UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 23, 2006
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Pre-Paid Legal Services, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Oklahoma
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(State or Other Jurisdiction of Incorporation)
001-09293 73-1016728
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(Commission File Number) (IRS Employer Identification No.)
One Pre-Paid Way
Ada, OK 74820
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(Address of Principal Executive Offices) (Zip Code)
(580) 436-1234
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
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On October 23, 2006, Pre-Paid Legal Services, Inc. (the "Company") issued a
press release announcing its earnings and operating results for the three months
ended September 30, 2006. A copy of the release is included as an exhibit to
this report.
Item 9.01 Financial Statements and Exhibits
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The following exhibits are included with this report:
Exhibit No. Description
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99.1 Company Press Release dated October 23, 2006
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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Randy Harp, Chief Operating Officer
Date: October 23, 2006
For Release 8:30 a.m. Eastern Company Steve Williamson
Monday, October 23, 2006 Contact: (580) 436-1234
Pre-Paid Legal Announces 2006 Third Quarter Financial Results
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Net Income Up 55%; EPS Up 69% & Cash Flow Up 55%
ADA, OK, October 23, 2006 - Pre-Paid Legal Services, Inc. (NYSE:PPD),
announced financial results for the third quarter ended September 30, 2006.
Membership revenues increased 5% to $103.6 million from $99.0 million for the
same period last year. Net income increased 55% to $13.4 million compared to
$8.6 million primarily due to lower commissions of $31.4 million compared to
$37.4 million for the previous year's comparable period. Diluted earnings per
share for the quarter increased 69% to 93 cents per share from 55 cents per
share for the prior year's comparable quarter, higher than the net income
increase due to the 8% decrease in the diluted shares outstanding.
Membership revenues for the first nine months of 2006 increased 7% to a
record $308.4 million vs. $288.6 million for the 2005 comparable period.
Primarily due to increased membership revenues and lower commissions, net income
for the first nine months of 2006 increased 58% to $38.6 million vs. $24.4
million for the first nine months of 2005. Diluted earnings per share for the
nine month period increased 66% to $2.58 vs. $1.55. Diluted earnings per share
increased more than net income due to the 5% decrease in diluted shares
outstanding.
Net cash provided from operating activities before changes in assets
and liabilities for the nine months ended September 30, 2006 increased 55% to
$45.0 million compared to $29.0 million for the comparable period of 2005.
During the first nine months of 2006, we returned $48.9 million to shareholders
through the repurchase of 1.4 million shares of common stock at an average per
share price of $35.37 and also paid $4.7 million in dividends. Since April 1999,
we have returned $271.4 million to shareholders through the purchase of 10.8
million shares, at an average price of $25.14 per share, and $17.1 million in
dividends for a combined total of $288.5 million representing more than 115% of
our net earnings during the same timeframe. We have reduced the number of shares
outstanding by approximately 40% from 23.6 million at March 31, 1999 to 14.2
million today. At September 30, 2006, our bank debt was $96.6 million and we had
unpledged cash and investment balances exceeding $95.7 million.
Third quarter 2006 membership fees increased slightly to $103.6 million
from $103.1 million for the second quarter of 2006. Associate services revenues
decreased during the 2006 third quarter by approximately $452,000 to $6.4
million from $6.8 million for the 2006 second quarter and associate services and
direct marketing expenses decreased by $440,000 during the same period.
Membership benefits totaled $36.6 million in the third quarter of 2006 compared
to $36.5 million for the 2006 second quarter and represented 35% of membership
fees for both periods. Commissions to associates totaled $31.4 million in the
2006 third quarter compared to $32.7 million for the 2006 second quarter and
represented 30% and 32%, respectively, of membership fees for the two periods.
General and administrative expenses decreased during the 2006 third quarter to
$12.2 million compared to $13.0 million for the 2006 second quarter and
represented 12% and 13%, respectively, of membership fees for the two periods.
We will conduct a conference call to present the third quarter results on
Wednesday, October 25, 2006, 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 (719) 457-2646. Audio replay will be available beginning at
11:30 a.m. Eastern Time on October 25, 2006 and will run through midnight
Wednesday, November 1, 2006 by dialing (719) 457-0820; passcode for the replay
is 7714209. 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.
We expect to file our quarterly report on Form 10-Q for the three months
ended September 30, 2006 later this week.
About Us - We believe our products are one of a kind, life events legal
service plans. Our plans provide for legal service benefits provided through a
network of independent law firms across the U.S. and Canada, and include
unlimited attorney consultation as well as will preparation, traffic violation
defense, automobile-related criminal charges defense, letter writing, document
preparation and review and a general trial defense benefit. We have an identity
theft restoration product we think is also one of a kind because of the
combination of outside vendors and our provider law firms. More information
about us and our products can be found at our homepage at
http://www.prepaidlegal.com.
Forward-Looking Statements
Statements in this press release, other than purely historical information,
regarding our future plans and objectives and expected operating results,
dividends and share repurchases 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 our 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 us with the Securities and Exchange Commission,
including (among others) those listed in our Form 10-K, Form 10-Q and Form 8-K,
and include the risks that our membership persistency or renewal rates may
decline, that we may not be able to continue to grow our memberships and
earnings, that we are dependent on the continued active participation of our
principal executive officer, that pending or future litigation may have a
material adverse effect on us if resolved unfavorably to us, that we could be
adversely affected by regulatory developments, that competition could adversely
affect us, that we are substantially dependent on our marketing force, that our
stock price may be affected by short sellers, that we have been unable to
increase our employee group membership sales and that our active premium in
force is not indicative of future revenue as a result of changes in active
memberships from cancellations and additional membership sales. Please refer to
pages 14 and 15 of our 2005 Form 10-K and pages 7 through 9 of our June 30, 2006
Form 10-Q for a more complete description of these risks. We undertake no duty
to update any of the forward-looking statements in this release.
PRE-PAID LEGAL SERVICES, INC.
Financial Highlights (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
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2006 2005 2006 2005
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Revenues:
Membership fees.................................................... $ 103,592 $ 99,009 $ 308,443 $ 288,606
Associate services................................................. 6,368 7,335 20,151 21,552
Other.............................................................. 1,234 1,238 3,758 3,938
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111,194 107,582 332,352 314,096
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Costs and expenses:
Membership benefits................................................ 36,578 34,919 108,696 101,350
Commissions........................................................ 31,393 37,374 96,023 107,871
Associate services and direct marketing............................ 7,144 7,687 22,030 24,746
General and administrative......................................... 12,229 12,015 37,716 35,451
Other, net......................................................... 2,932 2,390 8,555 7,357
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90,276 94,385 273,020 276,775
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Income before income taxes........................................... 20,918 13,197 59,332 37,321
Provision for income taxes........................................... 7,512 4,553 20,765 12,876
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Net income........................................................... $ 13,406 $ 8,644 $ 38,567 $ 24,445
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Basic earnings per common share...................................... $ .93 $ .56 $ 2.59 $ 1.58
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Diluted earnings per common share.................................... $ .93 $ .55 $ 2.58 $ 1.55
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Weighted average number of shares:
Basic.............................................................. 14,360 15,451 14,867 15,471
Diluted............................................................ 14,427 15,726 14,968 15,753
Net cash provided by operating activities before
changes in assets and liabilities.................................. $ 16,433 $ 10,085 $ 45,016 $ 29,032
Net cash provided by operating activities............................ $ 11,634 $ 10,851 $ 38,571 $ 31,230
Net cash used in investing activities (see note below)............... $ (39,474) $ (4,685) $ (43,367) $ (1,523)
Net cash (used in) provided by financing activities.................. $ (14,605) $ (3,271) $ 5,199 $ (30,509)
Note: The 2006 amounts were impacted by a $35.3 million net increase in
investment balances primarily from our bank debt proceeds. Additions to property
plant and equipment were $2.1 million and $8 million for the quarter and nine
months, respectively.
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