-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cgn6KOv5iQKFDh8++Dv+kaDIkdMFQDPlhl190dCyv/QynZcjmKaiMpYGjDZDwmrH MCDhBHJNw61PJ1Qfsmpz/Q== 0001157523-04-006925.txt : 20040728 0001157523-04-006925.hdr.sgml : 20040728 20040727181214 ACCESSION NUMBER: 0001157523-04-006925 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040727 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EPIQ SYSTEMS INC CENTRAL INDEX KEY: 0001027207 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 481056429 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22081 FILM NUMBER: 04934189 BUSINESS ADDRESS: STREET 1: 501 KANSAS AVENUE CITY: KANSAS CITY STATE: KS ZIP: 66105-1309 BUSINESS PHONE: 9136219500 MAIL ADDRESS: STREET 1: 501 KANSAS AVENUE CITY: KANSAS CITY STATE: MO ZIP: 66105-1309 FORMER COMPANY: FORMER CONFORMED NAME: ELECTRONIC PROCESSING INC DATE OF NAME CHANGE: 19961116 8-K 1 a4689468.txt EPIQ SYSTEMS, INC. 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 27, 2004 (July 27, 2004) 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 (Commission File Number) (IRS Employer of incorporation) 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 report: Exhibit No. Description ----------- ----------- 99.1 EPIQ Systems, Inc. Press Release issued July 27, 2004. Item 12. Results of Operations and Financial Condition. On July 27, 2004, EPIQ Systems, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2004. 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. Management of EPIQ Systems believes that certain non-GAAP financial measures provide additional insight for investors into the operating results and business trends of the Company. Consistent with prior periods, in this period, the Company has provided investors with non-GAAP adjusted net income from continuing operations, calculated as net income from continuing operations plus after-tax amortization of acquisition-related intangibles, after-tax acquisition-related expenses and after-tax amortization of capitalized loan fees, as well as non-GAAP adjusted net income per share from continuing operations. The Company uses this non-GAAP financial measure (i) in its strategic planning for the Company and (ii) in evaluating the results of operations of the Company. A reconciliation of non-GAAP adjusted net income from continuing operations to GAAP net income from continuing operations is included in a schedule to the press release filed with this Current Report on Form 8-K. The Company also uses non-GAAP adjusted EBITDA. EBITDA is a component of each of the financial covenants contained in our credit facility, and management regularly reviews EBITDA as we assess our current and prospective compliance with these covenants. The credit facility adjusts EBITDA to exclude discontinued operations and certain acquisition related costs. Exclusion of discontinued operations and acquisition costs also is consistent with how management evaluates results of operations and is consistent with our non-GAAP adjusted net income calculation. Accordingly, non-GAAP adjusted EBITDA is calculated as net income from continuing operations plus the provision for income taxes, interest expense, depreciation, amortization, and acquisition related expenses. A reconciliation of non-GAAP adjusted EBITDA to GAAP net income from continuing operations is included in a schedule to the press release filed with this Current Report on Form 8-K. The information in this report 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. 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 27, 2004 By: /s/ Tom W. Olofson ------------------------------------------- Name: Tom W. Olofson Title: Chairman of the Board, Chief Executive Officer and Director EX-99.1 2 a4689468ex991.txt EXHIBIT 99.1 Exhibit 99.1 EPIQ Systems, Inc. Announces Strong Second Quarter Results KANSAS CITY, Kan.--(BUSINESS WIRE)--July 27, 2004--EPIQ Systems, Inc. (NASDAQ: EPIQ) today reported results of operations for the second quarter of 2004, with quarterly operating revenue growth of 88% versus prior year. Net income from continuing operations for the quarter of $3.0 million and net income from continuing operations per diluted share of $0.16 include the effect of acquisition-related intangible expenses totaling $1.2 million, net of tax or $0.07 per diluted share. Non-GAAP adjusted net income for the quarter, as defined below, was $4.7 million and non-GAAP adjusted net income per diluted share of $0.26 achieved management's previously stated second-quarter objective. Diluted weighted average shares outstanding were 18.2 million for both the quarter and the six-month period ended June 30, 2004. Financial highlights from continuing operations for the quarter ended June 30, 2004, compared to the same period last year include: -- Operating revenue (total revenue less reimbursed expenses) increased 88% to $29.6 million from $15.7 million. Case management revenue increased 41% and document management revenue increased 260%. -- Operating income was $7.1 million compared to $6.6 million. Operating income includes $2.0 million of acquisition intangible amortization expense compared to $1.0 million last year. -- Net income from continuing operations was $3.0 million compared to $3.9 million and net income from continuing operations per diluted share was $0.16 versus $0.21. Net income includes $1.2 million of amortization of acquisition-related intangibles compared to $0.6 million last year and $1.2 million of interest expense compared to no interest expense for the year ago quarter, both net of tax. -- Non-GAAP adjusted net income (net income plus amortization of acquisition-related intangibles, acquisition-related expense and amortization of capitalized loan fees, all net of tax) increased to $4.7 million compared to $4.4 million last year. Non-GAAP adjusted net income per share was $0.26 versus $0.24. A reconciliation statement is attached. -- Non-GAAP adjusted earnings before interest, taxes, depreciation, amortization and acquisition related expenses (Non-GAAP Adjusted EBITDA) increased 23% to $10.7 million compared to $8.7 million for the year ago quarter. A reconciliation statement is attached. Financial highlights from continuing operations for the six-month period ended June 30, 2004, compared to the same period last year include: -- Operating revenue (total revenue less reimbursed expenses) increased 81% to $52.6 million from $29.0 million. Case management revenue increased 44% and document management revenue increased 247%. -- Operating income was $11.9 million compared to $11.0 million. Operating income includes $3.7 million of acquisition intangible amortization expense compared to $1.7 million last year. -- Net income from continuing operations was $5.0 million compared to $6.6 million and net income from continuing operations per diluted share was $0.27 versus $0.36. Net income includes $2.2 million of amortization of acquisition-related intangibles compared to $1.0 million last year, $1.3 million of acquisition-related expense compared to $0.9 million last year, and $2.1 million of interest expense compared to no interest expense last year, all net of tax. -- Non-GAAP adjusted net income (net income plus amortization of acquisition-related intangibles, acquisition-related expense and amortization of capitalized loan fees, all net of tax) increased to $9.4 million compared to $8.4 million last year. Non-GAAP adjusted net income per share was $0.51 versus $0.46. A reconciliation statement is attached. -- Non-GAAP adjusted earnings before interest, taxes, depreciation, amortization and acquisition-related expenses (Non-GAAP Adjusted EBITDA) increased 27% to $20.7 million compared to $16.3 million last year. A reconciliation statement is attached. Recent key events for the company include: -- EPIQ Systems was ranked #36 on the Fortune Small Business America's Fastest-Growing Small Companies list. This marks the Company's fourth consecutive appearance on this list. -- On April 30, 2004, EPIQ Systems divested the infrastructure software business unit, which included the DataExpress product, to a private investor group. -- The Company released TCMS(TM) 9.5 Chapter 7 Software, a significant enhancement to its industry-leading Chapter 7 case management solution. -- The board of directors elected Joel Pelofsky to serve as an independent member of the company's board of directors effective July 1, 2004. Mr. Pelofsky formerly served as a U.S. Bankruptcy Court Judge and as a United States Trustee. -- EPIQ Systems completed a $50 million Rule 144A private placement of unsecured contingent convertible subordinated notes with three institutional investors. The proceeds were used to repay higher interest rate borrowings from the Company's then outstanding credit facility. -- During July the Company entered into a new $75 million four-year senior credit facility replacing the former credit facility which was repaid in full and terminated. The new facility provides a more favorable amortization schedule and interest rates and offers additional cash availability for future business expansion. Tom W. Olofson, chairman and CEO, and Christopher E. Olofson, president and chief operating officer of EPIQ Systems, commented: "We are pleased to announce strong results in our recently completed quarter and look forward to solid financial performance during the second half of the year. With interest rates rising and a high level of debt in the economy, we feel these factors may contribute to increased bankruptcy filings in the future. Our recently acquired class action business also affords us attractive new growth potential to supplement our bankruptcy business." EPIQ Systems provides an advanced offering of integrated technology-based products and services for fiduciary management and claims administration applications. 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 Statement Disclaimer: This press release 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 "goal" and "objective." Because those statements are subject to a number of risks, actual results may differ materially from those expressed or implied in this presentation. These risks include (1) any material changes in our total number of bankruptcy trustees and cases; (2) any material changes in our Chapter 7 deposits, the services required by our Chapter 11, Chapter 13, class action or mass tort cases, or the number of cases processed by our Chapter 13 bankruptcy trustee customers; (3) material changes in the number of bankruptcy filings, class action filings or mass tort actions each year; (4) our reliance on and the previously-announced change in our marketing arrangement and pricing arrangements with Bank of America for Chapter 7 revenue; (5) future bankruptcy, class action, or mass tort legislation; (6) risks associated with the integration of acquisitions into our existing business operations; (7) risks associated with the significant new indebtedness we incurred in 2004; (8) a decline in the business of Poorman-Douglas Corporation; and (9) 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. Note: A telephone conference call and webcast will be held at 3:30 p.m. Central time today (July 27, 2004) to further discuss this announcement. The toll-free dial in number for this call is 800-473-6123. This call can also be accessed on the company's website at www.epiqsystems.com. A supplemental slide presentation is available from the website. A digital replay of the call will be available until August 24, 2004, by dialing 877-519-4471 (pass code: 4973979). The archived webcast will be available on the company's website. 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, ------------------- ----------------- 2004 2003 2004 2003 ---------- -------- -------- -------- REVENUE: Case management $17,372 $12,347 $34,298 $23,762 Document management 12,224 3,392 18,290 5,273 ---------- -------- -------- -------- Operating revenue 29,596 15,739 52,588 29,035 Reimbursed expenses 5,312 1,345 8,332 2,124 ---------- -------- -------- -------- Total Revenue 34,908 17,084 60,920 31,159 ---------- -------- -------- -------- COSTS AND EXPENSES: Direct costs 17,672 4,113 27,976 7,068 General and administrative 6,573 4,289 12,211 7,775 Depreciation and software amortization 1,578 1,093 2,959 2,211 Amortization of identifiable intangible assets 2,032 976 3,712 1,658 Acquisition related - - 2,181 1,485 ---------- -------- -------- -------- Total Operating Expenses 27,855 10,471 49,039 20,197 ---------- -------- -------- -------- INCOME FROM OPERATIONS 7,053 6,613 11,881 10,962 Net Interest Income (Expense) (1,975) 3 (3,463) 73 ---------- -------- -------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 5,078 6,616 8,418 11,035 PROVISION FOR INCOME TAXES 2,095 2,741 3,433 4,482 ---------- -------- -------- -------- NET INCOME FROM CONTINUING OPERATIONS 2,983 3,875 4,985 6,553 NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS 1,008 (267) 744 (633) ---------- -------- -------- -------- NET INCOME $3,991 $3,608 $5,729 $5,920 ========== ======== ======== ======== NET INCOME PER SHARE INFORMATION: Income per share - Diluted Diluted income per share from continuing operations $0.16 $0.21 $0.27 $0.36 Diluted income (loss) from discontinued operations 0.06 (0.01) 0.04 (0.03) ---------- -------- -------- -------- EARNINGS PER SHARE - DILUTED $0.22 $0.20 $0.31 $0.33 ========== ======== ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED 18,248 18,204 18,240 17,987 ========== ======== ======== ======== EPIQ SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 2004 (In thousands) (Unaudited) June 30, 2004 ---------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $14,231 Accounts receivable, trade, less allowance for doubtful accounts of $603 20,437 Prepaid expenses 1,682 Deferred income taxes 5,965 Other current assets 3,172 ---------------- Total Current Assets 45,487 LONG-TERM ASSETS: Property and equipment, net 21,184 Software development costs, net 5,973 Goodwill 148,492 Other intangibles, net of accumulated amortization of $7,962 28,112 Other 2,305 ---------------- Total Long-term Assets 206,066 ---------------- Total Assets $251,553 ================ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITES: Accounts payable $5,321 Customer deposits 2,913 Other accrued expenses 1,890 Current maturities of long-term obligations 19,440 --------------- Total Current Liabilities 29,564 LONG-TERM LIABILITIES: Deferred income taxes 10,069 Long-term obligations (excluding current maturities) 76,540 --------------- Total Long-term Liabilities 86,609 STOCKHOLDERS' EQUITY 135,380 --------------- Total Liabilities and Stockholders' Equity $251,553 =============== EPIQ SYSTEMS, INC. AND SUBSIDIARIES RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS TO NON-GAAP ADJUSTED NET INCOME FROM CONTINUING OPERATIONS (In thousands) (Unaudited) THREE-MONTHS SIX-MONTHS ENDED ENDED June 30, June 30, 2004 2003 2004 2003 ------- ------- ------- ------- NET INCOME FROM CONTINUING OPERATIONS $2,983 $3,875 $4,985 $6,553 Plus (net of tax): Amortization of acquisition intangibles 1,194 572 2,198 985 Acquisition related expense - - 1,292 882 Amortization of capitalized loan fees 516 - 884 - ------- ------- ------- ------- 1,710 572 4,374 1,867 ------- ------- ------- ------- NON-GAAP ADJUSTED NET INCOME FROM CONTINUING OPERATIONS $4,693 $4,447 $9,359 $8,420 ======= ======= ======= ======= EPIQ SYSTEMS, INC. AND SUBSIDIARIES RECONCILIATION OF NET INCOME PER SHARE FROM CONTINUING OPERATIONS TO NON-GAAP ADJUSTED NET INCOME PER SHARE FROM CONTINUING OPERATIONS (Unaudited) THREE-MONTHS SIX-MONTHS ENDED ENDED June 30, June 30, 2004 2003 2004 2003 ------ ------ ------ ------ NET INCOME FROM CONTINUING OPERATIONS $0.16 $0.21 $0.27 $0.36 Plus (net of tax): Amortization of acquisition intangibles 0.07 0.03 0.12 0.05 Acquisition related expense - - 0.07 0.05 Amortization of capitalized loan fees 0.03 - 0.05 - ------ ------ ------ ------ 0.10 0.03 0.24 0.10 ------ ------ ------ ------ NON-GAAP ADJUSTED NET INCOME FROM CONTINUING OPERATIONS $0.26 $0.24 $0.51 $0.46 ====== ====== ====== ====== 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 SIX-MONTHS ENDED ENDED June 30, June 30, 2004 2003 2004 2003 ---------- -------- -------- -------- NET INCOME FROM CONTINUING OPERATIONS $2,983 $3,875 $4,985 $6,553 Acquisition related expense - - 2,181 1,485 Depreciation and amortization 3,610 2,069 6,671 3,869 Net interest (income) expense 1,975 (3) 3,463 (73) Provision for income taxes 2,095 2,741 3,433 4,482 ---------- -------- -------- -------- 7,680 4,807 15,748 9,763 ---------- -------- -------- -------- NON-GAAP ADJUSTED EBITDA FROM CONTINUING OPERATIONS $10,663 $8,682 $20,733 $16,316 ========== ======== ======== ======== CONTACT: EPIQ Systems Peggy Leinen, 913-621-9500 www.epiqsystems.com -----END PRIVACY-ENHANCED MESSAGE-----