GlobeNewswire
2010-02-23
Net Cash Provided by Operating Activities of $52 Million
Increased 51% Compared to the Prior Year
KANSAS CITY, Kan., Feb. 23, 2010 (GLOBE NEWSWIRE) -- Epiq Systems, Inc.
(Nasdaq:EPIQ) today announced results of operations for the fourth
quarter and full year of 2009 with fourth quarter operating revenue
(total revenue before operating revenue from reimbursed direct costs)
of $47.7 million compared to $55.2 million for the same period last
year. 2009 operating revenue was $208.5 million compared to $207.9
million for the prior year. Operating revenue reflects all time high
Bankruptcy segment results alongside the offset from the expected wind
down of the major analog-to-digital television conversion contract in
the Settlement Administration segment that was substantially completed
during the second quarter of 2009.
Net income for the fourth quarter of 2009 was $3.6 million, $0.09 per
share, compared to $4.0 million, $0.10 per share, for the year ago
quarter. 2009 net income was $14.6 million, $0.38 per share, up 5%
compared to $13.8 million, $0.36 per share, for the prior year.
Bankruptcy segment operating revenue, which carries the highest margin
of all the segments at 52% for the year, increased to 44% of 2009
operating revenue compared to 29% last year, resulting in higher
overall profit levels for the company and improved operating margins in
2009 versus the prior year.
Fourth quarter 2009 net cash provided by operating activities was $24.3
million, up 50% compared to $16.2 million for the year ago quarter.
2009 net cash provided by operating activities was $51.8 million, up
51% compared to $34.2 million for the prior year. Net cash provided by
operating activities as a percent of operating revenue increased to 25%
in 2009 versus 16% in 2008. A condensed consolidated cash flow
statement is attached.
Epiq Systems' management also evaluates the following non-GAAP
financial measures: (i) non-GAAP net income (net income adjusted for
amortization of acquisition intangibles, share-based compensation,
realized cash gains on financial instruments, non-cash mark-to-market
adjustments, acquisition expense, the gain or loss on the disposal of
long-lived assets, the effect of tax adjustments that are outside of
the company's anticipated effective tax rate, litigation settlement
reserve and capitalized loan fee amortization, all net of tax), (ii)
non-GAAP earnings per share, calculated as non-GAAP net income on a
fully diluted per share basis, and (iii) non-GAAP adjusted EBITDA (net
income adjusted for interest/financing, taxes, depreciation,
amortization, share-based compensation, realized cash gains on
financial instruments, non-cash mark-to-market adjustments, acquisition
expense, litigation settlement reserve and the gain or loss on the
disposal of long-lived assets). Reconciliation statements for non-GAAP
financial measures are provided below.
Non-GAAP net income for the fourth quarter of 2009 was $6.8 million,
$0.17 per share, up 7% compared to $6.4 million, $0.16 per share, for
the year ago quarter. 2009 non-GAAP net income was $26.7 million, $0.67
per share, up 14% compared to $23.5 million, $0.60 per share, for the
prior year. Non-GAAP net income as a percent of operating revenue
increased to 13% in 2009 from 11% in 2008.
Fourth quarter 2009 non-GAAP adjusted EBITDA was $17.0 million, up 8%
compared to $15.7 million for the year ago quarter. 2009 non-GAAP
adjusted EBITDA was $64.1 million, up 11% compared to $57.8 million for
the prior year. Non-GAAP adjusted EBITDA as a percent of operating
revenue increased to 31% in 2009 from 28% in 2008.
Operating revenue for the Bankruptcy segment for the fourth quarter of
2009 was $24.2 million, up 16% compared to $20.8 million for the year
ago quarter, which included $2.7 million from a large noticing related
to a 2001 retention. Excluding this noticing, fourth quarter operating
revenue increased 34% compared to the prior year. 2009 operating
revenue was $91.0 million, up 52% compared to $59.8 million in the
prior year. Non-GAAP adjusted EBITDA was $12.7 million for the fourth
quarter of 2009, up 21% compared to $10.5 million for the year ago
quarter. 2009 non-GAAP adjusted EBITDA was $47.4 million, up 39%
compared to $34.1 million in the prior year, which included a $3.5
million cash gain on interest rate floor options. Excluding the prior
year one-time cash gain on interest rate floor options, 2009 non-GAAP
adjusted EBITDA increased 55% compared to the prior year. The strong
financial results for the segment relate to an increase in Chapter 11
filings and retentions, which generated a 94% increase in corporate
restructuring operating revenue in 2009 compared to the prior year.
Operating revenue for the Electronic Discovery segment for the fourth
quarter of 2009 was $15.3 million, up 13% compared to $13.5 million for
the year ago quarter. 2009 operating revenue was $55.8 million compared
to $58.1 million in the prior year. Fourth quarter 2009 non-GAAP
adjusted EBITDA was $5.9 million, up 14% compared to $5.2 million for
the year ago quarter. 2009 non-GAAP adjusted EBITDA was $18.5 million
compared to $26.3 million in the prior year. Global economic conditions
and pricing pressures in the industry impacted 2009 segment results.
Fourth quarter results benefited from increased case activity levels
and a growing contribution from new service offerings. It is
anticipated that as the global economy recovers, the electronic
discovery market will experience increased activity levels arising from
a general pickup in legal matters as well as an active regulatory
environment, both domestically and internationally.
Operating revenue for the Settlement Administration segment for the
fourth quarter of 2009 was $8.2 million compared to $20.9 million in
the year ago quarter. 2009 operating revenue was $61.7 million compared
to $89.9 million in the prior year. Non-GAAP adjusted EBITDA was $1.3
million for the fourth quarter of 2009 compared to $6.4 million for the
year ago quarter. 2009 non-GAAP adjusted EBITDA was $17.9 million,
compared to $19.9 million in the prior year. The decline in fourth
quarter and total year operating revenue and non-GAAP adjusted EBITDA
was related to the major analog-to-digital television conversion
contract that was launched in the fourth quarter of 2007 and which, as
expected, was substantially completed during the second quarter of
2009.
Tom W. Olofson, chairman and CEO, and Christopher E. Olofson, president
and COO of Epiq Systems, stated, "We continue to experience strong
growth in bankruptcy revenue, highlighted by major contributions from a
significant ongoing portfolio of corporate restructuring Chapter 11
engagements that are generally long-term, multi-year assignments
characterized by a recurring revenue component and visibility into
future periods. We believe electronic discovery has the opportunity to
expand in 2010, building on the momentum of the fourth quarter. Our new
IQ Review(TM) capability demonstrates clear technology leadership in
the e-discovery marketplace."
Select financial results and key events in 2009 included:
-- Net cash provided by operating activities of $51.8 million increased 51%
in 2009 compared to the prior year.
-- Cash and cash equivalents of $49.0 million increased 158% in 2009
compared to $19.0 million for the same period last year.
-- The Electronic Discovery segment recorded the best performance of the
year in the fourth quarter of 2009, with operating revenue up 26% and
non-GAAP adjusted EBITDA up 80% compared to the third quarter of
2009.
-- Bankruptcy segment operating revenue increased 52% compared to 2008.
Non-GAAP adjusted EBITDA increased 55% compared to the prior year,
excluding the one-time cash gain of $3.5 million on interest rate floor
options.
-- Within the Bankruptcy segment, Chapter 11 operating revenue increased
94% during 2009 compared to the same period last year.
-- The company's trustee services deposit portfolio exceeded $2 billion at
the close of 2009, up 27% compared to the previous year.
-- As reported by the Administrative Office of the U.S. Courts, bankruptcy
filings totaled 1,402,816 for the 12 month period ended September 30,
2009, up 34% versus the same period in 2008. During this period, Chapter
7 filings were up 45%, Chapter 11 filings were up 68%, and Chapter 13
filings were up 13%. The quarter ending September 30, 2009 represented
the highest quarterly filing period since the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 was enacted.
-- Signature Chapter 11 bankruptcy retentions in 2009 included a diverse
group of companies such as Chrysler, Thornburg Mortgage, Lyondell
Chemical, Capmark Financial Group, BankUnited Financial Corporation,
Nortel Networks, AbitibiBowater, and Smurfit-Stone Container. Epiq also
served as voting agent in the CIT Group Inc. pre-packaged Chapter 11
bankruptcy, the fifth largest filing by assets in history.
-- Epiq's corporate restructuring bankruptcy business was engaged to
provide consulting services to the three main Icelandic banks in
moratorium, Glitnir Banki hf, Kaupthing Banki hf and Landsbanki Islands
hf. The engagement primarily involves the development and implementation
of claim trading procedures for each of the banks.
-- During the National Association of Bankruptcy Trustees Annual Seminar,
the next generation version of TCMS(R), Epiq's comprehensive trustee
case management system, was premiered. Scheduled for release in 2010,
the new release of TCMS(R) will provide a modernized user interface and
significant value-added features, including customized one click
buttons, advanced search capabilities and integration with Microsoft
Outlook.
-- The Electronic Discovery segment launched IQ Review(TM), a revolutionary
combination of new prioritization and expert services technology which
was incorporated into DocuMatrix(TM), our flagship document management
platform. With the ability to "learn" from a legal expert, IQ Review(TM)
determines patterns in content across all data, rates each document, and
fast tracks the most responsive documents to the beginning of the
review, resulting in more cost-effective prioritized reviews.
-- Electronic Discovery service offerings were expanded to include data
collections, forensics, and document review, offering an optimized, full
lifecycle e-discovery solution with significant bottom-line efficiencies
for clients. In addition, new e-discovery offices in Hong Kong and
Brussels were opened to expand Epiq's global presence and to support
clients more effectively in Asia and continental Europe.
Conference Call
The company will host a conference call today at 3:30 p.m. central time
to discuss these results. The internet broadcast of the call can be
accessed at www.epiqsystems.com. To listen by phone, please call (888)
211-4434 before 3:30 p.m. central time. An archive of the internet
broadcast will be available on the company's website until the next
earnings update. A recording of the call will also be available through
March 23, 2010 beginning approximately two hours after the call ends.
To access the recording, call (888) 203-1112 and enter passcode
1810041.
Company Description
Epiq Systems is a leading global provider of integrated technology
solutions for the legal profession. Our solutions streamline the
administration of bankruptcy, litigation, financial transactions and
regulatory compliance matters. We offer innovative technology solutions
for electronic discovery, document review, legal notification, claims
administration and controlled disbursement of funds. Our clients
include leading law firms, corporate legal departments, bankruptcy
trustees, government agencies and other professional advisors who
require innovative technology, responsive service and deep
subject-matter expertise.
The Epiq Systems, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=5250
Forward-looking and Cautionary Statements
This press release contains 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 our operations and financial condition.
These forward-looking statements are based on our current expectations
and may be identified by terms such as "believe," "expect,"
"anticipate," "should," "planned," "may," "estimated," "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 our
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
client's deposit portfolio or the services required or selected by our
clients in engagements, (3) material changes in the number of
bankruptcy filings, class action filings or mass tort actions each
year, (4) risks associated with handling of confidential data and
compliance with information privacy laws, (5) changes in or the effects
of pricing structures and arrangements, (6) risks associated with the
integration of acquisitions into our existing business operations, (7)
risks associated with our indebtedness, (8) risks associated with
foreign currency fluctuations, (9) risks associated with developing and
providing software and internet-based technology solutions to our
clients, and (10) 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 publicly or revise
any forward-looking statements contained herein to reflect future
events or developments.
EPIQ SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
-------------------- ----------------------
2009 2008 2009 2008
--------- --------- ---------- ----------
REVENUE:
Case management services $ 33,468 $ 30,031 $ 137,170 $ 128,331
Case management bundled
products and services 4,526 3,532 15,206 17,774
Document management services 9,676 21,622 56,153 61,751
--------- --------- ---------- ----------
Operating revenue before
reimbursed direct costs 47,670 55,185 208,529 207,856
Operating revenue from
reimbursed direct costs 6,574 8,198 30,542 28,262
--------- --------- ---------- ----------
Total Revenue 54,244 63,383 239,071 236,118
--------- --------- ---------- ----------
OPERATING EXPENSES:
Direct cost of services
(exclusive of depreciation
and
amortization shown
separately below) 14,505 19,093 71,864 81,884
Direct cost of bundled
products and services
(exclusive of
depreciation and
amortization shown separately
below) 894 877 3,520 3,642
Reimbursed direct costs 6,475 8,146 30,217 28,134
General and administrative 18,093 19,948 78,441 71,113
Depreciation and software and
leasehold amortization 4,946 4,466 18,775 16,302
Amortization of identifiable
intangible assets 1,827 2,177 7,409 9,051
Other operating expense 23 1,682 634 171
--------- --------- ---------- ----------
Total Operating Expenses 46,763 56,389 210,860 210,297
--------- --------- ---------- ----------
INCOME FROM OPERATIONS 7,481 6,994 28,211 25,821
--------- --------- ---------- ----------
INTEREST EXPENSE (INCOME):
Interest expense 397 419 1,474 1,757
Interest income (17) (60) (124) (279)
--------- --------- ---------- ----------
Net Interest Expense 380 359 1,350 1,478
--------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES 7,101 6,635 26,861 24,343
PROVISION FOR INCOME TAXES 3,539 2,603 12,266 10,507
--------- --------- ---------- ----------
NET INCOME $ 3,562 $ 4,032 $ 14,595 $ 13,836
========= ========= ========== ==========
NET INCOME PER SHARE
INFORMATION:
Net income per share --
Diluted $0.09 $0.10 $0.38 $0.36
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING -- DILUTED 41,872 41,553 41, 908 41,425
EPIQ SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December December
31, 31,
2009 2008
-------- --------
ASSETS
ASSETS:
Cash and cash
equivalents $48,986 $19,006
Trade accounts
receivable, net 43,471 48,540
Property and
equipment, net 40,005 39,951
Goodwill 264,239 263,871
Other intangibles, net 19,524 26,851
Other 21,716 20,727
-------- --------
TOTAL ASSETS $437,941 $418,946
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $8,260 $12,781
Indebtedness 58,798 61,222
Other liabilities 44,485 44,448
STOCKHOLDERS' EQUITY 326,398 300,495
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $437,941 $418,946
======== ========
EPIQ SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months Twelve months
ended ended
December 31, December 31,
----------------- ------------------
2009 2008 2009 2008
-------- ------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,562 $4,032 $14,595 $13,836
Non-cash adjustments to net income:
Depreciation and amortization 6,773 6,643 26,184 25,353
Other, net 652 2,534 10,538 5,114
Changes in operating assets and
liabilities, net 13,300 2,941 505 (10,085)
-------- ------- -------- --------
Net cash provided by operating
activities 24,287 16,150 51,822 34,218
-------- ------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for business combinations, net -- -- -- (4,762)
Property and equipment, software and
other (2,900) (3,595) (17,561) (21,063)
-------- ------- -------- --------
Net cash used in investing activities (2,900) (3,595) (17,561) (25,825)
-------- ------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on indebtedness (1,025) (648) (6,065) (4,037)
Other 306 771 1,660 1,825
-------- ------- -------- --------
Net cash provided by (used in)
financing activities (719) 123 (4,405) (2,212)
-------- ------- -------- --------
Effect of exchange rate changes on
cash 58 (488) 124 (590)
-------- ------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS $20,726 $12,190 $29,980 $5,591
======== ======= ======== ========
EPIQ SYSTEMS, INC.
RECONCILIATION OF NET INCOME TO
NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three months Twelve months
ended ended
December 31, December 31,
----------------- -----------------
2009 2008 2009 2008
-------- ------- -------- -------
NET INCOME $3,562 $4,032 $14,595 $13,836
Plus:
Depreciation and amortization 6,773 6,643 26,184 25,353
Share-based compensation 2,239 390 8,543 2,831
Acquisition expense/disposal
of long-lived assets 23 1,682 657 2,541
Expenses related to
financing, net 380 359 1,350 1,478
Litigation settlement reserve 500 -- 500 --
Realized gain on interest
rate floors -- -- -- 1,273
Provision for income taxes 3,539 2,603 12,266 10,507
-------- ------- -------- -------
13,454 11,677 49,500 43,983
-------- ------- -------- -------
NON-GAAP ADJUSTED EBITDA $17,016 $15,709 $64,095 $57,819
======== ======= ======== =======
EPIQ SYSTEMS, INC.
BANKRUPTCY SEGMENT
RECONCILIATION OF SEGMENT PERFORMANCE MEASURE TO
NON-GAAP ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three months Twelve months
ended ended
December 31, December 31,
----------------- -----------------
2009 2008 2009 2008
-------- ------- -------- -------
SEGMENT PERFORMANCE MEASURE $12,712 $10,492 $47,447 $30,621
Realized gain on interest
rate floors -- -- -- 3,465
-------- ------- -------- -------
NON-GAAP ADJUSTED EBITDA $12,712 $10,492 $47,447 $34,086
======== ======= ======== =======
EPIQ SYSTEMS, INC.
RECONCILIATION OF NET INCOME TO
NON-GAAP NET INCOME
(In thousands)
(Unaudited)
Three months Twelve months
ended ended
December 31, December 31,
---------------- -----------------
2009 2008 2009 2008
-------- ------ -------- -------
NET INCOME $3,562 $4,032 $14,595 $13,836
Plus (net of tax):
Amortization of acquisition
intangibles 1,105 1,318 4,482 5,475
Share-based compensation 1,316 247 6,193 1,782
Acquisition expense/disposal
of long-lived assets 14 1,017 397 1,537
Effective tax rate 699 (51) 1,522 770
Loan fee amortization 52 52 208 275
Litigation settlement
reserve 303 -- 303 --
Mark-to-market adjustments (244) (244) (974) (974)
Realized gain on interest
rate floors -- -- -- 770
-------- ------ -------- -------
3,245 2,339 12,131 9,635
-------- ------ -------- -------
NON-GAAP NET INCOME $6,807 $6,371 $26,726 $23,471
======== ====== ======== =======
EPIQ SYSTEMS, INC.
RECONCILIATION OF EPS TO
NON-GAAP EPS
(Unaudited)
Three months Twelve months
ended ended
December 31, December 31,
---------------- -----------------
2009 2008 2009 2008
-------- ------ -------- -------
EPS (on a diluted basis) $0.09 $0.10 $0.38 $0.36
Plus (net of tax):
Amortization of acquisition
intangibles 0.03 0.03 0.11 0.13
Share-based compensation 0.03 0.01 0.15 0.04
Acquisition expense/disposal
of long-lived assets -- 0.03 0.01 0.04
Effective tax rate 0.02 -- 0.03 0.02
Loan fee amortization -- -- -- 0.01
Litigation settlement
reserve 0.01 -- 0.01 --
Mark-to-market adjustments (0.01) (0.01) (0.02) (0.02)
Realized gain on interest
rate floors -- -- -- 0.02
-------- ------ -------- -------
0.08 0.06 0.29 0.24
-------- ------ -------- -------
NON-GAAP EPS (on a diluted
basis) $0.17 $0.16 $0.67 $0.60
======== ====== ======== =======
EPIQ SYSTEMS, INC.
EPS CALCULATION
(In thousands, except per share data)
(Unaudited)
Three months Twelve months
ended ended
December 31, December 31,
---------------- -----------------
2009 2008 2009 2008
-------- ------ -------- -------
NET INCOME $3,562 $4,032 $14,595 $13,836
Interest expense adjustment for convertible
debt 305 305 1,209 1,212
Net income re-allocated to nonvested shares -- -- (56) --
-------- ------ -------- -------
NET INCOME ADJUSTED FOR DILUTED CALCULATION $3,867 $4,337 $15,748 $15,048
======== ====== ======== =======
NON-GAAP NET INCOME $6,807 $6,371 $26,726 $23,471
Interest expense adjustment for convertible
debt 305 305 1,209 1,212
Net income re-allocated to nonvested shares -- -- (56) --
-------- ------ -------- -------
NON- GAAP NET INCOME ADJUSTED FOR DILUTED
CALCULATION $7,112 $6,676 $27,879 $24,683
======== ====== ======== =======
BASIC WEIGHTED AVERAGE SHARES 36,168 35,606 35,895 35,459
Adjustment to reflect share-based awards 1,421 1,661 1,729 1,680
Adjustment to reflect convertible debt
shares 4,283 4,286 4,284 4,286
-------- ------ -------- -------
DILUTED WEIGHTED AVERAGE SHARES 41,872 41,553 41,908 41,425
======== ====== ======== =======
NET INCOME PER SHARE -- DILUTED $0.09 $0.10 $0.38 $0.36
======== ====== ======== =======
NON-GAAP NET INCOME PER SHARE - DILUTED $0.17 $0.16 $0.67 $0.60
======== ====== ======== =======
CONTACT: Epiq Systems, Inc.
Investor Relations
Lew P. Schroeber
913-621-9500
ir@epiqsystems.com
www.epiqsystems.com
