SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: April 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 April 26, 2004
Item 12. Results of Operation and Financial Condition
On April 26, 2004, Pre-Paid Legal Services, Inc. (the "Company") issued a
press release announcing its earnings and operating results for the three months
ended March 31, 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
------------------------------------------------
Date: April 26, 2004 Randy Harp, Chief Operating Officer
INDEX TO EXHIBITS
Exhibit No. Description
99.1 Company Press Release dated April 26, 2004
For Release 8:30 am Eastern Company Steve Williamson
Monday, April 26, 2004 Contact: (580) 436-1234
Pre-Paid Legal Announces First Quarter 2004 Results
ADA, OK, April 26, 2004 - Pre-Paid Legal Services, Inc. (NYSE:PPD), today
announced results for the first quarter ended March 31, 2004. Net income for the
first quarter of 2004 decreased 12 percent to $10.6 million from $12.0 million
for the prior year's first quarter primarily due to after-tax losses of $3.2
million related to the sale of more than 91,000 Identity Theft Shield
memberships in the 2004 first quarter period compared to none in the 2003
comparable period. These after-tax losses are created since the Company advances
significant commissions at the time a membership is sold and are expensed during
the first month of the membership. Since approximately 95% of membership fees
are collected on a monthly basis, a significant cash flow deficit and after-tax
loss is created at the time a membership is sold. This deficit and loss are
reduced as monthly membership fees are remitted and no additional commissions
are paid on the membership until all previous unearned advance commission
balances have been fully recovered. Diluted earnings per share decreased 6
percent to 63 cents per share from 67 cents per share for the prior year's
comparable quarter due to decreased net income of 12 percent partially offset by
an approximate 7 percent decrease in the weighted average number of outstanding
shares. Membership revenues increased 6 percent to a record $86.8 million from
$81.5 million for the same period last year.
Net cash provided from operating activities for the 2004 quarter decreased
16 percent to $17.0 million from $20.3 million for the 2003 quarter due to the
approximate $5.6 million negative cash flow resulting from sales of Identity
Theft Shield memberships during the 2004 first quarter. At March 31, 2004, the
Company had cash and investment balances exceeding $47 million after spending
$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. At March 31, 2004, the Company
had $19.4 million outstanding of the $25 million previously announced stock
purchase line of credit and $19.2 million of its $20 million line of credit for
its new office construction. Further purchases of common stock are currently
precluded by the Company's agreement with its bank lenders until the stock
purchase line of credit is repaid. The Company has asked its lenders to consider
additional funding or modification of the existing covenants in order to
continue its treasury stock purchases.
First quarter 2004 membership fees increased from the 2003 fourth quarter
to $86.8 million vs. $84.2 million. Associate services revenue increased during
the 2004 first quarter from the 2003 fourth quarter by approximately $753,000.
Associate services and direct marketing expenses also increased by $494,000 from
the 2003 fourth quarter. Membership benefits totaled $29.3 million in the first
quarter of 2004 compared to $28.2 million for the 2003 fourth quarter and
represented 34% and 33% of membership fees for the respective periods.
Commissions to associates per new membership sold during the respective quarters
were $180 per membership for the 2004 first quarter compared to $198 for the
2003 fourth quarter. General and administrative expenses during the 2004 first
quarter were $10.0 million compared to $9.9 million for the 2003 fourth quarter
and represented 12% of membership fees for both periods.
Commenting on the first quarter highlights, Harland C. Stonecipher,
Chairman and Chief Executive Officer of Pre-Paid Legal Services, Inc. said,
"This 2004 first quarter is the best quarter in our more than 30 year history in
terms of membership revenues. The sale of the 91,000 Identity Theft memberships
in the quarter is a strong positive. Since these Identity Theft memberships, as
most of our legal plan memberships, are marketed to be collected on a monthly
basis, we should experience an improved revenue stream in the future against
which all advance commissions have been paid and expensed."
The Company will conduct a conference call to present the first quarter
results on Wednesday, April 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) 981-5519. Audio replay will be available
beginning at 11:30 a.m. Eastern Time on April 28, 2004 and will run through
midnight Thursday, May 6, 2004 by dialing (719) 457-0820; passcode for the
replay is 241205. 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 March 31, 2004 before the conference call.
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 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)
(Dollars and shares in 000's, except per share amounts)
Three Months Ended
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March 31 December 31
2004 2003 2003
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Revenues:
Membership fees........................................... $ 86,750 $ 81,547 $ 84,199
Associate services........................................ 6,557 7,537 5,804
Other..................................................... 1,302 1,236 1,324
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94,609 90,320 91,327
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Costs and expenses:
Membership benefits....................................... 29,286 26,725 28,894
Commissions............................................... 29,272 28,178 30,412
Associate services and direct marketing................... 7,603 7,059 7,109
General and administrative................................ 10,046 7,993 9,894
Other, net................................................ 2,185 1,993 2,290
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78,392 71,948 78,599
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Income before income taxes.................................. 16,217 18,372 12,728
Provision for income taxes.................................. 5,595 6,338 4,336
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Net income.................................................. $ 10,622 $ 12,034 $ 8,392
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Basic earnings per common share............................. $ .63 $ .67 $ .49
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Diluted earnings per common share........................... $ .63 $ .67 $ .49
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Weighted average number of shares, as adjusted:
Primary................................................. 16,751 18,039 17,161
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Diluted................................................. 16,825 18,055 17,278
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Net cash provided by operating activities................... $ 16,968 $ 20,272 $ 12,325
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Net cash used in investing activities....................... $ (4,650) $ (6,001) $ (16,767)
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Net cash used in financing activities....................... $ (13,526) $ (18,062) $ 13,412
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