Talx (NASDAQ:TALX)
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TALX Corporation (NASDAQ: TALX) today reported that fiscal
fourth-quarter diluted earnings per share from continuing operations
increased 35 percent to $0.35, excluding expenses of $1.7 million (or
$0.06 per share) related to the previously announced merger with
Equifax, Inc., compared to $0.26 per diluted share a year ago. Including
the $0.06 per share merger-related expenses, diluted earnings per share
from continuing operations for the 2007 fiscal fourth quarter were
$0.29. Additionally, the 2007 fourth-quarter results included
share-based compensation expense of $0.02. The 2006 fourth quarter was
not impacted by Statement of Financial Accounting Standards No. 123r
(SFAS 123r), "Share-based Payment." The improvement in earnings from
continuing operations to $11.3 million, excluding the merger-related
expenses discussed above, from $9.0 million reflected strong performance
in The Work Number® services and tax
management services, as well as contributions from the talent management
services business acquired early in fiscal 2007. Results also benefited
from the company’s ongoing emphasis on cost
control, as demonstrated by the rate of increase in gross profit
outpacing the year-over-year revenue increase. See attached
"Supplemental Financial Information" for a reconciliation of differences
from the comparable GAAP measures.
Fourth-quarter revenues increased 23 percent to $73.7 million from $60.0
million the year before. The Work Number services’
revenues rose 22 percent, and revenues for the tax management services
business increased 9 percent from year-ago levels. The 2007 fourth
quarter also benefited from $5.3 million in revenues from the company’s
April 6, 2006, acquisition of Performance Assessment Network, Inc., or
pan.
Gross profit for the fourth quarter expanded 26 percent to $46.9 million
from $37.3 million. Gross margin improved 150 basis points to 63.7
percent from 62.2 percent the year before, despite the impact of
expenses related to share-based compensation, which negatively affected
gross margin by 26 basis points in the 2007 fourth quarter. Gross profit
for The Work Number services increased 23 percent to $24.6 million from
$20.1 million. Gross profit for the tax management services business
rose 19 percent to $20.1 million from $16.9 million, and gross profit
for talent management services was $2.1 million.
Revenues for the full year increased 30 percent to $270.6 million from
$207.4 million the year before. Earnings from continuing operations for
the period were $35.5 million, or $1.08 per diluted share, excluding
expenses of $1.7 million (or $0.05 per share) related to the previously
announced merger with Equifax. Including the $0.05 per share
merger-related expenses, diluted earnings per share from continuing
operations were $1.03. Fiscal 2007 results include share-based
compensation expense of $0.09. In the year-ago period, earnings from
continuing operations were $30.0 million, or $0.89 per diluted share.
Fiscal 2006 was not impacted by SFAS 123r.
William W. Canfield, president and chief executive officer, commented,
"We achieved record revenues across all our business units for both the
fourth quarter and full year, as we continued to provide clients with
electronic, easy-to-use solutions to simplify HR and payroll processes.
In The Work Number, record revenues resulted from increased transactions
and from the seasonal effect of our electronic W-2 business. In
addition, we are set to roll out our new One Stop Verifications Service
to additional verifiers, based on the positive results that we have
experienced in the pilot. Our clients’
feedback has confirmed the value of their seamlessly obtaining
verification information through us as their trusted verification
partner even when the applicant’s information
isn’t currently in The Work Number database.
"In our unemployment tax management services segment, as a result of
continued emphasis on streamlining our operations, together with a 6
percent organic revenue gain this quarter, we achieved a 370 basis point
improvement in gross margin compared to a year ago. In our tax credits
and incentives business, we benefited this quarter from additional
revenues related to the reinstated Welfare to Work and Work Opportunity
tax credits. These higher revenues drove the 880 basis point improvement
in gross margin in this segment compared to a year ago.
"In our talent management services segment, revenues related to the
contract with the U.S. Department of Homeland Security rebounded, as the
Transportation Security Administration ramped up hiring activity by the
end of the quarter."
L. Keith Graves, chief financial officer and president of tax management
services, pointed out, "Along with record operating income of $22.2
million in our fiscal fourth quarter, TALX achieved record cash flow
from operations for fiscal year 2007 of $69.0 million –
75 percent higher than fiscal 2006. Our strong cash flow from operations
in fiscal 2007 allowed us to increase capital spending to $23.4 million,
repurchase $32.0 million of TALX common stock, and pay down debt by
$25.8 million. Additionally, we increased our dividend payments by more
than 50 percent compared to fiscal year 2006."
The company’s effective income tax rate was
higher in the fiscal fourth quarter compared to a year ago, primarily as
a result of the merger-related expenses and, to a lesser extent, the
implementation of SFAS 123r. Merger-related expenses were not tax
deductible, causing a higher effective income tax rate in fiscal 2007.
Additionally, the corresponding income tax benefit of certain elements
of share-based compensation can be recognized only if, and to the extent
that, certain future events occur.
The total number of employment records on The Work Number services
database increased 14 percent to 147.0 million at March 31, 2007, from
129.0 million a year ago. The company added 4.2 million employment
records during the quarter. Total employment records under contract,
including those in the contract backlog to be added to the database,
increased 24.2 million, or 18 percent, to 160.5 million at March 31,
2007, from 136.3 million a year earlier. Of the 147.0 million records on
the database at March 31, 2007, 27 percent represented current
employees, while the remainder represented former employees.
As previously announced, Equifax (NYSE: EFX) and TALX have announced
that Equifax will acquire TALX in a stock and cash transaction valued at
approximately $1.4 billion, including the assumption of debt. A special
shareholders’ meeting has been set for May 15,
2007, at 2:00 p.m. St. Louis time at the Ritz-Carlton of St. Louis, to
consider and vote upon the Agreement and Plan of Merger dated February
14, 2007, by and among TALX, Equifax Inc. and Chipper Corporation.
A conference call to discuss the company’s
fiscal 2007 fourth-quarter performance is scheduled for Thursday, May
10, at 9:00 a.m. Central Time. To participate in this call, dial (800)
288 -8960. A slide presentation will accompany the call on the Web at www.talx.com/2007.
Other information of investor interest can be found at www.talx.com/investor,
and the company’s corporate governance
website is located at www.talx.com/governance.
A digitized replay of the call will be available beginning on Friday,
May 11. The replay number is (800) 475-6701 and the access code is
871200.
Statements in this news release expressing or indicating the beliefs and
expectations of management regarding future performance are
forward-looking statements including, without limitation, favorable
operating trends, and any other plans, objectives, expectations and
intentions contained in this release that are not historical facts.
These statements reflect our current views with respect to future events
and are based on assumptions and subject to risks and uncertainties.
These risks and uncertainties include, without limitation, the
preliminary nature of our estimates, which are subject to change as we
collect additional information and they are reviewed internally and by
our external auditors, as well as the risks detailed in the company’s
Form 10-K for the fiscal year ended March 31, 2006, in "Part I –
Item 1A. – Risk Factors" and in the company’s
Form 10-Q for the quarter ended June 30, 2006, in "Part II. Other
Information – Item 1A. Risk Factors," as well
as (1) the failure to obtain approval of the Equifax merger by our
shareholders; (2) actions that may be taken by the competitors,
customers, suppliers or shareholders of Equifax or TALX that may cause
the merger to be delayed or not completed; (3) the risk that our
revenues from The Work Number may fluctuate in response to changes in
certain economic conditions such as interest rates and employment
trends; (4) risks associated with our ability to prevent breaches of
confidentiality or inappropriate use of data as we perform large-scale
processing of verifications; (5) risks associated with our ability to
maintain the accuracy, privacy and confidentiality of our clients’
employee data; (6) risks related to our ability to increase the size and
range of applications for The Work Number database and to successfully
market current and future services and related to our dependence on
third party providers to do so; (7) proceedings by Federal and state
regulators related to our business, including the inquiry by the Federal
Trade Commission related to our acquisitions in the unemployment
compensation and Work Number businesses; (8) the risk of interruption of
our computer network and telephone operations, including potential
slow-down or loss of business as potential clients review our
operations; (9) risks associated with potential challenges regarding the
applicability of the Fair Credit Reporting Act or similar law; (10)
risks relating to the dependence of the market for The Work Number on
mortgage documentation requirements in the secondary market and the risk
that our revenues and profitability would be significantly harmed if
those requirements were relaxed or eliminated; (11) risks related to the
applicability of any new privacy legislation or interpretation of
existing laws; (12) the risk that our revenues from unemployment tax
management services may fluctuate in response to changes in economic
conditions; (13) risks related to changes in tax laws, including the
potential for nonrenewal or elimination of the work opportunity, or
WOTC, and welfare to work, or WtW, tax credits; (14) the risk to our
future growth due to our dependence on our ability to effectively
integrate acquired companies and capitalize on cross-selling
opportunities; and (15) risks relating to doing business with the
federal government following our April 2006 acquisition of pan. These
risks, uncertainties and other factors may cause our actual results,
performance or achievements to be materially different from those
expressed or implied by our forward-looking statements. We do not
undertake any obligation or plan to update these forward-looking
statements, even though our situation may change.
TALX Corporation, based in St. Louis, Missouri, is a leading provider of
human resource and payroll-related services and holds a leadership
position in automated employment and income verification as well as
unemployment tax management. TALX provides 9,000 clients, including
three-fourths of Fortune 500 companies, with Web-based services focused
in three employment-related areas: hiring, pay reporting, and
compliance. Hiring services include assessments and talent management,
paperless new hires, and tax credits and incentives. Pay reporting
services include electronic time tracking, paperless pay, and W-2
management. Compliance services include employment and income
verifications through The Work Number, unemployment tax management, and
I-9 management. The company’s common stock
trades in The NASDAQ Global Select Market under the symbol TALX. For
more information about TALX Corporation, call 314-214-7000 or access the
company's Web site at www.talx.com
.
Additional Information and Where to Find It
In connection with the proposed transaction, Equifax has filed a
registration statement on Form S-4 (Registration No. 333-141389)
containing a proxy statement/prospectus of Equifax and TALX with the
SEC, which was declared effective April 9, 2007. Equifax and TALX
shareholders are encouraged to read the registration statement and any
other relevant documents filed with the SEC, including the proxy
statement/prospectus, because they contain important information about
Equifax, TALX, and the proposed transaction. The final proxy
statement/prospectus has been mailed to shareholders of TALX. Investors
and security holders are able to obtain free copies of the registration
statement and proxy statement/prospectus (when available) as well as
other filed documents containing information about Equifax and TALX,
without charge, at the SEC’s web site (http://www.sec.gov).
Free copies of Equifax’s SEC filings are also
available on Equifax’s website (www.equifax.com)
and free copies of TALX’s SEC filings are
also available on TALX’s website (www.talx.com).
Free copies of Equifax’s filings also may be
obtained by directing a request to Equifax, Investor Relations, by phone
to (404) 885-8000, in writing to Jeff Dodge, Vice President—Investor
Relations, or by email to investor@equifax.com.
Free copies of TALX’s filings may be obtained
by directing a request to TALX Investor Relations, by phone to (314)
214-7252, in writing to Janine A. Orf, Director of Finance, or by email
to jorf@talx.com.
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy securities, nor shall there be any sale
of securities in any jurisdiction in which such solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of such jurisdiction.
Participants in the Solicitation
Equifax, TALX and their respective directors and executive officers may
be deemed, under SEC rules, to be participants in the solicitation of
proxies from TALX’s shareholders with respect
to the proposed transaction. Information regarding the directors and
executive officers of Equifax is included in its definitive proxy
statement for its 2006 Annual Meeting of Shareholders filed with the SEC
on April 12, 2006. Information regarding the directors and officers of
TALX is included in the definitive proxy statement for TALX’s
2006 Annual Meeting of Shareholders filed with the SEC on July 24, 2006
and in TALX’s Current Report on Form 8-K
dated April 13, 2007. More detailed information regarding the identity
of potential participants, and their direct or indirect interests, by
securities holdings or otherwise, are set forth in the registration
statement and proxy statement/prospectus and other materials filed with
the SEC in connection with the proposed transaction.
TALX Corporation and Subsidiaries
Supplemental Financial Information
The company sometimes uses information derived from consolidated
financial information but not presented in the financial statements
prepared in accordance with generally accepted accounting principles
("GAAP"). Specifically, in this release, the company has used
non-GAAP financial measures to eliminate the effect on earnings from
continuing operations and diluted earnings per share of expenses of
$1.7 million associated with our previously announced merger with
Equifax, Inc.
Non-GAAP financial measures should not be considered as a substitute
for, or superior to, measures of financial performance prepared in
accordance with GAAP. We use these non-GAAP measures internally to
evaluate the performance of the business, including allocation of
assets and resources, planning, comparison of financial performance
between historical periods and evaluation and compensation of
management and staff. We believe that the presentation of these
non-GAAP financial measures provides useful information to investors
because these measures exclude elements that we do not consider to be
indicative of earnings from our ongoing operating activities and allow
for an equivalent comparison to prior-period results.
Reconciliation of the Fiscal 2007 Adjusted Earnings from Continuing
Operations to GAAP Earnings from Continuing Operations:
3 Months Year
Ended Ended
3/31/07 3/31/07
Adjusted earnings from
continuing operations $11.3 million $35.5 million
Less: merger-related expenses 1.7 million 1.7 million
GAAP earnings from continuing
operations $ 9.6 million $33.8 million
Reconciliation of the Fiscal 2007 Adjusted Diluted Earnings Per Share
to GAAP Diluted Earnings Per Share:
Adjusted diluted EPS from
continuing operations $ 0.35 $ 1.08
Less: merger-related expenses 0.06 0.05
GAAP diluted EPS from
continuing operations $ 0.29 $ 1.03
TALX Corporation and Subsidiaries
Consolidated Statements of Earnings
(dollars in thousands, except per share information)
(unaudited)
Three Months Ended Year Ended
March 31, March 31,
2007 2006 2007 2006
Revenues:
The Work Number services $33,066 $27,125 $110,292 $ 91,331
Tax management services 35,353 32,474 135,430 114,420
Talent management
services 5,267 - 23,649 -
Maintenance and support - 358 1,187 1,676
Total revenues 73,686 59,957 270,558 207,427
Cost of revenues:
The Work Number services 8,427 7,052 23,349 21,339
Tax management services 15,218 15,543 62,674 55,289
Talent management services 3,138 - 12,781 -
Maintenance and support - 65 50 352
Total cost of revenues 26,783 22,660 98,854 76,980
Gross profit 46,903 37,297 171,704 130,447
Operating expenses:
Selling and marketing 11,210 8,310 44,466 32,700
General and administrative 13,480 11,410 54,278 42,658
Total operating
expenses 24,690 19,720 98,744 75,358
Operating income 22,213 17,577 72,960 55,089
Other income(expense), net:
Interest income 245 215 849 693
Interest expense (3,326) (1,885) (13,756) (5,165)
Merger-related expenses (1,718) - (1,718) -
Other, net 34 - 58 (5)
Total other income
(expense), net (4,765) (1,670) (14,567) (4,477)
Earnings from continuing
operations before
income tax expense 17,448 15,907 58,393 50,612
Income tax expense 7,838 6,930 24,587 20,637
Earnings from continuing
operations 9,610 8,977 33,806 29,975
Discontinued operations,
net of income taxes:
Earnings from discontinued
operations, net - (1) - (1)
Gain on disposal of
discontinued operations,
net - 66 - 516
Earnings from
discontinued
operations - 65 - 515
Net earnings $ 9,610 $ 9,042 $ 33,806 $ 30,490
Basic earnings per share:
Continuing operations $ 0.31 $ 0.28 $ 1.07 $ 0.94
Discontinued operations - - - 0.02
Net earnings $ 0.31 $ 0.28 $ 1.07 $ 0.96
Diluted earnings per share:
Continuing operations $ 0.29 $ 0.26 $ 1.03 $ 0.89
Discontinued operations - - - 0.01
Net earnings $ 0.29 $ 0.26 $ 1.03 $ 0.90
Weighted average number
of shares outstanding
(basic) 31,232,096 31,992,969 31,521,623 31,775,969
Weighted average number
of shares outstanding
(diluted) 32,788,370 34,236,268 32,888,706 33,828,651
TALX Corporation and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share information)
Assets March 31, 2007 March 31, 2006
(unaudited)
Current assets:
Cash and cash equivalents $ 13,807 $ 5,705
Short-term investments - 5,850
Accounts receivable, less allowance for
doubtful accounts of $2,741 at March
31, 2007, and $3,731 at March 31, 2006 33,710 31,527
Unbilled receivables 6,199 5,911
Prepaid expenses and other current assets 8,823 6,576
Deferred tax assets, net 3,750 2,580
Total current assets 66,289 58,149
Property and equipment, net of accumulated
depreciation of $33,763 at March 31,
2007, and $25,227 at March 31, 2006 25,399 16,037
Capitalized software development costs, net
of amortization of $8,580 at March 31,
2007, and $6,329 at March 31, 2006 7,731 4,059
Goodwill 226,647 190,232
Other intangibles, net 127,998 77,434
Other assets 2,353 1,634
$456,417 $347,545
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 2,353 $ 2,257
Accrued expenses and other liabilities 24,522 19,219
Dividends payable 1,573 1,289
Deferred revenue 6,030 5,859
Total current liabilities 34,478 28,624
Deferred tax liabilities, net 45,192 17,634
Long-term debt 176,577 110,802
Other liabilities 4,858 4,187
Total liabilities 261,105 161,247
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value;
authorized 5,000,000 shares and no
shares issued or outstanding at
March 31, 2007 or 2006 - -
Common stock, $.01 par value per share;
authorized 75,000,000 shares at
March 31, 2007 and 2006; issued
32,414,950 shares at March 31, 2007,
and 32,225,321 shares at March 31,
2006 324 322
Additional paid-in capital 176,254 177,463
Deferred compensation - (5,076)
Retained earnings 32,492 13,467
Accumulated other comprehensive income:
Unrealized gain on interest rate
swap contract, net of tax expense of
$19 at March 31, 2007, and $80 at
March 31, 2006 28 122
Treasury stock, at cost, 599,146 shares
at March 31, 2007 (13,786) -
Total shareholders' equity 195,312 186,298
$456,417 $347,545
TALX Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Year Ended March 31,
2007 2006
Cash flows from operating activities:
Net earnings $ 33,806 $ 30,490
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 20,059 13,242
Share-based compensation 3,545 399
Deferred taxes 4,959 3,235
Gain on swap agreement - (59)
Change in assets and liabilities,
excluding those acquired:
Accounts receivable, net 3,668 (7,780)
Unbilled receivables (288) (1,799)
Prepaid expenses and other
current assets (2,051) (1,149)
Other assets (239) (702)
Accounts payable (417) 22
Accrued expenses and other
liabilities 3,430 5,992
Deferred revenue (141) (2,774)
Other liabilities 2,671 253
Net cash provided by operating
activities 69,002 39,370
Cash flows from investing activities:
Additions to property and equipment, net (18,102) (10,471)
Acquisitions, net of cash acquired (80,139) (87,079)
Purchases of short-term investments - (5,120)
Proceeds from sale of short-term
investments 5,850 6,885
Capitalized software development costs (5,314) (2,408)
Net cash used in investing activities (97,705) (98,193)
Cash flows from financing activities:
Issuance of common stock 6,230 4,923
Tax benefit on exercise of stock options 3,509 -
Repurchase of common stock (31,973) (1,287)
Borrowings under long-term debt agreements 164,760 138,802
Repayments under long-term debt agreements (100,005) (85,500)
Dividends paid (5,716) (3,809)
Net cash provided by financing
activities 36,805 53,129
Net increase (decrease) in cash and cash
equivalents 8,102 (5,694)
Cash and cash equivalents at beginning
of period 5,705 11,399
Cash and cash equivalents at end of period $ 13,807 $ 5,705