8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

July 28, 2003 (July 28, 2003)

Date of Report (Date of earliest event reported)

EPIQ SYSTEMS, INC.

(Exact name of Registrant as specified in its charter)

Missouri	0-22081	48-1056429
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

501 Kansas Avenue

Kansas City, KS 66105

(Address of principal executive offices)

(913) 621-9500

(Registrant’s telephone number, including area code)

Item 7.  Financial Statements and Exhibits.

(c)  Exhibits.

The following exhibit is filed as part of this Current Report on Form 8-K:

Exhibit No.	Description
99.1	EPIQ Systems, Inc. Press Release issued July 28, 2003.

Item 9.  Regulation FD Disclosure.

In accordance with guidance from the Securities and Exchange Commission in Release Nos. 33-8216 and 34-47583, the information furnished under this Item 9 (“Regulation FD Disclosure”) is intended to be furnished under Item 12 (“Results of Operations and Financial Condition”).  The information in this Current Report on Form 8-K and the Exhibit attached hereto is not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 or 12(a)(2) of the Securities Act of 1933, as amended.  The information contained herein and in the accompanying exhibit is not incorporated by reference into any filing with the SEC made by the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

On July 28, 2003, EPIQ Systems, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2003.  A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

EPIQ Systems provides certain non-GAAP financial measures as additional information relating to its operating results.  The management of EPIQ Systems believes that the presentation of these measures provide additional insight for investors into the operating results and business trends of the Company.  The Company also uses these or similar non-GAAP financial measures (i) in its strategic planning for the Company and (ii) in evaluating the results of operations of the Company.  The current calculation of non-GAAP adjusted net income is net income plus after-tax amortization of acquisition-related intangibles and after-tax acquisition-related expenses.  A reconciliation of non-GAAP adjusted net income to GAAP net income is included in a schedule to the press release filed with this Report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	EPIQ SYSTEMS, INC.
Date:  July 28, 2003
	By:	/s/ Tom W. Olofson
	Name:	Tom W. Olofson
	Title:	Chairman of the Board, Chief Executive Officer and Director

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EX-99.1

Exhibit 99.1

	News Release
	Contact:
	Susan M. Johnson
	Director, Investor Relations
	Telephone 913-621-9500
	Web Site: http://www.epiqsystems.com

EPIQ Systems, Inc. Announces Record Second Quarter 2003 Results

Note:  A telephone conference call and web cast will be held at 3:30 p.m. central time today (July 28, 2003) to further discuss this announcement.  The toll-free dial-in number is 877-780-2271 (passcode: EPIQ Systems; conference leader: Sue Johnson). A replay will be available shortly thereafter through August 12, 2003 on 877-519-4471 (passcode: 4061392). A supplemental slide presentation will be available along with the web cast from our website: www.epiqsystems.com. The archived web cast of the call will also be available from the website.

Kansas City, KS, July 28, 2003 — EPIQ Systems, Inc. (NASDAQ:EPIQ) today reported record results for the second quarter ended June 30, 2003, with quarterly revenue growth of 93% versus prior year.  Net income per diluted share increased 54% to $0.20 for the quarter.  Net income for the quarter of $3.6 million compared with $1.9 million for the same period last year includes $593 thousand and $72 thousand, respectively, of amortization of acquisition related intangibles, net of tax.  Diluted weighted average shares of 18.204 million were outstanding for the quarter and 17.987 million were outstanding for the six-month period ended June 30, 2003.

Highlights for the quarter ended June 30, 2003, compared to the same period last year, were:

•Revenues were $17.6 million, a 93% increase, compared to $9.1 million. Revenues for bankruptcy services were $17.1 million, an increase of 98%, and revenues for infrastructure software were $478 thousand, a 5% increase.

•Gross profit was $12.1 million compared to $6.1 million. The gross profit margin was 68.7% versus 67.1%.

•Operating income was $6.2 million compared to $2.9 million. The operating margin was 35.1% versus 32.2%.  Operating income includes $1.0 million of intangible amortization expense compared to the second quarter of last year, which had $116 thousand of intangible amortization expense.

•Net income was $3.6 million compared to $1.9 million. Net income per diluted share was $0.20, compared to $0.13.

•Non-GAAP adjusted net income (net income plus after-tax amortization of acquisition-related intangibles and after-tax acquisition-related expenses) was $4.2 million compared to $1.9 million. A reconciliation statement is attached.

Highlights for the six-month period ended June 30, 2003, compared to the same period last year, were:

•Revenues were $32.2 million, a 78% increase, compared to $18.1 million. Revenues for bankruptcy services were $31.2 million, an increase of 82%, and revenues for infrastructure software were $1.0 million, a 10% increase.

•Gross profit was $22.2 million compared to $12.2 million. The gross profit margin was 69.0% vs. 67.3%.

•Operating income was $9.9 million compared to $5.8 million. The operating margin was 30.8% vs. 32.0%.  Operating income includes $1.7 million of intangible amortization expense and $1.5 million of acquisition related expense compared to the first six months of last year, which had $233 thousand of intangible amortization expense and no acquisition-related expense.

•Net income was $5.9 million compared to $3.7 million. Net income per diluted share was $0.33, compared to $0.25.

•Non-GAAP adjusted net income (net income plus after-tax amortization of acquisition-related intangibles and after-tax acquisition-related expenses) was $7.8 million compared to $3.9 million. A reconciliation statement is attached.

Recent key events for the company include:

•EPIQ Systems was ranked #5 on the Fortune Small Business 100 Fastest-Growing Small Businesses list. This marks the Company’s third consecutive appearance on this list, advancing from #29 last year and #71 the previous year.

•The Company released TCMS^Ò 8.5 Chapter 7 Software, a significant enhancement to its Chapter 7 software, to all current customers.

•EPIQ Systems was retained in seven of the top fifteen year-to-date Chapter 11 bankruptcy filings, based on total assets of the debtor.

•Total bankruptcy filings for the quarter ended March 31, 2003 reached a record of 413,000 quarterly filings.  Debt in the economy remains at high levels, with mortgage and credit card delinquencies near record levels.

Tom W. Olofson, chairman and CEO, and Christopher E. Olofson, president and COO, said, “We are very pleased with the strength of our second quarter financial results. Our core bankruptcy business is strong, and we continue to increase market share in key geographic areas. Debt, both corporate and consumer, remains at record levels, which we believe can be a strong indicator of additional future bankruptcy filings.”

NOTE ON FORWARD-LOOKING STATEMENTS:  This news release and the related investor call/web cast contain or will contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act, included those relating to the possible or assumed future results of operations and financial condition of the Company.  Because those statements are subject to a number of risks, actual results may differ materially from those expressed or implied.  These risks include (1) any material changes in our total number of bankruptcy trustees and bankruptcy cases, (2) any material changes in our Chapter 7 deposits, the services required by our Chapter 11 or Chapter 13 cases, or the number of cases processed by our Chapter 13 trustee customers, (3) changes in the number of bankruptcy filings each year, (4) our reliance on our marketing arrangement and pricing arrangements with Bank of America for Chapter 7 revenue, (5) changes in bankruptcy legislation, (6) risks associated with the integration of acquisitions into our existing business operations, including the BSI acquisition, and (7) other risks detailed from time to time in our SEC filings, including our Form 10-K for 2002. 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.

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EPIQ SYSTEMS, INC. and SUBSIDIARY

STATEMENTS OF INCOME

(In thousands, except share and per share data)

(Unaudited)

	QUARTER ENDED JUNE 30,
	2003		2002
OPERATING REVENUES
Bankruptcy case management fees	$	10,235	$	7,067
Bankruptcy professional services	6,849		1,554
Infrastructure software and other	478		455
	17,562		9,076
COST OF SALES
Cost of goods and services	4,283		1,797
Depreciation and amortization	1,210		1,190
	5,493		2,987
GROSS PROFIT	12,069		6,089
OPERATING EXPENSES
General and administrative	4,697		2,917
Depreciation	202		136
Amortization of intangibles	1,013		116
Acquisition-related expenses	—		—
	5,912		3,169
INCOME FROM OPERATIONS	6,157		2,920
NET INTEREST INCOME	3		98
INCOME BEFORE INCOME TAXES	$	6,160	$	3,018
NET INCOME	$	3,608	$	1,877
EARNINGS PER SHARE – DILUTED	$	0.20	$	0.13
WEIGHTED AVERAGE SHARES – DILUTED	18,204		14,951

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EPIQ SYSTEMS, INC. and SUBSIDIARY

STATEMENTS OF INCOME

(In thousands, except share and per share data)

(Unaudited)

	YEAR TO DATE JUNE 30,
	2003		2002
OPERATING REVENUES
Bankruptcy case management fees	$	20,214	$	14,725
Bankruptcy professional services	10,945		2,404
Infrastructure software and other	1,038		943
	32,197		18,072
COST OF SALES
Cost of goods and services	7,464		3,592
Depreciation and amortization	2,504		2,320
	9,968		5,912
GROSS PROFIT	22,229		12,160
OPERATING EXPENSES
General and administrative	8,737		5,880
Depreciation	371		257
Amortization of intangibles	1,732		233
Acquisition-related expenses	1,485		—
	12,325		6,370
INCOME FROM OPERATIONS	9,904		5,790
NET INTEREST INCOME	73		211
INCOME BEFORE INCOME TAXES	$	9,977	$	6,001
NET INCOME	$	5,920	$	3,729
EARNINGS PER SHARE – DILUTED	$	0.33	$	0.25
WEIGHTED AVERAGE SHARES – DILUTED	17,987		14,974

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EPIQ SYSTEMS, INC. and SUBSIDIARY

BALANCE SHEET

JUNE 30, 2003

(In thousands)

(Unaudited)

ASSETS:
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS	$	20,818
ACCOUNTS RECEIVABLE	10,772
OTHER CURRENT ASSETS	1,151
TOTAL CURRENT ASSETS	32,741
PROPERTY, PLANT & EQUIPMENT, net	12,685
SOFTWARE, net	5,003
GOODWILL	68,014
INTANGIBLE ASSETS, net	19,191
OTHER ASSETS	67
TOTAL ASSETS	$	137,701
LIABILITIES & SHAREHOLDERS’ EQUITY:
CURRENT LIABILITIES:
ACCOUNTS PAYABLE	$	1,753
ACCRUED EXPENSES	2,396
DEFERRED REVENUE	881
OTHER CURRENT LIABILITIES	841
TOTAL CURRENT LIABILITIES	5,871
LONG-TERM OBLIGATIONS (less current portion)	17
DEFERRED ACQUISITION PRICE (less current portion)	3,066
DEFERRED REVENUE	44
DEFERRED INCOME TAXES	2,487
SHAREHOLDERS’ EQUITY	126,216
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	137,701

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EPIQ SYSTEMS, INC. and SUBSIDIARY

RECONCILIATION OF NET INCOME

TO NON-GAAP ADJUSTED NET INCOME

(In thousands)

(Unaudited)

	QUARTER ENDED JUNE 30,
	2003		2002
NET INCOME	$	3,608	$	1,877
Plus (net of tax):
Acquisition-related expenses	—		—
Amortization of acquisition intangibles	593		72
	593		72
NON-GAAP ADJUSTED NET INCOME	$	4,201	$	1,949

	YEAR TO DATE JUNE 30,
	2003		2002
NET INCOME	$	5,920	$	3,729
Plus (net of tax):
Acquisition-related expenses	881		—
Amortization of acquisition intangibles	1,028		145
	1,909		145
NON-GAAP ADJUSTED NET INCOME	$	7,829	$	3,874

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