Epiq Systems, Inc. Announces Fourth Quarter and Full Year 2006 Results.KANSAS CITY Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). , Kan. -- Epiq Systems, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :EPIQ) announced results of operations for the fourth quarter and full year of 2006 with fourth quarter operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. (total revenue less operating revenue from reimbursed direct costs) of $38.7 million compared to $23.5 million for the same period last year and 2006 operating revenue of $199.7 million compared to $82.7 million last year. Operating revenue for the fourth quarter of 2006 does not include recognition of previously deferred revenue, while fourth quarter 2005 operating revenue reflected a deferral deferral - Waiting for quiet on the Ethernet. of $5.6 million. In 2006, the Company recognized $59.7 million of previously deferred revenue; during 2005, the Company deferred $24.5 million of revenue. Excluding the impacts of deferred revenue for both fiscal years, operating revenue in 2006 increased 31% compared to the prior year. A reconciliation statement is attached with additional details. The fourth quarter 2006 net loss of $2.1 million or ($0.11) per share compared to a net loss of $4.0 million or ($0.22) per share for the year ago quarter. Net income for 2006 was $35.1 million or $1.58 per share compared to a net loss of $3.8 million or ($0.21) per share for the prior year. As a result of our adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No.123R, "Share-Based Payment," effective January 1, 2006, during the fourth quarter 2006 we recognized $3.7 million and for the full year 2006 we recognized $5.4 million of share-based compensation expense compared to no expense during 2005. Fourth quarter 2006 net cash provided by operating activities was $10.8 million compared to $13.5 million for the year ago quarter. Net cash provided by operating activities for 2006 was $34.4 million, a 26% increase compared to $27.2 million for the prior year. A condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. consolidated cash flow statement is attached. Epiq Systems' management also evaluates the following non-GAAP financial measures: (i) non-GAAP operating revenue (operating revenue before reimbursed direct costs adjusted to include deferred revenue accounted for under SOP 97-2, "Software Revenue Recognition," in the period in which the services were provided and to exclude the revenue in the later period in which the deferred revenue is recognized), (ii) non-GAAP adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (net income before interest/financing, taxes, depreciation, amortization, share-based compensation, and acquisition related expenses, adjusted to include deferred revenue accounted for under SOP 97-2 in the period in which the services were provided and to exclude the revenue in the later period in which it is recognized) and (iii) non-GAAP net income (net income before amortization of acquisition related intangibles, share-based compensation, acquisition-related expenses, capitalized loan fee amortization, and embedded option Embedded Option An option that is an inseparable part of another instrument. Compare this to a normal (or bare) option, which trades separately from the underlying security. Notes: A common embedded option is the call provision in most corporate bonds. mark-to-market expense/convertible debt accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the , adjusted to include deferred revenue accounted for under SOP 97-2 in the period in which the services were provided and to exclude the revenue in the later period in which it is recognized, all net of tax). Reconciliation statements for non-GAAP operating revenue, non-GAAP adjusted EBITDA, non-GAAP net income and non-GAAP earnings per share are attached. Fourth quarter 2006 non-GAAP adjusted EBITDA was $8.9 million, compared to $12.0 million for the year ago quarter. Non-GAAP adjusted EBITDA for 2006 was $38.9 million, compared to $41.9 million for the prior year. Non-GAAP net income for the fourth quarter of 2006 was $2.8 million or $0.15 per share, compared to $5.2 million or $0.25 per share for the year ago quarter. Non-GAAP net income for 2006 was $10.9 million or $0.53 per share compared to $18.2 million or $0.90 per share for the prior year. Non-GAAP net income includes net interest expense, which increased $1.7 million in the fourth quarter of 2006 and $6.6 million for the full year of 2006 compared to last year. The increase in interest expense is primarily attributable to bank debt utilized to finance the November 15, 2005 acquisition of the Company's electronic discovery business. As of December 31, 2006 the Company has reduced its bank borrowings by $25.0 million since the electronic discovery acquisition. Tom W. Olofson, chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , and Christopher E. Olofson, president and COO of Epiq Systems, stated, "As anticipated, 2006 was an important transitional year of significant investment and integration. By year's end, we had appointed new managing directors in our electronic discovery, class action and legal settlements, and corporate restructuring businesses to strengthen our senior management organization. In addition, we augmented the sales and leadership teams in each of these areas. During 2006, our electronic discovery business experienced significant growth and is now ranked among the top national providers of electronic discovery services See service discovery. . Operating revenue for our bankruptcy businesses also met or exceeded internal objectives. Although our class action and legal settlements business experienced a sales shortfall for new client engagements in 2006, its fourth quarter revenue was the strongest quarter of the year. Entering 2007, the company has an attractive opportunity to harvest the benefits of its recent investments and stands as a market leader in integrated technology solutions for electronic discovery, bankruptcy, class action and legal settlements." Key events in 2006 include: * Epiq Systems appeared on the top 20 Electronic Discovery Service Providers list in the 2006 Socha Gelbmann Survey. The survey indicates the electronic discovery market has a 2-year projected 55% CAGR CAGR See: Compound Annual Growth Rate , with 2005 revenue of $0.8 billion projected to reach $2.0 billion in 2007. * In 2006 the company further established its technology leadership in the legal market with major software releases for DocuMatrix[TM], the company's electronic discovery and document review platform and TCMS TCMS Taylor County Middle School (Georgia) TCMS Transcranial Magnetic Stimulation (treatment of Parkinson's disease) TCMS Theater Construction Management System TCMS Trouble Call Management System [R], the company's Chapter 7 case management software. * New managing directors were appointed during the third quarter to assume leadership for electronic discovery, corporate restructuring and class action/legal settlements. * During 2006, the company recruited new sales and client relationship executives in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , London, Chicago, Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. , and northern California Northern California, sometimes referred to as NorCal, is the northern portion of the U.S. state of California. The region contains the San Francisco Bay Area, the state capital, Sacramento; as well as the substantial natural beauty of the redwood forests, the northern . * The company opened a full-service office (including sales, client services and technology support) for its electronic discovery business in Los Angeles. * 1.11 million bankruptcies were filed in the U.S. Court's annual period ended September 30, 2006. * The Federal Reserve reported that both corporate debt and consumer credit increased compared to the prior year, reaching $5.6 trillion and $2.4 trillion, respectively, as of September 30, 2006. 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, call 800-322-9079 before 3:30 p.m. central time. The archive of the Internet broadcast will be available on the company's website until the next earnings update. A recording of the call will be available through March 31, 2007 beginning approximately two hours after the call ends. To access the replay, call 877-519-4471 and enter pin #8442362. Company Description Epiq Systems is a leading provider of integrated technology solutions for the legal profession. Our solutions streamline the administration of bankruptcy, litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , financial transactions and regulatory compliance matters. We offer innovative technology solutions for electronic discovery, document review, legal notification, claims administration and controlled disbursement Controlled disbursement A service that provides for a single presentation of checks each day (typically in the early part of the day). . Our clients include leading law firms This list of the world's largest law firms by revenue is taken from The Lawyer and The American Lawyer and is ordered by 2006 revenue:[1]
Forward-Looking and Cautionary Statements This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act, including those relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc 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," "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) risks associated with the application of complex accounting rules to unique transactions, including the risk that good faith application of those rules and audits of those results may be later reversed by new interpretations of those rules or new views regarding the application of those rules, (2) any material changes in our total number of client engagements and the volume associated with each engagement, (3) any material changes in our client's deposit portfolio or the services required or selected by our clients in engagements, (4) material changes in the number of bankruptcy filings, class action filings or mass tort A mass tort is a civil action involving numerous plaintiffs against one or a few corporate defendants in state or federal court. As the name implies a mass tort includes many plaintiffs and law firms have used the mass media to reach possible plaintiffs. actions each year, (5) changes in the marketing and pricing arrangements with our partner depository banks A depository bank (U.S. usage) is a bank organized in the United States which provides all the stock transfer and agency services in connection with a depository receipt program. , (6) risks associated with the integration of acquisitions into our existing business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets , (7) risks associated with our indebtedness, and (8) other risks detailed from time to time in our SEC filings, including our annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] Note: The adjustment reverses the effect of deferred revenue related to a specific 36 month Chapter 7 bankruptcy arrangement spanning October 2003 - September 2006. Throughout the 36 month fixed term of the arrangement the company provided services to clients and received ordinary course cash payments each month. However, based on the structure of this arrangement, SOP 97-2 required the deferral of substantially all revenue from the arrangement to the final two quarterly periods. A deferral of $66.1 million of revenue was reported through the first quarter of 2006, of which $60.1 million was recognized in the second quarter of 2006 and $6.0 million was recognized in the third quarter of 2006. Although revenue from the arrangement was deferred, under generally accepted accounting principals the related costs were not deferred but rather recognized as incurred. Revenue for arrangements in periods prior to October 2003 and for the current arrangement, which began October 1, 2006, are recognized in the period the services are provided. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] (a) The Non-GAAP EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. calculation excludes adjustments related to convertible debt as such adjustments are antidilutive. [TABLE OMITTED] (b) Convertible debt is antidilutive and therefore excluded from EPS calculation. |
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