Exhibit 99.1
EPIQ Systems, Inc. Announces First Quarter 2005 Results
KANSAS CITY, Kan.--(BUSINESS WIRE)--April 26, 2005--EPIQ Systems,
Inc. (Nasdaq:EPIQ) announces results of operations for the first
quarter of 2005 with operating revenue (total revenue less reimbursed
expenses) of $26.0 million compared to $23.8 million for the fourth
quarter of 2004 and $23.0 million for the year ago quarter. Net income
from continuing operations for the first quarter of 2005 increased 69%
to $3.3 million versus $1.9 million in the fourth quarter of 2004 and
increased 62% compared to $2.0 million in the first quarter of 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
the quarter. Taking into effect the accounting change, diluted
weighted average shares outstanding were 21.1 million for the quarter.
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.
Net income from continuing operations per diluted share for the
first quarter of 2005 increased 70% to $0.17 compared to $0.10 per
share for the fourth quarter of last year and increased 55% versus
$0.11 per share for the year ago quarter.
Non-GAAP net income for the first quarter of 2005 was $4.1
million, or $0.21 per share, compared to $3.2 million, or $0.17 per
share for the fourth quarter of last year and versus $4.7 million or
$0.26 per share in the first quarter of last year. Non-GAAP net income
adjusts for amortization of acquisition related intangibles,
acquisition-related expenses, amortization of capitalized loan fees,
and embedded option mark-to-market expense/convertible debt accretion,
all net after tax, to net income from continuing operations. 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 $9.7
million in the first quarter compared to $8.3 million in the fourth
quarter of 2004 and versus $10.1 million for the year ago quarter. A
reconciliation statement is attached.
Net cash provided by operating activities in the first quarter of
2005 was $1.7 million compared to net cash used in operating
activities of $2.6 million for the first quarter of last year. 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, "We are
pleased to report a solid quarter of financial performance. During the
quarter we benefited from favorable timing and volume developments
from class action engagements as well as strong client retention
throughout the company. New class action and bankruptcy laws were
enacted during the quarter, both of which are anticipated to have an
overall neutral impact on our business despite an anticipated mix
change between federal and state court for class action matters and
between Chapter 7 and Chapter 13 for consumer bankruptcy filings. In
addition, escalating interest rates and record high debt levels may
fuel increased bankruptcy filings in the medium term."
Recent key events include:
-- Forbes named EPIQ Systems to its "Midas List" of the top 25
technology companies based on the Company's exceptional,
sustained revenue growth over the past five years.
-- EPIQ Systems released TCMS(R) 10.0, an industry-leading
Chapter 7 case management solution, marking the tenth
consecutive, on-time annual release to further establish the
Company's technology leadership.
-- The Class Action Fairness Act of 2005 was signed into law and
became effective February 18, 2005. The new law provides
federal jurisdiction to any action where any class member
resides in a different state from any defendant, and where the
aggregate amount in controversy exceeds $5 million.
-- The new bankruptcy law was signed into law April 20, 2005 and
becomes effective 180 days thereafter. The new law may require
individuals seeking Chapter 7 relief whose income exceeds
their state's median to file under Chapter 13.
-- In the past 12 months, the Federal Open Market Committee has
raised the federal funds rate seven times from its low of
1.00% to the current 2.75%.
-- Corporate debt and consumer credit both reached record levels
of $5.2 trillion and $2.2 trillion, respectively, as of
December 31, 2004.
-- Bankruptcy filings for the twelve months ended December 31,
2004 nearly reached 1.60 million, essentially unchanged from
the 1.66 million record level reached in 2003.
Conference Call
The Company will host a conference call today at 3:30 p.m. (CDT)
to discuss these results. Interested parties may dial 800-955-1321.
The audio with supplemental slides is also available at
www.epiqsystems.com. A recording of the call will be available for one
week beginning approximately two hours after the call ends. To access
the replay, call 800-642-1687 and enter pin# 5586417. The archived
Internet broadcast will be available on the company's website until
the next earnings update.
Company Description
EPIQ Systems is a national leader in the market for fiduciary
management and claims administration systems and provides an advanced
offering of integrated technology-based products and services. 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 "believe,"
"expect," "anticipate," "should," "planned," "may," "goal,"
"objective" and "potential." Because forward-looking statements
involve future risks and uncertainties, listed below are a variety of
factors that could cause actual results and experience to differ
materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements. These factors
include (1) any material changes in our total number of client
engagements and the volume associated with each engagement, (2) any
material changes in our Chapter 7 deposit portfolio, the services
required or selected by our Chapter 11, Chapter 13, class action or
mass tort engagements, or the number of cases processed by our Chapter
13 bankruptcy trustee clients, (3) material changes in the number of
bankruptcy filings, class action filings or mass tort actions each
year, (4) our reliance on and future changes in our marketing
arrangement and pricing arrangements with Bank of America for Chapter
7 revenue, (5) the marketing and pricing arrangements with other
Chapter 7 depository banks, (6) the impact of recently enacted tort
reform and bankruptcy reform legislation on the volume and timing of
disposition of client engagements, (7) risks associated with the
integration of acquisitions into our existing business operations, (8)
risks associated with our indebtedness, and (9) other risks detailed
from time to time in our SEC filings, including our annual report on
Form 10-K for the year ended December 31, 2004. 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 ended
--------------------
March 31, March 31,
2005 2004
--------- ---------
REVENUE:
Case management $19,885 $16,926
Document management 6,081 6,067
------- -------
Operating revenue 25,966 22,993
Reimbursed expenses 5,495 3,019
------- -------
Total Revenue 31,461 26,012
------- -------
COSTS AND EXPENSES:
Direct costs 13,736 10,305
General and administrative 7,992 5,638
Depreciation and software amortization 1,774 1,381
Amortization of identifiable intangible assets 1,623 1,680
Acquisition related - 2,181
------- -------
Total Operating Expenses 25,125 21,185
------- -------
INCOME FROM OPERATIONS 6,336 4,827
EXPENSES RELATED TO FINANCING:
Interest income 39 34
Interest expense (801) (1,522)
------- -------
Net Expenses Related to Financing (762) (1,488)
------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 5,574 3,339
PROVISION FOR INCOME TAXES 2,324 1,338
------- -------
NET INCOME FROM CONTINUING OPERATIONS 3,250 2,001
LOSS FROM DISCONTINUED OPERATIONS - (264)
------- -------
NET INCOME $3,250 $1,737
======= =======
NET INCOME PER SHARE INFORMATION:
Income per share - Diluted
Income from continuing operations $0.17 $0.11
Loss from discontinued operations - (0.01)
------- -------
Net income per share - Diluted $0.17 $0.10
======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
- DILUTED 21,112 18,237
======= =======
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, 2005 December 31, 2004
-------------- -----------------
ASSETS
ASSETS:
Cash, cash equivalents and
short term investments $12,357 $13,330
Trade receivables, net 24,644 18,690
Property and equipment, net 19,512 20,431
Goodwill 147,728 147,728
Other intangibles, net 22,434 24,057
Other 13,907 15,852
------- -------
Total Assets $240,582 $240,088
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $3,350 $4,263
Indebtedness 79,688 82,149
Other liabilities 14,394 13,843
STOCKHOLDERS' EQUITY 143,150 139,833
------- -------
Total Liabilities and Stockholders'
Equity $240,582 $240,088
======= =======
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended
--------------------
March 31, March 31,
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,250 $1,737
Non-cash adjustments to net income:
Depreciation and amortization 3,397 3,061
Other, net 470 896
Changes in operating assets and liabilities,
net (5,410) (8,302)
------- -------
Net cash provided by (used in) operating
activities 1,707 (2,608)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition, net of cash
acquired - (113,193)
Net sale (purchase) of short-term investments (1,850) 1,625
Other (608) (1,711)
------- -------
Net cash used in investing activities (2,458) (113,279)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) on indebtedness (2,118) 88,948
Other 46 287
------- -------
Net cash provided by (used in) financing
activities (2,072) 89,235
------- -------
NET INCREASE (DECREASE) IN CASH $(2,823) $(26,652)
======= =======
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 ended
-----------------------------------
March 31, December 31, March 31,
2005 2004 2004
--------- ------------ ---------
NET INCOME FROM CONTINUING
OPERATIONS $3,250 $1,918 $2,001
Plus (net of tax):
Amortization of acquisition
intangibles 946 1,163 1,008
Acquisition related expense - - 1,309
Amortization of capitalized
loan fees 166 163 369
Non-cash embedded option
charges (221) (22) -
------- ------- -------
891 1,304 2,686
------- ------- -------
NON-GAAP NET INCOME FROM
CONTINUING OPERATIONS $4,141 $3,222 $4,687
======= ======= =======
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF EPS FROM CONTINUING OPERATIONS TO
NON-GAAP EPS FROM CONTINUING OPERATIONS
(Unaudited)
Three months ended
-----------------------------------
March 31, December 31, March 31,
2005 2004 2004
--------- ------------ ---------
EPS FROM CONTINUING OPERATIONS
(on a diluted basis) $0.17 $0.10 $0.11
Plus (net of tax):
Amortization of acquisition
intangibles 0.04 0.06 0.06
Acquisition related expense - - 0.07
Amortization of capitalized
loan fees 0.01 0.01 0.02
Non-cash embedded option
charges (0.01) - -
------- ------- -------
0.04 0.07 0.15
------- ------- -------
NON-GAAP EPS FROM CONTINUING
OPERATIONS (on a diluted basis) $0.21 $0.17 $0.26
======= ======= =======
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 ended
-----------------------------------
March 31, December 31, March 31,
2005 2004 2004
--------- ------------ ---------
NET INCOME FROM CONTINUING
OPERATIONS $3,250 $1,918 $2,001
Acquisition related expense - - 2,181
Depreciation and amortization 3,397 3,787 3,061
Expenses related to financing 762 1,131 1,488
Provision for income taxes 2,324 1,418 1,338
------- ------- -------
6,483 6,336 8,068
------- ------- -------
NON-GAAP ADJUSTED EBITDA
FROM CONTINUING OPERATIONS $9,733 $8,254 $10,069
======= ======= =======
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
EPS CALCULATION ADJUSTMENTS PER EITF 04-08
(In thousands, except per share data)
(Unaudited)
Three months ended
------------------------
March 31, December 31,
2005 2004
--------- ------------
NET INCOME $3,250 $1,918
Interest expense adjustment for
convertible debt 288 296
------- -------
ADJUSTED FOR DILUTED CALCULATION $3,538 $2,214
======= =======
DILUTED WEIGHTED AVERAGE SHARES 18,255 18,268
Adjustment to reflect convertible
debt shares 2,857 2,857
------- -------
ADJUSTED FOR DILUTED CALCULATION 21,112 21,125
======= =======
INCOME PER SHARE - DILUTED $0.17 $0.10
======= =======
CONTACT: EPIQ Systems, Inc.
Shawn Southard, 913-621-9500
ir@epiqsystems.com