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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2003 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number 000-21465
TALX CORPORATION
(Exact name of registrant as specified in its charter)
MISSOURI 43-0988805
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1850 BORMAN COURT, ST. LOUIS, MO 63146
(Address of principal executive offices) (Zip Code)
(314) 214-7000
(Registrant's telephone
number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ]No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [X]Yes [ ]No
As of August 1, 2003 there were 13,518,209 shares of the Registrant's Common
Stock outstanding, net of treasury shares held by the Company.
Exhibit Index is on page 29.
TALX CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 2003 and June 30, 2003........................... 3
Consolidated Statements of Earnings for the Three Months Ended June 30, 2002 and 2003........ 4
Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2002 and 2003...... 5
Notes to Consolidated Financial Statements................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk...................................... 26
Item 4. Controls and Procedures......................................................................... 26
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings............................................................................... 27
Item 2. Changes in Securities and Use of Proceeds....................................................... 27
Item 3. Defaults Upon Senior Securities................................................................. 27
Item 4. Submission of Matters to a Vote of Securities Holders........................................... 27
Item 5. Other Information............................................................................... 27
Item 6. Exhibits and Reports on Form 8-K................................................................ 27
Signatures ........................................................................................... 28
2
TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share information)
MARCH 31, JUNE 30,
2003 2003
--------- ---------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,409 $ 2,930
Short term investments -- 2,275
Accounts receivables, net 18,082 16,694
Work in progress, less progress billings 1,091 1,644
Prepaid expenses and other current assets 4,122 4,828
Deferred tax assets, net 556 592
--------- ---------
Total current assets 33,260 28,963
Property and equipment, net 10,315 9,477
Capitalized software development costs, net 3,804 2,449
Goodwill 105,469 105,563
Other intangibles, net 18,450 18,110
Net assets of business held for sale -- 429
Other assets 1,431 1,371
--------- ---------
$ 172,729 $ 166,362
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,560 $ 1,533
Accrued expenses and other liabilities 11,478 10,190
Dividends payable 542 538
Current portion of capitalized lease obligations 130 96
Current portion of long term debt 10,000 10,500
Income taxes payable 482 987
Deferred revenue 7,537 3,026
--------- ---------
Total current liabilities 31,729 26,870
Deferred tax liabilities, net 3,372 3,867
Capitalized lease obligations 22 18
Long term debt 12,000 9,000
Other long term liabilities 2,508 2,530
--------- ---------
Total liabilities 49,631 42,285
--------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value; authorized 5,000,000 shares and
no shares issued or outstanding at March 31, 2003 and June 30, 2003 -- --
Common stock, $.01 par value; authorized 30,000,000 shares,
issued and outstanding 13,948,542 shares at March 31, 2003
and June 30, 2003 140 140
Additional paid-in capital 162,773 162,801
Accumulated deficit (34,806) (32,784)
Accumulated other comprehensive income:
Unrealized loss on interest rate swap contract, net of tax of $99
at March 31, 2003 and $111 at June 30, 2003 (158) (176)
Treasury stock, at cost, 409,231 shares at March 31, 2003 and
465,166 shares at June 30, 2003 (4,851) (5,904)
--------- ---------
Total shareholders' equity 123,098 124,077
--------- ---------
$ 172,729 $ 166,362
========= =========
See accompanying notes to consolidated financial statements.
3
TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands, except share information)
(unaudited)
THREE MONTHS ENDED JUNE 30,
---------------------------------
2002 2003
------------ ------------
Revenues:
The Work Number services $ 7,617 $ 10,943
Unemployment cost management services 18,039 18,183
Customer premises systems 587 --
Maintenance and support 933 1,053
------------ ------------
Total revenues 27,176 30,179
------------ ------------
Cost of revenues:
The Work Number services 2,815 3,333
Unemployment cost management services 9,260 9,723
Customer premises systems 339 --
Maintenance and support 196 332
------------ ------------
Total cost of revenues 12,610 13,388
------------ ------------
Gross margin 14,566 16,791
------------ ------------
Operating expenses:
Selling and marketing 4,726 6,029
General and administrative 5,855 6,017
------------ ------------
Total operating expenses 10,581 12,046
------------ ------------
Operating income 3,985 4,745
------------ ------------
Other income (expense), net:
Interest income 24 23
Interest expense (355) (295)
Other, net -- 3
------------ ------------
Total other income (expense), net (331) (269)
------------ ------------
Earnings from continuing operations before
income tax expense 3,654 4,476
Income tax expense 1,406 1,723
------------ ------------
Earnings from continuing operations 2,248 2,753
Discontinued operations:
Earnings (loss) from discontinued operations, net
of income taxes (173) 80
------------ ------------
Net earnings $ 2,075 $ 2,833
============ ============
Basic earnings (loss) per share:
Continuing operations $ 0.16 $ 0.20
Discontinued operations (0.01) 0.01
------------ ------------
Net earnings $ 0.15 $ 0.21
============ ============
Diluted earnings (loss) per share
Continuing operations $ 0.15 $ 0.20
Discontinued operations (0.01) --
------------ ------------
Net earnings $ 0.14 $ 0.20
============ ============
Weighted average number of shares outstanding - basic 13,862,717 13,507,758
============ ============
Weighted average number of shares outstanding - diluted 14,399,979 14,023,878
============ ============
See accompanying notes to consolidated financial statements.
4
TALX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
THREE MONTHS ENDED JUNE 30,
---------------------------
2002 2003
-------- --------
Cash flows from operating activities:
Net earnings $ 2,075 $ 2,833
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,977 2,036
Deferred taxes 268 459
Net assets of business held for sale -- (123)
Change in assets and liabilities, excluding those acquired:
Trade receivables 1,007 1,388
Work in progress, less progress billings 93 (1,052)
Prepaid expenses and other current assets (451) (600)
Other assets 8 (2)
Accounts payable (2) (27)
Accrued expenses and other liabilities 559 (1,510)
Income taxes payable 395 517
Deferred revenue 1,113 (883)
Other noncurrent liabilities 25 22
-------- --------
Net cash provided by operating activities 7,067 3,058
-------- --------
Cash flows from investing activities:
Additions to property and equipment (1,566) (1,023)
Acquisitions, net of cash received (15,101) --
Deposit associated with acquisition -- (1,596)
Purchases of short-term investments -- (3,975)
Sales of short-term investments -- 1,700
Capitalized software development costs (484) (266)
-------- --------
Net cash used in investing activities (17,151) (5,160)
-------- --------
Cash flows from financing activities:
Issuance of common stock 736 498
Purchases of treasury stock -- (1,795)
Repayments of capitalized lease obligations (39) (38)
Repayments of long term debt (2,000) (2,500)
Dividends paid (413) (542)
-------- --------
Net cash used in financing activities (1,716) (4,377)
-------- --------
Net decrease in cash and cash equivalents (11,800) (6,479)
Cash and cash equivalents at beginning of period 21,431 9,409
-------- --------
Cash and cash equivalents at end of period $ 9,631 $ 2,930
======== ========
See accompanying notes to consolidated financial statements.
5
TALX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Our consolidated balance sheet at March 31, 2003 was obtained from our audited
balance sheet as of that date. All other financial statements contained herein
are unaudited and, in the opinion of management, contain all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation. Operating results for the three months ended June 30, 2003 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 2004. Our accounting policies and certain other disclosures are set
forth in the notes to our audited consolidated financial statements as of and
for the year ended March 31, 2003.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflects the
incremental increase in common shares outstanding assuming the exercise of all
employee stock options and warrants that would have had a dilutive effect on
earnings per share. The weighted average number of shares is based on common
stock outstanding for basic earnings per share and common stock outstanding and
common stock options and warrants for diluted earnings per share in periods when
such common stock options and warrants are not antidilutive.
NOTE 3 - COMPREHENSIVE INCOME
Comprehensive income for the three months ended June 30, 2002 and 2003 was $2.0
million and $2.8 million, respectively. The difference between comprehensive
income and net income for the three months ended June 30, 2002 and 2003 arose
from unrealized holding gains (losses) on our interest rate swap contract.
NOTE 4 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for income taxes totaled $641,000 and $796,000 for the three months
ended June 30, 2002 and 2003, respectively. Cash paid for interest totaled
$333,000 and $259,000 for the three months ended June 30, 2002 and 2003,
respectively.
We declared a $0.04 per share cash dividend, totaling $538,000, on May 22, 2003.
The dividend was payable July 18, 2003 to shareholders of record on June 20,
2003.
NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS
In connection with the acquisitions of Ti3, Inc.; the unemployment cost
management services business of Gates, McDonald & Company, a subsidiary of
Nationwide Mutual Insurance Company; and James E. Frick, Inc., d/b/a The Frick
Company, TALX acquired certain identifiable intangible assets. These assets were
recorded in accordance with the Financial Accounting Standards Board SFAS No.
141, "Business Combinations."
Effective April 1, 2002, we adopted the Financial Accounting Standards Board
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 addresses the
initial recognition and measurement of intangible assets acquired outside of a
business combination and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 provides that intangible assets
with finite useful lives be amortized and that goodwill and intangible assets
with indefinite lives will not be amortized, but will rather be tested at least
annually for impairment. Through the use of an independent business appraiser,
we reviewed our goodwill and intangible assets as of December 31, 2002 and
determined that no impairment existed.
6
TALX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes goodwill and other intangible asset activity for
the three months ended June 30, 2003 (dollars in thousands).
OTHER INTANGIBLE ASSETS
--------------------------------------------------
CUSTOMER CUSTOMER NON-
GOODWILL RELATIONSHIPS RECORDS COMPETE TOTAL
-------- ------------- -------- -------- --------
GROSS CARRYING VALUES:
March 31, 2003 $105,469 $ 17,583 $ 2,184 $ 109 $ 19,876
Incremental acquisition 94 -- -- -- --
-------- -------- -------- -------- --------
June 30, 2003 $105,563 $ 17,583 $ 2,184 $ 109 $ 19,876
======== ======== ======== ======== ========
ACCUMULATED AMORTIZATION:
March 31, 2003 $ -- $ 1,215 $ 147 $ 64 $ 1,426
Amortization -- 295 36 9 340
-------- -------- -------- -------- --------
June 30, 2003 $ -- $ 1,510 $ 183 $ 73 $ 1,766
======== ======== ======== ======== ========
Weighted average lives (in years) 14.92 15.00 3.00 14.86
======== ======== ======== ========
Amortization of other intangible assets was $340,000 for the three months ended
June 30, 2003 and is currently projected to be $1.4 million for the fiscal year
ended March 31, 2004 and $1.3 million for each of the fiscal years ended March
31, 2005 through 2008.
NOTE 6 - LONG-TERM DEBT
In connection with the acquisitions of The Frick Company and the unemployment
cost management services business (the "GM Unemployment Compensation Business")
of Gates, McDonald & Company, a subsidiary of Nationwide Mutual Insurance
Company, on March 27, 2002, pursuant to a loan agreement dated as of March 27,
2002, (the "Loan Agreement"), we obtained secured financing consisting of a
$30,000,000 term loan (the "Term Loan") and a $10,000,000 revolving credit
facility (the "Revolving Credit Facility") from LaSalle Bank National
Association, as administrative agent and lender, and Southwest Bank of St.
Louis, as lender, and any other lenders that may become party to the Loan
Agreement (collectively, the "Lenders"). We used the proceeds of the Term Loan
to pay a portion of the purchase price for the acquisitions; however, we have
not borrowed under the Revolving Credit Facility. We must repay principal of the
Term Loan in quarterly installments, with the final installment due on February
27, 2005. In addition, principal payments are required out of excess cash flow,
as defined, unless certain tests are met. The Revolving Credit Facility also
matures on February 27, 2005.
The Term Loan and advances under the Revolving Credit Facility bear interest at
rates we select under the terms of the Loan Agreement, including a base rate or
eurodollar rate, plus an applicable margin. Until March 27, 2003, eurodollar
rate loans bore interest at the applicable eurodollar rate plus 2.25% and base
rate loans bore interest at the applicable base rate plus 0.00%. Commencing
March 28, 2003, the applicable margin for eurodollar rate loans varies from
2.00% to 2.25%, and the applicable margin for base rate loans remains at 0.00%,
in each case based upon our ratio of total indebtedness to EBITDA. We may make
prepayments under the Term Loan and Revolving Credit Facility without penalty.
In addition, if William W. Canfield ceases serving as our chief executive
officer during the first 24 months after closing, and we do not retain a
substitute satisfactory to the Lenders within 120 days, then we are required to
repay all outstanding loans (Term Loan and Revolving Credit Facility).
The Loan Agreement is secured by security interests in substantially all the
assets of us and of our two subsidiaries (Ti3 and TALX UCM Services, Inc.), the
guarantees of our two subsidiaries, and a pledge of the stock of each of those
subsidiaries.
The Loan Agreement includes certain covenants, including, without limitation,
restrictions on the use of proceeds of the Term Loan and loans made under the
Revolving Credit Facility. The Term Loan was to be used solely to pay a
7
TALX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
portion of the purchase price for the acquisitions of the The Frick Company and
the GM Unemployment Compensation Business. The proceeds of loans made under the
Revolving Credit Facility may be used solely for working capital, permitted
capital expenditures, as the source for payment of our obligations with respect
to certain existing letters of credit, to pay the transaction cost of the Loan
Agreement, and to finance certain permitted acquisitions. The Loan Agreement
also requires compliance with certain financial covenants based on our minimum
net worth, minimum EBITDA, our ratio of total indebtedness to EBITDA and our
ratio of EBITDA to fixed charges. The Loan Agreement further requires compliance
with certain operating and other covenants which limit, among other things, the
incurrence of additional indebtedness by us and our subsidiaries, the amount of
capital expenditures to be made by us and our subsidiaries, sales of assets and
mergers and dissolutions, impose restrictions on distributions to shareholders,
change of control of TALX, investments, acquisitions and liens, and which
require compliance, in all material respects, with material laws. The Loan
Agreement generally prohibits the payment of cash dividends, except for cash
dividends not in excess of $2.5 million per fiscal year so long as we are not in
default at the time of the declaration. The Loan Agreement also contains various
representations and warranties, including among other things, the accuracy of
financial statements and other information delivered to the Lenders, the absence
of changes which would have or would reasonably be likely to have a material
adverse effect (as customarily included in secured credit facilities of this
nature).
On July 31, 2003 we entered into an amendment to the Loan Agreement, effective
June 30, 2003. Our wholly-owned subsidiaries, TALX UCM Services, Inc. and Ti3,
Inc., consented to the amendment as guarantors. Among other things, the
amendment increased the amount of dividends we are permitted to make during any
fiscal year and modified the minimum EBITDA covenant for the quarters ended June
30, 2003 through the maturity of the Loan Agreement. The amendment further
modified the definition of excess cash flow such that treasury stock repurchases
are included as a fixed charge in the calculation of excess cash flow, as
defined, which required us to pay to the Lenders $3.25 million by July 31, 2003.
At June 30, 2003, we believe we were in material compliance with all covenants
under the Loan Agreement, after giving effect to the amendment.
NOTE 7 - DERIVATIVE FINANCIAL INSTRUMENT
On March 27, 2002, we entered into the Term Loan which accrues interest based
upon certain LIBOR indexes and will amortize over three years with a maturity of
February 27, 2005. As a condition of the Term Loan Agreement, we were required
to enter into a hedge contract for 50% of our outstanding term loan as a means
of reducing our interest rate exposure. Pursuant to this requirement, we entered
into an interest rate swap contract on June 26, 2002 for a notional amount of
$14 million, which represented 50% of our outstanding term loan balance on that
date. Under this contract, we pay a fixed rate of 3.45% and receive a variable
rate of LIBOR, which is equal to the LIBOR rate utilized on our term loan. The
notional amount of our interest rate swap contract steps down according to the
same schedule as our term loan, maintaining a 50% hedged position. All payment
dates and maturity dates are the same as our term loan. This strategy
effectively converts 50% of our term loan into a fixed rate instrument.
The interest rate swap and related gains and losses arising on the contract are
accounted for as a cash flow hedge in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities." Specifically, changes in the fair value of derivative
instruments designated as cash flow hedges are deferred and recorded in other
comprehensive income. These deferred gains or losses are recognized in income
when the transactions being hedged are completed.
As of June 30, 2003, the fair value of the interest rate swap in the amount of
$287,000 is included in accrued expenses and other liabilities.
We do not use financial instruments for trading or speculative purposes.
8
TALX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - BUSINESS SEGMENTS
FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information," requires companies to provide certain information about their
operating segments. During our prior fiscal year, we had identified two
reportable segments: Payroll-Based Services and Software (which included The
Work Number Services, Human Resources and Benefits Application Services and
Customer Premises Systems and the related Maintenance and Support) and
Unemployment Cost Management Services (which included our UC eXpress(SM)
services suite).
Effective April 1, 2003, we consolidated our sales and services team into
regional territories. Each territory is responsible for selling all services,
and we no longer have any teams or individuals dedicated to just one service
offering. Further, management does not evaluate any of our businesses on a
regional basis, other than sales team performance. Additionally, we consolidated
all back-office general and administrative groups by function, as opposed to
service line. Therefore, effective April 1, 2003, management has determined that
we have only one reportable segment.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
We are a defendant from time to time in lawsuits. Except to the extent described
below, based on information currently available, we believe that no current
proceedings, individually or in the aggregate, will have a material adverse
effect upon the Company.
On December 26, 2001, a purported class action lawsuit was filed in the United
States District Court for the Eastern District of Missouri (Civil Action No.
4:01CV02014DJS) by Matt L. Brody, an alleged shareholder of the Company, against
the Company, certain of its executive officers and directors (William W.
Canfield, Craig N. Cohen and Richard F. Ford) (collectively, the "Individual
Defendants"), and two underwriters (Stifel, Nicolaus & Company, Incorporated and
A.G. Edwards & Sons, Inc.) in the Company's August 2001 secondary common stock
offering ("Secondary Offering"). The case purportedly is brought on behalf of
all persons who purchased or otherwise acquired shares of our common stock
between July 18, 2001 and October 1, 2001 ("Putative Class Period"), including
as part of the Secondary Offering. The complaint alleges, among other things,
that certain statements in the registration statement and prospectus for the
Secondary Offering, as well as other statements made by the Company and/or the
Individual Defendants during the Putative Class Period, were materially false
and misleading because they allegedly did not properly account for certain
software and inventory, did not reflect certain write-offs, and did not
accurately disclose certain business prospects. The complaint alleges violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder against the Company and the Individual Defendants,
violations of Section 11 of the Securities Act of 1933 against the Company, the
Individual Defendants and the underwriters, and violation of Section 15 of the
Securities Act of 1933 against Mr. Canfield.
Three additional purported class action lawsuits were filed in the same court,
against the same defendants and making substantially the same allegations: on
January 8, 2002 by Donald Metzger (Civil Action No. 4:02CV00031DJS); on January
9, 2002 by Anna Goodman (Civil Action No. 4:02CV00033DJS); and on January 30,
2002 by Al Hinton (Civil Action No. 4:02CV00168DJS) each of whom allegedly were
shareholders of the Company during the Putative Class Period. On February 15,
2002, these three lawsuits were consolidated with and into the Brody lawsuit
(Civil Action No. 4:01CV02014DJS) for all purposes. In October 2002, the case
was transferred from the Honorable Donald J. Stohr, United States District
Judge, to the Honorable Henry E. Audrey, United States District Judge.
The consolidated lawsuit seeks, among other things, an award of unspecified
money damages, including interest, for all losses and injuries allegedly
suffered by the putative class members as a result of the defendants' alleged
conduct and unspecified equitable/injunctive relief as the Court deems proper.
On May 20, 2002, the Company and the Individual Defendants filed a motion to
dismiss the lawsuits, and the underwriter defendants filed a separate motion to
dismiss. On March 31, 2003, the Court granted defendants' motion
9
TALX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
in part, dismissing plaintiffs' claims under Section 10(b) of the Exchange Act
and Rule 10b-5 thereunder, without prejudice. The Court granted plaintiffs sixty
additional days to file an amended consolidated complaint, and defendants sixty
days thereafter to respond to the amended complaint.
On May 29, 2003, plaintiffs in the several pending securities lawsuits filed an
Amended Consolidated Complaint ("Amended Complaint"). The Amended Complaint
amends the original Complaint by adding allegations pertaining to our December
2002 restatement of financials and expanding the Putative Class Period to
include all persons who purchased or otherwise acquired shares of our common
stock between April 25, 2001 and November 14, 2002 ("Amended Putative Class
Period"). The Amended Complaint alleges, among other things, that certain
statements in the registration statement and prospectus for our August 2001
secondary common stock offering, as well as other statements made by us and/or
the Individual Defendants during the Amended Putative Class Period, were
materially false and misleading because we capitalized instead of expensed $1.6
million related to a patent technology license agreement executed in March 2001;
expensed approximately $158,000 in bonus payments to executive officers in the
first quarter of fiscal 2002 instead of the fourth fiscal quarter of 2001;
improperly recognized revenue and expenses during the Amended Putative Class
Period; and miscalculated diluted earnings per share during the Amended Putative
Class Period. All of these matters were the subject of our 2002 restatement of
financials described in our Form 10-K/A for the year ended March 31, 2002. The
Amended Complaint also alleges, as did the original Complaint, that we did not
properly account for certain software and inventory, did not reflect certain
write-offs, and did not accurately disclose certain business prospects. The
Amended Complaint seeks, among other things, an award of unspecified money
damages, including interest, for all losses and injuries allegedly suffered by
the putative class members as a result of the defendants' alleged conduct and
unspecified equitable/injunctive relief as the Court deems proper. On July 30,
2003, the defendants filed a motion to dismiss the Amended Complaint.
We intend to defend vigorously against the plaintiffs' claims. However, due to
the inherent uncertainties of litigation, we cannot accurately predict the
ultimate outcome of the litigation. An unfavorable outcome could have a material
adverse impact on our business, financial condition and results of operations.
As previously reported, the Securities and Exchange Commission initially
commenced an investigation into our second fiscal quarter 2001 financial
results. We are cooperating fully with the investigation. On November 12, 2002,
the staff of the Central Regional Office of the Commission sent us a "Wells
letter" indicating the staff's plans to recommend to the Commission that it
institute an enforcement action against us and two of our executive officers,
William Canfield and Craig Cohen, related to two matters, and requesting that we
and such executive officers submit responses to the letter. The Wells letter
states that the SEC staff will allege, among other things, that our financial
statements were misleading as a result of capitalizing instead of expensing $1.6
million related to a patent technology license agreement executed in March 2001
and expensing approximately $158,000 in bonus payments to executive officers in
the first quarter of fiscal 2002 instead of the fourth fiscal quarter of 2001.
Those items are among those that are the subject of the restatement as disclosed
on our Form 10-K/A for the year ended March 31, 2002. The remedies the
Commission may consider, if appropriate, include an injunction against us and
the individuals and an officer and director bar and disgorgement and civil money
penalties against the individuals. The Company and the individuals have filed
separate written responses to the Wells letter setting forth the reasons why the
proposed enforcement action should not be instituted by the Commission.
As previously reported, we have restated our financial statements for each of
the quarters ended June 30, 2001 through June 30, 2002 and for the fiscal years
ended March 31, 2001 and 2002. As a result of the restatement, plaintiffs who
have filed lawsuits against us previously have amended their complaints to
include claims related to this restatement, as described above. We cannot
predict the outcome of any such litigation at this time. Additionally, the
lenders under our March 27, 2002 Loan Agreement, which is described above in
Note 6, could seek to exercise remedies which may be available to them, such as
acceleration of our loans, in the event they determine that, as a result of the
restatement discussed above or the SEC investigation discussed above or
otherwise, we have breached a covenant or representation and warranty in the
Loan Agreement. If an unfavorable result occurred in any such action, our
business and financial conditions could be harmed.
10
TALX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
As of the date hereof, the SEC is investigating our accounting for certain
items, including those which were the subject of the restatement. At this time,
we cannot predict whether or not any additional regulatory investigation related
to this restatement or any other matter will be commenced, or if it is, the
outcome of any such investigation. However, if any such investigation were to
result in a regulatory proceeding or action against us, our business and
financial condition could be harmed.
As required under our articles of incorporation, we are obligated to indemnify
and advance expenses of each of the Individual Defendants, as officers and/or
directors of the Company to the fullest extent permitted by Missouri law, in
connection with the above matters, subject to their obligations to repay amounts
advanced under certain circumstances. Stifel, Nicolaus & Company and A.G.
Edwards & Sons, Inc. have made demands on the Company to indemnify and advance
expenses to them in connection with these matters.
Our directors' and officers' liability insurance carriers have received notice
of the consolidated litigation and SEC investigation.
Regardless of the outcome of any litigation or regulatory proceeding, litigation
and regulatory proceedings of these types are expensive and will require that we
devote substantial resources and executive time to defend these proceedings.
NOTE 10 - DISCONTINUED OPERATIONS
On April 21, 2003, the board of directors granted management the authority to
dispose of the human resources and benefits application services business.
Accordingly, it was determined that this business met the requirements to be
presented as a discontinued operation.
On April 22, 2003 we transferred substantially all of the assets of our human
resources and benefits application services business to Workscape, Inc., a
Framingham, Massachusetts-based provider of benefits and workforce management
solutions. The primary product of this line of services, the benefits enrollment
business, provides a customized solution for clients' employees to enroll in an
employer's benefits programs and make changes to their personal information and
benefits elections, all by means of the Internet or by telephone. Workscape,
Inc. has hired all of the employees related to the benefits enrollment business.
The transaction was structured as a transfer of assets under contract for sale
with no initial down-payment and the purchase price to be paid over a three-year
period, based on a client retention formula. Proceeds are anticipated to be
between $2 million and $6 million, with no minimum guaranteed amount.
All assets and liabilities of this business, both the portion of the business
transferred under contract (approximately 90%) and the portion remaining to be
sold, along with related transaction costs, have been recorded on our
consolidated balance sheet as net assets of business held for sale. We will
record cash received under the asset purchase agreement first to reduce the
recorded value of net assets of business held for sale and then to reflect gain
on the sale of the business.
In connection with the transfer, we will provide Workscape, Inc., for
agreed-upon fees, with various transition services related to the operation of
the benefits enrollment business until December 31, 2005, or until certain
transferred client contracts have expired or been terminated.
The historical results of operations for this business have been reclassified to
earnings (loss) from discontinued operations on our consolidated statement of
earnings.
11
TALX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following represents the net assets of business held for sale at June 30,
2003, in thousands:
DESCRIPTION AMOUNT
----------- ---------
Work in progress, less progress billings................ $ 499
Prepaid expenses and other current assets............... 1,710
Property and equipment, net............................. 633
Capitalized software development costs, net............. 1,215
Deferred revenue........................................ (3,628)
---------
$ 429
=========
NOTE 11 - SUBSEQUENT EVENT
On June 30, 2003 we announced the acquisition of Johnson & Associates, L.L.C.,
an Omaha, Nebraska-based company specializing in unemployment cost management
("UCM") and employment tax credit administration services. We funded the
acquisition on June 30, 2003, and the effective date was July 1, 2003. Johnson &
Associates has annual revenues of approximately $1.5 million.
In addition to its UCM services, Johnson & Associates provides employment tax
credit services, which we have not previously provided. This service allows
clients to take advantage of federal tax incentive programs for hiring
individuals who have traditionally faced difficulties in securing employment. We
intend to cross-sell this complementary service into our existing client base.
Operations of this business will be included in our unemployment cost management
services business, as part of UC eXpress. Cash paid for this transaction is
recorded on our consolidated balance sheet as of June 30, 2003 in prepaid
expenses and other current assets.
12
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this discussion together with the financial statements and other
financial information included in this Form 10-Q and in our Annual Report on
Form 10-K for the year ended March 31, 2003.
OVERVIEW
We are the leading provider of automated employment and income verification and
unemployment cost management services and a leader in providing outsourced
employee self-service applications. Our services enable mortgage lenders,
pre-employment screening companies, employers and other authorized users to
obtain employee human resources and payroll information. We also allow employees
to review and modify information in human resources and payroll management
information systems without requiring employer assistance. Further, we provide
unemployment insurance claims processing and unemployment tax planning and
management services to a broad range of employers.
Our services and software use interactive web, interactive voice response, fax
and other technologies and are designed to enhance service levels, improve
productivity and reduce costs by automating historically labor intensive,
paper-based processes and enabling users to perform self-service transactions.
We typically serve large organizations, including approximately two-thirds of
Fortune 500 companies and a number of federal, state and local government
agencies.
From the early 1980s until 1993, we offered our products and services
exclusively through licensed software specifically developed for each customer
and installed at the customer's site. We refer to this as our "customer premises
systems" business. In 1993, we began to deliver benefits enrollment and other
human resource services on an outsourced basis, allowing clients to utilize
applications and services over public or private networks without incurring the
capital expenditures and maintenance responsibilities of operating such a system
in-house. We also host many of our clients' databases at our facilities. In
1995, we introduced The Work Number, our leading service for employment and
income verification.
With the market's acceptance of our outsourced delivery method, in 1998, we
began to de-emphasize sales of customer premises systems, and in 2000
discontinued sales to new clients; however, we still have a base of clients for
whom we continue to provide maintenance and technical support services as well
as software and hardware upgrades. During 2003, we notified our maintenance
clients of our intention to discontinue all support services effective June
2005.
On April 22, 2003 we transferred substantially all of the assets of our human
resources and benefits application services business to Workscape, Inc., a
Framingham, Massachusetts-based provider of benefits and workforce management
solutions. The primary product of this line of services, the benefits enrollment
business, provides a customized solution for clients' employees to enroll in an
employer's benefits programs and make changes to their personal information and
benefits elections, all by means of the Internet or by telephone. Workscape,
Inc. has hired all of the employees related to the benefits enrollment business.
The transaction was structured as a transfer of assets under contract for sale
with no initial down-payment and the purchase price to be paid over a three-year
period, based on a client retention formula. Proceeds are anticipated to be
between $2 million and $6 million, with no minimum guaranteed amount.
All assets and liabilities of this business, both the portion of the business
transferred under contract (approximately 90%) and the portion remaining to be
sold, along with related transaction costs, have been recorded on our
consolidated balance sheet as net assets of business held for sale. We will
record cash received under the asset purchase agreement first to reduce the
recorded value of net assets of business held for sale and then to reflect gain
on the sale of the business.
In connection with the transfer, we will provide Workscape, Inc., for
agreed-upon fees, with various transition services related to the operation of
the benefits enrollment business until December 31, 2005, or until certain
transferred client contracts have expired or been terminated.
13
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SERVICES AND PRODUCTS
We provide services that enable both large and mid-size corporations, as well as
government agencies, to outsource the performance of business processes that
would otherwise be performed by their own human resources or payroll
departments. Our software uses interactive web, interactive voice response, fax
and other technologies to enable mortgage lenders, pre-employment screening
companies, employees and other authorized users to obtain employee human
resources and payroll information, and allows employees and their managers to
review and modify information in the human resources and payroll management
information systems on a self-service basis. Our services and products fall
within four general categories: The Work Number services, unemployment cost
management services, human resources and benefits application services and
customer premises systems, including related maintenance and support.
THE WORK NUMBER SERVICES
Responding to inquiries to verify employment and income information, printing
and distributing pay stubs and annual W-2 forms, and updating employee personnel
records are burdensome and time-consuming tasks for employers and divert
resources from managing their businesses. The Work Number employment and income
verification service and other payroll-related business process outsourcing
services supported by The Work Number's database of employee records are
designed to help employers save time and effort and reduce expenses associated
with many of the administrative tasks required to support large workforces.
The Work Number. Mortgage lenders, pre-employment screeners, social service
agencies and other information verifiers often request organizations to verify
employment and income information that has been provided by employees or former
employees. For example, the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation, leading purchasers of residential
mortgages in the United States, usually require independent verification of
employment and income data for the past two calendar years and a current payroll
period in connection with mortgages that they will purchase. In 1995, we
developed The Work Number as an outsourced service that enables employers to
reduce the costs and resources to respond to verification requests, while
empowering employees to control the release of personal information to third
parties.
When an employer receives a request for income and employment data regarding an
employee, the employer may direct the third-party verifier to our web site or to
a telephone number. Using the Internet or a toll-free telephone number,
verifiers who subscribe to our service can confirm the employee's employment
status and income for the past three years. Non-subscribing verifiers can
receive the same information through these methods using a credit card or
through a 1-900 telephone number. The Work Number is designed to ensure that
access to an employee's income data is available only to verifiers who have been
pre-authorized by the employee.
We generate substantially all of The Work Number revenues from transaction-based
fees charged to mortgage lenders, pre-employment screeners, credit issuers and
other information verifiers for verification of income and employment
information. Revenue is recognized on these transaction-based fees in the period
that the transactions occur and are billed. We also generate revenues from
employer data conversion and ongoing maintenance fees, and record this revenue
on a monthly basis as billed. Lastly, we derive revenues from one-time up-front
setup fees. These fees are recognized as revenue on a straight-line basis over
the initial contract period, beginning with the date the client is live on our
system.
W-2 eXpress. W-2 eXpress is a suite of services relating to the initial
distribution (either printed or electronic), reissue and correction of W-2 wage
and tax statement forms that we offer to existing clients of The Work Number and
other large employers. Using data provided by employers, we distribute original
W-2 forms (both electronically and in paper form) to employees and provide an
automated process to enable employees to request corrections to their W-2 forms
and obtain additional copies via the Internet or by telephone instead of
requiring direct interaction with the employer's payroll staff.
14
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The majority of W-2 eXpress clients are billed based upon the number of unique
W-2s, generally pursuant to multi-year contracts. Revenue is recognized on a
straight-line basis from the time the service is available for use by TALX
clients through the end of the service period. Additionally, we have some
clients that are billed on a transactional basis. For these clients, we
recognize revenue on a monthly basis, as transactions occur.
ePayroll. ePayroll is another outsourcing service that we offer to existing
clients of The Work Number and other large employers. ePayroll is a suite of
payroll self-service applications that enable employees, via the Internet or by
telephone, to receive pay statement information, access current and historical
payroll information, review and change direct deposit account information and
maintain their federal W-4 forms.
Employers that send us electronic transmissions of their employees' pay stubs
and direct deposit data can reduce the amount of staff required to process
routine employee payroll requests as well as reduce the cost to distribute paper
pay advices.
We charge ePayroll clients on a per-employee per-month basis, plus an initial
set-up fee, generally pursuant to multi-year contracts. Revenue for the initial
setup fees is recognized on a straight-line basis over the initial contract
period, beginning with the date the client is live on our system. Per-employee
per-month fees are recognized as revenue in the months billed.
FasTime. FasTime services are integrated time capture and reporting solutions
that work from any phone or the Internet. For large employers, FasTime collects
hours worked and exception time codes providing a user-friendly online approval
and reporting for managers. FasTime is customized according to a company's
business rules and processes. For the temporary staffing industry, FasTime
provides a comprehensive, paperless system for time, expenses and availability,
including manager approvals and the reporting and management tools for branch
offices.
FasTime clients are billed for initial set up fees, monthly maintenance fees and
per transaction fees, generally pursuant to multi-year contracts. Revenue is
recognized on a straight-line basis from the time the service is available for
use by our clients through the end of the service period for setup and
maintenance fees and as services are performed for transaction-based fees.
UNEMPLOYMENT COST MANAGEMENT
As a result of acquisitions we made during our 2002 fiscal year, we provide
unemployment cost management services under the name UC eXpress, through our
wholly-owned subsidiary TALX UCM Services, Inc. UC eXpress is a comprehensive
suite of services designed to reduce the cost of processing unemployment claims
by human resource departments and better manage the tax rate that employers are
assessed for unemployment taxes. UC eXpress utilizes document imaging and web
access to speed the processing of unemployment claims with the goal of
uncovering inaccuracies in claims that have been filed with state agencies by
separated employees. UC eXpress services are aimed at relieving human resource
departments of the administrative burden of managing unemployment claims.
Following an employee separation, UC eXpress services respond to unemployment
claims on behalf of our clients. This includes reviewing employment records to
preserve the clients' rights as an employer. If an unemployment hearing is
required, UC eXpress services include client conferences with UC eXpress hearing
consultants/attorneys and, upon client request, attendance at the hearing with
the employer's representative. In addition, the UC eXpress field-based account
management team and hearing consultants bring state-specific unemployment tax
knowledge to the client.
15
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
UC eXpress also offers comprehensive employer tax services that encompass five
service areas:
o unemployment tax services
o employment tax research and recovery
o unemployment tax planning
o tax registrations
o employment tax consulting (withholding and unemployment)
Clients who choose UC eXpress for tax services collaborate with a UC eXpress tax
analyst to monitor the clients' unemployment tax accounts, verify tax rates and
contribution reports, and identify voluntary contribution opportunities. Since
UC eXpress offers a choice of employer tax services, clients can take advantage
of the services that are most effective in reducing their employment tax costs.
We charge clients fees pursuant to multi-year contracts, generally billed
monthly or quarterly. Most contracts allow for additional charges if transaction
activity exceeds a certain threshold. Some unemployment tax planning contracts
call for contingent fees based upon actual tax savings realized. Revenues from
UC eXpress are recognized in the period that they are earned, evenly over the
life of the contract. Transaction fees are recorded as the services are
provided. Revenue which is contingent upon achieving certain performance
criteria is recognized when those criteria are met.
HUMAN RESOURCES AND BENEFITS APPLICATION SERVICES
As discussed above, on April 22, 2003 we transferred substantially all of the
assets of our human resources and benefits application services business,
retaining certain contracts to administer other human resources services for
three clients, which we expect will either terminate or be assigned prior to the
end of fiscal 2004.
We formerly offered our clients outsourcing solutions designed to reduce the
resources and expenses associated with enrolling employees and administering
ongoing participation in employee benefits programs. In 2000, we introduced
eChoice, our advanced benefits enrollment service combining the most popular
features of our various customized benefits enrollment offerings that we
configured to meet each employer's particular needs.
We generated revenues from eChoice by charging clients on a per-employee basis,
generally pursuant to multi-year contracts. We generated revenues from our other
human resources and benefits application services by charging clients an initial
set-up and development fee and monthly hosting and transactions fees, generally
pursuant to multi-year contracts. Revenue was primarily recognized on a
straight-line basis from the time the service was available for use by our
clients through the end of the service period.
CUSTOMER PREMISES SYSTEMS AND RELATED MAINTENANCE AND SUPPORT
From the early 1980s until 1993, we offered our products and services
exclusively through licensed software specifically developed for each customer,
and installed these systems at the customer's site. In 1993 we began to deliver
benefits enrollment services as an application services provider. In 1998 we
began to de-emphasize sales of customer premises systems, and in 2000 we
discontinued sales to new customers. We provide system enhancements to these
customers and customer support 7-days per week, 24-hours per day, through a
toll-free hotline, email and our website. We sold these systems under licenses
and generate additional revenues by providing ongoing maintenance and support.
During 2003, we notified our maintenance clients of our intention to discontinue
all support services effective June 2005.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses, and related disclosure of contingent assets and
liabilities. On a periodic basis, we evaluate our estimates, including those
related to revenue recognition, intangible assets,
16
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
capitalized software and income taxes. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ materially from
these estimates under different assumptions or conditions.
We believe that the following critical accounting policies include our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.
REVENUE RECOGNITION: Revenues from The Work Number are recognized in the period
that they are earned, from transaction fees charged to users for verifications
of employment history and income. Additionally, revenue for set up fees, monthly
maintenance and employer conversion fees are recognized on a straight-line basis
from the time the service is available to be used by our clients through the end
of the service period.
Revenues from our unemployment cost management services, called UC eXpress, are
recognized in the period that they are earned, evenly over the life of the
contract. Transaction fees are recorded as the services are provided. Revenue
which is contingent upon achieving certain performance criteria is recognized
when those criteria are met.
We recognize hardware and software license revenue upon shipment based on
vendor-specific objective evidence. Revenues for customization services of
customer premises systems which are outside of our standard maintenance
agreements are recognized by the completed contract method. Revenue from
maintenance contracts is deferred and recognized ratably over the maintenance
period.
Deferred revenue represents the unearned portion of The Work Number setup fees,
UC eXpress and maintenance fees. Commissions are paid based upon successful
efforts and are deferred and expensed over the related service period.
INTANGIBLE ASSET VALUATIONS: In connection with the acquisitions of Ti3, Inc.;
the unemployment cost management services business of Gates, McDonald & Company,
a subsidiary of Nationwide Mutual Insurance Company; and James E. Frick, Inc.,
d/b/a The Frick Company, TALX acquired certain identifiable intangible assets.
These assets were recorded in accordance with the Financial Accounting Standards
Board SFAS No. 141, "Business Combinations".
Effective April 1, 2002, we adopted the Financial Accounting Standards Board
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 addresses the
initial recognition and measurement of intangible assets acquired outside of a
business combination and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 provides that intangible assets
with finite useful lives be amortized and that goodwill and intangible assets
with indefinite lives will not be amortized, but will rather be tested at least
annually for impairment. Through the use of an independent business appraiser,
we reviewed our goodwill and intangible assets as of December 31, 2002 and
determined that no impairment existed.
CAPITALIZED SOFTWARE: Software development costs are expensed as incurred until
technological feasibility is achieved, after which they are capitalized on a
product-by-product basis. Amortization of capitalized software development costs
is computed using the straight-line method over the remaining estimated economic
life of the product, generally three years. Amortization of capitalized software
development costs starts when the product is available for general release to
clients. All capitalized software assets are reviewed as of each balance sheet
date for impairment. Upon determination of any impairment, the asset is
written-down to the appropriate value in the period that the impairment is
determined.
INCOME TAXES: We record income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. In assessing the
realization of deferred tax assets, management considers whether it is more
likely than not that some
17
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in
making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely than not we will
realize the benefits of these deductible differences. If management were to
determine that we would not be able to realize all or part of our net deferred
tax asset in the future, an adjustment to the deferred tax asset would be
charged against earnings in the period such determination was made.
The above listing is not intended to be a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by accounting principles generally accepted
in the United States of America, with no need for management's judgment in their
application. There are also areas in which management's judgment in selecting
any available alternative would not produce a materially different result. See
our consolidated financial statements and notes thereto contained in our Annual
Report on Form 10-K for the year ended March 31, 2003 which contains accounting
policies and other disclosures required by accounting principles generally
accepted in the United States of America.
FORWARD-LOOKING STATEMENTS
This report contains certain statements regarding future results, performance,
expectations, or intentions that may be considered forward looking statements
("forward-looking statements") within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These statements relate to, among other things,
business trends and prospects, potential future profitability, revenue growth,
cash flows and anticipated improvements in gross margin and general and
administrative expense as a percentage of revenues of the unemployment cost
management business. All statements other than statements of historical facts
included in this Form 10-Q are forward-looking statements. Although we believe
that the expectations reflected in such forward-looking statements are
reasonable, we can give no assurance that such expectations will prove to be
correct. Actual results could differ materially from those projected in the
forward-looking statements as a result of risks facing us. Such risks include,
but are not limited to:
(1) the risks associated with pending litigation, investigations, and
possible future proceedings as a result of our recent financial
statement restatement;
(2) the risk to our future growth due to our dependence on our ability to
effectively integrate acquired companies and capitalize on
cross-selling opportunities;
(3) 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;
(4) risks associated with our ability to maintain the accuracy and
confidentiality of our clients' employee data;
(5) the risk that our revenues from The Work Number may fluctuate due to
changes in the level of residential mortgage activity and interest
rates;
(6) our ability to prevent breach of confidentiality as we initiate
large-scale processing of verifications;
(7) 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 could be significantly harmed
if those requirements were relaxed;
(8) risks associated with future challenges regarding applicability of the
Fair Credit Reporting Act or any new privacy legislation or
interpretation of existing laws;
(9) risks associated with changes in economic conditions or unemployment
compensation laws;
(10) the risk of interruption of our computer network and telephone
operations; and
(11) the risk of discontinuance of 900 number telephone service.
18
See Item 1 "Business-Risk Factors" in our Annual Report on Form 10-K for the
year ended March 31, 2003, for a more detailed description of these and other
risk factors. You should read this report and the risk factors in our Annual
Report on Form 10-K completely and with the understanding that our actual
results may be materially different from what we expect. We do not undertake any
obligation to update these forward-looking statements, even though our situation
may change in the future. We qualify all of our forward-looking statements by
these cautionary statements.
19
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, our (1) revenues and
gross margin, (2) gross margin percentage by revenue category, and (3) certain
items from our statements of earnings as a percentage of revenues:
THREE MONTHS PERCENTAGE CHANGE
ENDED JUNE 30, THREE MONTHS
------------------------- ENDED JUNE 30,
2002 2003 2003 OVER 2002
--------- --------- -----------------
(Dollars in thousands)
REVENUES AND GROSS MARGIN:
Revenues:
The Work Number services $ 7,617 $ 10,943 43.7%
Unemployment cost management services 18,039 18,183 0.8
Customer premises systems 587 -- *
Maintenance and support 933 1,053 12.9
--------- ---------
Total revenues $ 27,176 $ 30,179 11.1
========= =========
Gross margin:
The Work Number services $ 4,802 $ 7,610 58.5%
Unemployment cost management services 8,779 8,460 (3.6)
Customer premises systems 248 -- *
Maintenance and support 737 721 (2.2)
--------- ---------
Total gross margin $ 14,566 $ 16,791 15.3
========= =========
GROSS MARGIN PERCENTAGE BY REVENUE CATEGORY:
The Work Number services 63.0% 69.5%
Unemployment cost management services 48.7 46.5
Customer premises systems 42.2 --
Maintenance and support 79.0 68.5
PERCENTAGE OF TOTAL REVENUES:
Revenues:
The Work Number services 28.0% 36.3% 43.7%
Unemployment cost management services 66.4 60.3 0.8
Customer premises systems 2.2 -- *
Maintenance and support 3.4 3.4 12.9
--------- ---------
Total revenues 100.0 100.0 11.1
Cost of revenues 46.4 44.4 6.2
--------- ---------
Gross margin 53.6 55.6 15.3
--------- ---------
Operating expenses:
Selling and marketing 17.4 20.0 27.6
General and administrative 21.5 19.9 2.8
--------- ---------
Total operating expenses 38.9 39.9 13.8
--------- ---------
Operating income 14.7 15.7 19.1
Other income (expense), net (1.3) (0.9) (18.7)
--------- ---------
Earnings from continuing operations before income tax 13.4 14.8 22.5
Income tax expense 5.2 5.7 22.5
--------- ---------
Earnings from continuing operations 8.2 9.1 22.5
Earnings (loss) from discontinued operations, net of tax (0.6) 0.3 *
--------- ---------
Net earnings 7.6% 9.4% 36.5%
========= =========
* - not meaningful.
20
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002
Revenues. Total revenues increased 11.1% to $30.2 million in the first quarter
of fiscal 2004 from $27.2 million in the first quarter of fiscal 2003.
Revenues from The Work Number services increased 43.7% to $10.9 million in the
first quarter of fiscal 2004 from $7.6 million in the first quarter of fiscal
2003, due primarily to an increase in transaction volume from marketing efforts
directed to verifiers and employers, partially offset by lower average
transaction fees due to the increase in transactions from users with volume
pricing discounts. Also, we experienced increased transaction volumes due to an
increase in the number of clients and related employment records in the
database.
Revenues from unemployment cost management services increased 0.8% to $18.2
million in the first quarter of fiscal 2004 from $18.0 million in the first
quarter of fiscal 2003, due primarily to new clients added during the current
quarter, offset by the loss of some smaller clients last year as we instituted
certain minimum pricing policies.
Revenues from customer premises systems decreased to $0 in the first quarter of
fiscal 2004 from $587,000 in the first quarter of fiscal 2003. We are no longer
selling these systems.
Revenues from maintenance and support increased 12.9% to $1.1 million in the
first quarter of 2004 from $933,000 in the first quarter of fiscal 2003 due to
additional revenue generated through services provided to clients that were
outside of our standard maintenance agreements. This increase was partially
offset by lower standard maintenance revenues caused by a shrinking client base.
We anticipate revenues will decrease over time from current quarter levels as
our installed base continues to shrink as supported systems approach the end of
their life cycle.
Gross Margin. Gross margin increased 15.3% to $16.8 million in the first quarter
of fiscal 2004 from $14.6 million in the first quarter of fiscal 2003. As a
percentage of total revenues, gross margin increased to 55.6% in the first
quarter of fiscal 2004 from 53.6% in the first quarter of fiscal 2003.
The Work Number services gross margin increased 58.5% to $7.6 million, or 69.5%
of corresponding revenue, in the first quarter of fiscal 2004 from $4.8 million,
or 63.0% of corresponding revenue, in the first quarter of fiscal 2003. The
increase in gross margin and gross margin percentage was due primarily to
revenue increases and improved leveraging of our operational infrastructure.
Additionally, more transactions were performed over the internet, which has a
lower transaction cost compared to transactions performed through our 900 or 800
telephone services.
Unemployment cost management services gross margin decreased 3.6% to $8.5
million, or 46.5% of corresponding revenue, in the first quarter of fiscal 2004
from $8.8 million, or 48.7% of corresponding revenue, in the first quarter of
fiscal 2003. This decrease in gross margin and gross margin percentage is due
primarily to costs related to our efforts to consolidate the UCeXpress
operational infrastructure. We believe that certain of these costs are
temporary, although continuing into the second fiscal quarter. During the last
half of the fiscal year, we expect to realize improvements in the gross margin
percentage as we continue to consolidate the cost structure of the acquired
businesses.
Customer premises systems gross margin decreased to $0 in the first quarter of
fiscal 2004 from $248,000, or 42.2% of corresponding revenue, in the first
quarter of fiscal 2003. We are no longer selling these systems.
Maintenance and support gross margin decreased 2.2% to $721,000, or 68.5% of
corresponding revenue, in the first quarter of fiscal 2004, from $737,000, or
79.0% of corresponding revenue, in the first quarter of fiscal 2003. The
decrease in gross margin and gross margin percentage is due to the fixed nature
of personnel and infrastructure costs even as our installed base continues to
shrink. Also, we incurred additional personnel costs related to providing
additional services outside of our standard maintenance agreement.
21
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Selling and Marketing Expenses. Selling and marketing expenses increased 27.6%
to $6.0 million in the first quarter of fiscal 2004 from $4.7 million in the
first quarter of fiscal 2003. As a percentage of revenues, such expenses
increased to 20.0% in the first quarter of fiscal 2004 from 17.4% in the first
quarter of fiscal 2003. These increases are due to increased costs related to
our recent reorganization of the sales and services teams. In addition to
realigning our sales and service teams into regions, we added personnel and
related costs. Additionally, marketing costs increased in the first quarter of
fiscal 2004 as we increased our efforts to market to high volume verifiers of
the The Work Number database. We expect to see selling and marketing expenses,
as a percentage of revenues, decrease slightly from current levels throughout
the year as we continue to consolidate the sales and service teams.
General and Administrative Expenses. General and administrative expenses
increased 2.8% to $6.0 million in the first quarter of fiscal 2004 from $5.9
million in the first quarter of fiscal 2003. The increase in such expenses
reflects the increased infrastructure costs of a growing business and workforce.
As a percentage of revenues, such expenses decreased to 19.9% in the first
quarter of fiscal 2004 from 21.5% in the first quarter of fiscal 2003. This
decrease is due primarily to improved leveraging of personnel and infrastructure
costs. Also, we experienced cost savings as we consolidated certain back office
functions related to our acquisitions from March 2002.
Other Income (Expense), Net. Other income (expense), net decreased to $269,000
of other expense in the first quarter of fiscal 2004 from $331,000 of other
expense in the first quarter of fiscal 2003, due to a lower level of outstanding
borrowings throughout the current period compared to the year-ago period.
Income Tax Expense. Our effective income tax rate was 38.5% in the first quarter
of fiscal 2004 and 2003.
Earnings (Loss) From Discontinued Operations, Net of Income Taxes. The loss of
$173,000 for the first quarter of fiscal 2003 represents the net loss realized
during the period for our human resource and benefits application services
business. The majority of this business was sold April 22, 2003. The remainder
of the business is currently held for sale. We anticipate that this remaining
business will be disposed of within the next 12 months. We realized net earnings
of $80,000 for the first quarter of fiscal 2004 related to the operations of the
remaining business.
LIQUIDITY AND CAPITAL RESOURCES
In recent years, we have financed our operations through cash flows from
operations, except as described below.
Net cash provided by operating activities was $3.1 million in the first quarter
of fiscal 2004, compared to $7.1 million in the first quarter of fiscal 2003.
This change from the comparable period was primarily due to our significant
payment of current liabilities in the first quarter of fiscal 2004, the largest
being our payment of accrued incentive compensation related to year end fiscal
2003.
Additionally, during the quarter, we used cash to retire debt, repurchase stock,
acquire a small unemployment cost management company, invest in infrastructure
and pay a quarterly dividend.
On August 8, 2001 we completed a secondary stock offering of 2,950,000 shares of
our common stock, including 200,000 shares of a selling shareholder, resulting
in gross proceeds to the Company of $83.1 million. Additionally, we incurred
$644,000 of costs related to the transaction which were offset against the
proceeds. The share amounts discussed above do not include the effect of the 10%
stock dividend declared on September 6, 2001.
Our working capital was $1.5 million at March 31, 2003 and $2.1 million at June
30, 2003. Total working capital increased during the three months ended June 30,
2003 due principally to the sale of our human resource and benefits application
services business, which had net negative working capital at March 31, 2003.
Based on cash and cash equivalents on hand, together with anticipated cash flows
from operations, we believe we have sufficient liquidity to pay our obligations
as they become due, for at least the next 12 months.
Our accounts receivable decreased from $18.1 million at March 31, 2003 to $16.7
million at June 30, 2003, due primarily to a higher level of billings during the
last quarter of fiscal 2003 compared to the first quarter of fiscal 2004.
Our capital expenditures were $1.0 million during the three months ended June
30, 2003. These capital expenditures were principally for computer equipment and
integrating the operational infrastructure for our unemployment cost management
services business. At June 30, 2003, we had no significant capital spending or
purchase commitments other than normal purchase commitments and commitments
under facilities and operating leases, but would expect
22
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
capital expenditures to increase during the next 15 to 21 months, as we continue
to integrate the operations of our acquisitions.
In September 5, 2002, our board of directors authorized us to repurchase up to
one million shares of our stock in the open market, or through privately
negotiated transactions, during the 36 month period ending September 30, 2005,
subject to market conditions and other factors. As of June 30, 2003, 306,211
shares have been repurchased under this plan, including 131,211 shares
repurchased during the three month period ended June 30, 2003 for $1.8 million.
Except for the 465,166 shares remaining in the treasury at June 30, 2003, all
shares repurchased have been reissued in connection with employee stock option
exercises and employee stock purchase plan purchases.
During the first quarter of fiscal 2004, we continued our quarterly dividend
program, declaring a $0.04 per share cash dividend, totaling $538,000, on May
22, 2003. The dividend was payable July 18, 2003 to shareholders of record on
June 20, 2003.
In connection with the acquisitions of The Frick Company and the GM Unemployment
Compensation Business, on March 27, 2002, pursuant to a loan agreement dated as
of March 27, 2002, (the "Loan Agreement"), we obtained secured financing
consisting of a $30,000,000 term loan (the "Term Loan") and a $10,000,000
revolving credit facility (the "Revolving Credit Facility") from LaSalle Bank
National Association, as administrative agent and lender, and Southwest Bank of
St. Louis, as lender, and any other lenders that may become party to the Loan
Agreement (collectively, the "Lenders"). We used the proceeds of the Term Loan
to pay a portion of the purchase price for the acquisitions; however, we have
not borrowed under the Revolving Credit Facility. We must repay principal of the
Term Loan in quarterly installments, with the final installment due on February
27, 2005. In addition, principal payments are required out of excess cash flow,
as defined, unless certain tests are met. We made our first excess cash flow
principal payment of $3.3 million during our second quarter of fiscal 2004. The
Revolving Credit Facility also matures on February 27, 2005.
The Term Loan and advances under the Revolving Credit Facility bear interest at
rates we select under the terms of the Loan Agreement, including a base rate or
eurodollar rate, plus an applicable margin. Until March 27, 2003, eurodollar
rate loans bore interest at the applicable eurodollar rate plus 2.25% and base
rate loans bore interest at the applicable base rate plus 0.00%. Commencing
March 28, 2003, the applicable margin for eurodollar rate loans varies from
2.00% to 2.25%, and the applicable margin for base rate loans will remain at
0.00%, in each case based upon our ratio of total indebtedness to EBITDA
(earnings before interest, taxes, depreciation and amortization). We may make
prepayments under the Term Loan and Revolving Credit Facility without penalty.
In addition, if William W. Canfield ceases serving as our chief executive
officer during the first 24 months after closing, and we do not retain a
substitute satisfactory to the Lenders within 120 days, then we are required to
repay all outstanding loans, including both the Term Loan and Revolving Credit
Facility.
The Loan Agreement is secured by pledges of our stock in, and guarantees of, our
subsidiaries and security interests in substantially all of our, and our
subsidiaries' assets.
The Loan Agreement includes certain covenants, including, without limitation,
restrictions on the use of proceeds of the Term Loan and loans made under the
Revolving Credit Facility. The Term Loan was to be used solely to pay a portion
of the purchase price for the acquisitions of the The Frick Company and the GM
Unemployment Compensation Business. The proceeds of loans made under the
Revolving Credit Facility may be used solely for working capital, permitted
capital expenditures, as the source for payment of our obligations with respect
to certain existing letters of credit, to pay the transaction cost of the Loan
Agreement, and to finance certain permitted acquisitions. The Loan Agreement
also requires compliance with certain financial covenants based on our minimum
net worth, minimum EBITDA, our ratio of total indebtedness to EBITDA and our
ratio of EBITDA to fixed charges. The Loan Agreement further requires compliance
with certain operating and other covenants which limit, among other things, the
incurrence of additional indebtedness by us and our subsidiaries, the amount of
capital expenditures to be made by us and our subsidiaries, sales of assets and
mergers and dissolutions, impose restrictions on distributions to shareholders,
change of control of TALX, investments, acquisitions and liens, and which
require compliance, in all material respects, with material laws. The Loan
Agreement generally prohibits the payment of cash dividends, except for cash
dividends not
23
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
in excess of $3.0 million per fiscal year so long as we are not in default at
the time of the declaration. The Loan Agreement also contains various
representations and warranties, including among other things, the accuracy of
financial statements and other information delivered to the Lenders and the
absence of changes which would have or would reasonably be likely to have a
material adverse effect (as customarily included in secured credit facilities of
this nature).
On July 31, 2003 we entered into an amendment to the Loan Agreement, effective
June 30, 2003. Our wholly-owned subsidiaries, TALX UCM Services, Inc. and Ti3,
Inc., consented to the amendment as guarantors. Among other things, the
amendment increased the amount of dividends we are permitted to make during any
fiscal year and modified the minimum EBITDA covenant for the quarters ended June
30, 2003 through the maturity of the Loan Agreement. The amendment further
modified the definition of excess cash flow such that treasury stock repurchases
are included as a fixed charge in the calculation of excess cash flow, as
defined, which required us to pay to the Lenders $3.25 million by July 31, 2003.
At June 30, 2003, we believe we were in material compliance with all covenants
under the Loan Agreement, after giving effect to the amendment.
As a condition of our Loan Agreement, we were required to enter into an interest
rate swap agreement for 50% of our outstanding Term Loan as a means of reducing
our interest rate exposure. Pursuant to this requirement, we entered into an
interest rate swap contract on June 26, 2002 for a notional amount of $14
million, which represented 50% of our outstanding Term Loan balance on that
date. Under this contract, we pay a fixed rate of 3.45% and receive a variable
rate of LIBOR, which is equal to the LIBOR rate utilized on our Term Loan. The
notional amount of our interest rate swap contract steps down according to the
same schedule as our Term Loan, maintaining a 50% hedged position. All payment
dates and maturity dates are the same as our Term Loan. This strategy
effectively converts 50% of our Term Loan into a fixed rate instrument.
The interest rate swap and related gains and losses arising on the contract are
accounted for as a cash flow hedge in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities." Specifically, changes in the fair value of derivative
instruments designated as cash flow hedges are deferred and recorded in other
comprehensive income. These deferred gains or losses are recognized in income
when the transactions being hedged are completed.
As of June 30, 2003, the fair value of the interest rate swap in the amount of
$287,000 is included in accrued expenses and other liabilities.
We do not use financial instruments for trading or speculative purposes.
OTHER MATTERS
We are cooperating with a pending SEC investigation and are a defendant in
pending lawsuits which are described in note 9 of our Notes to Consolidated
Financial Statements.
As previously reported, we restated our financial statements for each of the
quarters ended June 30, 2001 through June 30, 2002 and for the fiscal years
ended March 31, 2001 and 2002. As a result of the restatement, plaintiffs who
have filed lawsuits against us previously have amended their complaints to
include claims related to this restatement. We cannot predict the outcome of any
such litigation at this time. Additionally, the lenders under our March 27, 2002
Loan Agreement, which is described more fully above under Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources, could seek to exercise remedies which may be
available to them, such as acceleration of our loans, in the event they
determine that, as a result of the restatement discussed above or the SEC
investigation discussed above or otherwise, we have breached a covenant or
representation and warranty in the Loan Agreement. If an unfavorable result
occurred in any such action, our business and financial conditions could be
harmed.
24
TALX CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Further, we cannot predict at this time whether or not any additional regulatory
investigation by the SEC or otherwise related to the restatement or any other
matter will be commenced, or if it is, the outcome of any such investigation.
However, if any such investigation were to result in a regulatory proceeding or
action against us, our business and financial condition could be harmed.
Regardless of the outcome of any litigation or regulatory proceeding, litigation
and regulatory proceedings of these types are expensive and will require that we
devote substantial resources and executive time to defend these proceedings.
25
TALX CORPORATION AND SUBSIDIARIES
PART I - ITEMS 3 AND 4
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND
CONTROLS AND PROCEDURES
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As discussed above, our Term Loan and advances under our Revolving Credit
Facility bear interest at rates we select under the terms of the Loan Agreement,
including a base rate or eurodollar rate, plus an applicable margin. Until March
27, 2003, eurodollar rate loans bore interest at the applicable eurodollar rate
plus 2.25% and base rate loans will bear interest at the applicable base rate.
After that, the applicable margin for eurodollar rate loans varies from 2.00% to
2.25%, and the applicable margin for base rate loans remains at 0.00%, in each
case based upon our ratio of total indebtedness to EBITDA.
As of June 30, 2003, we had $19.5 million principal outstanding on our term
loan, of which $9.75 million was hedged with an interest rate swap contract. On
an annual basis, a 100 basis point change in interest rates would result in an
approximate $97,500 change to our annual interest expense, based on net variable
borrowings of $9.75 million.
ITEM 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, management, including our
Chairman, President and Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures with respect to the information generated for use in
this Quarterly Report. Based upon, and as of the date of that evaluation, the
Chairman, President and Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures were effective to provide
reasonable assurance that information required to be disclosed in the reports
that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Commission's rules and forms.
There was no change in our internal control over financial reporting during the
quarter ended June 30, 2003, that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
It should be noted that while our management, including the Chairman, President
and Chief Executive Officer and Chief Financial Officer, believe our disclosure
controls and procedures provide a reasonable level of assurance, they do not
expect that our disclosure controls and procedures or internal controls will
prevent all error and all fraud. A control system, no matter how well conceived
or operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the controls. The design of any
system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions;
over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.
26
TALX CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information contained in Notes 9 and of our Notes to Unaudited Consolidated
Financial Statements is incorporated by reference herein.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index.
(b) Reports on Form 8-K
(i) On May 7, 2003, we filed a Current Report on Form 8-K furnishing,
under Items 7 and 9, our results of operations for the fiscal year
ended March 31, 2003 and guidance for revenues and earnings per
share for fiscal year 2004.
(ii) On April 24, 2003, we filed a Current Report on Form 8-K
furnishing, under Items 7 and 9, information concerning the sale
of our outsourced benefits enrollment business.
27
TALX CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TALX CORPORATION
Date: August 1, 2003 By: /s/ WILLIAM W. CANFIELD
--------------------------------
William W. Canfield
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 1, 2003 By: /s/ L. KEITH GRAVES
--------------------------------
L. Keith Graves
Chief Financial Officer and
Assistant Secretary
(Principal Financial and
Accounting Officer)
28
TALX CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Restated Articles of Incorporation, as amended, incorporated
by reference from Exhibit 3.1 to our Form 10-K for the fiscal
year ended March 31, 1997 (File No. 000-21465)
3.2 Bylaws, as amended and restated, incorporated by reference to
Exhibit 3.2 to our Quarterly Report on Form 10-Q for the
period ended December 31, 2001 (File No. 000-21465)
10.1 Employment Agreement between TALX Corporation and
Mr. Hoffmann +
10.2 Third Amendment to Loan Agreement, among LaSalle Bank
National Association, Southwest Bank of St. Louis and TALX
Corporation effective as of June 30, 2003.
11 Computation of Earnings (Loss) Per Share
31.1 Chief Executive Officer Certification pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2 Chief Financial Officer Certification pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934.
32.1 Chief Executive Officer Certification pursuant to
Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.
32.2 Chief Financial Officer Certification pursuant to
Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350.
- -----------
+ Represents management contract or compensatory plan or arrangement
29