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TALX Corporation (NASDAQ: TALX) today reported that fiscal
second-quarter earnings from continuing operations increased 14 percent
to $8.1 million, or $0.25 per diluted share, from the year-ago $7.2
million, or $0.21 per diluted share. The increased earnings primarily
reflected the contribution from recent acquisitions, revenue gains in
The Work Number services, and ongoing emphasis on cost controls.
Effective April 1, 2006, the company adopted Statement of Financial
Accounting Standards No. 123r, "Share-Based Payment" (SFAS 123r).
Included in fiscal 2007 second-quarter results was approximately
$666,000, net of taxes, or $0.02 per diluted share, related to share-
based compensation expense.
Second-quarter revenues increased 36 percent to $65.7 million from $48.3
million the year before. The Work Number services' revenues rose 17
percent, and revenues for the tax management services business increased
24 percent from year-ago levels. The 2007 second quarter also benefited
from $7.3 million in revenues from the company's April 6, 2006
acquisition of Performance Assessment Network, Inc., or pan.
Gross profit for the second quarter expanded 36 percent to $42.0 million
from $30.8 million. Gross margin improved to 64.0 percent from 63.7
percent the year before, despite the impact of expenses related to
share-based compensation, which negatively affected gross margin by 25
basis points in the 2007 second quarter. Gross profit for The Work
Number services increased 23 percent to $21.1 million from $17.2
million, with gross margin climbing 400 basis points to 82.6 percent
from 78.6 percent the year before. Gross profit for the tax management
services business rose 28 percent to $16.9 million from $13.3 million,
with gross margin improving 120 basis points to 52.2 percent from 51.0
percent the year before. Gross profit for talent management services was
$3.6 million, and gross margin was 49.2 percent.
William W. Canfield, president and chief executive officer, commented,
"As a result of our highly scalable business model in The Work Number
business, the higher revenues this quarter resulted in record gross
margin. In particular, this quarter we benefited from the consolidation
of our shared services group, which led to lower costs. To drive further
revenue growth in this segment, we continued to pursue initiatives that
expanded its reach. For example, we began recognizing revenues this
quarter from our new Confirmation Direct service, which offers a
simplified, lower-priced verification that we are marketing primarily to
short-term lenders and property managers. In addition, we expect to
begin a pilot of our One Stop Verifications call center service in our
fiscal fourth quarter. Through a partner relationship, a verifier using
this service can satisfy virtually all verification needs through TALX,
whether or not the records are on The Work Number database.
"In our tax management services businesses, we continued to benefit from
our acquisitions in both the unemployment tax services and the tax
credits and incentives businesses. Additionally, in the unemployment
business, we realized 8 percent organic growth, marking our fourth
consecutive quarterly organic gain. As a result of the higher revenues
in the unemployment tax business, coupled with continued leveraging of
our infrastructure, our gross margin reached a record 52.7 percent this
quarter."
L. Keith Graves, senior vice president and chief financial officer,
pointed out, "As a result of our higher gross profit, as well as
continued focus on cost control, operating income increased 35 percent
compared to the year-ago quarter. Higher gross profit and strong
management of our working capital, particularly our accounts receivable,
drove our operating cash flow to almost $23 million this quarter,
compared to $7 million a year ago.
"We also increased shareholder value this quarter by raising our
quarterly dividend by 25 percent, to 5 cents per share. Further, we
repurchased almost 1.1 million shares during the second quarter for
approximately $23.8 million, bringing the year-to-date total to more
than 1.4 million shares, purchased for about $31.9 million. The share
repurchases and increased earnings resulted in second-quarter diluted
earnings per share being ahead of our expectations."
Graves also reported, "Fiscal 2007 second-quarter results reflected
costs of approximately $0.01 per share for additional infrastructure
costs primarily related to relocating our corporate offices.”
He added that these costs will drop significantly in the third quarter
as the relocations are substantially completed.
The company's effective income tax rate was slightly higher in the
fiscal second quarter compared to a year ago, primarily as a result of
the implementation of SFAS 123r. 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 company expects
this rate to continue through the 2007 fiscal year.
The total number of employment records on The Work Number services
database increased 16 percent to 138.3 million at September 30, 2006,
from 119.2 million a year ago. The company added 5.2 million employment
records during the quarter, representing a 4 percent increase in total
records over the previous sequential quarter. Total employment records
under contract, including those in the contract backlog to be added to
the database, increased 18 percent to 149.0 million at September 30,
2006, from 126.5 million a year earlier and 4 percent over the previous
sequential quarter total of 143.0 million. Of the 138.3 million records
on the database at September 30, 28 percent represented current
employees, while the remainder represented former employees.
Canfield noted, "We continue to monitor the status of the Work
Opportunity, or WOTC, and Welfare to Work, or WtW, federal tax credits,
which have been in hiatus since January 1 and which are not likely to be
reinstated during our fiscal third quarter. The absence of these credits
adversely affected second-quarter revenues by approximately $2.0
million, and we expect that future quarterly revenues will be similarly
adversely impacted unless and until the credits are reinstated.
Additionally, within our talent management services segment, the
Transportation Security Administration, or TSA, has reduced funding of
its contract, which we expect will adversely impact our fiscal third
quarter revenues by approximately $2.9 million. We understand that the
reduced TSA funding is temporary and that the TSA expects to have
funding in place beginning in calendar year 2007 to return to levels
consistent with previous quarters in calendar year 2006.
"Despite the impact of this reduced revenue, we are pleased that our
strong second-quarter financial performance and expected outlook for the
rest of the year have allowed us to maintain our full-year financial
guidance." TALX is reiterating guidance for the fiscal year ending March
31, 2007, with diluted earnings per share from continuing operations
estimated in a range of $1.06 to $1.12 and revenue between $275 million
and $280 million.
TALX also provided initial guidance for the third fiscal quarter ending
December 31, 2006. The company expects revenues ranging from $66 million
to $68 million and diluted earnings per share from continuing operations
of $0.24 to $0.26. Third-quarter diluted earnings per share from
continuing operations in fiscal 2006 were $0.22 and revenues totaled
$52.3 million. Results for fiscal year 2006 included no impact from SFAS
123r.
A conference call to discuss the company's fiscal 2007 second- quarter
performance and its outlook is scheduled for Thursday, October 26, at
9:00 a.m. Central Time. To participate in this call, dial (888)
400-7916. 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 from 2:30 p.m. CDT on
Thursday, October 26, through January 25, 2007. The replay number is
(800) 475-6701 and the access code is 844370.
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, anticipated revenue and earnings in the third quarter
of fiscal 2007 and for the fiscal year ending March 31, 2007, 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 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; (2) risks
associated with our ability to prevent breaches of confidentiality or
inappropriate use of data as we perform large-scale processing of
verifications; (3) risks associated with our ability to maintain the
accuracy, privacy and confidentiality of our clients' employee data; (4)
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; (5) 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; (6) 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; (7) risks
associated with potential challenges regarding the applicability of the
Fair Credit Reporting Act or similar law; (8) 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; (9) risks related to the applicability of any new
privacy legislation or interpretation of existing laws; (10) the risk
that our revenues from unemployment tax management services may
fluctuate in response to changes in economic conditions; (11) risks
related to changes in tax laws, including potential continuation of the
hiatus or even the nonrenewal or elimination of the work opportunity, or
WOTC, and welfare to work, or WtW, tax credits; (12) 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 (13) 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 over 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.
TALX Corporation and Subsidiaries
Consolidated Statements of Earnings
(dollars in thousands, except per share information)
(unaudited)
Three Months Ended
Six Months Ended
September 30,
September 30,
2006
2005
2006
2005
Revenues:
The Work Number services
$
25,547
$
21,857
$
51,444
$
42,302
Tax management services
32,419
26,043
65,577
51,968
Talent management services
7,308
-
14,025
-
Maintenance and support
391
444
793
868
Total revenues
65,665
48,344
131,839
95,138
Cost of revenues:
The Work Number services
4,452
4,679
10,025
9,409
Tax management services
15,486
12,766
31,751
25,542
Talent management
services
3,714
-
7,099
-
Maintenance and support
19
100
38
186
Total cost of revenues
23,671
17,545
48,913
35,137
Gross profit
41,994
30,799
82,926
60,001
Operating expenses:
Selling and marketing
10,868
8,073
21,973
15,803
General and
administrative
14,005
10,052
28,424
20,140
Total operating expenses
24,873
18,125
50,397
35,943
Operating income
17,121
12,674
32,529
24,058
Other income(expense), net:
Interest income
190
154
350
311
Interest expense
(3,547)
(1,008)
(6,734)
(1,924)
Other, net
19
-
24
(5)
Total other income
(expense), net
(3,338)
(854)
(6,360)
(1,618)
Earnings from continuing operations before income tax expense
13,783
11,820
26,169
22,440
Income tax expense
5,638
4,669
10,705
8,864
Earnings from continuing Operations
8,145
7,151
15,464
13,576
Discontinued operations, net of income taxes:
Earnings from discontinued operations, net
-
(4)
-
3
Gain on disposal of discontinued operations, net
-
30
-
225
Earnings from discontinued operations
-
26
-
228
Net earnings
$
8,145
$
7,177
$
15,464
$
13,804
Basic earnings per share:
Continuing operations
$
0.26
$
0.23
$
0.49
$
0.43
Discontinued operations
-
-
-
0.01
Net earnings
$
0.26
$
0.23
$
0.49
$
0.44
Diluted earnings per share:
Continuing operations
$
0.25
$
0.21
$
0.46
$
0.40
Discontinued operations
-
-
-
0.01
Net earnings
$
0.25
$
0.21
$
0.46
$
0.41
Weighted average number of shares outstanding (basic)
1,602,206
31,588,088
31,852,265
31,587,219
Weighted average number of shares outstanding (diluted)
33,076,605
33,660,792
33,408,942
33,529,938
TALX Corporation and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share information)
Assets
September 30,2006
March 31,2006
(unaudited)
Current assets:
Cash and cash equivalents
$
5,670
$
5,705
Short-term investments
-
5,850
Accounts receivable, less allowance
for doubtful accounts of $3,866 at
September 30, 2006, and $3,731 at
March 31, 2006
36,168
31,527
Unbilled receivables
3,556
5,911
Prepaid expenses and other
current assets
8,734
6,576
Deferred tax assets, net
755
2,580
Total current assets
54,883
58,149
Property and equipment, net of
accumulated depreciation of $29,529
at September 30, 2006, and $25,227
at March 31, 2006
22,479
16,037
Capitalized software development costs,
Net of amortization of $7,403 at
September 30, 2006, and $6,329 at
March 31, 2006
5,801
4,059
Goodwill
231,672
190,232
Other intangibles, net
132,562
77,434
Other assets
2,151
1,634
$
449,548
$
347,545
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable
$
3,301
$
2,257
Accrued expenses and other
liabilities
18,080
19,219
Dividends payable
1,567
1,289
Deferred revenue
7,170
6,893
Total current liabilities
30,118
29,658
Deferred tax liabilities, net
42,928
17,634
Long-term debt
199,877
110,802
Other liabilities
3,733
3,153
Total liabilities
276,656
161,247
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value;
authorized 5,000,000 shares and
no shares issued or outstanding
at September 30, 2006, or
March 31, 2006
-
-
Common stock, $.01 par value per
share; authorized 75,000,000
shares at September 30, 2006 and
March 31, 2006; issued 32,417,630
shares at September 30, 2006, and
32,225,321 shares at March 31, 2006
324
322
Additional paid-in capital
176,825
177,463
Deferred compensation
-
(5,076)
Retained earnings
22,349
13,467
Accumulated other comprehensive income:
Unrealized gain on interest rate
swap contract, net of tax expense
of $56 at September 30, 2006, and
$80 at March 31, 2006
81
122
Treasury stock, at cost, 1,225,562
shares at September 30, 2006
(26,687)
-
Total shareholders' equity
172,892
186,298
$
449,548
$
347,545
TALX Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Six Months Ended June 30,
2006
2005
Cash flows from operating activities:
Net earnings
$
15,464
$
13,804
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization
9,962
6,045
Non-cash compensation
1,758
43
Deferred taxes
2,264
1,715
Gain on swap agreement
-
(59)
Change in assets and liabilities,
excluding those acquired:
Accounts receivable, net
1,210
(2,794)
Unbilled receivables
2,355
939
Prepaid expenses and other
current assets
(1,854)
(1,771)
Other assets
(64)
(267)
Accounts payable
531
1,062
Accrued expenses and other
liabilities
(2,707)
(2,127)
Deferred revenue
(35)
(1,174)
Other liabilities
580
(57)
Net cash provided by operating
activities
29,464
15,359
Cash flows from investing activities:
Additions to property and equipment, net
(10,949)
(3,882)
Acquisitions, net of cash acquired
(80,068)
(27,545)
Purchases of short-term investments
-
(5,120)
Proceeds from sale of short-term
investments
5,850
3,785
Capitalized software development costs
(2,206)
(1,186)
Net cash used in investing activities
(87,373)
(33,948)
Cash flows from financing activities:
Issuance of common stock
2,983
3,611
Tax benefit on exercise of stock options
1,195
-
Repurchase of common stock
(31,901)
(1,287)
Borrowings under long-term debt agreements
164,888
84,850
Repayments under long-term debt agreements
(76,705)
(75,500)
Dividends paid
(2,586)
(1,678)
Net cash provided by financing
activities
57,874
9,996
Net decrease in cash and cash
equivalents
(35)
(8,593)
Cash and cash equivalents at beginning
of period
5,705
11,399
Cash and cash equivalents at end of period
$
5,670
$
2,806
TALX Corporation (NASDAQ: TALX) today reported that fiscal
second-quarter earnings from continuing operations increased 14
percent to $8.1 million, or $0.25 per diluted share, from the year-ago
$7.2 million, or $0.21 per diluted share. The increased earnings
primarily reflected the contribution from recent acquisitions, revenue
gains in The Work Number services, and ongoing emphasis on cost
controls.
Effective April 1, 2006, the company adopted Statement of
Financial Accounting Standards No. 123r, "Share-Based Payment" (SFAS
123r). Included in fiscal 2007 second-quarter results was
approximately $666,000, net of taxes, or $0.02 per diluted share,
related to share- based compensation expense.
Second-quarter revenues increased 36 percent to $65.7 million from
$48.3 million the year before. The Work Number services' revenues rose
17 percent, and revenues for the tax management services business
increased 24 percent from year-ago levels. The 2007 second quarter
also benefited from $7.3 million in revenues from the company's April
6, 2006 acquisition of Performance Assessment Network, Inc., or pan.
Gross profit for the second quarter expanded 36 percent to $42.0
million from $30.8 million. Gross margin improved to 64.0 percent from
63.7 percent the year before, despite the impact of expenses related
to share-based compensation, which negatively affected gross margin by
25 basis points in the 2007 second quarter. Gross profit for The Work
Number services increased 23 percent to $21.1 million from $17.2
million, with gross margin climbing 400 basis points to 82.6 percent
from 78.6 percent the year before. Gross profit for the tax management
services business rose 28 percent to $16.9 million from $13.3 million,
with gross margin improving 120 basis points to 52.2 percent from 51.0
percent the year before. Gross profit for talent management services
was $3.6 million, and gross margin was 49.2 percent.
William W. Canfield, president and chief executive officer,
commented, "As a result of our highly scalable business model in The
Work Number business, the higher revenues this quarter resulted in
record gross margin. In particular, this quarter we benefited from the
consolidation of our shared services group, which led to lower costs.
To drive further revenue growth in this segment, we continued to
pursue initiatives that expanded its reach. For example, we began
recognizing revenues this quarter from our new Confirmation Direct
service, which offers a simplified, lower-priced verification that we
are marketing primarily to short-term lenders and property managers.
In addition, we expect to begin a pilot of our One Stop Verifications
call center service in our fiscal fourth quarter. Through a partner
relationship, a verifier using this service can satisfy virtually all
verification needs through TALX, whether or not the records are on The
Work Number database.
"In our tax management services businesses, we continued to
benefit from our acquisitions in both the unemployment tax services
and the tax credits and incentives businesses. Additionally, in the
unemployment business, we realized 8 percent organic growth, marking
our fourth consecutive quarterly organic gain. As a result of the
higher revenues in the unemployment tax business, coupled with
continued leveraging of our infrastructure, our gross margin reached a
record 52.7 percent this quarter."
L. Keith Graves, senior vice president and chief financial
officer, pointed out, "As a result of our higher gross profit, as well
as continued focus on cost control, operating income increased 35
percent compared to the year-ago quarter. Higher gross profit and
strong management of our working capital, particularly our accounts
receivable, drove our operating cash flow to almost $23 million this
quarter, compared to $7 million a year ago.
"We also increased shareholder value this quarter by raising our
quarterly dividend by 25 percent, to 5 cents per share. Further, we
repurchased almost 1.1 million shares during the second quarter for
approximately $23.8 million, bringing the year-to-date total to more
than 1.4 million shares, purchased for about $31.9 million. The share
repurchases and increased earnings resulted in second-quarter diluted
earnings per share being ahead of our expectations."
Graves also reported, "Fiscal 2007 second-quarter results
reflected costs of approximately $0.01 per share for additional
infrastructure costs primarily related to relocating our corporate
offices." He added that these costs will drop significantly in the
third quarter as the relocations are substantially completed.
The company's effective income tax rate was slightly higher in the
fiscal second quarter compared to a year ago, primarily as a result of
the implementation of SFAS 123r. 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 company
expects this rate to continue through the 2007 fiscal year.
The total number of employment records on The Work Number services
database increased 16 percent to 138.3 million at September 30, 2006,
from 119.2 million a year ago. The company added 5.2 million
employment records during the quarter, representing a 4 percent
increase in total records over the previous sequential quarter. Total
employment records under contract, including those in the contract
backlog to be added to the database, increased 18 percent to 149.0
million at September 30, 2006, from 126.5 million a year earlier and 4
percent over the previous sequential quarter total of 143.0 million.
Of the 138.3 million records on the database at September 30, 28
percent represented current employees, while the remainder represented
former employees.
Canfield noted, "We continue to monitor the status of the Work
Opportunity, or WOTC, and Welfare to Work, or WtW, federal tax
credits, which have been in hiatus since January 1 and which are not
likely to be reinstated during our fiscal third quarter. The absence
of these credits adversely affected second-quarter revenues by
approximately $2.0 million, and we expect that future quarterly
revenues will be similarly adversely impacted unless and until the
credits are reinstated. Additionally, within our talent management
services segment, the Transportation Security Administration, or TSA,
has reduced funding of its contract, which we expect will adversely
impact our fiscal third quarter revenues by approximately $2.9
million. We understand that the reduced TSA funding is temporary and
that the TSA expects to have funding in place beginning in calendar
year 2007 to return to levels consistent with previous quarters in
calendar year 2006.
"Despite the impact of this reduced revenue, we are pleased that
our strong second-quarter financial performance and expected outlook
for the rest of the year have allowed us to maintain our full-year
financial guidance." TALX is reiterating guidance for the fiscal year
ending March 31, 2007, with diluted earnings per share from continuing
operations estimated in a range of $1.06 to $1.12 and revenue between
$275 million and $280 million.
TALX also provided initial guidance for the third fiscal quarter
ending December 31, 2006. The company expects revenues ranging from
$66 million to $68 million and diluted earnings per share from
continuing operations of $0.24 to $0.26. Third-quarter diluted
earnings per share from continuing operations in fiscal 2006 were
$0.22 and revenues totaled $52.3 million. Results for fiscal year 2006
included no impact from SFAS 123r.
A conference call to discuss the company's fiscal 2007 second-
quarter performance and its outlook is scheduled for Thursday, October
26, at 9:00 a.m. Central Time. To participate in this call, dial (888)
400-7916. 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 from 2:30 p.m. CDT on Thursday, October 26,
through January 25, 2007. The replay number is (800) 475-6701 and the
access code is 844370.
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, anticipated revenue and earnings in the
third quarter of fiscal 2007 and for the fiscal year ending March 31,
2007, 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 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; (2) risks
associated with our ability to prevent breaches of confidentiality or
inappropriate use of data as we perform large-scale processing of
verifications; (3) risks associated with our ability to maintain the
accuracy, privacy and confidentiality of our clients' employee data;
(4) 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; (5) 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; (6) 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; (7) risks associated with potential challenges
regarding the applicability of the Fair Credit Reporting Act or
similar law; (8) 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; (9) risks related to the applicability of any new privacy
legislation or interpretation of existing laws; (10) the risk that our
revenues from unemployment tax management services may fluctuate in
response to changes in economic conditions; (11) risks related to
changes in tax laws, including potential continuation of the hiatus or
even the nonrenewal or elimination of the work opportunity, or WOTC,
and welfare to work, or WtW, tax credits; (12) 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
(13) 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 over 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.
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TALX Corporation and Subsidiaries
Consolidated Statements of Earnings
(dollars in thousands, except per share information)
(unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
2006 2005 2006 2005
Revenues:
The Work Number
services $ 25,547 $ 21,857 $ 51,444 $ 42,302
Tax management
services 32,419 26,043 65,577 51,968
Talent management
services 7,308 - 14,025 -
Maintenance and
support 391 444 793 868
Total revenues 65,665 48,344 131,839 95,138
Cost of revenues:
The Work Number
services 4,452 4,679 10,025 9,409
Tax management
services 15,486 12,766 31,751 25,542
Talent management
services 3,714 - 7,099 -
Maintenance and
support 19 100 38 186
Total cost of
revenues 23,671 17,545 48,913 35,137
Gross profit 41,994 30,799 82,926 60,001
Operating expenses:
Selling and
marketing 10,868 8,073 21,973 15,803
General and
administrative 14,005 10,052 28,424 20,140
Total
operating
expenses 24,873 18,125 50,397 35,943
Operating
income 17,121 12,674 32,529 24,058
Other
income(expense),
net:
Interest income 190 154 350 311
Interest expense (3,547) (1,008) (6,734) (1,924)
Other, net 19 - 24 (5)
Total other
income
(expense), net (3,338) (854) (6,360) (1,618)
Earnings from
continuing
operations
before income
tax expense 13,783 11,820 26,169 22,440
Income tax expense 5,638 4,669 10,705 8,864
Earnings from
continuing
Operations 8,145 7,151 15,464 13,576
Discontinued
operations, net of
income taxes:
Earnings from
discontinued
operations, net - (4) - 3
Gain on disposal
of discontinued
operations, net - 30 - 225
Earnings from
discontinued
operations - 26 - 228
Net earnings $ 8,145 $ 7,177 $ 15,464 $ 13,804
Basic earnings per
share:
Continuing
operations $ 0.26 $ 0.23 $ 0.49 $ 0.43
Discontinued
operations - - - 0.01
Net earnings $ 0.26 $ 0.23 $ 0.49 $ 0.44
Diluted earnings
per share:
Continuing
operations $ 0.25 $ 0.21 $ 0.46 $ 0.40
Discontinued
operations - - - 0.01
Net earnings $ 0.25 $ 0.21 $ 0.46 $ 0.41
Weighted average
number of shares
outstanding
(basic) 1,602,206 31,588,088 31,852,265 31,587,219
Weighted average
number of shares
outstanding
(diluted) 33,076,605 33,660,792 33,408,942 33,529,938
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TALX Corporation and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share information)
Assets September 30, March 31,
2006 2006
(unaudited)
Current assets:
Cash and cash equivalents $ 5,670 $ 5,705
Short-term investments - 5,850
Accounts receivable, less allowance
for doubtful accounts of $3,866 at
September 30, 2006, and $3,731 at
March 31, 2006 36,168 31,527
Unbilled receivables 3,556 5,911
Prepaid expenses and other
current assets 8,734 6,576
Deferred tax assets, net 755 2,580
Total current assets 54,883 58,149
Property and equipment, net of
accumulated depreciation of $29,529
at September 30, 2006, and $25,227
at March 31, 2006 22,479 16,037
Capitalized software development costs,
Net of amortization of $7,403 at
September 30, 2006, and $6,329 at
March 31, 2006 5,801 4,059
Goodwill 231,672 190,232
Other intangibles, net 132,562 77,434
Other assets 2,151 1,634
$449,548 $347,545
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,301 $ 2,257
Accrued expenses and other
liabilities 18,080 19,219
Dividends payable 1,567 1,289
Deferred revenue 7,170 6,893
Total current liabilities 30,118 29,658
Deferred tax liabilities, net 42,928 17,634
Long-term debt 199,877 110,802
Other liabilities 3,733 3,153
Total liabilities 276,656 161,247
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value;
authorized 5,000,000 shares and
no shares issued or outstanding
at September 30, 2006, or
March 31, 2006 - -
Common stock, $.01 par value per
share; authorized 75,000,000
shares at September 30, 2006 and
March 31, 2006; issued 32,417,630
shares at September 30, 2006, and
32,225,321 shares at March 31, 2006 324 322
Additional paid-in capital 176,825 177,463
Deferred compensation - (5,076)
Retained earnings 22,349 13,467
Accumulated other comprehensive income:
Unrealized gain on interest rate
swap contract, net of tax expense
of $56 at September 30, 2006, and
$80 at March 31, 2006 81 122
Treasury stock, at cost, 1,225,562
shares at September 30, 2006 (26,687) -
Total shareholders' equity 172,892 186,298
$449,548 $347,545
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TALX Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Six Months Ended
June 30,
2006 2005
Cash flows from operating activities:
Net earnings $ 15,464 $ 13,804
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 9,962 6,045
Non-cash compensation 1,758 43
Deferred taxes 2,264 1,715
Gain on swap agreement - (59)
Change in assets and liabilities,
excluding those acquired:
Accounts receivable, net 1,210 (2,794)
Unbilled receivables 2,355 939
Prepaid expenses and other
current assets (1,854) (1,771)
Other assets (64) (267)
Accounts payable 531 1,062
Accrued expenses and other
liabilities (2,707) (2,127)
Deferred revenue (35) (1,174)
Other liabilities 580 (57)
Net cash provided by operating
activities 29,464 15,359
Cash flows from investing activities:
Additions to property and equipment, net (10,949) (3,882)
Acquisitions, net of cash acquired (80,068) (27,545)
Purchases of short-term investments - (5,120)
Proceeds from sale of short-term
investments 5,850 3,785
Capitalized software development costs (2,206) (1,186)
Net cash used in investing activities (87,373) (33,948)
Cash flows from financing activities:
Issuance of common stock 2,983 3,611
Tax benefit on exercise of stock options 1,195 -
Repurchase of common stock (31,901) (1,287)
Borrowings under long-term debt agreements 164,888 84,850
Repayments under long-term debt agreements (76,705) (75,500)
Dividends paid (2,586) (1,678)
Net cash provided by financing
activities 57,874 9,996
Net decrease in cash and cash
equivalents (35) (8,593)
Cash and cash equivalents at beginning
of period 5,705 11,399
Cash and cash equivalents at end of period $ 5,670 $ 2,806
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