Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2016 | Jul. 28, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | EPIQ SYSTEMS INC | |
Entity Central Index Key | 1,027,207 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 38,126,452 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands | Jun. 30, 2016 | Dec. 31, 2015 |
Current Assets: | ||
Cash and cash equivalents | $ 17,296 | $ 27,620 |
Trade accounts receivable, net | 167,457 | 140,597 |
Prepaid expenses | 16,536 | 20,206 |
Income taxes receivable | 8,173 | 8,421 |
Other current assets | 817 | 199 |
Total current assets | 210,279 | 197,043 |
Long-term Assets: | ||
Property and equipment, net | 70,329 | 77,715 |
Internally developed software, net | 17,375 | 15,971 |
Goodwill | 476,973 | 477,479 |
Other intangible assets, net | 37,489 | 44,943 |
Other long-term assets | 10,112 | 10,746 |
Total long-term assets | 612,278 | 626,854 |
Total Assets | 822,557 | 823,897 |
Current Liabilities: | ||
Accounts payable | 25,298 | 28,704 |
Current maturities of long-term obligations | 11,917 | 12,213 |
Accrued compensation | 16,478 | 23,977 |
Client deposits | 1,130 | 3,593 |
Deferred revenue | 3,962 | 3,669 |
Dividends payable | 3,750 | 3,599 |
Other accrued expenses | 13,602 | 9,144 |
Total current liabilities | 76,137 | 84,899 |
Long-term Liabilities: | ||
Deferred income taxes | 49,891 | 47,036 |
Other long-term liabilities | 13,974 | 12,476 |
Long-term obligations | 383,863 | 371,365 |
Total long-term liabilities | 447,728 | 430,877 |
Commitments and contingencies | ||
Equity: | ||
Preferred stock-$1 par value; 2,000,000 shares authorized; none issued and outstanding | ||
Common stock-$0.01 par value; authorized 100,000,000 shares; issued and outstanding June 30, 2016-40,835,651 and 37,944,698 shares, respectively; issued and outstanding December 31, 2015-40,835,651 and 37,534,447 shares, respectively | 408 | 408 |
Additional paid-in capital | 297,686 | 296,324 |
Accumulated other comprehensive loss | (11,793) | (7,949) |
Retained earnings | 50,518 | 62,991 |
Treasury stock, at cost-2,890,953 shares and 3,301,204 shares, respectively | (38,127) | (43,653) |
Total equity | 298,692 | 308,121 |
Total Liabilities and Equity | $ 822,557 | $ 823,897 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares | Jun. 30, 2016 | Dec. 31, 2015 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||
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 | 37,944,698 | 37,534,447 |
Treasury stock, shares | 2,890,953 | 3,301,204 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Revenue: | ||||
Operating revenue | $ 130,647 | $ 130,557 | $ 262,175 | $ 238,312 |
Reimbursable expenses | 10,097 | 7,453 | 25,100 | 18,726 |
Total revenue | 140,744 | 138,010 | 287,275 | 257,038 |
Operating Expense: | ||||
Direct cost of operating revenue (exclusive of depreciation and amortization shown separately below) | 64,216 | 67,901 | 129,369 | 118,930 |
Reimbursable expenses | 9,250 | 7,290 | 24,158 | 17,794 |
Selling, general and administrative expense | 47,299 | 44,773 | 95,041 | 83,837 |
Depreciation and software and leasehold amortization | 10,084 | 9,498 | 19,618 | 18,263 |
Amortization of identifiable intangible assets | 3,680 | 4,810 | 7,454 | 7,495 |
Impairment of goodwill and identifiable intangible assets | 1,162 | 1,162 | ||
Fair value adjustment to contingent consideration | (1,201) | (1,201) | ||
Other operating expense | 2,861 | 53 | 2,998 | |
Total operating expense | 134,529 | 137,094 | 275,693 | 249,278 |
Operating income | 6,215 | 916 | 11,582 | 7,760 |
Interest expense (income): | ||||
Interest expense | 5,458 | 5,480 | 10,866 | 9,709 |
Interest income | (1) | (1) | (34) | (5) |
Net interest expense | 5,457 | 5,479 | 10,832 | 9,704 |
Income (loss) before income taxes | 758 | (4,563) | 750 | (1,944) |
Income tax expense (benefit) | 6,338 | (1,322) | 6,395 | (436) |
Net loss | $ (5,580) | $ (3,241) | $ (5,645) | $ (1,508) |
Net loss per common share: | ||||
Basic (in dollars per share) | $ (0.15) | $ (0.09) | $ (0.15) | $ (0.04) |
Diluted (in dollars per share) | $ (0.15) | $ (0.09) | $ (0.15) | $ (0.04) |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 37,432 | 36,536 | 37,250 | 36,409 |
Diluted (in shares) | 37,432 | 36,536 | 37,250 | 36,409 |
Cash dividends declared per common share (in dollars per share) | $ 0.09 | $ 0.09 | $ 0.18 | $ 0.18 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) | ||||
Net loss | $ (5,580) | $ (3,241) | $ (5,645) | $ (1,508) |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment, net of $0 tax in all periods | (2,241) | 2,308 | (2,597) | (27) |
Unrealized gains (losses) on derivatives, net of tax expense (benefit) of $0, $107, $0, and $(332), respectively | (244) | 148 | (1,247) | (548) |
Comprehensive loss | $ (8,065) | $ (785) | $ (9,489) | $ (2,083) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED) | ||||
Foreign currency translation adjustment, net of tax | $ 0 | $ 0 | $ 0 | $ 0 |
Unrealized gains (losses) on derivatives, tax expense (benefit) | $ 0 | $ 107 | $ 0 | $ (332) |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | Common Stock | Additional Paid-In Capital | AOCL | [1] | Retained Earnings | Treasury Stock | Total |
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 loss | (1,508) | (1,508) | |||||
Other comprehensive loss | (575) | (575) | |||||
Tax benefit from share-based compensation | 297 | 297 | |||||
Restricted common stock issued under share-based compensation plans | (4,560) | $ 9,941 | 5,381 | ||||
Restricted common stock issued under share-based compensation plans (in shares) | 770 | ||||||
Stock option exercises | (136) | $ 1,482 | 1,346 | ||||
Stock option exercises (in shares) | 112 | ||||||
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 ($0.18 per share) | (6,713) | (6,713) | |||||
Share-based compensation expense | 3,692 | 3,692 | |||||
Balance at Jun. 30, 2015 | $ 408 | 293,347 | (4,937) | 80,170 | $ (46,148) | 322,840 | |
Balance (in shares) at Jun. 30, 2015 | 40,836 | (3,493) | |||||
Balance at Dec. 31, 2015 | $ 408 | 296,324 | (7,949) | 62,991 | $ (43,653) | 308,121 | |
Balance (in shares) at Dec. 31, 2015 | 40,836 | (3,301) | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Net loss | (5,645) | (5,645) | |||||
Other comprehensive loss | (3,844) | (3,844) | |||||
Restricted common stock issued under share-based compensation plans | (815) | $ 10,286 | 9,471 | ||||
Restricted common stock issued under share-based compensation plans (in shares) | 780 | ||||||
Stock option exercises | (69) | $ 116 | 47 | ||||
Stock option exercises (in shares) | 9 | ||||||
Common stock repurchased under share-based compensation plans | $ (4,876) | (4,876) | |||||
Common stock repurchased under share-based compensation plans (in shares) | (379) | ||||||
Dividends declared ($0.18 per share) | (6,828) | (6,828) | |||||
Share-based compensation expense | 2,246 | 2,246 | |||||
Balance at Jun. 30, 2016 | $ 408 | $ 297,686 | $ (11,793) | $ 50,518 | $ (38,127) | $ 298,692 | |
Balance (in shares) at Jun. 30, 2016 | 40,836 | (2,891) | |||||
[1] | AOCL-Accumulated Other Comprehensive Loss |
CONDENSED CONSOLIDATED STATEME8
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) (Parenthetical) - $ / shares | Apr. 28, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) | |||||
Cash dividends declared per common share (in dollars per share) | $ 0.09 | $ 0.09 | $ 0.09 | $ 0.18 | $ 0.18 |
CONDENSED CONSOLIDATED STATEME9
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Cash flows from operating activities: | ||
Net cash provided by operating activities | $ 2,873 | $ 27,931 |
Cash flows from investing activities: | ||
Cash paid for business acquisitions, net of cash acquired | (123,649) | |
Purchase of property and equipment | (8,234) | (11,710) |
Internally developed software costs | (4,848) | (4,620) |
Cash proceeds from sale of assets | 459 | 108 |
Net cash used in investing activities | (12,623) | (139,871) |
Cash flows from financing activities: | ||
Proceeds from revolver borrowings | 31,000 | 23,000 |
Repayment of revolver borrowings | (13,000) | (5,000) |
Proceeds from borrowings of long-term debt | 75,000 | |
Repayment of long-term debt and other long-term obligations | (6,343) | (5,357) |
Debt issuance costs | (1,644) | |
Payment of acquisition-related liabilities | (29) | |
Excess tax benefit related to share-based compensation | 390 | |
Common stock repurchases | (4,876) | (4,017) |
Cash dividends paid | (6,765) | (6,629) |
Proceeds from exercise of stock options | 47 | 1,128 |
Net cash provided by financing activities | 63 | 76,842 |
Effect of exchange rate changes on cash | (637) | (212) |
Net decrease in cash and cash equivalents | (10,324) | (35,310) |
Cash and cash equivalents at beginning of period | 27,620 | 54,226 |
Cash and cash equivalents at end of period | 17,296 | 18,916 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 10,070 | 7,718 |
Cash paid (recovered) for income taxes, net | 1,557 | (1,643) |
Non-cash investing and financing transactions: | ||
Property, equipment, and leasehold improvements and software development accrued in accounts payable | 5,684 | 1,651 |
Capital expenditures funded by capital lease borrowings | 1,583 | |
Capital leases assumed | 9,061 | |
Dividends declared | $ 3,459 | $ 3,420 |
ACCOUNTING POLICIES, INTERIM FI
ACCOUNTING POLICIES, INTERIM FINANCIAL STATEMENTS AND BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2016 | |
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. and Subsidiaries (“Epiq,” “we,” “our,” “us” or the “Company”) included herein have been prepared by Epiq, 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. We believe 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 our Annual Report on Form 10-K, for the year ended December 31, 2015, as amended (“2015 Form 10-K”), 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 and six months ended June 30, 2016, are not necessarily indicative of the results expected for other interim periods or for the full year ending December 31, 2016. Merger Agreement On July 26, 2016, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Document Technologies, LLC, a Georgia limited liability company (“Parent”), and DTI Merger Sub, Inc., a Missouri corporation and a wholly owned subsidiary of Parent (“Merger Sub”), relating to the proposed acquisition of Epiq by OMERS Private Equity, the private equity arm of the OMERS pension plan (“OMERS”), and funds managed by Harvest Partners LP, a leading middle-market private equity fund (“Harvest Partners”). The Merger Agreement provides that, subject to the terms and conditions thereof, Merger Sub will be merged with and into Epiq, with Epiq continuing as the surviving corporation in the merger, and, at the effective time of the merger each outstanding share of common stock of Epiq (other than shares owned by Epiq, Parent or Merger Sub) will cease to be outstanding and will be converted into the right to receive $16.50 in cash, without interest. The proposed merger is expected to close in the fourth quarter of 2016, subject to customary closing conditions, including receipt of shareholder and regulatory approvals. The merger requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of Epiq’s common stock entitled to vote on the transaction, which will be sought at a special meeting of Epiq’s shareholders. Each of St. Denis J. Villere & Company, LLC (“Villere”) and P2 Capital Partners, LLC (“P2 Capital”), Epiq’s two largest shareholders, and Epiq’s executive officers and directors who hold shares of common stock, have signed voting support agreements in support of the merger, representing approximately 38% of the total issued and outstanding shares of common stock of Epiq. Consummation of the merger is not subject to a financing condition. There can be no assurance that the merger will be consummated on the expected timeline or at all. Recently Issued Accounting Standards In March 2016, the Financial Accounting Standards Board (the “FASB”) issued accounting standard update (“ASU”) No. 2016-09, Compensation—Stock Compensation (Topic 718): “Improvements to Employee Share-Based Payment Accounting”. Under the new guidance, entities will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital (“APIC”). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement, and APIC pools will be eliminated. In addition, the guidance eliminates the requirement that excess tax benefits be realized (i.e., through a reduction in income taxes payable) before companies can recognize them. Under today’s guidance, entities cannot recognize excess tax benefits when an option is exercised or a share vests if the related tax deduction increases a net operating loss carryforward rather than reduces income taxes payable. This guidance also simplifies several other aspects of the accounting for employee share-based payments, including forfeitures, statutory tax withholdings requirements and classification in the statement of cash flow. The guidance is effective for Epiq beginning in the first quarter of fiscal 2017. Early adoption is permitted, but all of the guidance must be adopted in the same period. In addition, if early adoption is elected in an interim period, any adjustment shall be reflected as of the beginning of the annual period that includes that interim period. We do not expect the adoption of this new guidance to have a material impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This new lease guidance requires that an entity should recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. Leases would be classified as either Type A leases (generally today’s capital leases) or Type B leases (generally today’s operating leases). For certain leases of assets other than property (for example, equipment, aircraft, cars, trucks), a lessee would classify the lease as a Type A lease and would do the following: (1) recognize a right-of-use asset and a lease liability, initially measured at the present value of lease payments and (2) recognize the unwinding of the discount on the lease liability as interest separately from the amortization of the right-of-use asset. For certain leases of property (that is, land and/or a building or part of a building), a lessee would classify the lease as a Type B lease and would do the following: (1) recognize a right-of-use asset and a lease liability, initially measured at the present value of lease payments and (2) recognize a single lease cost, combining the unwinding of the discount on the lease liability with the amortization of the right-of-use asset, on a straight-line basis. This guidance also provides accounting updates with respect to lessor accounting under a lease arrangement. Historically, we have not engaged in the business of leasing assets to third parties. This new lease guidance is effective for Epiq beginning in the first quarter of fiscal 2019. Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. Early adoption is permitted for all entities. We are currently assessing the full impact of this new guidance on our consolidated financial position, results of operations and cash flows, however, due to the magnitude of our operating leases and related rent expense, we expect the adoption of this accounting guidance to have a material effect on our consolidated financial statements. In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The new guidance clarifies that a performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition. As a result, compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The new guidance does not require any new or additional disclosures. This guidance was effective for us beginning January 1, 2016 and its adoption did not have a material impact on our Condensed Consolidated Financial Statements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes the revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition. This new revenue guidance outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most of the current revenue recognition guidance. The new guidance requires that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, an entity should apply the following steps: (1) identify the contract with a customer, (2) identify the performance obligations under the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations under the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance also provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. This new revenue guidance was going to be effective for Epiq beginning in the first quarter of fiscal 2017. In August 2015, the FASB deferred the effective date by one year. Early adoption as of the original effective date will be permitted. Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. We are currently assessing the impact of this new revenue guidance on our consolidated financial position, results of operations and cash flows and will adopt this new guidance effective January 1, 2018. |
ACQUISITIONS
ACQUISITIONS | 6 Months Ended |
Jun. 30, 2016 | |
ACQUISITIONS | |
ACQUISITIONS | NOTE 2: ACQUISITIONS Acquisition of Iris Data Services, Inc. On April 30, 2015, we completed the acquisition of Iris Data Services, Inc. (“Iris”).The aggregate purchase consideration was $133.8 million, consisting of $124.7 million in cash consideration (the “Cash Consideration”) and $9.1 million of assumed capital lease obligations of the seller. Of the Cash Consideration, $1.1 million was paid during the second half of 2015 pursuant to certain provisions of the purchase agreement. The Cash Consideration was funded with existing cash and borrowings under our Credit Agreement (defined in Note 3 to these Condensed Consolidated Financial Statements). Approximately $13.0 million of the Cash Consideration was placed in escrow through July 2016 as security for potential future indemnification claims. We have filed claims with the escrow agent for losses incurred primarily related to certain working capital accounts, and as of June 30, 2016, we have not received or recognized any recovery of these losses in the Condensed Consolidated Financial Statements. Effective January 2016, we completed the integration of Iris into our legacy eDiscovery business within our Technology Segment, and as a result, the determination of Iris’s post-acquisition revenues and operating results for 2016 on a stand-alone basis are impractical, given the integration of accounting records, including cost centers, customer contracts, the realignment of key personnel and the sharing of property and equipment assets. During the fourth quarter of 2015, we finalized the purchase price allocation related to the Iris acquisition, and as a result, no allocation adjustments were recorded during the six months ended June 30, 2016. See Note 13 to the Consolidated Financial Statements included in our 2015 Form 10-K for additional information. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date. The purchase consideration was allocated to the assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values at the date of acquisition. This allocation resulted in goodwill of $73.7 million, all of which was assigned to Epiq’s Technology segment. (in thousands) Purchase Price Allocation Cash and cash equivalents $ Accounts receivable Other current assets Deferred income tax assets Property and equipment Other long-term assets Intangible assets Goodwill Total assets acquired Accounts payable Accrued liabilities Deferred revenue Deferred income tax liabilities — Capital lease obligations Total liabilities assumed Net assets acquired $ The fair values of intangible assets acquired were estimated utilizing a discounted cash flow approach, with the assistance of an independent appraisal firm. The intangible assets acquired as part of the Iris acquisition are being amortized over their expected estimated economic benefit period. The fair values consist of the following: (in thousands) Fair Value Useful Life Customer relationships $ 8 years Technology 3 years Trade name 10 years Non-compete agreements 2 – 5 years Total $ Pro Forma Results of Operations The following table presents the unaudited pro forma combined results of operations of Epiq and Iris for the three and six months ended June 30, 2015, after giving effect to certain pro forma adjustments including: (i) amortization of acquired intangible assets, (ii) the impact of acquisition-related expenses, and (iii) interest expense adjustment for historical long-term debt of Iris that was repaid and interest expense on additional borrowings by Epiq to fund the acquisition. The operating results of Iris were included in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2016 for the full period. (in thousands) Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 Total revenues $ $ Net loss ) ) The unaudited pro forma financial information presented above assumes that the Iris acquisition occurred on January 1, 2014 and is not necessarily indicative of the actual results that would have occurred had those transactions been completed on that date. Furthermore, it does not reflect the impacts of any potential operating efficiencies, savings from expected synergies, or costs to integrate the operations. The unaudited pro forma financial information presented above is not necessarily indicative of future results. Disposal of Minus -10 Software, LLC During the second quarter of 2015, management approved a plan to exit the operating business of Minus -10 Software, LLC (“Minus 10”), and as a result, we recorded impairment charges of $1.0 million and $0.2 million related to intangible assets and goodwill, respectively. In addition, we remeasured the fair value of the contingent consideration obligation related to the acquisition using actual operating results and revised forecasted financial information for Minus 10 for the remainder of the measurement period, and as a result, the fair value of the contingent consideration obligation was reduced to zero, resulting in a non-cash gain of $1.2 million. In August 2015, we sold our 100% equity interest in Minus 10 for an amount immaterial to the Condensed Consolidated Financial Statements. The historical assets and liabilities and operating results of Minus 10 are included in the Bankruptcy and Settlement Administration segment through the date of disposition and are immaterial to the Condensed Consolidated Financial Statements. |
LONG-TERM OBLIGATIONS
LONG-TERM OBLIGATIONS | 6 Months Ended |
Jun. 30, 2016 | |
LONG-TERM OBLIGATIONS | |
LONG-TERM OBLIGATIONS | NOTE 3: LONG-TERM OBLIGATIONS Long-term obligations consisted of the following (in thousands): As of June 30, 2016 As of December 31, 2015 Principal Unamortized Debt Issuance Costs Principal Unamortized Debt Issuance Costs Senior secured term loan due 2020, variable interest rate $ $ ) $ $ ) Senior secured revolving loan due 2018, variable interest rate — (1) — — (1) Capital leases, due various dates from 2016 to 2021 — — Notes payable, due 2017, 2.20% interest rate — — Total obligations ) ) Less: Obligations due within one year — — Long-term obligations $ $ ) $ $ ) (1) As of June 30, 2016 and December 31, 2015, we had $ 0.8 million and $1.1 million, respectively, of unamortized debt issuance costs related to the $100 million senior secured revolving loan commitment that was included in “Other long-term assets, net” in the Condensed Consolidated Balance Sheets. Credit Agreement As of June 30, 2016, we had a $ 475 million senior secured credit facility consisting of a $100 million senior secured revolving loan commitment, maturing in August 2018, and a $375 million amortizing senior secured term loan, maturing in August 2020 (the “Credit Agreement”). As of June 30, 2016: · Borrowings outstanding under the senior secured term loan were subject to an interest rate based on the 0.75% LIBOR floor plus an applicable margin of 3.75% for an aggregate interest rate floor of 4.50%. · Borrowings outstanding under the senior secured revolving loan had a weighted average interest rate of 5.0%. · We had $0.8 million in letters of credit outstanding that reduce the borrowing capacity under the senior secured revolving loan. · We were in compliance with all financial covenants. Capital Leases We lease certain property and equipment und er capital leases that generally require monthly payments with final maturity dates during various periods through 2021. As of June 30, 2016 our capital leases had a weighted-average interest rate of approximately 4.6%. Notes Payable In November 2014 we entered into a note payable related to a software license and maintenance agreement that bears interest of approximately 2.20% and is payable quarterly through September 2017. |
EQUITY
EQUITY | 6 Months Ended |
Jun. 30, 2016 | |
EQUITY | |
EQUITY | NOTE 4: 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 us for satisfaction of the exercise price of stock options. During the six months ended June 30, 2016 and 2015, we repurchased 378,527 shares of common stock for $ 4.9 million and 219,737 shares of common stock for $4.0 million, respectively. Additionally, during the six months ended June 30, 2016 and 2015, shares of common stock surrendered to us to satisfy the exercise price of stock options were 40,308 and 1,889, respectively. Dividends On April 28, 2016, the board of directors (the “Board”) of Epiq declared a cash dividend of $0.09 per outstanding share of common stock payable to shareholders of record as of the close of business on May 23, 2016, and on July 5, 2016, we paid an aggregate $3.4 million to such shareholders. The aggregate amount of the dividends declared during the six months ended June 30, 2016 and 2015, was $6.8 million and $6.7 million, respectively, or $0.18 per share of common stock. Accumulated Other Comprehensive Loss The following table summarizes the components of Accumulated other comprehensive loss (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Foreign currency translation adjustments Balance at beginning of period $ ) $ ) $ ) $ ) Other comprehensive income (loss), net of tax ) ) ) Balance at end of period $ ) $ ) $ ) $ ) Unrealized loss on cash flow hedges Balance at beginning of period $ ) $ ) $ ) $ ) Other comprehensive income (loss), net of tax ) ) ) Balance at end of period $ ) $ ) $ ) $ ) There were no reclassifications of amounts from Accumulated other comprehensive loss into the Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2016 and 2015. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2016 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | NOTE 5: EARNINGS PER SHARE Basic earnings per common share is computed on the basis of weighted-average outstanding shares of common stock. Diluted earnings per common share is computed on the basis of basic weighted-average outstanding common shares adjusted for the dilutive effect, if any, of dilutive securities which includes outstanding stock options and nonvested restricted stock awards. The following table summarizes basic and diluted earnings per share (in thousands, except per share amounts). Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net loss $ ) $ ) $ ) $ ) Weighted-average common shares outstanding: Basic common shares Effect of dilutive securities — — — — Diluted common shares Net loss per common share: Basic net loss per common share $ ) $ ) $ ) $ ) Diluted net loss per common share $ ) $ ) $ ) $ ) Potentially dilutive shares excluded from the calculation: Stock options and nonvested shares excluded as their inclusion would be anti-dilutive |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended |
Jun. 30, 2016 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | NOTE 6: FAIR VALUE MEASUREMENTS Recurring 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 June 30, 2016 and December 31, 2015 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. 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 Prices in Active Markets Significant Other Observable Inputs Significant Unobservable Inputs Value (Level 1) (Level 2) (Level 3) June 30, 2016: Liabilities: Interest rate swap $ $ — $ $ — December 31, 2015: Liabilities: Interest rate swap $ $ — $ $ — 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 the interest rate swap is classified as Level 2. The fair value of the interest rate swap is subject to material changes based upon changes in the forward curve for 1 month LIBOR and the volatility thereof. 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 June 30, 2016 and December 31, 2015, 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 | 6 Months Ended |
Jun. 30, 2016 | |
INCOME TAXES | |
INCOME TAXES | NOTE 7: INCOME TAXES To calculate our interim financial reporting income tax expense (benefit) we apply an estimated consolidated annual effective income tax rate to year-to-date pretax income (loss). We exclude material income tax jurisdictions from the estimated consolidated annual effective tax rate that are forecasted to generate annual pretax losses for which no income tax benefit can be recognized due to lack of evidence of future realization of deferred income tax assets. As of June 30, 2016, we forecast that a pretax loss will be incurred in the United Stated for 2016, and as a result, the United States is excluded from the calculation of our estimated consolidated annual effective tax rate for the three and six months ended June 30, 2016. We separately compute our estimated tax expense for the three and six months ended June 30, 2016 in the United States, which is combined with the tax expense computed utilizing our foreign annual effective tax rate to derive the consolidated income tax expense for the three and six months ended June 30, 2016. In all scenarios, the tax effect of unusual or infrequently occurring items, including effects of changes in tax laws or rates, are reported in the interim period in which they occur. We estimate that our pretax income (loss) incurred in the United States will be subject to a combined statutory federal and state tax rate of approximately 41%, while our pretax income (loss) incurred in foreign income tax jurisdictions will be subject to a combined statutory tax rate of approximately 21%, primarily driven by our expected pretax income in Europe. We utilize the asset and liability method of accounting for income taxes and record deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, and recent financial performance. Based upon our review of all positive and negative evidence, including a three year cumulative pretax book loss in the United States, we concluded that a full valuation allowance should continue to be recorded against our net deferred tax assets in the United States as of June 30, 2016. Our Condensed Consolidated Balance Sheet includes deferred tax liabilities that are related to certain indefinite-lived intangibles recorded in the United States, which are being amortized for income tax purposes. Since the reversal of these deferred tax liabilities cannot be scheduled against our deferred tax assets, our estimated consolidated annual effective tax rate includes approximately $4.5 million of tax expense related to this amortization. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2016 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | NOTE 8: SHARE-BASED COMPENSATION Share-based Compensation Expense The following table presents total share-based compensation expense (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Direct cost of services $ $ $ $ Selling, general and administrative expense Total share-based compensation expense $ $ $ $ Nonvested Restricted Stock Awards A summary of nonvested restricted stock activity is presented in the table below (shares in thousands): Shares Weighted Average Grant Date Fair Value Nonvested at December 31, 2015 $ Granted Vested ) Forfeited/Canceled ) Nonvested at June 30, 2016 The fair value of nonvested restricted stock awards is based on the closing market price of our common stock on the date of grant. Nonvested restricted stock entitles the holder to shares of unrestricted common stock upon vesting. As of June 30, 2016, total unrecognized compensation expense related to unvested restricted stock awards was $5.6 million and will be recognized over a weighted-average period of approximately 1.5 years. Performance-based Restricted Stock Awards In March 2016, we granted 20,000 shares of performance-based restricted stock to a senior management employee (“2016 Management Performance RSA”). The 2016 Management Performance RSA is earned based upon the achievement of certain segment-level financial performance criteria for the calendar year ending December 31, 2016. In February 2015, we granted an aggregate of 320,000 shares of performance-based restricted stock awards to executive officers of Epiq (the “2015 Executive Officer Performance RSAs”). The 2015 Executive Officer Performance RSAs were earned based upon the achievement of certain financial performance criteria of Epiq for the year ended December 31, 2015 and required certification by the compensation committee of the Board (the “Compensation Committee”). On January 28, 2016, the Compensation Committee certified that the performance conditions with respect to all of the 2015 Executive Officer Performance RSAs were achieved, and according to the terms of the underlying award agreements, awards representing 140,000 shares of common stock vested on February 22, 2016. The remaining 180,000 of 2015 Executive Officer Performance RSAs are scheduled to vest, subject to continuing employment, in two equal installments in February 2017 and 2018. In January 2015, we granted 20,000 shares of performance-based restricted stock to a senior management employee (“2015 Management Performance RSA”). The 2015 Management Performance RSA was earned based upon the achievement of certain segment-level financial performance criteria for the year ended December 31, 2015. In February 2016, one of the performance conditions related to the 2015 Management Performance RSA was certified to be achieved, and restricted stock equal to 10,000 shares of common stock vested. The remaining 10,000 shares were forfeited. Contingent Restricted Stock Awards On January 28, 2016, the Compensation Committee approved the grants of service-based and performance-based restricted stock to directors and executive officers (the “Contingent Equity Awards”) of Epiq. These awards were contingent upon the approval by our shareholders of an amendment and restatement (the “Plan Amendment”) of the Epiq Systems, Inc. 2004 Equity Incentive Plan (the “2004 Plan”), to increase the number of shares of common stock available for awards by 3,325,000. On July 28, 2016, our shareholders approved the Plan Amendment. If shareholder approval was not obtained, the Contingent Equity Awards would automatically convert to cash awards, in an amount equal to the number of shares that ultimately vest, depending on level of achievement of certain financial measures, multiplied by the closing stock price of Epiq common stock (as published by NASDAQ Global Markets) on the vest date. As of June 30, 2016, the estimated cash value of the Contingent Equity Awards was $7.2 million. For the three and six months ended June 30, 2016, we recognized $0.9 million and $1.5 million of expense, respectively, related to the Contingent Equity Awards, which are included in “Selling, general and administrative expense” in the Condensed Consolidated Statements of Operations. Prior to shareholder approval of the Plan Amendment, and as of June 30, 2016, the expense related to the Contingent Equity Awards is recognized as a cash expense, and therefore is not included in “Share-based Compensation Expense”. Annual Incentive Awards During the six months ended June 30, 2016, we granted an aggregate of 717,461 shares of restricted stock to executive officers and employees of Epiq that immediately vested in connection with the payment of 2015 annual incentive compensation awards. In addition, we plan to pay a portion of the 2016 annual incentive awards to executive officers and employees of Epiq in the form of fully vested common stock (the “2016 Annual Incentive Awards”). Our ability to pay the 2016 Annual Incentive Awards in common stock was contingent upon the approval by our shareholders of the Plan Amendment as described above. For the three and six months ended June 30, 2016, we have recognized $2.1 million and $4.4 million of expense, respectively, related to the 2016 Annual Incentive Awards. Prior to obtaining shareholder approval as described above, and as of June 30, 2016, the expense related to the 2016 Annual Incentive Awards is recognized as a cash expense, and therefore is not included in “Share-based Compensation Expense”. Stock Options Stock option activity during the six months ended June 30, 2016 was immaterial to the Condensed Consolidated Financial Statements. As of June 30, 2016, unrecognized compensation cost related to unvested stock options was $1.4 million, which will be recognized over a weighted-average period of approximately 2.5 years. Equity Award Plans As of June 30, 2016, there were 167,664 shares available for issuance under the 2004 Plan, and on July 28, 2016, our shareholders approved the Plan Amendment as described above, to increase the number of shares of common stock available for awards under the 2004 Plan by 3,325,000. Also, effective July 28, 2016, the Board of Epiq approved the termination of the Epiq Systems, Inc. 2015 Inducement Award Plan (the “2015 Inducement Award Plan”), which had 200,000 shares available for issuance on the termination date. |
SEGMENT REPORTING
SEGMENT REPORTING | 6 Months Ended |
Jun. 30, 2016 | |
SEGMENT REPORTING | |
SEGMENT REPORTING | NOTE 9: 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 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 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, class action, mass tort proceedings, federal regulatory actions and data breach responses. The segment performance measure is based on earnings before interest, taxes, depreciation and amortization, certain nonrecurring operating expenses, share-based compensation expense and contingent equity award expense (as described in Note 8 to the Condensed Consolidated Financial Statements). In management’s evaluation of segment performance, certain costs, such as executive management, administrative staff, and other enterprise level expenses including certain information technology, data security and marketing 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 and equipment, 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 and equipment, 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 (in thousands): Three Months Ended June 30, 2016 Technology Bankruptcy and Settlement Administration Eliminations Total Operating revenue $ $ $ — $ Intersegment revenue — ) — Operating revenues including intersegment revenue ) Reimbursable expenses — Total revenue ) Direct costs, reimbursable expenses, selling, general and administrative expenses ) Segment performance measure $ $ $ — $ As a percentage of segment operating revenue % % % Three Months Ended June 30, 2015 Technology Bankruptcy and Settlement Administration Eliminations Total Operating revenue $ $ $ — $ Intersegment revenue — ) — Operating revenues including intersegment revenue ) Reimbursable expenses — Total revenue ) Direct costs, reimbursable expenses, selling, general and administrative expenses ) Segment performance measure $ $ $ — $ As a percentage of segment operating revenue % % % Six Months Ended June 30, 2016 Technology Bankruptcy and Settlement Administration Eliminations Total Operating revenue $ $ $ — $ Intersegment revenue — ) — Operating revenues including intersegment revenue ) Reimbursable expenses — Total revenue ) Direct costs, reimbursable expenses, selling, general and administrative expenses ) Segment performance measure $ $ $ — $ As a percentage of segment operating revenue % % % Six Months Ended June 30, 2015 Technology Bankruptcy and Settlement Administration Eliminations Total Operating revenue $ $ $ — $ Intersegment revenue — ) — Operating revenues including intersegment revenue ) Reimbursable expenses — Total revenue ) Direct costs, reimbursable expenses, selling, general and administrative expenses ) Segment performance measure $ $ $ — $ As a percentage of segment operating revenue % % % Following is a reconciliation of the segment performance measure to consolidated income (loss) before income taxes (in thousands) : Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Segment performance measure $ $ $ $ Unallocated corporate expenses ) ) ) ) Share-based compensation expense ) ) ) ) Depreciation and software and leasehold amortization ) ) ) ) Amortization of identifiable intangible assets ) ) ) ) Impairment of goodwill and identifiable intangible assets — ) — ) Fair value adjustment to contingent consideration — — Other operating expense — ) ) ) Operating income Interest expense, net ) ) ) ) Income (loss) before income taxes $ $ ) $ $ ) Following are capital expenditures (including software development costs) by segment (in thousands) : Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Capital Expenditures Technology $ $ $ $ Bankruptcy and Settlement Administration Unallocated and corporate Total capital expenditures $ $ $ $ Following are assets by segment (in thousands): As of June 30, 2016 As of December 31, 2015 Total Assets Technology $ $ Bankruptcy and Settlement Administration Unallocated and corporate Total assets $ $ Following is total revenue, determined by the location providing the services, by geographical area (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Total Revenue United States $ $ $ $ United Kingdom Other countries Total revenue $ $ $ $ Following are long-lived assets, excluding intangible assets, by geographical area (in thousands): As of June 30, 2016 As of December 31, 2015 Long-lived assets United States $ $ Other countries Total long-lived assets $ $ |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 6 Months Ended |
Jun. 30, 2016 | |
LEGAL PROCEEDINGS | |
LEGAL PROCEEDINGS | NOTE 10: LEGAL PROCEEDINGS We are at times involved in litigation and other legal claims in the ordinary course of business. When appropriate in management’s estimation, we may record reserves in our financial statements for pending litigation and other claims. Although it is not possible to predict with certainty the outcome of litigation, we do not believe that any of the current pending legal proceedings to which we are a party will have a material impact on our results of operations, financial condition or cash flows. Villere Litigation On December 11, 2015, St. Denis J. Villere & Company, L.L.C. (“Villere”) and George Young (together with Villere, the “Plaintiffs”) filed a petition, which was later amended, in the Circuit Court of Jackson County, Missouri against Epiq and eight of our directors. The petition, as amended, concerned Villere’s December 7, 2015 purported nomination of six directors, which Epiq had rejected. Following negotiations between Villere and Epiq, on June 6, 2016, Epiq entered into a Director Nomination Agreement with the Plaintiffs and Jeffrey Galgano, Barry LeBlanc and Gregory Share (the “Villere Designees”). Pursuant to the Director Nomination Agreement, on June 7, 2016, the Plaintiffs and Epiq dismissed with prejudice all claims and counterclaims asserted in the pending litigation, and Epiq agreed to include the Villere Designees as director nominees in Epiq’s proxy statements for the 2016 and 2017 annual meetings. Epiq also agreed to reimburse Villere’s documented out-of-pocket expenses in connection with the litigation incurred prior to the execution of the Director Nomination Agreement in an amount equal to $3.6 million. This amount was paid to Villere in June 2016 and is included in “Selling, general and administrative expense” in the Condensed Consolidated Statements of Operations. Epiq has filed an insurance claim relative to this matter and the settlement thereof. Shareholder Litigation in Connection with Merger Agreement On August 2, 2016, a purported shareholder of the Company, on behalf of the public shareholders, filed a putative class action in the Circuit Court of Jackson County, Missouri against the Company, the Company’s directors, DTI Technologies, LLC and DTI Merger Sub, Inc. seeking, among other relief, declaratory and injunctive relief against the Company’s merger with DTI, and damages, costs and fees. The outcome of this lawsuit is uncertain. |
ACCOUNTING POLICIES, INTERIM 20
ACCOUNTING POLICIES, INTERIM FINANCIAL STATEMENTS AND BASIS OF PRESENTATION (Policies) | 6 Months Ended |
Jun. 30, 2016 | |
ACCOUNTING POLICIES, INTERIM FINANCIAL STATEMENTS AND BASIS OF PRESENTATION | |
Merger Agreement | Merger Agreement On July 26, 2016, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Document Technologies, LLC, a Georgia limited liability company (“Parent”), and DTI Merger Sub, Inc., a Missouri corporation and a wholly owned subsidiary of Parent (“Merger Sub”), relating to the proposed acquisition of Epiq by OMERS Private Equity, the private equity arm of the OMERS pension plan (“OMERS”), and funds managed by Harvest Partners LP, a leading middle-market private equity fund (“Harvest Partners”). The Merger Agreement provides that, subject to the terms and conditions thereof, Merger Sub will be merged with and into Epiq, with Epiq continuing as the surviving corporation in the merger, and, at the effective time of the merger each outstanding share of common stock of Epiq (other than shares owned by Epiq, Parent or Merger Sub) will cease to be outstanding and will be converted into the right to receive $16.50 in cash, without interest. The proposed merger is expected to close in the fourth quarter of 2016, subject to customary closing conditions, including receipt of shareholder and regulatory approvals. The merger requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of Epiq’s common stock entitled to vote on the transaction, which will be sought at a special meeting of Epiq’s shareholders. Each of St. Denis J. Villere & Company, LLC (“Villere”) and P2 Capital Partners, LLC (“P2 Capital”), Epiq’s two largest shareholders, and Epiq’s executive officers and directors who hold shares of common stock, have signed voting support agreements in support of the merger, representing approximately 38% of the total issued and outstanding shares of common stock of Epiq. Consummation of the merger is not subject to a financing condition. There can be no assurance that the merger will be consummated on the expected timeline or at all. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In March 2016, the Financial Accounting Standards Board (the “FASB”) issued accounting standard update (“ASU”) No. 2016-09, Compensation—Stock Compensation (Topic 718): “Improvements to Employee Share-Based Payment Accounting”. Under the new guidance, entities will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital (“APIC”). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement, and APIC pools will be eliminated. In addition, the guidance eliminates the requirement that excess tax benefits be realized (i.e., through a reduction in income taxes payable) before companies can recognize them. Under today’s guidance, entities cannot recognize excess tax benefits when an option is exercised or a share vests if the related tax deduction increases a net operating loss carryforward rather than reduces income taxes payable. This guidance also simplifies several other aspects of the accounting for employee share-based payments, including forfeitures, statutory tax withholdings requirements and classification in the statement of cash flow. The guidance is effective for Epiq beginning in the first quarter of fiscal 2017. Early adoption is permitted, but all of the guidance must be adopted in the same period. In addition, if early adoption is elected in an interim period, any adjustment shall be reflected as of the beginning of the annual period that includes that interim period. We do not expect the adoption of this new guidance to have a material impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This new lease guidance requires that an entity should recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. Leases would be classified as either Type A leases (generally today’s capital leases) or Type B leases (generally today’s operating leases). For certain leases of assets other than property (for example, equipment, aircraft, cars, trucks), a lessee would classify the lease as a Type A lease and would do the following: (1) recognize a right-of-use asset and a lease liability, initially measured at the present value of lease payments and (2) recognize the unwinding of the discount on the lease liability as interest separately from the amortization of the right-of-use asset. For certain leases of property (that is, land and/or a building or part of a building), a lessee would classify the lease as a Type B lease and would do the following: (1) recognize a right-of-use asset and a lease liability, initially measured at the present value of lease payments and (2) recognize a single lease cost, combining the unwinding of the discount on the lease liability with the amortization of the right-of-use asset, on a straight-line basis. This guidance also provides accounting updates with respect to lessor accounting under a lease arrangement. Historically, we have not engaged in the business of leasing assets to third parties. This new lease guidance is effective for Epiq beginning in the first quarter of fiscal 2019. Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. Early adoption is permitted for all entities. We are currently assessing the full impact of this new guidance on our consolidated financial position, results of operations and cash flows, however, due to the magnitude of our operating leases and related rent expense, we expect the adoption of this accounting guidance to have a material effect on our consolidated financial statements. In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The new guidance clarifies that a performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition. As a result, compensation cost would be recognized over the required service period, if it is probable that the performance condition will be achieved. The new guidance does not require any new or additional disclosures. This guidance was effective for us beginning January 1, 2016 and its adoption did not have a material impact on our Condensed Consolidated Financial Statements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes the revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition. This new revenue guidance outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most of the current revenue recognition guidance. The new guidance requires that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, an entity should apply the following steps: (1) identify the contract with a customer, (2) identify the performance obligations under the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations under the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance also provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. This new revenue guidance was going to be effective for Epiq beginning in the first quarter of fiscal 2017. In August 2015, the FASB deferred the effective date by one year. Early adoption as of the original effective date will be permitted. Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. We are currently assessing the impact of this new revenue guidance on our consolidated financial position, results of operations and cash flows and will adopt this new guidance effective January 1, 2018. |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) - Iris Data Services Inc | 6 Months Ended |
Jun. 30, 2016 | |
Acquisitions | |
Schedule of the purchase price of acquisition and the preliminary estimated fair values of the assets acquired and liabilities assumed | (in thousands) Purchase Price Allocation Cash and cash equivalents $ Accounts receivable Other current assets Deferred income tax assets Property and equipment Other long-term assets Intangible assets Goodwill Total assets acquired Accounts payable Accrued liabilities Deferred revenue Deferred income tax liabilities — Capital lease obligations Total liabilities assumed Net assets acquired $ |
Schedule of fair value of intangible assets acquired | (in thousands) Fair Value Useful Life Customer relationships $ 8 years Technology 3 years Trade name 10 years Non-compete agreements 2 – 5 years Total $ |
Schedule of unaudited pro forma combined result of operations | (in thousands) Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 Total revenues $ $ Net loss ) ) |
LONG-TERM OBLIGATIONS (Tables)
LONG-TERM OBLIGATIONS (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
LONG-TERM OBLIGATIONS | |
Summary of long-term obligations | Long-term obligations consisted of the following (in thousands): As of June 30, 2016 As of December 31, 2015 Principal Unamortized Debt Issuance Costs Principal Unamortized Debt Issuance Costs Senior secured term loan due 2020, variable interest rate $ $ ) $ $ ) Senior secured revolving loan due 2018, variable interest rate — (1) — — (1) Capital leases, due various dates from 2016 to 2021 — — Notes payable, due 2017, 2.20% interest rate — — Total obligations ) ) Less: Obligations due within one year — — Long-term obligations $ $ ) $ $ ) (1) As of June 30, 2016 and December 31, 2015, we had $ 0.8 million and $1.1 million, respectively, of unamortized debt issuance costs related to the $100 million senior secured revolving loan commitment that was included in “Other long-term assets, net” in the Condensed Consolidated Balance Sheets. |
EQUITY (Tables)
EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
EQUITY | |
Schedule of accumulated other comprehensive loss | The following table summarizes the components of Accumulated other comprehensive loss (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Foreign currency translation adjustments Balance at beginning of period $ ) $ ) $ ) $ ) Other comprehensive income (loss), net of tax ) ) ) Balance at end of period $ ) $ ) $ ) $ ) Unrealized loss on cash flow hedges Balance at beginning of period $ ) $ ) $ ) $ ) Other comprehensive income (loss), net of tax ) ) ) Balance at end of period $ ) $ ) $ ) $ ) |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
EARNINGS PER SHARE | |
Summary of basic and diluted earnings per share | The following table summarizes basic and diluted earnings per share (in thousands, except per share amounts). Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net loss $ ) $ ) $ ) $ ) Weighted-average common shares outstanding: Basic common shares Effect of dilutive securities — — — — Diluted common shares Net loss per common share: Basic net loss per common share $ ) $ ) $ ) $ ) Diluted net loss per common share $ ) $ ) $ ) $ ) Potentially dilutive shares excluded from the calculation: Stock options and nonvested shares excluded as their inclusion would be anti-dilutive |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
FAIR VALUE MEASUREMENTS | |
Schedule of financial assets and liabilities measured and recorded at fair value on a recurring basis | Fair Value Measurements Carrying Quoted Prices in Active Markets Significant Other Observable Inputs Significant Unobservable Inputs Value (Level 1) (Level 2) (Level 3) June 30, 2016: Liabilities: Interest rate swap $ $ — $ $ — December 31, 2015: Liabilities: Interest rate swap $ $ — $ $ — |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
SHARE-BASED COMPENSATION | |
Schedule of share-based compensation expense | The following table presents total share-based compensation expense (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Direct cost of services $ $ $ $ Selling, general and administrative expense Total share-based compensation expense $ $ $ $ |
Summary of nonvested restricted stock activity | A summary of nonvested restricted stock activity is presented in the table below (shares in thousands): Shares Weighted Average Grant Date Fair Value Nonvested at December 31, 2015 $ Granted Vested ) Forfeited/Canceled ) Nonvested at June 30, 2016 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
SEGMENT REPORTING | |
Summary of segment information | Following is a summary of segment information (in thousands): Three Months Ended June 30, 2016 Technology Bankruptcy and Settlement Administration Eliminations Total Operating revenue $ $ $ — $ Intersegment revenue — ) — Operating revenues including intersegment revenue ) Reimbursable expenses — Total revenue ) Direct costs, reimbursable expenses, selling, general and administrative expenses ) Segment performance measure $ $ $ — $ As a percentage of segment operating revenue % % % Three Months Ended June 30, 2015 Technology Bankruptcy and Settlement Administration Eliminations Total Operating revenue $ $ $ — $ Intersegment revenue — ) — Operating revenues including intersegment revenue ) Reimbursable expenses — Total revenue ) Direct costs, reimbursable expenses, selling, general and administrative expenses ) Segment performance measure $ $ $ — $ As a percentage of segment operating revenue % % % Six Months Ended June 30, 2016 Technology Bankruptcy and Settlement Administration Eliminations Total Operating revenue $ $ $ — $ Intersegment revenue — ) — Operating revenues including intersegment revenue ) Reimbursable expenses — Total revenue ) Direct costs, reimbursable expenses, selling, general and administrative expenses ) Segment performance measure $ $ $ — $ As a percentage of segment operating revenue % % % Six Months Ended June 30, 2015 Technology Bankruptcy and Settlement Administration Eliminations Total Operating revenue $ $ $ — $ Intersegment revenue — ) — Operating revenues including intersegment revenue ) Reimbursable expenses — Total revenue ) Direct costs, reimbursable expenses, selling, general and administrative expenses ) Segment performance measure $ $ $ — $ As a percentage of segment operating revenue % % % |
Schedule of reconciliation of segment performance measure to consolidated income (loss) before income taxes | Following is a reconciliation of the segment performance measure to consolidated income (loss) before income taxes (in thousands) : Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Segment performance measure $ $ $ $ Unallocated corporate expenses ) ) ) ) Share-based compensation expense ) ) ) ) Depreciation and software and leasehold amortization ) ) ) ) Amortization of identifiable intangible assets ) ) ) ) Impairment of goodwill and identifiable intangible assets — ) — ) Fair value adjustment to contingent consideration — — Other operating expense — ) ) ) Operating income Interest expense, net ) ) ) ) Income (loss) before income taxes $ $ ) $ $ ) |
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 June 30, Six Months Ended June 30, 2016 2015 2016 2015 Capital Expenditures Technology $ $ $ $ Bankruptcy and Settlement Administration Unallocated and corporate Total capital expenditures $ $ $ $ |
Schedule of total assets by segment | Following are assets by segment (in thousands): As of June 30, 2016 As of December 31, 2015 Total Assets Technology $ $ Bankruptcy and Settlement Administration Unallocated and corporate Total assets $ $ |
Schedule of total revenue, determined by the location providing the services, by geographical area | Following is total revenue, determined by the location providing the services, by geographical area (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Total Revenue United States $ $ $ $ United Kingdom Other countries Total revenue $ $ $ $ |
Schedule of long-lived assets, excluding intangible assets, by geographical area | Following are long-lived assets, excluding intangible assets, by geographical area (in thousands): As of June 30, 2016 As of December 31, 2015 Long-lived assets United States $ $ Other countries Total long-lived assets $ $ |
ACCOUNTING POLICIES, INTERIM 28
ACCOUNTING POLICIES, INTERIM FINANCIAL STATEMENTS AND BASIS OF PRESENTATION - Merger Agreement (Details) - Document Technologies, LLC, and DTI Merger Sub, Inc | Jul. 26, 2016$ / shares |
Merger Agreement | |
Cash price assigned per outstanding share | $ 16.50 |
Minimum Percentage Affirmative Vote of Outstanding Shareholders | 66.67% |
Percentage of shares of Common Stock Outstanding Held by Shareholders who have signed Voting Support Agreements | 38.00% |
ACQUISITIONS - Acquisition of I
ACQUISITIONS - Acquisition of Iris (Details) - USD ($) $ in Thousands | Apr. 30, 2015 | Jun. 30, 2015 | Jun. 30, 2016 | Dec. 31, 2015 | Jun. 30, 2015 |
Intangible assets: | |||||
Goodwill | $ 476,973 | $ 477,479 | |||
Customer relationships | |||||
Intangible assets: | |||||
Useful life | 8 years | ||||
Technology | |||||
Intangible assets: | |||||
Useful life | 3 years | ||||
Trade names | |||||
Intangible assets: | |||||
Useful life | 10 years | ||||
Non-compete agreements | Minimum | |||||
Intangible assets: | |||||
Useful life | 2 years | ||||
Non-compete agreements | Maximum | |||||
Intangible assets: | |||||
Useful life | 5 years | ||||
Iris Data Services Inc | |||||
Acquisitions | |||||
Aggregate purchase consideration | $ 133,800 | ||||
Cash Consideration | 124,700 | ||||
Capital lease obligations | 9,061 | ||||
Cash consideration paid | $ 1,100 | ||||
Cash consideration in escrow deposit | 13,000 | ||||
Purchase price allocation adjustments | $ 0 | ||||
Intangible assets: | |||||
Cash and cash equivalents | 197 | ||||
Accounts receivable | 15,208 | ||||
Other current assets | 1,551 | ||||
Deferred income tax assets | 8,484 | ||||
Property and equipment | 10,642 | ||||
Other long-term assets | 246 | ||||
Intangible assets | 34,694 | ||||
Goodwill | 73,676 | ||||
Total assets acquired | 144,698 | ||||
Accounts payable | 4,407 | ||||
Accrued liabilities | 4,837 | ||||
Deferred revenue | 1,689 | ||||
Capital lease obligations | 9,061 | ||||
Total liabilities assumed | 19,994 | ||||
Net assets acquired | 124,704 | ||||
Pro forma financial information | |||||
Total revenues | $ 142,345 | $ 274,260 | |||
Net loss | $ (1,687) | $ (1,348) | |||
Iris Data Services Inc | Customer relationships | |||||
Intangible assets: | |||||
Intangible assets | 15,400 | ||||
Iris Data Services Inc | Technology | |||||
Intangible assets: | |||||
Intangible assets | 8,400 | ||||
Iris Data Services Inc | Trade names | |||||
Intangible assets: | |||||
Intangible assets | 7,000 | ||||
Iris Data Services Inc | Non-compete agreements | |||||
Intangible assets: | |||||
Intangible assets | $ 3,894 |
ACQUISITIONS - Disposal of Minu
ACQUISITIONS - Disposal of Minus 10 (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended |
Aug. 31, 2015 | Jun. 30, 2015 | |
Minus -10 Software, LLC | ||
Disposal | ||
Fair value of contingent consideration | $ 0 | |
Non-cash gain on fair value adjustment to contingent consideration | 1.2 | |
Minus -10 Software, LLC | Disposal Group, Held-for-sale, Not Discontinued Operations | ||
Disposal | ||
Intangible assets impairment charge | 1 | |
Goodwill impairment charge | $ 0.2 | |
Minus -10 Software, LLC | Disposal Group, Disposed of by Sale, Not Discontinued Operations | ||
Disposal | ||
Equity interest sold | 100.00% |
LONG-TERM OBLIGATIONS (Details)
LONG-TERM OBLIGATIONS (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2015 | |
LONG-TERM OBLIGATIONS | ||
Total obligations | $ 400,503 | $ 388,842 |
Unamortized debt issuance costs | (4,723) | (5,264) |
Less: Obligations due within one year | 11,917 | 12,213 |
Long-term obligations | 388,586 | 376,629 |
Credit Agreement | ||
LONG-TERM OBLIGATIONS | ||
Aggregate amount of funds available | 475,000 | |
Senior secured term loan due 2020, variable interest rate | ||
LONG-TERM OBLIGATIONS | ||
Total obligations | 365,388 | 367,213 |
Unamortized debt issuance costs | (4,723) | (5,264) |
Principal amount of debt issued | $ 375,000 | |
Senior secured term loan due 2020, variable interest rate | LIBOR | ||
LONG-TERM OBLIGATIONS | ||
Interest rate, variable interest rate floor | 0.75% | |
Variable interest rate basis | LIBOR | |
Basis points added to reference rate (as a percent) | 3.75% | |
Aggregate floating rate (as a percent) | 4.50% | |
Senior secured revolving loan due 2018, variable interest rate | ||
LONG-TERM OBLIGATIONS | ||
Total obligations | $ 18,000 | |
Aggregate amount of funds available | 100,000 | |
Letters of credit amount outstanding | 800 | |
Senior secured revolving loan due 2018, variable interest rate | Other long-term assets, net | ||
LONG-TERM OBLIGATIONS | ||
Unamortized debt issuance costs | $ (800) | (1,100) |
Senior secured revolving loan due 2018, variable interest rate | Prime rate | ||
LONG-TERM OBLIGATIONS | ||
Weighted average interest rate (as a percent) | 5.00% | |
Capital leases, due various dates from 2016 to 2021 | ||
LONG-TERM OBLIGATIONS | ||
Total obligations | $ 11,152 | 13,326 |
Weighted average interest rate (as a percent) | 4.60% | |
Notes payable, due 2017, 2.20% interest rate | ||
LONG-TERM OBLIGATIONS | ||
Total obligations | $ 5,963 | $ 8,303 |
Interest rate (as a percent) | 2.20% | 2.20% |
EQUITY - Share Repurchases (Det
EQUITY - Share Repurchases (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 05, 2016 | Apr. 28, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 |
Dividend | ||||||
Cash dividends declared per share of common stock | $ 0.09 | $ 0.09 | $ 0.09 | $ 0.18 | $ 0.18 | |
Cash dividends paid | $ 3,400 | $ 6,765 | $ 6,629 | |||
Aggregate amount of dividends declared | $ 6,828 | $ 6,713 | ||||
Repurchase Shares Satisfy Employee Tax Withholding Obligations | ||||||
Share Repurchases | ||||||
Share repurchases (in shares) | 378,527 | 219,737 | ||||
Share repurchases | $ 4,900 | $ 4,000 | ||||
Additional shares of common stock surrendered under stock repurchase program | 40,308 | 1,889 |
EQUITY - Accumulated Other Comp
EQUITY - Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||
Balance beginning of the period | $ (7,949) | |||
Other comprehensive income (loss), net of tax | (3,844) | $ (575) | ||
Reclassification adjustments, net of tax | $ 0 | $ 0 | 0 | 0 |
Balance end of the period | (11,793) | (11,793) | ||
Foreign currency translation adjustments | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||
Balance beginning of the period | (5,517) | (5,287) | (5,161) | (2,952) |
Other comprehensive income (loss), net of tax | (2,241) | 2,308 | (2,597) | (27) |
Balance end of the period | (7,758) | (2,979) | (7,758) | (2,979) |
Unrealized loss on cash flow hedges | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||
Balance beginning of the period | (3,791) | (2,106) | (2,788) | (1,410) |
Other comprehensive income (loss), net of tax | (244) | 148 | (1,247) | (548) |
Balance end of the period | $ (4,035) | $ (1,958) | $ (4,035) | $ (1,958) |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
EARNINGS PER SHARE | ||||
Net loss | $ (5,580) | $ (3,241) | $ (5,645) | $ (1,508) |
Weighted-average common shares outstanding: | ||||
Basic common shares (in shares) | 37,432 | 36,536 | 37,250 | 36,409 |
Diluted common shares (in shares) | 37,432 | 36,536 | 37,250 | 36,409 |
Net loss per common share: | ||||
Basic net loss per common share | $ (0.15) | $ (0.09) | $ (0.15) | $ (0.04) |
Diluted net loss per common share | $ (0.15) | $ (0.09) | $ (0.15) | $ (0.04) |
Potentially dilutive shares excluded from the calculation: | ||||
Stock options and nonvested shares excluded as their inclusion would be anti-dilutive | 2,208 | 272 | 2,335 | 208 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - Interest rate swap - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2015 | |
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 | ||
Interest rate swap | $ 5,103 | $ 3,856 |
Recurring Basis | Significant Other Observable Inputs (Level 2) | Fair Value | ||
Assets and liabilities measured and recorded at fair value on a recurring basis | ||
Interest rate swap | $ 5,103 | $ 3,856 |
INCOME TAXES (Details)
INCOME TAXES (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2016USD ($) | |
Reconciliation of the provision for income taxes at the statutory rate to the provision for income taxes at effective rate | |
Estimated annual tax expense related to amortization of indefinite lived-intangible assets | $ 4.5 |
Europe | |
Reconciliation of the provision for income taxes at the statutory rate to the provision for income taxes at effective rate | |
Statutory 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 | |
Statutory tax rate | 41.00% |
SHARE-BASED COMPENSATION - Expe
SHARE-BASED COMPENSATION - Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
SHARE-BASED COMPENSATION | ||||
Total share-based compensation expense | $ 965 | $ 5,305 | $ 3,481 | $ 6,926 |
Direct cost of services | ||||
SHARE-BASED COMPENSATION | ||||
Total share-based compensation expense | 52 | 1,288 | 170 | 1,377 |
Selling, general and administrative expense | ||||
SHARE-BASED COMPENSATION | ||||
Total share-based compensation expense | $ 913 | $ 4,017 | $ 3,311 | $ 5,549 |
SHARE-BASED COMPENSATION - Nonv
SHARE-BASED COMPENSATION - Nonvested Share Awards (Details) $ / shares in Units, $ in Millions | Jul. 28, 2016shares | Feb. 22, 2016itemshares | Mar. 31, 2016shares | Feb. 29, 2016itemshares | Feb. 28, 2015shares | Jan. 31, 2015shares | Jun. 30, 2016USD ($)$ / sharesshares | Jun. 30, 2016USD ($)$ / sharesshares |
Restricted stock awards | ||||||||
Summary of restricted stock activity (in shares) | ||||||||
Non-vested, beginning of period (in shares) | 709,000 | |||||||
Granted (in shares) | 803,000 | |||||||
Vested (in shares) | (986,000) | |||||||
Forfeited/Canceled (in shares) | (23,000) | |||||||
Non-vested, end of period (in shares) | 503,000 | 503,000 | ||||||
Summary of restricted stock activity (weighted average grant date fair value) | ||||||||
Nonvested, beginning of period (in dollars per shares) | $ / shares | $ 17 | |||||||
Granted (in dollars per share) | $ / shares | 12.74 | |||||||
Vested (in dollars per shares) | $ / shares | 13.80 | |||||||
Forfeited/Canceled (in dollars per share) | $ / shares | 16.35 | |||||||
Outstanding, end of period (in dollars per shares) | $ / shares | $ 16.49 | $ 16.49 | ||||||
Unrecognized compensation cost related to outstanding, unvested stock options and restricted stock | $ | $ 5.6 | $ 5.6 | ||||||
Weighted average recognition period of unrecognized compensation expense | 1 year 6 months | |||||||
Stock options | ||||||||
Summary of restricted stock activity (weighted average grant date fair value) | ||||||||
Unrecognized compensation cost related to outstanding, unvested stock options and restricted stock | $ | 1.4 | $ 1.4 | ||||||
Weighted average recognition period of unrecognized compensation expense | 2 years 6 months | |||||||
2016 Management Performance RSA | Performance-based restricted stock awards | ||||||||
Summary of restricted stock activity (in shares) | ||||||||
Granted (in shares) | 20,000 | |||||||
2015 Executive Officer Performance RSAs | Performance-based restricted stock awards | ||||||||
Summary of restricted stock activity (in shares) | ||||||||
Granted (in shares) | 320,000 | |||||||
Summary of restricted stock activity (weighted average grant date fair value) | ||||||||
Number of shares vested | 140,000 | |||||||
Number of remaining equal vesting installments | item | 2 | |||||||
2015 Executive Officer Performance RSAs | Performance-based restricted stock awards | Vest one to two years | ||||||||
Summary of restricted stock activity (weighted average grant date fair value) | ||||||||
Number of shares expected to vest | 180,000 | |||||||
2015 Management Performance RSA | Performance-based restricted stock awards | ||||||||
Summary of restricted stock activity (in shares) | ||||||||
Granted (in shares) | 20,000 | |||||||
Summary of restricted stock activity (weighted average grant date fair value) | ||||||||
Number of shares vested | 10,000 | |||||||
Number of performance conditions certified to be achieved | item | 1 | |||||||
Number of shares forfeited | 10,000 | |||||||
Contingent Nonvested Share Awards | Restricted stock awards | ||||||||
Summary of restricted stock activity (weighted average grant date fair value) | ||||||||
Increase in number of shares of common stock available for awards | 3,325,000 | |||||||
Estimated cash value of contingent equity awards | $ | 7.2 | $ 7.2 | ||||||
Selling, general and administrative expense | $ | 0.9 | $ 1.5 | ||||||
Annual Incentive Awards | Performance-based restricted stock awards | ||||||||
Summary of restricted stock activity (in shares) | ||||||||
Granted (in shares) | 717,461 | |||||||
Summary of restricted stock activity (weighted average grant date fair value) | ||||||||
Selling, general and administrative expense | $ | $ 2.1 | $ 4.4 | ||||||
2004 Incentive Plan | ||||||||
Summary of restricted stock activity (weighted average grant date fair value) | ||||||||
Increase in number of shares of common stock available for awards | 3,325,000 | |||||||
Number of remaining shares available for issuance under plan | 167,664 | 167,664 | ||||||
2015 Inducement Award Plan | ||||||||
Summary of restricted stock activity (weighted average grant date fair value) | ||||||||
Number of remaining shares available for issuance under plan | 200,000 |
SEGMENT REPORTING - General (De
SEGMENT REPORTING - General (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2016USD ($)segment | Jun. 30, 2015USD ($) | |
Segment information | ||||
Number of reporting segments | segment | 2 | |||
Revenues: | ||||
Operating revenue | $ 130,647 | $ 130,557 | $ 262,175 | $ 238,312 |
Reimbursable expenses | 10,097 | 7,453 | 25,100 | 18,726 |
Total revenue | 140,744 | 138,010 | 287,275 | 257,038 |
Direct costs, reimbursable expenses, selling, general and administrative expenses | 101,504 | 104,491 | 210,480 | 192,606 |
Segment performance measure | $ 39,240 | $ 33,519 | $ 76,795 | $ 64,432 |
As a percentage of segment operating revenue | 30.00% | 26.00% | 29.00% | 27.00% |
Technology | ||||
Revenues: | ||||
Operating revenue | $ 96,008 | $ 93,159 | $ 189,265 | $ 163,182 |
Intersegment revenue | 23 | 168 | 292 | 1,107 |
Bankruptcy and Settlement Administration | ||||
Revenues: | ||||
Operating revenue | 34,639 | 37,398 | 72,910 | 75,130 |
Operating segment | Technology | ||||
Revenues: | ||||
Operating revenue | 96,031 | 93,327 | 189,557 | 164,289 |
Reimbursable expenses | 867 | 309 | 1,429 | 622 |
Total revenue | 96,898 | 93,636 | 190,986 | 164,911 |
Direct costs, reimbursable expenses, selling, general and administrative expenses | 67,677 | 69,594 | 135,948 | 122,660 |
Segment performance measure | $ 29,221 | $ 24,042 | $ 55,038 | $ 42,251 |
As a percentage of segment operating revenue | 30.00% | 26.00% | 29.00% | 26.00% |
Operating segment | Bankruptcy and Settlement Administration | ||||
Revenues: | ||||
Operating revenue | $ 34,639 | $ 37,398 | $ 72,910 | $ 75,130 |
Reimbursable expenses | 9,230 | 7,144 | 23,671 | 18,104 |
Total revenue | 43,869 | 44,542 | 96,581 | 93,234 |
Direct costs, reimbursable expenses, selling, general and administrative expenses | 33,850 | 35,065 | 74,824 | 71,053 |
Segment performance measure | $ 10,019 | $ 9,477 | $ 21,757 | $ 22,181 |
As a percentage of segment operating revenue | 29.00% | 25.00% | 30.00% | 30.00% |
Eliminations | ||||
Revenues: | ||||
Operating revenue | $ (23) | $ (168) | $ (292) | $ (1,107) |
Intersegment revenue | (23) | (168) | (292) | (1,107) |
Total revenue | (23) | (168) | (292) | (1,107) |
Direct costs, reimbursable expenses, selling, general and administrative expenses | $ (23) | $ (168) | $ (292) | $ (1,107) |
SEGMENT REPORTING - Segment Per
SEGMENT REPORTING - Segment Performance (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Reconciliation of the segment performance measure to consolidated income (loss) before income taxes | ||||
Segment performance measure | $ 39,240 | $ 33,519 | $ 76,795 | $ 64,432 |
Unallocated corporate expenses | (18,296) | (10,168) | (34,607) | (21,029) |
Share-based compensation expense | (965) | (5,305) | (3,481) | (6,926) |
Depreciation and software and leasehold amortization | (10,084) | (9,498) | (19,618) | (18,263) |
Amortization of identifiable intangible assets | (3,680) | (4,810) | (7,454) | (7,495) |
Impairment of goodwill and identifiable intangible assets | (1,162) | (1,162) | ||
Fair value adjustment to contingent consideration | 1,201 | 1,201 | ||
Other operating expense | (2,861) | (53) | (2,998) | |
Operating income | 6,215 | 916 | 11,582 | 7,760 |
Interest expense, net | (5,457) | (5,479) | (10,832) | (9,704) |
Income (loss) before income taxes | $ 758 | $ (4,563) | $ 750 | $ (1,944) |
SEGMENT REPORTING - Capital Exp
SEGMENT REPORTING - Capital Expenditures (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Capital Expenditures | ||||
Total capital expenditures | $ 7,740 | $ 7,712 | $ 13,082 | $ 16,330 |
Technology | ||||
Capital Expenditures | ||||
Total capital expenditures | 3,270 | 3,642 | 4,914 | 5,894 |
Bankruptcy and Settlement Administration | ||||
Capital Expenditures | ||||
Total capital expenditures | 657 | 392 | 1,046 | 828 |
Unallocated and corporate | ||||
Capital Expenditures | ||||
Total capital expenditures | $ 3,813 | $ 3,678 | $ 7,122 | $ 9,608 |
SEGMENT REPORTING - Total Asset
SEGMENT REPORTING - Total Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2016 | Dec. 31, 2015 |
Assets | ||
Total assets | $ 822,557 | $ 823,897 |
Unallocated and corporate | ||
Assets | ||
Total assets | 72,424 | 82,064 |
Technology | ||
Assets | ||
Total assets | 467,748 | 465,736 |
Bankruptcy and Settlement Administration | ||
Assets | ||
Total assets | $ 282,385 | $ 276,097 |
SEGMENT REPORTING - Revenue and
SEGMENT REPORTING - Revenue and Long-Lived Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Revenue and long-lived assets excluding intangible assets, by geographical area | |||||
Revenue | $ 140,744 | $ 138,010 | $ 287,275 | $ 257,038 | |
Long-lived assets | 87,704 | 87,704 | $ 93,686 | ||
United States | |||||
Revenue and long-lived assets excluding intangible assets, by geographical area | |||||
Revenue | 114,363 | 117,865 | 237,447 | 219,533 | |
Long-lived assets | 78,696 | 78,696 | 84,137 | ||
United Kingdom | |||||
Revenue and long-lived assets excluding intangible assets, by geographical area | |||||
Revenue | 12,476 | 16,289 | 26,126 | 29,979 | |
Other countries | |||||
Revenue and long-lived assets excluding intangible assets, by geographical area | |||||
Revenue | 13,905 | $ 3,856 | 23,702 | $ 7,526 | |
Long-lived assets | $ 9,008 | $ 9,008 | $ 9,549 |
LEGAL PROCEEDINGS (Details)
LEGAL PROCEEDINGS (Details) $ in Millions | Jun. 07, 2016USD ($) |
Villere Litigation | |
Legal proceedings | |
Amount agreed to be reimbursed to Plaintiffs | $ 3.6 |