-----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, ICD0EODjTMu7wr4SOYsPCAPnoiuerD+KuUWXZp6xLJsQFnnMsmgKqlw0oLz7vgeE 2RGoyFlKDtmerF65DrAzbw== 0001157523-04-009845.txt : 20041026 0001157523-04-009845.hdr.sgml : 20041026 20041026160546 ACCESSION NUMBER: 0001157523-04-009845 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20041026 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041026 DATE AS OF CHANGE: 20041026 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: 041096792 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 a4751097.txt EPIQ SYSTEMS 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 October 26, 2004 (October 26, 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 2.02. Results of Operations and Financial Condition. On October 26, 2004, EPIQ Systems, Inc. issued a press release announcing its financial results for the quarter ended September 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. The Company uses these non-GAAP financial measures (i) in its strategic planning for the Company and (ii) in evaluating the results of operations of the Company. Consistent with prior periods, in this period, the Company has provided investors with non-GAAP net income from continuing operations, calculated as net income from continuing operations plus amortization of acquisition-related intangibles, acquisition-related expenses, amortization and write-off of capitalized loan fees and embedded option market-to-market expense/convertible debt accretion, all net of tax, as well as non-GAAP net income per share from continuing operations. Reconciliations of non-GAAP net income and earnings per share from continuing operations to GAAP net income and earnings per share from continuing operations are included in schedules 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 virtually all the financial covenants contained in the Company's current and previous debt agreements, and management regularly reviews EBITDA as it assesses its current and prospective compliance with these financial covenants. The debt agreement covenants adjust EBITDA to exclude certain non-cash costs, non-recurring costs and acquisition related costs. These adjustments are consistent with how management evaluates results of operations and are consistent with the Company's non-GAAP 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, other non-cash expenses, 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. Item 9.01. 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 October 26, 2004, reporting third quarter financial results. 1 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: October 26, 2004 By: /s/ Tom W. Olofson ------------------------------------- Name: Tom W. Olofson Title: Chairman of the Board, Chief Executive Officer and Director 2 EX-99.1 2 a4751097ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 EPIQ Systems, Inc. Announces Third Quarter Results KANSAS CITY, Kan.--(BUSINESS WIRE)--Oct. 26, 2004--EPIQ Systems, Inc. (NASDAQ: EPIQ) Note: A telephone conference call and web cast will be held at 3:30 p.m. central time today (October 26, 2004) to further discuss this announcement. The toll-free dial in number for this call is 1-800-473-6123. 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 November 23, 2004 by dialing 1-877-519-4471 (pass code: 5293967). The archived web cast will be available on the company's website. EPIQ Systems, Inc. (NASDAQ: EPIQ) today reported results of operations for the third quarter of 2004, with quarterly operating revenue growth of 73% versus prior year. Net income from continuing operations for the quarter of $2.2 million, $0.12 per diluted share, includes the net after tax effect of acquisition related intangible expenses totaling $1.2 million, amortization and write-off of capitalized loan fees of $0.8 million and non-cash mark-to-market expense/convertible debt accretion related to the convertible debt embedded option of $0.2 million, which combined result in $0.12 per diluted share. Non-GAAP net income and Non-GAAP Adjusted EBITDA, both as defined below, were $4.3 million and $10.2 million respectively for the quarter. Diluted weighted average shares outstanding were 18.3 million for both the quarter and the nine-month period ended September 30, 2004. Financial highlights from continuing operations for the quarter ended September 30, 2004, compared to the same period last year include: -- Operating revenue (total revenue less reimbursed expenses) increased 73% to $28.7 million from $16.6 million. Case management revenue increased 33% and document management revenue increased 210%. -- Operating income was $6.3 million compared to $6.9 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 $2.2 million compared to $4.2 million and net income from continuing operations per diluted share was $0.12 versus $0.23. Net income includes net after tax expenses of $1.2 million for amortization of acquisition related intangibles compared to $0.6 million last year and $1.5 million of expenses related to financing, which include interest expense, amortization and write-off of capitalized loan fees and embedded option mark-to-market expense/convertible debt accretion, compared to minimal financing related expense for the year ago quarter. -- Non-GAAP net income (net income plus amortization of acquisition related intangibles, acquisition related expense, amortization and write-off of capitalized loan fees and embedded option mark-to-market expense/convertible debt accretion, all net after tax) was $4.3 million compared to $4.8 million last year. Non-GAAP net income per share was $0.24 versus $0.26. A reconciliation statement is attached. -- Non-GAAP adjusted earnings before expenses related to interest/financing, taxes, depreciation, amortization and acquisition related expenses (Non-GAAP Adjusted EBITDA) increased 13% to $10.2 million compared to $9.0 million for the year ago quarter. A reconciliation statement is attached. -- Net cash provided by operating activities increased 4% to $5.1 million compared to $4.9 million last year. Financial highlights from continuing operations for the nine-month period ended September 30, 2004, compared to the same period last year include: -- Operating revenue (total revenue less reimbursed expenses) increased 78% to $81.2 million from $45.6 million. Case management revenue increased 40% and document management revenue increased 232%. -- Operating income was $18.2 million compared to $17.9 million. Operating income includes $5.7 million of acquisition intangible amortization expense compared to $2.6 million last year and $2.2 million of acquisition related expense versus $1.5 million last year. -- Net income from continuing operations was $7.1 million compared to $10.8 million and net income from continuing operations per diluted share was $0.39 versus $0.59. Net income includes net after tax expenses of $3.4 million for amortization of acquisition related intangibles compared to $1.6 million last year, $1.3 million of acquisition related expense compared to $0.9 million last year and $3.6 million of expenses related to financing compared to minimal interest income last year. -- Non-GAAP net income (net income plus amortization of acquisition related intangibles, acquisition related expense, amortization and write-off of capitalized loan fees and embedded option mark-to-market expense/convertible debt accretion, all net after tax) was $13.7 million compared to $13.2 million last year. Non-GAAP net income per share was $0.75 versus $0.72. A reconciliation statement is attached. -- Non-GAAP adjusted earnings before expenses related to interest/financing, taxes, depreciation, amortization and acquisition related expenses (Non-GAAP Adjusted EBITDA) increased 22% to $30.9 million compared to $25.3 million last year. A reconciliation statement is attached. -- Net cash provided by operating activities increased 65% to $20.4 million compared to $12.3 million last year. Recent key events for the company include: -- Forbes magazine ranked EPIQ Systems #37 on the 200 Best Small Companies list. This marks the Company's fifth consecutive appearance on this list. -- In August, EPIQ Systems formed a new subsidiary, Financial Balloting Group (FBG). Based in New York, FBG offers specialty balloting and voting support services for Chapter 11 reorganization plans. -- During July EPIQ Systems 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 very pleased to be included in the Forbes Best 200 Companies in America list for the fifth consecutive year. During the third quarter, we had particularly strong revenue performance from recurring Chapter 7 deposit fees, and we expanded the business organically into Chapter 11 balloting administration with the opening of our new subsidiary, Financial Balloting Group. Rising interest rates and high debt levels can be key factors in the growth of the market for bankruptcy services." 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. 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, --------------------- ------------------ 2004 2003 2004 2003 ---------- ---------- --------- -------- REVENUE: Case management $16,980 $12,807 $51,278 $36,569 Document management 11,671 3,761 29,961 9,034 ---------- ---------- --------- -------- Operating revenue 28,651 16,568 81,239 45,603 Reimbursed expenses 7,043 1,807 15,375 3,931 ---------- ---------- --------- -------- Total Revenue 35,694 18,375 96,614 49,534 ---------- ---------- --------- -------- OPERATING EXPENSES: Direct costs 18,533 4,663 46,509 11,731 General and administrative 6,998 4,730 19,209 12,505 Depreciation and software amortization 1,804 1,071 4,763 3,282 Amortization of identifiable intangible assets 2,032 976 5,744 2,634 Acquisition related 16 - 2,197 1,485 ---------- ---------- --------- -------- Total Operating Expenses 29,383 11,440 78,422 31,637 ---------- ---------- --------- -------- INCOME FROM OPERATIONS 6,311 6,935 18,192 17,897 EXPENSES RELATED TO FINANCING: Interest expense, net of interest income 1,621 3 5,084 (70) Loan fee write-off 995 - 995 - ---------- ---------- --------- -------- Net Expenses Related to Financing 2,616 3 6,079 (70) ---------- ---------- --------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 3,695 6,932 12,113 17,967 PROVISION FOR INCOME TAXES 1,534 2,727 4,968 7,210 ---------- ---------- --------- -------- NET INCOME FROM CONTINUING OPERATIONS 2,161 4,205 7,145 10,757 NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS (77) (279) 668 (911) ---------- ---------- --------- -------- NET INCOME $2,084 $3,926 $7,813 $9,846 ========== ========== ========= ======== NET INCOME PER SHARE INFORMATION: Income per share - Diluted Income from continuing operations $0.12 $0.23 $0.39 $0.59 Gain (loss) from discontinued operations (0.01) (0.02) 0.04 (0.05) ---------- ---------- --------- -------- NET INCOME PER SHARE - DILUTED $0.11 $0.21 $0.43 $0.54 ========== ========== ========= ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED 18,278 18,391 18,251 18,262 ========== ========== ========= ======== EPIQ SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2004 (In thousands) (Unaudited) September 30, 2004 ---------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $10,526 Trade receivables, less allowance for doubtful accounts of $893 22,071 Prepaid expenses 2,822 Deferred income taxes 5,663 Other current assets 1,927 ---------------------- Total Current Assets 43,009 LONG-TERM ASSETS: Property and equipment, net 21,001 Software development costs, net 5,835 Goodwill 148,215 Other intangibles, net of accumulated amortization of $9,994 26,080 Other 2,234 ---------------------- Total Long-term Assets 203,365 ---------------------- Total Assets $246,374 ====================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $4,197 Customer deposits 2,513 Other accrued expenses 2,346 Current maturities of long-term obligations 7,611 ---------------------- Total Current Liabilities 16,667 LONG-TERM LIABILITIES: Deferred income taxes 9,780 Long-term obligations (excluding current maturities) 82,100 ---------------------- Total Long-term Liabilities 91,880 STOCKHOLDERS' EQUITY 137,827 ---------------------- Total Liabilities and Stockholders' Equity $246,374 ====================== 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 NINE-MONTHS ENDED ENDED September 30, September 30, 2004 2003 2004 2003 --------- ------- -------- -------- NET INCOME FROM CONTINUING OPERATIONS $2,161 $4,205 $7,145 $10,757 Plus (net of tax): Amortization of acquisition intangibles 1,189 592 3,389 1,578 Acquisition related expense 9 - 1,296 890 Amortization/write-off - capitalized loan fees 782 - 1,670 - Non-cash embedded option charges 194 - 194 - --------- ------- -------- -------- 2,174 592 6,549 2,468 --------- ------- -------- -------- NON-GAAP NET INCOME FROM CONTINUING OPERATIONS $4,335 $4,797 $13,694 $13,225 ========= ======= ======== ======== EPIQ SYSTEMS, INC. AND SUBSIDIARIES RECONCILIATION OF NET INCOME PER SHARE FROM CONTINUING OPERATIONS TO NON-GAAP NET INCOME PER SHARE FROM CONTINUING OPERATIONS (Unaudited) THREE-MONTHS NINE-MONTHS ENDED ENDED September 30, September 30, 2004 2003 2004 2003 -------- ------ ------- ------- NET INCOME PER SHARE FROM CONTINUING OPERATIONS (on a diluted basis) $0.12 $0.23 $0.39 $0.59 Plus (net of tax): Amortization of acquisition intangibles 0.07 0.03 0.19 0.08 Acquisition related expense - - 0.07 0.05 Amortization/write-off - capitalized loan fees 0.04 - 0.09 - Non-cash embedded option charges 0.01 - 0.01 - -------- ------ ------- ------- 0.12 0.03 0.36 0.13 -------- ------ ------- ------- NON-GAAP NET INCOME PER SHARE FROM CONTINUING OPERATIONS (on a diluted basis) $0.24 $0.26 $0.75 $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 30, September 30, 2004 2003 2004 2003 --------- -------- -------- -------- NET INCOME FROM CONTINUING OPERATIONS $2,161 $4,205 $7,145 $10,757 Acquisition related expense 16 - 2,197 1,485 Depreciation and amortization 3,836 2,047 10,507 5,916 Expenses related to financing 2,616 3 6,079 (70) Provision for income taxes 1,534 2,727 4,968 7,210 --------- -------- -------- -------- 8,002 4,777 23,751 14,541 --------- -------- -------- -------- NON-GAAP ADJUSTED EBITDA FROM CONTINUING OPERATIONS $10,163 $8,982 $30,896 $25,298 ========= ======== ======== ======== CONTACT: EPIQ Systems, Inc. For more information: Peggy Leinen 913-621-9500 Website: www.epiqsystems.com -----END PRIVACY-ENHANCED MESSAGE-----