Exhibit 99.1
EPIQ Systems, Inc. Announces Fourth Quarter and Full Year 2005 Results
KANSAS CITY, Kan.--(BUSINESS WIRE)--Feb. 21, 2006--EPIQ Systems, Inc.
(NASDAQ: EPIQ) today announced results of operations for the fourth quarter and
full year of 2005 with fourth quarter operating revenue (total revenue less
reimbursed expenses) of $29.2 million compared to $23.8 million last year and
2005 operating revenue of $107.2 million compared to $105.1 million last year.
Fourth quarter 2005 net income from continuing operations was $1.7 million
or $0.09 per share compared to $1.9 million or $0.10 per share last year. 2005
net income from continuing operations was $10.9 million or $0.56 per share
compared to $9.1 million or $0.49 per share last year.
Non-GAAP net income from continuing operations for the fourth quarter of
2005 was $5.2 million or $0.25 per share compared to $3.2 million or $0.17 per
share for the prior year. 2005 non-GAAP net income from continuing operations
was $18.2 million or $0.90 per share compared to $16.9 million or $0.89 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 $12.0 million for
the fourth quarter of 2005 compared to $8.3 million for the prior year. 2005
non-GAAP Adjusted EBITDA from continuing operations was $41.9 million compared
to $39.2 million for the prior year. A reconciliation statement is attached.
Net cash provided by operating activities was $13.5 million for the fourth
quarter of 2005 compared to $11.2 million for the prior year. 2005 net cash
provided by operating activities was $27.2 million compared to $31.6 million for
the prior year. A condensed consolidated cash flow statement is attached.
Tom W. Olofson, chairman and CEO, and Christopher E. Olofson, president and
chief operating officer of EPIQ Systems stated, "Throughout 2005, we made key
investments to extend our national presence in the legal technology industry,
highlighted by our November acquisition of the high growth electronic discovery
software business of nMatrix. As we begin a new year, we have established a
unique combination of capabilities spanning electronic discovery, claims
administration, document review, legal notification and case management. Today,
EPIQ Systems is a national leader in specialty integrated solutions for the
legal industry and is well poised to take advantage of growth opportunities in
our core practice areas of bankruptcy, class action litigation and financial
transactions."
Significant events in 2005 include:
-- Forbes named EPIQ Systems to its Midas List of top 25 national
technology companies based on the Company's exceptional, sustained
revenue growth over the past five years.
-- In November we acquired nMatrix, Inc. a leading provider of products
and services for electronic discovery and litigation support.
-- In October we acquired Hilsoft, Inc. a national leader of legal
notification programs, and in September we acquired Novare, Inc. a
boutique provider of specialty bankruptcy consulting services.
-- On October 17, 2005, most provisions of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 became effective and
made the most sweeping changes to bankruptcy law in a generation,
affecting both consumer and business bankruptcies.
-- 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.
-- A record 1.78 million bankruptcies were filed in the U.S. Court's
fiscal year ended September 30, 2005; up 10% from the 1.62 million
level reached in 2004.
-- The Federal Reserve reported that both corporate debt and consumer
credit pushed further into record levels, approaching $5.5 trillion
and $2.2 trillion, respectively, as of September 30, 2005.
-- Since June 2003, the Federal Open Market Committee has raised the
federal funds rate fourteen times from its low of 1.0% to the current
4.5%.
Conference Call
The Company will host a conference call today at 3:30 p.m. (CST) 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 (877) 666-6296
before 3:30 p.m. (CST). 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 March 30, 2006 beginning approximately two hours after
the call ends. To access the replay, call (877) 519-4471 and enter pin# 7044248.
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 complex legal proceedings, including
electronic litigation discovery, bankruptcy administration, class action
administration, 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 an integrated 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 electronic discovery, 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 our marketing
and pricing arrangements with Bank of America and other depository banks, (5)
the impact of recently enacted tort reform and bankruptcy reform legislation on
the volume and timing of disposition of client engagements, (6) risks associated
with the integration of acquisitions, particularly nMatrix, into our existing
business operations, (7) risks associated with our indebtedness, and (8) 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,
------------------ ------------------
2005 2004 2005 2004
--------- -------- --------- --------
REVENUE:
Case management $21,179 $17,248 $79,279 $68,526
Document management 7,979 6,587 27,874 36,549
--------- -------- --------- --------
Operating revenue 29,158 23,835 107,153 105,075
Reimbursed expenses 6,526 4,971 23,643 20,345
--------- -------- --------- --------
Total Revenue 35,684 28,806 130,796 125,420
--------- -------- --------- --------
COSTS AND EXPENSES:
Direct costs 15,715 13,875 57,790 60,384
General and administrative 8,001 6,677 31,072 25,886
Depreciation and software
amortization 2,007 1,764 7,288 6,527
Amortization of identifiable
intangible assets 2,259 2,023 6,751 7,767
Acquisition related 2,870 - 2,984 2,197
--------- -------- --------- --------
Total Operating Expenses 30,852 24,339 105,885 102,761
--------- -------- --------- --------
INCOME FROM OPERATIONS 4,832 4,467 24,911 22,659
--------- -------- --------- --------
EXPENSES RELATED TO FINANCING:
Interest income (15) (30) (122) (128)
Interest expense 2,501 1,161 6,809 6,343
Debt extinguishment - - - 995
--------- -------- --------- --------
Net Expenses Related to
Financing 2,486 1,131 6,687 7,210
--------- -------- --------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES 2,346 3,336 18,224 15,449
PROVISION FOR INCOME TAXES 639 1,418 7,276 6,386
--------- -------- --------- --------
INCOME FROM CONTINUING
OPERATIONS 1,707 1,918 10,948 9,063
TOTAL DISCONTINUED OPERATIONS,
NET OF TAX - - - 667
--------- -------- --------- --------
NET INCOME $1,707 $1,918 $10,948 $9,730
========= ======== ========= ========
NET INCOME PER SHARE
INFORMATION:
Income per share - Diluted
Income from continuing
operations $0.09 $0.10 $0.56 $0.49
Income from discontinued
operations - - - 0.03
--------- -------- --------- --------
Net income per share -
Diluted $0.09 $0.10 $0.56 $0.52
========= ======== ========= ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 22,431 21,125 21,551 19,828
========= ======== ========= ========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, December 31,
2005 2004
------------- -------------
ASSETS
ASSETS:
Cash and cash equivalents $13,563 $13,330
Trade receivables, net 33,504 18,690
Property and equipment, net 23,751 20,431
Goodwill 249,427 147,728
Other intangibles, net 53,399 24,057
Other 21,226 15,852
------------ -------------
Total Assets $394,870 $240,088
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $7,954 $4,263
Indebtedness 173,548 82,149
Other liabilities 36,827 13,843
STOCKHOLDERS' EQUITY 176,541 139,833
------------ -------------
Total Liabilities and Stockholders'
Equity $394,870 $240,088
============ =============
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months Twelve months
ended ended
December 31, December 31,
------------------ -------------------
2005 2004 2005 2004
--------- -------- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $1,707 $1,918 $10,948 $9,730
Non-cash adjustments to net
income:
Depreciation and amortization 4,266 3,787 14,039 14,294
Other, net 424 5,711 3,008 10,369
Changes in operating assets and
liabilities, net 7,104 (214) (757) (2,804)
--------- -------- --------- ---------
Net cash provided by operating
activities 13,501 11,202 27,238 31,589
--------- -------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash acquired from (paid for)
business combinations, net (109,883) - (110,533) (113,111)
Other (2,284) (998) (6,297) (5,918)
--------- -------- --------- ---------
Net cash used in investing
activities (112,167) (998) (116,830) (119,029)
--------- -------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net proceeds (payments) on
indebtedness 99,836 (7,438) 89,732 69,114
Other (810) 38 93 595
--------- -------- --------- ---------
Net cash provided by (used in)
financing activities 99,026 (7,400) 89,825 69,709
--------- -------- --------- ---------
NET INCREASE (DECREASE) IN CASH $360 $2,804 $233 $(17,731)
========= ======== ========= =========
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
------------------------------ -------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2005 2005 2004 2005 2004
--------- ---------- --------- --------- ---------
NET INCOME FROM
CONTINUING
OPERATIONS $1,707 $3,087 $1,918 $10,948 $9,063
Plus (net of tax):
Amortization of
acquisition
intangibles 1,367 836 1,163 4,084 4,559
Acquisition related
expense 1,736 66 - 1,805 1,290
Loan fee
amortization and
debt
extinguishment 201 161 163 708 1,828
Non-cash embedded
option charges 164 256 (22) 626 171
--------- ---------- --------- --------- ---------
3,468 1,319 1,304 7,223 7,848
--------- ---------- --------- --------- ---------
NON-GAAP NET INCOME
FROM CONTINUING
OPERATIONS $5,175 $4,406 $3,222 $18,171 $16,911
========= ========== ========= ========= =========
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
------------------------------ -------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2005 2005 2004 2005 2004
--------- ---------- --------- --------- ---------
EPS FROM CONTINUING
OPERATIONS
(on a diluted basis) $0.09 $0.16 $0.10 $0.56 $0.49
Plus (net of tax):
Amortization of
acquisition
intangibles 0.06 0.04 0.06 0.19 0.23
Acquisition related
expense 0.08 - - 0.08 0.07
Loan fee
amortization and
debt
extinguishment 0.01 0.01 0.01 0.04 0.09
Non-cash embedded
option charges 0.01 0.01 - 0.03 0.01
--------- ---------- --------- --------- ---------
0.16 0.06 0.07 0.34 0.40
--------- ---------- --------- --------- ---------
NON-GAAP EPS FROM
CONTINUING
OPERATIONS (on a
diluted basis) $0.25 $0.22 $0.17 $0.90 $0.89
========= ========== ========= ========= =========
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
------------------------------ -------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2005 2005 2004 2005 2004
--------- ---------- --------- --------- ---------
NET INCOME FROM
CONTINUING
OPERATIONS $1,707 $3,087 $1,918 $10,948 $9,063
Acquisition related
expense 2,870 114 - 2,984 2,197
Depreciation and
amortization 4,266 3,174 3,787 14,039 14,294
Expenses related to
financing and debt
extinguishment 2,486 1,595 1,131 6,687 7,210
Provision for
income taxes 639 2,236 1,418 7,276 6,386
--------- ---------- --------- --------- ---------
10,261 7,119 6,336 30,986 30,087
--------- ---------- --------- --------- ---------
NON-GAAP ADJUSTED
EBITDA FROM
CONTINUING
OPERATIONS $11,968 $10,206 $8,254 $41,934 $39,150
========= ========== ========= ========= =========
EPIQ SYSTEMS, INC. AND SUBSIDIARIES
EPS CALCULATION
(In thousands, except per share data)
(Unaudited)
Three months Twelve months
ended ended
------------------------------ -------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2005 2005 2004 2005 2004
--------- ---------- --------- --------- ---------
NET INCOME FROM
CONTINUING
OPERATIONS $1,707 $3,087 $1,918 $10,948 $9,063
Interest expense
adjustment for
convertible debt 297 292 290 1,178 647
--------- ---------- --------- --------- ---------
ADJUSTED FOR
DILUTED
CALCULATION $2,004 $3,379 $2,208 $12,126 $9,710
========= ========== ========= ========= =========
DILUTED WEIGHTED
AVERAGE SHARES 18,627 17,942 17,881 18,092 17,848
Adjustment to
reflect stock
options 947 919 387 602 411
Adjustment to
reflect
convertible debt
shares 2,857 2,857 2,857 2,857 1,569
--------- ---------- --------- --------- ---------
ADJUSTED FOR
DILUTED
CALCULATION 22,431 21,718 21,125 21,551 19,828
========= ========== ========= ========= =========
INCOME PER SHARE -
DILUTED $0.09 $0.16 $0.10 $0.56 $0.49
========= ========== ========= ========= =========
CONTACT: EPIQ Systems, Inc.
Mary Ellen Berthold, 913-621-9500
ir@epiqsystems.com