SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: July 26, 2004
(Date of earliest event reported)
Pre-Paid Legal Services, Inc.
(Exact name of registrant as specified in its charter)
(Commission File No. 1-9293)
Oklahoma 73-1016728
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
One Pre-Paid Way
Ada, Oklahoma 74820
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (580) 436-1234
Item 7. Financial Statements and Exhibits
The following exhibits are included with this report:
Exhibit No. Description
99.1 Company Press Release dated July 26, 2004
Item 12. Results of Operation and Financial Condition
On July 26, 2004, Pre-Paid Legal Services, Inc. (the "Company") issued a
press release announcing its earnings and operating results for the three and
six months ended June 30, 2004. A copy of the release is included as an exhibit
to this report.
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 thereunto duly authorized.
PRE-PAID LEGAL SERVICES, INC.
By: /s/ Randy Harp
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Date: July 27, 2004 Randy Harp, Chief Operating Officer
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Company Press Release dated July 26, 2004
For Immediate Release Company Steve Williamson
Monday, July 26, 2004 Contact: (580) 436-1234
Pre-Paid Legal Announces Second Quarter 2004 Financial Results
Membership Revenue Up 8% and EPS Up 5%
ADA, OK, July 26, 2004 - Pre-Paid Legal Services, Inc. (NYSE:PPD), today
announced financial results for the second quarter and for the six months ended
June 30, 2004. The Company released production results earlier this month. Net
income remained unchanged at $10.0 million for both the 2004 and 2003 second
quarters. Membership revenues increased eight percent in the second quarter of
2004 to $88.1 million from $81.9 million for the same period last year. Diluted
earnings per share for the quarter increased five percent to 60 cents per share
from 57 cents per share for the prior year's comparable quarter primarily due to
an approximate six percent decrease in the weighted average number of
outstanding shares.
Net income for the first six months of 2004 decreased seven percent to
$20.6 million from $22.1 million for the first six months of 2003. Diluted
earnings per share for both the 2004 and 2003 six-month periods remained
unchanged at $1.24 per share primarily due to an approximate seven percent
decrease in the weighted average number of outstanding shares. Membership
revenues for the first six months of 2004 were up seven percent to $174.9
million from $163.4 million for the prior year period.
Net cash provided from operating activities for the six months ended June
30, 2004 decreased 26 percent to $20.8 million from $28.3 million for the
comparable period of 2003. Unpledged cash and investment balances exceeded $44
million at June 30, 2004, after the Company spent $9.2 million during the first
quarter of 2004 to repurchase 375,500 shares of its stock at an average share
price of $24.49. No shares were purchased during the second quarter of 2004.
Since April 1999, the Company has purchased 8.0 million shares at a cost of
$182.6 million, or an average share cost of $22.83. The stock buyback initiative
has reduced the number of outstanding shares by approximately 30 percent to
approximately 16.4 million shares outstanding. At June 30, 2004, the Company
owed $15.3 million on its stock purchase line of credit and $18.7 million on its
line of credit for its new office construction.
Second quarter 2004 membership fees increased slightly to $88.1 million
from $86.8 million for first quarter of 2004. Associate services revenues
declined during the 2004 second quarter by approximately $639,000 to $5.9
million from $6.6 million for the 2004 first quarter and associate services and
direct marketing expenses decreased by $899,000 during the same period.
Membership benefits totaled $30.4 million in the second quarter of 2004 compared
to $29.3 million for the first quarter and represented 35% of membership fees
for the second quarter compared to 34% for the first quarter. Commissions to
associates totaled $29.6 million in the second quarter of 2004 compared to $29.3
million for the first quarter and represented 34% of membership fees for both
periods. General and administrative expenses increased during the 2004 second
quarter to $10.9 million compared to $10.0 million for the first quarter of 2004
and represented 12.4% and 11.6% of membership fees, respectively, for each
period.
The Company will conduct a conference call to present the second quarter
results on Wednesday, July 28, 2004, at 8:30 a.m. Eastern Time. The conference
call will be webcast on the investor relations' page of www.prepaidlegal.com or
may be accessed by dialing (913) 981-5582. Audio replay will be available
beginning at 11:30 a.m. Eastern Time on July 28, 2004 and will run through
midnight Wednesday, August 4, 2004 by dialing (719) 457-0820; passcode for the
replay is 633986. The presentation will be available on the web site
indefinitely by selecting "Earnings Calls" under the "Investor Relations"
section. Questions may be submitted prior to the call via email to
investor@pplsi.com.
The Company expects to file its quarterly report on Form 10-Q for the three
months ended June 30, 2004 later this week.
About Pre-Paid Legal Services Pre-Paid Legal Services develops and markets
legal service plans across North America. The plans typically provide for legal
service benefits, including unlimited attorney consultation, will preparation,
traffic violation defense, automobile-related criminal charges defense, letter
writing, document preparation and review and a general trial defense benefit.
More information can be located at the Company's homepage on the worldwide web
at http://www.prepaidlegal.com.
Forward-Looking Statements
Statements in this press release, other than purely historical information,
regarding the Company's future plans and objectives and expected operating
results, and statements of the assumptions underlying such statements,
constitute forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934. The forward-looking statements contained herein
are based on certain assumptions that may not be correct. They are subject to
risks and uncertainties incident to the Company's business that could cause
actual results to differ materially from those described in the forward-looking
statements. These risks and uncertainties are described in the reports and
statements filed by the Company with the Securities and Exchange Commission,
including (among others) those listed in the Company's Form 10-K and Form 10-Q,
and include the risks that the Company's membership persistency or renewal rates
may decline, that the Company may not be able to continue to grow its
memberships and earnings, that the Company is dependent on the continued active
participation of its principal executive officer, that pending or future
litigation may have a material adverse effect on the Company if resolved
unfavorably to the Company, that the Company could be adversely affected by
regulatory developments, that competition could adversely affect the Company,
that the Company is substantially dependent on its marketing force, that the
Company's stock price may be affected by short sellers and that the Company has
been unable to increase significantly its employee group membership sales.
Please refer to pages 39 and 40 of the Company's 2003 Form 10-K and pages 8
through 10 of the Company's March 31, 2004 Form 10-Q for a more complete
description of these risks. The Company undertakes no duty to update any of the
forward-looking statements in this release.
PRE-PAID LEGAL SERVICES, INC.
Financial Highlights (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
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2004 2003 2004 2003
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Revenues:
Membership fees.................................................... $ 88,120 $ 81,881 $ 174,870 $ 163,428
Associate services................................................. 5,918 6,330 12,475 13,867
Other.............................................................. 1,391 1,431 2,693 2,667
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95,429 89,642 190,038 179,962
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Costs and expenses:
Membership benefits................................................ 30,449 27,590 59,735 54,315
Commissions........................................................ 29,591 28,353 58,863 56,531
Associate services and direct marketing............................ 6,704 7,350 14,307 14,409
General and administrative......................................... 10,904 8,928 20,950 16,921
Other, net......................................................... 2,505 2,088 4,690 4,081
---------- ---------- ---------- ----------
80,153 74,309 158,545 146,257
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Income before income taxes........................................... 15,276 15,333 31,493 33,705
Provision for income taxes........................................... 5,270 5,290 10,865 11,628
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Net income........................................................... $ 10,006 $ 10,043 $ 20,628 $ 22,077
---------- ---------- ---------- ----------
Basic earnings per common share...................................... $ .61 $ .57 $ 1.24 $ 1.24
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Diluted earnings per common share.................................... $ .60 $ .57 $ 1.24 $ 1.24
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Weighted average number of shares:
Basic.............................................................. 16,485 17,611 16,619 17,824
Diluted............................................................ 16,558 17,684 16,692 17,866
Net cash provided by operating activities............................ $ 3,873 $ 8,009 $ 20,841 $ 28,281
Net cash used in investing activities................................ $ (2,135) $ (5,811) $ (6,785) $ (11,812)
Net cash used in financing activities................................ $ (4,472) $ (5,040) $ (17,998) $ (23,102)