 24/7 maintenance and support service to
our customer premises system clients.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses increased 9.8%
from $3.8 million for the six months ended September 30, 1999 to $4.2 million
for the six months ended September 30, 2000. As a percentage of revenues, such
expenses decreased from 22.7% for the six months ended September 30, 1999 to
20.7% for the six months ended September 30, 2000. The increase in expense
reflects the expansion of the Company's sales and marketing efforts. The
decrease in percentage of revenues is due to improved leveraging of personnel
and related costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 6.9% from $2.7 million for the six months ended September 30, 1999 to
$2.9 million for the six months ended September 30, 2000. As a percentage of
revenues, such expenses decreased from 15.9% for the six months ended September
30, 1999 to 14.2% for the six months ended September 30, 2000. 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) increased from $6,000 for
the six months ended September 30, 1999 to $250,000 for the six months ended
September 30, 2000, due to interest income earned on a higher level of invested
funds.
INCOME TAX EXPENSE. The Company's effective income tax rate was 38.6% for the
six months ended September 30, 1999 and 41.2% for the six months ended September
30, 2000. The increase in effective tax rate is due to higher state tax rates
and the expiration of certain tax credit carryforwards. The Company expects that
the effective rate during fiscal 2001 will be generally consistent with the
September 30, 2000 effective rate.
DISCONTINUED OPERATIONS
In August 1996, the Company determined to pursue the divestiture of the database
and document services businesses and, accordingly, 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. The net assets
related to this sale were
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<PAGE> 11
approximately $566,000. As of 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.
Effective March 31, 2000, the Company sold substantially all of the assets, net
of liabilities, of the database services business to WPZ Holdings, Inc., the
parent company of one of the division's largest customers. The sales price was
$1,273,000, which represented the current book value of the net assets sold. The
Company realized pre-tax and after-tax gains of $187,000 and $117,000,
respectively.
During the quarter ended September 30, 2000, the Company concluded all
transition-related activity for the database services business. Completing this
transition ahead of schedule resulted in a savings of $61,000 of the transition
reserve. Therefore, the Company realized pre-tax and after-tax gains of $61,000
and $36,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a current ratio of 3.68 to 1 and 4.89 to 1 at March 31, 2000 and
September 30, 2000, respectively. The Company's working capital was $15.2
million and $15.8 million at March 31, 2000 and September 30, 2000,
respectively. Total working capital increased during the six months ended
September 30, 2000 due principally to the Company's earnings for the period,
offset by net stock repurchases by the Company.
The Company's accounts receivable decreased from $8.0 million at March 31, 2000
to $7.8 million at September 30, 2000. As a percentage of the Company's total
revenues for the respective quarter, accounts receivable decreased from 86% of
revenues at March 31, 2000 to 72% of revenues at September 30, 2000. These
decreases are due primarily to improved collections of accounts receivable.
The Company's capital expenditures, principally computer equipment related to
The Work Number and application services lines of business, were $1.2 million
during the six months ended September 30, 2000. At September 30, 2000, the
Company had no significant capital spending or purchase commitments other than
normal purchase commitments and commitments under facilities and operating
leases.
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 over a two-year
period. During the six months ended September 30, 2000 the Company repurchased
92,500 shares for $1.5 million. Cumulative shares repurchased amount to 192,587.
Except for the 941 shares remaining in the treasury at September 30, 2000, all
shares repurchased have been reissued to fund employee stock option exercises
and employee stock purchase plan purchases.
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, all of which
was available at September 30, 2000. 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
$366,000 in the first six months of fiscal 2001. This increase is due to
increased labor costs and several projects approaching their release dates. The
Company anticipates that capitalized software will increase slightly in future
periods as we continue to develop new products in The Work Number and
application services lines of business.
On September 7, 2000 the Company announced that it would pay a 10 percent stock
dividend and a $0.03 per share cash dividend on October 19, 2000, to
shareholders of record at the close of business on September 21, 2000.
YEAR 2000 COMPLIANCE
As of the date of this filing, the Company has had no reported year 2000
incidents from its clients. However, the Company may in the future be subject to
claims based on century compliance issues related to a client'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.
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While the Company has not been a party to any proceeding involving its products
or services in connection with century compliance issues, 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.
As of the date of this filing, the Company has not experienced any year 2000
issues involving its internal use information systems. However, there is no
assurance that such century compliance problems will not arise, and if so that
such problems will not have a material adverse effect on the Company's business,
operating results and financial condition.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company maintains a short-term investment portfolio consisting of federal
agency debt obligations. These available for sale securities are subject to
interest rate risk and will fall in value if market interest rates increase. The
Company has the ability to hold its fixed income investments until maturity, and
therefore, the Company would not expect its operating results or cash flows to
be affected to any significant degree by the effect of a sudden change in market
interest rates on its securities portfolio.
The Company's current line of credit facility with a commercial bank provides
for borrowings that bear interest at LIBOR plus 2.25%. The Company had no
borrowings outstanding under this line of credit at September 30, 2000. The
Company currently believes that the effect, if any, of changes in interest rates
on the Company's financial position, results of operations and cash flows would
not be material.
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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 7, 2000, 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 M. Stephen 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: 5,204,815 votes
for the election of Eugene M. Toombs, with 121,883 votes withheld
and 5,204,315 votes for the election of M. Stephen Yoakum, with
122,383 votes 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 930,000 to
1,680,000. 3,321,586 votes were cast for approval of the
amendment, 858,606 votes were cast against the amendment, and
there were 14,812 abstentions and 1,131,694 non-votes.
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 200,000 to 500,000.
4,120,074 votes were cast for approval of the amendment, 60,718
votes were cast against the amendment, and there were 14,212
abstentions and 1,131,694 non-votes.
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, 2001. 5,319,008
votes were cast in favor of the appointment, 4,928 votes were cast
against, and there 2,762 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.
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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, 2000 By /s/ William W. Canfield
---------------------------------
William W. Canfield
Chairman, President and
Chief Executive Officer
Date: November 10, 2000 By /s/ Craig N. Cohen
---------------------------------
Craig N. Cohen
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
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
27.1 Financial Data Schedule
(provided for the information of the Securities and Exchange
Commission only)
27.2 Financial Data Schedule (Restated for Stock Dividend) - June 30, 2000
27.3 Financial Data Schedule (Restated for Stock Dividend) - March 31, 2000
27.4 Financial Data Schedule (Restated for Stock Dividend) - December 31, 1999
27.5 Financial Data Schedule (Restated for Stock Dividend) - September 30, 1999
27.6 Financial Data Schedule (Restated for Stock Dividend) - June 30, 1999
27.7 Financial Data Schedule (Restated for Stock Dividend) - March 31, 1999
27.8 Financial Data Schedule (Restated for Stock Dividend) - December 31, 1998
27.9 Financial Data Schedule (Restated for Stock Dividend) - September 30, 1998
27.10 Financial Data Schedule (Restated for Stock Dividend) - June 30, 1998
27.11 Financial Data Schedule (Restated for Stock Dividend) - March 31, 1998
27.12 Financial Data Schedule (Restated for Stock Dividend) - December 31, 1997
27.13 Financial Data Schedule (Restated for Stock Dividend) - September 30, 1997
27.14 Financial Data Schedule (Restated for Stock Dividend) - June 30, 1997
</TABLE>
15
