Exhibit 99.1
EPIQ Systems, Inc. Announces Fourth Quarter and Full Year 2004 Results
KANSAS CITY, Kan.--(BUSINESS WIRE)--Feb. 7, 2005--EPIQ Systems,
Inc. (NASDAQ: EPIQ) announces results of operations for the fourth
quarter and full year of 2004, with fourth quarter operating revenue
(total revenue less reimbursed expenses) of $23.8 million versus $16.8
million last year and 2004 operating revenue of $105.1 million
compared to $62.4 million last year.
In accordance with a required accounting change (EITF 04-08 -- The
Effect of Contingently Convertible Debt on EPS) effective December 15,
2004, potential shares related to our convertible notes issued June
10, 2004 are included in the diluted shares calculation as though the
debt was converted entirely on the date of issuance. To date, no
shares have been converted. In the absence of EITF 04-08, diluted
weighted average shares outstanding would have been 18.3 million for
both the quarter and the year. Taking into effect the accounting
change, diluted weighted average shares outstanding were 21.1 million
for the quarter and 19.8 million for the year. The convertible notes
bear interest at 4% annually. EITF 04-08 requires earnings per share
calculations to include the appropriate after tax interest adjustment.
A reconciliation statement identifying the changes related to the new
accounting treatment is attached.
Fourth quarter 2004 net income from continuing operations was $1.9
million, or $0.10 per share ($0.10 per share before EITF 04-08),
compared to $3.8 million and $0.21 per share last year. Fourth quarter
net income includes net after tax expenses of $1.8 million for
amortization of acquisition related intangibles and expenses related
to financing including interest expense, amortization and write-off of
capitalized loan fees, and embedded option mark-to-market
expense/convertible debt accretion compared to $0.6 million last year.
2004 net income from continuing operations was $9.1 million, or $0.49
per share ($0.50 per share before EITF 04-08), compared to $14.5
million and $0.80 per share last year. 2004 net income includes net
after tax expenses of $8.9 million for amortization of acquisition
related intangibles and expenses related to financing including
interest expense, amortization and write-off of capitalized loan fees,
and embedded option mark-to-market expense/convertible debt accretion
compared to $2.2 million for the prior year.
Non-GAAP net income from continuing operations (net income from
continuing operations plus amortization of acquisition related
intangibles, acquisition related expenses, amortization and write-off
of capitalized loan fees, and embedded option mark-to-market
expense/convertible debt accretion, all net after tax) was $3.2
million in the fourth quarter of 2004 compared to $4.5 million last
year. Fourth quarter 2004 non-GAAP net income per share was $0.17
($0.18 per share before EITF 04-08), versus $0.25 last year. 2004
non-GAAP net income from continuing operations was $16.9 million
compared to $17.7 million last year and was $0.89 per share ($0.93 per
share before EITF 04-08), versus $0.98 last year. A reconciliation
statement is attached.
EPIQ Systems' management primarily analyzes financial results
adjusted for certain items that are non-operational and not
necessarily ongoing in nature, as well as cash flow generated from
operations. Management evaluates the following key metrics: (i)
Non-GAAP Adjusted EBITDA from continuing operations (earnings before
interest/financing, taxes, depreciation, amortization, and acquisition
related expenses) and (ii) net cash provided by operating activities.
Non-GAAP Adjusted EBITDA from continuing operations was $8.3
million in the fourth quarter compared to $9.3 million for the year
ago quarter; 2004 full year results increased 13% to $39.2 million
compared to $34.6 million a year ago. A reconciliation statement is
attached.
Net cash provided by operating activities in the fourth quarter
reached $11.2 million, a 35% increase from $8.3 million last year, and
increased 53% to $31.6 million in 2004 from $20.7 million in 2003. A
condensed cash flow statement is attached.
Tom W. Olofson, chairman and CEO, and Christopher E. Olofson,
president and chief operating officer of EPIQ Systems, stated: "2004
represented an important year of investment as we continue to execute
our long-term strategic business plan. To complement our comprehensive
franchise in bankruptcy administration, we added immediate market
leadership in the class action administration market with the
acquisition of Poorman-Douglas. We believe class action administration
is well suited to our existing resources and capabilities and is a
good counterbalance to bankruptcy administration. To extend our
Chapter 11 market penetration, we formed Financial Balloting Group, a
new subsidiary providing specialty voting and tabulation services and
while large Chapter 11 corporate filings were down compared to prior
years, high debt levels and rising interest rates suggest the
possibility for robust future growth for bankruptcy services. The
Company produced strong cash flow from operating activities of $31.6
million, representing a 53% increase over last year, and entered 2005
as a stronger and broader-based organization."
Significant events in 2004 include:
-- Record-level consumer debt in 2004 near $2.1 trillion, marking
the 13th consecutive annual increase.
-- 1.62 million bankruptcies were filed in the U.S. Court's
fiscal year ended September 30, 2004; essentially unchanged
from the 1.66 million record level reached in 2003.
-- Forbes magazine ranked EPIQ Systems #37 on the 200 Best Small
Companies list. This marks the Company's fifth consecutive
appearance on this list.
-- Fortune Small Business ranked EPIQ Systems #36 on the
America's Fastest-Growing Small Companies list, marking the
Company's fourth consecutive appearance on this list.
-- In August, EPIQ Systems formed a new subsidiary, Financial
Balloting Group (FBG). Based in New York, FBG offers specialty
balloting and voting support services for Chapter 11
reorganization plans.
-- 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. The
six-member Board is now comprised of four independent
directors.
-- On April 30, 2004, EPIQ Systems divested the infrastructure
software business unit to a private investor group.
-- EPIQ Systems released TCMS(TM) 9.0, the latest version of its
industry-leading Chapter 7 case management solution. TCMS(TM)
9.0 represents the product's ninth consecutive, on-time annual
release and further establishes EPIQ Systems' technology
leadership.
-- In January 2004, EPIQ Systems acquired Poorman-Douglas
Corporation, a national leader in class action and mass tort
case administration services.
Conference Call
The Company will host a conference call today at 3:30 p.m. (CST)
to discuss these results. Interested parties may dial (800) 473-6123.
The audio with supplemental slides is also available at
www.epiqsystems.com and www.vcall.com. A replay of the call will be
available for one week by dialing (877) 519-4471 and entering pin#
5635676. The archived Internet broadcast will be available on the
company's website until the next earnings update.
Company Description
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.
This press release and the referenced conference call 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 disclosure. 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 change in our non-exclusive marketing and pricing with Bank of
America for Chapter 7 revenue, (5) the risks associated with new
Chapter 7 depository relationships (6) future bankruptcy, class
action, or mass tort legislation, (7) risks associated with the
integration of acquisitions into our existing business operations, (8)
risks associated with the significant new indebtedness we incurred in
2004, (9) a decline in new client engagements in our case management
or document management business, and (10) 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.
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months Twelve months
ended ended
December 31, December 31,
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
REVENUE:
Case management $17,250 $13,119 $68,526 $49,688
Document management 6,588 3,696 36,549 12,730
-------- -------- -------- --------
Operating revenue 23,838 16,815 105,075 62,418
Reimbursed expenses 4,968 1,587 20,345 5,518
-------- -------- -------- --------
Total Revenue 28,806 18,402 125,420 67,936
-------- -------- -------- --------
OPERATING EXPENSES:
Direct costs 13,875 4,759 60,384 16,490
General and administrative 6,677 4,362 25,886 16,868
Depreciation and software
amortization 1,764 1,286 6,527 4,568
Amortization of identifiable
intangible assets 2,023 976 7,767 3,610
Acquisition related - 308 2,197 1,793
-------- -------- -------- --------
Total Operating Expenses 24,339 11,691 102,761 43,329
-------- -------- -------- --------
INCOME FROM OPERATIONS 4,467 6,711 22,659 24,607
EXPENSES (INCOME) RELATED TO
FINANCING:
Interest expense, net of interest
income 1,131 (13) 6,215 (83)
Loan fee write-off - - 995 -
-------- -------- -------- --------
Net Expenses (Income) Related
to Financing 1,131 (13) 7,210 (83)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 3,336 6,724 15,449 24,690
PROVISION FOR INCOME TAXES 1,418 2,955 6,386 10,165
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS 1,918 3,769 9,063 14,525
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS - (4,908) 667 (5,818)
-------- -------- -------- --------
NET INCOME $1,918 $(1,139) $9,730 $8,707
======== ======== ======== ========
NET INCOME PER SHARE INFORMATION:
Income per share - Diluted
Income from continuing
operations $0.10 $0.21 $0.49 $0.80
Income (loss) from
discontinued operations - (0.27) 0.03 (0.32)
-------- -------- -------- --------
Net income per share -
Diluted $0.10 $(0.06) $0.52 $0.48
======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 21,125 18,171 19,828 18,104
======== ======== ======== ========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, December 31,
2004 2003
------------ ------------
ASSETS
ASSETS:
Cash and cash equivalents $13,330 $30,347
Trade receivables, net 18,690 11,337
Property and equipment, net 20,431 11,886
Goodwill 147,728 64,188
Other intangibles, net 24,057 16,325
Other 15,852 7,844
------------ ------------
Total Assets $240,088 $141,927
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $4,263 $1,998
Indebtedness 82,149 3,915
Other liabilities 13,843 6,759
STOCKHOLDERS' EQUITY 139,833 129,255
------------ ------------
Total Liabilities and Stockholders' Equity $240,088 $141,927
============ ============
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------- -------------------
2004 2003 2004 2003
--------- --------- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $1,918 $(1,139) $9,730 $8,707
Non-cash adjustments to net
income
Depreciation and
amortization 5,067 2,516 17,409 9,541
Impairment provision - 7,615 - 7,615
Other, net 4,431 (2,360) 7,254 (1,621)
Changes in operating assets
and liabilities, net (214) 1,690 (2,804) (3,591)
--------- --------- --------- ---------
Net cash from operating
activities 11,202 8,322 31,589 20,651
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash paid for acquisition,
net of cash acquired - - (113,111) (43,263)
Other (998) (1,539) (5,918) (6,734)
--------- --------- --------- ---------
Net cash used in investing
activities (998) (1,539) (119,029) (49,997)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net proceeds (payments) on
indebtedness (7,438) - 69,114 -
Other 38 83 595 580
--------- --------- --------- ---------
Net cash from (used in)
financing activities (7,400) 83 69,709 580
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH $2,804 $6,866 $(17,731) $(28,766)
========= ========= ========= =========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO
NON-GAAP NET INCOME FROM CONTINUING OPERATIONS
(In thousands)
(Unaudited)
THREE-MONTHS TWELVE-MONTHS
ENDED ENDED
December 31, December 31,
2004 2003 2004 2003
------- ------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS $1,918 $3,769 $9,063 $14,525
Plus (net of tax):
Amortization of acquisition
intangibles 1,163 548 4,559 2,124
Acquisition related expense - 173 1,290 1,055
Amortization/write-off -
capitalized loan fees 163 - 1,828 -
Non-cash embedded option charges (22) - 171 -
------- ------- -------- --------
1,304 721 7,848 3,179
------- ------- -------- --------
NON-GAAP NET INCOME FROM
CONTINUING OPERATIONS $3,222 $4,490 $16,911 $17,704
======= ======= ======== ========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF EPS FROM CONTINUING OPERATIONS TO
NON-GAAP EPS FROM CONTINUING OPERATIONS
(Unaudited)
THREE-MONTHS TWELVE-MONTHS
ENDED ENDED
December 31, December 31,
2004 2003 2004 2003
------ ------ ------ ------
EPS FROM CONTINUING OPERATIONS
(on a diluted basis) $0.10 $0.21 $0.49 $0.80
Plus (net of tax):
Amortization of acquisition
intangibles 0.06 0.03 0.23 0.12
Acquisition related expense - 0.01 0.07 0.06
Amortization/write-off - capitalized
loan fees 0.01 - 0.09 -
Non-cash embedded option charges - - 0.01 -
------ ------ ------ ------
0.07 0.04 0.40 0.18
------ ------ ------ ------
NON-GAAP EPS FROM CONTINUING OPERATIONS
(on a diluted basis) $0.17 $0.25 $0.89 $0.98
====== ====== ====== ======
NON-GAAP EPS FROM CONTINUING OPERATIONS
(diluted, before EITF 04-08) $0.18 (a) $0.93 (a)
====== ====== ====== ======
(a) Convertible debt was not issued until June 2004.
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 TWELVE-MONTHS
ENDED ENDED
December 31, December 31,
2004 2003 2004 2003
------- ------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS $1,918 $3,769 $9,063 $14,525
Acquisition related expense - 308 2,197 1,793
Depreciation and amortization 3,787 2,262 14,294 8,178
Expenses (income) related to
financing 1,131 (13) 7,210 (83)
Provision for income taxes 1,418 2,955 6,386 10,165
------- ------- -------- --------
6,336 5,512 30,087 20,053
------- ------- -------- --------
NON-GAAP ADJUSTED EBITDA FROM
CONTINUING OPERATIONS $8,254 $9,281 $39,150 $34,578
======= ======= ======== ========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
EPS CALCULATION ADJUSTMENTS PER EITF 04-08
(In thousands, except per share data)
(Unaudited)
THREE-MONTHS TWELVE-MONTHS
ENDED ENDED
December 31, December 31,
2004 2004
------------- -------------
NET INCOME $1,918 $9,063
Interest expense adjustment 296 647
------------- -------------
ADJUSTED FOR DILUTED CALCULATION $2,214 $9,710
============= =============
DILUTED WEIGHTED AVERAGE SHARES 18,268 18,259
Adjustment to shares 2,857 1,569
------------- -------------
ADJUSTED FOR DILUTED CALCULATION 21,125 19,828
============= =============
EPS BEFORE EITF 04-08 $0.10 $0.50
EPS AFTER EITF 04-08 $0.10 $0.49
CONTACT: EPIQ Systems, Inc.
Shawn Southard, 913-621-9500
Email: ir@epiqsystems.com