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
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