EX-99.1 2 a4938813ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 EPIQ Systems, Inc. Announces Second Quarter 2005 Results KANSAS CITY, Kan.--(BUSINESS WIRE)--July 26, 2005--EPIQ Systems, Inc. (NASDAQ: EPIQ) announces results of operations for the second quarter of 2005 with operating revenue (total revenue less reimbursed expenses) of $26.2 million compared to $26.0 million for the first quarter of 2005 and versus $29.6 million for the year ago second quarter. June 30, 2005 year-to-date operating revenue of $52.2 million compared to $52.6 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 18.4 million for the quarter. Taking into effect the accounting change, diluted weighted average shares outstanding were 21.3 million for the 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. Second quarter 2005 net income from continuing operations was $2.9 million or $0.15 per share versus $3.3 million or $0.17 per share for the first quarter of 2005 and compared to $3.0 million or $0.16 per share for the year ago quarter. June 30, 2005 year-to-date net income from continuing operations was $6.2 million or $0.32 per share compared to $5.0 million or $0.27 per share for the prior year. Non-GAAP net income from continuing operations for the second quarter of 2005 was $4.3 million or $0.22 per share compared to $4.1 million or $0.21 per share for the first quarter of 2005 and versus $4.7 million or $0.25 per share in the second quarter of 2004. June 30, 2005 year-to-date non-GAAP net income from continuing operations was $8.4 million or $0.43 per share compared to $9.4 million or $0.51 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, amortization of capitalized loan fees, 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, taxes, depreciation, amortization, and acquisition related expenses) and (ii) net cash provided by operating activities. Non-GAAP Adjusted EBITDA from continuing operations was $10.0 million in the second quarter of 2005 compared to $9.7 million in the first quarter of 2005 and versus $10.7 million for the year ago quarter and was $19.8 million for June 30, 2005 year-to-date compared to $20.7 million for the prior year. A reconciliation statement is attached. June 30, 2005 year-to-date net cash provided by operating activities was $10.3 million compared to $15.3 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: "We are pleased to report another solid quarter of financial performance. The enactment of major new legislation has focused renewed attention on bankruptcy trends in the media. As the effective date in mid-October approaches for many aspects of the new legislation, there are implications for both consumer filings (Chapters 7 and 13) as well as major corporate restructurings (Chapter 11). We are prepared to leverage our national franchise throughout the bankruptcy system to accommodate new filings and to adapt to new administrative requirements." Recent key events include: -- EPIQ Systems released TCMS(R) 10.5, an industry-leading Chapter 7 case management solution to further establish the Company's technology leadership. -- Since late June 2004, the Federal Open Market Committee has raised the federal funds rate nine times from its low of 1.00% to the current 3.25%. -- The Federal Reserve reported that corporate debt and consumer credit both pushed further into record levels, approaching $5.3 trillion and $2.2 trillion, respectively, as of March 31, 2005. -- For the three months ended March 31, 2005, prior to the signing of the new bankruptcy law on April 20, 2005, bankruptcy filings exceeded 400,000. Conference Call The Company will host a conference call today at 3:30 p.m. (CDT) to discuss these results. Interested parties may dial (800) 955-1321. The audio with supplemental slides is also available at www.epiqsystems.com. A recording of the call will be available through July 28, 2005 beginning approximately two hours after the call ends. To access the replay, call (800) 642-1687 and enter pin# 7803982. The archived Internet broadcast will be available on the company's website until the next earnings update. 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 Six months ended June 30, June 30, ------------------- ------------------ 2005 2004 2005 2004 --------- -------- -------- -------- REVENUE: Case management $19,746 $17,372 $39,631 $34,298 Document management 6,441 12,224 12,522 18,290 --------- -------- -------- -------- Operating revenue 26,187 29,596 52,153 52,588 Reimbursed expenses 5,448 5,312 10,944 8,332 --------- -------- -------- -------- Total Revenue 31,635 34,908 63,097 60,920 --------- -------- -------- -------- COSTS AND EXPENSES: Direct costs 13,564 17,672 27,300 27,976 General and administrative 8,044 6,573 16,036 12,211 Depreciation and software amortization 1,775 1,578 3,549 2,959 Amortization of identifiable intangible assets 1,427 2,032 3,050 3,712 Acquisition related - - - 2,181 --------- -------- -------- -------- Total Operating Expenses 24,810 27,855 49,935 49,039 --------- -------- -------- -------- INCOME FROM OPERATIONS 6,825 7,053 13,162 11,881 --------- -------- -------- -------- INTEREST INCOME (EXPENSE): Interest income 40 32 78 66 Interest expense (1,884) (2,007) (2,685) (3,529) --------- -------- -------- -------- Net Interest Income (Expense) (1,844) (1,975) (2,607) (3,463) --------- -------- -------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 4,981 5,078 10,555 8,418 PROVISION FOR INCOME TAXES 2,077 2,095 4,401 3,433 --------- -------- -------- -------- NET INCOME FROM CONTINUING OPERATIONS 2,904 2,983 6,154 4,985 TOTAL DISCONTINUED OPERATIONS - 1,008 - 744 --------- -------- -------- -------- NET INCOME $2,904 $3,991 $6,154 $5,729 ========= ======== ======== ======== NET INCOME PER SHARE INFORMATION: Income per share - Diluted Income from continuing operations $0.15 $0.16 $0.32 $0.27 Gain from discontinued operations - 0.06 - 0.04 --------- -------- -------- -------- Net income per share - Diluted $0.15 $0.22 $0.32 $0.31 ========= ======== ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED 21,289 18,782 21,187 18,507 ========= ======== ======== ======== EPIQ SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) June 30, December 31, 2005 2004 ------------ ------------- ASSETS ASSETS: Cash, cash equivalents and short term investments $13,736 $13,330 Trade receivables, net 22,674 18,690 Property and equipment, net 18,722 20,431 Goodwill 147,728 147,728 Other intangibles, net 21,007 24,057 Other 15,030 15,852 ------------ ------------- Total Assets $238,897 $240,088 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Accounts payable $3,408 $4,263 Indebtedness 73,860 82,149 Other liabilities 15,338 13,843 STOCKHOLDERS' EQUITY 146,291 139,833 ------------ ------------- Total Liabilities and Stockholders' Equity $238,897 $240,088 ============ ============= EPIQ SYSTEMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three months Six months ended ended ----------------- ------------------ June 30, June 30, June 30, June 30, 2005 2004 2005 2004 -------- -------- -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $2,904 $3,991 $6,154 $5,729 Non-cash adjustments to net income: Depreciation and amortization 3,202 3,610 6,599 6,671 Other, net 784 1,650 1,254 2,546 Changes in operating assets and liabilities, net 1,717 8,626 (3,693) 323 -------- -------- -------- --------- Net cash provided by operating activities 8,607 17,877 10,314 15,269 -------- -------- -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Cash acquired from (paid for) acquisition, net - 78 - (113,115) Other 3,052 (1,718) (1,406) (3,429) -------- -------- -------- --------- Net cash provided by (used in) investing activities 3,052 (1,640) (1,406) (116,544) -------- -------- -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds (payments) on indebtedness (6,563) (4,790) (8,681) 84,158 Other 133 - 179 287 -------- -------- -------- --------- Net cash provided by (used in) financing activities (6,430) (4,790) (8,502) 84,445 -------- -------- -------- --------- NET INCREASE (DECREASE) IN CASH $5,229 $11,447 $406 $(16,830) ======== ======== ======== ========= 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 Six months ended ended ------------------------ --------------- June March June June June 30, 31, 30, 30, 30, 2005 2005 2004 2005 2004 -------- ------- ------- ------- ------- NET INCOME FROM CONTINUING OPERATIONS $2,904 $3,250 $2,983 $6,154 $4,985 Plus (net of tax): Amortization of acquisition intangibles 832 946 1,194 1,778 2,198 Acquisition related expense - - - - 1,292 Amortization of capitalized loan fees 161 166 516 327 884 Non-cash embedded option charges 409 (221) - 188 - -------- ------- ------- ------- ------- 1,402 891 1,710 2,293 4,374 -------- ------- ------- ------- ------- NON-GAAP NET INCOME FROM CONTINUING OPERATIONS $4,306 $4,141 $4,693 $8,447 $9,359 ======== ======= ======= ======= ======= EPIQ SYSTEMS, INC. AND SUBSIDIARIES RECONCILIATION OF EPS FROM CONTINUING OPERATIONS TO NON-GAAP EPS FROM CONTINUING OPERATIONS (Unaudited) Three months Six months ended ended --------------------- -------------- June March June June June 30, 31, 30, 30, 30, 2005 2005 2004 2005 2004 ------- ------ ------ ------- ------ EPS FROM CONTINUING OPERATIONS (on a diluted basis) $0.15 $0.17 $0.16 $0.32 $0.27 Plus (net of tax): Amortization of acquisition intangibles 0.04 0.04 0.06 0.08 0.12 Acquisition related expense - - - - 0.07 Amortization of capitalized loan fees 0.01 0.01 0.03 0.02 0.05 Non-cash embedded option charges 0.02 (0.01) - 0.01 - ------- ------ ------ ------- ------ 0.07 0.04 0.09 0.11 0.24 ------- ------ ------ ------- ------ NON-GAAP EPS FROM CONTINUING OPERATIONS (on a diluted basis) $0.22 $0.21 $0.25 $0.43 $0.51 ======= ====== ====== ======= ====== 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 Six months ended ------------------------- ----------------- June March June June June 30, 31, 30, 30, 30, 2005 2005 2004 2005 2004 -------- ------- -------- -------- -------- NET INCOME FROM CONTINUING OPERATIONS $2,904 $3,250 $2,983 $6,154 $4,985 Acquisition related expense - - - - 2,181 Depreciation and amortization 3,202 3,397 3,610 6,599 6,671 Expenses related to financing 1,844 762 1,975 2,606 3,463 Provision for income taxes 2,077 2,324 2,095 4,401 3,433 -------- ------- -------- -------- -------- 7,123 6,483 7,680 13,606 15,748 -------- ------- -------- -------- -------- NON-GAAP ADJUSTED EBITDA FROM CONTINUING OPERATIONS $10,027 $9,733 $10,663 $19,760 $20,733 ======== ======= ======== ======== ======== EPIQ SYSTEMS, INC. AND SUBSIDIARIES EPS CALCULATION ADJUSTMENTS PER EITF 04-08 (In thousands, except per share data) (Unaudited) Three months ended Six months ended June 30, June 30, ------------------- ----------------- 2005 2004 2005 2004 ---------- -------- -------- ------- NET INCOME FROM CONTINUING OPERATIONS $2,904 $2,983 $6,154 $4,985 Interest expense adjustment for convertible debt 291 55 578 55 ---------- -------- -------- ------- ADJUSTED FOR DILUTED CALCULATION $3,195 $3,038 $6,732 $5,040 ========== ======== ======== ======= DILUTED WEIGHTED AVERAGE SHARES 17,904 17,831 17,896 17,822 Adjustment to reflect stock options 528 417 434 418 Adjustment to reflect convertible debt shares 2,857 534 2,857 267 ---------- -------- -------- ------- ADJUSTED FOR DILUTED CALCULATION 21,289 18,782 21,187 18,507 ========== ======== ======== ======= INCOME PER SHARE - DILUTED $0.15 $0.16 $0.32 $0.27 ========== ======== ======== ======= CONTACT: EPIQ Systems, Inc. Shawn Southard, 913-621-9500 ir@epiqsystems.com