<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 December 31, 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 February 7, 2000 there were 5,602,690 shares of the Registrant's Common
Stock outstanding.
Exhibit Index is on page 14.
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TALX CORPORATION AND SUBSIDIARIES
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1999
and March 31, 1999 3
Consolidated Statements of Operations for the Three Months and
Nine Months Ended December 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the Nine Months
Ended December 31, 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
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TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
Dec. 31 March 31,
1999 1999
--------- ---------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,709 $ 267
Trade receivables, net 9,098 6,552
Inventories 1,028 1,262
Work in progress, less progress billings 3,650 3,170
Prepaid expenses and other current assets 1,195 1,299
Deferred tax assets, net 235 235
-------- --------
Total current assets 17,915 12,785
Property and equipment, net 5,268 5,856
Capitalized software development costs, net 3,311 3,822
Net assets of business held for sale 1,123 859
Deferred tax assets, net -- 1,021
Other assets 439 221
-------- --------
$ 28,056 $ 24,564
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 964 $ 1,075
Accrued expenses and other liabilities 1,719 1,681
Progress billings in excess of work in progress 1,335 588
Deferred maintenance revenue 1,340 1,125
-------- --------
Total current liabilities 5,358 4,469
Deferred tax liabilities, net 287 --
-------- --------
Total liabilities 5,645 4,469
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000 shares and
no shares issued or outstanding at December 31, 1999 and March 31, 1999 -- --
Common stock, $.01 par value; authorized 30,000,000 shares,
issued and outstanding 5,602,590 shares at December 31, 1999
and 5,505,017 shares at March 31, 1999 56 55
Additional paid-in capital 23,859 23,478
Accumulated deficit (1,504) (3,432)
Treasury stock, at cost, no shares at December 31, 1999
and 948 shares at March 31, 1999 -- (6)
-------- --------
Total stockholders' equity 22,411 20,095
-------- --------
$ 28,056 $ 24,564
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share information)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Dec. 31, Nine Months Ended Dec. 31,
--------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
The Work Number $ 3,147 $ 2,518 $ 8,603 $ 6,258
Outsourced services 2,974 1,791 6,272 4,184
Customer premises systems 2,594 2,843 8,154 8,074
Maintenance and support 1,210 1,133 3,752 3,733
----------- ----------- ----------- -----------
Total revenues 9,925 8,285 26,781 22,249
----------- ----------- ----------- -----------
Cost of revenues:
The Work Number 1,004 871 2,825 2,235
Outsourced services 1,503 1,021 3,227 2,441
Customer premises systems 2,135 2,302 6,315 5,764
Maintenance and support 350 367 1,025 1,201
----------- ----------- ----------- -----------
Total cost of revenues 4,992 4,561 13,392 11,641
----------- ----------- ----------- -----------
Gross margin 4,933 3,724 13,389 10,608
----------- ----------- ----------- -----------
Operating expenses:
Selling and marketing 2,068 2,091 5,889 6,668
General and administrative 1,427 1,209 4,112 3,506
Restructuring charge -- 496 -- 496
----------- ----------- ----------- -----------
Total operating expenses 3,495 3,796 10,001 10,670
----------- ----------- ----------- -----------
Operating income (loss) 1,438 (72) 3,388 (62)
----------- ----------- ----------- -----------
Other income (expense), net:
Interest income 14 3 23 52
Interest expense -- (26) (4) (38)
Other, net -- -- 1 19
----------- ----------- ----------- -----------
Total other income, net 14 (23) 20 33
----------- ----------- ----------- -----------
Earnings (loss) before income tax expense 1,452 (95) 3,408 (29)
Income tax expense (benefit) 553 (35) 1,308 (10)
----------- ----------- ----------- -----------
Net earnings (loss) $ 899 $ (60) $ 2,100 $ (19)
=========== =========== =========== ===========
Basic earnings (loss) per share $ 0.16 $ (0.01) $ 0.38 $ (0.00)
=========== =========== =========== ===========
Diluted earnings (loss) per share $ 0.16 $ (0.01) $ 0.37 $ (0.00)
=========== =========== =========== ===========
Weighed average number of shares outstanding - basic 5,567,370 5,442,778 5,544,022 5,370,136
=========== =========== =========== ===========
Weighed average number of shares outstanding - diluted 5,670,570 5,503,437 5,630,871 5,508,480
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Dec. 31,
----------------------------
1999 1998
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 2,100 $ (19)
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 2,990 2,171
Net assets of business held for sale (264) 86
Deferred taxes 1,308 (10)
Change in assets and liabilities:
Trade receivables (2,546) (754)
Inventories 234 463
Work in progress in excess of progress billings (480) (571)
Prepaid expenses and other current assets 104 (46)
Other assets (218) (233)
Accounts payable (111) (88)
Accrued expenses and other liabilities 38 (621)
Progress billings in excess of work in progress, net 747 254
Deferred maintenance revenue 215 232
------- -------
Net cash provided by operating activities 4,117 864
------- -------
Cash flows from investing activities:
Additions to property and equipment (708) (3,202)
Capitalized software development costs (1,183) (1,254)
------- -------
Net cash used in investing activities (1,891) (4,456)
------- -------
Cash flows from financing activities:
Issuance of common stock 661 217
Purchases of treasury stock (445) (123)
Borrowings under note payable -- 1,232
------- -------
Net cash provided by financing activities 216 1,326
------- -------
Net increase (decrease) in cash and cash equivalents 2,442 (2,266)
Cash and cash equivalents at beginning of period 267 2,879
------- -------
Cash and cash equivalents at end of period $ 2,709 $ 613
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
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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 nine months ended December 31, 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 CHANGE
-------------------------------
THREE MONTHS NINE MONTHS
ENDED DEC. 31, ENDED DEC. 31, THREE MONTHS NINE MONTHS
--------------- -------------- ENDED DEC. 31, ENDED DEC. 31,
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 31.7% 30.4% 32.1% 28.1% 25.0% 37.5%
Outsourced services 30.0 21.6 23.4 18.8 66.1 49.9
Customer premises systems 26.1 34.3 30.5 36.3 (8.8) 1.0
Maintenance and support 12.2 13.7 14.0 16.8 6.8 0.5
------ ------- ----- -------
Total revenues 100.0 100.0 100.0 100.0 19.8 20.4
------ ------- ----- -------
Cost of revenues
The Work Number 10.1 10.5 10.5 10.0 15.3 26.4
Outsourced services 15.1 12.3 12.0 11.0 47.2 32.2
Customer premises systems 21.6 27.9 23.7 25.9 (7.3) 9.6
Maintenance and support 3.5 4.4 3.8 5.4 (4.6) (14.7)
------ ------- ----- -------
Total cost of revenues 50.3 55.1 50.0 52.3 9.4 15.0
------ ------- ----- -------
Gross margin 49.7 44.9 50.0 47.7 32.5 26.2
------ ------- ----- -------
Operating expenses
Selling and marketing 20.8 25.2 22.0 30.0 (1.1) (11.7)
General and administrative 14.4 14.6 15.3 15.8 18.0 17.3
Restructuring charge 0.0 6.0 0.0 2.2 (100.0) (100.0)
------ ------- ----- -------
Total operating expenses 35.2 45.8 37.3 48.0 (7.9) (6.3)
------ ------- ----- -------
Operating income (loss) 14.5 (0.9) 12.7 (0.3) * *
Other income (expense), net 0.1 (0.2) 0.1 0.1 * (39.4)
------ ------- ----- -------
Earnings (loss) from continuing
operations before income tax
expense 14.6 (1.1) 12.8 (0.2) * *
Income tax expense (benefit) 5.5 (0.4) 5.0 (0.1) * *
------ ------- ----- -------
Net earnings (loss) from continuing
operations 9.1% (0.7)% 7.8% (0.1)% * *
====== ======= ===== =======
</TABLE>
* - Not meaningful
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1999
REVENUES. Total revenues increased by 19.8% from $8.3 million for the three
months ended December 31, 1998 to $9.9 million for the three months ended
December 31, 1999. Revenues from The Work Number increased 25.0% from $2.5
million for the three months ended December 31, 1998 to $3.1 million for the
three months ended December 31, 1999, due to an increase in pricing during the
quarter, 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 66.1% from $1.8 million for the three months ended December 31, 1998
to $3.0 million for the three months ended December 31, 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 decreased 8.8% from $2.8 million for the three months
ended December 31, 1998 to $2.6 million for the three months ended December 31,
1999. This decrease is mainly attributable to the shift in the market from
purchasing in-house systems to utilizing the Company's outsourcing services.
Revenues from maintenance and support related to the customer premises systems
increased by 6.8% from $1.1 million for the three months ended December 31, 1998
to $1.2 million for the three months ended December 31, 1999, due to the support
provided to an increased installed base of customer premises systems.
COST OF REVENUES. Total cost of revenues increased by 9.4%, from $4.6 million
for the three months ended December 31, 1998 to $5.0 million for the three
months ended December 31, 1999. Cost of revenues from The Work Number increased
15.3% from $871,000 for the three months ended December 31, 1998 to $1.0 million
for the three months ended December 31, 1999, due principally to the growth in
revenues, offset by improved leveraging of personnel and infrastructure costs.
Cost of revenues from outsourced services
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increased by 47.2%, from $1.0 million for the three months ended December 31,
1998 to $1.5 million for the three months ended December 31, 1999. This increase
in cost is attributable to the growth in new business discussed above. Cost of
revenues did not increase at the same level as revenues, since a portion of the
revenue growth was attributed to increased pricing, with no corresponding impact
on cost. Cost of revenues from customer premises systems decreased by 7.3%, from
$2.3 million for the three months ended December 31, 1998 to $2.1 million for
the three months ended December 31, 1999. This decrease in cost is in proportion
to the decrease in revenue as discussed above. Cost of revenues from maintenance
and support related to customer premises systems decreased by 4.6%, from
$367,000 for the three months ended December 31, 1998 to $350,000 for the three
months ended December 31, 1999, due principally to a lower cost of hardware
components.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses remained
consistent at $2.1 million for the three months ended December 31, 1998 and
1999. As a percentage of revenues, such expenses decreased from 25.2% for the
three months ended December 31, 1998 to 20.8% for the three months ended
December 31, 1999. Selling and marketing expenses remained consistent due to
better leveraging of personnel and related costs. The decrease in expense as a
percentage of revenue 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 offices.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 18.0% from $1.2 million for the three months ended December 31, 1998
to $1.4 million for the three months ended December 31, 1999. As a percentage of
revenues, such expenses decreased slightly from 14.6% for the three months ended
December 31, 1998 to 14.4% for the three months ended December 31, 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.
RESTRUCTURING CHARGE. During the quarter ended December 31, 1998, the Company
reorganized its sales and delivery operations and refocused its product line,
related to its customer premises systems line of business. In conjunction with
the reorganization, the Company reduced its workforce by approximately 8% and
closed certain regional sales offices. As a result of these actions, the Company
incurred restructuring charges of $318,000 related to employee severance costs
and $178,000 of other costs.
OTHER INCOME (EXPENSE), NET. Other income (expense) improved from $23,000 of net
expense for the three months ended December 31, 1998 to $14,000 of income for
the three months ended December 31, 1999, due to a shift from a borrowing to an
investing position.
INCOME TAX EXPENSE. The Company's effective income tax rate was 36.8% for the
three months ended December 31, 1998 and 38.1% for the three months ended
December 31, 1999. The Company expects that the future effective rate will be
consistent with the December 31, 1999 effective rate.
NINE MONTHS ENDED DECEMBER 31, 1998 AND 1999
REVENUES. Total revenues increased by 20.4%, from $22.2 million for the nine
months ended December 31, 1998 to $26.8 million for the nine months ended
December 31, 1999. Revenues from The Work Number increased 37.5% from $6.3
million for the nine months ended December 31, 1998 to $8.6 million for the nine
months ended December 31, 1999, due to an increase in pricing during the period,
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 ended September 30, 1999,
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 49.9% from $4.2 million for the nine months ended December
31, 1998 to $6.3 million for the nine months ended December 31, 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 1.0% from $8.1 million for the nine
months ended December 31, 1998 to $8.2 million for the nine months ended
December 31, 1999. Management believes that the revenue increase was due
principally to the Company responding better to web-based opportunities in the
marketplace, offset by the shift in the market from purchasing in-house systems
to utilizing the Company's
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outsourcing services. Revenues from maintenance and support related to the
customer premises systems increased slightly from $3.7 million for the nine
months ended December 31, 1998 to 3.8 million for the nine months ended December
31, 1999, due to the support provided to an increased installed base of customer
premises systems, offset by the cancellation of maintenance on older product
lines.
COST OF REVENUES. Total cost of revenues increased by 15.0%, from $11.6 million
for the nine months ended December 31, 1998 to $13.4 million for the nine months
ended December 31, 1999. Cost of revenues from The Work Number increased 26.4%
from $2.2 million for the nine months ended December 31, 1998 to $2.8 million
for the nine months ended December 31, 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 32.2%, from $2.4 million
for the nine months ended December 31, 1998 to $3.2 million for the nine months
ended December 31, 1999. This increase in cost is attributable to the growth in
new business discussed above. Cost of revenues did not increase at the same
level as revenues, since a portion of the revenue growth was attributed to
increased pricing, with no corresponding impact on cost. Cost of revenues from
customer premises systems increased by 9.6%, from $5.8 million for the nine
months ended December 31, 1998 to $6.3 million for the nine months ended
December 31, 1999. This 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 14.7%, from $1.2 million for
the nine months ended December 31, 1998 to $1.0 million for the nine months
ended December 31, 1999, due principally to a lower cost of hardware components.
SELLING AND MARKETING EXPENSES. Selling and marketing expenses decreased 11.7%
from $6.7 million for the nine months ended December 31, 1998 to $5.9 million
for the nine months ended December 31, 1999. As a percentage of revenues, such
expenses decreased from 30.0% for the nine months ended December 31, 1998 to
22.0% for the nine months ended December 31, 1999. The decrease in expense as a
percentage of revenue 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 offices.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 17.3% from $3.5 million for the nine months ended December 31, 1998 to
$4.1 million for the nine months ended December 31, 1999. As a percentage of
revenues, such expenses decreased from 15.8% for the nine months ended December
31, 1998 to 15.3% for the nine months ended December 31, 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.
RESTRUCTURING CHARGE. During the quarter ended December 31, 1998, the Company
reorganized its sales and delivery operations and refocused its product line,
related to its customer premises systems line of business. In conjunction with
the reorganization, the Company reduced its workforce by approximately 8% and
closed certain regional sales offices. As a result of these actions, the Company
incurred restructuring charges of $318,000 related to employee severance costs
and $178,000 of other costs.
OTHER INCOME (EXPENSE), NET. Other income decreased 39.4% from $33,000 for the
nine months ended December 31, 1998 to $20,000 for the nine months ended
December 31, 1999, due to a lower level of net invested funds.
INCOME TAX EXPENSE. The Company's effective income tax rate was 34.5% for the
nine months ended December 31, 1998 and 38.4% for the nine months ended December
31, 1999. The Company expects that the future effective rate will be consistent
with the December 31, 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
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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 within
the next six to nine months.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a current ratio of 2.86 to 1 and 3.34 to 1 at March 31, 1999 and
December 31, 1999, respectively. The Company's working capital was $8.3 million
and $12.6 million at March 31, 1999 and December 31, 1999, respectively. Total
working capital increased during the nine months ended December 31, 1999 due
principally to the Company's earnings for the period and a lower level of
capital expenditures.
The Company's accounts receivable increased from $6.6 million at March 31, 1999
to $9.1 million at December 31, 1999. The increase is due primarily to increased
revenues in the third 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 from 83% of revenues at March 31, 1999 to 92% of revenues
at December 31, 1999. This increase as a percentage of revenues is primarily due
to an increased level of progress billings in excess of work in progress during
the third quarter of fiscal 2000.
The Company's capital expenditures, principally computer equipment, were
$708,000 during the nine months ended December 31, 1999. At December 31, 1999,
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 nine months ended December 31, 1999, the Company repurchased
56,000 shares for $445,000. Cumulative shares repurchased amount to 97,587. 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. No balances
were outstanding under this line of credit at December 31, 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
$511,000 in the first nine 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
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. 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.
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
None.
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: February 11, 2000 By /s/ William W. Canfield
-------------------------------
William W. Canfield
Chairman, President and
Chief Executive Officer
Date: February 11, 2000 By /s/ Craig N. Cohen
-------------------------------
Craig N. Cohen
Chief Financial Officer
13
<PAGE> 14
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 Financial Data Schedule
(provided for the information of the Securities and Exchange
Commission only)
</TABLE>
14
<PAGE> 1
EXHIBIT 11
TALX CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
Three Months Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Ended Dec. 31, Nine Months Ended Dec. 31,
----------------------------- --------------------------
1999 1998 1999 1998
--------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
Actual shares outstanding - beginning of period 5,530,773 5,350,025 5,505,017 5,316,032
Weighted average number of common shares issued (1) 36,597 92,753 39,005 54,104
--------------- ------------ ------------- -----------
Weighted average number of common shares outstanding - end of period 5,567,370 5,442,778 5,544,022 5,370,136
=============== ============ ============= ===========
Net earnings: $ 899,000 $ (60,000) $ 2,100,000 $ (19,000)
=============== ============ ============= ===========
Basic earnings per common share: $ 0.16 $ (0.01) $ 0.38 $ (0.00)
=============== ============ ============= ===========
Diluted Earnings Per Share:
Actual shares outstanding - beginning of period 5,530,773 5,350,025 5,505,017 5,316,032
Weighted average number of common shares issued (1) 139,797 153,412 125,854 192,448
--------------- ------------ ------------- -----------
Weighted average number of common shares outstanding - end of period 5,670,570 5,503,437 5,630,871 5,508,480
=============== ============ ============= ===========
Net earnings: $ 899,000 $ (60,000) $ 2,100,000 $ (19,000)
=============== ============ ============= ===========
Diluted earnings per common share: $ 0.16 $ (0.01) $ 0.37 $ (0.00)
=============== ============ ============= ===========
</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> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2709
<SECURITIES> 0
<RECEIVABLES> 13164
<ALLOWANCES> 416
<INVENTORY> 1028
<CURRENT-ASSETS> 17915
<PP&E> 10880
<DEPRECIATION> 5613
<TOTAL-ASSETS> 28056
<CURRENT-LIABILITIES> 5358
<BONDS> 0
0
0
<COMMON> 56
<OTHER-SE> 22355
<TOTAL-LIABILITY-AND-EQUITY> 28056
<SALES> 26781
<TOTAL-REVENUES> 26781
<CGS> 13392
<TOTAL-COSTS> 13392
<OTHER-EXPENSES> 10001
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 3408
<INCOME-TAX> 1308
<INCOME-CONTINUING> 2100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2100
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
