TALX Corporation (NASDAQ: TALX) today reported that earnings from
continuing operations increased 54 percent to $7.4 million from the
year-ago $4.8 million. On a diluted share basis, reflecting a
three-for-two stock split effective January 17, 2006, earnings from
continuing operations were $0.22 ($0.33 on a pre-split basis), for
the third fiscal quarter ended December 31, 2005, compared to $0.15
($0.22 on a pre-split basis), for the year-ago period. The earnings
improvement primarily reflects strong revenue gains in The Work
Number services, overall cost control and the contribution from
recent acquisitions. Third-quarter revenues grew 31 percent to
$52.3 million from $39.8 million in the year-earlier quarter. The
Work Number services' revenues rose 41 percent, and revenues for
the tax management services business increased 27 percent from
year-ago levels. Gross profit for the third quarter expanded 37
percent to $33.1 million from $24.1 million, with gross margin
rising 270 basis points to 63.3 percent from 60.6 percent the year
before. Gross profit for The Work Number services increased 50
percent to $17.0 million from $11.4 million, and gross margin for
this segment climbed 460 basis points to 77.7 percent from 73.1
percent the year before. Gross profit for the tax management
services business rose 28 percent to $15.8 million from $12.3
million, with gross margin improving to 52.6 percent from 52.3
percent the year before. Revenues for the first nine months of
fiscal 2006 increased 31 percent to $147.5 million from $112.5
million the year before. Earnings from continuing operations for
the first nine months of fiscal 2006 were $21.0 million, or $0.62
per diluted share on a post-split basis ($0.93 on a pre-split
basis). In the year-ago period, earnings from continuing operations
were $8.9 million, or $0.28 per diluted share on a post-split basis
($0.41 on a pre-split basis), which included an SEC settlement
charge of $2.5 million, or $0.08 per diluted share on a post-split
basis ($0.12 on a pre-split basis). Excluding this charge, adjusted
earnings from continuing operations grew 84 percent for the
nine-month period, from $11.4 million, or $0.36 per diluted share
on a post-split basis ($0.53 on a pre-split basis). See attached
"Supplemental Financial Information" for a reconciliation of
differences from the comparable GAAP measures in fiscal year 2005.
Because of the favorable operating trends, as well as recent
acquisitions, TALX is again raising guidance for the fiscal year
ending March 31, 2006. Revenue is now estimated to be a range of
$205 million to $207 million compared with previous guidance of
$193 million to $196 million. On a post-split basis, the estimate
for diluted earnings per share from continuing operations is now a
range of $0.86 to $0.87 compared with the previous guidance of
$0.80 to 0.83 ($1.20 to $1.24 on a pre-split basis). TALX also
provided initial guidance for the fourth fiscal quarter ending
March 31, 2006. The company expects revenues ranging from $57
million to $59 million, up from the year-earlier $45.9 million, and
diluted earnings per share from continuing operations of $0.25 to
$0.26 on a post-split basis, compared with $0.21 on a post-split
basis in the comparable fiscal 2005 period. William W. Canfield,
president and chief executive officer, commented, "We achieved
record revenues again this quarter by continuing to execute our
strategies, including making acquisitions that meet our strict
criteria and focusing on key attributes of our business model,
notably scalability, efficiency, and cross-selling opportunities.
As an example, our continuing efforts to expand The Work Number
database, along with our REACH program to increase clients' use of
The Work Number, delivered double-digit improvements in both
revenues and gross profit. "The successful integration of
acquisitions, including the two that we announced during our fiscal
third quarter, has been a major contributor to revenue growth and
to our overall improvement in gross margins. While acquisitions
were strong contributors to the revenue increases in our tax
management services businesses, we also realized 4 percent organic
growth in the unemployment tax management business during the
fiscal third quarter. The tax management services businesses
continued to be significant generators of referrals for The Work
Number, introducing our clients to greater efficiency while
increasing transaction levels for TALX." L. Keith Graves, vice
president and chief financial officer, pointed out, "TALX is
focused on maintaining a highly disciplined approach to expense
control while expanding an infrastructure that leverages the
complementary nature of our business units. As a result, this
quarter we were able to substantially improve our operating margin
to almost 26 percent of revenues. Further, our solid financial
results for the first nine months of the fiscal year yielded nearly
$25 million in cash from operating activities, which helped us
repay $22 million of debt while funding our acquisitions and
capital expenditures and paying dividends." The total number of
employment records on The Work Number services database increased
to 125.7 million at December 31, 2005, from 104.1 million a year
ago, representing a 21 percent gain. The company added 6.5 million
employment records during the quarter, representing a 5 percent
increase in total records over the previous sequential quarter.
Total employment records under contract, including those in the
contract backlog to be added to the database, increased 22 percent
to 133.4 million at December 31, 2005, from 109.2 million a year
earlier and 5 percent over the previous sequential quarter total of
126.5 million. A conference call to discuss the company's fiscal
2006 third- quarter performance and its outlook is scheduled for
Thursday, January 26, at 9:00 a.m. Central Time. To participate in
this call, dial (800) 230-1902. A slide presentation will accompany
the call on the Web at www.talx.com/2006. Other information of
investor interest can be found at www.talx.com/investor, and the
company's corporate governance website is located at
www.talx.com/governance. A digitized replay of the call will be
available from 2:30 p.m. CDT on Thursday, January 26, through May
10, 2006. The replay number is (800) 475-6701 and the access code
is 814727. Statements in this news release expressing or indicating
the beliefs and expectations of management regarding future
performance are forward-looking statements including, without
limitation, favorable operating trends, anticipated revenue and
earnings in the fourth quarter of fiscal 2006 and for the fiscal
year ending March 31, 2006, and any other plans, objectives,
expectations and intentions contained in this release that are not
historical facts. These statements reflect our current views with
respect to future events and are based on assumptions and subject
to risks and uncertainties. These risks and uncertainties include,
without limitation, the preliminary nature of our estimates, which
are subject to change as we collect additional information and they
are reviewed internally and by our external auditors, as well as
the risks detailed in the company's Form 10-K for the fiscal year
ended March 31, 2005, under the caption "Risk Factors" in "Part I -
Item 1," as well as (1) risks related to our ability to increase
the size and range of applications for The Work Number database and
successfully market current and future services and our dependence
on third-party providers to do so; (2) the risk that our revenues
from The Work Number may fluctuate in response to changes in
certain economic conditions such as interest rates and employment
trends; (3) risks relating to the dependence of the market for The
Work Number on mortgage documentation requirements in the secondary
market and the risk that our revenues and profitability would be
significantly harmed if those requirements were relaxed or
eliminated; (4) risks associated with our ability to prevent
breaches of confidentiality or inappropriate use of data as we
perform large-scale processing of verifications; (5) risks
associated with our ability to maintain the accuracy, privacy and
confidentiality of our clients' employee data; (6) risks associated
with potential challenges regarding the applicability of the Fair
Credit Reporting Act or similar law; (7) risks associated with
changes in economic conditions or unemployment compensation or tax
credit laws; (8) risks related to Congressional approval of work
opportunity ("WOTC") and welfare to work ("WtW") tax credits; (9)
the risk to our future growth due to our dependence on our ability
to effectively integrate acquired companies and capitalize on
cross-selling opportunities; (10) risks related to the
applicability of any new privacy legislation or interpretation of
existing laws; (11) the risk of interruption of our computer
network and telephone operations, including potential slow-down or
loss of business as potential clients review our operations; and
(12) risks relating to the applicability of the SUTA Dumping
Prevention Act of 2004 to our tax planning services. These risks,
uncertainties and other factors may cause our actual results,
performance or achievements to be materially different from those
expressed or implied by our forward-looking statements. We do not
undertake any obligation or plan to update these forward-looking
statements, even though our situation may change. TALX Corporation
is a leading provider of payroll-related and human resources
services. Based in St. Louis, Missouri, TALX holds a leadership
position in two key areas - automated employment and income
verification via The Work Number (R) and unemployment tax
management via UC eXpress (R). The TALX suite of electronic
services also includes tax credits and incentives, paperless pay,
time tracking, W-2 management, I-9 management, and onboarding
services. The company's common stock trades in the Nasdaq National
Market under the symbol TALX. For more information about TALX
Corporation, call 314-214-7000 or access the company's web site at
www.talx.com. TALX Corporation and Subsidiaries Supplemental
Financial Information The company sometimes uses information
derived from consolidated financial information but not presented
in the financial statements prepared in accordance with generally
accepted accounting principles ("GAAP"). Specifically, in this
release, the company has used non-GAAP financial measures to
eliminate the effect on fiscal 2005 earnings from continuing
operations and diluted earnings per share of a $2.5 million charge
recorded in connection with a settlement with the SEC. Non-GAAP
financial measures should not be considered as a substitute for, or
superior to, measures of financial performance prepared in
accordance with GAAP. We use these non-GAAP measures internally to
evaluate the performance of the business, including allocation of
assets and resources, planning, comparison of financial performance
between historical periods and evaluation and compensation of
management and staff. We believe that the presentation of these
non- GAAP financial measures provides useful information to
investors because these measures exclude elements that we do not
consider to be indicative of earnings from our ongoing operating
activities and allow for an equivalent comparison to prior-period
results. -0- *T Reconciliation of the Nine Months Ended December
31, 2004 Adjusted Earnings from Continuing Operations to GAAP
Earnings from Continuing Operations: GAAP earnings from continuing
operations $ 8.9 million SEC settlement charge 2.5 million Adjusted
earnings from continuing operations $ 11.4 million Reconciliation
of the Nine Months Ended December 31, 2004 Adjusted Diluted
Earnings Per Share from Continuing Operations to GAAP Diluted
Earnings Per Share from Continuing Operations: Pre-split Post-split
GAAP diluted EPS from continuing operations $ 0.41 $ 0.28 SEC
settlement charge 0.12 0.08 Adjusted diluted EPS from continuing
operations $ 0.53 $ 0.36 TALX Corporation and Subsidiaries
Consolidated Statements of Earnings (dollars in thousands, except
per share information) (unaudited) Three Months Ended Nine Months
Ended December 31, December 31, 2005 2004 2005 2004 Revenues: The
Work Number services $21,904 $15,558 $ 64,206 $ 44,163 Tax
management services 29,978 23,605 81,946 66,167 Maintenance and
support 450 677 1,318 2,201 Total revenues 52,332 39,840 147,470
112,531 Cost of revenues: The Work Number services 4,878 4,186
14,287 12,309 Tax management services 14,204 11,260 39,746 33,267
Maintenance and support 101 253 287 717 Total cost of revenues
19,183 15,699 54,320 46,293 Gross profit 33,149 24,141 93,150
66,238 Operating expenses: Selling and marketing 8,587 6,965 24,390
20,603 General and administrative 11,108 8,460 31,248 24,409 SEC
settlement charge - - - 2,500 Total operating expenses 19,695
15,425 55,638 47,512 Operating income 13,454 8,716 37,512 18,726
Other income(expense), net: Interest income 167 66 478 122 Interest
expense (1,356) (827) (3,280) (2,110) Other, net - 1 (5) - Total
other income (expense), net (1,189) (760) (2,807) (1,988) Earnings
from continuing operations before income tax expense 12,265 7,956
34,705 16,738 Income tax expense 4,843 3,143 13,707 7,797 Earnings
from continuing operations 7,422 4,813 20,998 8,941 Discontinued
operations, net of income taxes: Earnings(loss)from discontinued
operations, net (3) 8 - 15 Gain on disposal of discontinued
operations, net 225 145 450 425 Earnings from discontinued
operations 222 153 450 440 Net earnings $ 7,644 $ 4,966 $ 21,448 $
9,381 Basic earnings per share: Continuing operations $ 0.23 $ 0.16
$ 0.66 $ 0.29 Discontinued operations 0.01 - 0.02 0.01 Net earnings
$ 0.24 $ 0.16 $ 0.68 $ 0.30 Diluted earnings per share: Continuing
operations $ 0.22 $ 0.15 $ 0.62 $ 0.28 Discontinued operations - -
0.02 0.01 Net earnings $ 0.22 $ 0.15 $ 0.64 $ 0.29 Weighted average
number of shares outstanding (basic) 31,928,437 30,992,405
31,706,367 30,882,218 Weighted average number of shares outstanding
(diluted) 34,083,492 32,719,350 33,715,465 32,384,523 TALX
Corporation and Subsidiaries Consolidated Balance Sheets (dollars
in thousands, except share information) Assets December 31, 2005
March 31, 2005 (unaudited) Current assets: Cash and cash
equivalents $ 1,967 $ 11,399 Short-term investments 5,850 7,615
Accounts receivable, less allowance for doubtful accounts of $4,097
at December 31, 2005, and $3,173 at March 31, 2005 36,895 19,718
Work in progress, less progress billings 2,433 3,713 Prepaid
expenses and other current assets 7,424 5,282 Deferred tax assets,
net 1,980 1,683 Total current assets 56,549 49,410 Property and
equipment, net of accumulated depreciation of $23,322 at December
31, 2005, and $18,572 at March 31, 2005 14,414 11,414 Capitalized
software development costs, net of amortization of $5,874 at
December 31, 2005, and $4,605 at March 31, 2005 3,837 3,374
Goodwill 185,901 136,143 Other intangibles, net 78,887 45,448 Other
assets 1,604 1,130 $341,192 $246,919 Liabilities and Shareholders'
Equity Current liabilities: Accounts payable $ 2,662 $ 2,054
Accrued expenses and other liabilities 16,317 16,502 Dividends
payable 1,068 835 Deferred revenue 11,280 5,203 Total current
liabilities 31,327 24,594 Deferred tax liabilities, net 12,728
10,083 Long-term debt 116,802 57,500 Other liabilities 3,048 2,878
Total liabilities 163,905 95,055 Commitments and contingencies
Shareholders' equity: Preferred stock, $.01 par value; authorized
5,000,000 shares and no shares issued or outstanding at December
31, 2005 or March 31, 2005 - - Common stock, $.01 par value per
share; authorized 75,000,000 shares at December 31, 2005, and
30,000,000 shares at March 31, 2005; issued 21,358,100 shares at
December 31, 2005, and 20,922,011 shares at March 31, 2005 214 209
Additional paid-in capital 172,877 164,937 Deferred compensation
(1,639) (223) Retained earnings (accumulated deficit) 5,749
(12,726) Accumulated other comprehensive income: Unrealized gain on
interest rate swap contract, net of tax expense of $56 at December
31, 2005, and $39 at March 31, 2005 86 59 Treasury stock, at cost,
42,275 shares at March 31, 2005 - (392) Total shareholders' equity
177,287 151,864 $341,192 $246,919 TALX Corporation and Subsidiaries
Consolidated Statements of Cash Flows (dollars in thousands)
(unaudited) Nine Months Ended December 31, 2005 2004 Cash flows
from operating activities: Net earnings $21,448 $9,381 Adjustments
to reconcile net earnings to net cash provided by operating
activities: Depreciation and amortization 9,369 7,874 Deferred
compensation 155 14 Deferred taxes 2,276 751 Gain on swap agreement
(59) - Change in assets and liabilities, excluding those acquired:
Accounts receivable, net (12,750) (2,746) Work in progress, less
progress billings 1,749 (100) Prepaid expenses and other current
assets (1,810) 6,316 Other assets (598) 122 Accounts payable 287
1,493 Accrued expenses and other liabilities 2,810 (485) Deferred
revenue 1,770 (70) Other liabilities 148 (251) Net cash provided by
operating activities 24,795 22,299 Cash flows from investing
activities: Additions to property and equipment (6,810) (4,709)
Change in restricted cash - 38,645 Acquisitions, net of cash
received (86,955) (59,285) Purchases of short-term investments
(5,120) (6,140) Proceeds from sale of short-term investments 6,885
- Capitalized software development costs (1,732) (1,538) Net cash
used in investing activities (93,732) (33,027) Cash flows from
financing activities: Issuance of common stock 4,231 2,132
Repurchase of common stock (1,287) - Borrowings under long-term
debt facility 138,802 18,000 Repayments under long-term debt
facility (79,500) (7,550) Dividends paid (2,741) (2,191) Net cash
provided by financing activities 59,505 10,391 Net decrease in cash
and cash equivalents (9,432) (337) Cash and cash equivalents at
beginning of period 11,399 8,568 Cash and cash equivalents at end
of period $ 1,967 $ 8,231 *T
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