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EPIQ Systems Inc. Reports Operating Results (10-Q)

October 28, 2010 | About:
10qk

10qk

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EPIQ Systems Inc. (EPIQ) filed Quarterly Report for the period ended 2010-09-30.

Epiq Systems Inc. has a market cap of $440.5 million; its shares were traded at around $11.65 with a P/E ratio of 22.6 and P/S ratio of 1.9. The dividend yield of Epiq Systems Inc. stocks is 0.3%. Epiq Systems Inc. had an annual average earning growth of 16.9% over the past 10 years.EPIQ is in the portfolios of Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

General and administrative costs increased $1.9 million, or 10%, to $20.1 million for the three months ended September 30, 2010. This increase was due primarily to a $0.7 million increase in outside services; a $0.4 million increase in compensation expense, including share-based compensation; a $0.4 million increase in lease expense; a $0.3 million increase in bad debt expense; and a $0.2 million increase in travel expense. Changes by segment are discussed below.

The direct cost of services, exclusive of depreciation and amortization, was $48.2 million for the nine months ended September 30, 2010, a decrease of $9.2 million, or 16%, as compared to $57.4 million in the prior year. Contributing to this decrease was a $5.8 million decrease in the expense related to outside services, primarily related to temporary help and mailing, a $2.9 million decrease in production supplies, and a $1.1 million decrease in legal notification costs. These decreases were partially offset by a $0.5 million increase in building and equipment expense. Changes by segment are discussed below.

General and administrative costs increased $3.8 million, or 6%, to $64.2 million for the nine months ended September 30, 2010. A litigation provision for a shareholder derivative action of $1.6 million was recorded for the nine months ended September 30, 2010, travel expense increased $1.2 million, lease expense increased $0.8 million, and bad debt expense increased $0.5 million. These increases were partially offset by a $0.7 million decrease in outside services. Changes by segment are discussed below.

Bankruptcy direct and administrative costs, including reimbursed direct costs, decreased $1.3 million, or 3%, to $38.5 million for the nine months ended September 30, 2010, compared to $39.8 million in the prior year. The decreases in these costs were primarily related to a decrease of $2.1 million in outside services, $0.7 million in reimbursed direct costs, $0.3 million in legal noticing, $0.3 million related a decline in call center activity, and $0.2 million in legal and professional services. These decreases were partially offset by an increase of $1.7 million in compensation related expense and $0.6 million in technology costs related to the business growth.

During the nine months ended September 30, 2010, our operating activities provided net cash of $19.2 million. Contributing to net cash provided by operating activities was net income of $10.8 million and non-cash expenses, such as depreciation and amortization and share-based compensation expense, of $27.9 million. These items were partially offset by a $19.5 million net use of cash resulting from changes in operating assets and liabilities. The most significant changes in operating assets and liabilities were a $9.2 million decrease in income taxes payable, primarily related to New York state income tax settlement payments, and the timing of estimated payments; and a $14.0 million increase in trade accounts receivable. These changes were partially offset by a $2.0 million increase in accounts payable, and a $1.0 million decrease in prepaid expenses and other assets. Trade accounts receivable will fluctuate from period to period depending on the timing of sales and collections. Accounts payable will fluctuate from period to period depending on timing of purchases and payments.

During the nine months ended September 30, 2010, we used cash of $30.9 million for the repurchase of our common stock, including $29.9 million for the purchase of shares under our Share Repurchase Program, and $1.0 million for the purchase of shares required to satisfy tax withholding obligations upon the vesting of restricted stock awards. We also used cash of $22.8 million upon maturity of our contingent convertible subordinated notes (convertible notes), approximately $4.4 million for the payment of long-term obligations, including capital lease payments, $1.5 million for debt issuance costs related to the amendment of our revolving credit facility, and $1.3 million for dividends on our common shares. These uses of cash were partially offset by $15.0 million of borrowings under our senior revolving loan and $1.0 million of net proceeds from stock issued in connection with the exercise of employee stock options. We also recognized a portion of the tax benefit related to the exercise of stock options as a financing source of cash.

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