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): July 24, 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
On July 24, 2006, Pre-Paid Legal Services, Inc. (the "Company") issued a
press release announcing its earnings and operating results for the three months
ended June 30, 2006. A copy of the release is included as an exhibit to this
report.
Item 9.01 Financial Statements and Exhibits
The following exhibits are included with this report:
Exhibit No. Description
99.1 Company Press Release dated July 24, 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: July 24, 2006
For Release 8:30 a.m. Eastern Company Steve Williamson
Monday, July 24, 2006 Contact: (580) 436-1234
Pre-Paid Legal Announces 2006 Second Quarter Financial Results
-- -- --
Membership Revenues Up 6%; Net Income Up 76%; EPS Up 84% & Cash Flow Up 70%
ADA, OK, July 24, 2006 - Pre-Paid Legal Services, Inc. (NYSE:PPD),
announced financial results for the second quarter ended June 30, 2006.
Membership revenues increased 6% to $103.1 million from $97.1 million for the
same period last year. Net income increased 76% to $12.1 million compared to
$6.9 million primarily due to lower commissions of $32.7 million compared to
$38.8 million for the previous year's comparable period. Diluted earnings per
share for the quarter increased 84% to 81 cents per share from 44 cents per
share for the prior year's comparable quarter, slightly higher than the net
income increase due to the 5% decrease in the weighted average number of
outstanding shares.
First half 2006 membership revenues increased 8% to a record $204.9 million
vs. $189.6 million for the first half of 2005. Primarily due to increased
membership revenues, net income for the first six months of 2006 increased 59%
to $25.2 million vs. $15.8 million for the first six months of 2005. Diluted
earnings per share increased 65% to $1.65 vs. $1.00. Diluted earnings per share
increased more than net income due to the 3% decrease in diluted shares
outstanding.
Net cash provided from operating activities before changes in assets and
liabilities for the six months ended June 30, 2006 increased 51% to $28.6
million compared to $18.9 million for the comparable period of 2005. During the
first six months of 2006, we returned $37.6 million to shareholders through the
repurchase of 1.1 million shares of common stock at an average per share price
of $35.09 and also paid $4.6 million in dividends. Since April 1999, we have
returned $260.1 million to shareholders through the purchase of 10.5 million
shares, average price of $24.81 per share, and $17.1 million in dividends for a
combined total of $277.2 million representing more than 115 percent of our net
earnings during the same timeframe. We have reduced the number of shares
outstanding by approximately 39% from 23.6 million at March 31, 1999 to 14.5
million today. At June 30, 2006, our total indebtedness was $99.0 million and we
had unpledged cash and investment balances exceeding $100 million.
Second quarter 2006 membership fees increased slightly to $103.1 million
from $101.7 million for the first quarter of 2006. Associate services revenues
decreased during the 2006 second quarter by approximately $143,000 to $6.8
million from $7.0 million for the 2006 first quarter and associate services and
direct marketing expenses increased by $282,000 during the same period.
Membership benefits totaled $36.5 million in the second quarter of 2006 compared
to $35.6 million for the 2006 first quarter and represented 35% of membership
fees for both periods. Commissions to associates totaled $32.7 million in the
2006 second quarter compared to $31.9 million for the 2006 first quarter and
represented 32% and 31%, respectively, of membership fees for the two periods.
General and administrative expenses increased during the 2006 second quarter to
$13.0 million compared to $12.5 million for the 2006 first quarter and
represented 13% and 12%, respectively, of membership fees for the two periods.
The Company will conduct a conference call to present the first quarter
results on Wednesday, July 26, 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) 457-2626. Audio replay will be available
beginning at 11:30 a.m. Eastern Time on July 26, 2006 and will run through
midnight Wednesday, August 2, 2006 by dialing (719) 457-0820; passcode for the
replay is 4834170. 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, 2006 later this week.
About Pre-Paid Legal Services, Inc.
Pre-Paid Legal Services, Inc. develops, underwrites and markets legal
service plans across North America. The plans provide for legal service
benefits, including unlimited attorney consultation, letter writing, document
preparation and review, will preparation, traffic violation defense,
automobile-related criminal charges defense and a general trial defense. We also
market an identity theft protection plan. More information can be located at our
homepage on the worldwide web 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 March 31,
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 Six Months Ended
June 30, June 30,
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2006 2005 2006 2005
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Revenues:
Membership fees.................................................... $ 103,111 $ 97,093 $ 204,851 $ 189,597
Associate services................................................. 6,820 7,175 13,783 14,217
Other.............................................................. 1,267 1,351 2,524 2,700
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111,198 105,619 221,158 206,514
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Costs and expenses:
Membership benefits................................................ 36,490 33,710 72,118 66,431
Commissions........................................................ 32,745 38,820 64,630 70,497
Associate services and direct marketing............................ 7,584 7,963 14,886 17,059
General and administrative......................................... 13,020 12,337 25,487 23,436
Other, net......................................................... 2,900 2,326 5,623 4,967
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92,739 95,156 182,744 182,390
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Income before income taxes........................................... 18,459 10,463 38,414 24,124
Provision for income taxes........................................... 6,369 3,610 13,253 8,323
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Net income........................................................... $ 12,090 $ 6,853 $ 25,161 $ 15,801
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Basic earnings per common share...................................... $ .81 $ .45 $ 1.66 $ 1.02
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Diluted earnings per common share.................................... $ .81 $ .44 $ 1.65 $ 1.00
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Weighted average number of shares:
Basic.............................................................. 14,863 15,397 15,125 15,480
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Diluted............................................................ 14,957 15,670 15,243 15,755
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Net cash provided by operating activities before
changes in assets and liabilities.................................. $ 13,593 $ 8,018 $ 28,599 $ 18,947
Net cash provided by operating activities............................ $ 9,656 $ 3,170 $ 27,933 $ 20,379
Net cash provided by (used in) investing activities.................. $ 4,066 $ 6,049 $ (3,893) $ 3,162
Net cash provided by (used in) financing activities.................. $ 43,881 $ (6,527) $ 18,808 $ (27,238)
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