Exhibit 99.1
EPIQ Systems, Inc. Announces Strong Second Quarter Results
KANSAS CITY, Kan.--(BUSINESS WIRE)--July 27, 2004--EPIQ Systems, Inc.
(NASDAQ: EPIQ) today reported results of operations for the second quarter of
2004, with quarterly operating revenue growth of 88% versus prior year. Net
income from continuing operations for the quarter of $3.0 million and net income
from continuing operations per diluted share of $0.16 include the effect of
acquisition-related intangible expenses totaling $1.2 million, net of tax or
$0.07 per diluted share. Non-GAAP adjusted net income for the quarter, as
defined below, was $4.7 million and non-GAAP adjusted net income per diluted
share of $0.26 achieved management's previously stated second-quarter objective.
Diluted weighted average shares outstanding were 18.2 million for both the
quarter and the six-month period ended June 30, 2004.
Financial highlights from continuing operations for the quarter ended June
30, 2004, compared to the same period last year include:
-- Operating revenue (total revenue less reimbursed expenses) increased
88% to $29.6 million from $15.7 million. Case management revenue
increased 41% and document management revenue increased 260%.
-- Operating income was $7.1 million compared to $6.6 million. Operating
income includes $2.0 million of acquisition intangible amortization
expense compared to $1.0 million last year.
-- Net income from continuing operations was $3.0 million compared to
$3.9 million and net income from continuing operations per diluted
share was $0.16 versus $0.21. Net income includes $1.2 million of
amortization of acquisition-related intangibles compared to $0.6
million last year and $1.2 million of interest expense compared to no
interest expense for the year ago quarter, both net of tax.
-- Non-GAAP adjusted net income (net income plus amortization of
acquisition-related intangibles, acquisition-related expense and
amortization of capitalized loan fees, all net of tax) increased to
$4.7 million compared to $4.4 million last year. Non-GAAP adjusted net
income per share was $0.26 versus $0.24. A reconciliation statement is
attached.
-- Non-GAAP adjusted earnings before interest, taxes, depreciation,
amortization and acquisition related expenses (Non-GAAP Adjusted
EBITDA) increased 23% to $10.7 million compared to $8.7 million for
the year ago quarter. A reconciliation statement is attached.
Financial highlights from continuing operations for the six-month period
ended June 30, 2004, compared to the same period last year include:
-- Operating revenue (total revenue less reimbursed expenses) increased
81% to $52.6 million from $29.0 million. Case management revenue
increased 44% and document management revenue increased 247%.
-- Operating income was $11.9 million compared to $11.0 million.
Operating income includes $3.7 million of acquisition intangible
amortization expense compared to $1.7 million last year.
-- Net income from continuing operations was $5.0 million compared to
$6.6 million and net income from continuing operations per diluted
share was $0.27 versus $0.36. Net income includes $2.2 million of
amortization of acquisition-related intangibles compared to $1.0
million last year, $1.3 million of acquisition-related expense
compared to $0.9 million last year, and $2.1 million of interest
expense compared to no interest expense last year, all net of tax.
-- Non-GAAP adjusted net income (net income plus amortization of
acquisition-related intangibles, acquisition-related expense and
amortization of capitalized loan fees, all net of tax) increased to
$9.4 million compared to $8.4 million last year. Non-GAAP adjusted net
income per share was $0.51 versus $0.46. A reconciliation statement is
attached.
-- Non-GAAP adjusted earnings before interest, taxes, depreciation,
amortization and acquisition-related expenses (Non-GAAP Adjusted
EBITDA) increased 27% to $20.7 million compared to $16.3 million last
year. A reconciliation statement is attached.
Recent key events for the company include:
-- EPIQ Systems was ranked #36 on the Fortune Small Business America's
Fastest-Growing Small Companies list. This marks the Company's fourth
consecutive appearance on this list.
-- On April 30, 2004, EPIQ Systems divested the infrastructure software
business unit, which included the DataExpress product, to a private
investor group.
-- The Company released TCMS(TM) 9.5 Chapter 7 Software, a significant
enhancement to its industry-leading Chapter 7 case management
solution.
-- The board of directors elected Joel Pelofsky to serve as an
independent member of the company's board of directors effective July
1, 2004. Mr. Pelofsky formerly served as a U.S. Bankruptcy Court Judge
and as a United States Trustee.
-- EPIQ Systems completed a $50 million Rule 144A private placement of
unsecured contingent convertible subordinated notes with three
institutional investors. The proceeds were used to repay higher
interest rate borrowings from the Company's then outstanding credit
facility.
-- During July the Company entered into a new $75 million four-year
senior credit facility replacing the former credit facility which was
repaid in full and terminated. The new facility provides a more
favorable amortization schedule and interest rates and offers
additional cash availability for future business expansion.
Tom W. Olofson, chairman and CEO, and Christopher E. Olofson, president and
chief operating officer of EPIQ Systems, commented: "We are pleased to announce
strong results in our recently completed quarter and look forward to solid
financial performance during the second half of the year. With interest rates
rising and a high level of debt in the economy, we feel these factors may
contribute to increased bankruptcy filings in the future. Our recently acquired
class action business also affords us attractive new growth potential to
supplement our bankruptcy business."
EPIQ Systems provides an advanced offering of integrated technology-based
products and services for fiduciary management and claims administration
applications. Our solutions enable clients to optimize the administration of
large and complex bankruptcy, class action, mass tort, and other similar legal
proceedings. EPIQ Systems clients include corporations, attorneys, trustees and
administrative professionals who require sophisticated case administration and
document management capabilities, extensive subject matter expertise and a high
service capacity. We provide clients a packaged offering of both proprietary
technology and value-added services that comprehensively addresses their
extensive business requirements. For more information, visit us online at
www.epiqsystems.com.
Forward-Looking Statement Disclaimer: This press release may contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act, including those
relating to the possible or assumed future results of operations and financial
condition of the Company. These forward-looking statements are based on the
Company's current expectations and may be identified by terms such as "goal" and
"objective." Because those statements are subject to a number of risks, actual
results may differ materially from those expressed or implied in this
presentation. These risks include (1) any material changes in our total number
of bankruptcy trustees and cases; (2) any material changes in our Chapter 7
deposits, the services required by our Chapter 11, Chapter 13, class action or
mass tort cases, or the number of cases processed by our Chapter 13 bankruptcy
trustee customers; (3) material changes in the number of bankruptcy filings,
class action filings or mass tort actions each year; (4) our reliance on and the
previously-announced change in our marketing arrangement and pricing
arrangements with Bank of America for Chapter 7 revenue; (5) future bankruptcy,
class action, or mass tort legislation; (6) risks associated with the
integration of acquisitions into our existing business operations; (7) risks
associated with the significant new indebtedness we incurred in 2004; (8) a
decline in the business of Poorman-Douglas Corporation; and (9) other risks
detailed from time to time in our SEC filings, including our annual report on
Form 10-K. In addition, there may be other factors not included in our SEC
filings that may cause actual results to differ materially from any
forward-looking statements. We undertake no obligations to update any
forward-looking statements contained herein to reflect future events or
developments.
Note: A telephone conference call and webcast will be held at 3:30 p.m.
Central time today (July 27, 2004) to further discuss this announcement. The
toll-free dial in number for this call is 800-473-6123. This call can also be
accessed on the company's website at www.epiqsystems.com. A supplemental slide
presentation is available from the website. A digital replay of the call will be
available until August 24, 2004, by dialing 877-519-4471 (pass code: 4973979).
The archived webcast will be available on the company's website.
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------- -----------------
2004 2003 2004 2003
---------- -------- -------- --------
REVENUE:
Case management $17,372 $12,347 $34,298 $23,762
Document management 12,224 3,392 18,290 5,273
---------- -------- -------- --------
Operating revenue 29,596 15,739 52,588 29,035
Reimbursed expenses 5,312 1,345 8,332 2,124
---------- -------- -------- --------
Total Revenue 34,908 17,084 60,920 31,159
---------- -------- -------- --------
COSTS AND EXPENSES:
Direct costs 17,672 4,113 27,976 7,068
General and administrative 6,573 4,289 12,211 7,775
Depreciation and software
amortization 1,578 1,093 2,959 2,211
Amortization of identifiable
intangible assets 2,032 976 3,712 1,658
Acquisition related - - 2,181 1,485
---------- -------- -------- --------
Total Operating Expenses 27,855 10,471 49,039 20,197
---------- -------- -------- --------
INCOME FROM OPERATIONS 7,053 6,613 11,881 10,962
Net Interest Income
(Expense) (1,975) 3 (3,463) 73
---------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 5,078 6,616 8,418 11,035
PROVISION FOR INCOME TAXES 2,095 2,741 3,433 4,482
---------- -------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS 2,983 3,875 4,985 6,553
NET INCOME (LOSS) FROM
DISCONTINUED OPERATIONS 1,008 (267) 744 (633)
---------- -------- -------- --------
NET INCOME $3,991 $3,608 $5,729 $5,920
========== ======== ======== ========
NET INCOME PER SHARE INFORMATION:
Income per share - Diluted
Diluted income per share
from continuing operations $0.16 $0.21 $0.27 $0.36
Diluted income (loss) from
discontinued operations 0.06 (0.01) 0.04 (0.03)
---------- -------- -------- --------
EARNINGS PER SHARE - DILUTED $0.22 $0.20 $0.31 $0.33
========== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 18,248 18,204 18,240 17,987
========== ======== ======== ========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2004
(In thousands)
(Unaudited)
June 30, 2004
----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $14,231
Accounts receivable, trade, less allowance for
doubtful accounts
of $603 20,437
Prepaid expenses 1,682
Deferred income taxes 5,965
Other current assets 3,172
----------------
Total Current Assets 45,487
LONG-TERM ASSETS:
Property and equipment, net 21,184
Software development costs, net 5,973
Goodwill 148,492
Other intangibles, net of accumulated
amortization of $7,962 28,112
Other 2,305
----------------
Total Long-term Assets 206,066
----------------
Total Assets $251,553
================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITES:
Accounts payable $5,321
Customer deposits 2,913
Other accrued expenses 1,890
Current maturities of long-term obligations 19,440
---------------
Total Current Liabilities 29,564
LONG-TERM LIABILITIES:
Deferred income taxes 10,069
Long-term obligations (excluding current
maturities) 76,540
---------------
Total Long-term Liabilities 86,609
STOCKHOLDERS' EQUITY 135,380
---------------
Total Liabilities and Stockholders' Equity $251,553
===============
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS
TO NON-GAAP ADJUSTED NET INCOME FROM CONTINUING OPERATIONS
(In thousands)
(Unaudited)
THREE-MONTHS SIX-MONTHS
ENDED ENDED
June 30, June 30,
2004 2003 2004 2003
------- ------- ------- -------
NET INCOME FROM CONTINUING OPERATIONS $2,983 $3,875 $4,985 $6,553
Plus (net of tax):
Amortization of acquisition
intangibles 1,194 572 2,198 985
Acquisition related expense - - 1,292 882
Amortization of capitalized loan
fees 516 - 884 -
------- ------- ------- -------
1,710 572 4,374 1,867
------- ------- ------- -------
NON-GAAP ADJUSTED NET INCOME FROM
CONTINUING OPERATIONS $4,693 $4,447 $9,359 $8,420
======= ======= ======= =======
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME PER SHARE FROM CONTINUING OPERATIONS TO
NON-GAAP ADJUSTED NET INCOME PER SHARE FROM CONTINUING OPERATIONS
(Unaudited)
THREE-MONTHS SIX-MONTHS
ENDED ENDED
June 30, June 30,
2004 2003 2004 2003
------ ------ ------ ------
NET INCOME FROM CONTINUING OPERATIONS $0.16 $0.21 $0.27 $0.36
Plus (net of tax):
Amortization of acquisition
intangibles 0.07 0.03 0.12 0.05
Acquisition related expense - - 0.07 0.05
Amortization of capitalized loan fees 0.03 - 0.05 -
------ ------ ------ ------
0.10 0.03 0.24 0.10
------ ------ ------ ------
NON-GAAP ADJUSTED NET INCOME FROM
CONTINUING OPERATIONS $0.26 $0.24 $0.51 $0.46
====== ====== ====== ======
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP ADJUSTED EBITDA FROM CONTINUING OPERATIONS
(In thousands)
(Unaudited)
THREE-MONTHS SIX-MONTHS
ENDED ENDED
June 30, June 30,
2004 2003 2004 2003
---------- -------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS $2,983 $3,875 $4,985 $6,553
Acquisition related expense - - 2,181 1,485
Depreciation and amortization 3,610 2,069 6,671 3,869
Net interest (income) expense 1,975 (3) 3,463 (73)
Provision for income taxes 2,095 2,741 3,433 4,482
---------- -------- -------- --------
7,680 4,807 15,748 9,763
---------- -------- -------- --------
NON-GAAP ADJUSTED EBITDA FROM
CONTINUING OPERATIONS $10,663 $8,682 $20,733 $16,316
========== ======== ======== ========
CONTACT: EPIQ Systems
Peggy Leinen, 913-621-9500
www.epiqsystems.com