Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | Apr. 21, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | EPIQ SYSTEMS INC | |
Entity Central Index Key | 1027207 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 37,283,980 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
CURRENT ASSETS: | ||
Cash and cash equivalents | $38,308 | $54,226 |
Trade accounts receivable, less allowance for doubtful accounts of $3,395 and $3,986, respectively | 129,801 | 117,854 |
Prepaid expenses | 17,076 | 12,934 |
Income taxes receivable | 6,497 | 9,437 |
Deferred income taxes | 4,675 | 4,625 |
Other current assets | 137 | 71 |
Total Current Assets | 196,494 | 199,147 |
LONG-TERM ASSETS: | ||
Property and equipment, net | 70,217 | 70,579 |
Internally developed software, net | 14,795 | 14,713 |
Goodwill | 403,990 | 404,187 |
Other intangibles, net | 26,919 | 29,605 |
Other long-term assets | 18,809 | 20,021 |
Total Long-term Assets | 534,730 | 539,105 |
Total Assets | 731,224 | 738,252 |
CURRENT LIABILITIES: | ||
Accounts payable | 15,388 | 18,548 |
Current maturities of long-term obligations | 10,301 | 10,959 |
Accrued compensation | 11,972 | 18,673 |
Customer deposits | 6,752 | 2,534 |
Deferred revenue | 3,572 | 2,276 |
Dividends payable | 3,387 | 3,376 |
Other accrued expenses | 8,717 | 7,988 |
Total Current Liabilities | 60,089 | 64,354 |
LONG-TERM LIABILITIES: | ||
Deferred income taxes | 33,535 | 34,650 |
Other long-term liabilities | 12,860 | 11,789 |
Long-term obligations (excluding current maturities) | 300,733 | 302,522 |
Total Long-term Liabilities | 347,128 | 348,961 |
COMMITMENTS AND CONTINGENCIES | ||
EQUITY: | ||
Preferred Stock | ||
Common stock-$0.01 par value; Authorized 100,000,000 shares; Issued and outstanding March 31, 2015 - 40,835,651 and 37,182,480 shares, respectively; Issued and outstanding December 31, 2014 - 40,835,651 and 36,680,469 shares, respectively | 408 | 408 |
Additional paid-in capital | 292,429 | 294,054 |
Accumulated other comprehensive loss | -7,393 | -4,362 |
Retained earnings | 86,773 | 88,391 |
Treasury stock, at cost - 3,653,171 shares and 4,155,182 shares, respectively | -48,210 | -53,554 |
Total Equity | 324,007 | 324,937 |
Total Liabilities and Equity | 731,224 | 738,252 |
Participating preferred stock | ||
EQUITY: | ||
Preferred Stock |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, except Share data, unless otherwise specified | ||
Trade accounts receivable, allowance for doubtful accounts (in dollars) | $3,395 | $3,986 |
Preferred stock, par value (in dollars per share) | $1 | $1 |
Preferred stock, shares authorized | 2,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 40,835,651 | 40,835,651 |
Common stock, shares outstanding | 37,182,480 | 36,680,469 |
Treasury stock, shares | 3,653,171 | 4,155,182 |
Participating preferred stock | ||
Preferred stock, par value (in dollars per share) | $1 | $1 |
Preferred stock, shares authorized | 100,000 | 100,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
REVENUE: | ||
Operating revenue | $107,755 | $116,220 |
Reimbursable expenses | 11,273 | 7,051 |
Total Revenue | 119,028 | 123,271 |
OPERATING EXPENSE: | ||
Direct cost of operating revenue (exclusive of depreciation and amortization shown separately below) | 51,029 | 57,635 |
Reimbursable expenses | 10,504 | 6,803 |
Selling, general and administrative expense | 39,064 | 44,176 |
Depreciation and software and leasehold amortization | 8,765 | 8,700 |
Amortization of identifiable intangible assets | 2,685 | 3,120 |
Fair value adjustment to contingent consideration | 1,142 | |
Other operating expense, net | 137 | 69 |
Total Operating Expense | 112,184 | 121,645 |
INCOME FROM OPERATIONS | 6,844 | 1,626 |
INTEREST EXPENSE (INCOME): | ||
Interest expense | 4,229 | 4,877 |
Interest income | -4 | -4 |
Net Interest Expense | 4,225 | 4,873 |
INCOME (LOSS) BEFORE INCOME TAXES | 2,619 | -3,247 |
PROVISION FOR (BENEFIT FROM) INCOME TAXES | 886 | -949 |
NET INCOME (LOSS) | $1,733 | ($2,298) |
NET INCOME (LOSS) PER SHARE INFORMATION: | ||
Basic | $0.05 | ($0.07) |
Diluted | $0.05 | ($0.07) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||
Basic | 36,281 | 34,862 |
Diluted | 36,914 | 34,862 |
Cash dividends declared per share of common stock | $0.09 | $0.09 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||
NET INCOME (LOSS) | $1,733 | ($2,298) |
Other comprehensive (loss) income: | ||
Foreign currency translation adjustment | -2,335 | 287 |
Unrealized losses on derivatives, net of tax benefit of $439 and $0, respectively | -696 | -18 |
COMPREHENSIVE LOSS | ($1,298) | ($2,029) |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Parenthetical) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||
Foreign currency translation adjustment, net of tax | $0 | $0 |
Unrealized losses on derivatives, tax benefit | $439 | $0 |
CONDENSED_CONSOLIDATED_STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (USD $) | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total |
In Thousands, unless otherwise specified | ||||||
Balance at Dec. 31, 2014 | $408 | $294,054 | ($4,362) | $88,391 | ($53,554) | $324,937 |
Balance (in shares) at Dec. 31, 2014 | 40,836 | -4,155 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 1,733 | 1,733 | ||||
Foreign currency translation adjustment | -2,335 | -2,335 | ||||
Unrealized losses on cash flow hedges | -696 | -696 | ||||
Tax benefit from share-based compensation | 325 | 325 | ||||
Restricted common stock issued under share-based compensation plans | -3,497 | 8,878 | 5,381 | |||
Restricted common stock issued under share-based compensation plans (in shares) | 685 | |||||
Stock option exercises | -8 | 483 | 475 | |||
Stock option exercises (in shares) | 37 | |||||
Common stock repurchased under share-based compensation plans | -4,017 | -4,017 | ||||
Common stock repurchased under share-based compensation plans (in shares) | -220 | |||||
Dividends declared ($0.09 per share) | -3,351 | -3,351 | ||||
Share-based compensation expense | 1,555 | 1,555 | ||||
Balance at Mar. 31, 2015 | $408 | $292,429 | ($7,393) | $86,773 | ($48,210) | $324,007 |
Balance (in shares) at Mar. 31, 2015 | 40,836 | -3,653 |
CONDENSED_CONSOLIDATED_STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical) (USD $) | 0 Months Ended | 3 Months Ended | |
Feb. 26, 2015 | Mar. 31, 2015 | Mar. 31, 2014 | |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | |||
Common Stock, Dividends, Per Share, Declared | $0.09 | $0.09 | $0.09 |
CONDENSED_CONSOLIDATED_STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | $3,824 | ($831) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | -6,482 | -9,464 |
Internally developed software costs | -2,136 | -1,437 |
Cash proceeds from sale of assets | 1 | 4 |
Net cash used in investing activities | -8,617 | -10,897 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Debt issuance costs | -612 | -837 |
Payments under long-term obligations | -2,496 | -2,133 |
Payment of acquisition-related liabilities | -18 | -3,457 |
Excess tax benefit related to share-based compensation | 31 | 197 |
Common stock repurchases | -4,017 | -3,214 |
Cash dividends paid | -3,340 | -3,152 |
Proceeds from exercise of stock options | 475 | 3,146 |
Net cash used in financing activities | -9,977 | -9,450 |
Effect of exchange rate changes on cash | -1,148 | 35 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | -15,918 | -21,143 |
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 54,226 | 40,336 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 38,308 | 19,193 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 3,506 | 3,669 |
Cash (recovered) paid for income taxes, net | -2,324 | 3,322 |
Non-cash investing and financing transactions: | ||
Property, equipment, and leasehold improvements accrued in accounts payable | 2,695 | 6,805 |
Dividends declared | 3,351 | 3,214 |
Capital expenditures funded by capital lease borrowings | $413 |
ACCOUNTING_POLICIES_INTERIM_FI
ACCOUNTING POLICIES, INTERIM FINANCIAL STATEMENTS AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2015 | |
ACCOUNTING POLICIES, INTERIM FINANCIAL STATEMENTS AND BASIS OF PRESENTATION | |
ACCOUNTING POLICIES, INTERIM FINANCIAL STATEMENTS AND BASIS OF PRESENTATION | |
NOTE 1: ACCOUNTING POLICIES, INTERIM FINANCIAL STATEMENTS AND BASIS OF PRESENTATION | |
The Condensed Consolidated Financial Statements of Epiq Systems, Inc. (“Epiq,” “we,” “our,” “us” or the “Company”) included herein have been prepared by the Company, without audit, in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules. The Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. The Condensed Consolidated Financial Statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements and the related notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 Form 10-K”) as filed with the SEC on March 2, 2015 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on Form 10-Q. | |
The preparation of financial statements in accordance with U.S GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the periods reported. Actual results may differ from those estimates. | |
In the opinion of the management of Epiq, the unaudited Condensed Consolidated Financial Statements contain all adjustments necessary for a fair presentation of the results for interim periods. All adjustments made were of a normal and recurring nature. | |
The results of operations for the three months ended March 31, 2015, are not necessarily indicative of the results expected for other interim periods or for the full year ending December 31, 2015. | |
LONGTERM_OBLIGATIONS
LONG-TERM OBLIGATIONS | 3 Months Ended | |||||||||||
Mar. 31, 2015 | ||||||||||||
LONG-TERM OBLIGATIONS | ||||||||||||
LONG-TERM OBLIGATIONS | ||||||||||||
NOTE 2: LONG-TERM OBLIGATIONS | ||||||||||||
The following is a summary of long-term obligations outstanding (dollars in thousands): | ||||||||||||
Final | Weighted- | March 31, | December 31, | |||||||||
Maturity | Average | 2015 | 2014 | |||||||||
Date | Interest Rate (1) | |||||||||||
Senior secured term loan | August 2020 | 4.50% | $ | 294,951 | $ | 296,250 | ||||||
Senior revolving loan | August 2018 | n/a | — | — | ||||||||
Capital leases | January 2019 | 3.00% | 3,129 | 3,177 | ||||||||
Notes payable | September 2017 | 2.20% | 11,746 | 12,895 | ||||||||
Acquisition-related liabilities | May 2021 | n/a | 1,208 | 1,159 | ||||||||
Total long-term obligations, including current portion | 311,034 | 313,481 | ||||||||||
Current maturities of long-term obligations | ||||||||||||
Senior secured term loan | (2,900 | ) | (3,574 | ) | ||||||||
Capital leases | (2,747 | ) | (2,749 | ) | ||||||||
Notes payable | (4,611 | ) | (4,593 | ) | ||||||||
Acquisition-related liabilities | (43 | ) | (43 | ) | ||||||||
Total Current maturities of long-term obligations | (10,301 | ) | (10,959 | ) | ||||||||
Total Long-term obligations | $ | 300,733 | $ | 302,522 | ||||||||
-1 | Weighted average interest rate as of March 31, 2015. | |||||||||||
Credit Agreement | ||||||||||||
As of March 31, 2015, we have a $400 million senior secured credit facility consisting of a $100 million senior revolving loan commitment, maturing in August 2018, and a $300 million senior secured term loan, maturing in August 2020 (the “Credit Agreement”). | ||||||||||||
On January 26, 2015, we entered into the Second Amendment to the Credit Agreement (the “Second Amendment”), which increased the senior secured term loan interest rate options by 25 basis points to the following: (1) 2.75% plus prime rate subject to a 1.75% floor; or (2) 3.75% plus one, two, three or six month LIBOR subject to a 0.75% LIBOR floor, for an aggregate floating rate floor of 4.50% The Second Amendment also amended the definition of “Applicable Margin” increasing the margin determined by reference to our consolidated net leverage ratio (as defined in the Credit Agreement) for purposes of calculating the interest rate for base rate loans, Eurodollar loans and the fee applicable to letters of credit as specified therein. In addition, the Second Amendment amended the definitions of “Consolidated EBITDA”, “Consolidated Net Income” and “Excess Cash Flow” to permit us to add back the additional following charges: (1) severance and reorganization costs and expenses incurred during any trailing twelve month period that includes a fiscal quarter ending on or after January 1, 2014, and on or prior to December 31, 2014; and (2) certain fees, costs and expenses incurred by us in connection with our previously announced review of certain strategic and financial alternatives, including potential proxy contests. | ||||||||||||
As of March 31, 2015, we had $1.7 million in letters of credit outstanding that reduce the available borrowing capacity under the senior revolving loan. | ||||||||||||
EQUITY
EQUITY | 3 Months Ended | ||||||||||
Mar. 31, 2015 | |||||||||||
EQUITY | |||||||||||
EQUITY | |||||||||||
NOTE 3: EQUITY | |||||||||||
Share Repurchases | |||||||||||
We have a policy that requires us to repurchase shares of our common stock to satisfy employee tax withholding obligations upon the vesting of restricted stock awards or the exercise of stock options and, at the participant’s election, shares of common stock surrendered to the Company for satisfaction of the exercise price of stock options. | |||||||||||
During the three months ended March 31, 2015 and 2014 we repurchased 219,737 shares of common stock for $4.0 million and 222,235 shares of common stock for $3.2 million, respectively. Additionally, during the three months ended March 31, 2015, 1,889 shares of common stock were surrendered to us to satisfy the exercise price of stock options. | |||||||||||
Dividends | |||||||||||
On February 26, 2015, the Board of Directors (the “Board”) of Epiq declared a cash dividend of $0.09 per outstanding share of common stock, which will be paid on May 29, 2015 to shareholders of record as of the close of business on April 24, 2015. Additionally, on April 23, 2015, the Board of Epiq declared a cash dividend of $0.09 per outstanding share of common stock, which will be paid on August 3, 2015 to shareholders of record as of the close of business on May 26, 2015. As of March 31, 2015, dividends payable were approximately $3.4 million. As of December 31, 2014, dividends payable were $3.4 million, for which we paid $3.3 million during the three months ended March 31, 2015. The remaining $0.1 million is related to dividend payments withheld on restricted stock until the release of restrictions. | |||||||||||
Shareholder Rights Agreement and Rights Dividend | |||||||||||
On September 18, 2014, we entered into a Rights Agreement (the “Rights Agreement”) pursuant to which the Board declared a dividend of one preferred stock purchase right (a “Right”) for each outstanding share of common stock of the Company. The dividend was paid on September 29, 2014, to holders of record as of the close of business on that date. The Rights will initially trade with, and will be inseparable from, the common stock. Each Right will allow its holder to receive from the Company one one-thousandth of a preferred share for $40.00 (or, in certain circumstances, alternative consideration which may include cash, property or other securities of the Company), subject to adjustment in accordance with the terms of the Rights Agreement, once the Rights become exercisable. This fraction of a preferred share will give the shareholder approximately the same dividend, voting, and liquidation rights as would one common share. | |||||||||||
Subject to certain exceptions, the Rights will separate from the common stock and become exercisable at the earlier to occur of the following dates (or such later date as the Board may determine under certain circumstances): (i) the tenth business day after the date of a public announcement, or public announcement of facts indicating, that a person or group has become a beneficial owner of 10% or more of the Company’s outstanding common stock; or (ii) the tenth business day after the date that any person or group commences or announces an intention to commence a tender or exchange offer that, if consummated, would result in that person or group becoming beneficial owner of 10% or more of the Company’s outstanding common stock. The Board may redeem the Rights for $0.001 per Right at any time prior to such time as any person or group triggers the Rights. The Rights have no voting or dividend privileges, and, unless and until they become exercisable, have no dilutive effect on the earnings of the Company. On April 23, 2015, the Board amended the Rights Agreement to extend the expiration of the Rights from May 15, 2015 to July 7, 2015. | |||||||||||
Accumulated Other Comprehensive Loss, Net | |||||||||||
Accumulated other comprehensive loss, net, is displayed as a separate component of Stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets. The following table presents the changes in the after-tax balances of each component of Accumulated other comprehensive loss, net for the three months ended March 31, 2015 and 2014 (in thousands): | |||||||||||
Foreign | Unrealized | Accumulated | |||||||||
Currency | Loss on | Other | |||||||||
Translation | Cash Flow | Comprehensive | |||||||||
Hedges | Loss | ||||||||||
Balance at December 31, 2014 | $ | (2,952 | ) | $ | (1,410 | ) | $ | (4,362 | ) | ||
Other comprehensive loss | (2,335 | ) | (696 | ) | (3,031 | ) | |||||
Balance at March 31, 2015 | $ | (5,287 | ) | $ | (2,106 | ) | $ | (7,393 | ) | ||
Balance at December 31, 2013 | $ | (541 | ) | $ | — | $ | (541 | ) | |||
Other comprehensive income (loss) | 287 | (18 | ) | 269 | |||||||
Balance at March 31, 2014 | $ | (254 | ) | $ | (18 | ) | $ | (272 | ) | ||
There were no reclassifications of amounts from Accumulated other comprehensive loss into the Condensed Consolidated Statements of Operations during the three months ended March 31, 2015 and 2014. | |||||||||||
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
EARNINGS PER SHARE | ||||||||
EARNINGS PER SHARE | ||||||||
NOTE 4: EARNINGS PER SHARE | ||||||||
Basic net income per share is computed on the basis of weighted-average outstanding common shares. Diluted net income per share is computed on the basis of basic weighted-average outstanding common shares adjusted for the dilutive effect, if any, of dilutive securities which included outstanding stock options and nonvested restricted stock awards. | ||||||||
The following table reconciles the basic earnings per share computation to the diluted earnings per share computation (in thousands, except per share amounts) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Net income (loss) | $ | 1,733 | $ | (2,298 | ) | |||
Weighted-average common shares outstanding: | ||||||||
Basic shares | 36,281 | 34,862 | ||||||
Effect of dilutive securities | 633 | — | ||||||
Diluted shares | 36,914 | 34,862 | ||||||
Earnings (loss) per share common share: | ||||||||
Basic income (loss) per common share | $ | 0.05 | $ | (0.07 | ) | |||
Diluted income (loss) per common share | $ | 0.05 | $ | (0.07 | ) | |||
Potentially dilutive shares excluded from the calculation: | ||||||||
Stock options excluded as their inclusion would be anti-dilutive | 137 | 553 | ||||||
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ||||||||||||||
FAIR VALUE MEASUREMENTS | ||||||||||||||
NOTE 5: FAIR VALUE MEASUREMENTS | ||||||||||||||
The following table provides the financial assets and liabilities carried at fair value, in thousands, measured on a recurring basis as of March 31, 2015 and December 31, 2014 using the fair value hierarchy prescribed by U.S. GAAP. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs. An asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. | ||||||||||||||
Fair Value Measurements | ||||||||||||||
Carrying | Quoted | Significant | Significant | |||||||||||
Prices | Other | Unobservable | ||||||||||||
in Active | Observable | Inputs | ||||||||||||
Markets | Inputs | |||||||||||||
Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||
March 31, 2015: | ||||||||||||||
Liabilities: | ||||||||||||||
Interest rate swap | $ | 3,586 | $ | — | $ | 3,586 | $ | — | ||||||
Acquisition-related contingent consideration | 1,165 | — | — | 1,165 | ||||||||||
Total Liabilities | $ | 4,751 | $ | — | $ | 3,586 | $ | 1,165 | ||||||
December 31, 2014: | ||||||||||||||
Assets: | ||||||||||||||
Interest rate cap | $ | 1 | $ | — | $ | 1 | $ | — | ||||||
Liabilities: | ||||||||||||||
Interest rate swap | $ | 2,451 | $ | — | $ | 2,451 | $ | — | ||||||
Acquisition-related contingent consideration | 1,116 | — | — | 1,116 | ||||||||||
Total Liabilities | $ | 3,567 | $ | — | $ | 2,451 | $ | 1,116 | ||||||
Interest rate swap | ||||||||||||||
The fair value of our interest rate swap was determined via the income and market approaches utilizing certain observable inputs including the forward and spot curves for the underlying 1 month LIBOR over the remaining term of the agreement. Based on these characteristics these derivative instruments are classified as Level 2. The fair values of the derivative instruments are subject to material changes based upon changes in the forward curve for 1 month LIBOR and the volatility thereof. | ||||||||||||||
Acquisition-related contingent consideration | ||||||||||||||
In connection with our April 2014 acquisition of Minus -10 Software, LLC (“Minus 10”), we established a contingent consideration liability that is considered to be a Level 3 liability. The fair value of the Minus 10 contingent consideration is based on management’s estimate of projected revenues and profit contributions over the measurement period and an applied discount rate of 25% which is reflective of the inherent risk attributable to this new product line given its status as an early-stage venture. Such unobservable inputs include financial forecasts prepared by management which include estimates of future cash flows, projected revenues and profit contributions, and discount rates. | ||||||||||||||
The following table represents the change in the acquisition-related contingent consideration obligation during the three months ended March 31, 2015 (in thousands): | ||||||||||||||
Fair Value | ||||||||||||||
Measurements | ||||||||||||||
Using Significant | ||||||||||||||
Unobservable | ||||||||||||||
Inputs | ||||||||||||||
(Level 3) | ||||||||||||||
Total | ||||||||||||||
Beginning balance December 31, 2014 | $ | 1,116 | ||||||||||||
Fair value related adjustments | — | |||||||||||||
Present value accretion | 67 | |||||||||||||
Payments | (18 | ) | ||||||||||||
Ending balance March 31, 2015 | $ | 1,165 | ||||||||||||
Other Fair Value Disclosures | ||||||||||||||
The carrying amounts of cash and cash equivalents, short-term investments, receivables, accounts payable and accrued expenses approximate their fair values because of the relatively short-term maturities of these financial instruments. As of March 31, 2015 and December 31, 2014, the amounts outstanding under both our credit facility and notes payable approximated fair value due to the borrowing rates currently available to us for debt with similar terms and are classified as Level 2. | ||||||||||||||
INCOME_TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2015 | |
INCOME TAXES | |
INCOME TAXES | |
NOTE 6: INCOME TAXES | |
The locations where we generate income (or loss) before income taxes have a significant effect on our consolidated effective tax rate. We estimate that our 2015 pre-tax income (or loss) earned in the United States will be subject to an approximate 42.0% combined statutory federal and state tax rate. Our foreign-sourced pre-tax income (or loss), which is earned primarily in the United Kingdom, will be subject to a statutory rate of approximately 21.0%. The amount of income (or loss) generated in the U.S. and foreign jurisdictions causes our tax rate to fluctuate due to the different statutory rates in the locations where we operate. As a result of foreign income earned, our effective tax rate for the three months ended March 31, 2015 and 2014 was lower than the U.S. federal statutory rate. | |
SHAREBASED_COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
SHARE-BASED COMPENSATION. | ||||||||
SHARE-BASED COMPENSATION | ||||||||
NOTE 7: SHARE-BASED COMPENSATION | ||||||||
We account for our share-based compensation by recognizing the grant date fair value of share-based awards, net of estimated forfeitures, as compensation expense over the underlying requisite service periods of the related awards. The following table presents total share-based compensation expense, which is a non-cash charge, included in the Condensed Consolidated Statements of Operations (in thousands): | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Direct cost of operating revenue | $ | 89 | $ | 19 | ||||
Selling, general and administrative | 1,532 | 3,520 | ||||||
Pre-tax share-based compensation expense | 1,621 | 3,539 | ||||||
Income tax benefit | (681 | ) | (1,541 | ) | ||||
Total share-based compensation expense, net of tax | $ | 940 | $ | 1,998 | ||||
Included in pre-tax share-based compensation expense for the three months ended March 31, 2015, is $1.0 million of expense recognized with respect to executive officer and employee incentive compensation awards. The accrual is recorded in “Accrued compensation” on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2015. | ||||||||
Nonvested Share Awards | ||||||||
During the three months ended March 31, 2015, we granted an aggregate of 340,000 shares of performance-based restricted stock awards (“2015 Performance RSAs”) to executive officers and senior management of the Company, with a weighted-average grant date fair value of $18.17 per share. The vesting of the executive officer 2015 Performance RSAs requires the certification by the compensation committee of the Board (the “Compensation Committee”) of the achievement of certain company financial performance criteria for the calendar year ending December 31, 2015. If achievement is certified by the Compensation Committee, the 2015 Performance RSAs will vest over the service period, which generally ranges from one to three years from the grant date. The vesting of the 2015 Performance RSAs are contingent upon continued employment by the participant through vesting date. As of March 31, 2015, we have assessed the likelihood that the performance criteria related to the 2015 Performance RSAs will be met and accordingly have recorded the related expense based on the estimated outcome. | ||||||||
Additionally, during the three months ended March 31, 2015, we granted an aggregate of 50,000 shares of service-based restricted stock awards (“Service RSAs”), with a weighted-average grant date fair value of $17.74 per share. The Service RSAs have vesting periods of one to three years from the grant date. | ||||||||
On January 28, 2014, we granted an aggregate of 225,000 shares of performance-based restricted stock awards (“2014 Performance RSAs”) to executive officers of the Company, with a weighted-average grant date fair value of $15.02. On February 20, 2015, the Compensation Committee certified that the performance condition was achieved and the 2014 Performance RSAs vested as of that date. | ||||||||
During the three months ended March 31, 2015, the Committee approved the grant of 314,869 shares of fully vested common stock, with a weighted-average grant date fair value of $18.28, as payment of 2014 annual incentive compensation to executive officers and employees, which was accrued as a liability and included in “Accrued compensation” on the Condensed Consolidated Balance Sheet as of December 31, 2014. | ||||||||
Stock Options | ||||||||
Options activity during the three months ended March 31, 2015 was immaterial to the Condensed Consolidated Financial Statements. | ||||||||
As of March 31, 2015, unrecognized compensation cost related to nonvested share-based awards and stock options was $10.7 million and $1.6 million, respectively, which will be recognized over a weighted-average period of approximately 2.6 years and 2.8 years, respectively. | ||||||||
As of March 31, 2015, there are 602,449 remaining shares available for issuance under the amended and restated Epiq Systems, Inc. 2004 Equity Incentive Plan. | ||||||||
SEGMENT_REPORTING
SEGMENT REPORTING | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
SEGMENT REPORTING | ||||||||||||||
SEGMENT REPORTING | ||||||||||||||
NOTE 8: SEGMENT REPORTING | ||||||||||||||
We report our financial performance based on the following two reportable segments: the Technology segment and the Bankruptcy and Settlement Administration segment. | ||||||||||||||
Our Technology segment provides eDiscovery managed services and technology solutions comprised of consulting, collections and forensics, processing, search and review, and document review to companies and law firms. Produced documents are made available primarily through a hosted environment utilizing our proprietary software DocuMatrix®, and third-party software which allows for efficient attorney review and data requests. Our Bankruptcy and Settlement Administration segment provides managed services and technology solutions that address the needs of our customers with respect to litigation, claims and project administration, compliance matters, controlled disbursements, corporate restructuring, bankruptcy and class action proceedings. | ||||||||||||||
The segment performance measure is based on earnings before interest, taxes, depreciation and amortization, other operating expense, and share-based compensation expense. In management’s evaluation of performance, certain costs, such as compensation for administrative staff and executive management, as well as other enterprise level expenses are not allocated by segment and, accordingly, the following reporting segment results do not include such unallocated costs. | ||||||||||||||
Assets reported within a segment are those assets that can be identified to a segment and primarily consist of trade receivables, property, equipment and leasehold improvements, software, identifiable intangible assets and goodwill. Cash, certain tax-related assets, and certain prepaid assets and other assets are not allocated to our segments. Although we can and do identify long-lived assets such as property, equipment and leasehold improvements, software, and identifiable intangible assets to reporting segments, we do not allocate the related depreciation and amortization to the segment as management evaluates segment performance exclusive of these non-cash charges. | ||||||||||||||
Following is a summary of segment information for the three months ended March 31, 2015 and 2014 (in thousands): | ||||||||||||||
Three Months Ended March 31, 2015 | ||||||||||||||
Technology | Bankruptcy | Eliminations | Total | |||||||||||
and Settlement | ||||||||||||||
Administration | ||||||||||||||
Operating revenue | $ | 70,023 | $ | 37,732 | $ | — | 107,755 | |||||||
Intersegment revenue | 939 | — | (939 | ) | — | |||||||||
Operating revenues including intersegment revenue | 70,962 | 37,732 | (939 | ) | 107,755 | |||||||||
Reimbursable expenses | 313 | 10,960 | — | 11,273 | ||||||||||
Total revenue | 71,275 | 48,692 | (939 | ) | 119,028 | |||||||||
Direct costs, selling, general and administrative expenses | 53,066 | 35,988 | (939 | ) | 88,115 | |||||||||
Segment performance measure | $ | 18,209 | $ | 12,704 | $ | — | $ | 30,913 | ||||||
As a percentage of segment operating revenue | 26 | % | 34 | % | 29 | % | ||||||||
Three Months Ended March 31, 2014 | ||||||||||||||
Technology | Bankruptcy | Eliminations | Total | |||||||||||
and Settlement | ||||||||||||||
Administration | ||||||||||||||
Operating revenue | $ | 81,169 | $ | 35,051 | $ | — | $ | 116,220 | ||||||
Intersegment revenue | 180 | — | (180 | ) | — | |||||||||
Operating revenues including intersegment revenue | 81,349 | 35,051 | (180 | ) | 116,220 | |||||||||
Reimbursable expenses | 1,107 | 5,944 | — | 7,051 | ||||||||||
Total revenue | 82,456 | 40,995 | (180 | ) | 123,271 | |||||||||
Direct costs, selling, general and administrative expenses | 60,158 | 29,044 | (180 | ) | 89,022 | |||||||||
Segment performance measure | $ | 22,298 | $ | 11,951 | $ | — | $ | 34,249 | ||||||
As a percentage of segment operating revenue | 27 | % | 34 | % | 29 | % | ||||||||
Following is a reconciliation of our segment performance measure to consolidated income (loss) before income taxes (in thousands): | ||||||||||||||
Three Months Ended March 31, | ||||||||||||||
2015 | 2014 | |||||||||||||
Segment performance measure | $ | 30,913 | $ | 34,249 | ||||||||||
Unallocated corporate expenses | (10,861 | ) | (16,053 | ) | ||||||||||
Share-based compensation expense | (1,621 | ) | (3,539 | ) | ||||||||||
Depreciation and software and leasehold amortization | (8,765 | ) | (8,700 | ) | ||||||||||
Amortization of identifiable intangible assets | (2,685 | ) | (3,120 | ) | ||||||||||
Fair value adjustment to contingent consideration | — | (1,142 | ) | |||||||||||
Other operating expense | (137 | ) | (69 | ) | ||||||||||
Income from operations | 6,844 | 1,626 | ||||||||||||
Interest expense, net | (4,225 | ) | (4,873 | ) | ||||||||||
Income (loss) before income taxes | $ | 2,619 | $ | (3,247 | ) | |||||||||
Following are assets by segment (in thousands): | ||||||||||||||
March 31, | December 31, | |||||||||||||
2015 | 2014 | |||||||||||||
Total Assets | ||||||||||||||
Technology | $ | 344,559 | $ | 342,596 | ||||||||||
Bankruptcy and Settlement Administration | 292,494 | 286,889 | ||||||||||||
Corporate and unallocated | 94,171 | 108,767 | ||||||||||||
Total assets | $ | 731,224 | $ | 738,252 | ||||||||||
Following are capital expenditures (including software development costs) by segment (in thousands): | ||||||||||||||
Three Months Ended March 31, | ||||||||||||||
2015 | 2014 | |||||||||||||
Capital Expenditures | ||||||||||||||
Technology | $ | 2,252 | $ | 6,557 | ||||||||||
Bankruptcy and Settlement Administration | 436 | 1,029 | ||||||||||||
Corporate and unallocated | 5,930 | 3,315 | ||||||||||||
Total capital expenditures | $ | 8,618 | $ | 10,901 | ||||||||||
Following is revenue, determined by the location providing the services, by geographical area (in thousands): | ||||||||||||||
Three Months Ended March 31, | ||||||||||||||
2015 | 2014 | |||||||||||||
Total Revenue | ||||||||||||||
United States | $ | 101,668 | $ | 110,192 | ||||||||||
United Kingdom | 13,690 | 11,331 | ||||||||||||
Other countries | 3,670 | 1,748 | ||||||||||||
Total revenue | $ | 119,028 | $ | 123,271 | ||||||||||
Following are long-lived assets, excluding intangible assets, by geographical area (in thousands): | ||||||||||||||
March 31, | December 31, | |||||||||||||
2015 | 2014 | |||||||||||||
Long-lived assets | ||||||||||||||
United States | $ | 79,527 | $ | 78,921 | ||||||||||
Other countries | 5,485 | 6,371 | ||||||||||||
Total long-lived assets | $ | 85,012 | $ | 85,292 | ||||||||||
SUBSQUENT_EVENTS
SUBSQUENT EVENTS | 3 Months Ended |
Mar. 31, 2015 | |
SUBSQUENT EVENTS | |
SUBSQUENT EVENTS | |
NOTE 9: SUBSQUENT EVENTS | |
Stock Purchase Agreement | |
On April 7, 2015, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) by and among Iris Data Services, Inc., a Texas corporation (“Iris Data Services”), R. Kent Teague II, an individual resident of the State of Texas (the “Seller”), Epiq Systems Acquisition, Inc., a New York corporation (“Buyer”), Epiq Systems, Ltd., a private limited company organized and existing under the laws of the United Kingdom (“UK Buyer”), and certain key participants to acquire all of the capital stock of Iris Data Services and its subsidiaries. Iris Data Services is a leading provider of managed services for the legal profession including electronic discovery and document review. | |
The aggregate consideration for the acquisition is approximately $134.0 million subject to certain post-closing adjustments. Of the aggregate consideration, approximately $67.0 million (less an amount placed in escrow as described below) will be paid to the Seller, and the remaining $67.0 million (less an amount placed in escrow as described below) will be distributed by Iris Data Services following the closing of the acquisition to participants in the Amended and Restated Iris Data Services, Inc. Participation Plan effective April 7, 2015, in accordance with the terms of the plan and the Purchase Agreement. Such post-closing distribution is expected to result in a post-closing tax benefit to Epiq of approximately $23.0 million. In addition, of the aggregate consideration, approximately $13.0 million will be placed in escrow for fifteen months after the closing as security for potential future indemnification claims. Epiq intends to fund the acquisition with existing cash and borrowings under the Company’s credit facility. The acquisition is expected to close on or about April 30, 2015. | |
Equity Events | |
On April 23, 2015, the Board declared a cash dividend of $0.09 per share of outstanding common stock and amended the Rights Agreement to extend the expiration of the Rights from May 15, 2015 to July 7, 2015. See Note 3 for additional information regarding these two events. | |
LONGTERM_OBLIGATIONS_Tables
LONG-TERM OBLIGATIONS (Tables) | 3 Months Ended | |||||||||||
Mar. 31, 2015 | ||||||||||||
LONG-TERM OBLIGATIONS | ||||||||||||
Summary of maturity of long-term obligations outstanding | ||||||||||||
The following is a summary of long-term obligations outstanding (dollars in thousands): | ||||||||||||
Final | Weighted- | March 31, | December 31, | |||||||||
Maturity | Average | 2015 | 2014 | |||||||||
Date | Interest Rate (1) | |||||||||||
Senior secured term loan | August 2020 | 4.50% | $ | 294,951 | $ | 296,250 | ||||||
Senior revolving loan | August 2018 | n/a | — | — | ||||||||
Capital leases | January 2019 | 3.00% | 3,129 | 3,177 | ||||||||
Notes payable | September 2017 | 2.20% | 11,746 | 12,895 | ||||||||
Acquisition-related liabilities | May 2021 | n/a | 1,208 | 1,159 | ||||||||
Total long-term obligations, including current portion | 311,034 | 313,481 | ||||||||||
Current maturities of long-term obligations | ||||||||||||
Senior secured term loan | (2,900 | ) | (3,574 | ) | ||||||||
Capital leases | (2,747 | ) | (2,749 | ) | ||||||||
Notes payable | (4,611 | ) | (4,593 | ) | ||||||||
Acquisition-related liabilities | (43 | ) | (43 | ) | ||||||||
Total Current maturities of long-term obligations | (10,301 | ) | (10,959 | ) | ||||||||
Total Long-term obligations | $ | 300,733 | $ | 302,522 | ||||||||
-1 | Weighted average interest rate as of March 31, 2015. | |||||||||||
Equity_Tables
Equity (Tables) | 3 Months Ended | ||||||||||
Mar. 31, 2015 | |||||||||||
Accumulated Other Comprehensive Loss, Net | |||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The following table presents the changes in the after-tax balances of each component of Accumulated other comprehensive loss, net for the three months ended March 31, 2015 and 2014 (in thousands): | ||||||||||
Foreign | Unrealized | Accumulated | |||||||||
Currency | Loss on | Other | |||||||||
Translation | Cash Flow | Comprehensive | |||||||||
Hedges | Loss | ||||||||||
Balance at December 31, 2014 | $ | (2,952 | ) | $ | (1,410 | ) | $ | (4,362 | ) | ||
Other comprehensive loss | (2,335 | ) | (696 | ) | (3,031 | ) | |||||
Balance at March 31, 2015 | $ | (5,287 | ) | $ | (2,106 | ) | $ | (7,393 | ) | ||
Balance at December 31, 2013 | $ | (541 | ) | $ | — | $ | (541 | ) | |||
Other comprehensive income (loss) | 287 | (18 | ) | 269 | |||||||
Balance at March 31, 2014 | $ | (254 | ) | $ | (18 | ) | $ | (272 | ) | ||
EARNINGS_PER_SHARE_Tables
EARNINGS PER SHARE (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
EARNINGS PER SHARE | ||||||||
Schedule of computation of basic and diluted net income per share | ||||||||
The following table reconciles the basic earnings per share computation to the diluted earnings per share computation (in thousands, except per share amounts) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Net income (loss) | $ | 1,733 | $ | (2,298 | ) | |||
Weighted-average common shares outstanding: | ||||||||
Basic shares | 36,281 | 34,862 | ||||||
Effect of dilutive securities | 633 | — | ||||||
Diluted shares | 36,914 | 34,862 | ||||||
Earnings (loss) per share common share: | ||||||||
Basic income (loss) per common share | $ | 0.05 | $ | (0.07 | ) | |||
Diluted income (loss) per common share | $ | 0.05 | $ | (0.07 | ) | |||
Potentially dilutive shares excluded from the calculation: | ||||||||
Stock options excluded as their inclusion would be anti-dilutive | 137 | 553 | ||||||
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ||||||||||||||
Schedule of assets and liabilities measured and recorded at fair value on a recurring basis | The following table provides the financial assets and liabilities carried at fair value, in thousands, measured on a recurring basis as of March 31, 2015 and December 31, 2014 using the fair value hierarchy prescribed by U.S. GAAP. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs. An asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. | |||||||||||||
Fair Value Measurements | ||||||||||||||
Carrying | Quoted | Significant | Significant | |||||||||||
Prices | Other | Unobservable | ||||||||||||
in Active | Observable | Inputs | ||||||||||||
Markets | Inputs | |||||||||||||
Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||
March 31, 2015: | ||||||||||||||
Liabilities: | ||||||||||||||
Interest rate swap | $ | 3,586 | $ | — | $ | 3,586 | $ | — | ||||||
Acquisition-related contingent consideration | 1,165 | — | — | 1,165 | ||||||||||
Total Liabilities | $ | 4,751 | $ | — | $ | 3,586 | $ | 1,165 | ||||||
December 31, 2014: | ||||||||||||||
Assets: | ||||||||||||||
Interest rate cap | $ | 1 | $ | — | $ | 1 | $ | — | ||||||
Liabilities: | ||||||||||||||
Interest rate swap | $ | 2,451 | $ | — | $ | 2,451 | $ | — | ||||||
Acquisition-related contingent consideration | 1,116 | — | — | 1,116 | ||||||||||
Total Liabilities | $ | 3,567 | $ | — | $ | 2,451 | $ | 1,116 | ||||||
Schedule of changes in the fair value of contingent consideration related to acquisitions | ||||||||||||||
The following table represents the change in the acquisition-related contingent consideration obligation during the three months ended March 31, 2015 (in thousands): | ||||||||||||||
Fair Value | ||||||||||||||
Measurements | ||||||||||||||
Using Significant | ||||||||||||||
Unobservable | ||||||||||||||
Inputs | ||||||||||||||
(Level 3) | ||||||||||||||
Total | ||||||||||||||
Beginning balance December 31, 2014 | $ | 1,116 | ||||||||||||
Fair value related adjustments | — | |||||||||||||
Present value accretion | 67 | |||||||||||||
Payments | (18 | ) | ||||||||||||
Ending balance March 31, 2015 | $ | 1,165 | ||||||||||||
SHAREBASED_COMPENSATION_Tables
SHARE-BASED COMPENSATION (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
SHARE-BASED COMPENSATION. | ||||||||
Schedule of share-based compensation expense | The following table presents total share-based compensation expense, which is a non-cash charge, included in the Condensed Consolidated Statements of Operations (in thousands): | |||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2015 | 2014 | |||||||
Direct cost of operating revenue | $ | 89 | $ | 19 | ||||
Selling, general and administrative | 1,532 | 3,520 | ||||||
Pre-tax share-based compensation expense | 1,621 | 3,539 | ||||||
Income tax benefit | (681 | ) | (1,541 | ) | ||||
Total share-based compensation expense, net of tax | $ | 940 | $ | 1,998 | ||||
SEGMENT_REPORTING_Tables
SEGMENT REPORTING (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
SEGMENT REPORTING | ||||||||||||||
Summary of segment information | ||||||||||||||
Following is a summary of segment information for the three months ended March 31, 2015 and 2014 (in thousands): | ||||||||||||||
Three Months Ended March 31, 2015 | ||||||||||||||
Technology | Bankruptcy | Eliminations | Total | |||||||||||
and Settlement | ||||||||||||||
Administration | ||||||||||||||
Operating revenue | $ | 70,023 | $ | 37,732 | $ | — | 107,755 | |||||||
Intersegment revenue | 939 | — | (939 | ) | — | |||||||||
Operating revenues including intersegment revenue | 70,962 | 37,732 | (939 | ) | 107,755 | |||||||||
Reimbursable expenses | 313 | 10,960 | — | 11,273 | ||||||||||
Total revenue | 71,275 | 48,692 | (939 | ) | 119,028 | |||||||||
Direct costs, selling, general and administrative expenses | 53,066 | 35,988 | (939 | ) | 88,115 | |||||||||
Segment performance measure | $ | 18,209 | $ | 12,704 | $ | — | $ | 30,913 | ||||||
As a percentage of segment operating revenue | 26 | % | 34 | % | 29 | % | ||||||||
Three Months Ended March 31, 2014 | ||||||||||||||
Technology | Bankruptcy | Eliminations | Total | |||||||||||
and Settlement | ||||||||||||||
Administration | ||||||||||||||
Operating revenue | $ | 81,169 | $ | 35,051 | $ | — | $ | 116,220 | ||||||
Intersegment revenue | 180 | — | (180 | ) | — | |||||||||
Operating revenues including intersegment revenue | 81,349 | 35,051 | (180 | ) | 116,220 | |||||||||
Reimbursable expenses | 1,107 | 5,944 | — | 7,051 | ||||||||||
Total revenue | 82,456 | 40,995 | (180 | ) | 123,271 | |||||||||
Direct costs, selling, general and administrative expenses | 60,158 | 29,044 | (180 | ) | 89,022 | |||||||||
Segment performance measure | $ | 22,298 | $ | 11,951 | $ | — | $ | 34,249 | ||||||
As a percentage of segment operating revenue | 27 | % | 34 | % | 29 | % | ||||||||
Schedule of reconciliation of segment performance measure to consolidated income (loss) before income taxes | ||||||||||||||
Following is a reconciliation of our segment performance measure to consolidated income (loss) before income taxes (in thousands): | ||||||||||||||
Three Months Ended March 31, | ||||||||||||||
2015 | 2014 | |||||||||||||
Segment performance measure | $ | 30,913 | $ | 34,249 | ||||||||||
Unallocated corporate expenses | (10,861 | ) | (16,053 | ) | ||||||||||
Share-based compensation expense | (1,621 | ) | (3,539 | ) | ||||||||||
Depreciation and software and leasehold amortization | (8,765 | ) | (8,700 | ) | ||||||||||
Amortization of identifiable intangible assets | (2,685 | ) | (3,120 | ) | ||||||||||
Fair value adjustment to contingent consideration | — | (1,142 | ) | |||||||||||
Other operating expense | (137 | ) | (69 | ) | ||||||||||
Income from operations | 6,844 | 1,626 | ||||||||||||
Interest expense, net | (4,225 | ) | (4,873 | ) | ||||||||||
Income (loss) before income taxes | $ | 2,619 | $ | (3,247 | ) | |||||||||
Schedule of total assets by segment | ||||||||||||||
Following are assets by segment (in thousands): | ||||||||||||||
March 31, | December 31, | |||||||||||||
2015 | 2014 | |||||||||||||
Total Assets | ||||||||||||||
Technology | $ | 344,559 | $ | 342,596 | ||||||||||
Bankruptcy and Settlement Administration | 292,494 | 286,889 | ||||||||||||
Corporate and unallocated | 94,171 | 108,767 | ||||||||||||
Total assets | $ | 731,224 | $ | 738,252 | ||||||||||
Schedule of capital expenditures (including software development costs) by segment | ||||||||||||||
Following are capital expenditures (including software development costs) by segment (in thousands): | ||||||||||||||
Three Months Ended March 31, | ||||||||||||||
2015 | 2014 | |||||||||||||
Capital Expenditures | ||||||||||||||
Technology | $ | 2,252 | $ | 6,557 | ||||||||||
Bankruptcy and Settlement Administration | 436 | 1,029 | ||||||||||||
Corporate and unallocated | 5,930 | 3,315 | ||||||||||||
Total capital expenditures | $ | 8,618 | $ | 10,901 | ||||||||||
Schedule of revenue, determined by the location providing the services, by geographical area | ||||||||||||||
Following is revenue, determined by the location providing the services, by geographical area (in thousands): | ||||||||||||||
Three Months Ended March 31, | ||||||||||||||
2015 | 2014 | |||||||||||||
Total Revenue | ||||||||||||||
United States | $ | 101,668 | $ | 110,192 | ||||||||||
United Kingdom | 13,690 | 11,331 | ||||||||||||
Other countries | 3,670 | 1,748 | ||||||||||||
Total revenue | $ | 119,028 | $ | 123,271 | ||||||||||
Schedule of long-lived assets, excluding intangible assets, by geographical area | Following are long-lived assets, excluding intangible assets, by geographical area (in thousands): | |||||||||||||
March 31, | December 31, | |||||||||||||
2015 | 2014 | |||||||||||||
Long-lived assets | ||||||||||||||
United States | $ | 79,527 | $ | 78,921 | ||||||||||
Other countries | 5,485 | 6,371 | ||||||||||||
Total long-lived assets | $ | 85,012 | $ | 85,292 | ||||||||||
LONGTERM_OBLIGATIONS_Details
LONG-TERM OBLIGATIONS (Details) (USD $) | 0 Months Ended | ||
Jan. 26, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | |
LONG-TERM OBLIGATIONS | |||
Total long-term obligations, including current portion | $311,034,000 | $313,481,000 | |
Total Current maturities of long-term obligations | -10,301,000 | -10,959,000 | |
Long-term obligations (excluding current maturities) | 300,733,000 | 302,522,000 | |
Increase in applicable margin | 0.25 | ||
Credit Facility | |||
LONG-TERM OBLIGATIONS | |||
Aggregate amount of funds available | 400,000,000 | ||
Senior secured term loan | |||
LONG-TERM OBLIGATIONS | |||
Total long-term obligations, including current portion | 294,951,000 | 296,250,000 | |
Total Current maturities of long-term obligations | -2,900,000 | -3,574,000 | |
Weighted average interest rate (as a percent) | 4.50% | ||
Principal amount of debt issued | 300,000,000 | ||
Senior secured term loan | Prime rate | |||
LONG-TERM OBLIGATIONS | |||
Basis points added to reference rate (as a percent) | 2.75% | ||
Variable interest rate basis | prime rate | ||
Interest rate, variable interest rate floor | 1.75% | ||
Senior secured term loan | LIBOR | |||
LONG-TERM OBLIGATIONS | |||
Basis points added to reference rate (as a percent) | 3.75% | ||
Variable interest rate basis | one, two, three or six month LIBOR | ||
Interest rate, variable interest rate floor | 0.75% | ||
Aggregate floating rate (as a percent) | 4.50% | ||
Senior revolving loan | |||
LONG-TERM OBLIGATIONS | |||
Aggregate amount of funds available | 100,000,000 | ||
Capital leases | |||
LONG-TERM OBLIGATIONS | |||
Total long-term obligations, including current portion | 3,129,000 | 3,177,000 | |
Total Current maturities of long-term obligations | -2,747,000 | -2,749,000 | |
Weighted average interest rate (as a percent) | 3.00% | ||
Notes payable | |||
LONG-TERM OBLIGATIONS | |||
Total long-term obligations, including current portion | 11,746,000 | 12,895,000 | |
Total Current maturities of long-term obligations | -4,611,000 | -4,593,000 | |
Weighted average interest rate (as a percent) | 2.20% | ||
Acquisition-related liabilities | |||
LONG-TERM OBLIGATIONS | |||
Total long-term obligations, including current portion | 1,208,000 | 1,159,000 | |
Total Current maturities of long-term obligations | -43,000 | -43,000 | |
Letters of credit | |||
LONG-TERM OBLIGATIONS | |||
Letters of credit outstanding amount | $1,700,000 |
EQUITY_Details
EQUITY (Details) (USD $) | 0 Months Ended | 3 Months Ended | 0 Months Ended | |||
Feb. 26, 2015 | Sep. 18, 2014 | Mar. 31, 2015 | Mar. 31, 2014 | Apr. 23, 2015 | Dec. 31, 2014 | |
Share Repurchases | ||||||
Number of shares of common stock repurchased under stock repurchase program | 219,737 | 222,235 | ||||
Value of shares of common stock repurchased under stock repurchase program | $4,000,000 | $3,200,000 | ||||
Additional shares of common stock surrendered under stock repurchase program | 1,889 | |||||
Dividend | ||||||
Cash dividends declared per share of common stock | $0.09 | $0.09 | $0.09 | |||
Dividends payable | 3,387,000 | 3,376,000 | ||||
Cash dividends paid | 3,340,000 | 3,152,000 | ||||
Dividend payments withheld on nonvested shares | 100,000 | |||||
Shareholder Rights Agreement | ||||||
Preferred stock purchase right dividend declared | 1 | |||||
Number of preferred shares callable by each right | 0.001 | |||||
Preferred stock purchase right consideration | $40 | |||||
Preferred stock purchase rights the Board may redeem per right | $0.00 | |||||
Minimum percent of beneficial ownership of common stock acquired for preferred stock rights to become exercisable under the agreement | 10.00% | |||||
Preferred stock purchase right dilutive effect on earnings | 0 | |||||
Common share amount equivalent to fraction of preferred share | 1 | |||||
Voting or dividend privileges of a preferred stock purchase right | 0 | |||||
Subsequent event | ||||||
Dividend | ||||||
Cash dividends declared per share of common stock | $0.09 |
EQUITY_Details_2
EQUITY (Details 2) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||
Balance beginning of the period | ($4,362) | ($541) |
Other comprehensive income (loss) | -3,031 | 269 |
Balance end of the year | -7,393 | -272 |
Reclassifications from Accumulated other comprehensive income (loss) | 0 | 0 |
Foreign Currency Translation | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||
Balance beginning of the period | -2,952 | -541 |
Other comprehensive income (loss) | -2,335 | 287 |
Balance end of the year | -5,287 | -254 |
Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||
Balance beginning of the period | -1,410 | |
Other comprehensive income (loss) | -696 | -18 |
Balance end of the year | ($2,106) | ($18) |
EARNINGS_PER_SHARE_Details
EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
EARNINGS PER SHARE | ||
Net income | $1,733 | ($2,298) |
Weighted Average Common Shares Outstanding (Denominator) | ||
Weighted Average Common Shares Outstanding Basic | 36,281 | 34,862 |
Effect of dilutive securities | 633 | |
Weighted Average Common Shares Outstanding Diluted | 36,914 | 34,862 |
Per Share Amount | ||
Basic income (loss) per common share | $0.05 | ($0.07) |
Diluted income (loss) per common share | $0.05 | ($0.07) |
Antidilutive securities excluded from computation of diluted net income per share | ||
Stock options excluded as their inclusion would be anti-dilutive | 137 | 553 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Dec. 31, 2014 |
Interest rate swap | ||
Assets and liabilities measured and recorded at fair value on a recurring basis | ||
Variable rate basis | 1 month LIBOR | |
Recurring Basis | Carrying Value | ||
Assets and liabilities measured and recorded at fair value on a recurring basis | ||
Acquisition-related contingent consideration | 1,165 | $1,116 |
Total Liabilities | 4,751 | 3,567 |
Recurring Basis | Carrying Value | Interest rate cap | ||
Assets and liabilities measured and recorded at fair value on a recurring basis | ||
Interest rate cap | 1 | |
Recurring Basis | Carrying Value | Interest rate swap | ||
Assets and liabilities measured and recorded at fair value on a recurring basis | ||
Interest rate swap | 3,586 | 2,451 |
Recurring Basis | Significant Other Observable Inputs (Level 2) | ||
Assets and liabilities measured and recorded at fair value on a recurring basis | ||
Total Liabilities | 3,586 | 2,451 |
Recurring Basis | Significant Other Observable Inputs (Level 2) | Interest rate cap | ||
Assets and liabilities measured and recorded at fair value on a recurring basis | ||
Interest rate cap | 1 | |
Recurring Basis | Significant Other Observable Inputs (Level 2) | Interest rate swap | ||
Assets and liabilities measured and recorded at fair value on a recurring basis | ||
Interest rate swap | 3,586 | 2,451 |
Recurring Basis | Significant Unobservable Inputs (Level 3) | ||
Assets and liabilities measured and recorded at fair value on a recurring basis | ||
Acquisition-related contingent consideration | 1,165 | 1,116 |
Total Liabilities | 1,165 | $1,116 |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 2) (USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 |
Minus - 10 | |
Change in the acquisition-related contingent consideration obligation | |
Contingent consideration liability, discount rate (as a percent) | 25.00% |
Contingent consideration | Significant Unobservable Inputs (Level 3) | |
Change in the acquisition-related contingent consideration obligation | |
Balance at the beginning of period | 1,116 |
Present value accretion | 67 |
Payments | -18 |
Balance at the end of period | 1,165 |
INCOME_TAXES_Details
INCOME TAXES (Details) | 3 Months Ended |
Mar. 31, 2015 | |
United Kingdom | |
Reconciliation of the provision for income taxes at the statutory rate to the provision for income taxes at effective rate | |
Combined statutory federal and state income tax rate | 21.00% |
United States. | |
Reconciliation of the provision for income taxes at the statutory rate to the provision for income taxes at effective rate | |
Combined statutory federal and state income tax rate | 42.00% |
SHAREBASED_COMPENSATION_Detail
SHARE-BASED COMPENSATION (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
SHARE-BASED COMPENSATION | ||
Pre-tax share-based compensation expense | $1,621 | $3,539 |
Income tax benefit | -681 | -1,541 |
Total share-based compensation expense, net of tax | 940 | 1,998 |
Direct cost of services | ||
SHARE-BASED COMPENSATION | ||
Pre-tax share-based compensation expense | 89 | 19 |
Selling, general and administrative expense | ||
SHARE-BASED COMPENSATION | ||
Pre-tax share-based compensation expense | $1,532 | $3,520 |
SHAREBASED_COMPENSATION_Detail1
SHARE-BASED COMPENSATION (Details 2) (USD $) | 3 Months Ended | 0 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Jan. 28, 2014 | Dec. 31, 2014 | |
SHARE-BASED COMPENSATION | ||||
Share-based compensation expense | $1,621,000 | $3,539,000 | ||
Accrued compensation | 11,972,000 | 18,673,000 | ||
Number of remaining shares available for issuance under current plan | 602,449 | |||
Nonvested share awards | ||||
SHARE-BASED COMPENSATION | ||||
Unrecognized compensation cost related to outstanding, unvested stock options and restricted stock | 10,700,000 | |||
Weighted average recognition period of unrecognized compensation cost | 2 years 7 months 6 days | |||
Share awards | ||||
SHARE-BASED COMPENSATION | ||||
Restricted stock granted (in shares) | 314,869 | |||
Weighted-average grant date fair value (in dollars per share) | $18.28 | |||
2014 Performance-based RSAs | ||||
SHARE-BASED COMPENSATION | ||||
Restricted stock granted (in shares) | 340,000 | |||
Weighted-average grant date fair value (in dollars per share) | $18.17 | |||
2014 Performance-based RSAs | Minimum | ||||
SHARE-BASED COMPENSATION | ||||
Vesting period | 1 year | |||
2014 Performance-based RSAs | Maximum | ||||
SHARE-BASED COMPENSATION | ||||
Vesting period | 3 years | |||
Service RSAs | ||||
SHARE-BASED COMPENSATION | ||||
Restricted stock granted (in shares) | 50,000 | |||
Weighted-average grant date fair value (in dollars per share) | $17.74 | |||
Service RSAs | Minimum | ||||
SHARE-BASED COMPENSATION | ||||
Vesting period | 1 year | |||
Service RSAs | Maximum | ||||
SHARE-BASED COMPENSATION | ||||
Vesting period | 3 years | |||
Stock options | ||||
SHARE-BASED COMPENSATION | ||||
Unrecognized compensation cost related to outstanding, unvested stock options and restricted stock | 1,600,000 | |||
Weighted average recognition period of unrecognized compensation cost | 2 years 9 months 18 days | |||
Strategic Executive Incentive Plan | 2014 Performance-based RSAs | Vest one year after and upon certification of achievement of performance criteria by the compensation committee of the Board | ||||
SHARE-BASED COMPENSATION | ||||
Restricted stock granted (in shares) | 225,000 | |||
Weighted-average grant date fair value (in dollars per share) | $15.02 | |||
Employee performance-based annual incentive compensation awards | ||||
SHARE-BASED COMPENSATION | ||||
Share-based compensation expense | $1,000,000 |
SEGMENT_REPORTING_Details
SEGMENT REPORTING (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
segment | ||
SEGMENT REPORTING | ||
Number of reporting segments | 2 | |
Revenues: | ||
Operating revenue | $107,755 | $116,220 |
Reimbursable expenses | 11,273 | 7,051 |
Total Revenue | 119,028 | 123,271 |
Direct costs, selling, general and administrative expenses | 88,115 | 89,022 |
Segment performance measure | 30,913 | 34,249 |
As a percentage of segment operating revenue | 29.00% | 29.00% |
Technology | ||
Revenues: | ||
Operating revenue | 70,023 | 81,169 |
Intersegment revenue | 180 | |
Direct costs, selling, general and administrative expenses | 53,066 | 60,158 |
Segment performance measure | 18,209 | 22,298 |
Bankruptcy and Settlement Administration Segment | ||
Revenues: | ||
Operating revenue | 37,732 | 35,051 |
Direct costs, selling, general and administrative expenses | 35,988 | 29,044 |
Segment performance measure | 12,704 | 11,951 |
Operating segment | ||
Revenues: | ||
Segment performance measure | 30,913 | 34,249 |
Operating segment | Technology | ||
Revenues: | ||
Operating revenue | 70,962 | 81,349 |
Reimbursable expenses | 313 | 1,107 |
Total Revenue | 71,275 | 82,456 |
As a percentage of segment operating revenue | 26.00% | 27.00% |
Operating segment | Bankruptcy and Settlement Administration Segment | ||
Revenues: | ||
Operating revenue | 37,732 | 35,051 |
Reimbursable expenses | 10,960 | 5,944 |
Total Revenue | 48,692 | 40,995 |
As a percentage of segment operating revenue | 34.00% | 34.00% |
Eliminations | ||
Revenues: | ||
Operating revenue | -939 | -180 |
Intersegment revenue | -180 | |
Total Revenue | -939 | -180 |
Direct costs, selling, general and administrative expenses | -939 | -180 |
Eliminations | Technology | ||
Revenues: | ||
Operating revenue | $939 |
SEGMENT_REPORTING_Details_2
SEGMENT REPORTING (Details 2) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Reconciliation of our segment performance measure to income (loss) before income taxes | ||
Segment performance measure | $30,913 | $34,249 |
Unallocated corporate expenses | -10,861 | -16,053 |
Share-based compensation expense | -1,621 | -3,539 |
Depreciation and software and leasehold amortization | -8,765 | -8,700 |
Amortization of identifiable intangible assets | -2,685 | -3,120 |
Fair value adjustment to contingent consideration | -1,142 | |
Other operating income (expense) | -137 | -69 |
INCOME FROM OPERATIONS | 6,844 | 1,626 |
Interest expense, net | -4,225 | -4,873 |
INCOME (LOSS) BEFORE INCOME TAXES | 2,619 | -3,247 |
Operating segment | ||
Reconciliation of our segment performance measure to income (loss) before income taxes | ||
Segment performance measure | $30,913 | $34,249 |
SEGMENT_REPORTING_Details_3
SEGMENT REPORTING (Details 3) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Assets | ||
Total assets | $731,224 | $738,252 |
Corporate and unallocated | ||
Assets | ||
Total assets | 94,171 | 108,767 |
Technology | ||
Assets | ||
Total assets | 344,559 | 342,596 |
Bankruptcy and Settlement Administration Segment | ||
Assets | ||
Total assets | $292,494 | $286,889 |
SEGMENT_REPORTING_Details_4
SEGMENT REPORTING (Details 4) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Capital Expenditures | ||
Total capital expenditures | $8,618 | $10,901 |
Technology | ||
Capital Expenditures | ||
Total capital expenditures | 2,252 | 6,557 |
Bankruptcy and Settlement Administration Segment | ||
Capital Expenditures | ||
Total capital expenditures | 436 | 1,029 |
Corporate and unallocated | ||
Capital Expenditures | ||
Total capital expenditures | $5,930 | $3,315 |
SEGMENT_REPORTING_Details_5
SEGMENT REPORTING (Details 5) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
Revenue and long-lived assets excluding intangible assets, by geographical area | |||
Revenue | $119,028 | $123,271 | |
Long-lived assets | 85,012 | 85,292 | |
United States | |||
Revenue and long-lived assets excluding intangible assets, by geographical area | |||
Revenue | 101,668 | 110,192 | |
Long-lived assets | 79,527 | 78,921 | |
United Kingdom | |||
Revenue and long-lived assets excluding intangible assets, by geographical area | |||
Revenue | 13,690 | 11,331 | |
Other countries | |||
Revenue and long-lived assets excluding intangible assets, by geographical area | |||
Revenue | 3,670 | 1,748 | |
Long-lived assets | $5,485 | $6,371 |
SUBSQUENT_EVENTS_Details
SUBSQUENT EVENTS (Details) (USD $) | 0 Months Ended | 3 Months Ended | 0 Months Ended | |||
In Millions, except Per Share data, unless otherwise specified | Feb. 26, 2015 | Mar. 31, 2015 | Mar. 31, 2014 | Apr. 23, 2015 | Apr. 07, 2015 | Apr. 07, 2014 |
Subsequent event | ||||||
Cash dividends declared per share of common stock | $0.09 | $0.09 | $0.09 | |||
Subsequent event | ||||||
Subsequent event | ||||||
Post-closing tax benefit | $23 | |||||
Cash dividends declared per share of common stock | $0.09 | |||||
Subsequent event | R. Kent Teague II | ||||||
Subsequent event | ||||||
Total purchase price | 67 | |||||
Subsequent event | Iris Data Services | ||||||
Subsequent event | ||||||
Total purchase price | 134 | |||||
Distribution following the closing | 67 | |||||
Escrow Deposit | $13 | |||||
Escrow deposit term | 15 months |