Exhibit 99.1
EPIQ Systems, Inc. Announces Second Quarter 2005 Results
KANSAS CITY, Kan.--(BUSINESS WIRE)--July 26, 2005--EPIQ Systems,
Inc. (NASDAQ: EPIQ) announces results of operations for the second
quarter of 2005 with operating revenue (total revenue less reimbursed
expenses) of $26.2 million compared to $26.0 million for the first
quarter of 2005 and versus $29.6 million for the year ago second
quarter. June 30, 2005 year-to-date operating revenue of $52.2 million
compared to $52.6 million last year.
In accordance with a required accounting change (EITF 04-08 - The
Effect of Contingently Convertible Instruments on Diluted Earnings per
Share) effective December 15, 2004, potential shares related to our
convertible notes issued June 10, 2004 are included in the diluted
shares calculation for all periods presented 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 18.4 million for the quarter.
Taking into effect the accounting change, diluted weighted average
shares outstanding were 21.3 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. All earnings per share
information, unless otherwise noted, references diluted earnings per
share calculated in accordance with EITF 04-08.
Second quarter 2005 net income from continuing operations was $2.9
million or $0.15 per share versus $3.3 million or $0.17 per share for
the first quarter of 2005 and compared to $3.0 million or $0.16 per
share for the year ago quarter. June 30, 2005 year-to-date net income
from continuing operations was $6.2 million or $0.32 per share
compared to $5.0 million or $0.27 per share for the prior year.
Non-GAAP net income from continuing operations for the second
quarter of 2005 was $4.3 million or $0.22 per share compared to $4.1
million or $0.21 per share for the first quarter of 2005 and versus
$4.7 million or $0.25 per share in the second quarter of 2004. June
30, 2005 year-to-date non-GAAP net income from continuing operations
was $8.4 million or $0.43 per share compared to $9.4 million or $0.51
per share for the prior year. Non-GAAP net income adjusts net income
from continuing operations 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. 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 $10.0
million in the second quarter of 2005 compared to $9.7 million in the
first quarter of 2005 and versus $10.7 million for the year ago
quarter and was $19.8 million for June 30, 2005 year-to-date compared
to $20.7 million for the prior year. A reconciliation statement is
attached.
June 30, 2005 year-to-date net cash provided by operating
activities was $10.3 million compared to $15.3 million 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 another solid quarter of financial performance. The
enactment of major new legislation has focused renewed attention on
bankruptcy trends in the media. As the effective date in mid-October
approaches for many aspects of the new legislation, there are
implications for both consumer filings (Chapters 7 and 13) as well as
major corporate restructurings (Chapter 11). We are prepared to
leverage our national franchise throughout the bankruptcy system to
accommodate new filings and to adapt to new administrative
requirements."
Recent key events include:
-- EPIQ Systems released TCMS(R) 10.5, an industry-leading
Chapter 7 case management solution to further establish the
Company's technology leadership.
-- Since late June 2004, the Federal Open Market Committee has
raised the federal funds rate nine times from its low of 1.00%
to the current 3.25%.
-- The Federal Reserve reported that corporate debt and consumer
credit both pushed further into record levels, approaching
$5.3 trillion and $2.2 trillion, respectively, as of March 31,
2005.
-- For the three months ended March 31, 2005, prior to the
signing of the new bankruptcy law on April 20, 2005,
bankruptcy filings exceeded 400,000.
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 through
July 28, 2005 beginning approximately two hours after the call ends.
To access the replay, call (800) 642-1687 and enter pin# 7803982. 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.
Forward-looking and Cautionary Statements
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 Six months ended
June 30, June 30,
------------------- ------------------
2005 2004 2005 2004
--------- -------- -------- --------
REVENUE:
Case management $19,746 $17,372 $39,631 $34,298
Document management 6,441 12,224 12,522 18,290
--------- -------- -------- --------
Operating revenue 26,187 29,596 52,153 52,588
Reimbursed expenses 5,448 5,312 10,944 8,332
--------- -------- -------- --------
Total Revenue 31,635 34,908 63,097 60,920
--------- -------- -------- --------
COSTS AND EXPENSES:
Direct costs 13,564 17,672 27,300 27,976
General and administrative 8,044 6,573 16,036 12,211
Depreciation and software
amortization 1,775 1,578 3,549 2,959
Amortization of identifiable
intangible assets 1,427 2,032 3,050 3,712
Acquisition related - - - 2,181
--------- -------- -------- --------
Total Operating Expenses 24,810 27,855 49,935 49,039
--------- -------- -------- --------
INCOME FROM OPERATIONS 6,825 7,053 13,162 11,881
--------- -------- -------- --------
INTEREST INCOME (EXPENSE):
Interest income 40 32 78 66
Interest expense (1,884) (2,007) (2,685) (3,529)
--------- -------- -------- --------
Net Interest Income
(Expense) (1,844) (1,975) (2,607) (3,463)
--------- -------- -------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 4,981 5,078 10,555 8,418
PROVISION FOR INCOME TAXES 2,077 2,095 4,401 3,433
--------- -------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS 2,904 2,983 6,154 4,985
TOTAL DISCONTINUED OPERATIONS - 1,008 - 744
--------- -------- -------- --------
NET INCOME $2,904 $3,991 $6,154 $5,729
========= ======== ======== ========
NET INCOME PER SHARE
INFORMATION:
Income per share - Diluted
Income from continuing
operations $0.15 $0.16 $0.32 $0.27
Gain from discontinued
operations - 0.06 - 0.04
--------- -------- -------- --------
Net income per share -
Diluted $0.15 $0.22 $0.32 $0.31
========= ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 21,289 18,782 21,187 18,507
========= ======== ======== ========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
2005 2004
------------ -------------
ASSETS
ASSETS:
Cash, cash equivalents and short term
investments $13,736 $13,330
Trade receivables, net 22,674 18,690
Property and equipment, net 18,722 20,431
Goodwill 147,728 147,728
Other intangibles, net 21,007 24,057
Other 15,030 15,852
------------ -------------
Total Assets $238,897 $240,088
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $3,408 $4,263
Indebtedness 73,860 82,149
Other liabilities 15,338 13,843
STOCKHOLDERS' EQUITY 146,291 139,833
------------ -------------
Total Liabilities and Stockholders' Equity $238,897 $240,088
============ =============
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months Six months
ended ended
----------------- ------------------
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
-------- -------- -------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $2,904 $3,991 $6,154 $5,729
Non-cash adjustments to net
income:
Depreciation and
amortization 3,202 3,610 6,599 6,671
Other, net 784 1,650 1,254 2,546
Changes in operating assets and
liabilities, net 1,717 8,626 (3,693) 323
-------- -------- -------- ---------
Net cash provided by
operating activities 8,607 17,877 10,314 15,269
-------- -------- -------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash acquired from (paid for)
acquisition, net - 78 - (113,115)
Other 3,052 (1,718) (1,406) (3,429)
-------- -------- -------- ---------
Net cash provided by (used
in) investing activities 3,052 (1,640) (1,406) (116,544)
-------- -------- -------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net proceeds (payments) on
indebtedness (6,563) (4,790) (8,681) 84,158
Other 133 - 179 287
-------- -------- -------- ---------
Net cash provided by (used
in) financing activities (6,430) (4,790) (8,502) 84,445
-------- -------- -------- ---------
NET INCREASE (DECREASE) IN CASH $5,229 $11,447 $406 $(16,830)
======== ======== ======== =========
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 Six months
ended ended
------------------------ ---------------
June March June June June
30, 31, 30, 30, 30,
2005 2005 2004 2005 2004
-------- ------- ------- ------- -------
NET INCOME FROM CONTINUING
OPERATIONS $2,904 $3,250 $2,983 $6,154 $4,985
Plus (net of tax):
Amortization of acquisition
intangibles 832 946 1,194 1,778 2,198
Acquisition related expense - - - - 1,292
Amortization of capitalized
loan fees 161 166 516 327 884
Non-cash embedded option
charges 409 (221) - 188 -
-------- ------- ------- ------- -------
1,402 891 1,710 2,293 4,374
-------- ------- ------- ------- -------
NON-GAAP NET INCOME FROM
CONTINUING OPERATIONS $4,306 $4,141 $4,693 $8,447 $9,359
======== ======= ======= ======= =======
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF EPS FROM CONTINUING OPERATIONS TO
NON-GAAP EPS FROM CONTINUING OPERATIONS
(Unaudited)
Three months Six months
ended ended
--------------------- --------------
June March June June June
30, 31, 30, 30, 30,
2005 2005 2004 2005 2004
------- ------ ------ ------- ------
EPS FROM CONTINUING OPERATIONS
(on a diluted basis) $0.15 $0.17 $0.16 $0.32 $0.27
Plus (net of tax):
Amortization of acquisition
intangibles 0.04 0.04 0.06 0.08 0.12
Acquisition related expense - - - - 0.07
Amortization of capitalized loan
fees 0.01 0.01 0.03 0.02 0.05
Non-cash embedded option charges 0.02 (0.01) - 0.01 -
------- ------ ------ ------- ------
0.07 0.04 0.09 0.11 0.24
------- ------ ------ ------- ------
NON-GAAP EPS FROM CONTINUING
OPERATIONS
(on a diluted basis) $0.22 $0.21 $0.25 $0.43 $0.51
======= ====== ====== ======= ======
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 Six months ended
------------------------- -----------------
June March June June June
30, 31, 30, 30, 30,
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS $2,904 $3,250 $2,983 $6,154 $4,985
Acquisition related
expense - - - - 2,181
Depreciation and
amortization 3,202 3,397 3,610 6,599 6,671
Expenses related to
financing 1,844 762 1,975 2,606 3,463
Provision for income
taxes 2,077 2,324 2,095 4,401 3,433
-------- ------- -------- -------- --------
7,123 6,483 7,680 13,606 15,748
-------- ------- -------- -------- --------
NON-GAAP ADJUSTED EBITDA
FROM CONTINUING
OPERATIONS $10,027 $9,733 $10,663 $19,760 $20,733
======== ======= ======== ======== ========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
EPS CALCULATION ADJUSTMENTS PER EITF 04-08
(In thousands, except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------- -----------------
2005 2004 2005 2004
---------- -------- -------- -------
NET INCOME FROM CONTINUING
OPERATIONS $2,904 $2,983 $6,154 $4,985
Interest expense adjustment
for convertible debt 291 55 578 55
---------- -------- -------- -------
ADJUSTED FOR DILUTED
CALCULATION $3,195 $3,038 $6,732 $5,040
========== ======== ======== =======
DILUTED WEIGHTED AVERAGE SHARES 17,904 17,831 17,896 17,822
Adjustment to reflect stock
options 528 417 434 418
Adjustment to reflect
convertible debt shares 2,857 534 2,857 267
---------- -------- -------- -------
ADJUSTED FOR DILUTED
CALCULATION 21,289 18,782 21,187 18,507
========== ======== ======== =======
INCOME PER SHARE - DILUTED $0.15 $0.16 $0.32 $0.27
========== ======== ======== =======
CONTACT: EPIQ Systems, Inc.
Shawn Southard, 913-621-9500
ir@epiqsystems.com