EXHIBIT 99.1
EPIQ Systems, Inc. Announces Third Quarter 2005 Results
KANSAS CITY, Kan.--(BUSINESS WIRE)--Oct. 25, 2005--EPIQ Systems,
Inc. (NASDAQ: EPIQ) today announced results of operations for the
third quarter of 2005 with operating revenue (total revenue less
reimbursed expenses) of $25.8 million compared to $26.2 million for
the second quarter of 2005 and versus $28.7 million for the year ago
third quarter. September 30, 2005 year-to-date operating revenue of
$78.0 million compares to $81.2 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 18.9 million for the third quarter
of 2005 and were 18.3 million for the year ago quarter. Taking into
effect the accounting change, diluted weighted average shares
outstanding were 21.7 million for the third quarter of 2005 and have
been restated to 21.1 million for the year ago 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.
Third quarter 2005 net income from continuing operations was $3.1
million or $0.16 per share versus $2.9 million or $0.15 per share for
the second quarter of 2005 and compared to $2.2 million or $0.12 per
share for the year ago quarter. September 30, 2005 year-to-date net
income from continuing operations was $9.2 million or $0.48 per share
compared to $7.1 million or $0.39 per share for the prior year.
Non-GAAP net income from continuing operations for the third
quarter of 2005 was $4.4 million or $0.22 per share compared to $4.3
million or $0.22 per share for the second quarter of 2005 and versus
$4.3 million or $0.22 per share in the third quarter of 2004.
September 30, 2005 year-to-date non-GAAP net income from continuing
operations was $12.9 million or $0.65 per share compared to $13.7
million or $0.72 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,
capitalized loan fee amortization and extinguishment 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 and debt extinguishment, taxes, depreciation,
amortization, and acquisition related expenses) and (ii) net cash
provided by operating activities.
Non-GAAP Adjusted EBITDA from continuing operations was $10.2
million in the third quarter of 2005 compared to $10.0 million in the
second quarter of 2005 and versus $10.2 million for the year ago
quarter and was $30.0 million for September 30, 2005 year-to-date
compared to $30.9 million for the prior year. A reconciliation
statement is attached.
September 30, 2005 year-to-date net cash provided by operating
activities was $13.7 million compared to $20.4 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, "The
period leading up to the October 17, 2005 effective date for
bankruptcy legislation witnessed a significant spike in bankruptcy
filings for both consumer and corporate debtors. In particular, the
week of October 10 saw a tremendous surge in new filings. EPIQ
Systems' market share has held strongly, and we were particularly
pleased to have been selected for major new Chapter 11 engagements
during the third quarter. In support of our strategic objectives, we
recently completed two smaller acquisitions which add important new
service offerings and which expand the reach of our industry
relationships."
Recent key events include:
-- After October 17, 2005, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 became effective and makes the
most sweeping changes in a generation, affecting both consumer
and business bankruptcies.
-- EPIQ Systems released TCMS(R) 10.6, an industry-leading
Chapter 7 case management solution to provide updates for
changes resulting from the new legislation.
-- Since June 2004, the Federal Open Market Committee has raised
the federal funds rate eleven times from its low of 1.00% to
the current 3.75%.
-- The Federal Reserve reported that corporate debt and consumer
credit both pushed further into record levels, approaching
$5.4 trillion and $2.2 trillion, respectively, as of June 30,
2005.
-- In August we acquired Novare, Inc. a boutique provider of
specialty bankruptcy consulting services, and in October we
acquired Hilsoft, Inc. a national leader of legal notification
programs for class action matters.
Conference Call
The Company will host a conference call today at 3:30 p.m. (CDT)
to discuss these results. The Internet broadcast of the call with
corresponding slides can be accessed at www.epiqsystems.com. To listen
by phone, call (800) 350-6237 before 3:30 p.m. (CDT). The archive of
the Internet broadcast will be available on the company's website
until the next earnings update. A recording of the call will be
available through November 30, 2005 beginning approximately two hours
after the call ends. To access the replay, call (800) 675-9924 and
enter pin# 102505.
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 Nine months ended
September 30, September 30,
-------------------- ------------------
2005 2004 2005 2004
---------- --------- --------- --------
REVENUE:
Case management $18,469 $16,980 $58,100 $51,278
Document management 7,373 11,671 19,895 29,961
---------- --------- --------- --------
Operating revenue 25,842 28,651 77,995 81,239
Reimbursed expenses 6,174 7,043 17,118 15,375
---------- --------- --------- --------
Total Revenue 32,016 35,694 95,113 96,614
---------- --------- --------- --------
COSTS AND EXPENSES:
Direct costs 14,775 18,533 42,074 46,509
General and administrative 7,035 6,998 23,071 19,209
Depreciation and software
amortization 1,732 1,804 5,281 4,763
Amortization of identifiable
intangible assets 1,442 2,032 4,492 5,744
Acquisition related 114 16 114 2,197
---------- --------- --------- --------
Total Operating Expenses 25,098 29,383 75,032 78,422
---------- --------- --------- --------
INCOME FROM OPERATIONS 6,918 6,311 20,081 18,192
---------- --------- --------- --------
EXPENSES RELATED TO FINANCING:
Interest income (28) (32) (106) (98)
Interest expense 1,623 1,653 4,309 5,182
Debt extinguishment - 995 - 995
---------- --------- --------- --------
Net Expenses Related to
Financing 1,595 2,616 4,203 6,079
---------- --------- --------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 5,323 3,695 15,878 12,113
PROVISION FOR INCOME TAXES 2,236 1,534 6,637 4,968
---------- --------- --------- --------
NET INCOME FROM CONTINUING
OPERATIONS 3,087 2,161 9,241 7,145
TOTAL DISCONTINUED OPERATIONS - (77) - 668
---------- --------- --------- --------
NET INCOME $3,087 $2,084 $9,241 $7,813
========== ========= ========= ========
NET INCOME PER SHARE
INFORMATION:
Income per share - Diluted
Income from continuing
operations $0.16 $0.12 $0.48 $0.39
Income (loss) from
discontinued operations - (0.01) - 0.03
---------- --------- --------- --------
Net income per share -
Diluted $0.16 $0.11 $0.48 $0.42
========== ========= ========= ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 21,718 21,135 21,259 19,388
========== ========= ========= ========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, 2005 December 31, 2004
------------------ -------------------
ASSETS
ASSETS:
Cash and cash equivalents $13,203 $13,330
Trade receivables, net 26,653 18,690
Property and equipment, net 19,663 20,431
Goodwill 147,585 147,728
Other intangibles, net 20,195 24,057
Other 15,514 15,852
------------------ -------------------
Total Assets $242,813 $240,088
================== ===================
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES:
Accounts payable $3,911 $4,263
Indebtedness 72,915 82,149
Other liabilities 15,588 13,843
STOCKHOLDERS' EQUITY 150,399 139,833
------------------ -------------------
Total Liabilities and
Stockholders' Equity $242,813 $240,088
================== ===================
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended Nine months ended
-------------------- -------------------
September September September September
30, 30, 30, 30,
2005 2004 2005 2004
---------- --------- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $3,087 $2,084 $9,241 $7,813
Non-cash adjustments to net
income:
Depreciation and
amortization 3,174 3,836 9,773 10,507
Other, net 1,330 2,112 2,584 4,658
Changes in operating assets
and liabilities, net (4,168) (2,914) (7,861) (2,591)
---------- --------- --------- ---------
Net cash provided by
operating activities 3,423 5,118 13,737 20,387
---------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash acquired from (paid
for) business combinations,
net (650) 4 (650) (113,111)
Other (2,607) (1,487) (4,013) (4,916)
---------- --------- --------- ---------
Net cash used in
investing activities (3,257) (1,483) (4,663) (118,027)
---------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net proceeds (payments) on
indebtedness (1,423) (7,606) (10,104) 76,552
Other 724 266 903 553
---------- --------- --------- ---------
Net cash provided by
(used in) financing
activities (699) (7,340) (9,201) 77,105
---------- --------- --------- ---------
NET DECREASE IN CASH $(533) $(3,705) $(127) $(20,535)
========== ========= ========= =========
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 Nine months ended
--------------------------- -------------------
September June September September September
30, 30, 30, 30, 30,
2005 2005 2004 2005 2004
--------- ------- --------- --------- ---------
NET INCOME FROM
CONTINUING OPERATIONS $3,087 $2,904 $2,161 $9,241 $7,145
Plus (net of tax):
Amortization of
acquisition
intangibles 836 832 1,189 2,614 3,389
Acquisition related
expense 66 - 9 66 1,296
Loan fee amortization
and debt
extinguishment 161 161 782 488 1,670
Non-cash embedded
option charges 256 409 194 444 194
--------- ------- --------- --------- ---------
1,319 1,402 2,174 3,612 6,549
--------- ------- --------- --------- ---------
NON-GAAP NET INCOME
FROM CONTINUING
OPERATIONS $4,406 $4,306 $4,335 $12,853 $13,694
========= ======= ========= ========= =========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
RECONCILIATION OF EPS FROM CONTINUING OPERATIONS TO
NON-GAAP EPS FROM CONTINUING OPERATIONS
(Unaudited)
Three months ended Nine months ended
-------------------------- -------------------
September June September September September
30, 30, 30, 30, 30,
2005 2005 2004 2005 2004
--------- ------ --------- --------- ---------
EPS FROM CONTINUING
OPERATIONS
(on a diluted basis) $0.16 $0.15 $0.12 $0.48 $0.39
Plus (net of tax):
Amortization of
acquisition
intangibles 0.04 0.04 0.05 0.13 0.17
Acquisition related
expense - - - - 0.07
Loan fee amortization
and debt
extinguishment 0.01 0.01 0.04 0.02 0.08
Non-cash embedded
option charges 0.01 0.02 0.01 0.02 0.01
--------- ------ --------- --------- ---------
0.06 0.07 0.10 0.17 0.33
--------- ------ --------- --------- ---------
NON-GAAP EPS FROM
CONTINUING OPERATIONS
(on a diluted basis) $0.22 $0.22 $0.22 $0.65 $0.72
========= ====== ========= ========= =========
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 Nine months ended
---------------------------- -------------------
September June September September September
30, 30, 30, 30, 30,
2005 2005 2004 2005 2004
--------- -------- --------- --------- ---------
NET INCOME FROM
CONTINUING OPERATIONS $3,087 $2,904 $2,161 $9,241 $7,145
Acquisition related
expense 114 - 16 114 2,197
Depreciation and
amortization 3,174 3,202 3,836 9,773 10,507
Expenses related to
financing and debt
extinguishment 1,595 1,844 2,616 4,203 6,079
Provision for income
taxes 2,236 2,077 1,534 6,637 4,968
--------- -------- --------- --------- ---------
7,119 7,123 8,002 20,727 23,751
--------- -------- --------- --------- ---------
NON-GAAP ADJUSTED
EBITDA FROM
CONTINUING OPERATIONS $10,206 $10,027 $10,163 $29,968 $30,896
========= ======== ========= ========= =========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
EPS CALCULATION ADJUSTMENTS PER EITF 04-08
(In thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
NET INCOME FROM CONTINUING
OPERATIONS $3,087 $2,161 $9,241 $7,145
Interest expense adjustment
for convertible debt 292 295 871 352
--------- --------- --------- ---------
ADJUSTED FOR DILUTED
CALCULATION $3,379 $2,456 $10,112 $7,497
========= ========= ========= =========
DILUTED WEIGHTED AVERAGE SHARES 17,942 17,867 17,911 17,837
Adjustment to reflect stock
options 919 411 491 414
Adjustment to reflect
convertible debt shares 2,857 2,857 2,857 1,137
--------- --------- --------- ---------
ADJUSTED FOR DILUTED
CALCULATION 21,718 21,135 21,259 19,388
========= ========= ========= =========
INCOME PER SHARE - DILUTED $0.16 $0.12 $0.48 $0.39
========= ========= ========= =========
CONTACT: EPIQ Systems, Inc.
Mary Ellen Berthold, 913-621-9500
Email: ir@epiqsystems.com