TALX Corporation (NASDAQ: TALX) today reported that fiscal
fourth-quarter earnings from continuing operations increased 27
percent to $9.0 million from the year-ago $7.1 million. On a
diluted share basis, earnings from continuing operations were
$0.26, compared to $0.21 for the year-ago period. The earnings
improvement primarily reflects strong revenue gains in The Work
Number services, the contribution from fiscal 2006 acquisitions,
and overall cost control. Fourth-quarter revenues grew 31 percent
to $60.0 million from $45.9 million in the year-earlier quarter.
The Work Number services' revenues rose 28 percent, and revenues
for the tax management services business increased 35 percent from
year-ago levels. Gross profit for the fourth quarter expanded 36
percent to $37.3 million from $27.4 million, with gross margin
rising 240 basis points to 62.2 percent from 59.8 percent the year
before. Gross profit for The Work Number services increased 35
percent to $20.1 million from $14.9 million, and gross margin for
this segment climbed 390 basis points to 74.0 percent from 70.1
percent the year before. Gross profit for the tax management
services business rose 38 percent to $16.9 million from $12.2
million, with gross margin improving 120 basis points to 52.1
percent from 50.9 percent the year before. Revenues for the full
year increased 31 percent to $207.4 million from $158.4 million the
year before. Earnings from continuing operations for the period
were $30.0 million, or $0.89 per diluted share. In the year-ago
period, earnings from continuing operations were $16.0 million, or
$0.49 per diluted share, which included an SEC settlement charge of
$2.5 million, or $0.08 per diluted share. Excluding this charge,
adjusted earnings from continuing operations grew 62 percent for
the year, from $18.5 million, or $0.57 per diluted share. See
attached "Supplemental Financial Information" for a reconciliation
of differences from the comparable GAAP measures in fiscal year
2005. William W. Canfield, president and chief executive officer,
commented, "Through organic growth, as well as acquisitions and our
ongoing emphasis on cross-selling, we again achieved record
revenues this quarter. In The Work Number services, our continued
focus on expanding the database and maximizing our clients' use of
it yielded a 28 percent rise in revenues. In our tax management
services, our acquisition strategy has enhanced our expertise in
certain state and federal tax credits, as well as provided strong
revenue gains this quarter. Additionally, in the unemployment tax
management business, we realized 2 percent organic growth this
quarter, marking our second consecutive quarterly gain. "We expect
to continue to benefit from the solid contributions of our
acquisition strategy. In addition to the four acquisitions we
completed in fiscal 2006, we began fiscal 2007 with the acquisition
of a new line of business for us, Performance Assessment Network,
or pan. pan provides secure, electronic-based psychometric testing
and assessments, as well as comprehensive talent management
services. These services fit nicely with our existing front-end
hiring solutions, which include paperless new hires, I-9 form
management, prior employment verifications, and tax credit
identification. We believe our well-established corporate client
base will provide additional avenues for pan's growth and look
forward to sharing pan's expertise with our clients." L. Keith
Graves, senior vice president and chief financial officer, pointed
out, "Through our scalable business model and continued focus on
cost control, we increased our operating margin by 330 basis
points, to 29.3 percent this quarter. For the year, our earnings
from continuing operations were up 87 percent compared to fiscal
2005. As a result of the strong financial performance in fiscal
2006, we realized cash flows from operating activities of $39
million, which helped us repay $28 million of debt while funding
our capital expenditures and paying dividends." The company's
income tax expense was slightly higher in the fiscal fourth quarter
as a result of an adjustment to deferred taxes. The company expects
its effective income tax rate to return to historical levels for
fiscal 2007. The total number of employment records on The Work
Number services database increased to 129.0 million at March 31,
2006, from 106.9 million a year ago, representing a 21 percent
gain. The company added 3.3 million employment records during the
quarter, representing a 3 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 21 percent to 136.3 million at March 31,
2006, from 113.1 million a year earlier and 2 percent over the
previous sequential quarter total of 133.4 million. Of the 129.0
million records on the database at March 31, 2006, 29 percent
represent current employees, while the remainder represent former
employees. Effective April 1, 2006, the company has adopted
Statement of Financial Accounting Standards No. 123r, "Share-Based
Payment" (SFAS 123r). The impact of the adoption of this statement
is included in the forward-looking guidance below and is expected
to be approximately $0.06 per diluted share in fiscal 2007,
expensed evenly over the four fiscal quarters. TALX provided
guidance for financial performance for the full year and first
quarter of fiscal 2007. For the fiscal year ending March 31, 2007,
the company anticipates total revenues to be in the range of $273
million to $278 million and diluted earnings per share from
continuing operations to be in the range of $1.04 to $1.10, which
includes the $0.06 charge related to SFAS 123r. For the first
fiscal quarter, the company anticipates total revenues to be in the
range of $64 million to $66 million, compared to $46.8 million in
the prior year. Diluted earnings per share from continuing
operations are anticipated to be in the range of $0.19 to $0.21,
which includes the $0.015 charge related to SFAS 123r.
First-quarter diluted earnings per share from continuing operations
in fiscal 2006 were $0.19, without consideration of SFAS 123r.
First-quarter earnings growth is not expected to match the
projected percentage increase for the full year due to the
inclusion of costs aimed at supporting the company's growth such as
headquarters relocation, creation of a shared services function,
integration of recent acquisitions, and enhancements to the
business continuity infrastructure. The bulk of these expenses will
be incurred in the first quarter and are not expected to have a
material impact on full-year earnings. A conference call to discuss
the company's fiscal 2006 fourth- quarter performance and its
outlook is scheduled for Thursday, May 11, at 9:00 a.m. Central
Time. To participate in this call, dial (800) 230-1085. A slide
presentation will accompany the call on the Web at
www.talx.com/2006. 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, May 11, through July 27, 2006. The replay number is
(800) 475-6701 and the access code is 827351. 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 first 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, 2005, under
the caption "Risk Factors" in "Part I - Item 1," as well as (1)
risks related to our ability to increase the size and range of
applications for The Work Number database and successfully market
current and future services and our dependence on third-party
providers to do so; (2) 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; (3) 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; (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 associated with potential challenges regarding the
applicability of the Fair Credit Reporting Act or similar law; (7)
risks associated with changes in economic conditions or
unemployment compensation or tax credit laws; (8) risks related to
the recent expiration of, and dependence on Congressional approval
of, work opportunity ("WOTC") and welfare to work ("WtW") tax
credits; (9) the risk to our future growth due to our dependence on
our ability to effectively integrate acquired companies and
capitalize on cross- selling opportunities; (10) risks relating to
doing business with the federal government following our April 2006
acquisition of pan; (11) risks related to the applicability of any
new privacy legislation or interpretation of existing laws; (12)
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; and (13) risks relating to
the applicability of the SUTA Dumping Prevention Act of 2004 to our
tax planning services. 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 is a leading provider of
payroll-related and human resources services. Based in St. Louis,
Missouri, TALX holds a leadership position in two key areas -
automated employment and income verification via The Work Number
(R) and unemployment tax management via UC eXpress (R). The TALX
suite of electronic services also includes tax credits and
incentives, paperless pay, time tracking, W-2 management, I-9
management, paperless new hire services, and assessments and talent
management. The company's common stock trades in the Nasdaq
National 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. -0- *T 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 fiscal 2005 earnings from continuing
operations and diluted earnings per share of a $2.5 million charge
recorded in connection with a settlement with the SEC. 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 Year ended March 31, 2005 Adjusted
Earnings from Continuing Operations to GAAP Earnings from
Continuing Operations: GAAP earnings from continuing operations $
16.0 million SEC settlement charge 2.5 million Adjusted earnings
from continuing operations $ 18.5 million Reconciliation of the
Year Ended March 31, 2005 Adjusted Diluted Earnings Per Share from
Continuing Operations to GAAP Diluted Earnings Per Share from
Continuing Operations: GAAP diluted EPS from continuing operations
$ 0.49 SEC settlement charge 0.08 Adjusted diluted EPS from
continuing operations $ 0.57 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, 2006 2005 2006 2005 Revenues: The Work Number
services $27,125 $21,210 $ 91,331 $ 65,373 Tax management services
32,474 24,041 114,420 90,208 Maintenance and support 358 613 1,676
2,814 Total revenues 59,957 45,864 207,427 158,395 Cost of
revenues: The Work Number services 7,052 6,336 21,339 18,645 Tax
management services 15,543 11,797 55,289 45,064 Maintenance and
support 65 291 352 1,008 Total cost of revenues 22,660 18,424
76,980 64,717 Gross profit 37,297 27,440 130,447 93,678 Operating
expenses: Selling and marketing 8,310 7,090 32,700 27,693 General
and administrative 11,410 8,436 42,658 32,845 SEC settlement charge
- - - 2,500 Total operating expenses 19,720 15,526 75,358 63,038
Operating income 17,577 11,914 55,089 30,640 Other income(expense),
net: Interest income 215 102 693 224 Interest expense (1,885) (834)
(5,165) (2,944) Other, net - (5) (5) (5) Total other income
(expense), net (1,670) (737) (4,477) (2,725) Earnings from
continuing operations before income tax expense 15,907 11,177
50,612 27,915 Income tax expense 6,930 4,090 20,637 11,887 Earnings
from continuing operations 8,977 7,087 29,975 16,028 Discontinued
operations, net of income taxes: Earnings(loss)from discontinued
operations, net (1) - (1) 15 Gain on disposal of discontinued
operations, net 66 142 516 567 Earnings from discontinued
operations 65 142 515 582 Net earnings $ 9,042 $ 7,229 $ 30,490
$16,610 Basic earnings per share: Continuing operations $ 0.28 $
0.22 $ 0.94 $ 0.52 Discontinued operations - 0.01 0.02 0.02 Net
earnings $ 0.28 $ 0.23 $ 0.96 $ 0.54 Diluted earnings per share:
Continuing operations $ 0.26 $ 0.21 $ 0.89 $ 0.49 Discontinued
operations - 0.01 0.01 0.02 Net earnings $ 0.26 $ 0.22 $ 0.90 $
0.51 Weighted average number of shares outstanding (basic)
31,992,969 31,174,664 31,775,969 30,953,408 Weighted average number
of shares outstanding (diluted) 34,236,268 32,986,658 33,828,651
32,451,456 TALX Corporation and Subsidiaries Consolidated Balance
Sheets (dollars in thousands, except share information) Assets
March 31, 2006 March 31, 2005 (unaudited) Current assets: Cash and
cash equivalents $ 5,705 $ 11,399 Short-term investments 5,850
7,615 Accounts receivable, less allowance for doubtful accounts of
$3,731 at March 31, 2006, and $3,173 at March 31, 2005 31,527
19,718 Work in progress, less progress billings 5,911 3,713 Prepaid
expenses and other current assets 6,576 5,282 Deferred tax assets,
net 2,580 1,683 Total current assets 58,149 49,410 Property and
equipment, net of accumulated depreciation of $25,227 at March 31,
2006, and $18,572 at March 31, 2005 16,037 11,414 Capitalized
software development costs, net of amortization of $6,329 at March
31, 2006, and $4,605 at March 31, 2005 4,059 3,374 Goodwill 190,232
136,143 Other intangibles, net 77,434 45,448 Other assets 1,634
1,130 $ 347,545 $246,919 Liabilities and Shareholders' Equity
Current liabilities: Accounts payable $ 2,257 $ 2,054 Accrued
expenses and other liabilities 19,219 16,502 Dividends payable
1,289 835 Deferred revenue 6,893 5,203 Total current liabilities
29,658 24,594 Deferred tax liabilities, net 17,634 10,083 Long-term
debt 110,802 57,500 Other liabilities 3,153 2,878 Total liabilities
161,247 95,055 Commitments and contingencies Shareholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000 shares and no
shares issued or outstanding at March 31, 2006 or 2005 - - Common
stock, $.01 par value per share; authorized 75,000,000 shares at
March 31, 2006, and 30,000,000 shares at March 31, 2005; issued
32,225,321 shares at March 31, 2006, and 20,922,011 shares at March
31, 2005 322 209 Additional paid-in capital 177,463 164,937
Deferred compensation (5,076) (223) Retained earnings (accumulated
deficit) 13,467 (12,726) Accumulated other comprehensive income:
Unrealized gain on interest rate swap contract, net of tax expense
of $80 at March 31, 2006, and $39 at March 31, 2005 122 59 Treasury
stock, at cost, 42,275 shares at March 31, 2005 - (392) Total
shareholders' equity 186,298 151,864 $347,545 $246,919 TALX
Corporation and Subsidiaries Consolidated Statements of Cash Flows
(dollars in thousands) (unaudited) Year Ended March 31, 2006 2005
Cash flows from operating activities: Net earnings $30,490 $16,610
Adjustments to reconcile net earnings to net cash provided by
operating activities: Depreciation and amortization 13,242 10,624
Deferred compensation 399 35 Deferred taxes 3,235 2,518 Gain on
swap agreement (59) - Change in assets and liabilities, excluding
those acquired: Accounts receivable, net (7,780) (2,990) Work in
progress, less progress billings (1,799) (1,999) Prepaid expenses
and other current assets (1,149) 5,554 Other assets (702) 119
Accounts payable 22 461 Accrued expenses and other liabilities
5,992 (1,560) Deferred revenue (2,774) 460 Other liabilities 253
217 Net cash provided by operating activities 39,370 30,049 Cash
flows from investing activities: Additions to property and
equipment (10,471) (6,382) Change in restricted cash - 38,645
Acquisitions, net of cash received (87,079) (59,316) Purchases of
short-term investments (5,120) (11,340) Proceeds from sale of
short-term investments 6,885 5,200 Capitalized software development
costs (2,408) (2,001) Net cash used in investing activities
(98,193) (35,194) Cash flows from financing activities: Issuance of
common stock 4,923 3,496 Repurchase of common stock (1,287) -
Borrowings under long-term debt facility 138,802 18,000 Repayments
under long-term debt facility (85,500) (10,500) Dividends paid
(3,809) (3,020) Net cash provided by financing activities 53,129
7,976 Net increase (decrease) in cash and cash equivalents (5,694)
2,831 Cash and cash equivalents at beginning of period 11,399 8,568
Cash and cash equivalents at end of period $ 5,705 $11,399 *T
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